2015 WAIRC 00203
DISPUTE RE ALLEGED BREACH OF CONTRACT
IN THE WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION
SITTING AS
THE ROAD FREIGHT TRANSPORT INDUSTRY TRIBUNAL
CITATION : 2015 WAIRC 00203
CORAM / : Commissioner S J KennerHEARD / : / Monday, 16 June 2014, Monday, 8 September 2014, Tuesday, 9 September 2014, Wednesday, 10 September 2014, Thursday, 11September 2014
DELIVERED : Wednesday, 25 February 2015
FILE NO. : RFT 2 OF 2014
BETWEEN / : / Supaworld Pty Ltd (Trading as Cousins Transport)Applicant
AND
LN Price Partners Pty Ltd (ACN 053 962 299) (Trading as Busselton Freight)
Respondent
Catchwords : Owner-driver contract – Referral of dispute regarding breach of contract and unconscionable conduct – Construction of the contract – Principles applied – Express and implied terms of the contract – Ambiguity – Surrounding circumstances – Object and purpose – Intention objectively assessed – Breach of contract – Unconscionable conduct claim not made out – Assessment of damages – Mitigation of loss – Application granted in part – Order issued
Legislation : Competition and Consumer Act 2010 (Cth) Pt 2-2, Sch 2
Owner-Drivers (Contracts and Disputes) Act 2007 (WA) ss 30, 30(1), 30(2), 43(1)(b), 47(4)
Trade Practices Act 1974 (Cth) Pt IVA
Result : Application upheld in part
Representation:
Counsel:
Applicant : Mr T M Retallack
Respondent : Mr D Beere
Solicitors:
Applicant : Culshaw Miller Lawyers
Respondent : Lane Buck & Higgins
Case(s) referred to in reasons:
Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Limited (2003) 214 CLR 51
BP Refinery (Westernport) Pty Limited v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266
Blomley v Ryan (1956) 99 CLR 362
Chaplin v Hicks [1911] 2KB786
Davies v Taylor [1974] AC 207
Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640
Red Hill Iron Ltd v API Management Pty Ltd [2012] WASC 323
Shacam Transport Pty Ltd v Damien Cole Pty Ltd (2014) 94WAIG1835
Tai Hing Cotton Mill Ltd v Kamsing Knitting Factory [1979] AC 91
The Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447
Reasons for Decision
The claim and brief background
1 For a number of years up to about October 2009, Supaworld Pty Ltd trading as Cousins Transport contracted its services to Foodland Association Limited, a large grocery industry company, to transport foodstuffs to IGA stores in the Perth metropolitan area. Cousins Transport conducted deliveries from the IGA cold store division. MrCousins is a director of Supaworld Pty Ltd and was the principal driver engaged on the IGA cold store work. It became known to MrCousins, and other contractors then engaged by IGA, in about early 2009, that IGA was not going to continue the contracts for transport services then on foot. There was about two years left to run on Cousins Transport’s contract with IGA.
2 The respondent, LN Price Partners Pty Ltd trading as Busselton Freight Services, had since about 2007, also provided transport services to IGA. This was mainly in the dry stores area, but this began to expand into the cold store area over time. Because of the decision taken by IGA not to renew the then cold store contracts with the contractors then providing those services, including Cousins Transport, MrCousins raised with the General Manager of BFS, MrAlan Price, the possibility of Cousins Transport joining the BFS fleet. These discussions ultimately led to an agreement reached in about October 2009, for Cousins Transport to assign its FAL cold store contract to BFS. The arrangement entered into was for Cousins Transport to continue to be paid the same rates as paid by IGA, on a per tonne basis. The agreement was reflected in a letter from MrPrice to MrCousins dated 14October 2009. The content of that letter is controversial in these proceedings and I will return to it later in these reasons.
3 After commencing with BFS, Cousins Transport assigned a second cold store contract to BFS in December 2009. As set out in a letter from MrPrice to MrCousins dated 18December 2009, this transaction involved MrCousins acquiring an IGA cold store contract from another contractor, and assigning it to BFS. On Cousins Transport’s contentions, the general arrangements to apply to the second contract were to be largely the same as in the first contract entered into in October 2009. As a consequence of various events, not all of which are material for present purposes, the contracts between Cousins Transport and BFS came to an end in September and November respectively, 2011.
4 The parties are now in dispute before the Tribunal as to the operation of the contracts. Cousins Transport contended that it was an express, or alternatively an implied term of both contracts, that it be allocated predominantly cold store work, because it was this work that Cousins Transport had solely performed under the prior IGA contract and it expected this to continue. Other work, in the dry store, was contended by Cousins Transport to be available only after Cousins Transport had performed available cold store deliveries. Further, Cousins Transport contended that BFS, in the course of the performance of the contracts, engaged in unconscionable conduct for the purposes of s30 of the Owner-Drivers (Contracts and Disputes) Act 2007, in connection with the acquisition by BFS of services from Cousins Transport. This was said to arise from changes made by BFS to the method of allocation of work for its contractors in March and June 2010, to the alleged detriment of Cousins Transport.
5 As a result of these matters, Cousins Transport alleges that it has suffered loss and damage. The loss and damage claimed by Cousins Transport, relates to what it says was its expected earnings, if it was working predominantly in cold store delivery work, compared to what its actual earnings were in the course of the work performed for BFS under the contracts. Cousins Transport initially claimed some $282,720 in damages. However, it substantially revised its damages claim to $82,452.19, shortly prior to the commencement of the hearing.
6 BFS wholly denies the claims made by Cousins Transport. In a nutshell, it contended that there was no binding agreement in the terms alleged by Cousins Transport. There was, on the contracts properly construed, no guarantee that Cousins Transport would predominantly receive cold store work. BFS did not, in making changes to the work allocation from June 2010, engage in unconscionable conduct. The changes made by BFS were to prevent damage being done to the relationship BFS had with its client, Metcash, by reason of the disruptive influence of Mr Cousins in the workplace. Further, in any event, BFS also contended that the failure of Cousins Transport to achieve the earnings it said it should have achieved under the contracts was in large part due to the poor performance of Cousins Transport’s vehicles. This was said to be due to excessive driver turnover, slowness in performance and a disproportionate number of accidents.
7 A number of issues arise for consideration in this case. They include what were the express terms of the contracts and did they oblige BFS, as a contractual entitlement, to allocate predominantly cold store work to Cousins Transport? Alternatively, if such an obligation was not an express term of the contract, could a term to this effect be implied? Further, was the conduct of BFS, in making changes to the allocation of work to contractors effective from about mid-2010, unconscionable conduct for the purposes of s30 of OD Act? Another question arises as to whether, if the contractual and unconscionability claims are made out by Cousins Transport, to what extent the evidence before the Tribunal establishes a sound basis for an award of damages.
8 Before dealing with each of these issues, and about which the Tribunal observes at this stage, there was much conflicting evidence, to put the claims into context, some understanding of the operations of BFS, the IGA stores and Cousins Transport is necessary. In particular, the rostering arrangements for the allocation of both cold store and dry store work to contractors, the changes made by BFS in about mid-2010, and the environment in which these various events took place.
The delivery work and its allocation prior to October 2009
9 Cousins Transport presently contracts to two companies and employs eight drivers. The business has five trucks in its fleet and the business has a turnover of $1,300,000 per annum. At the time of the entry into the contracts with BFS, the Cousins Transport business had a turnover of approximately $750,000 per annum. MrCousins has had some 25 years’ experience in the transport industry. At the time of the 2009 contracts with BFS, Cousins Transport also had a contract with another major food operator. At that point, Cousins Transport operated three trucks and employed five drivers.
10 Prior to the contracts with BFS, Cousins Transport was one of eight contractors providing services to FAL for delivery to IGA stores, at its cold store division in Canning Vale, Western Australia. The cold store or the “perishable warehouse” as it was otherwise known, stores and distributes frozen and other perishable foods to IGA grocery stores. The dry store stores and distributes non-perishable items. Refrigerated vehicles are required for cold store delivery work. Cousins Transport performed cold store deliveries for IGA under contract, for about eight years prior to contracting with BFS. To that point, Cousins Transport only performed cold store work.
11 The eight contractors working for FAL worked under a roster system, administered by IGA. The roster was broken into four sections; a top shift (earlier start time), a second top shift, a second bottom shift and bottom shift (later start times). The significance of the place on the roster, top or bottom, was that the truck on top of the roster would normally be the first to return to the distribution centre, and therefore would be the first to obtain a second or successive load. Drivers were paid on a per tonne rate. They were rotated through the roster starting times, top to bottom, to provide an even spread of early starts and thus, some equalisation of revenue. I note also from the terms of the FAL contract in evidence (exhibitA3), in existence at the time, that it was an express term of the contract, that FAL would endeavour to equalise annual income for the drivers. It was common ground, that no such term was incorporated into the contracts between Cousins Transport and BFS.
12 In accordance with this system, MrCousins testified that most days drivers would get at least two cold store runs per day. Sometimes this could be three or even four. Reference was made by MrCousins to records kept by his business in this regard, contained at tab1 in exhibitA1. This was generally working on a five day week basis, Monday to Friday. Some Saturdays were worked if requested by BFS. The work to be allocated to each truck on the roster for each day was the responsibility of the IGA dispatcher. According to MrCousins, as at about October 2009, he would do, on average, between 12 and 15 cold store runs per week. This resulted in an average weekly income of approximately $3,500 per week, which was supported from the materials tendered in evidence by Cousins Transport.
13 BFS has operated in the transport industry for about 35 years. MrAlan Price has been a director of the company for much of this time. MrPrice testified as to the involvement of BFS with IGA work. He said that this led to a significant capital investment by BFS to modernise its operations, to meet the requirements of IGA. BFS commenced work in the dry store delivery from about 2007. It gradually extended to some cold store work. As at the time of the contracts with Cousins Transport, BFS engaged some 25 drivers on work for IGA.
The contracts and their construction
14 As noted earlier, the contracts held by Cousins Transport with IGA were to come to an end by November 2011. MrCousins testified that he became aware that BFS had recently obtained contracts with IGA for dry store work. He was aware that MrPrice was the general manager of BFS. MrCousins said that because of the winding down of his contract with IGA, he introduced himself to MrPrice, for the purpose of looking to continue work at the site. MrCousins testified that he met with MrPrice in the tea room at the cold store to discuss the possibility of joining the BFS fleet. They discussed a number of matters. The payment structure, based on a rate per tonne, was suggested to remain the same and was what was paid to MrCousins by IGA at the time. It was proposed that MrCousins would move to a larger truck with a semi-trailer as opposed to his then rigid vehicle. This would lead to potentially an increase in revenue, with the larger capacity. MrCousins also testified that he discussed with MrPrice that as he would normally finish work in the cold store at between 2:30 and 4:30pm each day, that would give time for some dry store work to be performed also. Part of any arrangement, according to MrCousins, would also involve the purchase by Cousins Transport of a new prime mover.
15 After these initial discussions, MrCousins said he received an email from MrPrice on 1October 2009 (doc1 exhibitR1). Formal parts omitted, it provides as follows:
Subject: Letter of Offer
Hi Darryl, as per our recent meetings, please find attached the letter of offer relating to the purchase of a Prime Mover (under vendor finance conditions).