New South Wales Court of Appeal CITATION : Tekely v Pryce [2000] NSWCA 6 FILE NUMBER(S) : CA 40451/98 HEARING DATE(S) : 3 December 1999 JUDGMENT DATE : 17 February 2000 PARTIES : Appellant: Stephen Tekely trading as Premier Tekely Transport Respondent: James Robert Pryce JUDGMENT OF : Meagher JA at 1; Sheller JA at 20; Giles JA at 27 LOWER COURT JURISDICTION : District Court LOWER COURT 287/95 FILE NUMBER(S) : LOWER COURT Grogan DCJ JUDICIAL OFFICER : COUNSEL : Appellant: J S Drummond Respondent: S M Kettle SOLICITORS : Appellant: Bateman Battersby (Penrith) Respondent: Jacob law (Nth Richmond) CATCHWORDS : Breach of contract - whether breach of essential or implied term - whether reasonable notice given of termination - wrongful termination - damages - quantum of damages DECISION : Appeal dismissed with costs. THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40451/98 MEAGHER JA SHELLER JA GILES JA 17 FEBRUARY 2000 STEPHEN TEKELY TRADING AS PREMIER TEKELY TRANSPORT v JAMES ROBERT PRYCE BREACH OF CONTRACT - WHETHER BREACH OF ESSENTIAL OR IMPLIED TERM - WHETHER REASONABLE NOTICE GIVEN OF TERMINATION - WRONGFUL TERMINATION - DAMAGES - QUANTUM OF DAMAGES Facts: A dispute arose from an agreement to purchase a prime mover. The terms of the contract were very much in the appellant's favour. Among other things they specified the purchase was to financed by the appellant, and that the respondent would be responsible for obtaining insurance for the vehicle. Because of his age the respondent was unable to procure insurance for the vehicle. The appellant, without notice, terminated the contract. The respondent successfully brought action for the breach of contract. The appellant appeals against this decision. Held: (per Meagher JA, Giles JA agreeing) In the court below, the appellant argued the contract had been abandoned by mutual agreement. On appeal he endeavoured to plead the respondent's failure to obtain insurance constituted a repudiation of contract. The change in plea is rejected. The insurance clause did not stipulate any time by which the respondent was to obtain insurance, therefore it can not be construed as an essential term. An implied term can be read into the clause that the insurance would be obtained within a reasonable time, however there was no evidence that a reasonable time had passed. The appellant's contentions over the quantum of damages are dismissed. Per Sheller JA: The trial judge did not err in his conclusion as the agreement contained no specification for the respondent to obtain insurance, or for the transfer of registration to occur. The appellant did not give any notice that he intended on terminating the contract because of the respondent's failure to obtain insurance. Even if the court could imply a specific time into the contract, the appellant waived any right to immediate termination by continuing to allow the respondent to use the truck while it was still registered and insured in the appellant's name. The appellant failed to show grounds why the quantum of damages should be adjusted, therefore no adjustment will be made. ORDERS 1. The appeal should be dismissed with costs. - 9 - THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40451/98 MEAGHER JA SHELLER JA GILES JA 17 FEBRUARY 2000 STEPHEN TEKELY TRADING AS PREMIER TEKELY TRANSPORT v JAMES ROBERT PRYCE JUDGMENT 1 MEAGHER JA: For some years before 1 July 1995 the appellant, who traded as Premier Tekely Transport, operated a transport business carrying stock feed to customers located at Milton, Kangaroo Valley and other places in New South Wales. In that business he used two semi-trailers. The first was a 1980 Volvo prime mover which was used solely to transport raw materials to the appellant's plant. The second vehicle, the subject of the present proceedings, consisted a of Volvo prime-mover, together with a trailer to which were attached two cylindrical pressurised containers. This vehicle was known as N10 and was solely used to transport the manufactured stock feed to the appellant's customers. 2 In April 1995 the respondent, Mr Pryce, was employed by the appellant to drive the N10 truck, but a month later he resigned, being dissatisfied with both the terms of his employment and the rate of pay. In early May 1995 the N10 was badly damaged. 3 In early May 1995 the appellant, Mr Tekely, and the respondent, Mr Pryce, met at Mr Tekely's home, to discuss the purchase of N10 by Mr Pryce, to cart Mr Tekely's stockfeed on its behalf, that to commence on 1 July 1995. In late June 1995 Mr Tekely forwarded to Mr Pryce a written document styled "Working Agreement". It was obviously drafted by Mr Tekely, whose interests appear paramount from its text. It was signed by Mr Pryce on 17 July 1995. It goes without saying that Mr Pryce, who was young and inexperienced in business affairs, did not enjoy the luxury of a solicitor's advice. 4 The document is short and I shall set it out in full: " WORKING AGREEMENT BETWEEN JAMES PRICE (sic) AND PREMIER TEKLEY TRANSPORT TERMS AND CONDITIONS 1. If you decide to sell the truck. Premier Tekely Transport has first option to buy. 2. If Premier Tekely Transport passes up the option to buy whoever you sell the truck to, must be approved by Premier Tekely Transport. 3. You will keep the truck and pressure tanks plus the pup trailer clean and tidy. 4. You will maintain a good working relation (sic) with all our customers. 4a. Unloading hoses and fittings to be paid for by you. 5. The repairs and maintenance to said truck will be carried out and paid for by you including the power take off and drive shaft to blower plus tyres and brake linings on pup trailer 6. Price of Truck N10 Volvo registration No QFQ 535 is $35,000, which is to be paid for over a period of 3 Years at $1150.00 per month. Total repayments come to $41,400 which includes a rate of interest. 7. Said truck to be insured by you and a copy of the current policy given to Premier Tekely Transport. 5 As at 1 July 1995 the N10 was registered in the name of Mr Tekely, and that registration was due to expire on 24 November 1995. It was also the subject of a policy of insurance which was effective from August 1994 to August 1995. 6 Possession of the truck having passed to Mr Pryce on 1 July 1995 ( as by an implied term of the agreement it should have), Mr Pryce operated the truck with considerable success as Mr Tekely's sub-contractor. 7 On 21 August 1995, Mr Tekely, abruptly and without notice, proceeded to rescind the contract. 8 Mr Pryce sued the appellant for breach of contract and this claim was upheld by Grogan DCJ, who awarded him a verdict of $116,783.99. 9 Mr Pryce's claim was clear enough: he had done nothing to merit Mr Tekely retaking the truck; he had committed no breach of contract; and he was always very willing and able to perform the contract on his part. 10 Mr Tekely's response to the plaintiff's claim was also clear enough: he said that he had not wrongfully terminated the contract, but it had been abandoned by mutual agreement. That is what the written Defence said; it is what the cross-claim said; and it is the issue on which the District Court action was fought. In my view Mr Tekely ought not to be allowed to depart from that stance. 11 His Honour dismissed the only defence raised by the appellant, Mr Tekely, and he was correct in doing so. I think this court should adopt his Honour's reasoning in that regard. Indeed, even learned counsel for the appellant, Mr Drummond, conceded that his Honour was correct on this - the central, and indeed the only point in the case. On the appeal, he made no attempt to reagitate any claim of mutual abandonment. 12 However, he endeavoured to refashion his case by arguing that Mr Pryce, the respondent, had repudiated the contract by his inability to obtain insurance for the N10, a repudiation which was accepted by the appellant in terminating the contract. There are two reasons why this argument must be rejected. The first is that it was never raised before this appeal came on. 13 The second is that it would seem, on the materials before us, that non-obtaining of insurance by the respondent was not a repudiation of the contract. The contract did not require the respondent to obtain immediate insurance. Insurance and transfer of registration were, clearly enough, meant to be interdependent-transaction, but there was no time stipulated in regard to either. Doubtless there was an implied term that each would be effected within a reasonable time, but there was no evidence that, so far as insurance was concerned, such a reasonable time had elapsed. 14 The trial judge's computation of damages can be understood by an examination of the following table, provided at the trial on behalf of the plaintiff. It was based on a report of Mr Phillip Edwards, an accountant, whose evidence was accepted by his Honour. It is as follows: "SCHEDULE A Damages due to plaintiff based on a minimum period of 3 years as per report of Phillip Edmond's and concession made in Cross-Examination Annual Turnover of $146,468.00 Less : Average Operating costs per annum 1. Insurance $ 2,250.00 2. Registration $ 3,200.00 3. Fuel and lubricants $38,000.00 4. Repairs and Maintenance $15,000.00 5. Depreciation $ 2,000.00 6. Interest $ 2,133.33 7. Accounts/Telephone/Bank Cheques $ 579.00 $63,162.33 Estimated Annual Profit (including $700.00 gross per week labour costs of Plaintiff) $83,305.67 Estimated Profit for 3 Years $249,917.01 Less: Income earned for financial year 1995/1996 $27,395.00 Income earned for financial year 1996/1997 (47 weeks up to 21 May, 1997 Grossed $42,692.06 on $908 per week) Therefore 52 weeks at $908 per week $47,216.00 Less: Estimated Income earned for financial year 1997/1998 $47,216.00 $128,090.01 Plus : Value of truck purchased (see paragraph 5.2 of Mr Edmond's report) $17,140.00 Total Damages $145,230.01 Less: Purchase price of truck $35,000.00 Total damages $110,230.01" 15 This computation was attacked by the appellant at three points. The first was the "annual turnover" figure of $146,000.00. It was said that this was an extrapolation of unnecessarily slender figures, viz, the figures of turnover from 1 July 1995 to 21 August 1995. However, on further thought, Mr Drummond conceded its practical accuracy. 16 The next figures under attack were the figures for items 3 and 4. These figures, totalling $53,000.00, were less than the total of past figures in connection with the plaintiff's trucks. Instead of $53,000.00 it was submitted that there should be a figure of $80,000. However, the appellant's figures were put to Mr Edwards, who rejected them. He asserted that from his experience, the combined figures for items 3 and 4 should be one-third of "annual turnover". His Honour believed him. 17 Finally, it was said there should be a new item to be deducted from the figures of $146,468.00. viz. instalments of $13,800. But in my view the respondent was correct in his submission that no figure for instalments should be included, as they are a sum going to the purchase price, which is taken into account by the price of the truck. To include the instalments would be double counting, as it was not submitted that the damages should not have been calculated taking into account the purchase price of the truck and its value at the end of three years. 18 I might add that it seems to me there is a lot to be said for the view that the damages as assessed by his Honour are, if anything ,a little on the ungenerous side. The plaintiff lost his chance of working a truck for the rest of his life, and there is no reason to think its life was limited to three years. Yet his Honour's damages are so limited. But there was no cross-appeal. 19 In my view this appeal should be dismissed with costs. 20 SHELLER JA: I have had the benefit of reading the judgment of Meagher JA in draft. The trial Judge, his Honour Judge Grogan, found that on 21 August 1995 the appellant unilaterally and therefore wrongfully and in breach of its terms terminated his agreement with the respondent. His Honour described the appellant's conduct as unilaterally and peremptorily, without any prior notice, purporting to terminate the agreement, alter the respondent's entitlement to be paid for the work he had done under the agreement, refusing to pay the respondent for the invoiced work he had done and requiring him to work on wages at an hourly rate yet to be determined and to return the truck unless he agreed to all demands. His Honour said: "I am satisfied there was no legal or other justification for the [appellant's] conduct. It was high handed, contemptuous and arrogant." 21 The appellant's defence as filed to wrongful termination was that the agreement "was terminated by mutual agreement on or about 21 August 1995". His Honour rejected this defence and this attempt at absolution was not pursued on the appeal. Rather, the appellant submitted that the termination was justified because the respondent was in breach of what was said to be an essential term and condition of the agreement, namely: "7. Said Truck will be insured by you and a copy of the current policy give [sic] to Premier Tekely Transport." 22 This term has to be read in the context of the appellant's evidence that when he handed the document to the respondent he told the respondent that seeing: "we were financing the truck that he would have to get insurance cover on it and we wouldn't be signing the rego over until he had a cover note on the truck for insurance just to guarantee us that if something happened to the truck there would be some payment for the truck." 23 The trial Judge said that even if it was pleaded, the appellant was not entitled to terminate for the plaintiff's failure to obtain insurance before 21 August 1997 for the following reasons: "(a) The contract does not contain an entitlement to terminate the contract for such breach; (b) There was no breach in any event in that; (i) the agreement does not stipulate any time by which ownership or registration needed to be transferred to the plaintiff or for insurance to be obtained by the plaintiff; (ii) it was not an essential term of the contract that the plaintiff arrange for registration or insurance of the truck in his own name by 21 August 1995 or any other specified time; (iii) no reasonable notice was given to the plaintiff of any intention to terminate the contract because of the insurance problem or seeking to make time of the essence to obtain insurance; and (iv) even if such a term was implied, the defendant by continuing to direct the plaintiff to make deliveries while insured by the defendant's policy, waived any such immediate requirement for insurance to be obtained by the plaintiff. 8. According to the evidence, as at 21 August 1995: (a) The truck remained registered and insured in the defendant's name and thereby the plaintiff and the defendant remained covered by the defendant's insurance. (b) The agreement remained effective and the object of the agreement was achieved up to 21 August 1995 and there was no reason why it should not continue after that date. (c) The defendant admitted that the truck remained registered and insured in his name and there was no problem about the plaintiff driving the vehicle. (d) The plaintiff showed no unwillingness to obtain insurance for the truck and once the decision was made by the defendant not to permit co-insurance, the plaintiff, prior to termination, was given no opportunity to make further inquiries." 24 None of the arguments put by the appellant's counsel persuades me that there was any error in his Honour's conclusion. 25 I agree for the reasons given by Meagher JA that the appellant has shown no ground for interfering with the award of damages. 26 The appeal should be dismissed with costs. 27 GILES JA:I agree with Meagher JA. ***** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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