JUDGMENT No. 2.@ LES CATCHWORDS CONTRACT - principles governing assessment of damages for breach of contract -point at which contract of continuing nature could lawfully be terminated - interest payable on loan for purchase of business as expense of the business reducing profits made from the business - notional assessment of tax payable had the contract been performed according to its terms. N PETER EDWARD FINUCANE v NEW SOUTH WALES EGG CORPORATION G24 of 1987 LOCKHART J. SYDNEY 8 JULY 1988 IN THE FEDERAL COURT OF AUSTRALIA } ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G24 of 1987 ) ) GENERAL DIVISION BETWEEN: PETER EDWARD FINUCANE Applicant AND: NEW SOUTH WALES EGG CORPORATION Respondent JUDGE MAKING ORDER: LOCKHART J. DATE ORDER MADE: 8 JULY 1988 WHERE ORDER MADE: SYDNEY MINUTES OF ORDER 1. The Court grants leave to the applicant: (a) To amend the amended statement of claim by deleting paragraph 20(k) and inserting in lieu thereof paragraph 20(k2) which reads as follows: 'Failed to inform the applicant that: (i) the respondent held the view that in the event of the services of some egg carriers being dispensed with then the most recently retained carriers would probably be the carriers not retained. (ii) that the respondent held the view that it was more likely than not that in the event of changes to the transport system being introduced it would make compensation to carriers retained before 1 July 1983 but not those engaged thereafter.' (b) To amend the amended statement of claim by deleting paragraph 23A(b) and inserting in lieu thereof paragraph 23A(b2) which reads as follows: "It was a term and condition of the said Agreement that the respondent would not terminate the Agreement except upon the happening of any of the events mentioned in clause 2 of the Contract Carrier's Appointment or upon reasonable notice by one party to the other provided that such notice would not be given by the respondent to the applicant until the term of appointment had subsisted until at least the commencement of the long term." 2. The Court declares that: (a) The respondent engaged in conduct that was misleading or deceptive in trade or commerce by failing to inform the applicant prior to 17 September 1984 when interviewing the applicant as a person interested in buying an egg run that: (i) the respondent held the view that in the event of the services of some egg carriers being dispensed with then the most recently retained carriers would most probably be the carriers not retained; (ii) the respondent held the view that it was more likely than not that in the event of changes to the transport system being introduced it would make compensation to carriers retained before 1 July 1983 but not those engaged thereafter. (b) The applicant on or about 17 September 1984 entered into a contract with the respondent whereby the respondent agreed to retain the applicant to cart eggs on the respondent's behalf for a term of indefinite duration, terminable upon the happening of any of the events mentioned in clause 2 of the contract Carrier's Appointment or upon reasonable notice by one party to the other provided that such notice would not be given by the respondent to the applicant until the term of appoiintment had subsisted until at least the commencement of the long term. (c) The respondent breached the agreement referred to in declaration 2(b) above by terminating the said agreement on 12 November 1984. (d) The applicant suffered loss and damage as a_ result of the conduct of the respondent referred to in declaration 2(a). 3. The Court Orders: (a) The respondent to pay the applicant damages in the sum of $112,771.27 together with interest at the rate of $27.35 daily calculated from and including 23 April 1988. (b) The respondent to pay the applicant's costs of the (¢) proceedings except for the costs of the hearing on 21 and 22 March 1988. The applicant to pay the respondent's cost of the hearing on 21 and 22 March 1988. 4. The Court by consent stays execution in respect of the orders set out in paragraph 3 above pending the determination of an appeal by the respondent and notes the agreement of the parties that this stay is conditional on the filing and service of a Notice of Appeal by the respondent within 21 days and is also conditional on the respondent within 21 days depositing the sum of $112,771.27 with an institution to be selected by Angelo Hatsatouris and Geoffrey Pike, solicitors respectively for the applicant and the respondent, and in their joint names, such deposit to bear interest, to the intent that in the event that the appeal succeeds in whole or in part an appropriate portion of the said sum (with interest) be repaid to the respondent, and in the event that the appeal fails in whole or in part an appropriate portion of the said sum be paid to the applicant. 5. Liberty is reserved to any party to apply generally on seven days notice. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G24 of 1987 ) GENERAL DIVISION ) BETWEEN: PETER EDWARD FINUCANE Applicant AND: NEW SOUTH WALES EGG CORPORATION Respondent 8 July 1988 REASONS FOR JUDGMENT LOCKHART J. On 22 April 1988 I delivered my reasons for judgment in this matter. I found that the respondents had engaged in misleading or deceptive conduct within the meaning of s. 52 of the Trade Practices Act 1974 ("the Act") and I assessed damages for contravention of that section pursuant to s. 82 of the Act in the sum of $112,771.27. Although I found that the allegation in sub-paragraph 20(k) of the statement of claim was not established in its precise language, I found that the respondent held the view that in the event of the services of some carriers being dispensed with, then the "last in first out" principle would probably apply, and that the' respondent also held the view that it was more likely than not that, in the event of changes to the transport system being introduced, it would make compensation to carriers retained before 1 July 1983 but not to those engaged thereafter. These matters were the subject of evidence and of argument, and I accordingly grant leave to the applicant to amend the statement of claim with respect to paragraph 20(k) by deleting paragraph 20(k) and inserting in lieu thereof paragraph 20(k2) which reads as follows: "Failed to inform the applicant that: (i) the respondent held the view that in the event of the services of some egg carriers being dispensed with then the most recently retained carriers would probably be the carriers not retained. (ii) that the respondent held the view that it was more likely than not that in the event of changes to the transport system being introduced it would make compensation to carriers retained before 1 July 1983 but not those engaged thereafter." I found also that on or about 17 September 1984 the applicant had entered into a contract with the respondent, the contract arising from a combination of documents and conversations between officers of the respondent and the applicant. I found that the terms of the contract were that the respondent agreed to retain the applicant as a carrier to conduct the egg run formerly conducted by Mr. Mayoh, the term of the appointment being of indefinite duration terminable upon the happening of any of the events mentioned in clause 2 of the Contract Carrier's Appointment or upon reasonable notice by one party to the other provided that such notice would not be given by the respondent to the applicant until the term of appointment had subsisted until at least the commencement of the long term. I found that the respondent had breached the terms of the applicant's engagement by terminating his appointment on 12 November 1984. At the request of the parties, I did not proceed to assess damages for breach of contract other than to observe that such damages would be considerably less than the damages to which the applicant was entitled for contravention of s. 52 of the Act. The parties were in agreement with that observation. There was little argument advanced on the question of damages for breach of contract, and I said in my reasons for judgment that the parties should have an opportunity to reactivate this question if they wished to do so. I also found that the term and condition of the contract pleaded in paragraph 23A of the statement of claim is a different term from the one which I had found to have been established. I said, however, that I was satisfied that the question whether the appointment of the applicant could be terminated by the respondent before it had subsisted until at least the commencement of the long term had been the subject of evidence and argument and had been involved in certain of the allegations in paragraph 20 of the applicant's statement of claim with respect to s. 52 of the Act. I said I would give the applicant an opportunity to seek leave to further amend the statement of claim with respect to paragraph 23A to put this matter in order. I have now been asked to assess damages for breach of contract notwithstanding that it was common ground between the parties that the figure which would result from that assessment would necessarily be a smaller amount than the figure assessed as_ the applicant's damages for contravention of s. 52 of the Act. I acceded to this request because otherwise there would have been some doubt as to whether my judgment was a final judgment: Computer Edge Pty. Ltd. v Apple Computer Inc. (1984) 54 A.L.R. 767 per Gibbs C.J. at 767-768. In any case it is desirable and, indeed, essential that all matters in issue between the parties with respect to the substratum of fact that has given rise to the litigation in this Court be finally determined in this proceeding. The matter was restored to the list and I allowed additional evidence to be given by the applicant by affidavit in support of his claim for damages for breach of contract and heard argument with respect to that matter. I also indicated that the Court would grant leave to the applicant to amend the statement of claim by allowing him to delete para. 23A(b) and to insert in lieu thereof para. 23A(b2) which reads as follows: "It was a term and condition of the said Agreement that the respondent would not terminate the agreement except upon the happening of any of the events mentioned in clause 2 of the Contract Carrier's Appointment or upon reasonable notice by one party to the other provided that such notice would not be given by the respondent to the applicant until the term of appointment had subsisted until at least the commencement of the long term." The measure of damages for breach of contract is to award damages which are such as to put the applicant in the position which he would have been in if the contract had been performed by the respondent according to its terms: Robinson v Harman (1848) 1 Ex 850, 154 E.R. 363; Koufos v. C. Czarnikow Ltd. [1969] 1 A.C. 350 per Lord Pearce at 414, and per Lord Upjohn at 420. Expressed another way, the measure of damages for breach of contract is to award damages equivalent to the loss or damage to the applicant attributable to the respondent's breach of contract. Counsel for the applicant and the respondent each made written submissions on the question of assessment of damages for breach of contract and spoke briefly and succinctly to those submissions. It is unnecessary for me to set out the text or substance of those submissions. I have considered them and propose to simply state my findings. In my opinion, on the facts of this case, the respondent could not lawfully have terminated the contract until after a period of reasonable notice, which notice could not have been given until the term of the contract had subsisted until at least the commencement of the long term. I find that for this purpose the period in which the contract had to be allowed to subsist before the respondent could give notice to the applicant terminating his appointment is a period of 18 calendar months. That is to say, the earliest time at which the respondent could have lawfully terminated the appointment, consistent with my findings, was 18 calendar months after 17 September 1984, on which date the applicant was appointed by the respondent to act as an egg carrier. The termination of the contract on 12 November 1984 therefore occurred some 16 calendar months prior to the time at which it could lawfully occur. I find that the period of 16 calendar months (or 70 weeks in the particular period in issue) is therefore to be taken as the initial point of reference for the purpose of calculating damages. I find in accordance with evidence given at the hearing, and accepted by the respondent in its submissions on this issue, that the egg run would have returned a gross income of some $45,000 per annum. The expenses of the applicant over a period of 12 months would have been $8,463, so the applicant would have had a taxable income of $702.63 per week. There should be further deductions made from the sum of $702.63 per week in calculating damages. First, I accept the submission on behalf of the respondent that there should be deducted interest on the loan which the applicant secured from the State Bank in order to purchase the egg run and the truck used to conduct the run. The need to take out a loan for the purchase of the run was a matter peculiar to the applicant, which did not involve the respondent. Interest payable on the loan was an expense of carrying on the business of the egg run and it reduced the profits which the applicant would have earned from the run had it not been necessary for him to take out a loan' to purchase the run and consequently to incur an interest liability in respect of the loan. The principal of the loan was $77,250 and interest was payable at the rate of 14.5% per annum. It follows that the applicant was liable to make interest payments at a weekly rate of $215.41. Deducting the interest liability from the applicant's income from the run after payment of expenses, the applicant's taxable income is reduced to $487.22 per week. The respondent correctly contends that the Court ought to apply a tax rate of 30% to arrive at a net figure of the applicant's weekly income after tax. The decision of the House of Lords in British Transport Commission v Gourley [1980] Ch 52 indicated that the tax position of the plaintiff was relevant to the assessment of damages in an action for damages in tort. A majority of the High Court held in Cullen v Trappell (1980) 146 C.L.R. 1 that the decision in Gourley's Case should be followed in Australia. On the present facts, it is clear that the earnings of the applicant from the run would have been taxable had the contract not been terminated by the respondent. The Court has therefore to notionally assess the tax payable by the applicant had the contract been performed according to its terms, and to deduct that amount from the award of damages. Such reasoning assumes, of course, that the award of damages on the claim for contractual damages will not be taxable to the applicant. No argument to the contrary was advanced by the applicant. On this basis, the applicant would have had a net weekly income of $341.05 from the run after his expenses, interest liability on the loan, and personal tax liability had been met. The respondent submitted that there should be a_ further deduction in the respondent's favour in assessing the loss claimed by the applicant, since the applicant was employed from 4 March 1985 to 24 December 1985. The applicant gave evidence by affidavit on these proceedings that his average gross wage for the whole of that period of employment was $293 per week. The respondent submitted that there should therefore be an allowance in favour of the respondent of the amount earnt by the applicant during this period, less a deduction from the gross figure of tax at the rate of, say, 30%. In my opinion this submission is correct. The applicant asserts that one of the principal sources of his loss resulting from the respondent's early termination of his appointment as a carrier was his inability to raise the money to repay the capital of the loan taken out to purchase the run and to pay interest upon the loan. The applicant submits that further interest was incurred by him as a result of his inability to repay the loan and interest, and that such further interest flowed as a natural consequence of the respondent's breach. The applicant submits that such interest should be included in the measure of damage. The applicant argued that, as further interest accrued on each payment that fell due and was not made, interest should be calculated on an accumulating basis for the period that would have remained if the notice of termination had not been given by the respondent prior to the point at which such notice could lawfully be given. It was said that such interest should be calculated on the net sum of damages awarded to the applicant pursuant to the breach of contract claim. It was also said that the applicant should be allowed interest on the whole of that sum from the point at which his appointment could lawfully have been terminated to the present time. In my opinion the applicant's submission as to this issue is erroneous. I accept the submission on behalf of the respondent that to allow interest to be added to the applicant's claim in the manner suggested would be to place the applicant in the position in which he would have been had the appointment as contract carrier never been made. That, of course, is a measure of damages in tort. As I observed above, the purpose of contractual damages is rather to place the applicant in the position he would have been in if his appointment as contract carrier had been brought to an end in accordance with the terms of the contract of appointment. If the contract had been properly performed, then interest upon the loan would have been payable by the applicant as an expense of the run, and such interest is properly taken into account in calculating the applicant's loss of earnings on the basis adopted above. I accept also the correctness of the respondent's submission that the claim for interest to the present time should be rejected. The applicant knew that he would be at risk from the period of the commencement of the long term, which I have placed at 18 months from 17 September 1984, in the sense that after that time the applicant's appointment could lawfully be terminated. It follows that the respondent could not be held responsible for interest payments beyond the commencement of the long term as that concept is defined in these reasons for judgment. I do not propose to calculate the arithmetical results which follow from these findings. I could restore the matter to the list and have the parties make the necessary calculations in the meantime. However, it is common ground that there is no necessity for me to make orders or declarations with respect to the quantification of damages for breach of contract because such damages would on any view be less than the damages awarded for contravention of s. 52 of the Act. I have said sufficient to indicate the principles which have guided me in reaching my conclusion on the question of the assessment of damages for breach of contract. If it becomes necessary for the parties to determine the precise figure which follows from those reasons for judgment, that should require only a simple arithmetical calculation. 10. As to costs relating to the assessment of damages for breach of contract, the fair order in my opinion will follow the order made in the principal case, that the respondent should pay the applicant's costs of the assessment of damages. I certify that this and the preceding nine (9) pages are a true copy of the reasons for judgment herein of the Honourable Mr. Justice Lockhart. Associate A.TBodke Date: 8 July 1988 Counsel for the Applicant: Mr. C. Birch Solicitors for the Applicant: Patrick Hargraves & Co. Counsel for the Respondent: Mr. J.D. Heydon Q.C. with Mr. D. Davies Solicitors for the Respondent: Westgarth Baldick Date of Hearing: 15 June 1988 Date of Judgment: 8 July 1988