FEDERAL COURT OF AUSTRALIA

Sharp v Cossack Pearls Pty Ltd [2011] FCA 1477

THE COURT ORDERS THAT:

1.     The application be dismissed with costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

REASONS FOR JUDGMENT

1    This case arises out of a commercial dispute of long standing. The dispute is between entities associated with Mr Drew Sharp on one hand and Mr Lindsay Brady on the other.

2    Mr Sharp brings the proceeding as the assignee of Pearl Coast Divers Pty Ltd (in liquidation) (“PCD”) and as trustee of the Sharp Family Trust. Leave was granted by the Court for Mr Sharp to bring the proceeding in the name of PCD: see Pearl Coast Divers Pty Ltd v Cossack Pearls Pty Ltd [2008] FCA 927. The trustee of the Sharp Family Trust was, formerly, Liquid Investments (WA) Pty Ltd (“Liquid Investments”) a company whose sole director, prior to 7 November 2001, was Mr Sharp.

3    Mr Lindsay Brady (“Mr Brady”) was the director of the two corporate respondents, Cossack Pearls Pty Ltd (“Cossack”) and Dampier Pearling Company Pty Ltd (“Dampier”). Mr Russell Brady managed farms conducted by Cossack and Dampier. Mr Paul Thomas was the secretary and financial controller of both these companies.

4    In the mid-1990s both Mr Sharp and Mr Brady had interests in the pearling industry in the Exmouth Gulf area of Western Australia. Mr Sharp was a pearl fisherman. This term is apt to mislead. Pearl fishermen harvest shells from the ocean’s floor which are thought to be suitable for the creation of pearls. The shells are seeded in laboratories and placed in underwater pearl farms where the pearls develop over a period of two to three years. Cossack and Dampier conducted pearl farming businesses.

5    In each calendar year there was a period between January and June in which pearl shells could be harvested. The industry was regulated under the Pearling Act 1990 (WA) and the regulations made thereunder. Only those holding licences may fish for pearl shell. Quotas were imposed on the number of shell which could be harvested in particular areas. A licence holder could harvest quota allocated to it in that area. At relevant times both Cossack and Dampier held licences. The state fisheries authority issued tags to licence holders for each season. The number of tags issued to each holder depended on the quota allocated to that holder. Fishing for shell was prohibited unless tags were held on the fishing boat. Once shells were taken they were placed in racks which held eight shells. A tag had to be attached to each rack which contained shells.

6    In the 1996 season Cossack engaged Mr Sharp to catch 5,000 pearl shells in the Exmouth Gulf area. Thus began an association which was to last until the end of 2001.

7    In November 1996 PCD agreed with Cossack to purchase a boat known as the Panta Rei. The purchase price was $150,000. Payment was to be made in instalments of $50,000 due on 30 June 1997, 30 June 1998 and 30 June 1999. Ownership of the Panta Rei was to pass to PCD on the making of the final payment.

8    In 1997 Mr Sharp was involved in pearl fishing using the Panta Rei. He caught 30,000 pearl shells and made, after tax, income of $77,223.

9    In about September or October of that year Mr Brady raised with Mr Sharp the possibility of PCD catching Cossack’s pearl shell quota in the following season. Mr Brady said that PCD would need two boats to undertake this work.

10    Following a second meeting, held later in 1997, PCD and Cossack entered into an agreement (“the 1997 Agreement”) under which PCD would catch Cossack’s pearl quota and PCD agreed to purchase a boat named the Anzac Pearl from Cossack for $400,000.

11    On 13 October 1997 Mr Sharp attended a meeting with a solicitor from the firm which was acting for Cossack. The purpose of the meeting was to finalise the terms of the agreement. The solicitor made notes of the meeting.

12    The agreement had a five year term from 1 January 1998 to 31 December 2002. Cossack provided PCD with a loan of $400,000 to enable PCD to pay the purchase price of the Anzac Pearl. The loan was interest free and required PCD to make repayments of $80,000 by 30 October in each year during the term of the agreement. The first payment was due on or before 30 October 1998. Security for the loan was provided by a mortgage over the boat. Mr Sharp and his wife were guarantors of PCD’s obligations under the mortgage.

13    The agreement also provided for a price per shell ($18.50) with provision for periodic increases having regard to the movements in the consumer price index during the term of the agreement. PCD was required to take 5,000 shells per calendar month during the fishing season. Any shortfall not exceeding 20% or 1,000 could be carried over into the next month. If, however, the shortfall exceeded a thousand shells, Cossack was entitled to reallocate that quota to another contractor. PCD was required to invoice Cossack for shell fished under the contract at the end of each neap tide. Cossack was obliged to pay PCD 90 per cent of the invoiced shell price within one business day of receipt of an invoice.

14    At the same meeting the parties entered into a loan agreement under which Cossack provided PCD with $78,050 for the refitting of the Anzac Pearl. Repayments were to be made by PCD at the rate of $10,000 per neap tide.

15    Once the documents were signed Mr Brady gave Mr Sharp the tags necessary to cover Cossack’s quota of shells for the 1998 season.

16    Mr Sharp conducted fishing operations in the Exmouth Gulf area during the 1998 season pursuant to these arrangements. He took Cossack’s full quota of 25,000 shells. He took a further 15,000 pursuant to a quota held by Dampier.

17    As agreed, Mr Sharp issued invoices to Cossack after each neap tide. Ninety percent of the invoice price was paid promptly. The other ten percent was, as had been agreed, retained by Cossack.

18    In the 1997/98 financial year PCD’s operating profit after tax (including directors’ salaries) was $112,950. When the $78,050 repayment for the refitting of the Anzac Pearl and the $80,000 repayment which was due before 30 October 1998 were brought into account, PCD’s business was running at a loss.

19    In May 1998 Mr Sharp (at Mr Brady’s invitation) provided Mr Brady with a quotation for “turning” work to be performed later in the year. This process involved the turning of racks of seeded pearl shells at Cossack’s farm. Mr Sharp quoted a price of $850 a day to perform this work. Mr Brady accepted the quote. The work was performed between August and November 1998 after the fishing season had concluded.

20    PCD anticipated that it would be unable to pay the $50,000 instalment on the purchase of the Panta Rei when it fell due on 30 June 1998. In anticipation of this eventuality Mr Sharp forewarned Mr Brady. On 16 June 1998 Mr Brady wrote to Mr Sharp. He said that, in order to assist PCD’s cash flow, he was prepared to defer payment of the $50,000 for six months. Progressive part-payments would occur during 1999. He also proposed that, if PCD was unable to make the $80,000 payment on the Anzac Pearl, which was due by the end of October 1998, he was prepared to make deductions of $300 per day from the $850 per day which was to be paid for the turning work.

21    In the event, these proposals were not adopted. Cossack agreed to take back the Panta Rei and PCD was reimbursed the amount which it had paid in instalments on the purchase.

22    In 1999 Mr Sharp caught both Cossack’s and Dampier’s quotas. Cossack did not ask PCD to provide any transport or turning services during 1999.

23    After the 1999 quota had been fished Mr Sharp called Mr Thomas. He asked that retention monies, held by Cossack, be released to PCD. He also asked if Cossack could lend him $50,000.

24    In July 1999 Mr Sharp and Mr Brady held a meeting to discuss operations in the 2000 season. The meeting was also attended by Mr Steven Gava (Mr Sharp’s accountant) and Mr Thomas. Concern was expressed about PCD’s financial situation. Mr Gava said that PCD was experiencing serious financial problems. He asked if Cossack could give any turning or transport work to PCD. Mr Brady said no such work would be available because turning work at the farm was to be performed by Cossack employees. Mr Gava raised the possibility of refinancing the loan which had been taken out to purchase the Anzac Pearl. Mr Brady said that Cossack was prepared to assist but that Mr Sharp had first to prepare a budget.

25    Following the meeting Mr Gava faxed a budget to Mr Thomas. The budget had been prepared by Mr Sharp and Mr Gava. It made provision for turning work calculated on the basis of 60 days work at $2,000 per day. On 3 August 1999 Mr Thomas responded that Cossack would be doing its own turning work in 2000 and would not require Mr Sharp’s services for this work.

26    Shortly afterwards, Mr Gava, acting on behalf of PCD, wrote to a broker (Shell Lease Industrial) seeking to obtain $300,000 to finance PCD’s operations. In the letter, dated 12 August 1999, Mr Gava said:

“We refer to our telephone discussions regarding obtaining finance of $300,000 for Pearl Coast Divers Pty Ltd. The finance will be secured by a mortgage over the fishing vessel, the Anzac Pearl. We understand that Drew Sharp has forwarded to you a copy of a recent valuation of the boat ($430,000) for insurance purposes.

We confirm that the finance is required to pay out a boat mortgage of $240,000 secured over the Anzac Pearl to Cossack Pearls Pty Ltd and $60,000 working capital to pay out outstanding creditors. The $60,000 deficiency has arisen because of the significant loan repayments made to Cossack Pearls Pty Ltd ($240,000), capital expenditure ($100,000) and a deposit on a dump boat ($20,000), a total of $360,000 after income tax over two and a half years.

We do not only act as accountant for Pearl Coast Divers Pty Ltd, but we also recently took over the bookkeeping and financial control of the Company due to the cashflow problems experienced. We have prepared cashflow budgets for the financial year ended 30 June 2000 which show significant surpluses. We will be preparing monthly actual/budget comparisons to ensure future expenditure is controlled.

To assist with the finance Application we enclose the following information:

1.    Profit and Loss Statements, Balance Sheet and Depreciation Schedule prepared on MYOB by our bookkeeping division “NKH Technologies”.

2.    Financial Statements for the year ended 30 June 1998 incorporating 30 June 1997 comparatives.

3.    Cashflow Budgets for the financial year ended 30 June 2000.

4.    Copies of Agreements between Cossack Pearls Pty Ltd and Pearl Coast Divers Pty Ltd for purchase of the Anzac Pearl ($400,000), fitout of boat ($78,050) and terms for repayment of loans from 25,000 shell fishing quota.

5.    Copy of Agreement with Dampier Pearling Company Pty Ltd regarding 15,000 shell fishing quota.

…

2.    Cashflow Budget for the Year Ending 30 June 2000

a)    Contracting Income

If the $240,000 loan owing to Cossack Pearls can be paid out, Cossack is prepared to renegotiate a fee of $20.00 per shell for its 32,500 quota via a new agreement. Steve from Dampier Pearling Company has indicated to Drew that it is most likely that Pearl Coast Divers Pty Ltd will be engaged to catch the remaining 7,500 shell at $20.00 per shell. He also indicated it may be possible to catch additional shell given a revised quota.

…

b)    Other Income

Drew managed to derive approximately $60,000 in additional Income during the July to December 1998 off season. We are anticipating that this can be increased to at least $90,000 during the August to December 1999 off season. We are expecting that the boats will be used for approximately 45 days at the rate of $2,000 per day. This forecast has been based on work already negotiated, anticipated work from Cossack Pearls, Dampier Pearling Company, Fisheries Department and other sources.

c)    Expenditure

The expenditure forecast is based upon the 1999 financial statements with adjustments as discussed in 1 above. It also includes the Company’s $60,000 current creditors which are anticipated to be paid from the finance.”

27    PCD’s application for finance was supported by Cossack. It was successful. This enabled PCD to complete its payments for the purchase of the Anzac Pearl.

28    These changes to the financial arrangements led, in turn, in September 1999, to a renegotiation of the 1997 agreement between PCD and Cossack. On 24 September 1999 Cossack sent an e-mail to Mr Sharp which was headed “Pearl Coast Divers – Parts to be changed”. The document read, in part;

“1    …

2.    Responsibility of shell is Pearl Coast Diver’s until Cossack counts shell at approved site and confirm counts with Pearl Coast Divers.

3.    Term of Contract is to be 5 years.

4.    10% of value of shell fished will be withheld until Cossack accepts responsibility of shell from Pearl Coast Divers. This may be in part or in full.

5.    Shell to be turned every neap tide unless Cossack has taken delivery of shell. Shell especially has to be turned if a cyclone has occurred within the area of the Holding Site. (Definition shall be if the closest edge of the eye of the cyclone has passed within 150 km of the Holding Site. Shell shall be turned within 5 days of the eye having passed the Holding Site.)

6.    …

7.    Pearl Coast Divers will dump shell two times per day unless 50nm or more from Cossack’s approved holding site, then he will dump at the end of each neap.”

29    On 27 September 1999 Mr Sharp responded relevantly:

“Terms 1, 3, 4 & 7 are agreed to, though clarity is requested in the following areas.

Term 2. Clarify approved sites and frequency of shell stocktake.

Term 5. PCD will look after dumps during fishing period (at no cost). However should we complete fishing quota prior to stocktake being taken Cossack will be charged day rate for us to go and turn dumps.

..

In Addition To:

AUD$20.00/Shell

CPI adjusted after 3rd year.

Costs of adjustment to be halved.

If you could get back to me as soon as possible as settlement is due this week.”

30    On 24 November 1999 Cossack sent Mr Sharp a draft agreement for Mr Sharp’s approval. Two days later Mr Sharp advised Cossack that he had received the draft agreement and had no objections to the format. He asked that the necessary documentation be forwarded to him for signing.

31    The new agreement (“the 1999 agreement”), which was based on the earlier one, was formally entered into in December 1999. It had a term of five years commencing on 1 January 2000.

32    The 1999 agreement contained the following terms:

“1

…    Quota means:

(a)    the quota of 25,000 Shell allocated to Cossack under the Pearling Licence; and

(b)    the quota of 7,500 Shell which Cossack is entitled to catch pursuant to an agreement to catch Shell under a pearling licence granted to Dampier Pearling Company Pty Ltd;

…

2.1    Transfer

Subject to:

(a)    the Contractor complying with the Contractor’s Obligations; and

(b)    any necessary approvals being obtained from the Fisheries Department or any other relevant Authority,

Cossack must by 31 December:

(c)    in the year immediately preceding the Term;

(d)    with the exception of the last year of the Term,

in each year of the Term complete and lodge with the Fisheries Department;

(e)    an annual Notice of Intent to transfer the Quota to the Contractor;

(f)    Notice of Pearling or Hatchery Activity Form; and

(g)    any other forms, applications or documents reasonably required by the Fisheries Department or any other Authority,

to transfer the Tags for the Quota to the Contractor.

…

3.    Fishing of Quota

The Contractor during the Term must:

(a)    catch the Quota during the Shell Season;

(b)    in each month during the Term catch not less than 5,000 Shell;

(c)    only fish for Shell within Zone 1;

(d)    subject to clause 5, only fish for Shell which are within the Size Limit;

(e)    store and maintain the Shell in a manner approved by Cossack from time to time;

(f)    if Shell is caught more than 50 kilometres from a Holding Site:

(1)    place the Shell on Good Bottom at least twice a day at a Temporary Site; and

(2)    at the end of the neap tide during which that Shell is caught move the Shell from the Temporary Site to Good Bottom at a Holding Site;

(g)    if Shell is caught within 50 kilometres of a Holding Site, place the Shell on Good Bottom at least twice a day within a Holding Site;

(h)    without derogation from any other obligation specified in this clause 3, not place any Shell in a tank for a period of longer than one day;

(i)    in fishing the Quota comply with:

(1)    the Pearling Act;

(2)    the Pearling Licence;

(3)    the Pearl Producers Code of Practice published from time to time;

(4)    the Guidelines for Pearl Oyster Quota Management System in Western Australia published by the Fisheries Department from time to time;

(5)    all directions of the Fisheries Department pursuant to the Pearling Act or any other relevant legislation;

(6)    all reasonable directions of Cossack; and

(j)    not catch more than the Quota.

4.    Failure to fish Quota

4.1    Monthly Quota

Without derogation from the Contractor’s Obligations under this Document, if in any month during the Shell Season the Contractor fails to catch and deliver to a Holding Site at least 5,000 Shell, Cossack may itself, or may employ another contractor to, fish and catch that part of the Quota for the relevant month.

4.2    annual Quota

If the Contractor fails to catch and deliver to Cossack at least 80% of the Quota by 30 June in any year of the Term, then Cossack may by giving to the Contractor not less than 30 days notice, terminate the agreement contained in this Document and the provisions of clause 18 will apply as if an Event of Default had occurred and not been remedied by the Contractor in accordance with the provisions of that clause.

…

6.1    Contractor to deliver Shell to Holding Site

The Contractor must deliver the Shell to one of the following approved holding sites:

(a)    North Turtle Island;

(b)    Flying Foam Passage; or

(c)    Tent Point;

or such other place as is directed by Cossack or the Farm Manager from time to time.

6.1    Contractor to notify Cossack of location of Shell

The Contractor must promptly notify Cossack of the location and quantum of Shell which have been delivered to a Holding Site.

6.2    Cossack to Collect Shell

Cossack must by 31 August of each year of the Term collect Shell which has been delivered by the Contractor to a Holding Site.

6.3    Contractor to turn Shell

Before Cossack collects the Shell from a Holding Site the Contractor must at each neap tide turn all Shell that has been caught.

…

12    Specified employee

The Contractor must at all times during the Term employ COLIN ANDREW SHARP or such other person as may be first approved by Cossack (in Cossack’s absolute discretion) to supervise the carrying out of the Contractor’s Obligations.

…

14.5    Comply with statutory requirements

The Contractor must duly and punctually comply with and observe the requirements of all legislation, Acts, orders, regulations, directions, proclamations, decrees and other lawful requirements relating to the Boat, its use or operation including but not limited to the Navigation Act 1912 (Cth), Western Australian Marine Act 1982 (WA), Admiralty Act 1988 (Cth), (WA) and Shipping Registration Act 1981 (Cth) [sic].

…

28    Notice

A notice, demand, consent or authority given or made to a person:

(a)    must be in writing;

(b)    may be given or made by:

    (1)    delivering it to that person personally;

    (2)    addressing it to that person and either leaving it at, or posting it to, the address of that person appearing in this Document or any other address nominated by that person by notice to the person giving the notice; or

    (3)    sending a facsimile copy of the notice to the facsimile copier number specified from time to time by that person by notice to that person giving the notice; and

(c)    will be deemed to be given or made:

    (1)    if by leaving it at the address of that person, when left at that address;

    (2)    if by post, on the second Business Day following the date of posting; and

    (3)    if by facsimile, on the next following Business Day.

…

30    Entire Agreement

30.1    Document constitutes entire agreement

This Document constitutes the entire agreement between the Parties with respect to the subject matter of this Document and contains all of the representations, warranties, covenants and agreements of the Parties in relation to the subject matter of the Document as at the date of this Document.

30.2    No reliance on oral representations

Each Party acknowledges that it has not relied on any oral statement, representation, undertaking, covenant or agreement made before the date of this Document relating to the subject matter of this Document and not contained in this Document.

…

35    Further Assurances

Each Party must execute and do all acts and things necessary or desirable to implement and give full effect to the provisions and purpose of this Document.

…

Schedule

1.    Term

A term of 5 years:

Commencing on:        1 January 2000

Expiring on:            31 December 2005

2    CPI Variation Dates

1 January 2003

1 January 2004”

33    PCD fished under the 1999 agreement during the 2000 season. It harvested all of Cossack’s quota during this season. Cossack did not ask PCD to provide any transport or turning services during 2000.

34    Towards the end of 2000 Mr Sharp and Mr Brady met to discuss operations during the 2001 season. The Cossack and Dampier quotas remained the same as in earlier years. At similar meetings, held about the same time in the preceding years, Mr Brady had provided Mr Sharp with tags to cover the full quotas allocated to Cossack and Dampier. On this occasion he only provided 1,250 tags, that is, sufficient tags to cover 10,000 shells.

35    Early in 2001 Mr Sharp commenced looking for residential properties in the Perth area which might be purchased for investment purposes. Between March and August 2001 four properties were purchased by Liquid Investments.

36    At a meeting, held on 26 March 2001, Mr Sharp told Mr Brady that he had commenced purchasing investment properties which he proposed to positively gear.

37    Each of these properties was subsequently sold at a loss when Liquid Investments was unable to make mortgage repayments. These sales occurred between November 2001 and June 2002.

38    Mr Sharp commenced fishing operations in January 2001. These operations were impeded by a series of cyclones. As a result Mr Sharp had not harvested 10,000 shells by 31 March 2001.

39    On 26 March 2001 Cossack provided Mr Sharp with a further 625 tags, that is, enough to cover 5,000 shells. A further 937 tags were provided on 19 April 2001 which covered 7,496 shells. The following table sets out the details of the tags issued and the shell taken in the period between 1 January and 30 April 2001:

40    On 5 June 2001 Mr Sharp attended at Cossack’s offices and asked for more tags. Either Mr Brady or another employee of Cossack advised him that the remaining tags covering Cossack’s quota for the 2001 season had already been reallocated to another contractor, Mr Feeney. To this point Mr Brady had received 2,812 Cossack tags which covered 22,496 shell. Cossack’s remaining 1,250 tags covering 10,004 shell had been given to Mr Feeney.

41    On 18 June 2001 Mr Sharp ran out of tags to cover that part of Cossack’s quota which had been allocated to him. He then arranged to obtain tags from another allocation which enabled him to catch a further 7,500 shells. These shells did not form part of the quota referred to in the 1999 Agreement.

42    On 9 October 2001 Mr Sharp wrote to Mr Brady about arrangements for the 2002 season. Mr Sharp sought an assurance that Cossack was “secure enough to honour the contract it has in place with [PCD].”

43    Shortly afterwards Cossack instructed its solicitors to advise Mr Brady that the 1999 agreement was being terminated. By letter dated 26 October 2001 the solicitors advised that:

“[Cossack] instructs us that PCD has failed to catch and deliver to Cossack at least 80% of the Quota of 32,500 shells by 30 June 2001 as required under clause 4.2 of the Agreement.

Pursuant to clauses 4.2 and 18.4 of the Agreement we hereby give PCD 30 days notice of our client’s termination of the Agreement. Accordingly, the Agreement will be terminated as of 25 November 2001.”

44    On 7 December 2001 liquidators were appointed to PCD.

THE APPLICANTS’ CASE

45    Mr Sharp seeks damages and other relief for what he alleges were contraventions by the respondents of s 52 of the Trade Practices Act 1974 (Cth) (“the TP Act”) and the Fair Trading Act 1987 (WA) (“the FT Act”). He contends that the respondents made a series of representations to him, on which he acted to his detriment, which were misleading and deceptive.

46    Mr Sharp also complains that the respondents breached terms of the 1999 agreement when purporting to terminate it.

THE RESPONDENTS’ CASE

47    The respondents deny that any of the alleged representations were made and, accordingly, deny any contravention of the TP Act or the FT Act.

48    The respondents also deny having breached any term of the 1999 agreement.

49    The respondents, in a counter-claim, sought rectification of the 1999 agreement to the extent that the expiry date appearing in Clause 1 of the Schedule should appear as “31 December 2004” rather than “31 December 2005”.

THE LEGISLATION

50    The TP Act has been superseded by the Competition and Consumer Act 2010 (Cth). The TP Act was in force at the time at which events, relevant to this proceeding, occurred. It will, therefore, be convenient to refer to the provisions of the former Act.

51    The terms of s 52(1) of the TP Act are well known. They simply state that:

“(1)    A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”

The equivalent provision in the FT Act is s 10.

52    Section 51A of the TP Act potentially affected the operation of s 52. Relevantly, it provided that:

“(1)    For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.

(2)    For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.

(3)    ..”

THE ALLEGED REPRESENTATIONS

53    Mr Sharp alleged that the respondents had made three representations which had contravened s 52 of the TP Act and s 10 of the FT Act.

54    It will be necessary, shortly, to essay, in greater detail, the representations which Mr Sharp alleges were made by the respondents and which were said to be misleading and deceptive. It should, however, be noted at this point that not all of the pleaded representations were relied on in final submissions and the terms of some of the alleged representations were differently expressed in the pleadings and in the opening and the closing submissions made on behalf of Mr Sharp. In these reasons I have relied on the representations which Mr Sharp contended, in final submissions, had been made by the respondents. To the extent that the terms and substance of these representations departed from those pleaded, I have proceeded on the basis that the pleaded representations are no longer relied upon.

The “Purchase and Refit” Conduct

55    The first representation, on which Mr Sharp ultimately relied, was referred to in the substituted statement of claim as one of “the Anzac Pearl Representations”. These representations were said to be founded on the exchanges between Mr Sharp and Mr Brady in the latter part of 1997: see above at [7]-[8].

56    It was alleged that Mr Brady had represented to Mr Sharp that the 1997 Agreement would continue “at least long enough for [PCD] to repay Cossack the financed amount.” In opening submissions the representation was recast as an inducement to Mr Sharp: if he bought the Anzac Pearl, Cossack would provide him with extra work turning shell and transporting it around Cossack’s farm. In final submissions the representation was said to be that Cossack would give Mr Sharp additional work, including turning and transportation work, to assist PCD in paying the extra costs of purchasing, refitting and operating the Anzac Pearl.

The Turning Representation

57    This representation is related to the first. It was referred to in the statement of claim as the “Variation Representation”. It was framed as a representation “that if [PCD] would agree to change in the arrangements pursuant to the 1997 Agreement … for the 1998 season, Cossack and Dampier … would revert to the original arrangements for the following seasons.”

58    In oral submissions, the substance of the representations was said to be that Cossack and Dampier’s financial position made it necessary for PCD to perform the turning work at cost in the 1998 season and that in subsequent years the work would be paid for at market rates.

The “Inducement to Contract Conduct”

59    This representation relates to PCD’s entry into the 1999 Agreement. Mr Sharp claimed that PCD was induced to enter the Agreement by an omission. That omission was said to be the failure “of the respondents to inform Mr Sharp, at any time until 26 October 2001, [that] he (Mr Sharp) could not rely on the income of” PCD under the 1999 Agreement. He needed the funds to service the mortgages which Liquid Investments had entered into on the investment properties referred to above at [35] and [36].

SOME BASIC PRINCIPLES

60    The phrase “misleading and deceptive” has been examined in many cases. Collectively the words “mislead” and “deceive” mean “to lead into error”: see Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198; Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564 at 589-90. It may be, as Gibbs CJ observed in the Parkdale case, that the word “deceptive” is, as a result, redundant.

61    Conduct may be misleading or deceptive for the purposes of s 52 of the TP Act even if the actor does not intend to mislead or deceive: see Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre (1978) 140 CLR 216 at 223, 234.

62    In cases such as the present where the impugned conduct is the making of a statement which is misleading or deceptive or likely to mislead or deceive, it is necessary for an applicant to clearly identify the words which the respondent is alleged to have spoken: see Watson v Foxman (1995) 49 NSWLR 315 at 318.

63    In determining whether or not an alleged representation has been made the Court will have regard to all of the circumstances surrounding the dealings between the parties: see Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 41 (per Gummow J).

64    Where representations are said to have been made in the course of commercial negotiations the Court must take into account the common understanding of “commercial people” when determining whether the statements were misleading or deceptive. The relative experience of the parties will also be relevant but arms length negotiations are not required: see General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 at 177-8 (per Davies and Einfeld JJ).

65    Where an applicant’s complaint is that certain information was not disclosed in the course of negotiations an objective test is applied:

“The pertinent question must be whether any member of the class of persons affected by the conduct, excluding only the unusually stupid or those with quite unusually great expectations of disclosure, would have expected that the information in question would be disclosed. If the class of persons affected are ‘commercial people’, then the conduct must be assessed by reference to the expectations of all such people, and not by reference to the expectations of a reasonable member of that class.”

See: Lake Cumbeline Pty Ltd v Effem Foods Pty Ltd [1995] FCA 1340 at [493] (per Tamberlin J).

66    In certain circumstances silence can constitute conduct that is misleading or deceptive. In Demagogue Black CJ (with whom Gummow and Cooper JJ agreed), said (at 32) that:

“Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of ‘mere silence’ or of a duty of disclosure can divert attention from that primary question. Although ‘mere silence’ is a convenient way of describing some fact situations, there is in truth no such thing as ‘mere silence’ because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed.”

67    In Fraser v NRMA Holdings Limited (1995) 55 FCR 452 at 467-468 the Full Court considered what must be established by an applicant who advances a non-disclosure case under s 52. The Court said that:

“Where the contravention of s 52 alleged involves a failure to make a full and fair disclosure of information, the applicant carries the onus of establishing how or in what manner that which was said involved error or how that which was left unsaid had the potential to mislead or deceive. Errors and omissions to have that potential must be relevant to the topic about which it is said that the respondents’ conduct is likely to mislead or deceive. The need for an applicant to establish materiality is of particular importance … where the proposal is complex, and involves difficult questions of commercial judgment and matters of degree and conjecture as to the future about which there is room for a range of honestly and reasonably held opinions.”

The Court went on to observe that, where complex issues are involved, the question about whether non-disclosure is misleading or deceptive must be approached in a “practical, realistic way.”

68    It is, therefore, necessary for the Court to have regard to all of the relevant circumstances, with a view to determining whether a reasonable expectation existed that certain material facts, known to one party, would be disclosed to the other in the course of their discussions or negotiations.

69    In applying s 52 it may be necessary to notice the requirements of s 51A. Its effect was explained by Emmett J in McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230 at 242 [44]. His Honour there said:

“Under s 51A(1) of the Trade Practices Act, a representation is to be taken to be misleading if it is a representation with respect to any future matter and the maker of the representation does not have reasonable grounds for making the representation. Under s 51A(2), the maker of the representation with respect to any future matter is to be deemed not to have had reasonable grounds for making the representation unless it adduces evidence to the contrary. However, if evidence is adduced by a representor to the effect that the representor had reasonable grounds for making the representation, the deeming provision will not operate. Where the representor adduces such evidence, it is then a matter for the Court to determine, on the balance of probabilities in the ordinary way, whether or not the representor had reasonable grounds for making the representation.”

See also at 283 [192] (per Allsop J).

CONSIDERATION

70    The principal witnesses on each side were, respectively, Mr Sharp and Mr Brady. They gave evidence about their commercial dealings and conversations which had occurred over a decade earlier. Unsurprisingly, their accounts differed in material respects. I formed the impression that these differences were not the result of any deliberate attempt, on either side, to mislead the Court. Rather they arose from failure of memory after such a long time and attempts being made to reconstruct what the witnesses considered it likely they would have said or done or understood in the circumstances then arising. Mr Sharp’s evidence was given through the prism of the failure of a commercial venture which he had entered into in the expectation of considerable financial gain.

71    In such circumstances I consider that the proper approach is for the Court “to place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence”: see Lake Cumbeline at [412], an approach subsequently endorsed by the High Court as being “orthodox and sensible”: see Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599 at 603.

The Purchase and Refit Conduct

72    This representation was framed in different ways at different stages of the litigation. Mr Sharp also gave varying accounts of precisely what Mr Brady had said to him in the course of their discussions in which the representation was said to have been conveyed.

73    The various formulations of this representation have been set out above at [56].

74    The applicants’ case relied, principally, on the evidence of Mr Sharp.

75    In particulars provided in his statement of claim, Mr Sharp attributed to Mr Brady words to the effect that:

“(a)    If Pearl Coast wants to purchase the Anzac Pearl, Cossack would loan Pearl Coast the purchase price, which Pearl Coast could pay off over time, and would loan money to Pearl Coast to pay for the re-fit of the Anzac Pearl, with the payments to be made on each neap tide.

(b)    Cossack would engage Pearl Coast to fish the Cossack Quota for at least the next five years.

(c)    Cossack would also engage Pearl Coast to do the turning and transportation of shell harvested for Cossack.

(d)    Cossack would engage Pearl Coast to fish the Cossack Quota and provide turning and transportation services for at least as long as it took for Pearl Coast to repay Cossack through the income derived from providing those services.”

76    In his oral evidence Mr Sharp said that when, in the latter part of 1997, he and Mr Brady discussed the possibility of PCD catching Cossack’s quota, Mr Brady had said that, if PCD were to take up this offer, it would need a second boat. Mr Sharp had stressed to Mr Brady that the running of a boat was very expensive. Costs incurred included loan repayments, insurance and the general running and fitting of the vessel. Mr Sharp said that Mr Brady had responded by saying: “if we [PCD], basically, went ahead with the agreement and caught the shell for them, bought the vessel, he would provide turning and farm work, turning and transporting work.” At a later meeting, before the 1997 Agreement was entered into, Mr Brady had said to him words to the effect: “… there would be further work to cover those leaner months when we are not in the off season.”

77    Under cross-examination Mr Sharp maintained his position that Mr Brady had told him that he would be provided with turning and transport work and that he would not have gone ahead with the purchase of the Anzac Pearl had he not been assured of the additional income which would flow from this work. He acknowledged, however, that, although the 1997 Agreement dealt with many matters in great detail, no provision was made for PCD to perform any turning or transportation work during its five year term..

78    The following exchange then occurred:

“And could I put it to you that in any these discussions you may have had, or as you recall them, with Mr Brady, the understanding was that if Mr Brady could provide you, or Cossack could provide you with other work, it would. That was your understanding, wasn’t it? --- Well, if he was operating each year, I expected to do the turning.

Yes. Well, if he - - -?---If he didn’t operate that year, well, we would cross that when we got to it.

Yes?---But when he was operating, which he had to do each year, it was my understanding that Pearl Coast Divers would do the turning and the transporting.

But you are not saying that he ever said that to you?---He said to me that “to help with the financing of that vessel, we will give you transporting, turning and work around the farm,” and in the ‘97/98 year, he did give us some of that, at the reduced price.

Yes, full stop. To help with the finance, he would give you work around the farm, transporting and turning: that’s what he said to you?—That’s correct”

79    Later, Mr Sharp agreed that, despite not being requested to perform any transportation services for Cossack in the 1998 season, he did not contact Cossack and complain. It was put to him that he hadn’t complained because there had been no promise to give PCD such work. Mr Sharp’s response was:

“Well, when you say to me that you are going to do something, if you call that a ‘promise’ or you call that a – you know, not a promise – I don’t know, but when you say you are going to do something, you generally do it.”

80    Mr Brady said that at no time did he consider that Cossack or Dampier was under any obligation to provide turning or transport work to PCD. He recalled that, at some time during their relationship, Mr Sharp had told him that PCD was experiencing financial problems. He had told Mr Sharp that: “Well, if we get any work around the farms or any other work that we want a contractor to do, we will get you to quote on it.” Normally, however, that work was done “in-house”.

81    When cross-examined Mr Brady said that he did not recall any conversation with Mr Sharp in which Mr Sharp had said that it would be too expensive for him to run two boats. Mr Brady said that it was “highly unlikely” that he would have said to Mr Sharp that “to help [him] along, I can give you extra work in the form of turning and transport”. This was because he had no need for PCD to do such work. Furthermore, he would not have suggested that PCD might transport shell from the fishing grounds to farm because he did not consider that either of the boats which were used by PCD were suitable for such work. These boats were not equipped with the tanks which were necessary to ensure that the shells arrived at the farm in a suitable condition.

82    It was evident that both Mr Sharp and Mr Brady had difficulty recalling exactly what had passed between them almost 14 years earlier. Although at times Mr Sharp was adamant that a promise had been made to him that Cossack and Dampier would provide PCD with turning and transportation work in order to furnish PCD with additional income, it was notable that he was less definite about matters of detail such as the volume and value of the work to be provided, when it would be available, and the time at which the work was to be done. Statements such as those recorded above at [76] were pitched at a level of generality which is more consistent with an intimation by Mr Brady that Cossack and Dampier would give PCD the opportunity to tender for turning work should they have a need for such services. No binding assurance was proffered. What Mr Brady said appears to have given rise to a hope or expectation on the part of Mr Sharp that such work may have been forthcoming.

83    After the 1998 season PCD was invited to quote for some turning work. It quoted at cost and it performed the work. No similar offers were made in later seasons. Mr Sharp’s failure to complain about this or to insist that provision be made, in the 1999 Agreement, for the rendering by PCD of such services and the terms on which the services would be performed are considerations which tend to support Mr Brady’s account of the dealings between him and Mr Sharp.

84    No version of this alleged representation is supported by the documentary records. With some immaterial exceptions all of the agreements entered into between PCD, Cossack and Dampier were reduced to writing. Some of them, such as the 1997 and 1999 Agreements, the mortgage over the Anzac Pearl and the loan agreement for the refit of the vessel were prepared by solicitors. Other arrangements, such as the provision of turning services in 1998, were recorded in a quotation and invoices. Notably absent from any of this documentation is any record of a binding agreement between PCD and Cossack and Dampier pursuant to which the respondent companies were obliged to provide turning and transport work to PCD. This was despite Mr Sharp’s acceptance that he considered it important to reduce commercial agreements to writing.

85    No mention is made of such services in the notes taken by the solicitor who discussed the terms of the 1997 Agreement with Mr Sharp. When Mr Sharp was provided with a draft copy of the 1999 Agreement and invited to comment he did so. He made no mention of the failure to include provisions relating to turning or transport services. This was despite the fact that Dampier and Cossack had not provided PCD with such work following the conclusion of the 1999 season.

86    Neither the 1997 nor the 1999 Agreement provided for turning services. They did, however, refer to transportation. They both required PCD to deliver shell to dump sites adjacent to the fishing ground and for PCD to advise Cossack that shell had been deposited at the dump sites. Thereafter it was Cossack’s responsibility to transfer the shell from the dump site to the farm: see clause 6 of the 1999 Agreement.

87    In his letter to the broker on 12 August 1999 Mr Gava advised the broker, under the heading “Other Income”, that PCD was anticipating being able to earn at least $90,000 in additional work between August and December 1999. PCD was said to be “expecting that the boats will be used for approximately 45 days at the rate of $2,000 per day. This forecast has been based on work already negotiated, anticipated work from Cossack Pearls, Dampier Pearling Company, Fisheries Department and other sources.”

88    A number of observations may be made about these statements. The first is that they related to expectations rather than contractual rights. The second is that the potential sources of the additional income were not confined to Cossack and Dampier. The third is that, if the $2,000 per day for 45 days related to anticipated turning work, it could not have been an expectation based on anything offered by Cossack: Mr Sharp had been told, in the presence of Mr Gava, in the previous month, that Cossack would not be able to give any turning work to PCD following the 1999 or 2000 seasons. The letter to the broker does not, therefore, support Mr Sharp’s case in relation to this alleged representation.

89    There is one document which lends peripheral support to Mr Sharp’s contentions. On 23 October 2000 Cossack Pearls submitted a document entitled “Pearling Annual Notice of Intent” to the Western Australian regulatory authority. Under the heading “Details of proposed shell transport programme” was written “October/November move shell to farm from Exmouth”. Under the heading “Details of transport vessels to be used” the Anzac Pearl was nominated and Mr Sharp identified as the master. Mr Brady signed a declaration that the information contained in the form was true and correct. When confronted with the documentation, Mr Brady said that the reference to the Anzac Pearl undertaking the transportation work and another detail were incorrect. It had been necessary to lodge the notice of intent in order to obtain the fishing tags for the coming season. His concern was to obtain the tags and he had not given attention to the details entered on the form when he signed the declaration. The Anzac Pearl could not have undertaken the transportation work because it was not equipped with the necessary tanks. I accept Mr Brady’s evidence on this point. No doubt he should have been more careful in ensuring that the form was properly completed. It was, however, no more than a statement of intent and did not bind Cossack to utilise the services of PCD or anyone else for transportation work in the 2001 season.

90    The extent to which turning and transport services are needed in the pearling industry in any given year is subject to a range of unpredictable circumstances. They include the vagaries of the weather, where fishing occurs in relation to farms and the capacity of the licence holders to perform such work themselves. Given these uncertainties it is highly unlikely that either Cossack or Dampier would have committed themselves to providing PCD with work additional to fishing over a five year period. They would have been committing themselves to paying for services which they may not have required and may not have been able to afford. In doing so they would, effectively, have been subsidising PCD’s business. Such an arrangement would have made no commercial sense.

91    Mr Brady also relied on commercial considerations to support his contentions. He pointed to PCD’s operating loss in the 1997/98 financial year. They showed that the commitments which Mr Sharp had entered into in the 1997 Agreement could not be supported by the proceeds of fishing alone. It was, therefore, he submitted, unlikely that he would have agreed to enter into the 1999 Agreement in the absence of some assurance that he would receive income additional to that which could be provided by fishing. These submissions overlook the financial adjustments to which Cossack agreed in the latter part of 1998. These included the postponement of repayments on the Anzac Pearl and Cossack’s agreement to take back the Panta Rei and reimburse PCD for part payments already made. Cossack was not privy to the detail of PCD’s financial position but it would have been entitled to assume that these adjustments went a long way towards overcoming PCD’s financial problems. The fact those problems continued, even if Cossack had been aware of them, cannot, therefore, be relied on to support PCD’s claim that Cossack gave an undertaking to provide additional work.

92    For these reasons I conclude that the alleged representations relating to the purchase and refitting of the Anzac Pearl were not made.

The Turning Representation

93    This representation was said to have been made after the end of the 1998 pearl oyster season. It was then that Mr Sharp and Mr Brady discussed the prospect of PCD performing “turning” work: see above at [19]. Mr Sharp said that he had been induced to quote a price of $850 a day to perform this work because Mr Brady had told him that Cossack and Dampier were having temporary cash flow problems and that Dampier would pay PCD market rates for performing turning work in subsequent years.

94    In particulars provided in the statement of claim Mr Sharp attributed to Mr Brady words to the effect that Cossack and Dampier would pay PCD “enough to cover its costs for turning” in the 1998 season and that “Cossack staff would transport the shell using the Panta Rei”. Mr Brady was also alleged to have said that payment at market rates “would not be a problem for the next years.”

95    Mr Sharp gave evidence at trial that statements to this effect had been made to him by Mr Brady.

96    Both Mr Brady and his brother, Mr Russell Brady, agreed that the $850 was about the cost price of performing the turning work. It was put to Mr Russell Brady in cross-examination that, at the meeting at which the turning work was arranged, Mr Sharp had said: “Yes, I will do it [the turning work] this year, but after this year it will go to market”. Mr Russell Brady said that he had no recollection of any such statement being made but that it was possible that it had been said and that he did not recall it.

97    Mr Sharp’s case confronts a number of difficulties. The first is that it assumes that the first (“purchase and refit”) representation had been made. For reasons which I have already given I do not accept that any such representation was made.

98    Secondly, to the extent that the representation was said to involve the assertion, in mid to late 1998, Cossack and Dampier were in difficult financial circumstances and, as a result, not in a position to pay market rates for turning, it was common ground that this was true.

99    Thirdly, the proposition put to Mr Russell Brady was not that he or his brother had told Mr Sharp that turning work in future years would be paid for at market rates. It was Mr Sharp himself who was said to have asserted that this would occur. Cossack needed to have turning work done at its farm in 1998. It engaged PCD to do that work at a rate which it could afford but which was well below market rates. In these circumstances it is understandable that Mr Sharp might have needed the work and agreed to do it at the lower rate in 1998 but then made it clear to Messrs Brady that, if PCD performed any turning work in subsequent years, it would expect to be paid at the market rate.

100    Fourthly, the absence of any reference, in either the 1997 or the 1999 Agreements, to any rates of payment for turning work (or, indeed, any reference to turning work at all) tells against Mr Sharp’s contention that this representation was made.

101    For these reasons I do not accept that the second alleged representation was made.

The Inducement to Contract Conduct

102    The terms of this representation are set out above at [59].

103    The claim that this representation by omission was made is untenable.

104    There was no evidence called which could have supported a finding that Cossack did not, at the time of entering the 1999 Agreement, intend to perform it. What the evidence does establish is that, after the end of the 2001 season, Cossack considered that PCD had failed to comply with certain of the terms of the agreement and that this provided a ground for the termination of the agreement. Whether or not Cossack was right in concluding that grounds for termination existed is a matter which will shortly be considered. For present purposes it is sufficient to note that Cossack did not form this view until well into the life of the agreement. This was a view which Mr Brady did not hold when the 1999 Agreement was being negotiated and entered into and was, therefore, not a material matter which he was bound to disclose to Mr Sharp, lest Mr Sharp be misled or deceived.

105    The alleged representation was not made.

Conclusions on Representations

106    I am not satisfied that any of the representations alleged were made by the respondents or any of them. In so concluding I do not find it necessary to deal with Cossack’s further argument that the existence of the “entire contract” clauses of the 1997 and 1999 Agreements (respectively clauses 40 and 30) precluded a finding that the representations had been made. Nor is it necessary to consider the possible operation of s 51A of the TP Act.

BREACH OF CONTRACT

107    Mr Sharp complains that the respondents were not lawfully entitled to terminate the 1999 Agreement when they purportedly did so in October 2001.

108    In purporting to terminate the contract Cossack relied on Clause 4.2 which provided for termination in the event that PCD failed to catch and deliver to Cossack at least 80% of the quota of 32,500 shells before 30 June 2001.

109    It was common ground that PCD had not fished 80% of the quota by 30 June 2001.

110    The applicants’ pleaded case was that Cossack had breached Clauses 2.1, 2.2 and 35 of the Agreement thereby making it impossible for PCD to meet the 80% of the quota in the 2001 season by failing to provide PCD with sufficient tags. A consequence was that Cossack had wrongfully repudiated the agreement. This wrongful repudiation had caused PCD to suffer loss and damage.

111    The case opened for the applicants was that Cossack’s failure to provide all, or at least 80%, of the necessary tags to Mr Sharp prevented PCD from complying with Clause 4.2 of the agreement (when read with Clause 14.5). PCD had substantially performed its obligation to catch at least 80% of the quota notwithstanding Cossack’s refusal to provide the necessary tags. Mr Sharp had accepted the purported termination and the refusal to provide all the tags as acts of repudiation of the agreement.

112    The first issue is, then, whether Cossack was obliged, by Clause 2.1 of the agreement, to furnish PCD with all tags which PCD required to catch the quota. Clause 2.1 imposed no such obligation. What it required Cossack to do by 31 December in each year during which the agreement operated, was to complete and lodge with the Fisheries Department the various documents identified in paragraphs (e), (f) and (g). This Cossack did prior to 31 December 2000 in respect of the 2001 season. It provided Mr Sharp with tags to cover 10,000 shell rather than the number needed to catch 32,500 shell. This was sufficient to allow PCD to commence fishing at the start of the 2001 season. Further tags were issued through until 19 April 2001, by which time PCD had received sufficient tags to catch 22,496 shell. The remaining tags were given to Mr Feeney in mid April. There was, therefore, a shortfall. 438 more tags would have been needed in order to allow PCD to catch 26,000 shell (80% of the quota).

113    No submission was pressed at trial that Cossack had failed to use its reasonable endeavours to obtain the necessary approvals under clause 2.1 thereby contravening clause 2.2.

114    Under Clause 4.1 of the Agreement Cossack was entitled to arrange for another contractor to fish its quota to the extent that PCD had fallen short of the 5,000 shell minimum in a given month. The extent of any shortfall could not be ascertained until after the end of a particular month. Alternative arrangements could not be made, therefore, until a later month. That is, the shortfall could not be fished until some time after the end of the month in which it occurred. There was, as a result, no impediment, under Clause 4.1 to the accumulation of shortfalls over successive months, and the reallocation of the total shortfall to another contractor at a later time.

115    By 5 June 2001, when Mr Sharp asked for and was refused further tags, PCD had a cumulative catch shortfall of 7,295. Cossack had earlier allocated its remaining tags to Mr Feeney. This entitled him to take 10,004 shell. This allocation to Mr Feeney was not, therefore, authorised or supported by Clause 4.1 to the extent that it exceeded 7,295. That excess was 2,709 shell.

116    Despite Cossack having given Mr Feeney more tags than were necessary for him to catch PCD’s accumulated shortfall, this had no practical impact on PCD’s capacity to catch 80% of the quota in the 2001 season. This is because, even if PCD had received the additional 339 tags it needed to catch the 2,709 shell to which it remained entitled on 5 June 2001, it could not have caught 80% of the quota in the 2001 season. By that time PCD had caught 22,496 shell. A further 2,709 would have brought its total catch for the season to 25,205. This figure would have represented only 77.5% of the quota.

117    The failure of Cossack to provide Mr Sharp with additional tags when he asked for them on 5 June 2001 was not the cause of PCD’s failure to catch 80% of the quota in the 2001 season.

118    Clause 35 of the 1999 Agreement required Cossack to do all things necessary to give effect to the provisions of the agreement. These provisions included Clauses 2.1 and 2.2. When read together, these three clauses required Cossack to obtain and to provide PCD with sufficient tags to enable PCD to catch the quota during the 2001 season. Had Cossack not provided PCD with any tags prior to the start of the 2001 season or if it had failed to provide PCD with tags sufficient to catch at least the 5,000 minimum shell in the first month of the season Cossack would have contravened Clause 35. Cossack did not, however, do anything, prior to 5 June 2001, to impede PCD’s capacity to catch the quota. On 5 June 2001 Cossack wrongly refused to provide PCD with additional tags thereby preventing PCD from catching any more shell as part of the quota in the 2001 season. Whilst this failure constituted a contravention of Clause 35, it did not, for reasons already given, prevent PCD catching at least 80% of the quota in that season. Cossack’s breach did not, therefore, cause PCD to fall short of the 80% catch for the season and, in turn, provide Cossack with a ground to terminate the Agreement under Clause 4.2.

119    The applicants submitted (but did not plead) that Cossack’s right to terminate the 1999 Agreement was subject to the ‘doctrine of substantial performance’. They relied on a series of cases which, they contended, supported the proposition that “substantial compliance with contractual requirements has been held sufficient notwithstanding there was not complete performance.” As I understood the argument, it was to the effect that PCD had substantially complied with the 80% benchmark and that, as a result, Cossack could not rely on PCD’s failure to meet that benchmark in order to justify termination of the agreement under Clause 4.2

120    The cases to which the applicants referred, such as Hoenig v Isaacs [1952] 2 All ER 176, Bolton v Mahadeva [1972] 2 All ER 1322 and Zamperoni Decorators Pty Ltd v Lo Presti [1983] 1 VR 338, were cases in which dissatisfied clients had sought to refuse payments to tradesmen on the ground that the tradesmen’s work was defective. The principle to be applied in such cases, expressed by Chesire and Fifoot and cited by Sachs LJ in Bolton (at 1327-8), was “… the present rule is that ‘so long as there is substantial performance the contractor is entitled to the stipulated price, subject only to a cross-action or counter-claim for the omissions or defects in execution’”. One can well understand why it should be that a contractor who has substantially performed work pursuant to a contract should not be deprived of the whole of the amount contracted for merely because some of the work was not performed precisely to specifications or was, in parts, sub-standard.

121    Had PCD contracted with Cossack to catch a particular quantity of shell for a certain price and had caught slightly less than the amount agreed on, PCD may have been able to rely on the doctrine of substantial performance to obtain a part payment of the contracted price. That is not, however, what PCD, as I understood its argument, seeks to do in the present proceeding. What it seeks to do is to set up substantial performance as a defence to the exercise of Cossack’s contractual right under Clause 4.2 to terminate the contract. This it cannot do. The parties had fixed a failure to catch and deliver at least 80% of the quota as a ground on which Cossack might act to terminate the agreement. When Cossack exercised its right PCD was not deprived of the fruits of its labours during the 2001 season. What it lost (if anything) was the financial benefit which it might have obtained in one or more of the remaining seasons to which the agreement applied. There was no scope for the operation of the doctrine of substantial performance.

122    The applicants have failed to make good their pleaded case of breach of contract.

DAMAGES

123    In view of the conclusions which I have reached in relation to the alleged misrepresentations and breach of contract it is neither necessary nor appropriate to decide or deal with the question of damages.

RECTIFICATION

124    Clause 2 of the Schedule to the 1997 Agreement stated it was for “A term of 5 years”. It continued:

“Commencing on: 1 January 1998

Expiring on: 31 December 2003”

125    The three in “2003” had been struck out by pen and the figure “2” substituted.

126    In the 1999 Agreement Clause 1 of the Schedule again stated that the agreement was for a term of five years. It continued:

“Commencing on: 1 January 2000

Expiring on: 31 December 2005”

127    In its cross-claim Cossack seeks rectification so that this latter date reads “31 December 2004”.

128    The practical purpose served by such rectification would be to limit the scope of damages payable to PCD should Cossack be found to have been in breach of the agreement. As I have found no such breach occurred the need for a finding on this cross-claim has fallen away.

129    In September 1999, when the terms of the 1999 Agreement were being negotiated Mr Sharp expressly agreed that the term of the agreement was to be for five years. Had it been necessary I would have been prepared to order rectification on the basis that the parties had agreed, as they stated, to a five year term and that “2005” had been written in error below that statement because 5 was added to the “2000” commencing date: cf Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 336 (per Sheller JA).

DISPOSITION

130    The application must be dismissed with costs.

Associate:

Dated:    20 December 2011