THE PROPRIETORS STRATA PLAN 30102 v ENERGY AUSTRALIA (formerly known as Sydney Electricity) SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL HANDLEY, BEAZLEY and STEIN JJA 19 August 1997, 29 September 1997 [1997] NSWCA 251 Contract for supply of electricity — whether change of rate levied can be incorporated as a term of contract through a course of dealing. The strata property was supplied electricity by the respondent at a domestic rate. When the respondent became aware that the premises were used for commercial purposes it increased the rate levied to the applicable rate. The appellant paid the higher rate for an appreciable time, without protest. On appeal: The appellant argued there was: (1) no agreement for the supply of electricity to it. (2) no agreement to or notification of the increased rate to it. Held: There was an agreement for the supply of electricity, and due to the consistent course of dealing, the higher commercial rate was incorporated as a term of the agreement. Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 applied. Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (1992) 28 NSWLR 338 applied. Handley JA I agree with Stein JA. Beazley JA I agree with Stein JA. Stein JA On 1 October 1985 the appellant, Strata Plan 30102, was registered at the Land Titles Office. The Plan relates to a building situated at 2 Springfield Lane and 5 Orwell Street, Kings Cross. Under the Strata Titles Act 1973 its body corporate was responsible for the control and management of the common property for the benefit of the proprietors. On 21 October 1985 it appears that the body corporate of the Strata Plan opened an account with the respondent, Sydney Electricity, now known as Energy Australia. The account was numbered 246.016.02.304.00.0. Thereafter electricity was supplied by the respondent for the common areas of the strata plan. The microfiche of the respondent's ledger was in evidence before Judge Herron QC in the District Court. From the commencement of the electrical supply in late 1985 the ledger noted the tariff code as 321. It is common ground that this was the domestic rate. Quarterly accounts were rendered to the appellant strata plan for electricity supplied to the common areas. These accounts were paid promptly until early in 1991. According to the evidence, Snowlong Pty Ltd purchased a very high proportion of the lots in the strata plan on 20 February 1990. This company traded as the Hotel New Hampshire. Snowlong operated a private hotel under that name providing serviced apartments at the subject premises. The hotel did not provide food or beverages but maintained a reception area for customers to obtain a serviced apartment. Mr Jones was its bookkeeper. He came into 2 UNREPORTED JUDGMENTS possession of the quarterly accounts addressed to the Strata Plan in respect of electricity supplied by the respondent for the common areas including house lights. He saw to it that the bills were paid by Snowlong. During this time it is apparent, and his Honour so found, that the body corporate became quiescent. It imposed no levies on Snowlong. An examination of the respondent's ledger reveals that electricity was charged to the appellant at the domestic tariff (code 321) until and including an account rendered on 17 May 1990, which was paid on 13 June 1990. Although there was no direct evidence, it appears to be accepted that the respondent became aware of the commercial nature of the use of the premises, and this was most probably confirmed by an inspection. As a result, the supplier's next account (directed to the Strata Plan) for electricity supplied for the common areas of the premises, was rendered on 15 August 1990 at the commercial tariff (code 202). Neither the actual accounts, nor copies, were in evidence, although it is very probable that they included a tariff code number and a rate of supply in cents per kilowatt hour. The account of 15 August 1990 was paid in full and without objection. For reasons unexplained in the evidence, the next account was not rendered by the respondent to the appellant until 1 February 1991. It was in the sum of $39,832.56, and again applied a commercial tariff (code 278). Thereafter, quarterly bills were rendered to the appellant, none at the domestic rate. Payments of these accounts were made but in arrears and by instalments, which it seems was arranged by Mr Jones with the respondent. No objection was taken to the commercial tariff. Payments were made throughout 1991 and until 22 January 1992, when the last payment was made. As at 19 February 1992 the balance outstanding on the accounts was $44,367.13. A final account for electricity supplied to 17 March 1992 was issued for $8,130.82. The ledger indicates that the appellant made a payment of $5,119 on 25 June 1992 leaving a balance of $47,378.95. All accounts rendered between 15 August 1990 and 17 March 1992 were charged at a commercial tariff. On 17 March 1992 the account was closed. The respondent issued a statement of liquidated claim against the appellant in the District Court claiming the sum of $47,378.95 plus interest for power supplied between July 1991 and 17 March 1992. There is no dispute that the electricity was supplied. The appellant's defence was twofold. It denied any agreement for the supply of electricity to its premises. Alternatively, it claimed that the respondent had incorrectly charged the commercial tariff in lieu of the domestic rate between August 1990 and March 1992. During the hearing this became refined to a submission that there was no evidence either that the appellant had agreed to pay the commercial rate, or that the change in tariff from domestic to commercial had been notified to the appellant. Herron DCJ found for the respondent in an extemporary judgment. It seems that he was prepared to find a presumption of regularity in the charges levied, in the absence of any evidence to the contrary. He noted that after August 1990 the bills were paid, although they fell into arrears. The appellant appeals from the judgment submitting two principal errors. First, that there was no evidence of any agreement to supply electricity to it. Alternatively, that the incorrect commercial tariff had been charged for the period in question. URE PROPRIETORS STRATA PLAN 30102 v ENERGY AUSTRALIA (formerly known a8 Sydney Electricity) (Stein JA) For my Ptl can see no merit in the first submission. It is apparent that the appellant established an account in late 1985 for the supply of electricity to its common areas. The electricity was supplied to the premises and the accounts were directed to the appellant. They were paid, it seems by Snowlong. It is immaterial whether Snowlong was the appellant's agent or paid the appellant's accounts as a volunteer. A course of consistent dealings over almost 5 years of regular quarterly transactions, without any objection by the appellant, makes it plain that a contract was implied. The answer to the second question is not so simple. The nub of the appellant's case is that there was no agreement by the appellant to the change of tariff, nor indeed any notification of the tariff change by the respondent. The issue is narrowed by the disavowal of Counsel for the respondent of reliance on any statutory provision or on its Price List and Conditions of Supply. Accordingly, the issue becomes whether the contract which, as I have found, was implied from the course of dealings since late 1985, incorporated a term which varied the tariff from domestic to commercial as and from august 1990. The appellant's submission is that there was no evidence of any change of tariff; or any notification of, or entitlement to change the tariff. Mr Jones, the bookkeeper who processed the accounts and arranged for payment by Snowlong, gave evidence that he was hot aware of the change in tariff. The case for the respondent relies on the course of dealing between the parties, the supplier of electricity and the owner of the premises. Mr Cowan, on the respondent's behalf, relies on the regularity of dealing and the payment of and absence of objection to the new tariff from August 1990 onwards. He submits that the court can be comfortably satisfied that the change in tariff was notified in the August 1990 account by the inclusion of the new tariff code and the new rate in cents per kilowatt hour. In addition, all subsequent bills were levied at a commercial rate. Mr Cowan submits that Mr Jones' lack of awareness of the change can be put to one side because actual knowledge of the term is not required. The respondent places particular reliance on payment of the account at the new rate and the absence of objection, as well as the continued payment of accounts at the increased tariff during the period in question, albeit in arrears. According to the respondent, this leads to the conclusion that the new tariff became incorporated into the contract by the course of conduct of the parties. Mr Cowan also notes that the applicability of the commercial tariff to the use of the premises as a private hotel is not in issue, only whether it was agreed to by the appellant..' A course of dealing of a series of transactions over time may incorporate terms into a contract (Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 at 90, 104-105 and 130). In that case a lengthy and consistent course of dealing, together with a failure to object to the term in issue, was held to imply assent to the incorporation of the term. The House of Lords also held that in order to rely on a course of dealing a party need not show that the other party had actual knowledge of the term, thus overruling McCutcheon v David MacBraiyne Ltd [1964] 1 WLR 125 at 134. An important aspect in determining whether terms are incorporated by the course of dealing is the ex-tent of the dealing and the steps taken. As observed by Carter & Harland (Contract Law in Australia 3rd ed 618) the course of dealing must be consistent and sufficiently long, see for example J Spurling Ltd v Bradshaw (1956) | WLR 461. 4 UNREPORTED JUDGMENTS Henry Kendall was applied by Cohen J in Chattis Nominees Pty Ltd v Norman Ross Homeworks Pty Ltd (1992) 28 NSWLR 338 at 343. After describing the course of the dealings his Honour said: The regularity of those dealings indicates that in the absence of objection, the condition must be taken to have been accepted as being incorporated into the contracts which were entered into throughout 1991: see Henry Kendall & Sons (A Firm) v William Lillico & Sons; Holland Colombo Trading Society v Grimsdale & Sons; Grimsdale & Sons v Suffolk Agricultural Poultry Producers Association [1969] 2 AC 31 at 90, 104. The circumstances here make it reasonable to assume that orders placed by the defendant were on the basis of its accepting the term as to the retention of the property which the plaintiff had asserted to be its position throughout the period of the dealings between the two parties. From the facts I have recounted it is clear that, as at August 1990, there had already been a lengthy course of consistent dealing between the parties which acknowledged an agreement by the respondent to supply electricity to the appellant's common areas at the domestic rate and the payment of the quarterly accounts rendered by the respondent for the same. The question is whether the change in the tariff from domestic to commercial, having its origin in the August 1990 account, became incorporated as a term of the contract. In my opinion it did. The relevant account indicated a tariff code other than the domestic code and a different rate per kilowatt hour from that previously levied. The bill was paid. From | February 1991 (and quarterly thereafter) further accounts were rendered to the appellant based on the commercial tariff. They were also paid, albeit partly in arrears. The respondent allowed the accounts to be paid in arrears after Mr Jones negotiated an arrangement for instalment payments. At no time between August 1990 and March 1992, the period of supply at a commercial tariff, was any objection made to the rate. The fact that the appellant and Mr Jones may have been ignorant of the increased rate, does not affect the incorporation of the amended term, see Henry Kendall. It seems to me that there was a consistent course of dealing from August 1990 to March 1992 on the basis of the changed tariff, with payments made without objection. This was, of course, on top of the previous almost 5 years of consistent dealing prior to August 1990. In my opinion the appeal must fail. I propose that the appeal be dismissed with costs. Appeal dismissed with costs. Counsel for the appellant: MK Meek Solicitors for the appellant: Paul Marsh Counsel for the respondent: D Cowan Solicitors for the respondent: Bartier Perry & Purcell