New South Wales Supreme Court CITATION : Euphoric Pty Ltd v Ryledar Pty Ltd [2006] NSWSC 2 3, 4, 5, 8, 9, 10, 12 & 15 November 2004 HEARING DATE(S) : 6 June 2005 (Adoption of Referee's Report) 10, 11, 12, 13, and 14 October 2005 JUDGMENT DATE : 30 January 2006 JURISDICTION : Equity Division Commercial List JUDGMENT OF : Palmer J DECISION : Judgment for Plaintiff; Cross Claim dismissed. CATCHWORDS : CONTRACT – CONSTRUCTION – RECTIFICATION – What was the true construction of a contract for the sale of petroleum products – whether contract should be rectified. - SALE OF GOODS – Sale of petroleum products – petroleum subject to volume contraction and expansion – whether volumes sold to be measured at point of loading or point of delivery. - OPTION – Whether defendant validly exercised option to renew Supply Agreement. - Fair Trading Act 1987 (NSW) – s.72 - Prices Surveillance Act 1993 (Cth) – s.22 LEGISLATION CITED : - Sale of Goods Act 1923 (NSW) – s.31, s.33, s.36 - Supreme Court Rules 1970 (NSW) – Pt 72 - Trade Practices Act 1974 (Cth) – s.87 - Caltex Petroleum Pty Ltd v Flomad Pty Ltd [2003] FCA 648 - Canberra Washed Sand Pty Ltd v Ro-Mix Concrete Pty Ltd (1976) 11 ACTR 1 - Crane v Hegeman-Harris Co Inc [1939] 1 All ER 662 - Esso Petroleum Co Ltd v Addison [2003] EWHC 1730 (Comm) - Ettridge v Vermin Board of the District of Murat Bay [1928] SASR 124 - Fercometal SARL v Mediterranean Shipping Co SA [1989] AC 788 - Foran v Wight (1989) 168 CLR 385 - GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No 4) (1990) 9 BPR 17,461 CASES CITED : - Hamilton v Whitehead (1988) 166 CLR 121 - Hyundai Heavy Industries Co Ltd v Papadopoulos (1980) 1 WLR 1129 - Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 - McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 - Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 - Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 - Pukallus v Cameron (1982) 180 CLR 447 - Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 - Peter Turnbull & Co Pty Ltd v Mundus Trading Co (A'asia) Pty Ltd (1954) 90 CLR 235 50070/01 Euphoric Pty Ltd t/as Clay & Michel – Plaintiff/Cross Defendant Ryledar Pty Ltd t/as Volume Plus – First Defendant/Cross Claimant PARTIES : Aziz Magar Sidhom – Second Defendant 50071/01 Euphoric Pty Ltd t/as Clay & Michel – Plaintiff Ryledar Pty Ltd t/as Volume Plus – Defendant FILE NUMBER(S) : SC 50070/01; 50071/01 COUNSEL : B.J. Coles QC, M. Ashhurst, S. Docker – Plaintiff P.M. Biscoe QC, M. Sahade – Defendants SOLICITORS : Cowley Hearne – Plaintiff Mallesons Stephen Jaques – Defendants INTRODUCTION 1 The Plaintiff ("Euphoric") distributed Mobil petroleum products in New South Wales. The First Defendant ("Ryledar") carried on business as a reseller of petroleum products under the name "Volume Plus" at sites owned or occupied by it or by its licensees. 2 By an agreement dated 18 May 1998 (as varied) Euphoric agreed to supply petroleum products to Ryledar ("the Supply Agreement"). The Second Defendant gave guarantees and indemnities in respect of Ryledar's obligations under the Supply Agreement. 3 In proceedings 50070/01 Euphoric sues Ryledar and the Second Defendant for the price of petroleum products sold and delivered under the Supply Agreement. Quantification of Euphoric's claim was referred to a referee under Pt 72 of the Supreme Court Rules 1970 (NSW). The Referee's Report, which has been adopted by the Court, concludes that Ryledar is indebted to Euphoric in the sum of $9,033,567.17, subject to the possibility of deductions for claims made by Ryledar against Euphoric in Ryledar's Cross Claim in these proceedings. 4 The Defendants accept that Ryledar is indebted to Euphoric under the Supply Agreement in the amount found by the Referee but they say that the amount of Ryledar's Cross Claims against Euphoric exceeds the amount owing under the Supply Agreement, so that in the end result Euphoric owes Ryledar a substantial sum of money. 5 Ryledar's Cross Claims may be summarised, in the briefest outline, as follows: – a claim for $3,627,008.78 for a six cents per litre rebate which Ryledar claims it was entitled to receive if the Supply Agreement were to be rectified or other relief were to be provided; the rebate is said to apply to all of the petroleum fuel delivered to all of Ryledar's sites throughout New South Wales ("the Rebate Claim"); – a claim totalling $1,775,769.85 for the amount which Ryledar claims it was overcharged by Euphoric under the Supply Agreement because Euphoric failed to reduce the volume of the fuel it sold to Ryledar to the volume that the fuel would have had at 15° Celsius ("the Volume Contraction Claim") – a claim that a loan account of Ryledar has been wrongfully debited by an amount which is not attributable to any particular sale of goods ("the Loan Account Claim"); – a claim for damages for economic loss said to flow from the wrongful refusal of Euphoric to acknowledge that Ryledar had validly exercised an option to renew the Supply Agreement for a further term and from a wrongful refusal of Euphoric to supply further products after 24 May 2001 ("the Damages Claim"); 6 In proceedings 50071/01, Euphoric sues Ryledar to recover amounts totalling $1,872,024 which it says it allowed to Ryledar by way of rebate on the sale of fuel in the mistaken belief that Ryledar was entitled to such rebates under the Supply Agreement. Euphoric says that Ryledar has been unjustly enriched by the retention of the mistaken allowance of these rebates. RESTITUTION CLAIM 7 Euphoric's Amended Summons seeks: – a declaration that under the Supply Agreement, as varied, Ryledar is entitled to a 6¢ rebate in respect of sales only to locations within the area defined in Item 4 of the Agreement; – a declaration that Ryledar has been unjustly enriched by reason of receiving rebates for sales outside the defined area; – an order for restitution in the amount of $1,872,024. 8 On the seventh day of the trial, Mr Coles QC, who appears for Euphoric with Messrs Ashhurst and Docker of Counsel, rightly conceded that Euphoric could not establish that any rebates had been allowed to Ryledar as a result of a mistake by Euphoric as to the terms of the Supply Agreement. Accordingly, he abandoned the claim for the second declaration and the consequential restitution order. 9 However, it is convenient to discuss briefly Euphoric's restitution claim because the relevant facts are pertinent to other issues which must be resolved in the proceedings. 10 Rebates were allowed for sales to all of Ryledar's New South Wales country locations by Mr Nigel Hobbs, who was Euphoric's General Manager from February 1998 to February 2000. Mr Hobbs had negotiated the final terms of the Supply Agreement and had executed it on behalf of Euphoric 11 Mr Hobbs gave evidence that he decided to allow the contractual rebate to sales to all New South Wales country areas because "it was good business for us" , despite the fact that the Supply Agreement did not provide for that rebate. Indeed, Mr Hobbs said that, in allowing the rebate generally, he did not refer to the terms of the Supply Agreement and did not think about those terms: he was happy to provide the rebate because his "focus was on keeping, supplying a customer that was growing" . 12 He gave this evidence: "Q. Was it your attitude at the time that whatever the contract said about rebate rates, your concern was to keep an expanding customer happy in a competitive market, and give them the rebated rates? A. Yes, the majority of the business was in heavily discounted areas in Sydney and Wollongong, a few sites in the country. Whether it was five or ten, I can't recall how many got picked up in my time. I didn't turn my mind whether it was applicable or not, it seemed reasonable to extend it to those sites while it was expanding. Q. So your decisions were governed by a business relationship rather than contractual terms? A. That's correct." See generally Mr Hobbs' evidence at T80.50-T83.56. 13 Mr Hobbs was quite frank in conceding that, if the Supply Agreement did not entitle Ryledar to rebates for sales outside a certain area, nevertheless he allowed the rebates for sales to all of Ryledar's New South Wales country areas, not because of any mistake on his part as to what the Supply Agreement provided, but because of a commercial decision: "I had a customer that we wanted to keep happy. We wanted to grow the business and that's why I applied the rebate at the time" : T161.29-T162.18. 14 It is clear from Mr Hobbs' evidence that Euphoric's allowance of rebates on sales made to all of Ryledar's New South Wales country locations was not the result of any mistaken understanding that Ryledar was contractually entitled to such rebates; it was a result of Mr Hobbs' commercial decision, which was made regardless of the terms of the Supply Agreement. 15 Euphoric having allowed rebates voluntarily and not because of a mistaken belief that Ryledar was contractually entitled to them, it follows that its claim for $1,872,024 founded upon unjust enrichment must have failed. THE REBATE CLAIM Ryledar's contentions 16 Ryledar contends that it was entitled to the rebate in respect of sales to all country sites in New South Wales. Ryledar says that its entitlement to such rebate is founded upon one of the following bases: – the proper construction of the Supply Agreement read, if necessary, in the light of prior communications between the parties; – the common intention of the parties that Ryledar was entitled to the rebates in respect of all sites, so that the Supply Agreement should be rectified accordingly; – misleading or deceptive conduct on the part of Euphoric in representing to Ryledar that it was entitled to the rebate in respect of all country sites so that the Court should vary the Supply Agreement under s.87 Trade Practices Act 1974 (Cth) and s.72 of the Fair Trading Act 1987 (NSW) ab initio in order to reflect the representations made by Euphoric; – estoppel by conduct and representation, so that Euphoric is prevented from alleging that Ryledar is in breach of the Supply Agreement in failing to pay the full sale price for sales to certain sites rather than the rebated price; – estoppel by convention, the common assumption upon which the parties conducted their affairs being that Ryledar was entitled to a rebate in respect of sales to all country sites. 17 Consequently, Ryledar says that it is entitled to damages for Euphoric's breach of contract in refusing to allow rebates for sales to all sites after 6 July 2000. 18 As I have noted above, if Ryledar establishes these contentions, the Referee's Report has determined that $3,627,008.78 must be deducted from the amount otherwise due to Euphoric under the Supply Agreement. The terms of the Contractual Rebate 19 Clause 2.1 of the Supply Agreement provides: " Sale and Purchase of Mobil Petroleum Products . Subject to this Agreement, Euphoric shall sell to Customer and Customer shall purchase from Euphoric during each month of the Term: (a) Not less than the Minimum Quantity and not more than the Maximum Quantity of Customer's requirements of petrol and automotive distillate for resale at or from the Sites; and (b) Such quantity of Mobil Petroleum Products (other than petrol and automotive distillate) including lubricants as is sufficient to satisfy the expectation of Customer's customers that such products will be available at the Sites." 20 "Sites" are defined as meaning: "… the petrol retailing facilities, the names and locations of which are set out in Item 8 of the Reference Schedule. If during the Term Customer acquires or licences any additional petrol retailing facilities, then such facilities shall be included in this definition at Euphoric's discretion. If additional retailing facilities are not included in this definition Euphoric must provide just cause." 21 Item 8 of the Reference Schedule defines "sites" as: "All Sites in the State of New South Wales owned and/or leased by Customer or and/or [sic] operated as 'Volume Plus' branded Sites under licence from Customer." 22 Clause 4.1 of the Supply Agreement provides: "" Contractual Rebate . Subject to this Agreement for the Term, Euphoric shall allow the Contractual Rebate as a deduction in the price of Mobil Petroleum Products to which it refers on the face of the invoice, provided that Euphoric shall have no obligation to pay the Contractual Rebate to Customer during any period that an Event of Default specified in a Notice served by Euphoric on Customer pursuant to clause 3.6 remains unremedied." 23 "Contractual Rebate" is defined in Clause 1.1 as "the rebate described as such in Item 4 of the Reference Schedule expressed in a cents per litre amount off Mobil's List Price for Relevant Mobil Petroleum Products" . 24 Item 4 of the Reference Schedule to the Supply Agreement originally provided: Contractual Rebate: Gasoline: 6.2 cents per litre for Sydney Metro locations "Item 4 6.0 cents per litre for Wollongong, Central Coast and Newcastle locations Automotive Distillate: 6.2 cents per litre for Sydney Metro locations 6.0 cents per litre for Wollongong, Central Coast and Newcastle locations" 25 Item 5 in the Reference Schedule provides: "Freight: Deliveries outside areas defined under the Contractual Rebate will be charged freight as per Mobil's Price Book less the freight applicable to Newcastle." In the body of the Supply Agreement itself there is no provision dealing with freight charges or any reference to "Item 5". 26 The Supply Agreement was varied in a number of respects by an agreement recorded in a letter from Euphoric to Ryledar dated 31 March 1999. Items 4 and 5 of the Reference Schedule were amended to read as follows: "Reference Schedule Item 4 Contractual Rebate Gasoline: 6.2 cents per litre for Sydney Metro locations 6.0 cents per litre for Wollongong, Central Coast, Newcastle, and any town on or east of a straight line connecting Newcastle Bilpin Katoomba Bowral Wollongong but excluding the Sydney Metro locations. Automotive Distillate: 6.2 cents per litre for Sydney Metro locations 6.0 cents per litre for Wollongong, Central Coast, Newcastle, and any town on or east of a straight line connecting Newcastle Bilpin Katoomba Bowral Wollongong but excluding the Sydney Metro locations. Reference Schedule Item 5 Freight Deliveries outside areas defined under the Contractual Rebate will be charged freight as per Mobil's Price Book less the freight applicable to the Zone in which the location resides. Three Zones are defined as follows: Zone 1 (North) – All towns on the New England Highway and all towns between the New England Highway and the Coast up to the Queensland border. Zone 2 (South) – All towns between the Hume Highway and the Coast down to the Victorian border. Zone 3 (West) – All other areas in NSW. Reference location for each Zone – North Newcastle – South Wollongong – West Katoomba Freight Applicable for each location – Newcastle 1.2 CPL – Wollongong 0.9 CPL – Katoomba 1.0 CPL" The construction of the rebate provisions 27 Ryledar contends that on the true construction of Clause 4.1 and Items 4 and 5 of the Reference Schedule, in the form as varied by the letter of 31 March 1999, Ryledar was entitled to the contractual rebate of six cents per litre in respect of sales to all of its country sites throughout New South Wales. Ryledar submits that this construction emerges from the words of Items 4 and 5, "if necessary construed with or in light of prior communications between the parties" : submissions 11 November 2004, para 3(a). 28 I am unable to accept this submission. The words of Item 4 are clear and admit of no ambiguity in their meaning. 29 Clause 2.1 and the definition of "Sites" make it clear that the parties stipulated that the Supply Agreement would apply to sales to all of Ryledar's locations, present and future, throughout New South Wales. However, Clause 4.1 coupled with the definition of "Contractual Rebate" and Item 4 of the Reference Schedule, both in its original terms and as amended, make it clear that the rebate is not to apply to all "Sites" as defined in Item 8, i.e. all locations in New South Wales. In the original Item 4, the parties named express locations which would have the benefit of rebates. In the amended Item 4, they drew a line connecting particular points on the map and said that towns on or to the east of that line would have the benefit of the rebates. In doing so, they made clear their intention that sales of fuel to some sites in New South Wales would have the benefit of the Rebate and sales to other sites would not: otherwise, there was no point to their drawing the demarcation line. 30 It is now settled that the meaning of a commercial contract is to be construed objectively by reference to what it conveys to a reasonable person. This normally "requires consideration not only of the text of the documents, but also the surrounding circumstances known to [the parties] , and the purpose and object of the transaction" : Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451, at [22]; see also Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, at [40] and the illuminating discussion of the authorities by Finn J in Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812, at [78]-[79]. The Court does not, therefore, need to find that the language of a contract is ambiguous before considering its meaning as it may be revealed in the commonly known context and purpose of the transaction. 31 However, that does not mean that when the Court begins the task of construction it puts the words of the document aside and endeavours first to ascertain the commonly known factual context and purpose of the transaction, often only by resolving a strenuous contest between the parties. The Court does not, once it has found the commonly known factual context and purpose, then look at the words of the contract and, if they do not readily accommodate the context and purpose so found, force them to do so by a process of interpretation. 32 When the Court is construing a commercial contract, it begins with the words of the document: there it often finds expressed the factual context known to both parties and the common purpose and object of the transaction. But the Court is alive to the possibility that what seems clear by reference only to the words on the printed page may not be so clear when one takes into account as well what was known to both parties but does not appear in the document. When that is taken into account, the words in the contract may legitimately have one or more of a number of possible meanings. It is then the Court's task to identify which of the possible meanings represents the parties' contractual intention. 33 However, when a party to a contract argues that the known context and common purpose of the transaction gives the words of the contract a meaning which, by no stretch of language or syntax they will bear then, in truth, one has a rectification suit, not a construction suit. 34 That is the case here. Ryledar says that the commonly known factual circumstances and the purpose of the transaction embodied in Item 4 of the Supply Agreement are revealed in the discussions and correspondence with led up to the execution of the Supply Agreement in its original form and the variation of Item 4 which was effected by the letter dated 31 March 1999. Ryledar has relied on that evidence in aid of its claim for rectification – as, indeed, it must, because the construction which it seeks to put on the words of Item 4 of the Supply Agreement is the opposite of their plain meaning. 35 I have analysed the evidence of discussions and correspondence preceding the execution of the Supply Agreement and the 31 March variation letter for the purposes of considering Ryledar's rectification claim. For the reasons to which I will come shortly, that evidence does not support Ryledar's claim to rectification. Even less does it support Ryledar's claim as to the true construction of the contract. 36 As a matter of construction, I hold that under the Supply Agreement as varied by the letter of 31 March 1999 Ryledar was entitled to rebates on the sale of fuel to the sites within the areas defined in Item 4 but not otherwise. Rectification 37 Ryledar contends that the words of Item 4 as varied by the 31 March 1999 letter do not actually reflect the common intention of the parties so that Item 4 should be rectified. The evidence upon which Ryledar relies in support of its submission must be taken in two stages. The first is evidence of discussions leading up to execution of the Supply Agreement on 18 May 1998; the second is evidence leading up to the expression by the parties of their agreed variations to the Supply Agreement contained in Euphoric's letter of 31 March 1999. 38 I commence by observing that a party seeking rectification bears the civil onus in proving its case on the balance of probabilities. Nevertheless "within the civil onus there are various degrees of satisfaction and courts have held over a considerable period of time that, with rectification, a high degree of satisfaction is required" : per Young J (as he then was) in GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No 4) (1990) 9 BPR 17,461 at 463-464; and see e.g. Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336, at 351 per Mason J (as he then was); Pukallus v Cameron (1982) 180 CLR 447, at 456-457 per Brennan J; Crane v Hegeman-Harris Co Inc [1939] 1 All ER 662, at 664. 39 Mr A.A. Magar ("Eddie Magar"), on behalf of Euphoric, conducted negotiations with Mr Hobbs' predecessor as General Manager of Euphoric, Mr Rosenberg, from May 1997 to January 1998. Mr Magar gave evidence but Mr Rosenberg did not. 40 Mr Rosenberg provided a number of drafts of the Supply Agreement for discussion. The drafts were prepared with the assistance of solicitors. Ryledar also had advice from its own solicitors. However, when Mr Hobbs took over from Mr Rosenberg as General Manager of Euphoric in February 1998, discussions between Mr Magar and Mr Hobbs did not involve their solicitors. 41 Mr Magar said that in his negotiations with Mr Rosenberg he had asked for a rebate of more than six cents on sales in the Sydney metropolitan area. Mr Rosenberg countered with a suggestion that there should be a rebate of 6.2 cents per litre on sales in the Sydney metropolitan area and a six cents per litre rebate on sales outside the Sydney metropolitan area. Mr Magar agreed. An early draft of the Supply Agreement contained in Item 4 a provision that the six cents per litre rebate would apply "for outside Sydney Metro locations" . This was the form of draft Item 4 in the Reference Schedule when Mr Hobbs took over negotiations from Mr Rosenberg in February 1998. 42 Mr Hobbs said that when he read the words "six cents per litre for outside Sydney Metro locations" in draft Item 4 he interpreted that as applying only to Ryledar's then existing location outside Sydney, namely, Wollongong, and that if additional sites were acquired by Ryledar within the Sydney metropolitan area and Wollongong, the contract rebate would not apply to those sites. 43 Mr Hobbs said that later in negotiations with Mr Magar, Mr Magar requested that Newcastle and sites between Sydney and Newcastle be added as rebate locations, and that he agreed. Accordingly, he changed Item 4 as it had appeared in the draft Supply Agreement which he had inherited from Mr Rosenberg and inserted the wording which appears in the document as executed on 18 May 1998. 44 I accept Mr Hobbs' evidence. He was not shaken in it and the variations to Item 4 of the draft agreement which were made after Mr Hobbs took over negotiations support that evidence. 45 Mr Hobbs produced two drafts of the Supply Agreement containing the amendments to Item 4 which he had made. Both drafts were provided to Mr Magar, who made comments and suggested amendments to them. Mr Magar is obviously a capable, experienced businessman who has no difficulty at all with spoken or written English. He must have paid close attention to the critical provisions of the pricing provisions of these drafts. Amendments were made to Item 8 of the Reference Schedule, which defined "Sites", before the Agreement was executed. Yet Mr Magar did not suggest any amendment to the new Item 4, as proposed by Mr Hobbs, although its plain meaning was contrary to the intention which he said both parties had at the time. 46 Mr Magar gave evidence of his discussions with Mr Hobbs in paragraphs 195 to 247 of his witness statement of 7 April 2003. At paragraphs 227 to 233 he said that during negotiations for the Supply Agreement he and Mr Hobbs worked through a pricing example which made clear that the 6¢ rebate applied to all country locations in New South Wales. Mr Magar's evidence is detailed and elaborate, considering that the discussions occurred some five years before he recorded them in a witness statement and he had no contemporaneous notes of the conversations to refresh his recollection. 47 Elsewhere I have referred to evidence given by Mr Eddie Magar which I regard as demonstrating a preparedness to give untruthful evidence where it assists his case: see paragraphs 50-52, 92-94, 165-167. The same indications were present when Mr Magar gave evidence about his discussions with Mr Hobbs and about his understanding of the terms of the Supply Agreement in its various drafts. He was often prevaricating and avoided conceding the obvious when it did not suit his case. 48 For example, Mr Magar was taken to a draft of the Supply Agreement in which the price of the products was clearly stated to be the Mobil List Price plus freight. Mr Magar insisted that the List Price nevertheless included freight and that the draft agreement provided for a free delivery zone (which it clearly did not). Then he conceded that Ryledar had to pay freight under the terms of the draft agreement; later, he said that it did not. His evidence was highly confusing, not because he did not understand the questions but because he chose to make it so: see T170.5-T174.9. 49 Again, Mr Magar was taken to Item 4 in draft 1 of the Supply Agreement which clearly provided a 6.2¢ rebate on the list price for sales "for Sydney metro locations" and a rebate of 6¢ "for outside Sydney metro locations" . There was no reference to freight in the schedule of this draft. He was then taken to draft 2 of the Supply Agreement which provided in Items 4 and 5: " Contractual Rebate Gasoline 6.2 cents per litre for Sydney Metro locations 6.0 cents per litre for Wollongong, Central Coast and Newcastle locations Automotive Distillate 6.2 cents per litre for Sydney Metro locations 6.0 cents per litre for Wollongong, Central Coast and Newcastle locations" " Freight Deliveries outside areas defined under the Contractual Rebate will be charged freight as per Mobil's Price Book less the freight applicable to Newcastle." 50 Mr Magar was asked about his understanding of the changes between draft 2 and draft 1. He insisted that the express references to "Wollongong, Central Coast and Newcastle locations" in Item 4 in draft 2 meant the same as Item 4 in draft 1. he gave this evidence: "Q. In any event, you read this document and as far as you could see, it precisely accorded with what you intended should be the case; is that right? A. Yes, the agreement that we had at that time, yes. Q. That is to say, you knew that you would get a contractual – apart from the Sydney Metro locations – you would get a rebate a contractual rebate of 6 cents per litre for your Wollongong, your Central Coast and your Newcastle outlets? A. No, I would get a 6 cents rebate for everywhere across the State outside the Sydney Metro sites. Q. But you didn't understand it meant that, did you? You knew it meant Wollongong, Central Coast and Newcastle? A. No, I did not. Q. Because if you believed anything else you would have said, "Wollongong, Central Coast and Newcastle and everywhere in the State of New South Wales", wouldn't you? A. No, the understanding at the time was the rebate is 6 cents anywhere in the State except the Metro locations but these locations included with the freight. There's no delivering to them and I'm sure I put delivered price to make sure that was the concern. Q. You can read English very well indeed, can't you? A. Yes, I can. Q. It plainly says 6 cents per litre for Wollongong, Central Coast and Newcastle locations, doesn't it? A. Yes but – Q. And – A. It means 6 cents does not include any more freight. Q. It plainly does not say 6 cents per litre for the whole of the State of New South Wales, does it? A. No, the understanding was the 6 cents … Q. No, would you tell me how you read the document? Do you read the document as saying 6 cents per litre for Wollongong, Central Coast and Newcastle locations? A. No. Q. Or do you read the document as a matter of English … A. There's a difference between – I can answer the question by – at that time because the understanding was so clear that the 6 cents is everywhere across the State other than metro locations, okay, and this clause was asked for, just to make sure that this location does not incur any more freight but if you ask me now the way I see it now, okay, I will tell you, yes, it says 6 cents to these locations. Q. But that's the only possible meaning it could have had to you when you looked at this draft in April 1998, isn't that right? A. No, that's not true. Q. You intended at that time, if you made an agreement with Euphoric, that the agreement would be a complete and precise record of what you and Euphoric agreed upon, didn't you? A. Up to the best we can do. Q. You wanted an exact written record of the whole of the deal that Ryledar and Euphoric were doing, didn't you? A. To the best we can. Q. And with that in mind, you went through these drafts, I am suggesting to you, very carefully indeed, didn't you? A. To the point of concern. That was never a point of concern which is the 6 cents rebate because it already applied. We knew it was 6.2 in Sydney and 6 cents all the rest of the State so it wasn't even a point of concern for us. It is supplied. 51 This evidence, and Mr Magar's manner in giving it, persuaded me that he had no genuine explanation as to how he could have misunderstood the plain meaning of the words in Item 4 of draft 2; he merely insisted on adhering to a position which advanced his case: see also T187.3 - T187.35. 52 To return to Mr Magar's evidence of his discussions with Mr Hobbs during negotiations for the Supply Agreement: I formed the impression that much of this evidence was reconstruction and argumentative and that it appealed to business logic regarded exclusively from the viewpoint of Ryledar. I am unable to accept that evidence as reliable. 53 Mr Hobbs frankly conceded that he did not have a clear recollection of much of the discussions. However, he was firm in denying the critical statements attributed to him by Mr Magar. For these reasons, I prefer the evidence of Mr Hobbs to that of Mr Magar. 54 Mr Rosenberg may, indeed, have intended to allow the 6¢ rebate for sales to all country areas when he prepared the draft Supply Agreement containing in Item 4 the words "6 cents per litre for outside Sydney Metro locations" . I do not need to make a finding in this regard because Mr Rosenberg's intention in February 1998 is not the decisive question when one comes to consider Euphoric's intention at the time it executed the Supply Agreement on 18 May 1998. By that time, Mr Hobbs, not Mr Rosenberg, represented the mind of Euphoric so far as concerned this transaction: see e.g. Hamilton v Whitehead (1988) 166 CLR 121, at 127. Mr Hobbs intended that the Agreement should reflect what he himself understood to be the agreement reached by the parties. If Mr Hobbs mistakenly thought that his intention was the same as Mr Rosenberg's intention, that is beside the point. If Mr Magar's evidence of his own understanding of what was agreed and intended by Item 4 is accepted, then his understanding did not coincide with Mr Hobbs' understanding at the time that the Supply Agreement was executed. 55 Ryledar appeals to Mr Hobbs' conduct subsequent to 18 May 1998 in allowing the rebate to all country sites as evidencing an actual intention on his part as at 18 May 1998 that the Supply Agreement should provide such rebate. I do not accept this submission. As the evidence recounted above in relation to Euphoric's claim founded upon mistake makes clear, in allowing the rebate Mr Hobbs was not intending either to implement or to vary the terms of the Supply Agreement: his decision was made without regard to the terms of the Agreement and was concerned solely with fostering the commercial relationship with his customer. 56 For these reasons, I am far from being persuaded to a high degree of satisfaction that when the Supply Agreement was executed on 18 May 1998, both parties had an actual common intention that the 6¢ rebate would apply to sales to all sites outside the Sydney metropolitan area. 57 The next issue is whether the parties had formed the common intention that the 6¢ rebate would apply to all country sites by the time that they came to sign and exchange copies of the letter dated 31 March 1999, which varied the Supply Agreement. As I have said, the terms of Item 4, as varied by that letter, are clear enough that the rebate was not to apply outside the defined area. However, Ryledar relies mainly on a series of facsimiles exchanged between the parties prior to signature of the variation letter as demonstrating that the parties had reached a common intention and that it miscarried in expression in the variation letter. 58 The correspondence begins with a letter dated 11 August 1998, sent to Mr Hobbs about a week after Euphoric had commenced supplying Ryledar at its new location in Wandandian, which was the first site opened by Ryledar outside the rebate area as defined in the original Item 4 of the Supply Agreement. 59 The letter contained the following: "… we need your co-operation on a number of retail business opportunities in areas covered by Item 4 & 5 of the Reference Schedule in our Agreement. As you are aware, the Agreement states clearly the mechanism to adjust the Contractual Rebate for deliveries in areas outside Sydney, Wollongong, Central Coast and Newcastle. A typical example for Coffs Harbour is as follows: Cents per litre Contractual Rebate to Newcastle 6.0 Less Actual Freight to Newcastle 1.5 Plus Actual Freight to Coffs Harbour (3.0) Equals Contractual Rebate to Coffs Harbour 4.5 Please acknowledge as soon as possible as this matter has been outstanding for about two months." 60 This letter is highly confusing. It says that the Supply Agreement "states clearly the mechanism to adjust the Contractual Rebate for deliveries in areas outside Sydney, Wollongong, Central Coast and Newcastle" , but there was no mechanism in the Supply agreement which "adjusted" the "Contractual Rebate", as properly defined and as applied in accordance with the existing Item 4, in respect of any location outside the specified locations: under the Agreement as it stood, sales to sites outside the specified locations were not entitled to any Contractual Rebate. 61 The letter purports to give an example in respect of a sale to Coffs Harbour. It includes in the calculation a deduction from the List Price of a "Contractual Rebate of 6¢ per litre" to Newcastle, but the Supply Agreement made no provision for a sale to a site outside Newcastle to attract the rebate of 6¢ per litre which was allowable for a sale to Newcastle. 62 The explanation for the confusion is that the letter was drafted by Mr Peter Beckwith, then the General Manager of Ryledar, although it was signed by Mr E. Magar. Mr Beckwith conceded that he did not pay any particular attention to the words of the Supply Agreement or of Item 4 in particular when he drafted the letter but rather set out how he thought the pricing system should operate; he "assumed" that the Contractual Rebate would apply to sales to all sites in country New South Wales although, clearly, Item 4 did not say that and its words could not reasonably provide any foundation for such an assumption. 63 Mr Beckwith suggested that Item 5 in the Reference Schedule, which provided for freight charges, governed the interpretation of Item 4. But Item 4 dealt with a quite different topic, although the two pricing components in Item 4 and 5, rebate and freight charges, could come together to produce a delivered price for Ryledar where there was a sale to a location within the areas defined in Item 4. Mr Beckwith seemed to believe that the Supply Agreement provided – or, rather, ought to have provided – that the Contractual Rebate and the provisions relating to freight charges would always apply to a sale to country location, wherever it was New South Wales: see T273.30-T276.13. 64 I found Mr Beckwith's evidence on this point very unsatisfactory. For example, at first he said that before drafting the letter of 11 August 1998 he read Item 4 of the Supply Agreement and understood the words as meaning that the 6¢ rebate would apply to all sales in New South Wales "with an adjustment for incremental freight" . Later he insisted that the words of Items 4 and 5, which dealt with different topics, had to be read together to produce an interpretation which was simply not available on any fair and reasonable reading of Items 4 and 5 and of the Supply Agreement: T274.27 - T276.13. I shall return to the character and reliability of Mr Beckwith's evidence on this point below. 65 On 14 August 1998, Mr Hobbs responded to Mr Beckwith's letter in the following terms: "The pricing mechanism for areas outside the Metropolitan, Wollongong, Central Coast and Newcastle is also clear. Freight will be charged as per Mobil's Price Book less the freight applicable to Newcastle. This calculation mechanism is based on Mobil's Price Book, hence the reference. An example for Gasoline: Contractual Rebate to Newcastle 6.0 CPL Plus Coffs Harbour Book Freight 3.0 CPL Less Newcastle Book Freight 0.6 CPL Equals Coffs Harbour Rebate off Sydney List 3.6 CPL Over the last few months we have been discussing the applicable rebate for your new site at Wandandian the applicable Freight at this location is 2.5 CPL. We agreed, as a gesture of good faith to use Nowra Freight as the benchmark, which is 1 CPL lower than Wandandian. We also agreed to use Wollongong as the reference point rather than Newcastle, saving .3 CPL for Gasoline and .5 CPL for Diesel. All up the saving to you versus the letter of the Supply Agreement is 1.3 CPL for gasoline." 66 It will be seen that Mr Hobbs took the example which Mr Beckwith had given in the letter of 11 August but arrived a different ultimate deduction from the List Price. Further, it is clear that in this letter Mr Hobbs was concerned with the calculation of freight charges, which was the contentious issue between the parties, as is demonstrated by the correspondence which ensued. 67 On 26 August 1998, Mr Magar replied as follows: "Contrary to your letter of the 14th August, no final agreement had been reached between ourselves on the contractual rebate for Wandandian. Your advice is not consistent with our supply agreement. The Agreement states clearly the freight applicable to Newcastle from Sydney is to be used as the reference freight for all areas outside the designated areas in New South Wales. We would not have included this matter in our letter of the 11th August if this matter had been resolved." 68 It is notable that both in this letter and in the letter of 11 August, Ryledar used the words "Contractual Rebate" as including both the 6¢ rebate allowable under Item 4 and the rebates for freight charges allowable under Item 5. The words "Contractual Rebate" were certainly not used in the strict sense defined in the Supply Agreement. 69 The dispute between the parties as to whether the freight reduction should be book freight or actual freight continued in correspondence dated 22 September, 6 October, 12 November, 2 December and 14 December. At a meeting on 22 December between Messrs Hobbs and Braid, representing Euphoric, and Messrs Eddie Magar and Peter Beckwith representing Ryledar, Mr Hobbs suggested as a compromise to the freight dispute that New South Wales should be split into three zones, south, west and north. In the south the rates applicable to Wollongong freight would be used; in the west the freight charges applicable to Penrith would be used; and in the north the freight charges applicable to Newcastle would be used. Mr Beckwith responded that the idea was worth pursuing and that the zones would need to be defined. The parties agreed to think about the idea. 70 On 13 January 1999, Mr Eddie Magar sent to Mr Hobbs a facsimile which had been drafted by Mr Beckwith, in the following terms: "Further to our meeting on 21/12/98, we have reviewed the three zone proposal to resolve the 'freight issue'. The proposal (refer attachment) put is done on a without prejudice basis. We consider this counter proposal is a fair compromise. As discussed, the agreement signed on the 18th May 1998 remains unchanged until both parties are in full agreement on any proposed changes." 71 The attached proposal described three freight zones (north, west and south) by reference to specified major highways. The proposal then defined three separate "6 CPL Contractual Rebate areas" . Again, they were divided into three zones, north, west and south. The north zone was described as: "All towns between Newcastle, Lithgow and Sydney Metro" . The west zone was described as: "All towns between Lithgow, Moss Vale and Sydney Metro" . The south zone was described as: "All towns between Moss Vale, Wollongong and Sydney Metro" . 72 It is unmistakeably clear from Ryledar's proposed definition of three zones for the 6¢ Contractual Rebate that Ryledar did not believe, at that time, that it was entitled to a Contractual Rebate for sales to country sites throughout the whole of New South Wales. The proposal for three specified zones which would qualify for the 6¢ Contractual Rebate clearly acknowledged that sales to sites outside those specified zones would not be entitled to the rebate. 73 Mr Hobbs responded to this facsimile on the same day. He proposed certain changes to the specified zones for freight charges but said nothing about the proposed zones attracting the 6¢ Contractual Rebate. 74 On 9 February 1999, Mr Magar, in a facsimile drafted by Mr Beckwith, said: "Further to your fax dated 13/1/99 and subsequent telephone calls, we confirm our agreement on the 'freight issue'." The facsimile then described and defined the three proposed freight zones. The facsimile continued: "The 6 CPL contractual rebate area on a delivered basis becomes Newcastle, Central Coast, Wollongong and any town east of a straight line connecting Newcastle to Bilpin to Katoomba to Bowral to Wollongong excluding the Sydney Metro area. The contractual rebate for the Sydney Metro area remains unchanged at 6.2 CPL." 75 Pausing at this point, again, it is quite clear that in defining a certain area to which the 6¢ Contractual Rebate would apply, Ryledar was necessarily agreeing that the rebate would not apply to sales outside that area. Curiously, however, the facsimile goes on to give three examples for the calculation of sale prices for sites at Wagga, Queanbeyan and Coffs Harbour. In each of those examples the 6¢ rebate was applied although the site was outside the proposed zone attracting the 6¢ Contractual Rebate. 76 On 16 February 1999, Mr Hobbs replied to the 9 February 1999 facsimile in the following terms: "As per clause 15.1 of the Supply Agreement between Euphoric Pty Ltd and Ryledar Pty Ltd I can confirm the following variations to the Supply Agreement." The letter then reproduced the changes sought by Ryledar in its facsimile of 9 February 1999, except that there was no reference to the variation to the Contractual Rebate area in Item 4 which was sought by Ryledar. 77 On 24 February 1999, Mr Hobbs sent a letter to Ryledar in which he responded to a request by Mr Beckwith to demonstrate "how the country pricing would apply" . He set out an example for sales at sites at Forster, Wandandian and Forbes. Although each of these sites was outside the proposed zone attracting the 6¢ Contractual Rebate, that rebate was applied in the examples. Mr Hobbs gave evidence as to what he intended when he worked out these examples: "Q: Did you intend to communicate that Forster, Wandandian and Forbes would attract a rebate of 6 cents per litre? A: My focus was on the freight calculation. I made an assumption that 6 cents was applying. I didn't consider the agreement, I assumed it would apply, and didn't give it a whole lot of thought at the time. I was focusing on the freight component. His Honour: Q: When you said you didn't think about the agreement, do I understand you to say that it wasn't that you actually mistakenly believed that the rebate provisions of the contract actually included these towns, you believed that the rebate would be applied regardless of what the contract said, is that the effect of your evidence? A: No. At the time I was applying the rebate to towns that came on board. So, as I said yesterday, I wasn't – from a commercial point of view I was happy to provide the rebate to the small amount of sites that were added to the supply agreement. The questions and discussions I had were around the freight issue, and I was trying to resolve that. As an example, I left the 6 cents in because that was consistent with the price we were applying to Volume Plus at that time. Q: I understand what you are saying, that the freight issue is always the major issue for discussion and negotiation? A: Mmm. Q: As far as the contract rebate rate is concerned, your view was that as a matter of commercial good business, as and when towns or sites were acquired by Volume, if it was good business, you would be happy to apply the contract rate to those towns, despite the fact that the agreement didn't provide it? A: That's correct. Q: Was that the attitude that you had at all times while you were general manager? A: While I was general manager, yes." 78 Euphoric commenced supplying Ryledar's sites at Port Macquarie and Tuncurry on 19 and 26 February respectively. Euphoric allowed the 6¢ rebate for sales to those locations despite the fact that they were outside the rebate area defined in the exiting Item 4 of the Supply Agreement and in the proposed amendment to that area. However, this was consistent with Mr Hobbs' declared attitude that if it was good business for Euphoric, he would have been happy to apply the Contractual Rebate to those towns despite the fact that the Supply Agreement did not provide for it. 79 On 15 March 1999, Mr Eddie Magar sent a letter to Mr Hobbs which had been drafted by Mr Beckwith. The letter stated: "As per clause 15.1 of the Supply Agreement between Euphoric Pty Ltd and Ryledar Pty Ltd, I can confirm the following variations to the Supply Agreement." Under the heading "Reference Schedule Item 4 Contractual Rebate" appeared the words which were included under that heading in the 31 March 1999 variation letter which amended the Supply Agreement. Under the heading "Reference Schedule Item 5 Freight" appeared the words which were reproduced under that heading in the 31 March variation letter. 80 However, the 15 March letter went on to give "typical examples of Ryledar's delivered prices for each Zone" . Those examples did not appear in the 31 March variation letter. The examples given are the same as had been included in Mr Magar's facsimile of 9 February 1999, i.e., Wagga, Queanbeyan and Coffs Harbour. The examples included in each case a deduction from the List Price of the 6¢ rebate although, as I have noted, the three towns were outside the zone for the Contractual Rebate proposed in the amended Item 4. 81 On 31 March 1999, Mr Hobbs sent the proposed letter of variation of the Supply Agreement, including the changes sought by Ryledar to Item 4 of the Reference Schedule but not including in the letter any example of how delivered prices for each zone would be calculated. 82 On 13 April 1999, Mr Magar sent a further facsimile to Mr Hobbs, drafted by Mr Beckwith, requesting that Mr Hobbs confirm that the examples of Ryledar's delivered prices for each zone "are correct as demonstrated in our letter dated 15/3/99" . Mr Hobbs responded by sending by facsimile his letter of 24 February 1999. Mr Magar says that he executed the 31 March 1999 letter of variation shortly after 13 April 1999. 83 Between 13 April 1999 and 6 July 2000, Euphoric applied the 6¢ Contractual Rebate to sales to all Ryledar's country sites which opened during that time, whether those sites appeared within the area defined in Item 4 or not. In his witness statement, Mr Hobbs said that if he had been aware that Euphoric was allowing the 6¢ rebate contrary to the terms of the Supply Agreement he would have reviewed the practice. However, in cross examination, Mr Hobbs conceded that he probably would have continued the practice of allowing the rebate to all of Ryledar's country locations, for commercial reasons. 84 On 6 July 2000, Mr Hobbs' successor, Mr Rodgers, confirmed to Ryledar that from then on Euphoric would not allow the 6¢ rebate for sales outside the area defined in Item 4 of the Supply Agreement, as varied by the 31 March 1999 letter. 85 In support of its contention that by 31 March 1999 the parties had arrived at a common intention that the 6¢ rebate would apply to sales to all of Ryledar's country locations throughout New South Wales, Ryledar relies heavily upon the worked examples of pricing which appeared in the correspondence between the parties leading up to the variation letter, some of those examples emanating from Mr Hobbs. 86 The great difficulty with this submission is that those examples are manifestly at odds with the clear wording of revised Item 4 of the Reference Schedule, which Ryledar itself had put forward. If it had really been the intention of Ryledar to propose that the 6¢ rebate be allowable for sales to all its country locations in New South Wales, nothing would have been simpler than to say so in those very words. Instead, a carefully demarcated rebate zone was proposed in amended Item 4, a quick reading of which would have left the reader in no doubt that the rebate would be applicable to sales within that zone and not otherwise. 87 One possible explanation for the discrepancy between the worked examples and the words of the amended Item 4 is that Ryledar suspected that, if it asked outright that the 6¢ rebate be applied to all of its country locations, Euphoric would refuse; Ryledar therefore disingenuously included in its correspondence pricing examples showing the rebate as allowed to sales outside the defined area, hoping thereby to gain Euphoric's unwitting acceptance of the examples and, consequently, a basis for arguing later that Euphoric had agreed to allow the rebate throughout New South Wales, notwithstanding the wording of Item 4. 88 This suggestion was put directly to Mr Beckwith, who was the author of Ryledar's relevant correspondence with Euphoric, commencing with the letter of 11 August 1998. Mr Beckwith denied the suggestion. However, as I shall explain, I did not find at all convincing his explanation as to why he had thought it necessary to seek Mr Hobbs' confirmation of pricing examples pursuant to an agreement which, he said, was quite clear in its meaning. 89 Mr Beckwith said that the Supply Agreement, prior to the amendment by the March 1999 letter, was clear in its terms that the 6¢ rebate applied to sales at all Ryledar sites throughout country New South Wales. However, he said that in drafting the letter of 11 August setting out pricing examples showing the 6¢ rebate as applied to sales outside the areas defined in Item 4, he wanted to gain Mr Hobbs' confirmation that the rebate applied throughout New South Wales as a matter of "professional wisdom … it is just one of those things as being part of the commercial world" . 90 Mr Beckwith was then taken to the words which he had drafted under the heading "6 CPL Contractual Rebate Areas" in the proposal sent to Mr Hobbs by Ryledar under cover of its facsimile of 13 January 1999. Mr Beckwith gave this evidence: "Q: In paragraph 2 of the document on page 3.222 [should read 2.332] you specifically defined the areas in which the contractual rebate would apply, didn't you? A: If you read it as per the original agreement, that is true but that is not what the understanding was." The answer makes no sense. If Mr Beckwith meant to say that his own words in the proposal of 13 January 1999 did not reflect what he understood the parties to intend, the evidence is not credible. 91 In general, I found Mr Beckwith's evidence on this question and the manner in which he gave it often evasive, often prevaricating and generally implausible: see T277.22-T283.49. 92 Mr Eddie Magar said that he read and approved Mr Beckwith's letter of 11 August 1998 before it was sent. He was asked why, if the "mechanism to adjust the Contractual Rebate" in the Supply Agreement was so clear, it was necessary to send the letter. He gave this evidence: "Q. What was the purpose of writing this letter so far as it sets out this typical example? Why did you need to write such a letter in your view? A. To confirm the freight to Newcastle, the actual freight to Newcastle. Q. There it is: 1.5 cents per litre? A. Yes, because in the agreement it does not state how much it is. We just want to confirm the freight to Newcastle. Q. Mr Magar, you don't need to pick a typical example, being Coffs Harbour or any other town anywhere else in the State, if what you want to confirm is the freight to Newcastle, do you? A. I want to confirm the mechanism and the freight to Newcastle." A little later he said: "Q. … Do you say you wrote this letter in concert with Mr Beckwith to achieve firstly some confirmation of the actual freight to Newcastle? Is that what you are saying was your purpose in writing the letter? A. No, I knew what the rebate to Newcastle was. Q. I thought you told me a moment ago you wanted to confirm the freight to Newcastle? Wasn't that your answer a minute ago? A. No, I want to confirm the delivered price to this location, to Coffs Harbour. Q. Was it or was it not your intention in writing this letter to confirm the freight to Newcastle? A. The freight to Newcastle, yes. Q. Was that your only purpose or did you have some other purpose? A. I'd like to confirm the freight to Newcastle and the mechanism; mostly the freight to Newcastle. Q. Mostly, well, what else? A. The mechanism, we wanted to make sure the mechanism worked all right which is in the agreement which was number 4 and 5 altogether." 93 Why Mr Magar would want to confirm the freight to Newcastle by taking as an example a sale to Coffs Harbour when Ryledar then had no site at Coffs Harbour is very curious. Almost in the same breath, Mr Magar said that he did not know why Coffs Harbour was selected as an example in the letter, that Coffs Harbour was selected because Ryledar was looking at acquiring a site there and, finally, that he did not know why Coffs Harbour was selected: T203.33 - T204.4. 94 It was put directly to Mr Magar that in sending the 11 August letter Ryledar was trying to get an inadvertent concession from Mr Hobbs about the application of the Contractual Rebate notwithstanding the terms of the Supply Agreement. Mr Magar denied the suggestion. In the light of the unsatisfactory nature of Mr Magar's evidence on this topic, as well as the unsatisfactory character of his evidence generally, I cannot accept his denial with any assurance. 95 I can by no means dismiss as a real possibility that Ryledar deliberately set out to engineer, in its correspondence giving pricing examples, a state of confusion, at the least, in which it could argue later that Euphoric had agreed to allow the 6¢ rebate for sales to its sites in country New South Wales, wherever located, notwithstanding the clear words of Item 4 of the Supply Agreement. 96 On the other hand, I do not find any great difficulty in accepting Mr Hobbs' evidence that he regarded freight charges, not applicability of the 6¢ rebate, as the significant issue in the discussions between the parties leading up to the March variation letter and that he focused on that issue and gave no particular attention to the mention in the pricing examples of the 6¢ rebate. I do not regard as inherently improbable Mr Hobbs' evidence that in commenting upon Ryledar's pricing examples and in working out his own examples he included the 6¢ rebate without paying any regard to whether the locations were within the area defined in Item 4 of the Supply Agreement. 97 Ryledar also places strong reliance on the fact that from 13 April 1999 onwards Euphoric allowed the 6¢ rebate for sales to country locations outside the zone defined in Item 4 of the Supply Agreement. However, as I have noted, this circumstance does not lead to the inevitable conclusion that the parties had a common intention as at 13 April 1999 as to what the Supply Agreement should provide: it is explicable as evidencing the attitude which Mr Hobbs took to keeping Ryledar, a growing customer, happy in terms of pricing inducements, regardless of what the Supply Agreement said about entitlement to the Contractual Rebate. 98 In order to succeed in its defence of the rectification claim, Euphoric does not have to prove that Ryledar set out to trick it by seeking its confirmation of pricing examples which included rebates not allowable under the Supply Agreement. Euphoric will succeed in its defence if Ryledar cannot provide convincing proof, i.e. proof to a high degree of satisfaction, that notwithstanding the clear and unambiguous language of Item 4 of the Supply Agreement, as amended by the March variation letter, and as drafted by sophisticated commercial parties highly experienced in the industry, both parties actually intended the opposite of what they had said. 99 I am far from convinced that Ryledar has proved its rectification claim. I regard as improbable the suggestion that Ryledar itself put forward wording for the amended Item 4 which was directly contrary to what it believed to be the actual agreement of the parties. I regard the pricing examples used in the correspondence between the parties prior to March 1999 as confused and confusing in so far as they bear upon the parties' intention as to Ryledar's entitlement to the 6¢ rebate. I regard that confusion as introduced principally by the terms of Ryledar's letter of 11 August 1998. I do not find Euphoric's allowance of the 6¢ rebate to all locations after 13 April 1999 to be unequivocal evidence of a common intention as at that date that that entitlement be a term of the Supply Agreement rather than a commercial inducement or bonus which Euphoric, through Mr Hobbs, was prepared to proffer to keep Ryledar, as a substantial customer, happy. 100 For these reasons, I am not satisfied that as at the time of the parties' execution of the March 1999 variation letter, the parties had the common intention for which Ryledar contends. Accordingly, Ryledar's claim for rectification of the Supply Agreement fails. Misrepresentation and estoppel by conduct 101 In the alternative to its claim for rectification, Ryledar seeks orders under s.87 Trade Practices Act 1974 (Cth) and s.72 Fair Trading Act 1987 (NSW) that the Supply Agreement be varied ab initio so as to entitle Ryledar to the 6¢ rebate for sales to all country locations in New South Wales. 102 Ryledar's Amended Cross Claim alleges that from mid-August 1998 until about 29 June 2000 Euphoric represented to Ryledar in correspondence and by conduct "that the rebate applied to petroleum products delivered to all country locations" . The reference to "the rebate" can only mean the Contractual Rebate as defined in the Supply Agreement. The allegation must, therefore, be read as saying that from mid-August 1998 to 29 June 2000 Euphoric represented that the Supply Agreement contained a term that the 6¢ rebate referred to in Item 4 applied to sales to all Ryledar country locations in New South Wales. That this is, indeed, Ryledar's case is confirmed by its written submissions, to which I will come shortly. 103 The evidence upon which Ryledar relies in support of the alleged misrepresentation is the evidence in support of its claim for rectification: namely, the pricing examples contained in the correspondence between the parties from 11 August 1998 onwards and the fact that after 13 April 1999 Euphoric allowed the 6¢ rebate on sales outside the zone defined in Item 4. 104 Ryledar's submissions on misrepresentation are sparse and, with no disrespect to Counsel, superficial. They are set out in its written submissions dated 11 November 2004 as follows (omitting references to evidence): "Hobbs intended Eddie Magar to rely on his letters of 14 August 1998 and 24 February 1999 setting out country examples. In reliance on the Supply agreement as providing certainty to Ryledar as to the terms on which it could obtain petrol, Eddie Magar looked for and established numerous country sites including many in the country [sic] . Each time a site was to be opened, Ryledar advised Euphoric. The existence of a certain rebate was crucial to its profitability and survival. Eddie Magar's letter of 11 August 1998 to Hobbs was written because he wanted to make sure it was clear to Hobbs and himself the basis upon which products would be supplied to future country sites. He relied on Hobbs' letter of 14 August 1998 to continue with plans for Ryledar to supply petroleum to Volume Plus branded sites in country areas. Because the delivered price was important to the future profitability of service stations, and therefore to the price Ryledar was prepared to pay, on 2 November 1998 Eddie Magar sought confirmation in advance during the process of considering the opening of a site at Katoomba that the rebate would apply. Braid's response of 4 November 1998 confirmed that Katoomba attracted the rebate as per their agreement. In reliance upon the examples given by Hobbs in his letter dated 24 February 1999, Eddie Magar signed the variation to the Supply Agreement. Ryledar entered into a back to back agreement with Azkanaad Pty Ltd for the supply of petroleum products in reliance, obviously, on its Supply Agreement with Euphoric as understood by Ryledar. … In entering into the Supply Agreement of 18 May 1998 and the 1999 variation, it was the common intention of the parties that Ryledar was entitled to the 6 cents per litre contractual rebate for deliveries to all country sites. That was also the basis on which they conducted their relationship until July 2000 when the plaintiff resiled. At all times until July 2000 the plaintiff through Hobbs represented through Hobbs' express representations, and continually by its conduct in allowing rebates, that Ryledar was entitled to the rebate for deliveries to all country locations. Hobbs intended his representations to be relied upon. Ryledar relied on those representations and, if the plaintiff is allowed to depart from them, did so detrimentally. This would lead the Court, if necessary:– (a) to rectify accordingly the original Supply Agreement of 18 May 1998 and the Supply Agreement as varied in 1999; and to vary same under s.87 of the Trade Practices Act 1974 (Cth) and s.72 of the Fair Trading Act 1987 (NSW). (b) to conclude that the plaintiff was and is estopped from claiming that the contractual rebate did not apply to all country sites." 105 Ryledar's first submission is that Euphoric represented to it by Mr Hobbs' letter of 14 August 1998 that the terms of the Supply Agreement entitled, or would entitle, Ryledar to the 6¢ rebate on sales throughout New South Wales and that, in reliance on that representation: – Ryledar established country sites from 14 August 1998 onwards; – Mr Eddie Magar signed the 31 March 1999 letter varying the Supply Agreement. 106 I do not accept this submission, for the following reasons. 107 First, if the evidence of Mr Eddie Magar and Mr Beckwith is to be accepted, Ryledar firmly believed from 18 May 1998 onwards that the Supply Agreement, in its original form and on its true construction, entitled Ryledar to the 6¢ rebate for all country locations. This belief, if it was in truth held by Ryledar, could not have been induced by Mr Hobbs' letter of 14 August 1998. 108 Second, Ryledar, or more correctly, an associated company Azkanaad Pty Ltd, opened the first country site outside the locations identified in Item 4 of the Supply Agreement in July 1998, before Mr Beckwith wrote the 11 August 1998 letter and Ryledar had received Mr Hobbs' reply on 14 August. 109 Third, it was clear from the exchange of correspondence commencing on 11 August 1998 that the parties were endeavouring to negotiate variations to the Supply Agreement which, if agreed, would have to be formally documented. Ryledar well knew that Clause 15.1 of the Supply Agreement required any variation to be in writing signed by both parties in order to be effective, as it reminded Ryledar on occasion. I do not accept that Ryledar believed that Mr Hobbs' letter, which in certain respects did not accept the examples given in the 11 August letter, represented that, if the Supply Agreement in its original form did not entitle Ryledar to the 6¢ rebate for all country sales, then the Agreement, by virtue of the 14 August letter, was varied so as to confer that entitlement. Neither do I accept that Ryledar believed Mr Hobbs' letter contained a representation that the variations to the Supply Agreement, when finally agreed and confirmed according to Clause 15.1, would confer such an entitlement. 110 Fourth, on 15 March 1999, Ryledar sent to Euphoric a proposal for amendments to the Supply Agreement which defined the zone within which sales would attract the 6¢ Contractual Rebate. The wording of the proposal was totally inconsistent with a belief on the part of Ryledar at that time either that the Supply Agreement in its original form already entitled Ryledar to the 6¢ rebate throughout New South Wales or else that the variation proposed would confer that entitlement. 111 The wording of Ryledar's proposal was reproduced in the 31 March 1999 letter of variation. There is no evidence that at any time before 13 May 1999, when Ryledar signed the March variation letter, Euphoric said to Ryledar anything to the effect: "Don't worry about the clear terms of Item 4 of the Supply Agreement – the Supply Agreement really does entitle you to the 6¢ rebate throughout New South Wales" . 112 In short, I am not satisfied that by the time Ryledar came to sign the variation letter Euphoric had represented to it anything more than that it was prepared to vary the Supply Agreement on the terms expressly set out in the 31 March 1999 letter and that those terms contained the true agreement of the parties. 113 The second submission is that there was a representation by Euphoric's conduct after 13 May 1999 in allowing the 6¢ rebate for sales outside the area designated in Item 4 that it was a term of the Supply Agreement that Ryledar was entitled to such rebate. I do not accept that submission. The allowance was capable of being seen as a commercial benefit or inducement, over and above the terms of the Supply Agreement, which Euphoric was prepared to extend to Ryledar to keep it happy. This was, of course, in fact the case. 114 Euphoric did or said nothing after 13 May 1999 which represented that its conduct in allowing the rebate was pursuant to a contractual obligation. In the face of the clear terms of Item 4 of the Supply Agreement, it would be manifestly unreasonable for Ryledar to construe the rebate concession as representing a contractual variation of the Supply Agreement, particularly as it had earlier reminded Euphoric that variations to the Supply Agreement were required by Clause 15.1 to be in writing and signed by the parties. 115 For these reasons, I am not satisfied that Euphoric made the representation as alleged. Ryledar's claim founded on misrepresentation therefore fails at the threshold. Estoppel by common assumption 116 Again, as an alternative to its claim for rectification, Ryledar alleges that from 18 May 1998 onwards the parties to the Supply Agreement proceeded on the assumption that the agreement entitled Ryledar to the 6¢ rebate for all its country sites in New South Wales so that Euphoric is now estopped from denying the contrary. 117 Ryledar's submissions on estoppel are combined with its submissions on misrepresentation, which I have reproduced above. The submission is based upon the evidence as to rectification, which I have already recounted. 118 Ryledar's claim founded on estoppel by common assumption also fails at the threshold. As discussed above in relation to the rectification claim, I do not accept that, even if Ryledar assumed at any relevant time that the Supply Agreement entitled it to the 6¢ rebate for sales throughout New South Wales, Euphoric also held that assumption. That finding is sufficient to dispose of the estoppel claim. 119 However, in the light of the wording of the proposal for amendment to the Supply Agreement put forward by Ryledar on 15 March 1999, as discussed above, I am not satisfied that at that date or earlier Ryledar itself believed that the Supply Agreement, either in its existing form or in the form to be amended, conferred the entitlement to rebates for which it contends. Ryledar's rebate damages claim 120 Ryledar's claim to rebates not allowed by Euphoric from 6 July 2000 onwards was based entirely in contract – either upon the Supply Agreement in its original or its varied form, or as rectified, or as amended under s.87 TPA, or as containing a term which Euphoric was estopped from denying. Each of those claims has failed. 121 The Referee calculated the amount of the rebate to which Ryledar would have been entitled had its rebate claim succeeded. That amount was $3,627,008.78. Ryledar's claims having failed, this amount is not available as a deduction from the sum of $9,033,567.17 which the Referee has found Ryledar owes Euphoric, subject to any deductions to which Ryledar is found entitled in these proceedings. THE VOLUME CONTRACTION CLAIM Ryledar's contentions 122 It is common ground that petroleum products expand and contract in volume as the ambient temperature increases and decreases. When Ryledar placed an order for the supply of petroleum products, Euphoric filled the order by measuring the volume of petroleum at ambient temperatures at the point of loading and invoiced Ryledar according to the volumes so measured. Euphoric claims the price of the petroleum products calculated in accordance with these invoices. 123 By its Defence, Ryledar says that Euphoric, in breach of the Supply Agreement, failed to invoice it on a basis which correctly represented the quantity of petroleum delivered. 124 Ryledar contends that: – the Supply Agreement required the volume of petroleum products sold to be measured according to the ACCC formula promulgated on 16 January 1995, which was based on volume measurement in litres at 15ºC; – alternatively, Clause 5.4 of the Supply Agreement provided for title and risk to pass on delivery: accordingly, the contract required the volume sold to be measured at the point of delivery to Ryledar; – in breach of the Supply Agreement, Euphoric measured volumes at the point of loading, not at the point of delivery to each of Ryledar's locations; – ambient temperatures were probably higher at the point of loading than at the point of delivery; – in order to prove its entitlement to payment for petroleum, Euphoric must prove the amount of petroleum it actually delivered to Ryledar; – because Euphoric did not measure volumes of petroleum at the point of delivery to Ryledar, it cannot prove what volumes it sold and delivered; – there is, therefore, no factual basis upon which the Court can quantify the amount to which Euphoric is entitled for sales of petroleum to Ryledar; – the Court should reduce the amount payable to Euphoric for petroleum products sold by reference to the volumes measured at the point of loading by applying the "15ºC volume measurement standard" : Ryledar's written submissions 11 November 2004, para 115(b). 125 If Ryledar's contentions succeed, the calculation of the amount payable to Euphoric for petroleum products sold may be made by applying a formula which has been agreed between the parties for the purposes of this litigation in a confidential mediation settlement agreement dated 3 September 2002. The relevant terms of the Supply Agreement 126 Clause 2.2 of the Supply Agreement provides: " Price. The price payable by Customer for Mobil Petroleum Products shall be Mobil's List Price applying at the commencement of the day of delivery." Clause 1.1 provides: " 'Mobil's List Price' means: (a) in respect of those products which are 'notified goods or services' for the purposes of the Prices Surveillance Act 1983 , the maximum wholesale price endorsed by the ACCC for those products at the time and place for delivery plus any applicable package or other differential; or (b) if the existing ACCC maximum list price fixing mechanism operating at the Agreement Date is suspended or ceases to operate, then in respect of those products that were 'notified goods or services', Mobil's Price Book Price plus any applicable package or other differential; and (c) for all other products, Mobil's Price Book Price plus any applicable freight, package or other differential." Clause 4.2 provides: " Review of Rebates. Notwithstanding anything contained in this Agreement, if any government agency or authority takes any action whatsoever or there is a change in the variables or formula of the existing ACCC maximum list price fixing mechanism, then any rebate provided for by this Agreement in respect of such products will be reviewed by both parties. If the review indicates that the variables or formula ceases to exist or has not been fundamentally changed then Euphoric will make every endeavour to determine Mobil's List Price or Mobil's book price using the same formula as that implemented by the ACCC on the 16th January 1995 (Currently in use with the rebate unchanged). Provided that the variables in the formula are not available then both parties will negotiate in good faith to preserve the current pricing arrangements between Euphoric and the customer." Clause 5.4 provides: " Title and risk. Title and risk in Mobil Petroleum Products purchased by Customer under this Agreement shall pass to Customer upon delivery at the Sites." 127 It is common ground that, until 31 July 1998, oil company prices were subject to approval by the ACCC under s.22 of the Prices Surveillance Act 1993 (Cth) in accordance with a list pricing mechanism promulgated on 16 January 1995. From 1 August 1998, fuel prices were deregulated and companies such as Mobil were free to set their own prices. Ryledar's submissions 128 Ryledar's first submission is that a term that prices per litre for petroleum products sold under the Supply Agreement be determined by measuring volumes adjusted at 15ºC is incorporated into the contract: – by reference in the definition of "Mobil's List Price" to the "maximum wholesale price endorsed by the ACCC" ; and – when the ACCC price fixing mechanism ceased to operate, by the words in Clause 4.2 of the Supply agreement: "If the review indicates that the variables or formula ceases to exist or has not been fundamentally changed then Euphoric will make every endeavour to determine Mobil's List Price or Mobil's book price using the same formula as that implemented by the ACCC on the 16th January 1995 (Currently in use with the rebate unchanged)." 129 The ACCC maximum list price fixing mechanism promulgated on 16 January 1995 by the Prices Surveillance Authority explains how the "Intervention Pricing System" ("IPS") worked: "The IPS is based on international ex-refinery petroleum product prices (not crude oil), as quoted by Platts Global Alert for the Singapore market. Prices there closely reflect those in other major world petroleum product markets and it is the likely source of any imports into Australia. The Singapore product prices are adjusted to become import parity or 'landed' prices by the addition of freight from Singapore, wharfage costs in Australia and insurance and loss … . From 16 January 1995 the petrol intervention is derived by taking spot Mogas (petrol) 95 RON unleaded prices, plus a premium of $US0.08/bbl [barrel] on the daily prices quoted by Platts. … An example intervention price for leaded petrol on 16 January 1995 follows. cpl [cents per litre] Landed price 18.61 Local component 7.10 Commonwealth excise 34.10 Intervention price 59.81" 130 Ryledar points to the fact that certain of the "inputs" to the calculation of the intervention price shown in the 16 January 1995 document, namely spot price, wharfage, insurance and loss, are expressed in cents per litre. The evidence of Mr Beckwith was that in respect of these "inputs", volume was measured in litres adjusted at 15ºC. The evidence of Mr Beckwith in this regard was confirmed by Mr G. Asher, an expert who had worked for the Prices Surveillance Authority and then for the ACCC. Mr Asher first gave an affidavit on behalf of Ryledar; subsequently he gave an affidavit on behalf of Euphoric. Mr Asher was not cross examined. 131 Mr Beckwith went on to give evidence that the ACCC intervention price was measured on the basis of volume converted or adjusted at 15ºC. Ryledar says, therefore, that when the Supply Agreement required the price of petroleum products sold to Ryledar to be determined by reference to the ACCC maximum list pricing mechanism, it required the price per litre to be determined as a price per litre measured on the basis of volume adjusted at 15ºC. 132 Mr Beckwith's evidence that the ACCC intervention price was measured on the basis of volume adjusted at 15ºC was plainly wrong. 133 Mr Asher, whose evidence I accept without reservation, explained the true position thus: "Although the PSA intervention formulae … used some information that was expressed to be volume adjusted to 15ºC neither the PSA intervention price nor the endorsed wholesale price (explained … below) were expressed as temperature adjusted to 15ºC (or any other specific temperature)." 134 Mr Asher then referred to an enquiry which the ACCC had undertaken into the petroleum products industry in 1996 and to part of its report, which he annexed to his affidavit. Pertinent parts of the report are as follows: " Temperature correction of petrol sales Petrol expands as temperature rises. International trade, transfers between domestic oil majors and excise duty payments are made on a volume corrected basis at the international reference temperature of 15ºC. Singapore spot product prices reported by Platts assume sales on a corrected basis. While oil majors do not support temperature correction beyond current levels, there have been calls from various bodies over recent years to have mandatory temperature adjustment for sales to distributors, retailers and to the motorist at the pump. Evidence was given that only in isolated cases were resellers successful in obtaining some allowance from suppliers for temperature variations." The report then referred to a number of studies or examinations of the issue which had been conducted over a number of years and to the submissions of competing interests. The report concluded thus: "Whether petrol sales at wholesale or retail are made on a temperature corrected basis or not is an issue that will, in the longer run, be determined by the extent of competition in the market. The expected rising influence of imports and independent participants in the industry should result in competitive disciplines that will ensure the benefits of any efficiencies flow to motorists. It should therefore be the market, rather than a regulatory body, that will assess the costs, competitive advantages and negotiating powers of parties, in respect of temperature correction of petrol sales." 135 Because the ACCC maximum list price fixing mechanism, as referred to in the Supply Agreement, never determined a price by reference to a litre of petroleum volume adjusted to a temperature of 15ºC, I cannot find that a term for such an adjustment to measurement was incorporated into the Supply Agreement. 136 Ryledar's alternative submission is: – Clause 5.4 of the Supply Agreement provided for title and risk to pass on delivery to Ryledar's sites; – Euphoric was therefore implicitly required to measure the volumes delivered at the point of delivery; – Euphoric measured the volumes sold at the point of loading; – the ambient temperatures were likely to have been hotter at the point of loading than at the point of delivery; – "in any case, in circumstances where Euphoric, in breach of its own contractual obligation, has failed to measure and prove what the volume was at delivery, the Court should apply the 15ºC volume measurement standard" : Ryledar's written submissions, 11 November 2004, para 133. 137 I am unable to accept the submission that, as a matter of construction of Clause 5.4, Euphoric was required to measure volumes sold at the point of delivery. All that Clause 5.4 provides is that title and risk to whatever quantity of petroleum is delivered passes at the point of delivery: it says nothing about the measurement of the petroleum products to which the title and risk is to pass or where that measurement is to take place. 138 In any event, I could not be satisfied on the evidence that during the whole of the time that Euphoric supplied petroleum products to Ryledar, the ambient temperatures at the points of loading were higher than the temperatures at the points of delivery, so that Ryledar always paid for a larger volume of petroleum than it actually received. There is no evidence which would sufficiently support the conclusion that that happened even in one particular case, let alone in all or in the majority of cases. The only evidence upon which Ryledar relies in this regard is paragraphs 39 and 40 of a statement of Mr P. McCullagh, which recount his experiences as an officer of BP in Melbourne from 1987 to February 1988 in such generality as to carry no weight in the proof of the critical issue in this case. 139 It could well have happened in some cases that, by reason of contraction during transportation, Ryledar paid for a larger volume of petroleum than it actually received. Equally, in other case, it could well have happened that the ambient temperatures at the point of loading were lower than the temperatures at the point of delivery, so that Ryledar received a larger volume of petroleum than it had actually paid for. As I have said, the evidence does not enable me to draw any inference as to whether, on the whole, Euphoric or Ryledar did better from the fluctuations in volume of petroleum products sold under the Supply Agreement. 140 I do not accept that, in light of the fact that petroleum products inherently have a high coefficient of expansion, it is necessary in order to give business efficacy to the Supply Agreement to imply a term that volumes sold are to be measured at the point of delivery. Such a term could hardly be so obvious as to go without saying. The very debate about measurement in the sale of petroleum products in this case has been going on in the wholesale and retail petroleum industry for a long time, both overseas and in this country, without resolution: see Appendix U to the 1996 ACCC report – "Temperature correction of petrol sales" , Annexure A to Mr Asher's affidavit, 8 November 2004; Esso Petroleum Co Ltd v Addison [2003] EWHC 1730 (Comm); Caltex Petroleum Pty Ltd v Flomad Pty Ltd [2003] FCA 648. If the hypothetical bystander at the time of execution of the Supply Agreement had asked the parties whether it was understood that petroleum sold was to be measured at point of delivery rather than at point of loading, to avoid the effects of volume contraction during transport, I have no doubt that each of the parties would have given a different answer. 141 In my opinion, the answer to the issue of volume contraction is suggested by s.33(1) of the Sale of Goods Act 1923 (NSW) which provides: " Delivery of wrong quantity or mixed goods (1) Where the seller delivers to the buyer a quantity of goods less than the seller contracted to sell, the buyer may reject them, but if the buyer accepts the goods so delivered the buyer must pay for them at the contract rate." 142 Under this section, it was open to Ryledar to measure the volume of petroleum delivered in each case against the volume ordered. If the measurement showed that the volume delivered was less than the volume ordered, Ryledar could reject the delivery. Alternatively, it could accept the volume delivered and pay at the contract rate but then it would bear the onus of showing that the volume delivered was not the volume ordered and loaded: see e.g. Canberra Washed Sand Pty Ltd v Ro-Mix Concrete Pty Ltd (1976) 11 ACTR 1, at 7-8. Ryledar has uniformly accepted the volumes delivered by Euphoric but it has not even attempted to discharge the onus of showing that any one of these volumes was less than the volume ordered and loaded. 143 Another answer is suggested by s.36 of the Sale of Goods Act which provides: " Risk where goods are delivered at distant place Where the seller of goods agrees to deliver them at the seller's own risk at a place other than that where they are when sold, the buyer must nevertheless, unless otherwise agreed, take any risk of deterioration in the goods necessarily incident to the course of transit." 144 Prof. K. Sutton says of this section in "The Laws of Australia" , Sale of Goods, Chapter 4, para 27: "Deterioration which is natural to the class of goods sold, or necessarily incidental to such storage or transit as the contract contemplates, is (agreement apart) something which the buyer must accept: while deterioration attributable to inherent faults or unusual characteristics in the goods calls primarily for consideration of the question whether the condition or quality of the goods has been warranted and the period or point of time to which such warranty relates." 145 "To deteriorate" means "to grow worse in character; to become lowered or impaired in quality or value ; to degenerate" : Oxford English Dictionary . I think that, from a purchaser's viewpoint, it is legitimate to say that a tanker load of petroleum which it has purchased has "deteriorated" during transport because it has contracted to a smaller volume than that paid for and is therefore is of less value to it than when it was loaded at the refinery. 146 However, I do not think it essential that this case fit squarely into the words of s.36 Sale of Goods Act . In my opinion, the section states a general proposition of law as to how risk of deterioration inherent in the nature of the goods or in the nature of their transportation is to be borne, which may be applied by analogy in the present case. 147 Here, Euphoric, having sold the petroleum, agreed by Clause 5.1 and 5.2 to deliver it to Ryledar's sites. By Clause 5.4, the delivery was to be at Euphoric's own risk. However, as both buyer and seller well knew, there was a risk but not a certainty, inherent in the very nature of petroleum products, that there would be contraction in the volumes to be delivered due to variations in temperature necessarily incident to the course of transit. The Supply Agreement does not expressly or implicitly provide which of the seller or buyer is to bear that risk. Consistently with the policy evinced in s.36 Sale of Goods Act , it should be the buyer who bears the risk. Correspondingly, if there was an expansion in the volume delivered to the buyer between the time of loading and the time of delivery, then it should be the buyer who gains the benefit. 148 For these reasons, I conclude that Ryledar's contraction claim fails. It follows that the sum of $1,233,900.75, ascertained by the Referee as the value of this claim, cannot be deducted from the sum owing by Ryledar to Euphoric for the sale of petroleum products under the Supply Agreement. $100,000 CHARGE TO LOAN ACCOUNT The issue 149 The amounts owing by Ryledar to Euphoric under the Supply Agreement were much in contest from the commencement of their relationship. There were many meetings and discussions between the parties' representatives which endeavoured to resolve the differences and reach a reconciliation of the accounts between them. 150 On 11 October 1999, Mr Hobbs wrote to Mr Eddie Magar as follows: "I refer to various discussions and reconciliation of your trading account and confirm that the balance as per our records is $1,413,667.37 as at 9 August 1999. This balance covers all journals and payments up to transactions for 9 August 1999 i.e., your Journal no. 3413 and your payment of $749,989.13. Transactions after this date have been included in a different operating account (No. 06000), and is reconciled regularly by Mr. Partha Sarathy of Euphoric Pty. Ltd. and Bill Magar of Volume Plus. Currently, as per our agreement, you are paying the above outstanding balance in instalments of $5,000 per week. You have also agreed to increase the payment to $10,000 from 5 January 2000. In return, we agree not to charge us any interest on outstanding balance. The instalment payments would be made every week on Wednesday along with our banking for the week. If you are in agreement with the above arrangement please sign below and return to us." 151 On 13 October 1999, Mr Magar responded, in so far as is relevant, as follows: "RE: Outstanding Disputed Invoices and Account Balances Further to our various discussions, past meetings, past correspondences and your proposed letter of the 11th October 1999, we advise the following: 1) Ryledar Pty Ltd agrees that the account balance was $1,413,667 as at 9th August 1999. (This balance includes Journals not previously supplied.)" 152 Euphoric's Second Further Amended Summons alleges: – that as at 9 August 1999 Ryledar was indebted to Euphoric in the sum of $1,413,667.37, as agreed in the correspondence referred to above; – that Ryledar had paid Euphoric in reduction of that sum of $740,000; and – that Ryledar owed Euphoric the balance of $673,667.37. 153 Ryledar's Defence denied that the sum of $1,413,667.37 was outstanding as at 9 August 1999 and otherwise put this claim in issue. In accordance with Mr Hobbs' letter of 11 October 1999, Ryledar paid a number of weekly instalments of $5,000. Those payments were made into a separate account which was referred to by the Referee in his Report of 27 November 2004 as a "loan account" because the parties treated the sum of $1,413,667.37 as an interest free loan in accordance with Mr Hobbs' letter, as agreed by Mr Magar on 13 October 1999. 154 The Referee found that, after taking into account the $5,000 payment instalments made by Ryledar, Ryledar was entitled to an additional credit of $144,709.13 on the balance of the loan account. At paragraph 82 of his November 2004 Report, the Referee said: "These adjustments relate to all credits either conceded by Euphoric or found by me in relation to disputed deliveries which affected the loan account balance." 155 Ryledar submits that the balance of this loan account should be reduced further by the sum of $100,000 which, it says, was charged to the loan account by Euphoric but is not referable to any supply of petroleum products. 156 Following termination of supply of petroleum by Euphoric to Ryledar in May 2001, Euphoric prepared a reconciliation of the balance owing on this loan account as at 15 November 2001. The reconciliation stated: "Balance due 30th August 1999 account 020000 $989,937.80 Balance due 1st November 1999 account 030000 $ 423,729.57 TOTAL REPAYMENT ACCOUNT $1,413.667.37" 157 Euphoric's accounting system as at May 2000 shows a debit made on account 030000 on 1 November 1999 of $100,000. This debit brought the balance of account 030000 to $423,729.57. The whole of this sum was subsequently transferred on 1 November 1999 to account 020000 which was the "loan" account to which Ryledar's weekly payments of $5,000 were credited. 158 This debit of $100,000 was debated before the Referee, who said in his Report of 27 November 2004: "43. I note further that Ryledar has asserted that a charge of $100,000 made to the loan account on 1 November 1999 was without justification. I understand that this adjustment was made in order to bring the account balance to the amount agreed by Ryledar. The entry does not relate to the supply of petroleum products on 1 November 1999. … 86. In submissions, Ryledar alleged that a charge of $100,000 made to the loan account on 1 November 1999 was without justification. 87. I understand that this adjustment was made in order to bring the account balance to the amount agreed by Ryledar. The entry does not relate to the petroleum products on 1 November 1999. I do not express an opinion as to whether this adjustment was justified." 159 Ryledar contends that, as the Referee has found that the debit of $100,000 to account 020000 did not relate to the supply of petroleum products on 1 November 1999, the loan account should be reduced by that sum. The parties' submissions 160 Euphoric submits, in essence, that the amount of $100,000 to the loan account was not made in relation to any particular supply of petroleum products under the Supply Agreement but was made in order to reflect the reconciliation of accounts between the parties which had been agreed in the exchange of correspondence concluding in Mr Magar's letter of 13 October 1999. 161 Ryledar submits that Euphoric cannot rely upon the agreed reconciliation because: – various items within the reconciliation were debated before the Referee who resolved some of the issues in favour of Ryledar; – the agreed reconciliation is unreliable; – Mr Eddie Magar believed that he did not have time to check the figures in Mr Hobbs' letter before he agreed to the reconciliation because he was "concerned about Euphoric's threat to cut supply" : statement 7 April 2003, paragraph 412. Conclusion 162 I accept the Referee's conclusion, and Euphoric's submission, that the charge of $100,000 was debited to the loan account on 1 November 1999 merely to reflect the reconciliation of accounts which had been agreed between the parties. 163 The agreed reconciliation constituted an admission by Ryledar that it was indebted to Euphoric in the stated amount. It was at liberty to show in the reference that its admission was wrong as to the whole of the amount – i.e. that, in fact, it owed nothing on the loan account. Alternatively, it could have shown that its admission was partly wrong in that it owed Euphoric less than the amount agreed in the reconciliation. Ryledar chose to adopt the latter course in the reference. Before me, it has not endeavoured to show that there is any other error in the loan account amount. 164 I do not think that Ryledar, having agreed to a reconciliation of accounts in October 1999 and having undertaken to show in the reference that only part of the reconciliation was wrong, can now take the position before me that the reconciliation counts for nothing as an admission and that Euphoric must prove every item for which it claims payment as reflected in the loan account. In my opinion, Ryledar is bound by its admission as to the reconciliation and by the course which it took before the Referee in endeavouring to show that only part of the reconciliation amount was not owing. 165 I do not accept the evidence of Mr Eddie Magar that he agreed to the reconciliation of accounts in his letter of 13 October 1999 because he believed that he did not have time to check the figures and was concerned about a threat by Euphoric to cut supply. As I have said, the reconciliation exercise had been going on between the parties for a long time. Euphoric had been endeavouring to set up regular meetings between the parties to reconcile the accounts. The tone of its correspondence was co-operative, not threatening: see e.g. the letter from Mr Hobbs to Mr Bill Magar dated 27 August 1999. There was no "threat to cut supply" in Mr Hobbs' letter of 11 October 1999 unless the reconciliation was agreed within a specified time. 166 Mr Eddie Magar said that when he received Mr Hobbs' letter of 11 October 1999 he relied on what Mr Hobbs told him about the figures in agreeing to the reconciliation: witness statement 7 April 2003, paragraph 412. I reject this evidence as untruthful. The evidence as a whole leaves not the slightest doubt that throughout the whole of Ryledar's relationship with Euphoric it did not accept any invoice from Euphoric, or any account, without query and it very frequently disputed claims for payment. I regard it as improbable in the extreme that, when asked to agree to the reconciliation set out in Mr Hobbs' letter after so much discussion had taken place, Mr Eddie Magar took Mr Hobbs' figure on trust and felt cowed into agreeing with it. 167 Both Mr Magar and Mr Beckwith are forceful and assertive people, as the tone of their correspondence and their evidence before me demonstrate. I regard Mr Eddie Magar's suggestion that he took Mr Hobbs' reconciliation figure on trust and that he was somehow pressured into accepting it as indicating that he is generally prepared to give untrue evidence when he thinks that it will advance his case. 168 In short, I do not accept that Ryledar agreed to the reconciliation of accounts without fully appreciating the consequences. 169 Accordingly, Ryledar fails in its contention that the $100,000 charge to the loan account is unjustified. RYLEDAR'S CROSS CLAIM The issues 170 Ryledar cross claims against Euphoric for damages for breach of the Supply Agreement. Ryledar alleges that Euphoric breached and repudiated the Supply Agreement by: – refusing to allow Ryledar the Contractual Rebate for sales to locations outside the area defined in Item 4 of the Supply Agreement after 6 July 2000; – refusing to acknowledge as valid Ryledar's exercise on 31 August 2000 of an option to renew the Supply Agreement; – refusing to supply Ryledar after 24 May 2001 upon expiry of an interim supply agreement. 171 Ryledar says that on 12 June 2001 it accepted Euphoric's wrongful repudiation and terminated the Supply Agreement, which was then still in force because it had been validly renewed on 31 August 2000. Ryledar claims damages for the loss of the benefit of the Supply Agreement. 172 I have earlier held that Ryledar was not entitled under the Supply Agreement to the Contractual Rebate outside the area defined in Item 4. Accordingly, its Cross Claim for damages on this ground fails. The only part of the Cross Claim requiring consideration is, therefore, Ryledar's claim that Euphoric breached and repudiated the Supply Agreement by refusing to give effect to Ryledar's exercise of the option to renew. 173 Euphoric says that it did not breach the Supply Agreement by refusing to acknowledge Ryledar's exercise of the option to renew because: – exercise of the option was subject to a condition that Ryledar must have duly performed its obligations under the Supply Agreement at all times during the Term of the Supply Agreement; – as at the expiry of the Term of the Supply Agreement Ryledar was in continuing breach; – accordingly, Ryledar's purported exercise of the option was of no effect. The relevant terms of the Supply Agreement 174 Clause 3.1 provides: " Commencement and Duration. This Agreement shall commence on the Commencement Date and shall have full force and effect for the Term unless sooner terminated in accordance with the provisions of this Agreement." "Term" is defined in Clause 1.1 as follows: "… the period specified as such in Item 3 of the Reference Schedule, commencing on the Commencement Date and where the options for renewal referred to in clause 3.2 are exercised, it means the term of the Renewal Periods and also includes any formal or informal period of extension of the Term." 175 Item 3 of the Reference Schedule states that the Term is two years. However, the "Term" was amended by the 31 March 1999 letter of variation to "two and a half years" . Ryledar accepts that the Term of the Supply Agreement expired by effluxion of time on 17 November 2000, unless the option contained in Clause 3.3 was validly exercised. 176 Clause 3.3 provides: " Exercise of Options. Customer shall only be entitled to exercise the options to renew for the Renewal Periods contained in clause 3.2 in the event that: (a) Customer has, at all times during the Term duly observed and fulfilled its obligations under this Agreement and all other agreements with Euphoric; (b) Customer has given written notice to Euphoric exercising the option not more than 120 days nor less than 60 days before the expiration of the Term." Construction of Clause 3.3 177 On 31 August 2000, Ryledar gave Euphoric a "Notice of Exercise of Option to Renew" the Supply Agreement. There is no dispute that the Notice was given within the time stipulated in Clause 3.3(b) of the Supply Agreement. 178 On 4 October 2000, Euphoric wrote to Ryledar alleging that the option had been invalidly exercised. Euphoric contends that the condition for valid exercise required by Clause 3.3(a) was not fulfilled in that, as at expiry of the Term, i.e., 17 November 2000, Ryledar was in breach of its payment obligations under Clause 2.6 of the Supply Agreement. 179 Ryledar denies that it was in breach of Clause 2.6 as at 17 November 2000 but it says that, in any event, that date is not relevant for the purposes of Clause 3.3(a). It says that as at 31 August 2000, when it gave notice of exercise of the option, it was not in breach of any term of the Supply Agreement; accordingly, as a matter of construction of Clause 3.3(a), its exercise of the option was then valid, and valid once and for all, so that it did not matter if it fell into default under the Supply Agreement between 31 August and the expiry of the Term on 17 November 2000. 180 Euphoric submits that: – the words in Clause 3.3(a) "at all times during the Term" must be given their clear and literal meaning; – the "Term" is defined as two and a half years, i.e. expiring on 17 November 2000; – if, when the option is exercised, Ryledar has not previously been in breach of any term of the Supply Agreement then the exercise is conditionally valid but is subject to defeasance if Ryledar falls into breach on or before 17 November 2000; – when the Term expires at midnight on 17 November 2000, a new Term of two and a half years expiring on 17 April 2003 will commence if, but only if, Ryledar has not been in breach of the Supply Agreement during the whole of the Term. 181 In my opinion, Euphoric's submission is correct. The purpose of Clause 3.3(a) is, clearly enough, to protect Euphoric from having to enter into a renewed Supply Agreement with a party which breaches its contractual promises, whether those breaches occur before or after giving notice of exercise of the option. There is no reason to read down or qualify the literal and plain meaning of the words "at all times during the Term" . 182 Accordingly, the relevant date for determination of the question whether Ryledar was in breach of Clause 2.6 for the purposes of Clause 3.3(a) is 17 November 2000. 183 I should note for the sake of completeness that the parties have fixed on only two dates for determining whether Ryledar was in breach of the Supply Agreement for the purposes of Clause 3.3, namely, 31 August and 17 November 2000. Clause 13.3(a) disqualifies Ryledar from exercising the option to renew if it has not "at all times" during the Term complied with its obligations. However, in view of the number and complexity of the transactions between the parties, it would have been a gargantuan task for the Referee to determine what were the daily balances outstanding to Euphoric during the whole Term of the Supply Agreement. As a matter of practicality, therefore, the parties focussed on the state of accounts on the two dates most material to this issue. Summary of Ryledar's contentions 184 The Referee has found in his report of 31 March 2005 (paragraph 42) that as at 17 November 2000, the sum of $3,692,458.73 was outstanding and overdue from Ryledar to Euphoric, subject to Ryledar's Cross Claim. Ryledar contends that, in fact, none of this amount was outstanding and overdue because there must be deducted: – A credit facility then available to Ryledar under the Supply Agreement $1,800,000.00 – The Contractual Rebate not allowed after 6 July 2000 $1,553,754.01 – A refund to account for Volume Contraction $808,859.94 – An amount for deliveries in May 2000 said not to have been invoiced to Ryledar as at 17 November 2000 and therefore not to be payable as at that date $3,820,404.00 – An amount for deliveries in October 2000 said not to have been invoiced to Ryledar by 17 November 2000 and therefore not to be payable as at that date $1,082,994.94 – Unreconciled invoices, erroneous as to locations and delivery dates $407,967.11 185 As I have said, the claims in respect of Contractual Rebate and Volume Contraction fail. However, if Ryledar makes good its contention as to the May deliveries, with or without making good the contentions as to the credit facility, the October deliveries and the unreconciled invoices, then it will have shown that as at 17 November 2000 there was no amount outstanding or overdue to Euphoric under the Supply Agreement. It will then be able to say that Euphoric breached the Supply Agreement in refusing to give effect to Ryledar's exercise of the option to renew and that it has a claim for damages. 186 However, in its Reply to Euphoric's Defence to its Cross Claim, Ryledar pleads that an equitable set-off was available to it against any amount which it owed to Euphoric as at 17 November 2000. The pleading is as follows: "Further, and in the alternative: (i) on 31 August 2000, Ryledar validly exercised the option under clause 3.3; (ii) on 4 October 2000, Euphoric served notice on Ryledar that it refused to accept Ryledar's exercise of the option; (iii) the service of the notice referred to in 5(ii) above, was a breach, or an anticipatory breach, of the Supply Agreement by Euphoric on 4 October 2000; (iv) at the time of the breach or anticipatory breach by Euphoric referred to in 5(iii) above, Ryledar was ready, willing and able to perform its obligations under the Supply Agreement; (v) accordingly, Ryledar suffered anticipated damages (unliquidated) for the loss of the option and subsequent options under the Supply Agreement caused by Euphoric; (vi) for the period 4 October 2000 to 17 November 2000, Euphoric did not withdraw the notice referred to in 5(ii) above (but on the contrary, persisted in its position) and the breach or anticipatory breach by Euphoric continued throughout that time and at all times thereafter; (vii) the quantum of the damages referred to in 5(v) above exceeded the balance alleged to be owing to Euphoric as at 17 November 2000; (viii) Ryledar claims an equitable set-off against the balance alleged to be owing to Euphoric as at 17 November 2000 in respect of the damages or anticipated damages owed by Euphoric to Ryledar as an immediate answer to its liability to pay the said balance under the Supply Agreement; and (ix) accordingly, Ryledar is not in breach of the Supply Agreement to Euphoric as at 17 November 2000 as alleged." 187 The availability of the alleged equitable set-off depends on: – a finding that Euphoric committed an anticipatory breach of Clause 3.3 of the Supply Agreement on 4 October 2000 in refusing to acknowledge the validity of Ryledar's exercise of the option on 31 August 2000; – a finding that in law, as at 4 October, Ryledar was entitled to unliquidated anticipatory damages for the loss of the Supply Agreement for the remainder of the Original Term, i.e. until 17 November 2000, and for the following two Terms, i.e. until 17 November 2004, on the basis that Ryledar would successfully and validly have been entitled to exercise those two options. 188 I cannot make these findings. As I have held, the exercise of Ryledar's option on 31 August was not absolute and unconditional nor did it then bring into existence a renewed Supply Agreement; the exercise of the option was subject to defeasance if Ryledar fell into default of the Supply Agreement between 31 August and 17 November 2000. Only if the exercise of the option became unconditionally valid at midnight on 17 November 2000 could Ryledar have an action thereafter for damages for Euphoric's failure to give effect to the renewal. 189 In my opinion, Ryledar had no right of action for breach of Clause 3.3, and therefore no right to damages, anticipatory or otherwise, which it could set off against its indebtedness to Euphoric on 17 November 2000 until 18 November 2000, at the earliest. Suspension of performance 190 Ryledar submits that, even it was otherwise in default in payment of overdue amounts as at 17 November 2000, nevertheless any obligation to pay those amounts was suspended so that it was not in breach of the Supply Agreement as at that date and its exercise of the option was valid. 191 Ryledar submits that because Euphoric wrongfully repudiated the Supply Agreement on 4 October 2000 by refusing to acknowledge the validity of Ryledar's exercise of the option, Ryledar was thereupon absolved from the obligation of paying for petroleum products previously sold and delivered to it. 192 Ryledar relies upon the following statement by Brennan J in Foran v Wight (1989) 168 CLR 385, at 428: "… where a party repudiates, the non-repudiating party, who does not accept the repudiation and affirms the continued existence of the contract, is thereby absolved from tendering further performance under the contract while the repudiatory attitude is maintained." 193 I am unable to accept this submission, even if I were to accept that Euphoric's letter of 4 October 2000 constituted a repudiation of the Supply Agreement. I note, first, that the proposition stated by Brennan J was not endorsed by the other members of the High Court in Foran v Wight and has been rejected by the House of Lords in Fercometal SARL v Mediterranean Shipping Co SA [1989] AC 788; it is yet to be established as good law in Australia. 194 However, even if the proposition is good law, nevertheless it applies only where a contract is still executory, i.e. both parties have still to perform their promises. In such a case, if one party repudiates, refusing to perform its promise, the innocent party will not be liable for failing to tender performance of its own promise. 195 So, for example, in Peter Turnbull & Co Pty Ltd v Mundus Trading Co (A'asia) Pty Ltd (1954) 90 CLR 235, a contract for sale of goods required the buyers to nominate a vessel for transportation of the goods by a certain date. Before the nomination was made, the sellers repudiated the contract. The buyers did not accept the repudiation but, because of the sellers' repudiation, they did not nominate a vessel by the time required. They then brought an action against the sellers for damages. 196 The sellers' defence was that the buyers had breached a condition of the contract by failing to nominate the vessel. A majority of the High Court held that the buyers were entitled to succeed because the sellers' repudiation had dispensed with the buyers' obligation to nominate the vessel. 197 Again, in Foran v Wight the vendors of land advised the purchasers that they were unable to settle the contract. Consequently, the purchasers did not attend and tender settlement at the time stipulated, time having been made of the essence. The vendors then sought to treat the purchasers' failure to tender settlement as the breach of an essential time stipulation. 198 The High Court held that the purchasers were not in breach in failing to tender settlement because of the prior repudiation by the vendors. 199 Peter Turnbull and Foran are cases in which the contract was entirely executory because both parties had yet to perform their promises by the time that the repudiation had occurred. It is clear that Brennan J did not intend the proposition which he enunciated to be read as applying to the case where a contract is executed by the full performance of one party's promise before repudiation takes place and all that remains is for the other party to provide the consideration promised in return. It is well settled that when a contract is repudiated by one party and the other party accepts the repudiation and terminates, the termination does not discharge the liabilities under the contract of the parties which have accrued and become unconditional prior to the termination; either party may sue to enforce such accrued liabilities, even the repudiating party: see generally McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457, at 477; Ettridge v Vermin Board of the District of Murat Bay [1928] SASR 124, at 128; Hyundai Heavy Industries Co Ltd v Papadopoulos (1980) 1 WLR 1129, at 1136. 200 In the present case, Euphoric was a seller under a contract for the continuing supply of goods. By 17 November 2000, it had on numerous occasions fully performed its promise to sell and deliver certain goods ordered by Ryledar. Upon sale and delivery in accordance with Ryledar's orders, Ryledar's obligation to make payment for the goods had accrued and had become unconditional. If Euphoric repudiated the Supply Agreement by saying that it would no longer supply goods to Ryledar upon the terms of that Agreement and if Ryledar had accepted that repudiation and had terminated the Supply Agreement, Ryledar would have been absolved from its obligation to continue placing orders with Euphoric under the Supply Agreement but it would not have been absolved from its obligation to pay for the goods sold and delivered prior to termination. Ryledar's position at 17 November could be no stronger, when it had not yet accepted Euphoric's alleged repudiation and had not terminated the Supply Agreement. The short but decisive defence to the Cross Claim 201 There is no dispute that after receipt of Euphoric's letter of 6 July 2000 in which Euphoric clearly advised Ryledar that Euphoric would no longer allow the 6¢ rebate for sales outside the area defined in Item 4 of the Supply Agreement, Ryledar nevertheless deducted from its payments for sales to locations outside the defined area amounts calculated in accordance with the 6¢ rebate: Transcript 10 October 2005, 34.50 - 35.4. 202 I have found that the Supply Agreement did not entitle Ryledar to deduct rebate for such sales. It follows that from 6 July 2000 onwards Ryledar was in breach of its obligation under Clause 2.6 of the Supply Agreement to pay Mobil's List Price for petroleum sales outside the area defined in Item 4; it refused, in its accounting to Euphoric for sales, to include in its calculations the correct amounts payable under Clause 2.6 and it wrongly and steadfastly insisted that its position in this regard was in accordance with its contractual entitlements. Even if it is found that, after allowing the deductions which Ryledar claims, as at 17 November 2000 Ryledar was a net creditor of Euphoric rather than a net debtor, yet the amount of the debt claimed by Ryledar would have been larger than it was entitled to receive, by reason of its breach of the Supply Agreement in refusing to account for sales after 6 July 2000 on the proper basis. 203 Accordingly, as at 17 November 2000 Ryledar had not "at all times during the Term duly observed and fulfilled its obligations" under the Supply Agreement, as required by Clause 3.3(a), so that its purported exercise of the option was of no effect. Ryledar's claim for damages founded on Euphoric's alleged breach of Clause 3.2 fails out the outset. 204 However, in case I am wrong in this conclusion, I will go on to consider other submissions advanced by Ryledar in support of its Cross Claim. The May 2000 deliveries 205 Ryledar submits that from the amount of $3,692,458.73 found by the Referee to be overdue to Euphoric as at 17 November 2000 there must be deducted an amount of $3,820,404. If that deduction were allowed the consequence would be that as at 17 November 2000 Ryledar was not indebted to Euphoric at all. 206 Ryledar's case is that the sum of $3,820,404 is the total owing in respect of deliveries of petroleum products made to Ryledar in April and May 2000 – for convenience, the deliveries for those months are referred to as "the May 2000 deliveries". However, Ryledar says that on or about 5 May 2000 an oral agreement was made between Mr Nabil ("Bill") Magar on behalf of Ryledar and Mr R. Parthasarathy (then Senior Accountant of the Plaintiff) that until journals (as distinct from invoices) for the April and May deliveries were provided by Euphoric to Ryledar no debt would arise on the part of Ryledar in respect of those deliveries and, further, sums paid on account by Ryledar during May would be treated simply as a credit to Ryledar. Ryledar alleges in the alternative that Euphoric is estopped from denying such an agreement. 207 Euphoric denies that such an agreement was made. 208 It is not in dispute that between 10 May 2000 and 9 June 2000 Ryledar made payments to Euphoric, not attributable to specific invoices, totalling $5,675,000. 209 On or about 9 June 2000, Mr Parthasarathy and Mr Bill Magar reconciled disputed items in respect of May deliveries and agreed to set off an amount of $1,780,935.88 from the amounts paid by Ryledar against those deliveries. Due to difficulties encountered by Euphoric when it changed its accounting system, no further journals for the May 2000 period were provided by Euphoric to Ryledar prior to 17 November 2000 although delivery dockets had been provided when the deliveries were originally made. 210 If Ryledar is correct in its submissions, there cannot be taken into account at all in calculating what was owing by Ryledar to Euphoric as at 17 November 2000 the amount of $3,820,404 which was ascertained at the Reference as being the balance owed in respect of the May deliveries. Further, there has to be set off against any other debt owing by Ryledar to Euphoric as at 17 November a credit for an amount in excess of $3,800,000 being the balance of the payments on account made by Ryledar which it says were to be held by Euphoric on credit. 211 In his third witness statement dated 30 May 2003 (para 49), Mr Bill Magar said that in early May 2000 Euphoric commenced using a new accounting system known as SAP. He continues: "I had been told by Partha Sarathy in about May 2000 words to the effect that 'we are implementing a new SAP system and that we will not be able to provide Journals to you when this is happening'. Mr Sarathy then said words to the effect 'will you pay round figures on account and I will supply you proper Journals, a full set for the May period and then we reconcile the account'." 212 It will be noted that in this account of the discussion, Mr Magar does not say that Mr Parthasarathy agreed that the invoices for the May deliveries would not be due and payable until journals were received or that the amounts paid on account by Ryledar would be retained in credit until the journals were delivered. What Mr Magar alleges is simply an agreement that Ryledar will pay for the deliveries on account and that there will be a reconciliation when the journals become available. This accords with the evidence of Mr Parthasarathy, to which I will come shortly. 213 However, in a witness statement dated 7 December 2004 (paragraph 12), Mr Magar amplified the evidence of his discussion with Mr Parthasarathy. In doing so, he changed the evidence which he had previously given in a critical respect. He said: "I recall in about May 2000 I was at the office of Ryledar and I received a telephone call from Mr Partha Sarathy from Euphoric. Mr Sarathy was the senior accountant in charge of the Ryledar account at Euphoric. We had a conversation to the following effect: He said: 'We are implementing a new SAP system and we will not be able to provide Journals to you when this is happening.' I said: 'How will we know what to pay?' The reason I asked 'How will be know what to pay?' was because until I had received a Journal from Euphoric, Ryledar could not possibly know what was owed to Euphoric for Euphoric's deliveries of petrol. He said: 'Will you pay round figures on account and I will then supply you proper Journals, a full set for the May period and then we will reconcile the account?' I said: 'How much do you want me to pay on account?' He said: 'Whatever you estimate, about $1.2 million each week for all of May.' I said: 'When you give me the Journals, can we reconcile them against any disputes in the usual way, and then we will set off the adjusted balance of the Journal against the credit from the payments on the account?' He said: 'Yes your account will be in credit until we reconcile the Journals and so the deliveries of fuel for May 2000 will not be due and payable until you get the Journals and we reconcile them. Then we will reconcile the credit on your account against the balance of the adjusted Journal.' I said: 'Alright.'" (Emphasis added.) The statements underlined are the critical additions made in Mr Magar's evidence, upon which Ryledar now relies. 214 In his witness statement, Mr Parthasarathy denied making the critical statements attributed to him by Mr Bill Magar in his second witness statement. He said that in his discussions with Mr Magar he may have said that, because journals were not available for the first few weeks in May, Ryledar had to pay a figure which Euphoric calculated would be the value of the deliveries. He denied agreeing that Ryledar itself could estimate what this amount would be. Mr Parthasarathy agreed that he may have told Mr Magar that after the journals for the May deliveries had been sent to Ryledar Euphoric would carry out a reconciliation of the deliveries with the amounts paid by Ryledar on account. He agreed that he may have told Mr Magar that Euphoric would not "chase him for the difference between what he had paid and what had been delivered until after our reconciliation was completed" . Mr Parthasarathy denied, however, ever saying that Ryledar did not have to pay for any of the fuel that was sent until after it received a journal for those deliveries. 215 In cross examination Mr Parthasarathy frankly conceded that, after a lapse of some five years, his recollection of his conversations with Mr Bill Magar in May 2000 was poor. Many statements put to him were met with the response that he could not recollect. This is quite understandable. However, Mr Parthasarathy would not agree to the suggestion that it was likely that he had told Mr Magar "deliveries of fuel for May 2000 won't be due or payable until you get the journals" . He said that his belief was that payment was due when deliveries of petroleum were made: Transcript 13 October 2005, T104.20 - .43, T105.7 - .14. 216 Likewise, Mr Parthasarathy did not agree that he told Mr Magar that Ryledar's account would be in credit, notwithstanding the May deliveries not yet paid for, until the journals had been delivered. He said that payments made by Ryledar, and sales made by Euphoric, would be credited and debited to Ryledar's account in the normal way: Transcript 13 October 2005, T103.20 - .45. 217 The state of Mr Parthasarathy's recollection opened the way for a submission by Mr Biscoe that I should accept the clear and precise evidence of Mr Bill Magar as to the critical conversations. However, I would not be obliged to accept Mr Magar's evidence, even if it were unchallenged, if I were of the view that the evidence was inherently improbable or that there were circumstances casting doubt on its accuracy. 218 I decline to accept Mr Bill Magar's evidence as to the existence of an agreement in the terms which he alleges, for the following reasons. 219 First, the alleged term that no money at all for the May deliveries would be payable by Ryledar until journals (as distinct from invoices and delivery dockets) were delivered is inherently uncommercial and improbable. Very large sums of money were involved in these transactions and it seems contrary to commercial common sense that Euphoric would agree that the debts arising should be left outstanding for an indefinite time, even if the parties then believed it would probably be a matter of weeks. Likewise, it is inherently uncommercial and improbable that payments made in respect of the May deliveries by Ryledar on account during May and June 2000 would not be credited to its account for the supply of petroleum products but would be kept in some sort of suspense account for an indefinite time. 220 On the other hand, the account of the discussions between Mr Bill Magar and Mr Parthasarathy in May 2000 which was given in Mr Magar's first witness statement is simply that there was the sort of agreement one would reasonably expect in the situation in which the parties found themselves: Ryledar would pay regular amounts on account for the May deliveries and, when the journals became available so that more precise vouching could be made, there would be a reconciliation and either Ryledar would pay the shortfall or Euphoric would refund the overpayment. 221 This was the agreement which Mr Parthasarathy said was made. It was also the agreement which Mr Bill Magar ultimately assented to in cross examination: Transcript 11 October 2005, T58.11 - 60.7. Mr Magar gave no reason why the uncommercial and rather bizarre terms of the agreement, as he alleges them, should have been made by the parties. 222 Second, Mr Magar gave no satisfactory explanation why two different versions of the agreement had appeared in his witness statements. He was taken to the witness statement in which he had given the first version, which said nothing about the critical terms which he added in the second version. He then gave this evidence: "Q. And I take it that when you prepared your affidavit of 30 May 2003 you were attempting to record your best recollection of this conversation that you'd had with Mr Sarathy? A. Yes. Q. And that was your best recollection of this conversation as at that date, wasn't it? A. No. Q. You say that as at 30 May 2003 you could in fact recall more of the conversation with Mr Sarathy but you chose not to put it into your affidavit? A. I record the whole thing. At that time I was discussing my statement with Paul Venis, my solicitor and the agreement with Parthasarathy at that stage, as I understood from Paul, was not relevant because at this time we were dealing with a different date. We were dealing with the termination date. And at that time also Paul misunderstood that we received the full number of journals by then. He didn't even know we received part of the journals so he said to me if you received the journals – this is after the event it's not relevant, so we didn't put it here because at that time – it wasn't relevant at that stage but perhaps I should have put it in." 223 This explanation was confused and was entirely unconvincing. Paragraphs 47 to 51 of Mr Magar's statement of 30 May 2003 deals with the very question of the May 2000 deliveries and Ryledar's liabilities in relation thereto. If there had been an agreement between Euphoric and Ryledar in the terms given in Mr Magar's second version of the discussion, it would have been important and highly relevant to recount it in the earlier witness statement. 224 Third, if the agreement between Mr Magar and Mr Parthasarathy in May 2000 contained the unusual terms which Mr Magar alleges, one would expect to see some diary note or some reference to it in the argumentative correspondence which Ryledar was sending to Euphoric over accounting issues. There is none. 225 For these reasons, I am not satisfied that an agreement as to the May 2000 deliveries was made in the terms which Mr Bill Magar alleges. There is no evidence of any representation by Euphoric, either by words or conduct, which would support an estoppel preventing it from denying the existence of such an agreement. 226 Ryledar fails in its claim that there should be a deduction of $3,820,404 from the amount found by the Referee as overdue to Euphoric as at 17 November 2000. $1.8M credit facility 227 Clause 2.6 of the Supply Agreement provides: " Payment of moneys. All moneys payable in respect of Mobil Petroleum Products purchased each week (Monday to Sunday) shall be payable in cash (or with Euphoric's consent, by cheque) no later than 3:00pm on Wednesday of each week (or, if that day is not a Business Day, no later than 3:00pm on the next Business Day), except to the extent that credit is extended by Euphoric (in writing). Clause 2.7 relevantly provides: " Security requirements for credit facility. No later than the Commencement Date, Customer shall provide Euphoric with the Security. Where the Security is in the form of a Bank Guarantee, then it shall be for the Bank Guarantee Amount. If Customer requests that a credit facility (or a further credit facility as the case may be) be extended to it and if Euphoric agrees to extend credit (or further credit as the case may be) to Customer (which it may do or refrain from doing in its sole and absolute discretion), Euphoric may require that Customer provide such Security (or additional security) as Euphoric, in its sole and absolute discretion, considers satisfactory to secure payment to Euphoric of all purchase moneys payable in respect of Mobil Petroleum Products …" Clause 2.9 provides: " Credit facility. Euphoric agrees that whilst: (a) the Bank Guarantee is in place and has not been resorted to by Euphoric (in whole or in part); and (b) Customer complies with the terms and conditions of this Agreement, then Euphoric shall extend a credit facility to Customer to facilitate the purchase of Mobil Petroleum Products on credit to a maximum amount of $1,000,000." The amount of the credit facility was later increased to $1.8M. Clause 2.10 provides: " Withdrawal of credit facility. Any credit facility extended to Customer may be immediately withdrawn or varied at any time by Notice if: (a) Customer breach the terms and conditions of payment; or (b) Euphoric considers, in its sole discretion, that the Security provided by Customer is insufficient to adequately secure repayment of purchase moneys outstanding from time to time Euphoric will allow a period of two months for the inadequate security to be remedied; (c) Customer breaches any of the terms and conditions contained in any Security; without in any way limiting Euphoric's other Rights." 228 Euphoric submits that on the true construction of Clauses 2.6 and 2.9 of the Supply Agreement the credit facility created by Clause 2.9 refers to the credit facility provided by Clause 2.6 so that credit which may be given during the nine day period for payment contemplated by Clause 2.6 is capped at $1.8M. In other words, Euphoric submits that there is only one credit facility provided by the Supply Agreement: Clause 2.6 regulates the time during which credit is to be extended, i.e., a maximum of nine days, and Clause 2.9 limits the amount of the credit facility to $1.8M. 229 Ryledar submits that there are two credit facilities provided by the Supply Agreement: there is a nine day credit period for payment provided by Clause 2.6 which is unlimited in amount although limited in time. There is in addition a rolling credit facility of $1.8M provided by Clause 2.9. 230 If Euphoric's contention is correct then the maximum which can be deducted from the amount otherwise owing by Ryledar as at 17 November 2000 is $1,922,635.34 which is the amount of credit available only in respect of the nine day period for payment provided by Clause 2.6 of the Supply Agreement. This deduction of $1.9M has already been made by the Referee in calculating the balance owing by Ryledar as at 17 November of $3,692,548.73: see Referee's Report para 42. 231 If Ryledar's contention is correct and there are two credit facilities available under the Supply Agreement then, in addition to the $1.9M credit provided by Clause 2.6, there has to be deducted the additional sum of $1.8M. 232 In my opinion, Ryledar's construction of the Supply Agreement is the correct one. Clause 2.10 of the Supply Agreement provides that the credit facility pursuant to Clause 2.9 can be withdrawn in certain circumstances by Euphoric. If the credit facility provided by Clause 2.9 is withdrawn it would seem that the provisions of Clause 2.6 still operate. If Euphoric's construction is correct, that would mean that there would still be a credit facility for a period of nine days under Clause 2.6 but it would be unlimited in amount because, according to Euphoric's construction, the function of Clause 2.9 is to limit the amount of credit which is available under Clause 2.6. 233 It does not seem to make any commercial sense to provide that Euphoric can, for unsatisfactory credit performance by Ryledar, revoke under Clause 2.10 the very provision in the Supply Agreement which, according to Euphoric, limits the credit facility available under Clause 2.6. The result would be that because of its unsatisfactory credit performance, Ryledar would get a nine day credit facility under Clause 2.6 which was unlimited in amount whereas, as long as it was performing its credit obligations satisfactorily, it would have the same nine day credit period but for an amount which was limited to $1.8M. 234 It seems to me that clause 2.9 provides a credit facility which is quite separate and distinct from the credit facility provided by clause 2.6 and that second credit facility is liable to be withdrawn under clause 2.10 if Ryledar does not perform its credit obligations satisfactorily under the terms of clause 2.9. 235 The effect of this construction is that Ryledar is entitled to deduct from the amount of $3.6M owing as at 17 November 2000 the sum of $1.8M under its credit facility. However, this conclusion makes no difference to the ultimate result of Ryledar's Cross Claim: it reduces but does not extinguish the amount overdue for payment to Euphoric by Ryledar as at 17 November 2000. Ryledar was in breach of the Supply Agreement in failing to pay the reduced amount. Miscellaneous issues 236 In view of the conclusions to which I have come, Ryledar fails in its claim that it validly exercised the option to renew the Supply Agreement, and its Cross Claim will be dismissed. There were other minor issues raised, resolution of which could not possibly affect this result one way or the other. However, for the sake of completeness, I will deal with them briefly. "Code 4" disputes 237 The Referee's Report of 31 March 2005 (paragraph 27), in calculating amounts outstanding to Euphoric as at 17 November 2000, includes an item described as "Code 4 as alleged by Ryledar - $407,967.11" . "Code 4" was a term adopted by the parties to apply to invoices for the supply of petroleum products which were incorrect with respect either to location of the delivery or as to the date of delivery. 238 Ryledar says that although it does not dispute that the sum of $407,967 is owing to Euphoric, default in the payment of that sum as at 17 November 2000 cannot be a breach of the Supply Agreement because, as at that date, it was not possible for Ryledar to vouch the accuracy of its calculation by reference to correct invoices. 239 I do not accept this submission. As the Referee noted in paragraphs 73-77 of his Report dated 27 November 2004, the submission depends on the proposition that a payment for petroleum sold under the Supply Agreement is not owing unless and until an invoice for that supply is delivered to Ryledar which is correct in its particulars both as to place of delivery and date of delivery. 240 The Supply Agreement does not provide that payment by Ryledar is to be made upon receipt of an invoice. The only relevant clauses are Clause 2.2 and 2.6. The Supply Agreement says nothing about the provision of invoices, although one would normally expect that a sale under the Supply Agreement would be confirmed by the delivery of an invoice by Euphoric. 241 The evidence is that in the normal course, Ryledar would receive a delivery docket at the time of each delivery, showing the place of delivery and date of delivery. Ryledar had its own records showing deliveries and quantities delivered. It had the means of checking Euphoric's invoices and delivery dockets. 242 Because of the volume of deliveries and the number of sites which Ryledar had, the vouching of accounts on both sides was complex and time consuming. To assist Ryledar in this task, Euphoric agreed to provide journals showing in more detail the deliveries and the charges made. However, Euphoric was not contractually obliged to provide the journals nor was it contractually obliged to provide invoices, let alone invoices free of error, as a pre-condition of Ryledar's obligation to make payment under Clause 2.6. 243 Section 31 Sale of Goods Act provides: " Payment and delivery are concurrent conditions Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller must be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer must be ready and willing to pay the price in exchange for possession of the goods." 244 In the present case, the Supply Agreement made only one exception to the rule stated by s.31, namely, that instead of being obliged to pay on delivery, Ryledar had a specific time after delivery within which to make payment and had the benefit of a limited credit facility. Otherwise, s.31 applied and cast upon Ryledar, as buyer, the obligation to put itself in the position of being able to pay what was due upon the deliveries which were made by Euphoric. 245 In my opinion, the Referee correctly showed the sum of $407,967.11 as owing by Ryledar to Euphoric as at 17 November 2000. I conclude that, in failing to pay that amount by 17 November, Ryledar was in breach of Clause 2.6 of the Supply Agreement. May and October 2000 deliveries not invoiced 246 Very late in the case, Ryledar made a submission that payment for the deliveries in May and October 2000 was not due by 17 November 2000 because no invoices for those deliveries were provided to Ryledar by that time. Euphoric objected to Ryledar being permitted to raise that issue because it had not previously been pleaded by Ryledar and took Euphoric by surprise. 247 On 10 October 2005, I declined to allow Ryledar to raise this issue. Even if non-delivery of the invoices was proved, in view of the reasons for my conclusion on the "Code 4" dispute issue, Ryledar's submissions as to the contractual consequences would have failed. Termination of supply on 24 May 2001 248 Ryledar alleges that the Supply Agreement was validly renewed for another term of two and a half years by the exercise of its option on 31 August 2000 and that the Agreement was wrongfully terminated by Euphoric on 24 May 2001. It claims damages for economic loss. 249 It is not necessary to discuss this issue in view of my conclusion that Ryledar did not validly exercise its option to renew the Supply Agreement, so that it expired by effluxion of time on 17 November 2000. SUMMARY OF CONCLUSIONS 250 For the sake of convenience, I summarise the principal conclusions to which I have come in these reasons for judgment as follows. 251 In proceedings 50071 of 2001: – Euphoric is entitled to a declaration in terms of paragraph 1 of its Amended Summons; – Euphoric is not entitled to any further relief. 252 In proceedings 50070 of 2001: – Ryledar fails in its contention, by way of Defence and Cross Claim, that on the true construction of the Supply Agreement it was entitled to a 6¢ per litre rebate on all petroleum products sold by Euphoric and delivered to locations outside the area defined in Item 4 of the Reference Schedule to the Supply Agreement; – Ryledar fails in its contention, by way of Defence and Cross Claim, that the Supply Agreement should be rectified to entitle it to the 6¢ rebate; – Ryledar fails in its contention that the Supply Agreement should be amended pursuant to s.87 Trade Practices Act to include its claimed entitlement to the 6¢ rebate; – Ryledar fails in its contention that Euphoric is estopped from denying that the Supply Agreement contained the alleged term as to the 6¢ rebate; – Ryledar is not entitled to damages by reason of Euphoric's refusal to allow the 6¢ rebate for sales outside the area defined in Item 4 of the Supply Agreement after 6 July 2000; – Ryledar fails in its contentions that: the Supply Agreement required the volume of petroleum products sold to be adjusted by reference to temperature of 15ºC; the Supply Agreement required volumes to be measured at the point of delivery; there should be any reduction in the amount found by the Referee to be due under the Supply Agreement by Ryledar to Euphoric as at 17 November 2000 to allow for volume contraction in petroleum products sold and delivered; – Ryledar fails in its contention that the amount found by the Referee to be due by Ryledar to Euphoric as 17 November 2000 should be reduced by an amount of $100,000, being an unjustified charge to Ryledar's loan account; – Ryledar fails in its contention that Euphoric breached the Supply Agreement by failing to acknowledge the validity of the purported exercise of Ryledar's option to renew; – Ryledar is not entitled to any reduction from the amount of $9,033,567.17 found by the Referee as owing to Euphoric as at 17 November 2000. ORDERS 253 The orders of the Court are as follows. 254 In proceedings 50071 of 2001: i) declaration in terms of paragraph 1 of the Amended Summons; ii) otherwise, the Amended Summons is dismissed. 255 In proceedings 50070 of 2001: i) judgment on the Second Further Statement of Claim against the Defendants in the amount of $9,033,567.17, plus interest and costs; ii) the Cross Claim will be dismissed, with costs. COSTS 256 My tentative views as to costs are as follows. 257 In proceedings 50071 of 2001, as Euphoric succeeded in obtaining the declaration which it sought but failed in its claim founded on unjust enrichment, Euphoric should recover only half of its costs. In proceedings 50070 of 2001, as Euphoric succeeded on all determinative issues, costs should follow the event and Ryledar should pay Euphoric's costs on the party/party basis. However, I will hear the parties further on costs if they so desire. – oOo – 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.