Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407

Reported Decision: 76 NSWLR 603

New South Wales Court of Appeal

CITATION: Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 23/3/09-26/3/09

JUDGMENT DATE: 16 December 2009

JUDGMENT OF: Allsop P at 1; Giles JA at 42; Campbell JA at 66

For formal orders see para [686] In brief- (1) Trial judge's construction of formal Supply Agreement, whereby Wholesale Price for a Product requires deduction from Metcash's Wholesale 5 price of all allowances and discounts whatsoever, confirmed. (2) Trial judge's order for rectification of formal Supply Agreement replaced by an order (a) inserting into the definition of Wholesale Price for a Product an exception not requiring five specified types of allowance or discount to be deducted from Metcash's Wholesale 5 Price; and (b) for greater caution, deleting words in parenthesis from clause 4.4(a). DECISION: (3) Metcash's contentions of estoppel and misleading and deceptive conduct rejected. (4) Declaration made concerning extent of Franklins' contractual right of access to Metcash documents. (5) Minor or consequential amendments made to trial judge's answers to specific questions. (6) Proceedings remitted to court below. (7) Metcash's cross-appeal otherwise dismissed. (8) Metcash to pay Franklins' costs of appeal and cross-appeal.

CATCHWORDS: CONTRACTS – construction and interpretation of contracts – use of surrounding circumstances – whether ambiguity in the words of the contract is required before surrounding circumstances can be examined – businesslike or commercially sensible construction – relationship with surrounding circumstances – scope of admissible surrounding circumstances – CONTRACTS – construction and interpretation of contracts – subsequent conduct – whether the subsequent conduct of the parties can be examined to construe a written contract – relationship with objective theory of contract – extent of permissible use of evidence arising after the execution of a written contract – CONTRACTS – construction and interpretation of contracts – recitals – use of recitals as an aid to construction – EQUITY – equitable remedies – rectification – common intention of the parties – role of commercial context in determining the common intention of the parties – rationale for rectification – nature of the common intention required – standard of proof for common intention of the parties – test for appellate intervention – ESTOPPEL – equitable estoppel – whether the parties could be taken to have assumed or expected the existence of a binding agreement which differed the written agreement as executed – whether parties would be assumed to be free to withdraw from negotiations – estoppel by convention – need for a common assumption to be adopted by both parties – whether estoppel by convention can arise from pre-contractual negotiations