New South Wales Court of Appeal CITATION: Brady Contracting Pty Ltd v Kellyville Christmas Tree Farm Pty Ltd [2005] NSWCA 22 HEARING DATE(S): 17/02/2005 JUDGMENT DATE: 17 February 2005 JUDGMENT OF: Santow JA at 1-5 & 23; McColl JA at 6; Hunt AJA at 7-22 DECISION: 1. Appeal dismissed.; 2. Appellant to pay resondent's costs. CATCHWORDS: Oral contract to deliver to plaintiff timber of different qualities taken from demolition of wharves - payment to plaintiff of dump fee - expectation of parties that the timber delivered would contain some timber of commercial benefit to plaintiff warranting lesser dump fee - defendant by own mistake selected timber for delivery to plaintiff which was of more commercial value to plaintiff than intended by defendant - whether timber delivered was nevertheless delivered within the terms of contract - claims in detinue and unjust enrichment dismissed - no error. Associated Japanese Bank (International) Limited v Credit Du Nord SA [1989] 1 WLR 255 CASES CITED: McCrae v Commonwealth Disposals Commission (1951) 84 CLR 377 R J Brady Contracting Pty Ltd PARTIES: Kellyville Christmas Tree Farm Pty Ltd FILE NUMBER(S): CA 40501/04 Mr I D Cullen/Mr D Allen Appellant COUNSEL: Ms J Oakley Respondent Philip Parbury & Associates Appellant SOLICITORS: Robert King & Associates Respondent LOWER COURT JURISDICTION: District Court LOWER COURT FILE NUMBER(S): DC 2721/2003 LOWER COURT JUDICIAL OFFICER: Herron DCJ IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40501/04 SANTOW JA McCOLL JA HUNT A-JA 17 February 2005 R J BRADY CONTRACTING PTY LTD v KELLYVILLE CHRISTMAS TREE FARM PTY LTD trading as KELLYVILLE FIREWOOD CO Judgment 1 SANTOW JA: I agree and would only wish to add these observations. The fundamental starting point is the terms of the contract. Interpreting the contract as the trial judge did, as elaborated by Hunt A-JA, there is clearly a contemplated range of timber quality that would satisfy the contract. That range of quality starts with worthless scrap, proceeds through useable firewood and clearly includes timber of reusable quality. That provides the basis for appraising the nature of the mistake made and whether the contract provides expressly or by implication for who bears the risk of the relevant mistake. In that context the words of Steyn J in Associated Japanese Bank (International) Limited v Credit Du Nord SA [1989] 1 WLR 255 at 268 are apt where he observed: Logically, before one can turn to the rules as to mistake whether at Common Law or in Equity, I must first determine whether the contract itself, by express or implied condition precedent or otherwise, provides who bears the risk of the relevant mistake. It is at this hurdle that many pleas of mistake will either fail or prove to have been unnecessary. Only if the contract is silent on the point is there mistake for invoking mistake. 2 Here it appears that the supplier, being the appellant, carelessly at least, provided more of the reusable timber that it need have done to satisfy the terms of the contract. That said, it does not follow that he failed to satisfy the terms of the contract by supplying a larger proportion of reusable timber; to the contrary. 3 The risk of that mistake fell under the contract upon the appellant as supplier. This is more especially given the entirely careless manner in which he carried out the sorting process. This is quite apart from the question whether, McCrae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 408 suggesting otherwise, such a mistake is indeed one which allows of any application of the doctrine of mutual mistake or, here, unilateral mistake. That is to say, where the appellant's belief that he was supplying wood that did not include re-usable timber was without reasonable ground, given the appellant's carelessness in supervising its selection. At 408, Dixon and Fullagar JJ said: A party cannot rely on mutual mistake where the mistake consists of a belief which is, on the one hand, entertained by him without any reasonable ground and, on the other hand, deliberately induced by him in the mind of the other party. 4 To this may be compared what is said by Mason and Carter "Restitution Law in Australia" (Butterworths 1995) at [420]: [420] Payer's negligence. As long ago as Kelly v Solari in 1841, 109 it was established that forgetfulness or other negligence will not preclude recovery by a plaintiff whose mistake led to the payment. There an insurance company paid out a life policy overlooking the fact that it had lapsed during the deceased's lifetime for non-payment of premiums. This did not bar the right of recovery, although the court would have rejected the claim had it been established that the plaintiff had chosen to pay as the result of a conscious decision not to investigate the relevant facts carefully. Later decisions have confirmed that the payer's negligence does not affect the right of recovery.110" 109 (1841) 9 M & W 54; 152 ER 24. 110 White v Copeland (1894) 15 LR(NSW)(L)281; Imperial Bank of Canada v Bank of Hamilton [1903] AC 49; Westpac Banking Corp v ATL Pty Ltd [1985] 2 Qd R 577; Commercial Bank of Australia Ltd v Younis [1979] 1 NSWLR 444 at 450. 5 I conclude that this is not a case where the doctrine of mistake has any room for its application, still less any notion of unjust enrichment. The remedy sought is not rescission on the ground of mistake as would be an essential first step for relief. Rather it is predicated on the contract continuing, but relies on a misconstruction of it for relief. I would agree that the appeal should be dismissed. 6 McCOLL JA: I agree with Santow JA and with Hunt A-JA. 7 HUNT A-JA: This appeal is from the judgment of Herron A-DCJ in proceedings which had been transferred to the District Court from the Local Court because the sum claimed was in excess of that Court's jurisdiction. The plaintiff's claim, which succeeded in the District Court, was for a liquidated sum payable pursuant to a contract 8 The appellant, who was the defendant in the District Court, was a demolition company involved in demolishing the finger wharves at Walsh Bay. Mr Alexander of that company contacted Mr Keene of the plaintiff company, which was firewood merchant, with an offer to deliver timber to the plaintiff for a dump or tip fee which was to be agreed between the parties and paid by the defendant to the plaintiff. Mr Alexander said that he would send a couple of loads for the plaintiff to look at, and it was agreed that they would speak again about whether the deliveries would continue and what the fee would be for the plaintiff to receive them. 9 After a sample delivery had been made, a further conversation took place between the two men in which Mr Keene nominated a fee which the plaintiff would accept, expressed as being $330 per load plus GST. Mr Alexander said that the defendant would get back to him. There was a further conversation between Mr Keene and the defendant's Mr Brady in relation to what was to occur, and a fee of $330 per load inclusive of GST was agreed. It will be necessary to refer again, and in some more detail, to what had been discussed in all three conversations. 10 Seventy-one bins of timber were delivered by the defendant to the plaintiff. Invoices totalling $23,430 were sent by the plaintiff but the defendant paid only $9,240. The claim was for the balance of $14,190. The defendant's Grounds of Defence in the Local Court denied that the contract permitted the plaintiff to retain any timber delivered as its own property, and asserted that some timber had been delivered which did not fall within the terms of the contract and that such timber had been retained by the plaintiff notwithstanding that this timber remained the defendant's property. In the District Court, the defendant filed a cross-claim asserting that such timber which had been delivered but which was not within the terms of the contract was reusable structural timber which had a market value, and that the title to that timber had not passed to the plaintiff, yet the plaintiff had refused to return it and was unlawfully detaining it. In addition, the defendant claimed that this timber which had been delivered but which was not within the terms of the contract had been delivered by mistake and had provided the plaintiff with an unjust enrichment. The defendant sought the delivery of this timber by the plaintiff to it, or damages. The plaintiff accepted at the trial that, if the cross-claim succeeded, it would permit the defendant to collect this timber at its premises. 11 The amount involved in the cross-claim exceeded the amount of $100,000, and thus leave to appeal was unnecessary. 12 The actual words used in the conversations between Mr Keene for the plaintiff and Mr Alexander and Mr Brady for the defendant are not in dispute. What is in dispute is the interpretation of those words and whether some of the timber which was delivered by the defendant to the plaintiff did not fall within the terms of the contract constituted by those conversations. The relevant statements were as follows: Conversation of 20 February 2001 Mr ALEXANDER: We're demolishing the finger wharves at Walsh Bay. A lot of the timber would make good firewood. Would you be interested in taking it? […] It's all ironbark, a lot of it is shit but I think you'd get a lot of firewood out of it. […] We'd like to get someone like you to take it off our hands as you'd probably do quite well out of it. Mr KEENE: We'd still be wanting to get at least 50 per cent of what a commercial dump fee would be. This is what we've done with people in the past. Mr ALEXANDER: Can we send a couple of loads out to you for you to look at? Mr KEENE: Okay, get the bin delivered, if it's good enough to be worthwhile we then discuss how much we charge to take the bins. […] If we end up doing business we want to invoice you for this sample load and I'll talk to you after the load comes. A load was delivered on 21 February. Conversation of 21 or 22 February Mr ALEXANDER: What do you think of the timber? Mr KEENE: There's some good wood in it but there'll be a huge amount of processing. […] There's no way we'd accept it for free and I think you know that. […] We'd want $330 a load plus GST. Mr ALEXANDER: I'll talk it over with the boss and get back to you. Conversation in late February or early March Mr BRADY: As you probably know, we're demolishing wharves and need to get rid of the timber. Are you interested in taking it? Mr KEENE: I've seen the timber, there's a lot of scrap but enough good stuff for us to do something with it. I told Ken we'd want $330 a bin plus GST. [When the judge was delivering his judgment, he was reading from an affidavit of Mr Keene, but he either misread "a lot of scrap but enough good stuff" as "a lot of scrap but good enough stuff" or was misheard.] Mr BRADY: There's a lot of really good stuff that you can use in your line of business, you'll make a packet out of this timber. Mr KEENE: That might be right but there's going to be a lot of handling and sorting before we can do anything with it and then there'll be the cost to get rid of the stuff that we can't use. From what I know of the finger wharves, you've got a lot of stuff to get rid of. […] Look, what if I said we'd charge $330 a load, we'll cop the GST. Mr BRADY: Done. Mr KEENE: We should be able to take as much as you want to deliver provided there's enough good stuff in it for us to use and we don't have too many hassles in getting it sorted. […] After arranging that notification would be given that a load was on the way so that someone would be in the plaintiff's yard to receive the delivery, Mr Brady said "That won't be a problem". 13 The defendant has argued in its appeal that the only category of timber which was the subject of the contract formed by those conversations was "waste" wood, which was to include only the rubbish which the plaintiff would have to extract from the timber delivered and dispose of at its own expense and the wood suitable for resale by the plaintiff as firewood only. The defendant's argument is that "waste" wood did not include wood which was reusable structural timber having a market value otherwise than as firewood. The plaintiff's argument is that the contract covered all timber which was delivered to it by the defendant from the wharves project. 14 The other evidence which the defendant asserted at the trial was relevant to the interpretation of the contract entered into was: (i) the plaintiff's Statement of Liquidated Claim, which described it as one "to accept loads of timber waste" (a transposed version of which was also in the particulars supplied by the plaintiff); and (ii) a letter from the plaintiff's solicitor after the dispute arose in which he denied that the contract governed the use to which the timber could be put by the plaintiff after delivery and asserted that the plaintiff maintained its contractual right to terminate the contract either if the volume exceeded its capacity to receive it or if there were no commercial advantage in receiving the quality of the material delivered. 15 The plaintiff's use of the phrase "timber waste" in his pleading is relevant to the determination of the quality of the timber to be delivered within the terms of the contract only if there is some mutually accepted technical meaning to be ascribed to that phrase which accords with the defendant's argument. There was no suggestion in those conversations that it carried such a restricted meaning. The word "waste" in the situation which arose in the present case could refer to at least three different categories of timber — (i) the timber which was the rubbish which was of no commercial value to the plaintiff, (ii) the timber which included both the rubbish and the wood which was of no commercial value to the defendant such as the firewood, or (iii) all of the timber which was removed by the defendant from the wharves being demolished. Another way of describing the third category would be simply surplus material from the wharves. Neither party accepts the first of those alternatives. The plaintiff does not assert the third alternative, as it has argued that the contract covered only the timber which the defendant actually delivered. The choice between the second alternative (which is the defendant's contention) and the plaintiff's contention can only be governed by reference to the conversations which constituted the contract. 16 Mr Mahon of the defendant company gave evidence that the distinction between waste timber and reusable structural timber depended upon such matters as the length of the timber and whether it was rotten or had bolts through it, but the distinction which he drew cannot dictate the interpretation of the words used in the three relevant conversations. It was clearly contemplated that the plaintiff would receive not only timber which Mr Mahon described as waste timber but also material which was of some commercial value to it. The phrase "timber waste" used in the plaintiff's pleading took the proper interpretation of the conversations no further. 17 As to the letter from the plaintiff's solicitor, it is correct that the contract had nothing to say as to the use to which the timber could be put by the plaintiff once delivered, and the contract did indeed permit the plaintiff to terminate it in the event stipulated. However, neither of these matters had any relevance to the quality of the timber to be delivered within the terms of the contract. 18 There is nothing in any of the statements made which limited the quality of the timber to be delivered within the terms of the contract to that which was rubbish and that which could be used by the plaintiff in its usual business of selling firewood. What the defendant was seeking to do was to pay a lower dump fee than would be payable to a commercial dump operator by giving to the plaintiff the opportunity to obtain whatever commercial advantage was available to it from selling what had some value. Mr Alexander did mention its sale as firewood, but he did not indicate any restriction in the quality of the wood to be delivered to that which was suitable for that purpose. The commercial advantage which Mr Keene emphasised ("if its good enough to be worthwhile") similarly was not restricted to its sale as firewood. The absence any such restriction was made even clearer in the conversation which followed the delivery of the sample load, when Mr Keene remarked that, despite the large amount of processing which would be required, there was some "good wood" in that sample — by which, it is accepted by the appellant, he would have been understood as referring to reusable structural timber. It was also made clearer in the next conversation with Mr Brady, when Mr Keene said "there's a lot of scrap but enough good stuff for us to do something with it". 19 The intention of the parties was that the contract would be concluded by reference to the different qualities of the timber which that sample delivery contained, but not necessarily the different quantities of each quality of timber in that sample. That is because the plaintiff was to run the risk that the timber delivered in subsequent loads may not be good enough to be commercially worth its while, and the defendant was to run the risk that the timber delivered in subsequent loads may be so good that the dump fee being paid was too high and no longer commercially worth its while. Each party was free to end the contract whenever it pleased. That was the intention or the purpose with which each party entered into the contract. 20 I interpret the contract as being referable to all the timber which was delivered by the defendant to the plaintiff from the wharves project. In my opinion, the fact that the defendant by a unilateral mistake delivered to the plaintiff timber which it had intended be delivered to another address does not mean that that timber had not been delivered to the plaintiff within the terms of the contract and that property had not passed to the plaintiff. No claim in detinue was available if the timber had in fact been delivered within the terms of the contract. It was so delivered, and property passed to the plaintiff. 21 Nor, in my opinion, can a claim of unjust enrichment arise in a case where the unilateral mistake has been made by the party claiming unjust enrichment not in performing the agreement according to its terms, but rather in the anterior selection of the material to be delivered within its terms. It cannot be said in this case that the plaintiff had no right to receive the better quality timber which had been delivered to it within the terms of the contract. There was no unjust enrichment. 22 Accordingly, no error was made by the trial judge in upholding the plaintiff's claim and in dismissing the defendant's cross claim. I would dismiss the appeal. 23 SANTOW JA: Accordingly the orders of the Court are: 1. Appeal dismissed. 2. Appellant to pay respondent's costs. ******************************** 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. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.