Advance Waste Management Pty. Limited v. Jeffery Fletcher [1999] NSWSC 210

New South Wales Supreme Court CITATION : Advance Waste Management Pty. Limited v. Jeffery Fletcher [1999] NSWSC 210 CURRENT JURISDICTION : Equity Division FILE NUMBER(S) : 4471/98 HEARING DATE(S) : 17 March 1999 JUDGMENT DATE : 17 March 1999

PARTIES : Advance Waste Management Pty Limited (P) Jeffery Fletcher (D) JUDGMENT OF : Master McLaughlin

COUNSEL : Mr. R. Treganza (P) Mr. S. Bell (D) SOLICITORS : Ian McGillivray & Associates (P) Garrett Walmsley Madgwick (D) CATCHWORDS : ACTS CITED : Corporations Law The Moorcock (1889) 14 PD 64 CASES CITED : BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 Reigate v Union Manufacturing Company [1918] 1 KB 592 Shirlaw v Southern Foundries Ltd (1939) 2 KB 206 DECISION :

- 8 - SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

MASTER McLAUGHLIN

Wednesday, 17 March 1999

4471/98 ADVANCED WASTE MANAGEMENT PTY LIMITED -v- JEFFREY FLETCHER JUDGMENT

1 MASTER: By summons filed on 30 October 1998 the plaintiff Advance Waste, Management Pty Limited, seeks an order that the Statutory Demand served upon it by the defendant be set aside. That Statutory Demand, which was served on 13 October 1998, seeks payment by the plaintiff to the defendant, Jeffrey Fletcher, of the sum of $5,129.93. That amount is described in the schedule to the Demand as comprising "refund of moneys paid under agreement" $5,000, and two items of interest, giving a total amount of $5,129.93. 2 There were, in fact, two agreements entered into between the plaintiff and the defendant. No point is taken, however, by the plaintiff, that the Demand refers only to one amount and one agreement. 3 The defendant claims a refund of $2500 in respect of each of the two agreements, each of which was dated 19 December 1997. The scheme of each of those agreements was that the defendant (described in the agreement as "the grower") paid to the plaintiff under each agreement the sum of $2,500. The defendant was then to supply to the plaintiff a certain quantity of worms. There was an obligation placed upon the plaintiff to purchase worms and an obligation placed upon the defendant to supply worms. 4 The agreement -- I am speaking of a single agreement because the two are in identical terms --- contains in clause 1 a definition of "commencement date", which is said to be the date of first delivery of worms to the depot, which was a date in the future not less than 20 weeks from the date of this agreement or otherwise as stated in writing by the company. The plaintiff is described in the agreement as "the company". 5 Clause 6 A provides: The company agrees to purchase from the grower during the first term of this agreement worms to the value of $15,000 based on the fair market price of not less than $30 per kilogram of marketable quality worms. 6 Clause 9.3, provides, The grower guarantees to supply to the company regular deliveries of marketable worms of a minimum value of $600 per kilo during the term. If default of supply occurs during the duration of the term, the company may serve upon the grower notice to rectify the breach within 28 days of that notice. Failure to rectify such breach within the 28 day period will permit the company to terminate and discontinue this agreement. Allowance will be placed upon continuation of the business, however it is the grower's responsibility to notify the company of such drawbacks to the growers placing if such an event did occur. 7 Clause 11, which is headed Default by the Company, is in the following terms: In the event that the company breaches any of the its obligations under this agreement and provided that an event of default has occurred to purchase marketable worms the grower may serve written notice upon the company requiring the company to remedy the breach within 28 days of the company's receipt of such notice. If the company fails to rectify the breach within the 28 day period then the company shall be liable to refund the moneys paid by the grower to the company for the purchase of the worm farm less any amount which has been paid by the company to the grower or equipment supplied under the terms of this agreement in full and final settlement of any claim the grower has at that time or may have in the future against the company arising out of any breach by the company of the terms of this agreement. 8 Each of the two agreements bears upon the front page thereof an endorsement placed there by the plaintiff company in the following terms: "First delivery date as per contract 18 April 1998." 9 The company did not place any order for the purchase of worms with the defendant requiring delivery on 18 April 1998. Indeed, it did not place any order with the defendant for the purchase of worms throughout the first five months of 1988. On 10 June 1998, after the defendant had had a number of conversations with Mr Kevin Joseph Murphy, the director of the Plaintiff, in apparently the latter part of March, April and May, Mr Fletcher sent to the plaintiff a letter dated 10 June 1998. That letter purports to constitute notice of the nature contemplated by clause 11 of the agreement, requiring the plaintiff company to rectify a breach of the agreement and giving 28 days for such rectification. The letter contains the following: Please be advised that I hereby wish to serve notice upon your company regarding the breach of our contracts dated 19 December 1997. As no orders for my worm stock have been forthcoming to date, I believe you, the company, have defaulted on our agreement and I now issue you with 28 days to rectify that situation as stated in the contract. If at the expiry of 28 days you have not issued me with an order for our agreed 20 kilos of worms I will require a refund of all moneys paid to you by myself, this being in the order of $5,000. Your nonwillingness to abide by your contract has left me disappointed and very out of the pocket. I hope that you will now fulfill your obligation under the contract and refund to me my up front costs. 10 Subsequently a letter was sent by the solicitors for the defendant to the plaintiff, dated 4 September 1998, requesting refund of the $5,000 paid by the defendant to the plaintiff and giving notice of an intention to serve a Statutory Demand in the event that that amount were not paid. 11 The plaintiff, on 28 September 1998, sent a letter apparently to all its growers (that is, to all the persons with whom it had entered into an agreement of the nature of that with the defendant), inviting their attendance at a meeting to be held on 10 October 1998, and seeking to have each of those growers release the plaintiff from what is described in the letter as the "contingent liability" which the plaintiff considered had arisen as a result of the effect of clause 11 of the agreement. 12 On 9 December 1998 Mr Murphy left a recorded message on the defendant's telephone answering machine. The following day the defendant sent a letter to the plaintiff referring to that telephone message. It would appear that, although there were a number of conversations between the defendant and Mr Murphy, on behalf of the plaintiff, they were all telephone conversations and that those two gentlemen had never actually met in person. 13 The Statutory Demand claims a refund of the totality of the two amounts of $2,500 paid by the defendant to the plaintiff. That refund is sought by the defendant pursuant to the terms of clause 11 of the contract, the defendant asserting that, in consequence of a breach by the plaintiff and the notice given by the defendant by the letter of 10 June 1998 and the nonrectification of that breach, the provisions of clause 11 are brought into operation, and that, as a result, the plaintiff is obligated to repay to the defendant the moneys paid by the defendant totalling $5,000. 14 The plaintiff, however, submits that no breach of the agreement has occurred which can call into operation the provisions of clause 11. It has been submitted on behalf of the plaintiff that the obligation upon the defendant, as the grower, is to provide to the plaintiff a minimum quantity of $600 worth of worms per month during the term of the agreement, but that the obligation upon the plaintiff company is merely to purchase, within the first term of the agreement, worms to the value of $15,000, and that despite the clear intention of the plaintiff not to place any orders for the purchase of worms, up to and including 10 June 1999, and despite the clear fact, fully conceded by Mr Murray in the witness box today, that the plaintiff was not in a position to purchase any worms up to that date, no breach of the agreement had occurred. 15 The construction of the agreement that the plaintiff submits should be adopted by the Court is a construction which in effect places an obligation upon the grower to have ready each month and to offer for purchase by the company a minimum quantity of $600 worth of worms, but does not place upon the company any obligation either to purchase those, or any, worms until the termination of the first term of the agreement (which is 12 months from the commencement date). That is, on the construction submitted by the plaintiff, there is no default by the plaintiff unless within 12 months of a date which the plaintiff itself led the defendant to believe would be the date of the first order for worms (that is, 18 April 1998), the plaintiff did not purchase $15,000 worth of worms. Upon such a construction the plaintiff would not be in default of the agreement if, on 18 April 1999 --- that is a month from now --- it purchased $15,000 worth of worms from the defendant. 16 In an application of the nature of that before the Court for the setting aside of the statutory demand, the Court must consider whether there is a genuine dispute between the plaintiff company and the defendant about the existence or the amount of the debt. In the instant case the plaintiff company says that there is a genuine dispute as to the existence of the debt, in that there was no default by the company under the terms of the agreement; therefore, the defendant was not entitled to give the notice of 10 June 1998, and in consequence the plaintiff is not under an obligation to repay the amounts totalling $5,000 which have been paid by the defendant to the plaintiff. 17 It has been submitted, on behalf of the defendant, that the construction placed upon the literal terms of the agreement do not reflect the business arrangement that existed between the two parties to the agreement, and that there was an implied obligation upon the plaintiff firstly to place orders for worms, at least before the expiry of the 12 months, being the first term of the agreement; and then to accept any worms provided to it after an order had been placed. It is clear from the evidence that the plaintiff and the defendant both contemplated that there should in fact be orders placed by the plaintiff at least before 18 April 1999. The entirety of the conversations between Mr Murphy and Mr Fletcher makes that manifestly clear. 18 The evidence reveals that the plaintiff did not have the facility to accept any worms that might have been provided for it by the defendant in accordance with the obligation placed upon the defendant under clause 9 (3) for the provision and supply of regular monthly deliveries of worms. 19 The plaintiff cannot derive any comfort from the suggestion that the defendant was now in breach of its obligation under clause 9.3 of the agreement. The plaintiff clearly did not want the worms to be delivered to it on a monthly basis. It had no facilities for them. In the various conversations it was indicated to Mr Fletcher that the plaintiff was not in a position to take any supplies throughout the months of March, April and May of 1998. 20 The principles relating to the addition of terms to a written document have been referred to in many decided cases. The locus classicus is the judgment of the Bowen LJ in The Moorcock (1889) 14 PD 64 at 68. As recently as 1977, the Judicial Committee of the Privy Council in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283 reaffirms the principle set forth in the judgment of Bowen LJ. The Judicial Committee also quoted with approval passages from the judgment of Scrutton LJ in the English Court of Appeal in Reigate v Union Manufacturing Company [1918] 1 KB 592 at 605 and of Mackinnon LJ in Shirlaw v Southern Foundries Ltd (1939) 2 KB 206 at 227. 21 I have no doubt whatsoever that the parties in the instant case contemplated that the plaintiff would place with the defendant orders for the delivery of worms long before the end of the first term of the contract. Further, that the only reason why the plaintiff did not abide by the terms of what it clearly understood to be its obligation was its own inability to accept the supply of worms which the defendant was obliged to provide. 22 In order to give business efficacy to the arrangement between the parties there must essentially be implied a term which would allow the defendant to give the notice which he gave on 10 June 1998. That notice having not been complied with, I consider that the plaintiff is in default and that the provisions of clause 11 have been called into operation, and thus that the plaintiff is under an obligation to repay to the defendant the total amount of $5,000 sought in the Statutory Demand. There is no entitlement in the defendant to any interest on that amount, and I propose to make an order varying the amount from the amount claimed in the Demand to $5,000. 23 I make the following orders: (1) I order that the Summons be dismissed.