LIAWEENA (NSW) PTY LTD v McWILLIAMS WINES PTY UNITED SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P, PRIESTLEY JA, AND HANDLEY JA 12 April 1990, 5 December 1990 [1990] NSWCA 194 CONTRACT — exclusion of liability — supply of defective wine corks — whether supplier absolved by terms and conditions from liability for breach of warranties of merchantable quality and fitness implied by the Sale of Goods Act 1923, s19 — whether exempting terms and conditions incorporated into the contract of sale EVIDENCE — failure to call witness — inferences available — proper approach to — care necessary in drawing available inferences from such failure. Jones vy Dunkel (1963) 101 CLR 298 explained and applied. Steele vy Mirror Newspapers Ltd [1974] 2 NSWLR 348, 377 referred to. (1) Having regard to the letter by which the supplier submitted its new terms and conditions to the purchaser, and the evidence of the relevant officer of the purchaser who read that letter accepted at trial, the new terms and conditions were not incorporated into the contractual arrangements between the parties. Hardwick Game Farm v Suffolk Agricultural Poultry Producers' Association [1966] 1 WLR 287, 339 (HL); Curtis v Chemical Cleaning and Dyeing Co [1951] 1 KB 805, 809 (CA) applied; (2) Upon a proper analysis of the subsequent dealings by which further corks were ordered and supplied, the supplier's new terms and conditions contained on the back of its invoice did not become part of the contractual arrangement between the parties. Sargent v ASL Developments Ltd (1974) 131 CLR 634, 649 applied; (3) The failure of the purchaser to call as a witness the company secretary who initialled the supplier's letter providing the terms and conditions did not sufficiently fix the purchaser with any knowledge which could thereby be imputed to that officer. His knowledge was not that of the purchaser. Tesco Supermarkets Ltd v Nattrass [1972] AC 153, 170 (HL) applied; (4) Accordingly the purported limitation of liability did not avail the supplier and it was liable to the purchaser for the supply of the defective corks. Sale of Goods Act 1923, s19. ORDER Appeal dismissed with costs. Kirby P I agree with Handley JA that the appeal should be dismissed with costs. A misleading letter disguises new "terms" of trading The letter by which the appellant gave the "formal" notice to its customers (including the respondent) concerning the terms on which it would in future conduct its business was conceded to have been misleading. It was clearly open to Rogers J to conclude that the respondent, receiving that letter, would have believed exactly what the appellant asserted in it. This was that the new conditions of sale were now being submitted merely for the sake of "good order". That phrase alone would have suggested a confirmation, and not an alteration, of the previous terms and conditions. But if that expression left any doubt, the statements that the document attached did no more than "formally record" the conditions under which the appellant "has been selling and will continue to sell" its products "until further notice", provided five indicia of continuity of the then existing arrangements. It 2 UNREPORTED JUDGMENTS is little wonder that Mr Shipton, reading the covering letter, assumed that the attachment was a formality; that it was business as usual with the appellant; and that he need not engage his mind in the detail of the "formal" effort of the appellant to record that which had previously existed and would continue. Rogers J accepted the evidence of Mr Shipton and that he was lulled by the terms of the letter into the belief that there had been no alteration in the arrangements between the appellant and the respondent. That conclusion was obviously open to his Honour. In the light of the terms of the letter, it is scarcely a surprising conclusion. It cannot be disturbed by this Court. See Jones v Hyde (1989) 63 ALJR 349 at 351 Abalos v Australian Postal Commission, High Court of Australia, unreported, 15 November 1990. Supply of terms with invoices does not incorporate them So far as the dealings between the appellant and the respondent after that letter are concerned, it is true that with the subsequent supply of its corks, the appellant sent an invoice which contained, on the back, its purported conditions of sale. From this, the appellant argued that the course of dealings between the parties resulted in the incorporation of its terms and conditions in the contracts between the parties. I agree with the analysis by Handley JA of why this is not so. The respondent submitted with its orders, usually initially effected by telephone, a purchase document on the back of which were the respondent's conditions. They were expressed in terms inconsistent with those relied upon by the appellant to exempt it from liability in the events which occurred. A close analysis of the actual way in which, in each case, the contract was effected by telephone order, submission of the written order and supply of the goods leads to the conclusion in this case that, if any written terms and conditions were incorporated into the contract, they were the terms and conditions of the respondent. Those of the appellant were merely supplied with the account at or after the time when the goods were actually delivered. Purchaser's failure to call a witness The real strength of the appellant's case lay in the inferences which it invited the Court to draw from the respondent's failure to call as a witness the company secretary, Mr Ball. Mr Shipton, who was called, acknowledged that Mr Ball, as secretary, would be more responsible than he for considering legal questions. It was to Mr Ball that Mr Shipton sent the letter by which the appellant purported to notify its new conditions. From Mr Ball's initials on the letter, it may be inferred that he saw the letter. From the failure of the respondent to call him as a witness, the appellant asked the Court to infer that Mr Ball's evidence would not have assisted the respondent's case. Once again, the instruction in the High Court of Australia in Jones v Dunkel (1959) 101 CLR 298 was read to this Court. See also Clayton Robard Management Ltd v Siu (1987) 6 ACLC 57, 64; Qantas Airways Ltd v SS Pharmaceutical Co Ltd, Court of Appeal, unreported, 20 July 1990; (1990) NSWJB 78. Care must be taken in the consideration of the principles in Jones v Dunkel least an over exuberant application of those principles by appellate courts force upon litigants in courts of trial the tedious tender of innumerable witnesses, each of diminishing relevance, where one would suffice out of fear of later facing arguments based upon the holding in that case. As Samuels JA pointed out in Steele v Mirror Newspapers Ltd [1974] 2 NSWLR 348, 377: "The decision in Jones v Dunkel ought not be extended beyond the factual context in which it is intended to apply. It is authority for the proposition that any inference favourable to a plaintiff for which there is ground in the evidence may be more confidently drawn when a person presumably able to give the true URJ LIAWEENA (NSW) PTY LTD v McWILLIAMS WINES PTY UNITED (Handley JA) 3 complexion on the facts relied upon as the ground for the inference has not been called as a witness for the defendant and the evidence provides no sufficient explanation of his absence. It deals with the effect of a failure to answer the adversary's case." The evidence in this case clearly established that it was Mr Shipton, and not Mr Ball, who made the commercial decisions to purchase the appellant's corks. It was Mr Shipton who, in effect, continued to deal with the appellant on behalf of the respondent and in accordance with the understanding which he, Mr Shipton, had of the persistence, unaltered, of the arrangements between the respondent and the appellant which had earlier obtained. It is inherent in the acceptance by Rogers J of the evidence of Mr Shipton that he also accepted that any knowledge which Mr Ball may have gleaned from actually reading the appellant's tendered terms and conditions (if he did) was not passed on to Mr Shipton. Any knowledge that may be imputed to Mr Ball, by virtue of the failure of the respondent to call him as a witness, does not constitute knowledge of the respondent itself. I agree generally with what Handley JA has written in this regard. Conclusion: the exempting term was not part of contract In the result, neither by the "formal" notification of its new terms and conditions, nor by the course of subsequent dealings, nor by any knowledge that should be attributed to the respondent by the imputed knowledge of the absent Mr Ball, has the appellant established that the supply of corks, admittedly defective, was subject to an exempting condition of trade. Once this conclusion is reached, the appellant conceded that the respondent was entitled to judgment. The judgment against the appellant should therefore be affirmed. The appeal from it should, accordingly, be dismissed with costs. Priestley JA I have had the advantage of reading Handley JA's reasons in draft. Although the case involves a large sum of money, it seems to me possible to decide it on a very simple basis, and accordingly I see no point in going over the ground covered by Handley JA. The simple basis on which in my opinion it is preferable for the appeal to be decided appears towards the end of Handley JA's reasons, where he describes how the course of business between the appellant and respondent was such that the terms of the respondent's purchase order, and not those of the appellant's notice of 1 February 1981 or its invoices, were incorporated into the contract for breach of which the respondent sought damages from the plaintiff. I agree with Handley JA's analysis of the factual materials providing the basis for this conclusion, the consequence of which is that the appellant's conditions of sale never became part of the contract by which the defective corks were bought and sold. The parties were agreed that it would follow, if this position were reached, that the appeal must fail. In my opinion the appeal should be dismissed with costs. Handley JA Prior to and during 1983 the appellant, then called Jones, Steains and Waller (NSW) Pty Ltd, carried on business as cork merchants and general importers supplying wine corks and other items to the wine trade. Sales of imported wine corks accounted for approximately 60% of the appellant's total turnover. One of its customers was the respondent. On 16 March 1983 Mr Shipton the respondent's Production Manager, in a telephone conversation with Mr Charles, the appellant's Sales Supervisor ordered 500,000 wine corks of a particular specification. The corks were used by the respondent in its wine 4 UNREPORTED JUDGMENTS bottling operations between March and December 1983. Later it was found that a significant proportion of the bottles sealed with corks from this order were contaminated by 2,4,6 Trichloroanisole or "TCA" and unsaleable. TCA is formed by the interaction of phenolic compounds, chlorine and mould. Phenolic compounds occur naturally in cork. The corks in question had been bleached with chlorine and mould will grow in appropriate environments from air borne spores which are found virtually everywhere. The respondent contended that the corks were contaminated by TCA and that when bottles with these corks were stored on their sides some of the TCA leached into the wine. The appellant supplied the corks in sealed plastic bags. The respondent inspected the corks on delivery by looking through the plastic and again when the corks were emptied into a hopper from which they were extracted by machine and inserted mechanically into the necks of the bottles. The respondent having discovered that stocks of bottled wine incorporating corks from this order had become badly affected as a result of contamination by TCA brought proceedings against the appellant for damages for breach of the warranties of merchantable quality and fitness for a particular purpose implied by s19(1) and s19(2) of the Sale of Goods Act. One of the appellant's defences was that these warranties had been excluded by special terms in the contract of sale. On 1 May 1987 Wood J ordered a separate trial of the questions whether the contract for the sale of the corks included the statutory implied warranties relied upon by the plaintiff or the special exclusion clauses relied upon by the defendant. The separate trial took place before Rogers J on 26 August 1987. In an extemporary judgment his Honour held that the exclusion clauses did not form part of the contract and answered the separate questions favourably to the plaintiff. In 1988 the trial of the remaining issues took place before Brownie J. In a reserved judgment delivered on 31 October 1988 his Honour found that there had been breaches of the warranties relied upon by the plaintiff and damages were assessed in the sum of $2,080,892. The defendant has appealed but although the notice of appeal as filed contained a large number of grounds which canvassed the findings and conclusions of Brownie J as well as those of Rogers J, by the time the appeal came on for hearing the appellant's only challenge was directed to the decision of Rogers J on the trial of the separate issues. S103 of the Supreme Court Act provides that an appeal lies by leave of the Court of Appeal from a decision in proceedings in the Supreme Court on any questions ordered to be decided separately from other questions. In the present case the appellant has appealed, as of right, from the final decision in the action but it is well settled that in any such appeal the appellant can challenge, without leave, any prior interlocutory orders which have affected the final decision. See Crowley v Glissan (1902) 2 CLR 402. The appellant therefore propounded a single challenge to the final judgment in the action based on a challenge to the correctness of the earlier decision of Rogers J. The respondent conceded that if the appeal, so limited, succeeded, the action failed and there must be judgment for the appellant. URJ LIAWEENA (NSW) PTY LTD v McWILLIAMS WINES PTY UNITED (Handley JA) 5 The appellant had supplied wine corks to the respondent on a regular basis from 1972 onwards. Prior to February 1981 contracts for the sale of wine corks by the appellant to the respondent did not contain any clauses excluding or limiting the appellant's ordinary responsibility for the quality of the goods. On | February 1981 the appellant sent a formal notice to the respondent and probably to its other customers, signed by its Managing Director, notifying the terms on which the appellant would conduct its business in the future. The notice was in the following terms: "NOTICE TO ALL CUSTOMERS OF JONES, STEAINS and WALLER (NSW) Pty Ltd For the sake of good order, the company is enclosing herewith its conditions of sale. The conditions of sale are being issued to formally record the conditions under which the company has been selling and will continue to sell until further notice". A printed document comprising thirteen numbered clauses was enclosed with this notice. It was headed "Conditions of Sale" and included the conditions relied upon by the appellant. The notice and its enclosure were sent to the respondent by ordinary mail, without prior correspondence or prior discussion with Shipton, the respondent's executive who normally dealt with the appellant. It is clear from the evidence that the enclosed conditions did not "formally record the conditions under which the company has been selling". The appellant had not previously contracted in accordance with those conditions. Rogers J found that the conditions on which the appellant had sold to the respondent before February 1981 were "radically different" from those enclosed with the notice. This finding was clearly correct. He also found that the misrepresentation had been made innocently. Shipton said that he read the notice when he first saw it but did not read the enclosed conditions. He initialled the notice and sent it to the Company Secretary, Mr Ball who also initialled the notice. Neither initialled the conditions. Shipton said in evidence "I would think, just reading that front page, I wouldn't even have looked at the back page". Later he said "I just assumed that what was on the back was the same as the terms as we had always bought from them". Shipton did not recall any discussion with Ball concerning the documents and no internal memoranda were produced and in particular no internal memorandum which accompanied the documents from Shipton to Ball. Shipton further said that having looked at the notice and seeing that there was no change in conditions "it would have been back to the Company Secretary to look at and if he wanted to say anything he would have talked to me". He regarded the Company Secretary as being more responsible than himself for "legal conditions" and was content for Ball to take it over and "consider whether anything needed to be done". The respondent called Shipton as a witness during the separate trial but did not call Ball although it was common ground that he was available. In these circumstances the appellant contended that the notice and enclosed conditions operated to import the conditions into the contract for the sale of these corks. The appellant also relied upon the subsequent course of dealing between the parties in aid of its first submission and as operating independently, and in any event, to import the appellant's conditions of sale into this contract. After the notice was received the parties entered into 91 sale transactions prior to 16 March 1983 to which the conditions could have been applicable. The general course of business adopted by the respondent when it wished to purchase goods from the 6 UNREPORTED JUDGMENTS appellant was for Shipton to telephone either Mr Pardey the appellant's Managing Director, or Mr Charles. These telephone conversations were directed to matters such as quantity, price, availability and delivery. If agreement was reached during the telephone conversation Shipton would send a purchase order to the appellant. The respondent's purchase order set out, in typewriting, particulars of the order and more the printed notation "Please Supply the Undermentioned Goods/Services Subject to the Order Conditions on the Back Hereof:". The conditions printed on the back were inconsistent with the appellant's conditions of sale. The appellant did not deliver the goods until after receipt of the respondent's purchase order and from time to time either Mr Pardey or Mr Charles telephoned Shipton to chase up a purchase order which had not been received. The appellant did not send any written confirmation of the sale to the respondent, nor did Mr Pardey or Mr Charles ever challenge the respondent's practice of sending its own purchase orders purporting to incorporate its conditions in the sale contracts. When the goods were delivered they were generally accompanied by invoices which contained the appellant's conditions of sale on the back. The appellant delivered goods to the respondent at the latter's Chullora store. After accepting delivery the respondent's stores clerks made out an internal document described as an "inwards goods receipt" which was then sent, together with the invoices, to the respondent's Accounts Department at Pyrmont for processing and payment. The respondent's Chief Accountant submitted the appellant's invoices to Shipton for approval before arranging payment. It is clear therefore that the invoices for the 91 transactions passed across Shipton's desk and were passed by him for payment. He said however that prior to the commencement of the proceedings he had not read the printing on the back. Rogers J accepted Shipton's evidence. He found that the terms of the notice of 1 February 1981 misled Shipton into thinking that really nothing was being changed. With regard to the second limb of the appellant's case based his Honour said: "There was no reason to apprehend that there was material on the reverse side of the invoices. There was no reason to apprehend by reason of the letter of 1 February that the conditions on the back of the document - were one to become aware of them - were anything other than a restatement of the conditions of sale which previously obtained... the misleading information in the letter of 1 February 1981... entitled the recipient of the invoice to take the view that all was as theretofore." He therefore concluded that: It would be both commercially and legally unjust and inappropriate to hold that the conditions of sale which were called to attention in this imperfect and misleading way became part of the contractual relationship between the parties." There was no suggestion that the telephone conversation between Shipton and Mr Charles on 16 March included any reference to the appellant's conditions of sale or that they had ever been mentioned during any of the telephone conversations between the officers of the two companies at any time prior to that date. The only document which passed between the parties prior to the performance of the contracts was the respondent's purchase order which was inconsistent with the appellant's conditions. URJ LIAWEENA (NSW) PTY LTD v McWILLIAMS WINES PTY UNITED (Handley JA) 7 The appellant relies upon the notice of 1 February 1981 as sufficient, on its own, to incorporate its conditions of sale into the contract for the sale of these corks. The general principle governing the incorporation of the terms of a unsigned document into a contract are those stated in Parker v South Eastern Railway Co. (1877) 2 CPD 416 in the judgments of Mellish and Baggallay LJJ. At 421 Mellish LJ said: "Now if in the course of making a contract one party delivers to another a paper containing writing, and the party receiving the paper knows that the paper contains conditions which the party delivering it intends to constitute the contract, I have no doubt that the party receiving the paper does, by receiving and keeping it, assent to the conditions contained in it, although he does not read them and does not know what they are." In the present case Shipton knew that the enclosure with the notice contained conditions which the appellant intended to form part of its future contracts with the respondent. However because of the misrepresentation he did not read them. In my opinion the misrepresentation, albeit innocent, prevented the notice from operating to incorporate the enclosed conditions into later contracts. The misrepresentation operated in two ways. Firstly it misled Shipton into thinking that the enclosed conditions would not alter the basis on which business was done between the two companies and therefore he did not read them. Thus he did not know, in fact, that the appellant was seeking to transact business in the future on a radically different basis. The misrepresentation also operated, in law, to prevent Shipton from being estopped by his subsequent conduct from denying that the enclosed conditions formed part of any contract of sale that he later made with the appellant on behalf of his employer. The common law both in England and Australia has adopted the objective theory of contract. The existence of a contract therefore depends not on the real intentions of the parties but on the outward manifestations of those intentions. See Taylor v Johnson (1983) 151 CLR 422. See also Air Great Lakes v KS Easter Holdings (1985) 2 NSWLR 309. The relevant principles were stated by Diplock LJ in Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1966] | WLR 287 at 339 as follows: "The task of ascertaining what the parties to a contract... have agreed shall be their legal rights and liabilities to one another as a result of the contract... is accomplished not by determining what each party actually thought those rights and liabilities would be, but by what each party by his words and conduct reasonably led the other party to believe were the acts which he was undertaking a legal obligation to perform.... where... the parties... have entered into an oral contract... and it is sought to rely upon a term contained in some written document as modifying the respective rights and liabilities which would arise by implication of law from the nature of the contract, the only question is whether each party has led the other reasonably to believe that he intended that the rights and liabilities towards one another which would otherwise arise by implication of law from the nature of the contract... should be modified in the manner specified in the written document." In my opinion these principles have no application where the mistaken belief of one party has been induced by the misrepresentation of the other. The principle that a relevant misrepresentation, even innocent, will prevent the party responsible holding the other to contractual terms of which that other was unaware in fact is now well established. In Curtis v Chemical Cleaning and Dyeing Co. [1951] 1 KB 805 it was held that an innocent misrepresentation by 8 UNREPORTED JUDGMENTS a shop assistant as to the effect of writing on a receipt for dry cleaning which the customer was asked to and did sign prevented the dry cleaning company from relying on conditions whose effect had been misrepresented. At 809 Denning LJ said: "... by failing to draw attention to the width of the exemption clause, the assistant created [a] false impression... It was done perfectly innocently, but nevertheless a false impression was created.... it was a sufficient misrepresentation to disentitle the cleaners from relying on the exemption..." See also Jaques v Lloyd D George and Partners Ltd [1968] 1 WLR 625. Mr Taylor however submitted for the appellant that there was no misrepresentation in the enclosed conditions of sale and by sending them, albeit under cover of a misleading notice, the appellants had done all that was necessary to bring them to the knowledge of the respondent. Shipton knew that the appellant was proposing to do business with the respondent in the future on the basis of the enclosed conditions. He was made aware that the enclosed conditions were being proffered as a "contractual document". Although the conditions were not read they were accepted without protest and therefore they became incorporated by implication into all future contracts including that for the sale of these corks. In my opinion this argument does not enable the appellant to avoid the consequences of its misrepresentation. The underlying question is whether the appellant "did what was reasonably sufficient to give the plaintiff notice of the condition". See Parker v The South Eastern Railway Company [1877] 2 CPD 416 at 424. See also the Balmain New Ferry Company Ltd v Robertson (1906) 4 CLR 379 at 386 and The Council of the City of Sydney v West (1965) 114 CLR 481 at 485, 491. The applicable principles were restated in Watkins v Rymill [1883] 10 QBD 178 at 188 as follows: "A great number of contracts are... made by the delivery by one of the contracting parties to the other of a document in a common form, stating the terms by which the person delivering it will enter into the proposed contract. Such a form constitutes the offer of the party who tenders it. If the form is accepted without objection by the person to whom it is tendered this person is as a general rule bound by its contents, and his act amounts to an acceptance of the offer... whether he reads the document... or not." The Court in that case noted a number of exceptions one of which was as follows: "A third exception occurs, if, without being fraudulent, the document is misleading and does actually mislead the person who has taken it." (189) It may be convenient to treat misrepresentation as an exception to the general rule. The better view, in my opinion, is that the law does not recognise that an oral or written communication containing a material misrepresentation about the effect of written conditions of contract, which misleads the recipient, is capable of being "reasonably sufficient" notice of those conditions to that recipient. To so find would, in my opinion, be a contradiction in terms. The appellant then relies upon the inferred knowledge of Ball, the respondent's Company Secretary. It is first necessary to determine what inferences, adverse to the respondent, should be drawn because of its failure to call Ball. Consistently with the principles explained in Jones v Dunkel (1959) 101 CLR 298 the inference is open that Ball would not have initialled the notice without reading it and the further inference is also available that he read the enclosure as well. It is possible that he was misled by the notice, as Shipton had been, and did not read URJ LIAWEENA (NSW) PTY LTD v McWILLIAMS WINES PTY UNITED (Handley JA) 9 the enclosure. However evidence from Ball that he refrained from reading the enclosure because he was misled by the notice would have assisted the respondent, and evidence that for some other reason he did not read the conditions may also have been of assistance to it. Since he was not called to give such evidence this Court must infer that Ball could not have assisted the respondent in either of these ways. The Court should therefore draw the inference that Ball read both documents before he initialled the notice. What then follows? Shipton sent these conditions of sale to Ball without comment and said that Ball did not subsequently speak to him about them. It seems that the only reasonable conclusion is that Ball having read the conditions took no further action beyond arranging for them to be filed in the respondent's records. The appellant invited this Court to infer that Ball made a conscious decision on behalf of the respondent to accept the appellant's conditions as part of any future contracts the respondent would make with the appellant. I am unable to draw the inference that Ball made any such decision. He was not responsible for his company's commercial dealings with the appellant. Shipton, the man who was responsible, did not ask Ball to take any action and I see no reason why an inference should be drawn that Ball, on his own initiative, would incur expense in obtaining legal advice on the matter or would make a decision to accept these conditions on behalf of his company without either obtaining such advice or discussing the matter with Shipton. Accordingly while the appellant is entitled to the benefit of the inference that Ball read the conditions before they were filed I see no reason to draw any further inference in favour of the appellant and I do not consider that Jones v Dunkel (above) requires me to do so. In my opinion the knowledge of Ball, as Company Secretary, of the terms of these conditions cannot be imputed either to the respondent or to Shipton. The knowledge of an agent is not imputed to a coagent. See Armstrong v Strain [1952] 1 KB 232 at 244, 245. Moreover in the light of Shipton's evidence there is no room for an inference of fact that Ball actually passed on his knowledge of the conditions to Shipton. Knowledge obtained by an agent in the course of his employment is imputed to his principal but in my opinion this principle has no application in this case. Shipton received the notice of 1 February 1981 and sent it on to Ball. The documents constituted a formal notification by the appellant to the respondent. Normally such a notification received by an agent in the course of his employment is effective notice to the principal whether the agent passes it on to his principal or not. However the misrepresentation conveyed by the notice prevented Shipton acquiring actual knowledge of the terms of the enclosure. His state of mind was one of ignorance and it is that state of mind which is imputed to the respondent. The principal's imputed knowledge cannot exceed the agent's actual knowledge. The appellant also relies on Ball's knowledge but in my opinion his knowledge is not to be imputed to the respondent either. There is no finding and no evidence that it became Ball's duty, on receipt of the documents, to submit them to the Managing Director or the Board. Shipton did not ask Ball to take any such action and there is no suggestion that Shipton was not free to approach the Managing Director himself if he wished to do so. The doctrine of imputed notice is based upon the existence of a duty on the part of the agent to communicate the 10 UNREPORTED JUDGMENTS knowledge to his principal. If there was such a duty then in the words of Fry J. in Kettlewell v Watson (1882) 21 ChD 685 at 705: "... the Court always holds that he did communicate it, not because, in many cases, he did in fact communicate it, but because... it would be too dangerous to enquire whether the communication was really made. It would open the door to perjury." See also In re The Phillip Stephan Co. Ltd (1890) 12 NSWLR (Eq) 4 at 6-7. Moreover Ball was not shown to have been one of the superior officers of the respondent who represented its "directing mind and will" and whose knowledge would therefore be the knowledge of the company itself. See Tesco Ltd v Nattrass [1972] AC 153 at 170-171. The only remaining basis for imputing Ball's knowledge to the respondent depends upon whether he was employed by the company as its agent to enter into transactions to which the particular knowledge would be relevant. The applicable principles were stated by Lord Westbury LC in Wyllie v Pollen (1863) 3 DeG J and S 596 (46 ER 769) at 601 (770) as follows: "To affect the principal with notice the agent's knowledge must have been derived in the particular transaction in hand or be shown to have been in that transaction present to his mind; and further, it must have been knowledge of something material to the particular transaction; and something which it was the agent's duty to communicate to his principal, the whole doctrine of constructive notice resting on the ground of the existence of such a duty on the part of the agent." See also In re The Phillip Stephan Co. Ltd (above) at 6-9 and Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 649, 658-9. Since Ball was not employed to arrange contracts for the purchase of goods from the appellant his knowledge of the appellant's conditions of sale acquired in the course of his duties is not imputed to the respondent. In short, he was not a relevant agent of the respondent for the purpose of the business it transacted with the appellant, and his knowledge is therefore irrelevant also. Finally the appellant relied on the course of dealing reflected in the 91 contracts of sale which took place after 1 February 1981 and the invoices containing its conditions which were sent to the respondent in the course of those transactions. The principles to be applied in determining whether a course of dealing has incorporated the terms of a written document in an oral contract are those stated by Diplock LJ in Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association (above) previously quoted at page 11 of these reasons. The question therefore is whether on 16 March 1983 in the course of the oral negotiations Mr Charles on behalf of the appellant and Shipton "each... led the other reasonably to believe that he intended" that the appellant's conditions should be incorporated into the contract they were making. In my opinion no such finding ought to be made. The receipt of the formal notice and enclosed conditions can be put to one side because of the misrepresentation and its effect on Shipton. The important facts are that the existence of the appellant's conditions was not mentioned by either Mr Pardey or Mr Charles during the oral negotiations for any of these 91 contracts and in particular was not mentioned during the negotiation of the first few contracts following receipt of the appellant's notice. URJ LIAWEENA (NSW) PTY LTD v McWILLIAMS WINES PTY UNITED (Handley JA) 114 In fact the course of business was such that the terms of the respondent's purchase order were incorporated into the contracts. If the contracts were oral the practice was for them to be confirmed by the respondent despatching its written purchase order, which incorporated its conditions. The appellant accepted and acted on these purchase orders without demur. If the oral negotiations were merely provisional then the contracts were made when the respondent's purchase order was received by the appellant and accepted. The appellant relied upon the decisions of the Court of Appeal and House of Lords in Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1966] 1 WLR 287 [1969] 2 AC 31 to establish that the course of business resulted in its conditions being incorporated in the contracts between the parties. However in my opinion that case properly understood establishes that the course of business here resulted in the respondent's conditions being incorporated. The facts in that case relevant to the present question as summarised by Lord Morris of Borth y Gest ([1969] 2 AC at 90) were that oral contracts of sale had frequently been entered into between the parties. The seller sent a contract note to the buyer the same day or the day following and the buyer expected to receive such a document. The seller's contract note was thus the only written record of the contract and it had been received and accepted by the buyer as such in the course of many transactions before the one in question. It was held that this course of dealing was sufficient to incorporate the conditions on the contract notes into the oral contracts. The decision does not assist the appellant. The appellant's acceptance of the respondent's purchase orders without objection resulted in the respondent's conditions being incorporated in the contracts. The appellant's invoices were sent after the contracts had been made on different terms, and performed, and were sent too late to effect the course of dealing. There was in this case no "battle of forms". Compare Butler Machine Tool Co. Ltd v Ex Cell O Corporation (England) Ltd [1979] 1 WLR 401 discussed in 42 Mod. LR 715. The appellant's forms were always too late and were never referred to in the course of the parties oral negotiations. I have therefore rejected each of the grounds relied upon by the appellant to establish that its conditions were incorporated into the contract for the sale of these corks. Accordingly it has not been necessary to consider the difficult questions which may have arisen if the appellant had succeeded in establishing some of those grounds but not others. In my opinion the appellant's conditions of sale did not form part of the contract for the sale of these corks and the appeal must be dismissed with costs. Counsel for the Appellant: P Taylor / P Stockley Counsel for the Respondent: R Bainton QC/ P Jacobson Solicitors for the Appellant: Phillips Fox Solicitors for the Respondent: Bruce and Stewart Turton