FEDERAL COURT OF AUSTRALIA
Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd [2001] FCA 1876
CONTRACT- formation – offer and acceptance – three page offer sent by facsimile – whether offer to purchase entire stock of hardwood timber – third page mislaid and never read – whether constituted offer “actually received” – purported acceptance of what was understood to be offer of a different kind – whether consensus ad idem reached – whether parties manifested intention to be bound – whether contract uncertain or incomplete – whether void for mutual mistake.
TRADE PRACTICES – misleading or deceptive conduct – representations as to rate of supply and grades of timber to be achieved – whether mere estimates or opinions and known by applicants to be such – future matters – whether reasonable grounds for holding opinions demonstrated.
Trade Practices Act 1975 (Cth) ss 52, 53, 55A and 75B
Marks v GIO Australia Holdings (1998) 196 CLR 494 referred to
Henthorn v Fraser [1892] 2 Ch 27 at 37 referred to
R v Clarke (1927) 40 CLR 227 at 241 and 244 referred to
Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 at pars [205]-[212] referred to
Raffles v Wichelhaus (1864) 2 H & C 906; 159 ER 375 considered
Scriven Bros & Co v Hindley & Co [1913] 3 KB 564 considered
W & J Sharp v Thomson (1915) 20 CLR 137 at 141-142 considered
Smith v Hughes (1871) LR 6 QB 597 referred to
Taylor v Johnson (1983) 151 CLR 422 at 429-430 considered
Bell v Lever Bros [1932] AC 161 at 217-227 referred to
Solle v Butcher [1950] 1 KB 671 at 691 referred to
Toyota Motor Corp v Ken Morgan Motors [1994] 2 VR 106 at 130 and 131 applied
Clifton v Palumbo [1944] 2 All ER 497 at 499 applied
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 applied
Allstate Life Insurance Co v ANZ Banking Group Ltd (1995) 58 FCR 26 referred to
Short v City Bank (1912) 12 SR(NSW) 186 at 202-203 applied
Yorke v Lucas (1985) 158 CLR 661 at 666-669 applied
Carter and Harland, Contract Law in Australia, (3rd ed., 1996) at 21, 38 and 38
Halsbury’s Laws of Australia, par 110-5390
ALPINE HARDWOODS (AUST) PTY LTD (ACN 004 495 761) and THOMAS JOSEPH COURTNEY v HARDYS PTY LTD (ACN 000 071 705) and MICHAEL JAMES EWING
VG722 of 1998
WEINBERG J
21 DECEMBER 2001
MELBOURNE
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IN THE FEDERAL COURT OF AUSTRALIA |
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VG722 OF 1998 |
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BETWEEN: |
ALPINE HARDWOODS (AUST) PTY LTD (ACN 004 495 761) FIRST APPLICANT
THOMAS JOSEPH COURTNEY SECOND APPLICANT
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AND: |
HARDYS PTY LTD (ACN 000 071 705) FIRST RESPONDENT
MICHAEL JAMES EWING SECOND RESPONDENT
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DATE OF ORDER: |
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WHERE MADE: |
THE COURT ORDERS THAT:
1. The application be dismissed.
2. The applicants pay the respondents’ costs.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
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IN THE FEDERAL COURT OF AUSTRALIA |
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VG722 OF 1998 |
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JUDGE: |
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DATE: |
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PLACE: |
REASONS FOR JUDGMENT
introduction
1 The applicants, Alpine Hardwoods (Aust) Pty Ltd (“Alpine”) and Thomas Courtney, claim damages against the respondents. They claim loss of profits arising out of non-performance of an alleged contract and, in the alternative, the same amount as damages pursuant to s 82 of the Trade Practices Act 1974 (Cth) (“the Act”). They also have a smaller claim to a price adjustment in their favour under the terms of that alleged contract.
2 The first respondent, Hardys Pty Ltd, is a subsidiary of Boral Timber Division and for convenience will hereafter be referred to as “Boral”. The second respondent, Michael Ewing, was the former area sales manager for Boral. The claims brought against him are for the tort of inducing breach of contract and, in the alternative, for having aided and abetted Boral’s breaches of the Act.
background
3 In 1993 a hardwood timber mill located some 15 kilometres from Tumbarumba, in New South Wales was destroyed by fire. That mill was operated by Boral. A vast quantity of Alpine Ash hardwood that had already been processed was transported to another mill which was operated by Boral at Tumbarumba. The Tumbarumba mill was a softwood mill, designed to process pine. The Alpine Ash was stacked in the open, and was left to waste. Boral made a number of attempts to sell or otherwise dispose of it. However, none of these attempts were successful.
4 In 1997, Alan Ralph, a former Boral employee, was retained as a consultant to facilitate the sale of the timber. This was by no means an easy task since the outer parts of the stacks had been significantly degraded by being exposed to the elements, and the condition of the timber contained within the stacks was unknown. It was suspected that they may still have contained some high quality timber.
5 It is necessary to say something about the methods by which hardwood is graded. The highest grade is “select”. That is timber which is essentially flawless and which can be used for furniture and high quality joinery. The next grade is “standard”. It has minor imperfections but is still of sufficiently high quality to be used for furniture and joinery. Below that is “F17”, which can only be used for structural purposes, for example, window and door frames. Below “F17” is “F14” which, in some States, can be used for structural purposes, but not in Victoria.
6 The differences between “F17” and “F14” are slight, and it is a matter of judgment as to whether a particular piece of timber meets the standards required for “F17” grading. Careful processing of “F14” timber is capable of bringing at least some of it up to “F17” standard. Below “F14”, timber has little commercial value and can only be used for purposes such as “tomato stakes” or firewood. Such timber is often described within the trade as “rubbish” or “waste”.
the applicants’ case as pleaded, and opened
7 Put simply, the applicants’ case was that by an agreement made in or about late January or early February 1998 Alpine agreed to purchase the Alpine Ash timber contained in the stacks at Tumbarumba. They claimed that Boral had agreed to sell a total of 7,671 cubic metres of timber, as described in a table headed “Hardwood Drying Program” (the “Table”) provided by Boral. They noted that Boral denied the existence of any such agreement, but claimed that if an agreement of this nature had been struck, it was Mr Courtney who was the purchaser, and not Alpine.
8 Mr Clarke, who appeared on behalf of the applicants, contended that the terms of the alleged contract were that Boral would supply all of the timber referred to in the Table at a rate of 200 cubic metres per month, later increasing (if possible) to 400 cubic metres per month, other than the timber which was assessed to be badly damaged. Timber of that type would be removed and discarded prior to delivery to Alpine. Alpine would pay Boral a price for the timber supplied at the rate determined in accordance with a list of suggested prices sent by Mr Courtney to Mr Ralph with variations by way of credits or adjustments to be made following processing and determination of recovery rates and grades. The price payable for the timber supplied would be varied upward or downward if the grading of the timber supplied varied from the estimated average grading (based upon statements made by Boral’s representatives) of 13.3% select, 40% standard and 46% F17.
9 The applicants contended that between January and late September 1998 Boral delivered 34 loads of timber, each of approximately of 30 cubic metres which Alpine processed, and which was invoiced by Boral at the rate set out in the list of suggested prices. The timber was said to have been below the determined percentages of graded timber upon which the rates had been fixed, and to have been of such a nature as to entitle Alpine to a credit for that timber in the amount of $92,954.55. Boral had failed to pay that amount to Alpine.
10 The applicants claimed that Boral had failed to supply the total amount of 7,671 cubic metres less waste, but had begun to dispose of some of that timber itself. Moreover, Boral had failed to supply timber at the required rate, and had failed to remove badly damaged timber from that which was delivered. This rendered plant and equipment which Alpine had secured in order to carry out processing works redundant. These breaches of the agreement by Boral constituted a wrongful repudiation which, upon the applicants’ acceptance, led to the contract having been rescinded. The applicants claimed they, or one or other of them, had suffered damage, being a loss of net profit of at least $1,146,632. They accepted that if they recovered the $92,954.55 claimed under the price variation claim that amount would have to be deducted from the loss of profit claim.
11 The applicants’ claimed that Mr Ewing was aware of the alleged agreement, and that from late March 1998, he had solicited sales of some of the timber to third parties.
12 The applicants’ alternative claim against Boral was that, in order to induce Alpine to enter into the agreement, and to take deliveries of timber, it had made a series of representations which were false. Those representations included, inter alia, that:
· there was available for assessment, recovery and processing approximately 7,671 cubic metres of timber which would all be available for the purposes of the agreement with Alpine;
· Boral would supply increasing quantities of that timber, estimated to be at the rate of 200 cubic metres per month, increasing to 400 cubic metres per month, and all of the 7,671 cubic metres referred to in the Table would be supplied other than any timber which was badly damaged;
· the waste timber that would be removed and discarded totalled approximately 25%;
· while the grading of the timber available under the agreement would fluctuate, the average grading of approximately 13.3% select, 40% standard and 46% F17 formed a reasonable basis for the offer price to be calculated and for variations of price to be subsequently calculated.
13 The applicants claimed that Alpine had acted upon these representations, and had suffered significant loss and damage as a result. In so far as the representations related to “future matters” the applicants relied upon s 51A of the Act. They claimed that the quantum of their loss was the same as the amount previously set out in their loss of profits claim for non-performance of the contract.
14 The applicants claimed, in the alternative, that Mr Ewing had aided, abetted, counselled and procured, and was directly and knowingly concerned in, and party to, the contraventions of the Act.
the evidence in support of the applicants’ case
15 By way of background, in about July 1997 Matt Somers, who had been involved in the timber industry for many years, and who had sold some timber produced by Boral into the Asian market, contacted Mr Ralph. He said that he was interested in acquiring some or all of the Alpine Ash at Tumbarumba.
16 On 31 July 1997 Mr Somers was sent a fax by Mike Young of Boral which contained a memorandum prepared by Mr Ralph in which he referred to “action to dispose of the Vic Ash” at Tumbarumba. Mr Ralph recorded in that memorandum that some of the timber was already completely air-dried, and could be processed or de-stacked for early sale following a brief time in reconditioning. There then followed a list of Material Volumes broken down by size, and cubic metreages. There was said to be 4,230 cubic metres of timber available. Mr Ralph observed:
“These volumes are unknown in terms of grade recovery and length mix.”
Mr Courtney
17 The applicants’ case replied principally upon the evidence of Mr Courtney, and a large number of documents that were tendered through him.
18 Mr Courtney had for many years been a wealthy and successful businessman. He retired in 1995, but by 1997 was looking for new business opportunities. In about August of that year he placed an advertisement in a local newspaper indicating that he had investment capital available, and inviting interest from potential business partners.
19 In September or October 1997 Matt Somers responded to that advertisement. He told Mr Courtney that he had had discussions with Mr Ralph, and with Mr Mike Young of Boral (“Mike Young”) regarding the possible purchase of the Alpine Ash at Tumbarumba. Mr Courtney expressed interest in Mr Somers’ proposal. He approached a friend of his who had vast experience in the timber industry, Rod Young (“Mr Young”). He invited both Mr Young and Mr Somers to accompany him to Tumbarumba to assess the timber, and determine whether it was worth buying.
20 Accordingly in October 1997, Mr Courtney, Mr Somers and Mr Young visited the Tumbarumba site. They were met by Mr Ralph who introduced them to Ian Snowden, the mill manager. He took them on a tour of the mill. Mr Courtney observed that the timber was in various stages of degradation. The manner in which it was stacked meant that it was impossible to ascertain its quality, or the likely recovery rate of the various grades of marketable timber.
21 Mr Young quickly came to the view that the timber was in very poor condition. He warned Mr Courtney against becoming involved in the venture unless he could somehow ensure that he purchased only the best quality and the most easily sold sizes He also made it plain that he would not be willing to participate in any joint venture regarding its acquisition.
22 Some time after that initial inspection, Mr Somers told Mr Courtney that on 4 August 1997 he had had a discussion with Mr Ralph during which he had been told that the anticipated grade recovery could be 20% select, 40% F17, 20% F14 and 20% waste. Mr Ralph had also said that there would be a 15% docking loss. Mr Somers had recorded these figures on the fax Mike Young had sent to him on 31 July 1997.
23 On 17 November 1997 Mr Courtney spoke to Mr Snowden. He asked him what grades of timber he thought could be recovered from the stacks. Mr Snowden replied that Boral had processed 200 cubic metres in the last four to six weeks, and the grades had varied dramatically. By way of example, he said that one stack could yield 50% select, 25% F17, and 25% F14 with no waste, whereas another could yield no select, 50% F17, 25% F14 and 25% waste.
24 Shortly after Mr Young told Mr Courtney that he was not interested in participating in the project, Mr Courtney approached Graham Coulthard as a possible business partner. Mr Coulthard had some experience in the timber industry. On 19 November 1998 Mr Courtney, Mr Somers and Mr Coulthard travelled together to Tumbarumba and were met by Mr Snowden. They were taken on a tour of the mill and Mr Coulthard had the opportunity to inspect the timber. They discussed with Mr Snowden the grades that could be expected. According to Mr Courtney, Mr Snowden said that 25% of the timber would be lost, after throwing away 5% and reworking the rubbish.
25 According to Mr Courtney, he agrees with Mr Somers and Mr Coulthard that it would be impossible to predict, in advance of processing, what grades could be recovered. That made it difficult to price the timber, allowing for the waste. Mr Courtney said that he and Mr Snowden agreed that if he bought the timber, Boral would remove all waste from the stack before delivering the remainder to Mr Courtney’s processors. There would need to be further discussions as to what would be done with the waste. However, nothing would be settled regarding the waste until after the project was up and running successfully.
26 Mr Courtney said that Mr Snowden then advised that Boral would first remove the rubbish, and dry, pack and tally the remainder. It would end dock 300 mm from each board, and deliver it to Melbourne. Mr Snowden said that this was a system that Boral had used previously with other clients, and it had generally worked in their favour. Mr Snowden also said that the kilns at the mill were controlled by the pine production personnel, but nevertheless had the capacity to dry 200 cubic metres of hardwood per month. Mr Snowden also said that that figure could rise to 400 cubic metres per month in the not too distant future.
27 Following the inspection on 19 November 1997, Mr Courtney, Mr Somers and Mr Coulthard decided that budget estimates should be prepared, based upon the available timber. These budget estimates entailed research into the market for hardwood timber, and processing costs. Mr Courtney was responsible for their collation after the basic information was received from Mr Somers and Mr Coulthard.
28 As part of the process of preparing the budget estimates Mr Courtney wrote a note in which he set out some of the parameters which he proposed to apply. He said that he used that note for the purpose of preparing the offer that he claimed he subsequently made. The note was based in part upon the figures that came from the fax sent by Mike Young to Mr Somers on 31 July 1997. Mr Courtney’s note included the following:
“Based on 10% Select = 13.3%
30% Standard = 40.0%
35% F/17 = 46.7%
0% F/14 -
25% Waste? = 46.7%
100%”
29 Mr Courtney said that one of the parameters which he set for any proposed offer was that no timber of less than F17 grade would be delivered. The note confirmed that fact. He agreed that his refusal to accept F14 or waste, as set out in the note, did not reflect anything said by either Mr Snowden or Mr Ralph, but was his own stipulation. He said that he had transferred the entire F14 estimate given by Mr Ralph into the 25% waste, and had then taken that entire figure out of the equation because in his mind it was staying on the Boral site. That led him to conclude, as the note indicated, that he would be getting 13.3 % select, 40 % standard and 46.7 % F17.
30 On 6 December 1997 Mr Courtney prepared a document which projected an estimated profit figure of $2,291,560, excluding salaries to principals. That figure was based upon a recovery of 5,833 cubic metres out of a total of what he then believed was 7,771 cubic metres that was apparently available. Once that estimate was prepared, it was decided between himself, Mr Somers and Mr Coulthard that the group would make an offer to purchase the timber.
31 Mr Courtney said that following the decision to proceed, he prepared a document which listed some of the matters which he, Mr Somers and Mr Coulthard had discussed in assessing the viability and requirements of the project. That document (the “Draft of factors” document) was in the following terms:
“Draft of factors involved in purchase of timber
· Boral need to sell the product at a price which at least, recovers the costs of the stock, less the wastage which has occurred through damage to the stock.
· We need to buy at a price which allows us to make a profit, which is reasonable for the project, and which takes into account the risk factors involved. The higher the risk factor, the lower the price to be paid.
· The major risk factors, the percentage of various grades, the waste factor within the material bought, the amount of F14 and lower (if any) for which we have no market information or potential sales at this time.
· Purchased timber needs to be at 12% EMC.
· Assumed grades within the stock are 10% select, 30% standard, 35% F17. Balance is F14 and damaged timber.
· After removal of damaged timber and drying to 12% EMC, Boral to supply stock on truck, Melbourne, without need for further processing.
· We should take one or two semi loads prior to Xmas, to allow for inspection, grading and processing, to ensure that our systems will function as required.
· Commence selling in mid January, and expect to attain 200 plus cubic metre per month in short term.
· Start with all product other than 25 mm, and commence with 25 mm in February.
· In May 1998, assess the position as regards monthly sales, grades, co-ordination, and confirm pricing and contract for the purchase of the total stock and the time frame involved.
· If Boral wish to get the stock off the balance sheet by 30th June 1998, we will be able to accept an invoice at that stage, for the balance of the stock, with suitable retention of title for Boral security, and take and pay as timber is made available from the drying process.
· Between February and May, discuss damaged and waste with Boral and actively seek markets for waste at maximum attainable pricing for mutual benefit of both parties.”
32 Mr Courtney said that he then prepared a document (the “Suggested prices” document) which contained a series of suggested prices for the timber. That document was in the following terms:
“Suggested prices
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75 x 25 |
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To be decided after discussion in January/February at latest |
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100 x 25 |
} |
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125 x 25 |
} |
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150 x 25 |
} |
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200 x 25 |
} |
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75 x 38 |
} |
310-00 |
} |
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100 x 38 |
} |
310-00 |
} |
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125 x 38 |
} |
310-00 |
} |
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150 x 38 |
} |
410-00 |
} |
per cubic metre |
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175 x 38 |
} |
410-00 |
} |
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200 x 38 |
} |
410-00 |
} |
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250 x 38 |
} |
410-00 |
} |
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75 x 50 |
} |
310-00 |
} |
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100 x 50 |
} |
380-00 |
} |
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125 x 50 |
} |
380-00 |
} |
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150 x 50 |
} |
410-00 |
} |
per cubic metre |
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175 x 50 |
} |
410-00 |
} |
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200 x 50 |
} |
410-00 |
} |
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250 x 50 |
} |
410-00 |
} |
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300 x 50 |
} |
410-00 |
}” |
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33 Finally, he prepared a third document (the “Conditions” document) which was in the following terms:
“Conditions upon which buying price is based
· Badly damaged timber is removed and excluded for sale. This will include all top timber, a lot of side stacked timber and maybe 5% of internal stacked timber. Overall estimate of lost timber is 25%.
· Timber to be dried to 12% EMC.
· Prices includes delivery to Melbourne.
· No docking required on site. Allowance of 300 mm is to be given for each board when tallying the packs.
· Based on obtaining 13.3% select, 40% standard, 46% F17, 0% F14.
· Price adjustment to be made if the grading varies from this %age.
· Allowance has been made for 7.5% waste in docking and grading, over and above the 300 mm allowance for end docking. Variance from this allows price adjustment.”
34 In its amended statement of claim, Alpine relied upon these three documents, taken together, as constituting a written offer to purchase the Boral timber. However, when Mr Courtney gave evidence he agreed that the “Draft of factors” document was simply an attempt on his part to summarise some of the matters that he had taken into account in preparing the budget estimates. He accepted that this document did not form any part of the contract into which he claimed Alpine had entered with Boral for the purchase of the timber.
35 Mr Courtney said that on the evening of Sunday 7 December 1997, he faxed these three documents to Mr Ralph, at his home. He said that he telephoned him both before and after sending the fax, and that they had discussed the prices and conditions contained in them.
36 It is necessary to set out Mr Courtney’s evidence regarding the events of that evening in some detail. At about 8.40 pm, Mr Courtney telephoned Mr Ralph. According to Mr Courtney, he said to Mr Ralph:
“I’ve got an offer. Its on plain paper. We don’t as yet have a letterhead. We don’t have a company. I am going to send these through to you. There are three pages. I’ll call you after you get them.”
37 Mr Courtney said that Mr Ralph replied that he was not concerned about the absence of a letterhead. It was quite clear where the documents were coming from.
38 Mr Courtney said that he then faxed the three pages through to Mr Ralph. He said that he rang him a few minutes later and asked whether he had received them. Mr Ralph confirmed that he had. Mr Courtney then said that the following conversation ensued:
“All right?---Then I said, “Well, okay, the draft of the factors is just the background to this. It’s information that I’ve been given. We can disregard that. But it gives you a feel for the inputs that I have taken.” I said, “The prices are relatively self-explanatory. You just have to make a decision as to whether they’re acceptable to you or not.” Then I said the next page, which we discussed – and this is the only one we did discuss – was the conditions upon which the buying price was based. We went through them individually and we agreed that they were acceptable - well, he understood them – and that they were reasonable. Then we hung up.”
39 Mr Courtney retained the fax transmission report which recorded that a three page fax had been sent from Mr Courtney to Mr Ralph’s home at 8.40pm on 7 December 1997.
40 A significant issue in the trial revolved around Mr Ralph’s evidence that although he had received the first two of the three documents sent by Mr Courtney, he had no recollection of ever having received the third document. That document, the “Conditions” document, contained a number of statements which were of considerable importance to Alpine’s claim, including in particular the reference to the price being based on obtaining 13.3% select, 40% standard and 46% F17. It also stipulated that a price adjustment was to be made if the grading varied from this percentage.
41 It will be seen when I come to Mr Ralph’s evidence that he recalled that the fax from Mr Courtney had arrived during the course of a dinner party at his home, at a time when he had had a fair bit to drink, and was feeling “very mellow and relaxed”. He had no recollection of any telephone call having preceded the fax. He agreed that the “Draft of factors” document reflected various matters which had been discussed with Mr Courtney prior to that evening. He also agreed that the figures contained within the fifth dot point in that document, namely “10% select, 30% standard, 35% F17, and balance F14 and damaged timber” had been raised in earlier conversations. However, he said that his understanding of the discussions had been that there was about 5% of material that was so badly twisted or damaged in the stacks that it was to be removed as rubbish from whatever timber was sent to any client.
42 It will also be seen from Mr Ralph’s evidence that he took the documents which were faxed to him by Mr Courtney to Bathurst the following week. Those documents were placed on file and ultimately provided to Ellis Moate, the general manager of the softwood group. The file itself, when examined for the purposes of this litigation, contained only the “Draft of factors” and “Suggested price” documents, and not the “Conditions” document. No-one associated with Boral had ever, at any relevant time, seen that document.
43 Finally, it will be seen that Mr Ralph’s evidence was that the contents of the “Conditions” document did not align with his recollection of the discussions which he had had with Mr Courtney prior to the date upon which it was faxed to him. Mr Ralph said that he did not believe that there had been any discussion relating to an overall estimate of lost timber being 25%. He disputed the figures contained in the document regarding estimated grades recalling that what had been discussed was about “10% select”, and not “13.3% select”. He maintained that it was his understanding that F14 grade timber was included in whatever hardwood was to be supplied to Mr Courtney, as indicated in the “Draft of factors” document.
44 Returning to Mr Courtney’s evidence, he said that on 9 December 1997 it suddenly dawned upon him that one of the conditions upon which his offer depended had not been included as part of the “Conditions” document. That document had failed to specify the quantity of timber to be purchased, and the individual sizes. On that day he sent a two page fax to Mr Ralph at Tumbarumba. The first page advised that the prices were based upon the “following stock and sizes”. It added that prices would remain valid if the mix followed the same or a similar percentage for each of those sizes. The second page contained the Table.
45 Mr Courtney said that about a week later, Mr Ralph telephoned him. He asked Mr Courtney whether the conditions that were contained in the offer providing for price variation for grades of timber recovered would permit an increase in price in favour of Boral if the grades obtained ended up being higher than those upon which the offer had been based. Mr Courtney said that he had replied “of course”, and Mr Ralph had responded “good”.
46 According to Mr Courtney he had another telephone conversation with Mr Ralph on 21 December 1997, during which they discussed grades and prices. Mr Courtney told Mr Ralph that he had noted that the latest assessment of grades and waste differed from previous estimates, albeit only marginally. Mr Ralph suggested that there be a trial shipment and that Mr Courtney and his group should assess the quality and recovery. If both parties were satisfied, they would proceed upon the basis of Mr Courtney’s offer. Mr Ralph suggested that a trial shipment could be organised for the first week of the new year. He indicated that the project could benefit both parties, but if the arrangement became “unworkable”, and any difficulties could not be resolved, it could be terminated. Mr Courtney said he asked Mr Ralph what he meant by “unworkable”. Mr Ralph replied that that arrangement would be unworkable if Boral had to pay Mr Courtney money to have the timber removed. It should be noted that Mr Ralph said that he had made that remark facetiously. However, Mr Courtney did not view it in that light.
47 Mr Courtney said that on 22 December 1997 he spoke by telephone with Mr Snowden. They discussed the expected recovery and other issues of side checking, waste and what timber was to be put aside. They also discussed the required moisture content. Mr Courtney recalled that there was reference to Boral’s past processing methods, the resultant degradation, and the inability of Boral’s sales personnel to sell the timber despite many abortive attempts. Mr Snowden said that Mr Courtney ought to be able to improve upon the recovery that Boral had obtained because he would be adopting more sensible methods of processing. It was finally agreed that the trial shipment would arrive at Mr Courtney’s proposed processor at Smartwood in Melbourne, on 6 January 1998.
48 Mr Courtney said that he prepared some further budget estimates which were based on what Mr Snowden had told him regarding the likely rate of recovery, and the grades. He expected a profit of $2,682,144 (excluding salaries to principals) with a low side of $1,280,841 profit.
49 Mr Courtney was then asked about the first trial shipment. He said that the timber arrived at Smartwood and had been found to be of lower quality than expected. It had significantly more “rubbish” than Boral had advised, or than had been allowed for in the offer.
50 On 8 January 1998 Mr Courtney sent a three page fax to Mr Snowden concerning the quality of the timber in the trial shipment . He said that although he had not seen the timber personally, both Mr Coulthard and Mr Somers had inspected it, and concluded that 40% could be classified as “rubbish”. He also said that his colleagues considered that there was little hope of getting any select or standard grade from the 150 x 38 and the 125 x 38. This led him to assume that the best quality boards had been picked out. He wrote:
“At this time we have the following averages:
Select/Std 14.5%
F/17 31.6%
“Rubbish” 53.8%
This is nowhere near the figures represented by Boral as being indicative of the timber.”
51 After receiving Mr Courtney’s fax, Mr Ralph had contacted either Mr Courtney or Mr Somers and suggested that they all meet at the Smartwood premises to review the situation.
52 On 12 January 1998 Mr Courtney, Mr Somers and Mr Coulthard met with Mr Ralph and Mr Snowden at Smartwood. During the course of that meeting the grading of the timber that had been undertaken at Smartwood was checked. Consequently, it was agreed that the “rubbish” would be returned to Tumbarumba. With some of the side-checked timber it was agreed that Mr Courtney’s group would try and “run it through, cut the check off the side …” and see what could be recovered.
53 Following the meeting at Smartwood, and the removal of “rubbish” which was ultimately returned to Boral, the remaining timber was assessed. On 15 January 1998 Mr Courtney wrote to Mr Ralph regarding the recovery from the sample shipment. He expressed disquiet, and indicated that the grades did not meet either the budgeted expectations, or the assessments which Mr Ralph had given Mr Courtney on 21 December 1997. Mr Courtney went on to say:
“… we confirm the prices which we faxed to you prior to Xmas, on the basis that there is no further degradation of the mix of timbers, due to sales of the wider and thicker boards.
With regard to the side checked timber, this should be removed from the packs, when stripping, after drying, and held separately, so that when there is sufficient quantity, we can arrange for the ripping of the timber on your machinery, for which we would pay a reasonable hire fee. We would then buy the timber which meets the sizes already discussed, and explore options for the sale of the timber remaining.
We would agree to adjust the buying price, either up or down, based on an actual grade of timber obtained as a grade allowed for, but I have not at this time come to a formula which is easily worked, but will endeavour to do so in the near future.”
54 On 20 January 1998 Mr Courtney spoke with Mr Ralph by telephone and was advised that Boral was unable to rip the side-checked timber. Mr Ralph therefore suggested that Mr Courtney make an offer for the side-checked timber, as distinct from the better material. He also said that although the deal would go ahead, Boral would like an increase in the price. Mr Courtney said that that would be impossible unless the recovery was better than that which had been allowed for in the pricing, as per the conditions of offer.
55 During the course of that conversation Mr Ralph told Mr Courtney that he was soon to be married and would no longer be involved in the project. He said that Mr Snowden would be handling the deal in the future, under the general control of a more senior executive, John Wallis.
56 On 22 January 1998 Mr Courtney arranged for one of his companies, Airco Australia Pty Ltd, to change its name to Australian Alpine Hardwoods Pty Ltd. On 6 April 1998 that company changed its name again to Alpine Hardwoods (Aust) Pty Ltd. It seems therefore that from about 22 January 1998, Mr Courtney, Mr Somers and Mr Coulthard carried on the business of acquiring the Boral timber through that company rather than in their individual capacity. From about 9 February 1998 Australian Alpine Hardwoods Pty Ltd letterhead began to be used in correspondence with Boral rather than Mr Courtney’s own personal letterhead. Mr Courtney was at all times a director, shareholder, and the company secretary.
57 Mr Courtney said that on 28 January 1998 Mr Snowden telephoned and advised that 700 cubic metres of hardwood had been dried and was available.
58 On 30 January Mr Courtney sent Mr Snowden a fax which summarised Mr Courtney’s assessment of the first load of timber.
59 On 4 February 1998 Mr Courtney sent Mr Somers a list of the sizes of timber that were required for the next fourteen semi-trailer loads. He gave instructions that the list was to be passed on to Boral with a request that there be at least two loads, and preferably three, per week. Boral did not respond to this request.
60 The next day, Mr Somers advised Mr Courtney that Mr Snowden had told him that the project had been put on hold. Advice had been received that Boral’s Melbourne sales personnel, in particular Ian Tarpey, had been complaining that Mr Courtney and his group were selling timber in their area and upsetting their market. Mr Snowden subsequently confirmed that advice in a telephone conversation with Mr Courtney.
61 That led Mr Courtney to send a fax dated 5 February 1998 to Mr Snowden denying the claim by the Boral sales personnel that sales by Mr Courtney of the Tumbarumba Alpine Ash had affected Boral’s own sales. Mr Courtney pointed out that at that stage none of the Tumbarumba hardwood had been sold. Indeed, his group had not even been into the market place with a price list. Mr Courtney criticised Boral’s conduct strongly and indicated that there needed to be “a clear and unequivocal statement that the project is to proceed on the basis which has been discussed and agreed to date” so that his group could proceed with its planning.
62 Deliveries were subsequently delayed while the matter was sorted out. Mr Courtney said he recalled that Mr Snowden had earlier told him that the Boral sales division had been unsuccessfully working on selling the timber for about four years.
63 Mr Courtney said that on 5 February 1998 he received a telephone call from Mr Snowden. Mr Snowden said that he was with David Stratton, the site manager for the mill at Tumbarumba, and that they had been together all morning. He said that Mr Stratton was trying to “compose” a contract or agreement. It had seven pages. Mr Stratton was getting nowhere and Mr Snowden had suggested that he discuss the matter with Mr Courtney.
64 Mr Courtney said that as a result of his discussion with Mr Snowden he spoke to Mr Stratton. He said that the substance of the conversation was as follows:
“He said he was trying to construct an agreement in writing and I think that’s probably all he said and then I responded to him, look, I don’t care whether you have got a contract in writing; that I didn’t particularly care whether we got 50 lawyers involved in the thing that would perhaps offer some constraint, and that I was content that we’d made an offer and the offer has been – we’ve had the trial shipments and we have a contract, have an agreement. Then I subsequently confirmed that in a letter”.
65 Mr Courtney could not recall whether Mr Stratton had said anything in response to that statement. However, he identified a letter which was dated 9 February 1998, but which was sent to Mr Stratton on 12 February 1998, confirming the discussion which they had previously had.
“Following our conversation of Friday last, I confirm that we do not necessarily require a written contract or a letter of intent from Boral.
We are content to continue with the agreement, on the lines of our offer to Boral through Alan Ralph, prior to Xmas. We have proceeded to date, and are content to continue on that basis.
Alan Ralph initially gave figures of stock immediately available as at August last year, and confirmed this to Matt Somers, together with the future stock which was not dry at the time. On 4/12/97 we obtained an update of the available stock, and it was on this that we based our offer. Naturally, if the quantity or the product mix vary from that on which we based our strategy and profitability, then this would affect us, and we would need to re-assess the position to reflect the changes. Several requests for confirmation of the stock levels, have gone unanswered, and we assume that it remains unchanged.
To properly plan and organise, we need to know the approximate availability of the timber by size of timber. A verbal schedule will do, based on say one month reasonably firm and three months tentative.
We understand that circumstances such as weather or priority of pine production may affect the drying of the timber, and that this will affect deliveries to us. All we ask in these circumstances is that you notify us as soon as you become aware of likely delays, so that we can alter our production schedules and advise customers.”
66 Mr Courtney said that from that time on until about March 1998 supplies of timber were received from Boral on a regular basis. On 23 March 1998 he had a conversation with Mr Snowden. He made contemporaneous notes of that conversation. According to Mr Courtney, Mr Snowden said that as far as he was concerned Mr Ralph and Mr Ewing had “stars in their eyes” when it came to looking at the stacks of timber. They thought it was “better than it was”. Mr Snowden also said that Mr Ralph could have told Mr Moate “anything”, and that had become apparent within the past few weeks.
67 On the same day Mr Courtney spoke with Mr Moate. He told him that he believed that Boral was taking some of the timber, the 5 x 2, and that this was not part of the agreement between the parties. That agreement was for “the whole lot of the timber”. Mr Moate replied that there was no written agreement. He said that any agreement was on a “best endeavours” basis. Mr Courtney said that he told Mr Moate that if Boral failed to perform its part of the bargain, it would be sued.
68 On 26 March 1998 Mr Courtney wrote to Mr Snowden in the following terms:
“I have spoken with Ellis Moate about the agreement and have expressed my total dissatisfaction that having reached an agreement based on certain quantities of timber, we discovered during Matts’ visit that Boral were processing 125 x 50 timber for your own use, at a time when we could not obtain any 50 mm material.
I have confirmed to him that our pricing was based on definite quantities and a definite mix of timber, and that if Boral choose to vary that mix by taking specific sizes without our knowledge, then they have 1/ broken our agreement 2/ have affected our profit margins, even to a point of making the project unprofitable 3/ have made it difficult, if not impossible to sell the less popular sizes of timber, within an acceptable time frame.
I won’t go into the moral, ethical or legal issues, at this point of time. Suffice to say, that there is little point in continuing with the project, approaching customers when we do not know what we have to sell, selling them product which we cannot obtain, and generally making fools of ourselves.
I am currently in the final stages of negotiation with a customer who would take all the F17 over 10-12 months, except for 50% of the 100 x 38, and 85% of the 75 x 38.
Due to our inability to obtain the loads of 75 x 38 and 100 x 38, we have lost an order which was to be for 4000 lin. M per month, of 100 x 38 standard and better, rising to 8000 per month, within 12 months.
We have not been able to supply a sample of 75 x 38 select grade (3000 lin m/month), and the customer has now ordered from Neville Smith. We would be left with standard and F17, which I can’t sell in quantity, without some more popular sizes to provide our customers with a range of product.
The whole project is totally unsatisfactory at this time, and until it is resolved I have told Matt that we will only take selected 50 mm product and wider 38 mm boards, which will enable us to quit the present stocks in the shortest possible time, to minimise our losses.
Whilst we understand that it is not your area of responsibility, we bring this to your attention, so that you will understand our position.”
69 On 31 March 1998 Mr Ewing telephoned Mr Courtney. He said that there was no two inch timber available as it had been sold and was being cut into F17. Mr Courtney replied that he had a contract with Boral which was for the whole of the timber and that he had bought it to sell at the rate of about 200 cubic metres per month. Mr Ewing said he knew nothing about any contract. Mr Courtney threatened to go to court if necessary, and said that Boral could take its timber back and compensate him for his loss of profit. Alternatively Boral could negotiate, and not make unilateral decisions. He reminded Mr Ewing that Boral had been endeavouring unsuccessfully to sell the timber for four years. Now that there was a reasonable demand for it, Boral was “picking the eyes out of it” and selling the more profitable lines. He invited Mr Ewing speak to Mr Snowden and Mr Ralph who would confirm that what he had said was correct.
70 Later that day Mr Courtney telephoned Mr Snowden at home. Mr Snowden confirmed that Boral was taking some 5 x 2 timber. Mr Snowden also said that, contrary to what Mr Ewing had told Mr Courtney, Boral could easily supply more timber simply by putting on a couple of people from the green mill. Mr Snowden also told Mr Courtney that Mr Moate had instructed him “to continue as planned”.
71 Also on that day, Mr Courtney telephoned Mr Ewing and reiterated that:
“… we own the timber, or at least have the right to sell it to the exclusion of Boral. If he wants to do something, we do it by negotiation.”
72 Following these events, Mr Ralph telephoned Mr Courtney and said that he had been asked by Mr Moate to become involved in resolving the dispute between Mr Courtney and Boral. Accordingly, a meeting was convened at Wagga Wagga on 3 April 1998. It was attended by Mr Ewing, Mr Ralph, Mr Courtney and Mr Somers. Mr Courtney said that the discussion was rather disjointed. Mr Ewing claimed that Boral owned the timber, and had the right to sell it. Mr Ralph said that the price was too low, and Boral expected more money. He also said that he had been instructed that Boral wanted to quit the timber by December 1998. He nominated $2,500,000 as the sale price for the entire stock. Mr Courtney rejected that proposition and insisted:
“… we have purchased the timber. You can’t take any of it because you only take the good stuff anyhow. The whole thing is not viable.”
73 Mr Courtney said that at one stage during the meeting, Mr Ralph asked whether there was a minimum amount of timber that Mr Courtney would accept. He replied “perhaps about four thousand metres cubed.” Mr Courtney said that he and Mr Somers pointed out that the price that had been offered was based upon the purchase of the entire timber stock. A reduction in the amount of timber supplied meant that there would be have to be a reduction in the price paid. Otherwise Mr Courtney would not recover the profits for which he had budgeted. According to Mr Courtney, Mr Ralph then agreed, in the presence of Mr Ewing, that Mr Courtney had sent him the Table and had made it clear that it was part of the contract.
74 Mr Courtney said that on 17 April 1998 both he and Mr Somers had a meeting with Mr Ralph at Mr Ralph’s home in Dingley. During that meeting Mr Ralph gave them a list of some timbers which purported to show that the stock which they had taken had not changed the overall percentage mix of grading. The list showed a total stock of 6,136 cubic metres. Mr Courtney said that Mr Ralph advised that the level of “rubbish” that was coming out was approximately 45%. Because of that, Boral wanted more money. Mr Courtney replied that it was Boral’s negligence in handling the timber, that had led to its degradation to the point where it was worth very little. According to Mr Courtney, Mr Ralph said nothing to suggest that Alpine was not entitled to the entire stock.
75 Mr Courtney said that as a result of the meetings at Wagga Wagga and at Dingley it was clear that an impasse had been reached. Mr Courtney maintained that Alpine had agreed to purchase the entire stock, while Mr Ewing insisted that this was not the case. Mr Ralph continually reiterated that Boral had to quit the stock by December 1998, or by February 1999 at the latest.
76 After the meeting at Dingley, Mr Courtney prepared a summary of the key issues, and what he considered to be the agreements reached between the parties. In that summary he recorded that he had told Mr Ralph that Boral must make a decision regarding the continuity of supply. If Alpine were to continue to take supplies of Alpine Ash, it required an assurance from Boral that a continuous supply of timber would be maintained at a minimum of 200 cubic metres per month “with overall target to achieve [Mr Ralph’s] objectives at 4,000 cubic metres”. Mr Courtney noted Mr Ralph’s insistence that it was Boral’s aim to quit the stock by 31 December 1998 despite having missed previous deadlines. In the interim, Mr Courtney would continue to take the product.
77 According to Mr Courtney, there was turmoil at Boral from about May 1998. The problem was that there were constant management changes. Mr Snowden was moved to the green mill, and from that time on communication with Boral became particularly difficult.
78 Mr Courtney said that Alpine monitored and recorded recoveries from all of the loads supplied. There were major inconsistencies in the grades achieved. He said that Mr Snowden warned him that this might occur as the timber had been around the yard for many years, and varied greatly in quality. It was therefore decided that no decisions as to price adjustments would be made until a large number of loads had been processed, and the results averaged and assessed.
79 Mr Courtney said that in the meantime the quality of timber received from Boral was progressively deteriorating. One of Alpine’s processors, Kings, advised that this was because some of the timber had been “ripped down the side”. Mr Courtney said that he believed that this indicated that Boral was ripping the worst of the side-checked timber down to a smaller size.
80 According to Mr Courtney, by the time the later deliveries were being made to Ervins, another of Alpine’s processors, a significant proportion of the timber supplied was waste. The remaining timber was of a lower grade than that which had been estimated.
81 On 15 July 1998 Mr Courtney sent a fax to Mr Snowden in which he recorded that load 15 had resulted in a recovery of 3.2% select and 30.47% standard. Load 16 had produced no select, and only 3.88% standard. Load 17 had no select and 26.7% standard. Mr Courtney contrasted these figures with the 13.3% select which he claimed had been promised as the average grade which would be recovered.
82 On 6 August 1998 Mr Somers sent a fax to Mr Snowden indicating that load 21 was under sized. There were many other complaints regarding incorrect tallies, and the poor quality of the recoveries.
83 Mr Courtney said that he spoke to Mr Snowden and agreed that the tallies would be corrected in future shipments. It was also agreed that the losses to date would be compensated for by adding additional timber to future loads until the deficit was corrected.
84 On 13 August 1998 Mr Courtney sent Mr Snowden a schedule regarding the provision of additional timber sizes and dates of deliveries. There were 18 loads scheduled over a 2 month period. No response to that request was ever received by Alpine.
85 On 3 September 1998 Mr Courtney wrote to Mr Ewing enclosing graphs of the recovery of the timber at Kings. He pointed out that the graphs showed a consistent downward trend. He referred to the “contract” which Alpine had with Boral as having been based on “advised recoveries and quantities”. He complained about Boral’s performance of the contract, and described its personnel, apart from Mr Snowden, as “grossly incompetent”.
86 Mr Courtney produced a large bundle of invoices which had been sent to Alpine from Boral. They commenced on 12 February 1998 and extended through until 2 September 1998. They disclosed that as from 24 August 1998 the timber supplied was described by Boral as “ROM H/WOOD”. The specification “ROM”, which stood for “run of mill”, did not appear in the earlier invoices.
87 On 7 October 1998 Mr Courtney wrote to Mr Ewing noting that Alpine had received only eight of the seventeen loads which had been projected. The last three loads had been supplied over a period of about a month. According to Mr Courtney Alpine had now reached the point where it had no timber, two processors which were idle, and eight persons without work. Mr Courtney wrote:
“The situation of never knowing when timber will come, what will come, and being at the whim of ‘god knows who’ is not an acceptable way to run a business. It may be the Boral way, but it is not my way. Add this to the problems of tallies and the failure to meet the stated recoveries of Select and Standard grades, and the venture seems doomed to come to a halt in the immediate future.
For this project to be terminated due to the above brings with it further costs of quitting timber and the compensation for the setting up of processing plant and termination of personnel.”
88 On 13 October 1998 Mr Courtney again wrote to Mr Ewing. He enclosed a list of price adjustments based upon the timber which had been supplied not having met the grades, and percentage of waste upon which the original pricing had been based. He indicated that as Alpine was paying cash, there was no amount owing against which to offset the adjusted price. He requested a credit in its favour against which future loans could be drawn. The total of the proposed credit was $71,955.16.
89 On 16 October 1998 Gary Barnier, the general manager, marketing, of Boral, sent a fax to Mr Courtney responding to his letter of 13 October, addressed to Mr Ewing. Mr Barnier’s fax contained the following observations:
“My understanding is that Alpine Ash timber was supplied to Alpine Hardwoods (Aust) Pty Ltd on a Run of Mill basis and that invoices for the timber supplied reflect this. On this basis, I do not believe that you are entitled to the credit you … claimed.
As a potential dispute exists in respect of the credit claimed and the Terms of Sale I have requested that I be provided with all Boral Timber documents in respect of the matter.
At the same time, I request that you indicate in writing all of the terms and conditions that you consider apply to the Alpine Ash transactions and how those terms and conditions arise.
When I have received your response and the documents in Boral Timber’s possession, I will contact you with a view to attempting to resolve the dispute in respect of past sales and the terms and conditions to apply to future transactions.
In the interim, we will continue to supply Alpine Ash timber and we will invoice your company on the current prices and Terms of Sale.”
90 Mr Courtney said that when he received Mr Barnier’s fax, and saw the words “Run of Mill”, he had no idea what they meant. He telephoned Mr Snowden and was told that this expression meant “that’s minus the shit”. Mr Snowden also proffered the advice that “Run of Stack” meant “take it all”.
91 On the same day, Mr Courtney responded to Mr Barnier’s fax. He set out what he described as “the principal documents” which formed the basis of Alpine’s offer to Boral. He said that the price which had been agreed had been based on average estimates of the recovery to be expected from the timber supplied which had been provided by Mr Ralph and Mr Snowden. He said that it was a term of the agreement that the badly damaged timber was to be removed from each stack, and Mr Ralph had estimated the percentage of such timber as being approximately 25%. Mr Courtney said that he understood that the percentage of badly damaged timber actually supplied had reached as high as 45%. His fax continued:
“The estimated average wastage from each load was also given by Alan Ralph, and it was on these estimates that our price was based, with the provision that if the gradings and/or the waste varied from the estimate, then the price was to be adjusted accordingly.
It is upon these figures that all our budgets and forecasts were based, and on these figures that we made our offer of price and the conditions on which that price was based. We would not make an unqualified offer on a pile of damaged timber. The timber was so bad that Boral had not been able to sell it in four years. We knew that those who previously bought small portions either returned the timber, refused to pay, or refused to buy any more. Our investigations in the market revealed that many people simply refused to consider the timber as its poor quality was well known in the trade.
Our decision to continue with the venture was entirely based on the price and conditions of our offer. Anything less was, and is unacceptable in terms of the viability of the project.
The term ‘Run of Mill’ was never used to me, and is unknown to me. It may be a term with some meaning to Boral, but is no doubt a vague and non-specific description of timber, and as such would be unacceptable to me in any contract agreement.
I phoned Alan Ralph and told him that I had the offer and conditions on two sheets of paper and would type a letter, but he said to send it as it was. I faxed the pages to him on 8th December and the following day I faxed two further pages, which commented on the quantity involved.
A couple of days later, Alan Ralph phoned and asked whether the price would be varied upwards in the event that the actual gradings were better than his estimates, and I said “of course”, to which he replied “good”. He then said that he needed to discuss the matter with others (mainly Ellis Moate, I think) and would come back to me.
He later phoned and advised that Boral would go ahead with the supply of timber to us, at the prices and conditions offered. At that time we also agreed that the agreement was one of ‘good faith’ between both parties and that we would communicate on that basis. If one or both parties found that the agreement was not working to their satisfaction, then we should try to resolve the matter, modify the agreement if necessary, or if unable to do so, then we could terminate the arrangement.
There was never any qualification as to the price or the conditions of our offer from any person at Boral. Nor would such have been acceptable, bearing in mind the state of the timber, the racking of the timber, and impossibility of us being able to determine the quality and the grading from visual inspection.”
92 Mr Courtney went on to say that Mr Ewing had not been involved in any of the discussions leading up to the making of the agreement, and that he appeared not to understand the basis upon which it had been reached despite having had the matter explained to him on several occasions. He continued:
“In your fax you refer to continuing supply “on the current price and Terms of Sale”.
The “current price” is that which we offered, varied in accordance with the grades and wastage which results from the processing, and which you are now quoting as a “potential dispute”. This is the only price, which is acceptable. If you refuse to supply on that basis, then we are not able to take further timber as each time we take a load, we increase the cash deficiency of the venture; and this of course is unacceptable.
If you refuse to continue to supply on the basis of our offer and your acceptance, then the venture ceases operation.
As to “Terms of Sale”; there are none other than you will supply under the terms of the offer, and we will pay. Despite having been asked on a number of occasions, to apply for credit, we have chosen to pay cash for all the deliveries to date.”
93 On 21 October 1998 Mr Courtney wrote to Mr Barnier again advising him that Alpine had no timber to process. He said that it was no longer possible for Alpine to continue with the venture, and that the project was accordingly terminated. He claimed that Boral had been overpaid for the timber delivered to date, and he indicated that Alpine would require a refund of that money, together with compensation for the damage which it had sustained.
94 On 22 October 1998 Mr Barnier responded. He said that Boral had at all times endeavoured to act in good faith, and to honour the “agreement” between the parties. He asserted that Mr Courtney had acted prematurely in terminating the arrangement. He said that he had been committed to resolving the difficulties that had arisen, but the problems stemmed from the “informality” of the arrangement, and the many different people who had been involved. He invited Alpine to reconsider its position. He said that if Mr Courtney wished to continue to purchase the Boral timber he should contact Mr Barnier so that a formal agreement could be prepared to deal with future sales.
95 On 23 October 1998 Mr Courtney replied to Mr Barnier’s note. He wrote:
“There is no problem arising from the lack of documentation. The agreement is simple, as simple as any agreement can be. It is a case of offer and acceptance, and there were very few people involved in the contract discussions and agreement.
You are right in indicating that the ‘number of different people involved’ (at Boral) may have caused a problem, for no one seems to know what is required, what is going on, who is in charge, who is responsible and who makes the decisions. From the start there was no one in Boral who has the courage to put his or her name to a deal which will see a write down on the book value of the stock. Everyone wished it would go away with their being personally involved.
The ‘conflicting views on what the arrangement was’, are, not my problem. The communication failures lie with your company. Obviously, if everyone at your company has a different understanding, then you go to the source of the agreement and communicate the details of that agreement to all involved and hope that their comprehension level allows them to understand. That you all have different understandings is not my problem, nor should it be, nor should I suffer financially for your failings.
It really does not matter what you, or David Stratton, or Ellis Moate, or Mike Ewing, or Tony Berg thinks the agreement was. All that matters is what the parties agreed at the time.
I reject that you have always tried to act in good faith. Apart from Ian Snowden (who does not have the authority), no one wants to address the issues, and hence we are where we are today.”
96 Mr Courtney continued:
“You state that ‘[I] decline to a formalised arrangement by signing a written agreement’. Gary, you need to research your information. Address your questions to David Stratton and Ian Snowden, and get the facts.
After we had commenced with the project, without reference to me, David Stratton spent the best part of a day writing a contract. Snowden telephoned me and asked me to talk to Stratton, who was with Snowden at the time. Stratton had seven pages and indicated that they were going nowhere. Stratton did not want to finalise it. I told him that I didn’t care if it was a seven page document, or written on toilet paper, and that I was happy with the offer, which I had made, and the acceptance by Boral both verbally and by performance. I didn’t get the seven page document, nor did I get the toilet paper, so Boral was obviously happy with its verbal and performance based acceptance.”
Cross-examination of Mr Courtney
97 Dr Jessup QC, who appeared with Mr Wheelahan on behalf of Boral, initially questioned Mr Courtney about the method by which he had gone about calculating the value of Alpine’s claim for $92,000 or thereabouts in relation to the price adjustment. Mr Courtney agreed that the spreadsheet upon which he had calculated that amount was based upon an assumed figure of 13.3% select, 40% standard and 46% F17, and that he had not expected any particular load to conform to those ratios. They were, rather, figures that he had hoped would be achieved over a period of time. He also agreed that in calculating the price variations he had used his anticipated selling price, and not the price which he had actually paid for the timber. In other words, he had included in his claim all of the profits that Alpine might have hoped to have made had the timber accorded with his expectations.
98 Dr Jessup suggested to Mr Courtney that by interpreting the alleged agreement with Boral in the way that he had done, he was in effect asking Boral to underwrite his entrepreneurial activities. Mr Courtney agreed with that proposition. Dr Jessup then produced a document which he said was based upon Mr Courtney’s own calculations. He suggested to Mr Courtney that the document demonstrated that if one excluded the profit component built into the calculations which he had done, the true amount of any overpayment for timber was approximately $1,500. Mr Courtney agreed that this was so, “on the basis of the tallies only”.
99 Dr Jessup then questioned Mr Courtney about the grades of timber which he claimed to have been the subject of representations by Boral. He agreed that he was told, as early as 17 November 1997, that there could be considerable variation between the stacks. He also agreed that he had been told that it was possible that anything up to 50% of the timber might be of a standard lower than F17. He insisted, however, that the figure of “25% waste” which Mr Snowden had provided as a “guesstimate” was a figure that he had not only taken seriously, but a figure that had formed one of the terms of the contract.
100 It was suggested to Mr Courtney that Mr Snowden was hardly the sort of person who have had authority to enter into a contract of sale of a large quantity of timber on behalf of Boral. He was, after all, merely the mill manager at Tumbarumba, and not an executive. Mr Courtney replied that Mr Snowden had been responsible for taking his group on its two inspections of the timber at the mill. Moreover, Mr Snowden had been the principal point of contact regarding the logistics of dealing with the timber.
101 Mr Courtney was asked about the 25% waste which he had said was not included as purchases or sales in his budget estimates. The cross-examination continued:
“Did you intend at that time that you would ask Boral to take out the worst 25 per cent of the timber, however good or bad it may be, and sell you the rest?---No.
So how do we get to the 25 per cent wastage?---Because it came from Ralph. It came from Snowden.
No, how would it work in practice?---That’s up to Boral to work out what they would consider waste in conjunction with us because we determined later by our trial shipments what was acceptable and what wasn’t.
At this time though. At this time when you were doing your budget did it occur to you that the allowance of a 25 per cent wastage was something that would have to be converted into some practical modus operandi?---Snowden was the man that was going to pull it down and Snowden was the man that told us that – that was aware and was in the discussions, that we would only get 17 and he at the time also told us that the way we would be processing it, all F14 would become F17. So you know, waste is definitely anything outside of the F17 area.
But he’s not going to be able to grade it as F17 or otherwise is he, Mr Courtney, when he takes it off the stack?---Yes.
He could, could he?---He wouldn’t grade it but he would know if it was going to fall below F17.
What if he was wrong?---What if he was wrong? We’d dock it out. The only thing that you’re going to look at is a very small knot. We’re talking two millimetre on a knot in the timber the difference between F14 and F17. I mean, Ian’s competent. He would be able to do it and they did it for the first 10 or 12 shipments, anyhow.
Mr Courtney, what if it was less than 25 per cent?---It’s not our problem. We weren’t taking the waste. I’ve allowed in my budget 25 but we’re not buying waste.”
102 Mr Courtney agreed that he had embarked upon the Boral timber venture as an entrepreneur, hoping to make a profit. He also agreed that he understood that profit was a return on risk. He said that he appreciated that the purchase of F14 would involve a major risk, and that he had made no allowance for timber of that quality in his budget estimates. He said that he had never made any offer which encompassed F14 as he did not want timber of that grade. He also insisted that he had never contemplated buying the waste.
103 Mr Courtney said that his intention had been to purchase all of the timber located in the yard at Tumbarumba that fell within the categories specified. However, that excluded timber that was waste. He agreed that he had been told that the amount of waste could have been as high as 50%, or as low as 5%. His offer had been, in essence:
“Take out the waste … and I will pay for whatever is not waste. The waste will be retained here. It’s not our property, we’re not buying it. You do with it whatever your wish.”
104 Dr Jessup asked Mr Courtney about the “Draft of factors” document. He directed his attention to the fact it drew a distinction between F14 and “damaged timber”. Mr Courtney replied that the document contained “the inputs” that he took into account, but did not set out the terms of his offer to Boral. The cross-examination continued:
“Do you know that in your statement of claim in this case it is said to be part of the contact?--- Well, it may be part of the contract in that it – if it is, it explains that conditions that I took into consideration before making them the offer.
When did you decide that this wasn’t part of the offer to Boral?-- Well, it never was because I explained also to Alan Ralph on the night that I rang him that this was only an indication in the inputs that I took in considering the offer to make to him for the purchase of the timber.”
105 Mr Courtney went on to say that the “Draft of factors” document had been provided to Mr Ralph “basically for his information”. Moreover, there were matters contained in it which were not part of the offer made.
106 Mr Courtney was then questioned about the “Suggested prices” document. He agreed that the prices offered had been fixed by reference to the size of the timber, and did not vary according to its grade. The transcript then records the following discussion:
“HIS HONOUR: Is this where you are in effect assuming the risk because you’re prepared to offer these prices for timber of that dimension. It if turns out that you’re fortunate and there is a large amount of select quality then you’re going to do very well at an offer pitched at this level. If it turns out that there’s almost all F17 then you’re not going to do very well?---No, that wasn’t the offer at all. No, your Honour. The offer was that it would be assessed – the offer is based upon us achieving 13.3 per cent of select, 35 per cent of standard and 46.7 per cent of F17 and there will be an adjustment if it varies for that. We are not taking the risk on that issue.
That depends upon the next page – the conditions upon which buying price is based, qualifying what is set out on page 723?---Yes, that’s correct, your Honour.
Because as 723 reads, if you take that in isolation, all that is happening is that you’re offering a global amount?---Yes, that’s correct.
It seems from that page that you are assuming in effect a risk?---Yes, but that page wasn’t sent in isolation. It wasn’t prepared in isolation. It wasn’t discussed in isolation.”
107 Mr Courtney was asked about the “Conditions” document. He agreed that he understood that Mr Ralph would say that he had no recollection of ever having received that document. He also understood that Mr Ralph would say that he had provided both the “Draft of factors” and “Suggested prices” documents to Mr Moate for his consideration, but not the “Conditions” document.
108 Mr Courtney was asked what he had meant when he wrote in the “Conditions” document “badly damaged timber is removed and excluded for sale”. He replied that what he had in mind was timber that was warped, bowed, twisted or badly side checked, and could not be used to achieve select, standard or F17 grades. Dr Jessup suggested that by his answer, Mr Courtney had included within “badly damaged timber” F14, which was otherwise in perfectly good condition. Mr Courtney’s answer to that question was important. He said “it could do, perhaps. By that qualification there, yes.”
109 Dr Jessup put to Mr Courtney that merely because a piece of timber was F14, it would not be described as “badly damaged”. Mr Courtney accepted that this was so. He agreed that F14 was not included in his observation that “Overall estimate of lost timber is 25%”. He was then asked whether the 25% of “badly damaged timber” which was to be removed and excluded from the sale meant that that timber would not in fact be his property. He agreed that that was so. He was reminded that his counsel had opened the applicants’ case by claiming that the 25% put aside by Boral, and not delivered, would in fact be Mr Courtney’s property. He said that he had no recollection of anything like that having been said. Dr Jessup then asked about the fifth dot point in the “Conditions” document, “based on obtaining 13.3% select, 40% standard, 46% F17, 0% F14”. He replied that this was one of the conditions upon which the buying price (which appeared in the “Suggested prices” document) had been based. The cross-examination continued:
“You didn’t mean to convey, did you, that you only proposed to obtain from Boral physically timber in those grades, but that the buying price was based on those grades?---Yes, the price was based on achieving those grades.
What if the timber contained some F14? Would you send it back?---If the timber contained F14?
Yes?---I think that’s really not an issue because F14 is so close that most of the F14 would be F17 anyhow but if it were F14 we didn’t get any.
Yes, but can I ask you to address the question as of?---Sorry, yes, I didn’t – I was just away somewhere else. If it was we would adjust the price accordingly.”
110 Dr Jessup asked how Mr Courtney could reconcile the “assumed grades” set out in the “Draft of factors” document (10% select, 30% standard, 35% F17, balance F14 and damaged timber) with the grades set out in the “Conditions” document (13.3% select, 40% standard, 46% F17, 0% F14). He replied that the second set of percentages was derived from the first set simply by taking away the “balance”, ie “the F14 and damaged timber” which was 25% and then increasing the select, standard and F17 by 33%. Thus, the 10% became 13.3%, the 30% became 40%, and the 35% became 46%.
111 Mr Courtney was then asked to indicate precisely what timber he had proposed to buy from Boral. He replied:
“I was buying the timber from Boral to achieve these particular grades, based on achieving these particular grades and the other factors and the conditions upon which the buying price is based.”
112 Mr Courtney said that the price was to be adjusted if the timber received either exceeded or did not meet these grades. If it turned out that the timber had a 25% F14 grade, it would not have been returned to Boral. However, there would have been a price adjustment. Mr Courtney said that he expected that he would have “come to some agreement” regarding the nature of that price adjustment.
113 Shortly afterwards Mr Courtney appeared to resile from his earlier answer. He said that if the timber had contained 25% F14, as was possible, and was not capable of being converted into F17, he did not know what he would have done with it.
114 Mr Courtney insisted that he had never offered to purchase any timber at a grade below F17. The cross-examination continued:
“So if ever Boral sent you something that was F14 you would have been within your rights to send it back and claim a credit?---I would have – perhaps I would have kept it and made a price adjustment.
Never mind about what you perhaps would have done. If you weren’t offering to buy anything less than 17 you would have been within your rights to send it back and claim a credit?---I really don’t know how to answer that because I haven’t thought of it. …”
115 Mr Courtney was then asked about the “price adjustment” which would be applied if the gradings differed from the “13.3% select, 40% standard and 46% F17” figures stipulated in the “Conditions” document. The questioning continued:
“Yes. What price adjustment?---Well, there’d be a price adjustment for mine – the price adjustment to maintain the profit level we had determined.
Really?---Yes.
You had in mind that the price adjustment binding on Boral as a matter of contract would be tied to your intended profit level?---Yes, definitely.
Had you told Boral what your intended profit levels were?---No, I hadn’t told them what my intended profit levels were.
No. You hadn’t told Boral how much profit you made on these three different grades of timber?---No.
No. And you had in mind, did you, that they were bound as a matter of law to make a price level adjustment according to your undisclosed profit expectations?---Yes.
Can you point to any communication, written or oral, which provides any foundation for a term of the contract in those terms?---No.”
116 Dr Jessup asked Mr Courtney whether he had any idea of what would happen if Boral refused to agree to a price adjustment in Alpine’s favour should the timber not come up to the grades expected. Mr Courtney appeared to have some difficulty in answering that question. His own belief was that the price adjustment would be carried out using the data contained in his spreadsheet, though he had previously acknowledged that the figures contained within that document included a substantial anticipated profit component.
117 It was suggested to Mr Courtney that there was nothing in the “Conditions” document regarding any obligation on Boral’s part to deliver any amount of timber at any specific time. He replied that the rate of 200 cubic metres per month had been discussed with Mr Ralph, and appeared in Mr Courtney’s notes of that discussion. He conceded, however, that this figure had not been included in the “Conditions” document. Dr Jessup suggested that the figure was merely an estimate provided by Mr Snowden, and the expectation that that figure might rise to 400 cubic metres per month had never been the subject of any agreement. He pressed Mr Courtney regarding Boral’s “promise” to increase the rate of supply from 200 to 400 cubic metres per month, and asked when that increase was supposed to occur. Mr Courtney replied:
“I don’t know that they promised but they said they would and that was around about mid year. I think they were indicating perhaps May or June.”
118 Dr Jessup suggested to Mr Courtney that there were a number of discrepancies between his account of relevant events as set out in his outline of evidence, and the account which he gave in court. Mr Courtney accepted that there were some such discrepancies. For example, he had said originally that he first told Mr Ralph that a company would be utilised to purchase the timber on 16 December 1997. However, when he gave evidence he said that he had told Mr Ralph about the company during the course of one of the two conversations which he had with him on 7 December 1997. It will be recalled that that was the date upon which the three documents were faxed to Mr Ralph’s home.
119 Mr Courtney plainly had some difficulty in articulating the precise terms of the contract into which he claimed to have entered. His uncertainty may be illustrated by the following passage:
“DR JESSUP: Mr Courtney, as at February 1998 was the side-checked material part of the timber you had agreed to buy?---I don’t recall. We’d been in discussions ---
I thought your evidence was you agreed to buy all of the timber in the yard?---As the side-checked.
I thought your evidence was you agreed to buy all of the timber in the yard?---With the waste removed, yes.
Was the side-checked material part of what you had agreed to buy?---A lot of the side-checked is waste because it’s badly side-checked and at that stage we were discussing how we would deal with the side-checked material and some of it was to be taken out and we asked Boral to cut the check off the side and then we would buy the finished timber at the price that it would have bought if it was the nominal size. Whether February is the date of not, I don’t know.
Then in February, as you understand your agreement with Boral, was the recoverable side-checked material in or out of the contract?---I don’t know exactly what date – probably in the contract.
In the contract?---Probably the recoverable ---
Probable?---Probably.”
120 Mr Courtney was asked whether it had ever occurred to him that Boral would be unlikely to have entered into an agreement involving the sale of millions of dollars worth of timber without a written contract formalising the transaction. He replied that Mr Ralph, who was in charge of the negotiations, rarely put anything in writing. However, Mr Ralph had told Mr Courtney that Mr Moate had agreed that the project could proceed. Mr Courtney said that as far as he was concerned that amounted to an acceptance by Boral of his offer which had been set out in detail in the documents faxed to Mr Ralph. Mr Courtney said that, to that extent, he considered the contract to be in writing. He was asked to indicate precisely when he believed that Mr Moate had signified Boral’s acceptance of his offer. He replied that it was on or about 28 January 1998. Dr Jessup suggested that this was unlikely to be the case since almost immediately after that date Boral had put the entire transaction on hold. Mr Courtney agreed that that had occurred, and that he had been considerably irritated by what Boral had done. However, that did not detract from his belief that from the time Mr Moate signified his acceptance, he had a contact which entitled him to the entire stock of the timber.
121 When pressed further on the subject of the contract, Mr Courtney initially said that he regarded Alpine as having concluded a binding agreement with Boral on 12 February 1998, the date on which he sent Mr Stratton the fax dated 9 February. He added, however, that it was possible that the contract was complete when Mr Moate signified his oral acceptance of Mr Courtney’s offer on about 5February 1998. The transcript records:
“So somewhere in the period between 5 and 12 February is your appreciation of there was a concluded agreement from that point on?---Yes.”
122 There was then some cross-examination regarding the meeting at Wagga Wagga and what Mr Ralph would say had occurred on that occasion. It is fair to say that Mr Courtney accepted some of what Dr Jessup suggested Mr Ralph would say, but rejected other aspects of what was put to him.
123 Mr Courtney was recalled for further cross-examination so that Dr Jessup could put to him a further matter. He suggested that Mr Stratton would say that during a telephone conversation between himself and Mr Courtney, at some stage after 12 February 1998, Mr Stratton insisted that there was to be no contract. Mr Courtney denied that suggestion. Dr Jessup then suggested that Mr Stratton had said:
“Well I am not sure where this leads us, but we will continue to supply you on a load by load basis.”
124 Mr Courtney denied that Mr Stratton had said anything about a “load by load” supply.
Mr Snowden
125 The next witness called on behalf of the applicants was Mr Snowden. He was employed by Boral, in about July 1997, to prepare a report regarding the Tumbarumba mill. He was subsequently assigned the task of assisting Mr Ralph in the disposal of the Alpine Ash.
126 Mr Snowden said that he reported to Mr Stratton who was the site manager. Tumbarumba was a pine mill, and was not set up to process hardwood.
127 Mr Snowden explained how the Alpine Ash had come to be located at a softwood mill. He said that when he first saw the timber at Tumbarumba, it was in very poor condition. He could not believe that it had been allowed to sit out in the open for so many years.
128 Mr Snowden said that it was very difficult to assess the condition of the hardwood within the stacks. The timber had been rough sawn, which meant that it had been cut from a large log into specific sizes. It had not otherwise been processed. Each stack ought to have contained timber of a single size, but the stacking was not accurate.
129 Mr Snowden said that he had first met Mr Courtney, Mr Somers and Mr Young in about October or November 1997. They had come to Tumbarumba to inspect the timber. There was a general discussion about its quality, including its side-checking, age, shrinkage and twist. Mr Snowden told them of the grades that Boral had obtained from some of the recent runs. He said that the grades varied greatly from stack to stack. He also said that there was a great deal of waste.
130 Mr Snowden was asked about the various grades that could be obtained from hardwood. He explained that there was little difference, in reality, between F17 and F14. He said that he told Mr Courtney that it was impossible to look at the timber in the stacks and say that there would be “so much F17, F14 or select”. He was asked whether Boral had made a decision as to the how much timber was available for sale. He replied that the total stock was around 7,500 cubic metres.
131 Mr Snowden was shown the Table which he had sent to Mr Courtney. He said that Mr Ralph had asked him to prepare that document. He explained the meaning of the various concepts expressed within it.
132 Mr Snowden outlined what had occurred at the second meeting at Tumbarumba, in November. He said that he told Mr Courtney that Boral could supply approximately 200 cubic metres per month, hopefully increasing to about 400 cubic metres at some later stage.
133 Mr Snowden gave evidence regarding the first trial shipment. He said that after the timber had been delivered Mr Courtney telephoned him and told him that he was dissatisfied with the quality of load that had been sent down. Later Mr Snowden had a discussion with Mr Stratton who asked to go to Melbourne and inspect the timber. He had done so, and noted that approximately 30-40% had to be sent back to Tumbarumba to be re-worked by being re-sawn to a smaller size. He said that most of the timber which had been sent back had been salvageable, and would not be characterised as “rubbish” or “waste”.
134 Mr Snowden said that he had a subsequent discussion with Mr Stratton. He said that Mr Stratton told him that he “thought that Mr Courtney was looking for a contract as such”. At one point he told Mr Snowden to “… put it all down in writing and have a written contract”. According to Mr Snowden, Mr Courtney had made it clear that he needed continuity of supply. Mr Stratton had asked him what volumes Boral could supply, and what sizes. Mr Snowden had replied that although it was alright for Boral to say that it could supply 200 cubic metres per month of 100 x 50, the task of physically obtaining that timber, and supplying it by a certain date was impossible. Mr Stratton had replied that Boral had to try something. Mr Snowden had suggested that Mr Stratton ring Mr Courtney and discuss the issues with him.
135 Mr Snowden said that he understood that Mr Stratton had no authority to make any decision regarding the timber. That was a matter for Mr Moate who was the general manager.
136 Mr Snowden said that in late December 1997 and early January 1998 he began to process about 2,500 cubic metres of hardwood which was dried to be ready for Mr Courtney in order to “try and get continuity of supply”. Regrettably, there was no room at the mill to store that timber once it was dried, and it was left in the open. He said that he first told Mr Courtney in early March 1998 that he had this stock available. However, Mr Courtney was unable to take it at that time.
137 Mr Snowden said that he recalled a conversation with Mr Moate in late February 1998 with regard to the supply of timber to Mr Courtney. He said that he had spoken to Mr Courtney earlier, and had been told that he was setting up a processing operation in Albury-Wodonga. Mr Snowden then rang Mr Moate and asked him whether Boral was going to continue to supply Mr Courtney with timber. He suggested to Mr Moate that if not, Boral should let Mr Courtney know so that he would not waste his time or money. According to Mr Snowden, Mr Moate said “No, things would continue as they were”.
138 Mr Snowden emphasised that Mr Courtney had always said that he believed that he had purchased the entire stock of hardwood timber at Tumbarumba. Mr Snowden was under the same impression. It was his understanding that Mr Courtney’s “Suggested prices” document was based on the “whole parcel of that timber, not just a load here and there”.
139 Mr Snowden was invited to consider the meaning of the expression “ROM”. He said that it normally applied only to pine, and was not used in relation to hardwood. It signified that the timber which had been purchased had not been graded. That was certainly the position with the hardwood which Boral had supplied to Mr Courtney. The “rubbish” had been taken out, and Mr Courtney was supplied with the remainder which would be processed into graded material.
140 Mr Snowden was then asked:
“So run of mill was a perfectly correct description to apply to all of the deliveries that were made to Mr Courtney right back to January?---Yes.”
Cross-examination of Mr Snowden
141 Under cross-examination, Mr Snowden agreed that Boral had demonstrated “a lot of loyalty and patience” towards Mr Courtney. He also agreed that at no time did Boral have confirmation of what volumes or sizes were required on either a weekly or monthly basis.
142 Mr Snowden accepted that his early discussions with Mr Courtney regarding the grades that might be achieved from the timber were just “estimates” on his part. They were based upon what Boral had averaged in its own operation with roughly 200 cubic metres. He agreed that his prediction that Boral might be able to increase the supplies of timber to 400 cubic metres per month “was very ambitious”. He said that he had made that plain to Mr Courtney. He had explained that the pine must always take preference, and that no hardwood could be processed in winter because the kilns would be used exclusively for drying pine during that season.
Mr Somers
143 Mr Somers confirmed what Mr Courtney had said about the two inspections at Tumbarumba. He said that he and Mr Courtney had been shown all of the timber, and nothing had been said by Mr Ralph or Mr Snowden to suggest that only part of it was available for sale.
144 Mr Somers denied ever having heard the term “run of mill”. He said that he was told that owing to the site being muddy, regular deliveries were not forthcoming. The forklifts had to give priority to the green mill.
145 Mr Somers gave a detailed account of what had occurred on 3 April 1998 during the course of the meeting at Wagga Wagga. He also outlined what had taken place at the meeting at Mr Ralph’s home at Dingley on 17 April 1998. His evidence was broadly in accord with that given by Mr Courtney.
Cross-examination of Mr Somers
146 Mr Wheelahan asked Mr Somers whether he could recall Mr Courtney having asserted, during the course of the meeting at Wagga Wagga, that he had an exclusive right to the entire stock of Alpine Ash at Tumbarumba. He said that he recalled that assertion. Mr Wheelahan then suggested that it had been refuted by Mr Ralph. However, Mr Somers said that he had no such recollection.
147 It was further suggested to Mr Somers that Mr Ralph had acknowledged, at the meeting, that there was an agreement to sell Mr Courtney “a fair average mix” of the timber. However, Mr Somers said that he had no recollection of that having occurred either. It was finally suggested that Mr Ewing had said to Mr Courtney “Let’s start again. Forget about the past.”. Mr Somers could not remember any statement to that effect. He could, however, recall Mr Courtney having said that he would consider the possibility of purchasing all of the timber. Moreover, he recalled that there have been some discussion regarding a figure of around $2.5 million.
Mr Blyth
148 The applicants’ last witness was Colin Blyth, an accountant, and a partner in the firm RSM Bird Cameron Partners. He gave evidence in support of Alpine’s claim for damages. In substance, he said that the loss of profits claim was valued at somewhere between $733,768 and $1,140,773 depending upon what particular assumptions were made. He said that the price adjustment claim was valued at approximately $92,500, and that this sum would be deducted from the loss of profits claim if both those claims were upheld.
Cross-examination of Mr Blyth
149 Mr Blyth was extensively cross-examined. He acknowledged that he had made a number of adjustments to an earlier expert’s report prepared by Norman Jones, formerly an associate with Bird Cameron. Mr Jones had assessed the value of the loss of profits claim as being $1,176,020 and the value of the debt claim as being $92,955.
150 Mr Blyth agreed that he had relied substantially upon what Mr Courtney had told him in order to form the opinions expressed in his report. He agreed that Mr Jones had simply accepted Mr Courtney’s calculations when he analysed the price adjustment claim. He also agreed that the amount of $92,955 was not, in fact, a claim for price adjustment but was a claim for compensation for loss of profits. In other words, Mr Courtney had included the gross profits which he had expected to make upon the timber which was supplied.
151 Mr Blyth was then questioned about the loss of profits claim. He agreed that Mr Courtney had made an actual profit of $131,160 from the timber project, if one included his price adjustment claim. Otherwise the actual net profit had been $37,409.
the respondents’ case AS PLEADED, AND OPENED
152 Dr Jessup opened the respondents’ case by noting that in their defence they had pleaded that the relationship between the parties in this matter was not, as the applicants’ contended, one of vendor and purchaser of the entire stock of hardwood timber. Rather, the evidence would disclose that Mr Courtney (and not Alpine) had entered into a series of separate contracts for the supply of timber with Boral, each of which was subject to what was described as “an overarching agreement” on certain matters which had been reached between the parties. The “overarching agreement” had resolved:
· the price of the timber per cubic metre;
· the exclusion from deliveries of badly damaged timber;
· the drying of the timber to about 12% estimated moisture content (“EMC”); and
· the delivery of timber by Boral or at Boral’s expense to Melbourne.
153 Dr Jessup contended that the four matters set out above were the only matters of a general nature upon which agreement had been reached. He submitted that, under the broad umbrella of this “overarching agreement”, the parties had entered into a series of “load by load” agreements, each of which incorporated the terms of that more general agreement.
154 Dr Jessup also contended that in addition to the four matters which had been the subject of the “overarching agreement”, there had been various estimates provided by Boral and its agents which did not have contractual effect. For example, Mr Snowden had said that Boral would be able to deliver timber at a rate of 200 cubic metres per month, and that this rate might possibly build up to 400 cubic metres. That was a “general understanding” and not a term of any contract. Another such “understanding” was that the price which was offered was based upon approximate turnouts as to the grade of timber after processing. There may also have been an “understanding” that the price that Mr Courtney was prepared to pay was subject to variation if the approximate turnouts, over time, did not equate to those upon which the parties had their original discussions. However, as it turned out, there was never any formula agreed upon by which the price variations could be put into effect.
155 Boral categorically denied that there had ever been an agreement to sell either Alpine or Mr Courtney the entire stock of the timber in the yard. Mr Courtney had never made an offer in those terms. The only statement which could be categorised as an offer on his part to buy the whole of the timber had never been accepted by Boral.
156 It was Alpine’s case that by sending the fax to Mr Ralph on 7 December 1997 Mr Courtney had offered, on behalf of Alpine, to purchase the entire stock at Tumbarumba. That offer was said to have been accepted by Boral through the medium of Mr Moate at about the time that Mr Courtney spoke to Mr Stratton in February 1998. Boral denied that anything said by Mr Stratton, or by Mr Moate, or anything done by either of those individuals, constituted an acceptance of any offer of the type alleged by Mr Courtney, even if such an offer had been made.
157 Dr Jessup contended that Mr Courtney had been content not to enter into a written contract with Boral. On Alpine’s own case, Mr Courtney was aware that Mr Stratton was endeavouring to draw up such a contract, but was finding the task to be beyond him. Dr Jessup said that the reason was obvious. A new agreement was struck each time Mr Courtney offered to purchase a load of timber, and that offer was accepted. The parties knew the price that would attach to that load because that was part of the “overarching general understanding or agreement” which was incorporated into each contract.
158 Dr Jessup said that it was Boral’s contention that the third page of the fax which Mr Courtney claimed he had sent to Mr Ralph on 7 December 1997 (the “Conditions” document) had either not been received by him, or if it had, had not been read and understood. Moreover, even assuming that that document had been received, there was such uncertainty as to its meaning that it could not possibly constitute a term of a contract.
159 The fax which Mr Courtney sent on 9 December 1997, and which contained the Table, was not an offer to buy the entire stock of hardwood timber. It was merely a statement to Mr Ralph of the basis upon which he had calculated his prices in the “Suggested prices” document.
160 Dr Jessup contended that on Mr Courtney’s case he must not only have had the right to purchase the entire stock, but a contractual obligation to do so. On that analysis, Boral could have sued Alpine had it ceased purchasing timber, at any time, without good reason. That, he submitted, was never contemplated.
161 Dr Jessup submitted that nothing which Boral had done, or had failed to do, amounted to repudiatory conduct. Notwithstanding Mr Courtney’s many complaints, the evidence showed that Boral had supplied timber at a rate which made it possible for Alpine to continue to process it. He submitted that Mr Courtney had acted precipitously in purporting to rescind the contract assuming, contrary to his primary submission, that such a contract existed.
162 In summarising the respondents’ position in relation to the loss of profits claim, Dr Jessup contended that it assumed that the applicants had contracted with Boral to purchase the entire stock of timber. That assumption could not be sustained. However, even if such a contract did exist, the method by which the applicants had calculated their loss of profits was inappropriate. At most the contract was for the sale of goods. If goods are bought pursuant to a contract, but not delivered, or if they are delivered, but in a damaged state, then the measure of damages sustained by the purchaser is the difference between what he actually obtained, and what he could have obtained elsewhere. In other words, in order to calculate the measure of damages one had to take the cost to the purchaser of acquiring equivalent goods. There being no evidence in this case that Alpine Ash hardwood of the type located at Tumbarumba was available elsewhere, the claim was misconceived.
163 As for the price variation claim, Dr Jessup contended that in addition to the problem that there was no agreed formula for calculating the amount owing by either party, Mr Courtney had sought to include within it the profits that he had hoped to realise upon an ultimate resale of the timber. On no view could that component of damages be included in what was, in substance, a claim in debt.
164 With regard to the applicants’ claim against Mr Ewing for the tort of having procured or induced a breach of contract, Dr Jessup contended that it was all but common ground that Mr Ewing knew nothing of the terms of any contract of the type alleged by Alpine. Indeed, he at all times denied the existence of any such contract. Accordingly, he could hardly be said to have knowingly procured or induced a breach of that contract. Secondly, it was argued that where it is alleged that a company has acted in breach of contract, nothing said or done by a senior officer or employee of the company which is said to constitute the very breach alleged can, at the same time, amount to procuring or inducing breach of contract.
165 In relation to the trade practices claims, Dr Jessup contended that nothing said or done by or on behalf of Boral was capable of amounting to misleading or deceptive conduct. Statements made regarding the grades which might be achieved, and the rate of supply, were mere estimates, and were known to be so by Mr Courtney.
166 In addition, Dr Jessup submitted that the applicants’ claim for damages under s 82 of the Act was misconceived because they were seeking “performance damages” and not “reliance damages”. Even assuming that Boral had engaged in misleading or deceptive conduct, the question to be determined was what damage had been sustained as a result. It was not what damage had been sustained as a result of promises not being kept: cf. Marks v GIO Australia Holdings (1998) 196 CLR 494.
167 Dr Jessup noted that, on the evidence, Mr Courtney had made a small, but not insignificant, profit on the venture. His case was that he should have made a much larger profit. That case was essentially a claim for damages for breach of contract. It was not a claim for damages under s 82 of the Act.
168 As for the claim against Mr Ewing for having aided and abetted Boral’s supposed contraventions of the Act, Dr Jessup contended that it was misconceived. Mr Ewing had no connection whatever with the timber at Tumbarumba at the time the supposed misleading or deceptive conduct occurred.
the evidence in support of the respondents’ case
Mr Ewing
169 Mr Ewing said that he was the former area sales manager for Boral, and had been based in Bathurst. In late February or early March 1998, he was asked to become involved in the disposal of the Alpine Ash at Tumbarumba. He had introduced himself to Mr Stratton, who was in charge of the site. He had also spoken to Mr Snowden. He was aware that both Mr Ralph and Mr Snowden had been trying for some time to sell the timber, and that they had been partly successful in that endeavour.
170 Mr Ewing said that Mr Snowden had told him about Mr Courtney and his group’s involvement with the timber. He first spoke to Mr Courtney by telephone at the end of March 1998. Prior to that conversation, he had no knowledge whatever of any supposed contract between Mr Courtney and Boral. He was simply aware that Boral had, from time to time, supplied some timber to Mr Courtney. His understanding was that Mr Courtney was prepared to take the timber at a price after the “rubbish” had been removed. Mr Ewing was provided with a copy of the “Suggested prices” document. That was the only document that he was shown at that stage.
171 Mr Ewing said that he had been told by Mr Snowden that Mr Courtney could take 200 cubic metres per month. He regarded that as being at least a start, though he recognised that at that rate, it would take an extremely long time to move any substantial amount of the timber.
172 Mr Ewing was asked about the details of the one telephone conversation which he had had with Mr Courtney. He said that he had been told by Mr Snowden, prior to speaking to Mr Courtney, that Mr Courtney was going to invest money in a warehouse in Wodonga. He was also told that Mr Courtney wanted some 50 mm material, which Mr Ewing was not prepared to sell.
173 Mr Ewing said that before he spoke with Mr Courtney, he had spoken with Mr Somers. He told him not to build a business around the timber at Tumbarumba because, once it had gone, no more would be available. Mr Somers said that Mr Courtney and he did not have to depend on Boral as they had other sources of supply. Mr Ewing made it plain that there was no 50 mm material available. Mr Somers suggested that Mr Ewing tell that to Mr Courtney.
174 Mr Ewing then telephoned Mr Courtney. His reaction upon being told that he could not have the 50 mm material was to fly into a rage, and threaten to sue Boral. He told Mr Ewing that all of the hardwood timber was his, and it was not Boral’s to sell. Mr Ewing told Mr Courtney that this was news to him. He said that neither Mr Snowden nor Mr Ralph had ever suggested to him that Mr Courtney had purchased the entire stock of timber.
175 Mr Ewing said that after he spoke to Mr Courtney he telephoned his superior, Mr Wallis and informed him of what Mr Courtney had said. Mr Wallis had expressed disbelief. Mr Ewing also spoke to Mr Snowden and Mr Stratton. He told them that Mr Courtney was claiming that he had a contract with Boral. They both said that they knew nothing about any such contract.
176 Mr Ewing then spoke to Boral’s general manager, Mr Moate, and passed on Mr Courtney’s comments. Mr Moate suggested that Mr Ewing and Mr Ralph had better meet with Mr Courtney and find out what was going on.
177 Mr Ewing agreed with Mr Courtney that a meeting had taken place at Wagga Wagga on 3 April 1998. He said that Mr Ralph had begun by outlining his understanding of the arrangements which had been made regarding the timber. Mr Courtney had replied that he did not agree with anything that Mr Ralph had said. There had then been a discussion about the grades being recovered. Mr Courtney claimed that he was not making any money out of the timber and said that he was considering pulling out. At that stage Mr Ewing remarked:
“I’m there to sell the timber and you are a valuable customer, one of my good customers plural.”
to which Mr Courtney replied:
“Don’t categorise me as customers. I am the customer, single.”
178 Mr Ewing said that Mr Ralph had then indicated that there had never been an agreement that entire stock of timber would be sold to Mr Courtney. He said that Boral intended to sell the Alpine Ash the best way it could, and as quickly as possible. He stressed that there was a time limit upon its disposal. By that stage an earlier deadline of July 1998 had been extended to December 1998.
179 Mr Ewing clearly recalled having said to Mr Courtney that he had not seen an invoice for millions of dollars in Mr Courtney’s name for the purchase of the timber. At that point Mr Ralph had raised the possibility of Mr Courtney purchasing the timber outright and possibly even storing it on the Boral premises. Mr Courtney appeared to note Mr Ralph’s suggestion, and to be giving it some thought. The matter was left at that.
180 Mr Ewing maintained that he had always understood Mr Courtney was purchasing “run of mill” timber, that is, ungraded timber with the “rubbish” taken out of it. He said that he recalled having had a discussion with Mr Somers to that effect.
Cross-examination of Mr Ewing
181 Under cross-examination by Mr Clarke, Mr Ewing acknowledged that he had spoken to Mr Snowden on 2 February 1998, as recorded in Mr Snowden’s diary. Mr Snowden had provided him with some of the background to the various attempts which had been made to sell the hardwood timber. He said that he recalled having been told about Mr Courtney, and in particular, about his interest in purchasing hardwood from Boral and processing it off site.
182 Mr Ewing said that he did not speak to Mr Ralph, who was no longer involved by that stage, but relied solely upon Mr Snowden to inform him of the discussions that had previously taken place with Mr Courtney. He insisted that both he and Mr Snowden had been of the same mind, namely that Mr Courtney was taking the timber as “run of mill” grade, moving it to Melbourne to various processors to be machined, and endeavouring to recover the best grade of timber that he could. Mr Clarke suggested to Mr Ewing that Mr Snowden had given evidence that the expression “run of mill” was not normally appropriate to be used with respect to hardwood. Mr Ewing disagreed, and said that that expression was used throughout the industry both in relation to softwood and hardwood.
183 Mr Ewing agreed his view had been that Mr Courtney had devised a sound commercial strategy with regard to the processing of the hardwood. He considered that Boral ought to have emulated that strategy. He had contemplated acquiring a new moulder so that Boral could do the processing work that Mr Courtney was doing. He had also contemplated sending some of the timber to other mills that had that processing facility.
184 When questioned about his dealings with Mr Courtney, Mr Ewing made the somewhat surprising observation that when he used the term “contract” he had in mind only a written document. He said that although he had mentioned to Mr Snowden and Mr Stratton that Mr Courtney continually claimed that he had a contract with Boral, Mr Snowden had refuted that claim. He described the documents which had been faxed to Mr Ralph as “a letter of intent”. The transcript then records the following:
“HIS HONOUR: You may not have written contracts?---There’s no contracts.
But you certainly have contacts, Mr Ewing?---With our customers?
Yes, when you sell something to somebody that’s a contact?---Well, yes, your Honour, you’re legal gentlemen but for my point of view, from where I stand we don’t say to the customer, “We have to sign a contract between two parties.”
You’re distinguishing between a written contract and a verbal agreement, as it were, are you?---Sorry?
Are you distinguishing between a written contract and a verbal agreement?---Yes, when people say contract to me I’m always thinking a legal written document sosign in front of solicitor type of attitude. You know, I’m not into this law business, sir.
MR CLARKE: But you’d understand then – can you have an agreement that isn’t in writing to your way of thinking?---I think you can have an agreement but that agreement can be broken if one party is not into it.
If someone rings you up on the telephone and says they want to buy 50 cubic metres of timber and you say, “Okay, I’ll send it down to you,” is there an agreement in your mind, if you’d agreed on that price as well?---I think so, yes.
HIS HONOUR: Is that agreement a contract?---In my mind, no. I don’t find it binding. I mean, in the sense that, yes, I’ll send the timber down to him. But if it’s not what he wants or whatever, well, that’s it.
So if it’s not in writing it’s not binding in your mind?---It’s a gentleman’s agreement. I’ve never referred to it as a contract in the sense like that.”
185 Mr Ewing was shown the “Conditions” document. He said that he had not seen it until sometime in October 1998. When he saw the grades set out in fifth dot point, namely 13.3% select, 40% standard 46% F17 and 0% F14, he realised that the timber that Mr Courtney was purchasing from Boral could never have met those grades. He described them as being “off the planet”. He distinguished them from the grades set out in the “Draft of factors” document, namely 10% select, 30% standard, 35% F17 and balance F14 and damaged timber, which he said were feasible.
Mr Ralph
186 Mr Ralph said that he was a director of Senlac Concepts Pty Ltd, a private consulting company which was engaged by Boral in 1997 to assist in the disposal of the hardwood at Tumbarumba. He said that there were approximately 7,600 cubic metres of Alpine Ash at the site, and soon after his company had been engaged, he had carried out an inspection of the site. He became aware of several expressions of interest in the timber. He also spoke to a number of potential buyers. Eventually he met Mr Somers in Melbourne and was introduced by him to Mr Courtney. As a result of that meeting, both Mr Courtney and Mr Somers came to Tumbarumba to inspect the timber. There were two such visits, and Mr Ralph was present on both occasions.
187 Mr Ralph said that he did not spend a lot of time with Mr Courtney or Mr Somers on either visit. He did not participate in the inspection. He had no clear recollection of what had been discussed.
188 Mr Ralph was shown the three documents which Mr Courtney said he had faxed through to his home at Dingley on the evening of Sunday 7 December 1997. He said that he was having a dinner party at the time, and that he had been admonished for having allowed business to interrupt the evening. He said that he was “very mellow and relaxed” at the time.
189 Mr Ralph remembered receiving both the “Draft of factors” and the “Suggested prices” documents. However, he had no recollection whatever of having received the “Conditions” document. Nor did he have any recollection of what, if anything, he had done with the fax after receiving it.
190 Mr Ralph said that he could not recall having spoken to Mr Courtney on the telephone that evening. He said that he simply noticed that the fax machine was working and at a later stage he went over to it to collect the documents. He could not recall whether he read them that evening but he knew that he took whatever had been faxed through with him to Bathurst the following week. He said that he had been expecting a “proposal” regarding the hardwood timber from Mr Courtney at some stage, but not specifically at that time.
191 Mr Ralph was taken to the two documents which he acknowledged having received, and which he took with him to Bathurst. He agreed that the contents of those documents reflected, at least in broad terms, what had been discussed with Mr Courtney in earlier conversations. He said that the particular grades set out in the “Draft of factors” document had been discussed as “possible indicative figures” that could come out of the timber. However, he had not regarded this as being any more than an “indicative statement”. He agreed that because about 5% of the material was so badly twisted or damaged, it was understood that it would be removed from the timber supplied to any client. That 5% would be characterised as “waste” or “rubbish”.
192 Mr Ralph was then taken to the “Conditions” document and asked whether its contents aligned with his recollection of the discussions that he had had with Mr Courtney. He said that he did not believe that there had been any discussion to the effect that an overall estimate of lost timber was 25%. He specifically rejected the figures of 13.3% select, 40% standard, 46% F17 and 0% F14, emphasising that these figures did not accord with those contained in the “Draft of factors” document. It was the “Draft of factors” document figures which were correct. He said that from a practical point of view preparing rough sawn material with 0% F14 was virtually impossible. Moreover, Boral was selling the “package less badly damaged material – we have a number of names for that – and that package would include some F14 material”.
193 Mr Ralph said that he provided the two pages of the fax which he had received from Mr Courtney to Mr Moate, together with an undated file note. That file note was in the following terms:
“FILE NOTE: ELLIS MOATE
RE: TUMBARUMBA HARDWOOD
Attached copy of draft notes, with their proposed pricing, from Matt Somersand Tom Courtney. These are the people who were activating probable export to China of bulk volumes. This has not yet eventuated – in fact Matt Somers (who was introduced to us by Mike Young) is planning to visit China in the New Year.
Key Elements of Proposal
· Will take material as R.O.M. excluding damaged timber (this doesn’t include checked timber, it only refers to “unusable” material) estimated at 3-5% and docked split ends.
· Material must meet the 12% moisture specification and be reconditioned as acceptable for the furniture market.
· Initially requires 2 trailer loads which they will assess and confirm their assessment of waste and, of course, return to themselves.
· Assuming their numbers work out (and I would be keeping alongside their results) then starting January at 200 m3/mth building to 400 m3/mth by “mid year”?
N.B. 1. 400 m3/mth selected as it is Tumbarumba’s drying capacity at present.
2. About 2,000 m3 of stock is at present either air dried to required levels or nearly so (Ian Snowden preparing updated stock statement).
Recommend
We supply 2 trailers on a “try it and see” basis. At the prices suggested. I would propose a cards on the table approach re yields. They need to achieve a reasonable return and, of course, we are not to be shafted. But they are carrying the risk with variable grades.
Allowing for destacking, some drying and reconditioning and freight, we would lose about $100/m3 on COGS or $6,000 for the 2 trailers.
· In the interim we are proposing 50 mm material as rapidly as possible. This material has a ready sale and is achieving better A.S.P. than the 38mm which has been already heavily creamed..
· Initial shipment to be cash with later shipments meeting our normal credit requirements.”
194 Mr Ralph said that at some point after 7 December 1997, when he received the fax at his home, he received a further fax from Mr Courtney containing the Table. He said that he recalled a conversation with Mr Courtney regarding price adjustment. Mr Courtney wanted to point out that if the grades that Boral had used as “indicative” were not achieved, consideration should be given to a price adjustment. Mr Ralph had replied that that was fine, but it had to work both ways, up or down.
195 Mr Ralph also recalled a conversation with Mr Courtney regarding what would happen if timber supply arrangements became unworkable. He said that basically it was agreed that either party would have the opportunity, in those circumstances, to sever the relationship.
196 Mr Ralph said that after the two trial shipments Mr Courtney asked him whether Boral wished to continue with the arrangement. Mr Ralph asked Mr Moate for his views. Mr Moate indicated that he was happy to do so.
197 Mr Ralph said that Mr Courtney had made it clear in early December 1997 that he was looking at the possibility of purchasing the entire stock of Alpine Ash as a “complete export opportunity”. However, nothing had ever come of that proposal.
198 Mr Ralph insisted that during the course of the meeting of 3 April 1998 at Wagga Wagga he had denied Mr Courtney’s claim that he had a right to all of the timber. He said that there was no basis for that claim.
Cross-examination of Mr Ralph
199 Mr Ralph agreed with Mr Clarke that the entire stock of hardwood at Tumbarumba was available for sale. It was suggested to him that Mr Courtney had made it plain in late 1997 that he understood that he was negotiating to purchase that entire stock. Mr Ralph denied that. He said that save for the proposal of the “export opportunity” which had gone nowhere, he had no recollection of any such intimation from Mr Courtney prior to the meeting at Wagga Wagga.
200 It was suggested to Mr Ralph that Mr Courtney had telephoned him immediately prior to sending the fax on 7 December 1997. He replied that he did not recall very much about that evening. He was then shown telephone records which demonstrated that there had been a 35 second call from Mr Courtney to Mr Ralph’s home at 8.40 pm on that evening. However, that did not refresh his memory. Nor did the telephone records which showed that a further conversation of 6 mins and 48 seconds duration had taken place at 8.48 pm, moments after the fax had been sent.
201 Mr Ralph said that he had been “under the weather” on that evening. He had no recollection of ever having received the “Conditions” document. Nor did he have any recollection of having gone through that document in detail with Mr Courtney, over the telephone, as Mr Courtney had claimed.
202 Mr Ralph said that he did not understand Mr Courtney’s fax of the Table sent on 9 December 1997 as manifesting an intention to purchase the entire stock of the timber referred to in that drying program.
Mr Stratton
203 Between August 1996 and September 1998 Mr Stratton was the site manager for the mill at Tumbarumba. His role was effectively in production. He had no responsibility for entering into arrangements with outside parties to sell or dispose of the hardwood timber.
204 Mr Stratton said that his first involvement with Mr Courtney was around 5 February 1998 when he was shown a copy of a letter sent to Mr Snowden regarding the Alpine Ash timber. He saw from that letter that Mr Courtney was pressing Boral to come to some agreement regarding the timber. He said that it was his aim to ensure that there was a limit upon the material that was to be sold. He wrote across the copy of that letter the words “letter of intent” and “minimum limit m3 90 x 35, 100 x 40, 70 x 35 and 75 x 40”. He explained that the numbers mentioned were the sizes of the stock to be sold. He said that these sizes made up about half of the timber stored in the stacks. He said that he was concerned that Mr Courtney wanted timber which Boral would normally have sold in the ordinary course of events. For example, the one inch boards were being sold to Maxwell’s Creek, which was an internal sale for Boral. The two inch boards were being sold to a local producer at Wagga Wagga.
205 Mr Stratton was asked whether he had had a conversation with Mr Courtney after seeing the letter of 5 February 1998. He replied that he recalled such a conversation. He had asked Mr Courtney to meet Mr Moate “and get a contract going”. He told Mr Courtney that any agreement would have to be concluded with Mr Moate, and not with him.
206 Mr Stratton said that he had a subsequent conversation with Mr Courtney in which he told him that he believed that there would be no contract with Boral based on the original conditions discussed with Mr Ralph. However, he could possibly sell him timber on a “load by load” basis. He said that there was a pause, and Mr Courtney became upset. He told Mr Courtney that provided he paid cash up-front, he would sell him a truckload of timber if it was available.
207 Mr Stratton was asked the basis for his belief that there would be no contract with Boral. He said that he had spoken to Mr Moate a day or two earlier and had been told, in emphatic terms, when he asked about the contract with Mr Courtney:
“David, there is no contract between us and Tom Courtney.”
Cross-examination of Mr Stratton
208 Mr Stratton said that when he spoke with Mr Courtney on the first occasion he was unaware of the details of the arrangements which had previously been discussed between the parties. He had no recollection of having endeavoured to draft a contract, as both Mr Courtney and Mr Snowden claimed. All that he had sought to do was to prepare some terms that might later be incorporated by others in a formal contract. He had no recollection of having seen any of the documents which had been faxed to Mr Ralph on 7 December 1997.
209 It was suggested to Mr Stratton that the conversation outlined in Mr Courtney’s letter of 9 February 1998, which had been sent to him on 12 February 1998, had in fact taken place. It will be recalled that Mr Courtney wrote in that letter, inter alia:
“Following our conversation of Friday last, I confirm that we do not necessarily require a written contract or a letter of intent from Boral.
We are content to continue with the agreement, on the lines of our offer to Boral through Alan Ralph, prior to Xmas. We have proceeded to date, and are content to continue on that basis.”
210 Mr Stratton said that he recalled that the telephone conversation had been an emotional one. He could not remember all of the details of what had been said. He agreed that the letter suggested that Mr Courtney’s view of what had transpired was that the parties had entered into an agreement along the lines of Mr Courtney’s offer. He maintained that that was at odds with his understanding that there was no contract. However, he had not responded to the letter. He insisted that Mr Courtney’s version of the earlier telephone conversation was not accurate, and that he had made it abundantly clear, during the course of that conversation, that there was no contract. He recalled having offered to sell Mr Courtney a truckload of timber at a time if it was available, as “an olive branch”.
211 Mr Stratton said that his discussions with Mr Snowden had been directed towards the preparation of a “specification” in a “letter of intent”. He said that he understood that a “letter of intent” differed form a “contract”. He said that he had no authority whatever to sign off on a contract on behalf of Boral. He was adamant that if Boral was going to sell several million dollars worth of timber, a formal contract would have to have been executed.
Mr Moate
212 Mr Moate said that he had been employed by Boral as general manager of the softwood group between October 1996 and June 1998. He was located at head office in Bathurst. The mill at Tumbarumba had been under his control, and Mr Stratton had been the site manager at that mill.
213 Mr Moate said that there had been ongoing efforts to sell the large stock of green rough sawn Alpine Ash contained in the stacks. Mr Ralph had been engaged as a consultant to assist in that task. Mr Moate said that in late 1997 and early 1998 he became aware of a proposal to sell the entire stock of timber to Mr Courtney. He said that, as he understood the position, there had been some general discussions between Mr Ralph and Mr Stratton on the one hand, and Mr Courtney on the other, along those lines. Mr Moate was asked:
“To your knowledge and in your understanding at that time, did Boral ever agree to sell the entire stock to Mr Courtney?---Never.”
214 Mr Moate’s attention was drawn to the “Draft of factors” document, and in particular to the second last dot point on that page. Mr Courtney had recorded that if Boral wished to get the stock off the balance sheet by 30 June 1998, he would be able to accept an invoice at that stage for the balance of the stock with suitable retention of title for Boral’s security, and “take and pay” as timber was made available from the drying process. Mr Moate said that Boral had never accepted any such proposal.
215 Mr Moate’s attention was then directed to the “Conditions” document. He said that he had not seen that document until it had been shown to him by Boral’s legal representatives in the course of preparation for the hearing of this proceeding.
216 Mr Moate said that at some stage he discovered that Mr Stratton was contemplating a “contract” with Mr Courtney. His recollection was that Mr Stratton was reviewing a document which Mr Courtney had prepared. Mr Moate spoke to Mr Stratton about the matter and specifically instructed him not to enter into any contractual negotiations. When asked why he had given that instruction, Mr Moate said:
“As was known at the time, your Honour, we had a number of issues in the performance of that plant. We had limitations on our drying, limitations on our ability to mould the product. Additionally, we had to trade off the benefits of working the alpine ash versus working our pine. We had two products. It was never clear to me, our ability to manufacture the finished product of alpine ash, therefore I wanted to continue on a best endeavours basis to do whatever we could in terms of being able to supply the market.”
Cross-examination of Mr Moate
217 Mr Moate said that he doubted that he had sufficient authority to enter into a contract to sell the entire stock of Alpine Ash. Such a transaction would have involved the payment of a sum well in excess of $1 million. Mr Ralph had made a number of suggestions as to how best to dispose of the timber. Some of those suggestions had involved Mr Courtney’s group, but others did not.
218 Mr Ralph, as a consultant, had no authority whatever to deal with the Alpine Ash as he saw fit. If Boral had intended to enter a contract, the matter would have been dealt with by its legal department. Mr Moate had been content to authorise regular shipments of relatively small quantities of timber, such as several trailer loads a month. It was his understanding, however, that the timber was moved on a “best endeavours” basis. He had no recollection of any conversation with Mr Snowden in which he told Mr Snowden that things would continue as they were. Boral had never agreed to do anything more than endeavour to supply Mr Courtney, from time to time, and within the constraints that operated upon it, with the odd truck load of timber.
Mr Humphris
219 The last witness called on behalf of Boral was Mr Humphris, a member of the Chartered Accounting firm Sims Lockwood. Mr Humphris said that he had prepared a report regarding the applicants’ claim against Boral for, among other things, non-performance of the alleged contract. He noted that that claim identified at least two specific heads of damage. These were:
· a credit of $92,955 being the actual adjustment where the grade quality was not in accordance with what Alpine asserted were the agreed estimates; and
· loss of profits totalling $1,292,667 plus interest accumulated on the loss of $14,513 making a total claim of $1,307,180.
220 Mr Humphris said that he had read the report prepared by Mr Jones dated 2 February 2000 in support of the applicants’ claims. After an extensive analysis, he concluded that these claims had been calculated incorrectly. Once the appropriate assumptions were made, the credit claim would be reduced to somewhere between $697 and several thousand dollars. With regard to the loss of profits claim, the amount properly payable, upon the assumption that Boral was liable, was somewhere in the range $348,334 and $811,850.
221 In supplementary reports prepared by Mr Humphris in response to Mr Blyth’s report on behalf of the applicants, Mr Humphris calculated the credit claim under as being valued at approximately $7,726, and the loss of profits claim at approximately $614,392.
222 On 18 October 2000 Mr Humphris engaged in a further set of calculations. He recalculated the value of the loss of profits claim as $862,220.
FINDINGS of FACT
223 It was a somewhat unusual feature of this case that there were relatively few areas of factual dispute between the parties. For the most part, it was agreed that the meetings described had taken place, and the discussions outlined had occurred.
224 To the extent that there were significant issues of fact to be resolved, the starting point must be the credibility of the witnesses who gave evidence.
225 In my opinion, the witnesses who gave evidence in this proceeding all did so honestly, and with the intention of recounting as accurately as possible what had occurred.
226 Mr Courtney was meticulous in his attention to detail, and produced a large number of file notes and contemporaneous records of conversations. I was left in no doubt that he firmly believed that each of the allegations which he made against Boral and Mr Ewing were true, and that he also believed that Alpine was entitled to recover substantial damages for loss of profits, or at least some damages for price adjustments.
227 Mr Snowden was generally supportive of Mr Courtney’s claims, as was Mr Somers. I have no reason to doubt their veracity.
228 The witnesses called on behalf of the respondents were, in my opinion, equally credible. Mr Ewing was adamant that he knew nothing of any contract between Alpine and Boral of the type alleged by Mr Courtney. I have no reason to disbelieve that evidence.
229 Mr Ralph was a critical witness in this proceeding. He maintained that he had never entered into any agreement, or negotiations for an agreement, with Mr Courtney regarding the sale of the entire stock of hardwood timber at Tumbarumba, save for a proposal for export which never came to fruition. He said he had no authority to enter into any such agreement, and never did, or said anything to suggest that he had such authority. He had no recollection of having spoken with Mr Courtney on the evening of Sunday 7 December 1997.
230 I have no doubt that Mr Courtney’s evidence is to be preferred to that of Mr Ralph in this regard. Mr Courtney is supported by the telephone records which show that two telephone calls were made, one immediately before the fax was sent, and one immediately afterwards. However, I am equally satisfied that Mr Ralph was, as he put it “under the weather” that evening, having been dragged away from a dinner party which was apparently a convivial occasion. Whatever Mr Courtney may have said that evening, it certainly did not register with Mr Ralph.
231 I am also satisfied that the “Conditions” document was faxed to Mr Ralph as the third of the pages faxed by Mr Courtney that evening. Mr Ralph said that he had no recollection of having received that document, and no knowledge of its contents. I accept that evidence. I think it likely that in his “mellow” state Mr Ralph failed to include the “Conditions” document in the material which he took with him to Bathurst the following week. It seems to me that the document must have been mislaid very soon after it was faxed. That meant that it was never seen by Mr Moate, or by any other person in authority at Boral.
232 The undated file note addressed to Mr Moate by Mr Ralph seems to me to provide support for these conclusions. It will be recalled that Mr Ralph referred to an attached copy of “draft notes, with their proposed pricing”. Those two categories accord broadly with the “Draft of factors” document and the “Suggested prices” document. In summarising the “key elements” of the proposal Mr Ralph noted that Mr Courtney would “take material as R.O.M. excluding damage timber” which did not include checked timber and referred only to “unusable material” estimated at 3-5%. He also referred to the trial shipments, and said:
“We supply 2 trailers on a “try it and see” basis. At the prices suggested. I would propose a cards on the table approach re yields. They need to achieve a reasonable return and, of course, we are not to be shafted. But they are carrying the risk with variable grades.
Allowing for destacking, some drying and reconditioning and freight, we would lose about $100/m3 on COGS or $6,000 for the 2 trailers.
· In the interim we are proposing 50 mm material as rapidly as possible. This material has a ready sale and is achieving better A.S.P. than the 38mm which has been already heavily creamed.
· Initial shipment to be cash with later shipments meeting our normal credit requirements.”
233 The most significant part of Mr Ralph’s recommendation lies in the observation that Mr Courtney was “carrying the risk with variable grades” and that the 50 mm material had a “ready sale”. When combined with Mr Ralph’s use of the expression “ROM” it is difficult to see how that file note, and its recommendation, could have been written if Mr Courtney’s “Conditions” document had been absorbed. There is nothing in the file note to suggest that the entire stock of hardwood at Tumbarumba is to be sold to Mr Courtney. There is nothing to suggest that the sale price of each load of timber was based on obtaining “13.3% select, 40% standard, 46.7% F17 and 0% F14” as the fifth dot point on the “Conditions” document recorded. Indeed, the file note is difficult to reconcile with the existence of a contract of the type alleged by Mr Courtney.
234 It seems to me that Mr Courtney assumed that he was purchasing hardwood which was of F17 grade or better. In fact, as was abundantly clear, it was impossible for anybody to predict what grades would be recovered from any particular stack of timber. It was also impossible to remove F14 grade from the stacks before the timber was sent for processing.
235 Mr Courtney simply adjusted the figures relating to select, standard, and F17, as set out in the “Draft of factors” document by adding one third to each percentage because he believed that 25% of the timber, which contained F14 and below, would be removed by Boral prior to delivery. As indicated, that could never have been achieved. At best F14 would have been included, and there would have been discussions regarding a price adjustment. Mr Courtney’s expectations, as set out in the “Conditions” document were, as Mr Ewing described them, “off the planet”.
236 The level of uncertainty surrounding the grades that Mr Courtney thought he would recover from the timber is manifest from the passages of the transcript of his cross-examination set out earlier in these reasons for judgment. The reality is that Mr Courtney had never appreciated precisely how the arrangements with Boral would operate. To the extent that he had any firm views upon the subject, they were not shared by anyone in authority at Boral.
237 The meeting which took place on 3 April 1998 at Wagga Wagga consisted largely of Mr Courtney putting his point of view, and Mr Ralph disagreeing with it. There was nothing said during the course of that meeting that took the matter any further. The same may be said of the meeting which took place on 17 April 1998 at Dingley.
238 There is a dispute between Mr Courtney and Mr Stratton as to precisely what was said during the course of their telephone conversation on 5 February 1998. Mr Courtney’s version of that discussion receives some support from his letter dated 9 February (sent to Mr Stratton on 12 February). However, I am in some doubt as to whether either Mr Courtney or Mr Stratton has accurately recalled what was said.
239 Mr Stratton acknowledged that he had been working on a written document which was intended to encompass terms that might find their way into a letter of intent. Mr Courtney characterised Mr Stratton statements as indicating that he was in the course of drafting a contract, but finding it difficult to reduce to writing the arrangements which had been made. It will be recalled that Mr Stratton said that he had no recollection prior to his conversation with Mr Courtney of having seen any of the documents faxed to Mr Ralph on 7 December 1997. In fact, I think it extremely unlikely that he had seen those documents. The probability is that Mr Ralph had simply passed on to Mr Moate the “Draft of factors” and “Suggested prices” documents, and that Mr Stratton had not been provided with copies.
240 Mr Stratton plainly had no authority to enter into a contract for the sale of the entire stock of hardwood to Mr Courtney. Indeed, it is doubtful that even Mr Moate had that authority. I think it likely that Mr Stratton would have told Mr Courtney, as he said he did, that any contractual negotiations had to take place with Mr Moate.
241 Mr Moate was the person at Boral who was said by the applicants to have accepted the offer made to Mr Ralph on 7 December 1997. He denied any knowledge of the “Conditions” document. I accept that evidence.
242 Mr Courtney conceded under cross-examination that the “Draft of factors” document did not form part of his offer for the timber. That leaves the “Suggested prices” document and the Table as constituting the principal components of the written offer upon which the applicants relied.
243 Mr Moate denied having accepted, on behalf of Boral, an offer by Mr Courtney to purchase the entire stock of hardwood. He said that he was unaware of any such offer having been made. All that he had approved was a continuation of what he understood to be the somewhat loose arrangements between the parties whereby timber was supplied to Mr Courtney on a “load by load” basis. Had there been a proposal to purchase all of the timber, the matter would have been dealt with by others, including those within Boral’s legal department. Boral would have insisted upon the execution of a formal written contract. I accept Mr Moate’s evidence.
244 Mr Moate also denied having been aware of any representation on the part of Boral that Mr Courtney could expect to receive timber that would achieve the grades set out in the “Conditions” document. He regarded those figures as fanciful. I accept Mr Moate’s evidence in this regard.
245 It is unnecessary at this stage to make any findings as to the evidence given by Mr Blyth and Mr Humphris. Although they differed as to the measure of damages which had been sustained by the applicants in their price adjustment and loss of profits claims, these differences are of no consequence if the applicants fail to establish that Boral is liable.
THE relevant legal principles
The contract claims
246 A promise or agreement is not legally binding and enforceable as a contract unless the requirements for the formation of a contract, including consideration and certainty of terms are satisfied. Not all contracts are negotiated and formally agreed. Contracts are frequently informal, with little specific negotiation. Terms are often implied to complete the parties’ bargain, either in specific fact situations or in certain commonly occurring contractual relationships.
247 The first matter to be considered is whether the parties who are alleged to have become contractually bound will be regarded as having reached agreement.
248 In Carter and Harland, Contract Law in Australia, (3rd ed., 1996), the learned authors comment, at 21:
“…The foundation of the legal relations which we call contract is thus the agreement of the parties, and this remains so even though the law increasingly imposes rights and obligations upon contracting parties without reference to the question of what their real intentions may have been.”
249 The traditional approach to the question whether a binding agreement has been reached is to inquire whether there has been both offer and acceptance, that is, a clear indication by the “offeror” of a willingness to be bound on certain terms accompanied by an unqualified assent to that offer communicated by the “offeree”. Where agreement has been reached after lengthy negotiations, an analysis in terms of offer and acceptance may, at times, seem unrealistic. Moreover, the formation of agreement will, in many cases, be inferred from conduct.
250 The law is generally concerned with the interpretation which a reasonable person would place upon the words and actions of the parties rather than upon their subjective intentions. Thus an offer must normally be interpreted in the sense in which it would be understood by a reasonable person even though the offeror’s actual meaning was otherwise. Conversely, acts which otherwise amount to acceptance are not prevented from being effective merely because of a reservation not communicated to the other party.
251 The offer must be unequivocal in the sense that nothing further is left to be negotiated between the parties. The language used must be such as would clearly convey a definite decision by the offeree to be bound by the terms of the offer.
252 The applicants’ case is that an offer was made by Mr Courtney to Boral to purchase the entire stock of hardwood at Tumbarumba when, on 7 December 1997, he faxed through to Mr Ralph the “Draft of factors”, “Suggested prices” and “Conditions” documents. That offer was supplemented by the Table which was faxed on 9 December 1997.
253 I am satisfied that Mr Courtney intended to signify that he (or Alpine) was willing, without further negotiation, to enter into a contract with Boral on the terms set out in those documents.
254 Whether a statement is an offer depends on whether the person to whom it is addressed would reasonably interpret it as such. It is frequently said that an offer is “ineffective” until it is communicated to the offeree. Thus, for example, in Henthorn v Fraser [1892] 2 Ch 27 at 37, Kay LJ said that “an offer to sell is nothing until it is actually received”.
255 There is, therefore, an initial difficulty that needs to be resolved. Mr Ralph had no recollection of having received the “Conditions” document and did not pass it on to Mr Moate. Can it be said that the third page of the fax was, in any relevant sense, “actually received” by Boral? If the answer to that question is no, the “offer” which Mr Courtney made will be regarded as “ineffective”.
256 I am prepared to assume, for present purposes, that the applicants did make an offer to Boral in the terms set out in the documents faxed to Mr Ralph.
257 The next question that needs to be addressed is whether an offer in those terms was accepted. The principle is that where an offer has been made, a contract binding the parties will result when, and only when, the offeree has “clearly accepted” the offer: see Carter and Harland op cit at 37.
258 The offer and acceptance must precisely correspond. That which has been proposed by the offeror must be accepted, in toto, no more and no less. Any departure from the offer will result in the purported acceptance being ineffective: see Carter and Harland op cit at 38.
259 An acceptance is generally effective to conclude a contract only when the fact of acceptance is communicated to the offeror. That principle is subject to an exception in cases where the postal acceptance rule applies.
260 It is clear in principle that acceptance cannot occur if the offeree is in fact ignorant of the offer. Thus where an offer is made for a reward to be paid in return for the performance of some act, the fact that a person happens by chance to perform that act while ignorant of the offer will not result in any contract being formed. Similarly, no contract would result if two offers in identical terms should happen to cross in the post, each party being unaware of the offer of the other. In R v Clarke (1927) 40 CLR 227 at 244, Starke J said:
“…unless a person performs the conditions of the offer, acting upon its faith or in reliance upon it, he does not accept the offer…”
261 In the same case, Higgins J observed, at 241:
“… ignorance of the offer is the same thing whether it is due to never hearing of it or to forgetting it after hearing.”
262 It is a fact that many important business agreements are concluded informally. The approach generally taken by the courts to the construction of agreements drafted by businessmen rather than by lawyers is, where possible, to uphold the commercial arrangements which have been reached. Courts will interpret the language used broadly. Difficulties of construction must be distinguished from absence of meaning. There are, however, limits upon the extent to which courts will endeavour to give effect to such agreements.
263 If no agreement has been reached upon an important element of the transaction, there will be no binding agreement between the parties. This is sometimes described as the principle of incompleteness. Price is obviously such an element. There will be no contract if the parties provide that the price is to be agreed by them at a future date. The position will be different if the contract provides that in default of agreement, the price is to be determined according to some formula, or machinery, not depending upon further agreement between the parties.
264 The doctrine of mistake in contract is also relevant to the issues to be determined. It is not necessary, for present purposes, to deal with “common” or “unilateral” mistake as these doctrines are not applicable here. However, the doctrine of “mutual” mistake may be relevant. A “mutual” mistake may arise at the stage of formation of a contract. It involves both parties being at cross purposes. There is not, in any meaningful sense, consensus ad idem, because, in truth, the parties are not in agreement: cf Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833 at pars [205]-[212] per Allsop J. For example, the parties may contract for the sale and purchase of a house in a street of a certain name whereas, in fact, there exist two streets of that name, the seller intending to refer to one and the buyer to the other.
265 It is possible to regard the circumstances in the present case as giving rise to mutual mistake. The parties meant different things at the time that Mr Courtney made his offer, and at the time Mr Moate supposedly signalled Boral’s acceptance. In Halsbury’s Laws of Australia, at par 110-5390,it is said in relation to mutual mistake:
“Parties may both be mistaken but their mistakes may differ: the meeting of the minds may only be apparent since the parties may mean different things. This may arise where offer and acceptance are literally and in their true meanings different, so that no contract is concluded. It is, however, their significations that are essential: if these coincide there is a contract notwithstanding any literal discrepancy; but if they do not coincide, there is no contract though they may literally correspond.
Where there is insoluble ambiguity and the evidence shows that each party meant something different, there is also no contract because offer and acceptance do not coincide. …It is for a person seeking to enforce a contract to show that the terms contracted for were so clear and unambiguous that the other party cannot be heard to say that there was a mistake.” (footnotes omitted)
266 Some examples of the application of this principle may assist.
267 In Raffles v Wichelhaus (1864) 2 H & C 906; 159 ER 375 a contract for the sale of cotton described goods as “ex Peerless from Bombay”. However there were two ships of that name to sail from Bombay. The buyer refused to accept goods on the later ship. The seller argued that it was not open to the buyer to adduce evidence of a subjective intention, and that all that mattered was that the seller had performed in accordance with the literal wording of the contract. That argument was rejected.
268 In Scriven Bros & Co v Hindley & Co [1913] 3 KB 564, an auction was being conducted in which bales of tow and the far more valuable commodity, hemp, were for sale. They were in undifferentiated bales. The auctioneer intended to sell tow but the defendants’ buyer intended to bid for hemp. The amount offered was an extravagant price for tow and the auctioneer believed that the bid was made under mistake, but he believed that the mistake was merely as to value. It was held that as the parties were never in agreement as to the subject matter of the sale, there was no contract.
269 In W & J Sharp v Thomson (1915) 20 CLR 137, an action was brought for damages for breach of contract, the alleged breach being the non delivery of certain goods. The plaintiffs ordered from the defendants a quantity of crockery described inter alia as…“50 crates Wedgwood Seconds”. They alleged that the term “Wedgwood Seconds” meant in the trade crockery-ware made by the celebrated English firm, and not by a local company called Wedgwood & Co Ltd. Griffith CJ observed, at 141-142:
“If it appeared that the plaintiff W. Sharp thought that he was buying goods of some value, and corresponding in kind to the specimens shown to him, while the defendants intended to sell to the plaintiffs crates of such assorted rubbish as was tendered, then the parties would not have been ad idem.”
270 There is a line of authority which holds that a contract is void if one party enters into it under a serious mistake as to the content or existence of a fundamental term, and the other party has knowledge of that mistake: Smith v Hughes (1871) LR 6 QB 597. That approach accords with what has been described as the “subjective theory” of contract. It holds that the true consent of all parties is essential to a valid contract.
271 The contrary view, namely that described as the “objective theory”, is that the law is concerned not with the real intentions of the parties, but with the outward manifestations of those intentions.
272 In Taylor v Johnson (1983) 151 CLR 422 the High Court noted that the clear trend in decided cases and academic writings had been to leave the objective theory “in command of the field”. In a joint judgment, Mason ACJ and Murphy and Deane JJ referred to the observations of Denning LJ in Solle v Butcher [1950] 1 KB 671 at 691 where his Lordship said that neither party to a contract could rely upon his own mistake to say that it was a nullity from the beginning no matter that it was a mistake which to his mind was fundamental. Their Honours commented at 429-430:
“While the mistake in Solle v Butcher was a mistake of fact which affected the operation of a formal written contract, it is plain that the above remarks of Denning L.J. were intended to extend to a mistake as to the existence or content of an actual term of such a contract.”
273 The remedies for mistake at common law, according to Halsbury’s Laws of Australia, at par 110-5415, include “voidness” if the mistake caused offer and acceptance, both properly construed, not to coincide.
274 A decision which I regard as being of particular assistance in resolving the matters in dispute in this proceeding is Toyota Motor Corp v Ken Morgan Motors [1994] 2 VR 106. In that case, the plaintiffs (“KMG”) were a group of companies whose interests included three Toyota car dealerships. The defendants (“TMCA and TFA”) were two Toyota companies which supplied KMG with cars and finance. By mid 1990 KMG was in financial difficulties and entered negotiations with Toyota for a rescue package. The negotiations resulted in a letter dated 19 December 1990 from TMCA to KMG. That letter and a one page enclosure produced on 20 December (together “Exhibit G”) were faxed to KMG on 21 December. The letter referred to the “now agreed to conditions” and comprised two parts, headed “proposed offer” and “conditions relating to proposed offer”. Ken Morgan said he telephoned TMCA on 19 December upon receipt of Exhibit G and accepted the offer contained in it.
275 Exhibit G contained the details of a rescue package, including the purchase of real estate for $5.1M, a loan by TFA of $1.9M and the sale of one of the dealerships. It provided for external accountants to review KMG’s business position prior to advancing the loan and the property settlement. It concluded with the following under the heading “IMPORTANT NOTE”:
“If, following Rich & Co investigation, the financial position indicates that the Ken Morgan Group cannot be viable even after the current offer is concluded, Toyota will not proceed with the offer.”
276 After receipt of written and oral reports from the external accountants, Toyota decided not to proceed with the rescue package. It informed KMG of that decision on 15 January 1991. KMG defaulted on its debts to TFA, and receivers were appointed. KMG alleged that it had a binding agreement in December 1990 for Toyota to provide financial assistance, and that Exhibit G comprised the terms of that agreement. TMCA and TFA denied the existence of any such agreement.
277 The trial judge found in favour of KMG and awarded it damages of $16M. That judgment was overturned by the Full Court on appeal.
278 Brooking J concluded that at the time that Exhibit G came into existence the parties had not intended to make an immediately binding contract. He referred to the general terms and structure of Exhibit G, and its constant references to “ the proposed sale”. His Honour said that businessmen could be taken to know the difference between a sale and a proposed sale. While the letter showed that the ultimate aim was the conclusion of a binding contract or contracts, it evinced no intention to be immediately bound. The “now agreed to” conditions were no more than an action list or timetable.
279 His Honour observed that an agreement was not a binding contract unless the parties had agreed upon such terms as were, in the circumstances, legally necessary to constitute a contract. Otherwise the supposed contract would be bad for uncertainty. His Honour said, at 130:
“…It is convenient to distinguish between two varieties of uncertainty…and to call the first uncertainty and the second incompleteness. A contract is uncertain if some essential term is so vague that no definite meaning can be assigned to it. A contract is incomplete if the parties have deliberately (and whether expressly or by implication) left some essential term to be settled by their future agreement…
…Courts are reluctant to strike down an agreement on the ground of uncertainty or incompleteness…
…the vagueness of a provision may lead to its being held that there is no contract either on the ground of uncertainty or on the ground of incompleteness, the fatal dilemma being that the provision either is incapable of being given a definite meaning or, properly construed, shows that the parties intend to reach agreement hereafter by way of settling some point presently left outstanding…
…But a suggested contract may fail for a different and more fundamental reason: that the parties did not intend that it should be binding contract.”
280 His Honour went on to say that the presence of vagueness or incompleteness could lead the court to conclude that the necessary intention to make an immediately binding contract was absent. Importantly he added, at 131:
“…Failure to reach agreement on matters which, while not essential, are nonetheless matters which are ordinarily agreed upon in transactions of the class in question has the same tendency. …regard may be had, not only to the nature but also to the magnitude of the transaction in considering how likely it is that the parties would have intended to make or record a binding contract by means of some informal, vague and relatively short document.”
281 Brooking J referred to the well-known observation of Lord Greene MR in Clifton v Palumbo [1944] 2 All ER 497 at 499:
“There is nothing in the world to prevent an owner of an estate of this kind contracting to sell it to a purchaser, who is prepared to spend so large a sum of money, on terms, written out on a half sheet of notepaper, of the most informal description, and even, if he likes, on unfavourable conditions; but I think it is legitimate, in approaching the construction of a document of this kind, containing phrases and expressions of doubtful significance, to bear in mind that the probability of parties entering into so large a transaction, and finally binding themselves to a contract of this description couched in such terms is remote. If they have done it, they have done it, however unwise or however unbusinesslike it may be. The question is: Have they done it?”
282 Tadgell J agreed that the character of Exhibit G was non-promissory. JD Phillips J concluded that Exhibit G did not comprise the terms and conditions of an offer of financial assistance which, upon acceptance, for consideration, became the terms and conditions of a binding contract. It outlined a preliminary offer that was then only in contemplation and otherwise set out the conditions which were to be agreed before any final offer would be made.
283 It is clear that the party claiming damages must establish the existence of the contract, the breach of which is said to give rise to liability. The applicants bear that onus of proof in the present proceeding.
284 Returning to the facts of the present case, perhaps the term of the contract which is of the greatest importance so far as the applicants’ allegations are concerned is that Boral agreed to sell the entire stock of hardwood to the applicants. On any view, there was no express term to that effect in any of the faxes sent by Mr Courtney to Mr Ralph on either 7 or 9 December 1997. Mr Courtney plainly believed that the offer which he was making was an offer for all of the timber, and not for timber on a load by load basis. Mr Ralph did not share that understanding. Nor did Mr Ewing, Mr Stratton or Mr Moate. They proceeded upon the basis that the arrangement between Mr Courtney and Boral was simply that timber would be supplied, in accordance with the terms of the “overarching” agreement, on a load by load basis.
285 The fundamentally different views of the parties as to the nature of the arrangements that were being implemented gives rise to the question whether there was, in truth, consensus ad idem. Whether that question arises as a result of mutual mistake, uncertainty, or incompleteness, seems to be of no immediate relevance.
286 The first question is whether the applicants have discharged the onus which rests upon them to prove the existence of a contract to purchase the entire stock of hardwood. If they fail to meet that onus, their loss of profits claim, arising out of breach of contract, cannot succeed.
287 If the applicants are able to demonstrate the existence of a contract of the type alleged, the second question is whether the applicants have shown that the various terms and conditions which they have alleged were breached were part of the contractual arrangements entered into between the parties. The most important of these terms and conditions were the grades to be achieved, and the rate at which the timber would be supplied.
288 The applicants’ price adjustment claim depends entirely upon their being able to demonstrate that the differences between the grades “promised” and the grades recovered had legal significance. The absence of a formula to determine price adjustments is obviously of significance in that regard.
The Trade Practices claims
289 The applicants seek damages under s 82 of the Act. They rely upon various contraventions of the provisions of Part V and, in particular, s 52. They plead s 51A, and assert that some of the representations supposedly made by Boral related to “future matters”, and that Boral had no reasonable grounds for making them.
290 Insofar as the applicants rely upon s 52, a distinction must be drawn between statements as to existing fact, and predictions as to the future. Predictions will normally only be misleading or deceptive if they are known to be false, or are made with reckless disregard as to their truth. The mere fact that representations as to future conduct or events do not come to pass does not make them misleading or deceptive.
291 In Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 the Court held that the non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor’s intention lacked foundation. The same may be said if a prediction proves to be inaccurate. An expression of opinion which is identifiable as such conveys nothing more than that the opinion expressed is held and, perhaps, that there is a basis for it.
292 Hence, the character of a representation said to be false or misleading is to be tested at the date of the making of the representation and not with the benefit of hindsight.
293 The question to be resolved is whether the “estimates” of the grades which were thought to have been recoverable from the hardwood, even assuming that they accorded with those alleged by the applicants, were any more than broad indicators, which could not have formed the basis for any reliance on their part. The same question must be asked in relation to the “estimates” of the volume of timber that might be supplied, even assuming that the applicants could demonstrate that these volumes had not been supplied.
The claims against Mr Ewing
294 In Allstate Life Insurance Co v ANZ Banking Group Ltd (1995) 58 FCR 26 the Full Court referred with approval to the observations of Street J in Short v City Bank (1912) 12 SR (NSW) 186. His Honour said at 202-203:
“The words “induce” and “procure” in their ordinary significance, I think, convey the idea of persuasion or contrivance, and I think that a person complaining of a breach of contractual relations brought about by these means must show that the person whose actions are complained of did something in the nature of effectually persuading or prevailing upon the other party to the contract to violate his obligations under it. The persuasion may take the form of advice or friendly solicitation, or it may take the form of intimidation or molestation, but in every case I think that it must be shown that the defendant deliberately intervened between the contracting parties, either with the express design of depriving the plaintiff of the benefit of his contract, or under such circumstances that he must have known that the effect of his intervention would be to deprive the plaintiff of that benefit.”
295 The claims of aiding and abetting Boral’s alleged contraventions of ss 52, 53 and 55A are dependent upon s 75B of the Act. That section indicates the various ways in which a person can be involved in the commission of a contravention of the Act by a corporation. In order to be held to have aided or abetted, it must be proved that the person accused of having done so was aware of the facts that gave rise to the contravention: Yorke v Lucas (1985) 158 CLR 661 at 666-669. In effect, a person must be proved to have had knowledge of the essential elements constituting the contravention.
conclusion
296 In my opinion, the applicants’ claims for breach of contract must fail. They have not discharged the onus of proving that a binding agreement was entered into between Mr Courtney (and/or Alpine) and Boral for the purchase of the entire stock of hardwood timber at Tumbarumba.
297 Mr Courtney intended to make an offer in those terms. However, nothing in the faxes that he sent to Mr Ralph could be construed as amounting to such an offer. The applicants’ case relies heavily upon implication. However, an implied term is one which was in fact agreed between the parties, or deemed by legislation to exist. It is not a term upon which the parties might reasonably have agreed.
298 The applicants rely upon Boral’s silence in the face of statements made by Mr Courtney. However, in the circumstances of the present case, that silence does not give rise to the inference for which they contend. Silence may be equivocal, and, in my view, is so in this case.
299 Even if one were to assume, contrary to my earlier finding, that Mr Ralph not only received the “Conditions” document on 7 December 1997, but also read and understood it, it would have been entirely unreasonable for him to have construed the faxes sent that evening as amounting to an offer for the entire stock of hardwood timber. The “Draft of factors” document contains several dot points which are inconsistent with a proposal to purchase all of the stock. I refer in particular to the second and third last dot points. The “Suggested prices” document quotes prices per cubic metre. An offer to purchase the entire stock could more easily and sensibly have been expressed as a single global figure.
300 The fax of 9 December 1997 incorporating the Table did not amount to an offer to purchase the entire stock. No reasonable person receiving that fax, and considering it in combination with the earlier faxes, would have construed it in that manner. A natural reading of the fax was that it was simply a qualification of the prices faxed two days earlier. Mr Courtney would be understood as saying nothing more than that the prices offered were conditional upon the mix of sizes following the same or similar percentages in the loads of timber to be delivered. Moreover, even if the fax of 9 December were otherwise to amount to an offer to buy timber, it could not be read as an offer to buy all of the timber. The 25 mm sizes were bracketed for later discussion.
301 For as long as an offer is extant, the capacity to bring into existence a contract lies wholly with the offeree. It is unlikely that Mr Courtney intended that, after 9 December, Boral had it wholly within its power to bring a contract into existence merely by signifying its assent. Later in the month the parties agreed to the delivery of a trial load of timber to the applicants’ processor. That trial was plainly intended for the applicants’ benefit. It would have come as a surprise to Mr Courtney to learn that as a result of the faxes which he sent to Mr Ralph, he might be bound to purchase all of the timber even if the trial shipments proved it to be entirely unsatisfactory.
302 The discussion between Mr Courtney and Mr Stratton on 5 February 1998 did not amount to an acceptance of an offer to purchase the timber. Mr Stratton had no authority to accept such an offer and Mr Courtney knew that. On one version of the applicants’ case, there was an agreement already in existence by the time Mr Courtney spoke to Mr Stratton. His own evidence regarding that conversation is that he referred to an offer which he said he had previously made, and asserted that there already was an agreement in existence. He described his letter dated 9 February as a “confirmation”. That letter was clearly not an offer. Indeed, Mr Courtney said that he did not expect a response to it.
303 Assuming that Mr Courtney’s subjective intention to purchase the entire stock was translated into an offer to that effect, there is no evidence to suggest that an offer in those terms was accepted. The person with whom Mr Courtney had been dealing in relation to the sale of timber was Mr Ralph. As at 9 December 1997 he did not know that Mr Courtney intended to buy all of the timber. In fact, he interpreted the documents faxed to him as a “proposal”, not as an offer. Mr Ralph maintained that position during the course of the meeting Wagga Wagga and throughout.
304 Although it was not within his sphere of responsibility, Mr Stratton did not understand that Mr Courtney had purchased, or was to purchase all of the timber. From the outset, he had authorised the sale of some sizes of timber to other purchasers.
305 Mr Ewing first learned that Mr Courtney thought that he had purchased all of the timber when he spoke to Mr Courtney on 31 March 1998. Even Mr Courtney conceded that Mr Ewing told him that he was unaware of any contract.
306 Mr Snowden agreed with Mr Courtney that he had purchased all of the timber. However, he was merely one of the people employed at the mill to oversee de-stacking and loading. His task was to assist Mr Ralph in the disposal of the hardwood, but he was hardly equipped to assess the nature of the commercial dealings between the parties. His reasons for thinking that Mr Courtney had purchased all of the timber do not withstand scrutiny.
307 There are also several objective indicators that suggest that there was no mutual understanding that the subject of Mr Courtney’s supposed offer was the entire stock of timber. It is impossible to imagine that Boral would have entered into a binding agreement of the type alleged by the applicants without the preparation of a formal written contract. Lord Greene MRs’ observations in Clifton v Palumbo (supra) are particularly apposite here.
308 There are other difficulties with the applicants’ claims for breach of contract. No delivery schedule was ever prepared defining the times at which deliveries would be made at the time of the making of the alleged contract. As a result, it could not be determined whether either of the parties was complying with the contract, or in breach. The “possible” increase to 400 cubic metres per month was so vague as to be incapable of amounting to a term of a contract. The figure of 200 cubic metres per month, which appears to have been mentioned by Mr Snowden in November 1997, was, at best, an expectation or target, and not a requirement. There was never a promise by Boral to supply, or a promise by the applicants to receive, timber in any specific quantities. This makes the respondents’ claim that the only arrangement between the parties, that timber would be ordered and delivered on “a load by load” basis, entirely plausible.
309 There was also considerable uncertainty regarding the place of F14 timber in the contract which Mr Courtney claimed he had made with Boral. It is by no means clear whether the applicants alleged as a term of the contract that all F14 would be removed prior to delivery. Mr Courtney’s reasoning seems to have been that he had never offered to purchase any timber graded F14 or below. However, it would have been impossible for Boral to have removed F14 from the timber in the stacks. The only possible method of dealing with F14 was to deliver it to the purchaser and accept a subsequent price adjustment.
310 Somewhat inconsistently, Mr Courtney asserted that any F14 would have been upgraded to F17, as Mr Snowden had assured him could be done. Mr Snowden was less firm about that assurance in his evidence. He said that he had told Mr Courtney that:
“depending on their processor – the way they process the timber – they might be able to upgrade some of that timber into the higher grade.”
311 The absence of a formula by which any price adjustment could be calculated must be fatal to the applicants’ price adjustment claim. It is impossible, on the evidence, to conclude that Boral accepted Mr Courtney’s grades of 13.3% select, 40% standard, 46% F17 and 0% F14 as set out in the “Conditions” document. However, irrespective of whether those figures formed a term of the contract, the making of any price adjustment unavoidably required agreement on a formula. No such agreement was ever reached. Even Mr Courtney agreed that he had found the task “a bit too complex”. The only agreement reached in relation to how differences in grading outcomes might be accommodated in relation to timber sold on a load by load basis was that the parties would sit down and adjust the pricing accordingly at a later stage. An agreement of that kind cannot give rise to a contractual claim in debt.
312 In the end what Mr Courtney did was to calculate the price variation claim in this proceeding as one which included his own expenses and anticipated profits. There was never any agreement that would sustain that method of adjustment.
313 It is unnecessary in the light of these findings to deal with the applicants’ claim that in October 1998 Boral repudiated the contact, and the applicants accepted the repudiation by rescinding it. The allegation that it was the sales to others that constituted a repudiation depends upon a finding that there was a contract for the sale of all the timber to the applicants. I have already indicated that I reject that claim. The other bases for the assertion that Boral repudiated the contract need not be determined.
314 It also follows from these conclusions that I need not deal with Boral’s claims for contractual damages. These matters were the subject of extensive evidence, and complex submissions, and it would be both burdensome and unnecessary to deal with the issues raised if it should transpire that I was wrong in my conclusions regarding contractual liability.
315 In relation to the applicants’ claims under the Trade Practices Act, they are equally without foundation. The representations relied upon in the amended statement of claim are expressed in elaborate terms. The only ones, in my view, of any consequence, are that Boral represented that it would supply timber at a rate of 200 cubic metres increasing to 400 cubic metres per month, and that an average grading of approximately 13.3% select, 40% standard, and 46% F17 formed a reasonable basis for the offer price to be calculated, and upon which variations of price could be fixed.
316 The former representation was plainly only an estimate. Moreover, it was understood by the applicants as such. Mr Snowden had a reasonable basis for making the statements attributed to him concerning the rate of supply, namely his experience of what Boral had achieved with its own supply.
317 With regard to the grading representation, there is no evidence that it was ever made. The only place in which these grades are to be found is in the “Conditions” document. Even assuming that it was sent to Mr Ralph, there is no evidence that Boral adopted these figures, by silence, as the basis upon which the applicants were to calculate their offer price. Although silence may constitute a contravention of the Act, pursuant to s 4(2)(a), the silence must be deliberate: Costa Braca Pty Ltd v Berrigan Weed and Pest Control Pty Ltd (1998) 155 ALR 714. There is no evidence to support any such finding here.
318 It is unnecessary in the light of these findings to deal with the debate surrounding the basis upon which damages are assessed pursuant to s 82 of the Act.
319 The applicants’ claims against Mr Ewing are entirely devoid of merit. The claim for procuring or inducing breach of contract is based upon the proposition that the applicants had purchased all of the hardwood timber, and Mr Ewing had solicited sales of that timber to third parties. For the reasons set out above, that allegation cannot be sustained. Moreover, there is no evidence to suggest that Mr Ewing had any knowledge or belief in the existence of a contract, the breach of which he was alleged to have induced.
320 The claim against Mr Ewing for having aided and abetted Boral’s contraventions of the Act ought not to have been brought. There was no evidence to suggest that Mr Ewing had anything to do with the making of the representations which were said to constitute the misleading and deceptive conduct. Nor was there any evidence that he had the requisite intention to attract liability under s 75B of the Act. There was nothing to suggest that he had knowledge of all of the essential elements of the contravention, it being clearly established that “knowledge” means actual, and not constructive knowledge.
321 It follows that the applicants’ claims against the respondents must be dismissed. The applicants must pay the respondents’ costs.
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I certify that the preceding three hundred and twenty-one (321) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg. |
Associate:
Dated: 21 December 2001
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Counsel for the Applicants: |
Mr D.M. Clarke |
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Solicitors for the Applicants: |
Tress Crocks and Maddocx |
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Counsel for the Respondents: |
Dr C.N. Jessup QC, with Mr M.F. Wheelahan |
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Solicitors for the Respondents: |
Gadens Lawyers |
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Date of Hearing: |
10-13, 16-20 October 2000 and 4-6 December 2000 |
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Date of Judgment: |
21 December 2001 |
