NEW SOUTH WALES COURT OF APPEAL
CITATION:
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2003] NSWCA 75
FILE NUMBER(S):
40220/02
HEARING DATE(S):
05/02/03
JUDGMENT DATE:
11/04/2003
PARTIES:
Toll (FGCT) Pty Limited (Appellant)
Alphapharm Pty Limited (1st Respondent)
Ebos Group Limited (2nd Respondent)
Richard Thomson Pty Limited (3rd Respondent)
JUDGMENT OF:
Sheller JA Young CJ in Eq Bryson J
LOWER COURT JURISDICTION:
District Court
LOWER COURT FILE NUMBER(S):
3271/00
LOWER COURT JUDICIAL OFFICER: Hogan AJ
COUNSEL:
A S Bell (Appellant)
S White and E Cox; J Griffiths SC and N J Kidd (Respondents)
SOLICITORS:
Clayton Utz (Appellant)
Withnell Hetherington and Allens Arthur Robinson (Respondents)
CATCHWORDS:
Contract- Incorporation of exemption and exclusion of liability clauses- Must do all
that is "reasonably sufficient" to draw notice to it- What is "reasonably sufficient"?Contract- Rule in L'Estrange v Graucob- Ambit of operation of rule- Significance of
signed document- Ticket cases considered. Construction of contract- Formed by a
series of communications and behaviour of the parties- Must consider the whole
body of material- Objective approach to construction- Signature strong indication of
intention to be bound- Negligence- Bailee for reward- Standing to sue- De facto
possession- Dispute as to whether carrier took goods on customer's risk or carrier's
risk. Practice- When leave should be given to adduce further evidenceCarelessness does not constitute special grounds. (D)
LEGISLATION CITED:
DECISION:
Appeal dismissed. Cross appeal dismissed.
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
40220 of 2002
SHELLER JA
YOUNG CJ in EQ
BRYSON J
Friday 11 April 2003
TOLL (FGCT) PTY LTD v ALPHAPHARM PTY LTD
Judgment
1
SHELLER JA: I have had the benefit of reading the judgments in draft prepared by Young CJ in
Eq and Bryson J.
2
I agree with what Bryson J has said about the parties’ intention and his remarks that the signing of
the credit document and the return of it was objectively a strong indication that Richard Thomson Pty Ltd
intended to be bound by everything on both sides of the document. This is particularly so when there is a
subscription to the document on the front “Please read conditions of contract (overleaf) prior to signing”.
However, like Bryson J, I think it was open to the trial Judge, in the circumstances, to find that condition 8
did not form part of the parties’ contract because Finemores did not do what was reasonably sufficient to
give Richard Thomson notice of the existence or content of the conditions.
3
For the reasons given by the other members of the Court I agree with the orders that Young CJ in
Eq proposes.
4
YOUNG CJ in EQ: This is an appeal from his Honour Acting Judge Alan Hogan sitting in the
Commercial List of the Sydney District Court.
5
The plaintiffs in the District Court were the first and second respondents, Alphapharm Pty Ltd
(Alphapharm) and Ebos Group Ltd (Ebos). The defendant was the present appellant to whom I shall refer
by its name at the trial, Finemores. There were five cross claims, in the first three Finemores was the cross
claimant. The first cross claim was against the third respondent, Richard Thomson Pty Ltd (RT). RT was
the fourth cross claimant. Ebos was the fifth cross claimant. The first cross claim was for indemnity. The
other cross claims are no longer relevant.
6
On the appeal, Dr A Bell appeared for the appellant, Finemores, Mr S White SC and Mr E Cox
appeared for the first two respondents, the plaintiffs below, and Dr J Griffiths SC and Mr Kidd appeared for
the third respondent, RT.
7
The plaintiffs’ prime claims against the defendant were for negligence as a bailee for reward in and
about transporting two separate consignments of the flu vaccine Fluvirin in February and March 1999. The
plaintiffs also sued in what I might call ordinary tortious negligence and under s 52 of the Trade Practices
Act, 1975.
8
The plaintiffs claimed, and it seems accepted to have been known by all parties, that that vaccine
had to be kept within the temperature range of 2 and 8 degrees Celsius or else it would be rendered useless.
They said that the defendant had allowed the vaccine to reach below 2 degrees and indeed as low as minus
eight degrees Celsius whereby its value was lost to the plaintiffs.
9
The defendant pleaded that, to the extent it was a bailee, it was not a bailee for reward. (The type
of bailment was not a matter considered at the trial). It pleaded that its responsibilities were in accordance
with its Storage Agreement which contained an exemption clause on which it relied. It further said that, in
any event, that agreement was made with RT for and on behalf of Alphapharm. It said that Alphapharm
was bound by the exclusion clause by agency, estoppel or otherwise. There were other defences which it is
not now necessary to consider.
10
In summary, his Honour found the relevant facts to be as follows (what is in brackets is my view of
supplementary matters):
(a)
Medeva Pharma Ltd (Medeva) of the United Kingdom manufactures Fluvirin. Fluvirin is
extremely sensitive to temperature and must always be kept within the range of 2-8 degrees
Celsius;
(b)
Ebos, a New Zealand company, had an agreement with Medeva to distribute Fluvirin in
the South Pacific;
(c)
RT, a wholly owned subsidiary of Ebos was a general medical wholesaler to the
Australian market;
(d)
Ebos entered into a sub-distribution agreement with Alphapharm to distribute 275,000
doses of Fluvirin during the 1998 Flu Season (defined as 1 February to 31 July). The agreement by
cl 5.1 obliged Ebos to supply the vaccine to Alphapharm’s “designated Sydney, Australia
warehouse”;
(e)
The vaccine was stored in RT’s warehouse;
(f)
There was a Romalpa clause in the sub-distribution agreement so that title did not pass
until payment;
(g)
The sub-distribution agreement was renewed for the 1999 season involving 300,000 doses
with RT taking a further 50,000 doses;
(h)
On 17 February 1999, Mr Gardiner-Garden of RT signed an agreement with Finemores
with respect to storage and transport of the vaccine which agreement contained an exclusion of
liability clause;
(i)
Mr Gardiner-Garden also applied for credit in an application which contained reference to
Finemores’ conditions of storage and carriage. (This document has considerable significance in this
litigation and I will return to it in due course);
(j)
Shipments of the vaccine landed in Australia on 18 and 19 February 1999 and were
delivered to Finemores’ warehouse (probably on 19 February 1999);
(k)
Alphapharm ordered 350,000 units of Fluvirin for delivery in February 1999;
(l)
RT directed Finemores to ship 28,160 units of Fluvirin to Queensland Health in Brisbane.
This is the first consignment referred to earlier;
(m)
On 25 February 1999, Ebos invoiced Alphapharm for the price of the units;
(n)
On the same day, an Alphapharm representative attended Finemores’ depot inserted
temperature recorders and secured pallets of the vaccine and labelled them to be sent to
Queensland Health;
(o)
Finemores issued a consignment note which contained a limitation of liability clause, but
this was never signed by anyone except Finemores;
(p)
When the first consignment arrived in Brisbane, the temperature recorders showed that the
vaccine had been subjected to temperatures under minus 4 degrees Celsius. It was thus useless and
was rejected by Queensland Health.
(q)
Alphapharm paid Ebos for the first consignment on 8 March 1999;
(r)
The second consignment was to go to NSW Health at North Ryde;
(s)
Alphapharm was invoiced by Ebos for the second consignment on 4 March 1999;
(t)
An Alphapharm representative attended and repeated step (n) above and a consignment
note was issued as step (o);
(u)
The second consignment was stored overnight in too cold conditions and the vaccine was
destroyed;
(v)
Alphapharm paid Ebos for the second consignment on 12 April 1999;
(w)
On 13 April 1999, Finemores approved an application by Alphapharm to set up a credit
account for the latter. No attention was directed as to the terms or conditions on which Finemores
would store or carry stocks of the vaccine on account of Alphapharm;
(x)
11
The amount claimed for damages was agreed as appropriate.
The facts which I have set out above are not challenged.
12
The exclusion clause to which I have referred was not quite the same in different documents used
in the transactions. However, the clauses all operated to exclude liability in the circumstances of this case if
they were applicable. Additionally, Finemores’ customer was bound by an indemnity clause against
liability to a third party.
13
His Honour rejected the claim under the Trade Practices Act and there is no appeal on this issue.
The case was argued and decided as one of liability of a bailee.
14
It is common ground that, in the present case, Finemores was negligent and that provided
Alphapharm had sufficient title in the vaccine to enable it to sue and unless Finemores was entitled to rely
on an exclusion clause or indemnity from RT, the appeal must fail.
15
His Honour found that Alphapharm had designated Finemores’ Sydney warehouse to Ebos
pursuant to the sub-distribution agreement cl 5.1. He held that the phrase “designated-warehouse” did not
have any restricted, technical meaning and that, as a matter of fact, the circumstances showed that the
relevant parties had agreed that the vaccine would be stored in the Finemores' warehouse. This finding is
challenged.
16
His Honour found that there was no contract between Alphapharm and Finemores at any relevant
time, but held that that was immaterial. Finemores challenges this finding.
17
His Honour found that RT did not sign any contract with Finemores as agent for Alphapharm.
This finding is challenged.
18
His Honour also held that Alphapharm was not the legal owner of the vaccine at the date of the loss
of the either of the two shipments by virtue of the Romalpa clause in its contract with Ebos. The vaccine at
those times was the property of Ebos.
19
However, his Honour held that Alphapharm, by appropriating the goods with the permission of the
owner, had sufficient possessory title to entitle it to sue Finemores. This finding is challenged.
20
His Honour considered the estoppel defence, but held that the factual basis had not been made out.
21
On the findings he made, his Honour found a verdict for Alphapharm.
22
His Honour found that the conditions on the consignment notes did not bind RT.
23
His Honour considered that these matters meant that Finemores’ defences failed.
24
He thus found a verdict for Ebos as that company also had a property in the goods. He further held
that Finemores was not entitled to indemnity from RT.
25
The formal order was for judgment for the plaintiffs for $683,061.86 which included interest.
26
The appellant’s notice of appeal was phrased in very general terms. However, in his written
submissions, Dr BelI said that this appeal raises the following issues:
(1)
The title of Alphapharm to sue for damage to the goods;
(2)
Whether Ebos suffered any loss;
(3)
Whether the terms on the reverse side of RT’s application for credit formed part of the
contract;
(4)
If proposition (3) were established, the significance of that matter;
(5)
Whether RT should indemnify Finemores;
(6)
Whether the plaintiffs and RT were estopped from denying that they were bound by the
exclusion clause.
27
However at the hearing Dr Bell put his submissions under three heads, viz:
A.
RT was bound by the exemption clause and the indemnity clause;
B.
RT was the undisclosed principal of Alphapharm;
C.
Alphapharm did not have sufficient property in the vaccine to sue a bailee.
28
I should note that there is also a cross appeal which is really in the nature of a notice of contention
and does not raise any new considerations. A notice of contention filed by Alphapharm during the hearing
which I will call the second notice of contention raised the case in negligence causing economic loss. A
third notice of contention was filed by RT.
29
During the hearing, Dr Bell moved for leave to supplement the evidence by tendering an annexure
to a letter before the trial judge which annexure had been omitted from the tender bundle in error. The
respondents neither consented to nor opposed this application. The court reserved it decision on the point.
30
I will deal with the matters that arise on this appeal under the following heads:
1.
Whether leave should be given to adduce further evidence.
2.
RT was bound by the exemption clause and the indemnity clause.
3.
RT was the undisclosed principal of Alphapharm.
4.
Alphapharm did not have sufficient property in the vaccine to sue a bailee.
5.
Miscellaneous collateral matters including whether RT is bound by the indemnity clause;
and
6.
The result of this appeal.
31
Other issues arose in the notice of contention and cross appeal. The question as to whether, if the
appeal would otherwise succeed against the plaintiffs, they would succeed in negligence occasioning
economic loss was raised in a notice of contention filed during the oral hearing, but subsequently not
pursued. Other matters raised in these notices do not call for decision.
32
I should also note the submission that as none of the primary facts are challenged, this Court has
greater liberty than in the usual case to depart from the trial judge’s conclusions.
33
1.
A letter on which Dr Bell places considerable significance was written from Finemores’
Melbourne office to Mr Gardiner-Garden on 24 February 1999 (Blue 101). The original letter had annexed
to it a further copy of Finemores’ terms and conditions of contract. The copy in the tender bundle before the
trial judge and the copy attached to Mr Cheney’s statement did not attach the copy terms. The reason was
explained by affidavit that the file copy of the letter from which the tender bundle and statement were
prepared did not carry the usual annexure as it was a standard form.
34
Accepting this explanation, the reason why the material was not before the judge was carelessness
by those preparing the documentary material for the judge including the person who at least impliedly told
the judge in evidence that the material annexed to his statement was true.
35
Section 75A(7) and (8) of the Supreme Court Act allows this court to receive further evidence,
but, in the case of appeal after a hearing on the merits “the Court shall not receive further evidence except
on special grounds”.
36
I was at first inclined to receive the new material as I do not like seeing a party possibly prejudiced
by an administrative error of its legal team. However, apart from the fact that I consider that the additional
piece of paper could not affect the result, the legislature has made it clear that the motion can only be
granted if special grounds are shown and I do not consider that carelessness in producing an extant piece of
paper which had been discovered by the other side, constitutes special grounds.
37
Accordingly, I would refuse the application. However, this decision has no impact on the result of
the appeal.
38
2.
Dr Bell commenced by emphasizing the commercial nature of the trading terms between
the parties. He said that people like the appellant have at least two rates, one where they bear the risk and
may have to insure against it and the other where the customer bears the risk and may need to insure. The
situation thus ensued that both parties (RT and Finemores) were aware of the need to determine upon which
scenario applied.
39
Dr Bell says that the documents signed on behalf of RT clearly showed that RT accepted that the
risk was to be borne by the customer.
40
The distinction between goods carried at owner’s risk and those carried at the carrier’s risk with
differential rates has been around as long as carriers have been; see eg Grahame v Commissioner for
Railways (1946) 46 SR (NSW) 430. However little is to be gained by submitting, as Dr Bell did often, that
his client expected from its documentation that it was carrying at owner’s risk so did not adjust its rates.
The law has always been that those who wish to exclude risk must do so with proper documentation and, if
they fail to look after themselves in this way, that is their own fault.
41
Dr Bell’s principal submission basically relies on two documents both signed by Mr GardinerGarden on 17 February 1998: (a) a document headed “Application for Credit” (Blue 88-89); and (b)
acceptance of Freight Rate Schedule and Conditions (Blue 75).
42
Document (a) is a most peculiar one. Although headed “Application for Credit” and containing
spaces for the potential customer to give financial details, it no-where actually contains a sentence to the
effect, “I hereby apply for a credit account”. Indeed, the document notes that the trading terms are “Nett 7
days”. However, immediately below that statement and immediately above the signature spaces are the
words, “Please read “Conditions of Contract” (Overleaf) prior to signing.”
43
The conditions of contract not only contain a provision exempting the carrier from responsibility
for any loss, they also contain an agreement to indemnify the carrier against loss or liability to others.
44
Dr Griffiths SC, who presented the respondents’ argument on this point, drew our attention to the
point that document (b) was an attachment to a quotation, and that the document was an acceptance of the
offer in the quotation, rather than an offer in itself.
45
The conditions of contract all deal with the contract of carriage or storage which might come into
being as a result of orders placed with the carrier in the future. None deals with credit. It is true, as Dr Bell
repeatedly pointed out that the carrier would not accept orders unless the customer established credit, but it
goes too far to submit, as he did, that the credit and carriage were all part of the one contract.
46
The trial judge said:
“The question for decision then is whether the 'Conditions of Contract' on the
back of the Application for Credit formed part of the contract.
This is not a case where the parties have signed a single formal document which
purports to contain all the terms and conditions of the contract between them.
The relevant writing forms but part of one document out of a number which
partly evidence the contract. …
… the underlying question is whether the defendant 'did what was reasonably
sufficient to give the plaintiff notice of the condition …
There was nothing in the Application for Credit document itself, in the
surrounding circumstances or in anything that Finemores had said or done that
should have alerted (Mr Gardiner-Garden) to the fact that the document
contained conditions which so radically affected the contract.”
47
His Honour then concluded:
“I am satisfied that Finemores did not do what was reasonably sufficient to give
Richard Thompson notice of the existence or of the content of the conditions of
contract on the back of the Application for Credit form. Those conditions did not
therefore form part of the contract between Finemores and Richard Thompson.”
48
Dr Bell says that the question of sufficient notice should not have entered into the equation at all.
He says the trial judge was in error in considering whether the terms on the reverse side of the documents
containing the exclusion clause were sufficiently brought to the notice of RT.
49
The respondents also say that the application for credit form was similar to a voucher or receipt. It
would not without more be assumed by a reasonable person to contain contractual conditions: cf Causer v
Browne [1952] VLR 1, 5. Dr Bell’s riposte is that that principle does not apply to documents which are
known to be contracts and are signed as was the application for credit in this case: see Petelin v Cullen
(1975) 132 CLR 355, 259.
50
Dr Bell relies on the statement of Scrutton LJ in L’Estrange v F Graucob Ltd [1934] 2 KB 394,
402 where his Lordship applied what Mellish LJ said in Parker v South Eastern Railway Co (1877) 2
CPD 416, 421:
“In an ordinary case, where an action is brought on a written agreement which
is signed by the defendant, the agreement is proved by proving his signature,
and, in the absence of fraud, it is wholly immaterial that he has not read the
agreement and does not know its contents.”
51
L’Estrange v F Graucob Ltd is one of those cases taught to almost every law student. It has been
criticised academically, see eg Finn, Essays on Contract (LBC) (1987) p 133 and Le Mans Grand Prix
Circuits Pty Ltd v Lliadis [1998] 4 VR 661, 667 and 673. It is now clearly subject to two further
exceptions, the effect of the Trade Practices Act, 1975 and the doctrine of mistake expounded in Taylor v
Johnson (1983) 151 CLR 422. Where it is applicable the Contracts Review Act, 1980 will also often
operate that a signed document which the person relying on it knows that the other will not have read is set
aside, see per Cohen AJA in John Dorahy’s Fitness Centre Pty v Buchanan (NSWCA 1.12.1996).
52
The words “In the ordinary case” from the statement of Mellish LJ must always be borne in mind.
Indeed most of the recognized books on contracts do this by using the words “normally” or “ordinarily”.
53
Thus the 28th edition of Anson’s Law of Contract (OUP 2002) p 164 says:
”A person who signs a document which contains contractual terms is normally
bound by them even though that person has not read them and is ignorant of
their precise legal effect.”
See also Chitty on Contracts, 28th edition (Sweet & Maxwell, 1999) 12-002], and Cheshire &
Fifoot, 8th Australian edition (Butterworths, Sydney 2002) [10.26].
54
The same view was taken by Mahoney P in John Dorahy’s Fitness Centre Pty v Buchanan
(NSWCA 1.12.1996) where he said with respect to a membership contract signed by a now injured lady
with a gym where she had read only the first page, but not the exemption clause:
“In the light of authorities commencing at least from L’Estrange v Graucob …
signature of a document in these circumstances ordinarily results in the signing
party being bound by the conditions in the document …”.
55
The words “normally” or “ordinarily” do not merely deal with the acknowledged exception to the
general rule. This is made clear by two cases not reported in regular law reports.
56
In Grogan v Robin Meredith Plant Hire [1996] TLR 93, a hirer hired a piece of construction
equipment together with its driver. A document described in the judgment as a “time sheet” was presented
to the hirer and was signed by him. The document contained, above the place for signature the words, “All
hire undertaken on CPA conditions. Copies available on request.” The CPA (Contractors Plant Association)
conditions contained an indemnity clause against the operator’s liability for negligence to third parties.
57
The English Court of Appeal (Russell, McGowan & Auld LJJ) held that the signed document could
not be held to have varied the contract of hire to include the indemnity clause. Where even a signed
document was in existence, the question still had to be asked as to whether any reasonable person would
have considered that the clause had contractual effect.
58
said:
In Mouritz v Hedegus [1999] WASCA 1061, Owen J, with whom Kennedy and Ipp JJ agreed,
“The fact that the respondent did not read what she signed and therefore did not
take actual notice does not prevent her from being bound by the terms once she
has signed so long as the appellant had made a reasonable effort to bring the
disclaimer to her attention.”
59
Dr Bell vehemently submitted that the mere fact of signature led to the incorporation of all
conditions on the document and that there was no room for any exception even if some of those conditions
were completely extraneous to the subject matter of the document signed.
60
However the statements of the rule in L'Estrange v Graucob do not have the artificial finality of
the submission of Dr Bell that there is a clear gulf between signed and unsigned documents and with the
former, no enquiry at all is made to the circumstances.
61
Dr Bell urged us not to follow Mouritz v Hedegus endeavouring to distinguish it on the basis that
it was not a decision made in a commercial context and that it was inconsistent with what Brennan J said in
Oceanic Sunline Shipping Co Inc v Fay (1988) 165 CLR 197, 228-9. I reject both submissions.
62
Dr Bell denies any concept of "extraneity" with respect to clauses in a written contract. He says
that such a concept is beset with difficulties, especially in a commercial setting. The subject matter of a
document being signed is constituted by what appears in the document. That is to say, one cannot look at
parts of the document in isolation from or in priority to other parts of the document, define the "subject
matter of the document" and thereafter treat certain parts of the document as "extraneous". The document
was what it was and contained the terms it contained. It was extraneous to nothing.
63
With respect, this submission does not fully understand the rule in L'Estrange v Graucob as
developed by subsequent authority.
64
Finally, Dr Bell puts that to reject his submission would be to "open a can of worms" within
commercial transactions. He endeavours to rely on what Bryson J said in Burt v Australia & New
Zealand Banking Group Ltd (1994) 16 ATPR 46-123 at 53,597-8:
"The ordinary means of establishing in honesty and fair dealing that a person
with whom one is dealing knows the nature and terms of a document which one
proposes should be signed is to put the document before that person for
signature. The opportunity to find out what is in the document is there, available
to that person, who can use the opportunity in whatever manner is thought
right."
65
That statement must be read in context. It was made when considering what was unconscionable
conduct and never directed to a case of extraneous terms which a reasonable person would not expect to
find in the document in question.
66
Accordingly, in my view the trial judge made the correct enquiry. As a matter of fact, he
considered that the appellant did not do what was reasonably sufficient to bring the terms on which it now
relies to RT’s attention. That was a finding of fact he was well entitled to make.
67
Dr Bell kept reiterating that this was a commercial document and thus the commercial rule that if
one signs a document knowing that it will be relied upon by the other to fix its rates, one is caught by what
one has signed. For the reasons I have given, that is too mechanical an exposition of the law. Doubtless the
trial judge took the commercial nature of the transaction into account when considering the question of fact.
68
Of course, there is a distinction between drawing a customer’s attention to an exclusion clause and
drawing its attention to a contract of indemnity. The task on performing the second is more onerous.
However, in the present case, the judge could come to the view he did that both provisions were not
sufficiently brought to RT’s attention.
69
I noted earlier that there has been some academic disquiet about some of the operation of the
principle enunciated in L’Estrange v Graucob. It is, however, a most useful principle, properly understood
and should continue to be applied. The exceptions, particularly the exceptions which now exist in noncommercial contracts, mollify any harshness its strict application might otherwise impose.
70
3.
In view of my analysis on point 2, it matters not whether RT was agent for Alphapharm or
not. However, I will briefly consider the argument on this point.
71
The appellant submits that the trial judge was inconsistent with his treatment of the evidence. It
says that the whole of the evidence shows that Alphapharm left all the negotiations with Finemores to RT
and RT must be taken to have contracted on its behalf. It is thus bound by RT’s contract including the
exclusion clause.
72
Alternatively, it submits, all the circumstances point to the plaintiffs being estopped from denying
that the clause applied.
73
The respondents say that the facts showed that RT may have been the plaintiffs’ agent up to a point
in time. However, that point of time was no later than the deposit of the vaccine at the warehouse and was
merely for the convenience of all parties.
74
The appellant’s riposte is that the main witness for Alphapharm actually agreed that he left it to RT
to be the person that dealt with Finemores in relation to its consignments (see Black 14U).
75
There is always danger in merely asking the question, “Was X the agent for Y?” As the High
Court made clear in Petersen v Moloney (1951) 84 CLR 91, 94, the vital question is “Was X the agent of Y
to make the contract?” or as the case may be. In the present case, there is no doubt that RT was
Alphapharm’s agent for some purposes. However, in my view, the trial judge was correct in his conclusion
that it was not Alphapharm’s agent to contract.
76
4.
The thrust of the submissions on this point is that Alphapharm had not established any
title to the vaccine by possession. Thus, it is said, the whole legal property in the vaccine was in Ebos.
Ebos suffered no damage as it had been paid in full for the goods. Thus, there should be a verdict for the
defendant.
77
The bald submission that the appellant makes in its submission in chief in the orange Appeal Book
is that the mere act of Alphapharm’s representative in appropriating the pallets, labelling them and inserting
the temperature gauge was insufficient to justify a finding that Alphapharm assumed a possessory title in the
goods vis a vis Finemores.
78
However, the appellant’s reply in the Orange Book put that it is self evident that Alphapharm was
not in possession of the goods in either of the first two senses of the term “possession” as employed in
Pollock & Wright, Possession in the Common Law (1888) pp 118-9.
79
Pollock & Wright say at 118-9 that “possession” is used in three senses. First in the sense of
physical possession, secondly in the sense of legal possession as where a person is away from his or her
house where the goods are stored they are still in his or her possession. This is the usual sense of the term in
law. The third sense is not applicable here. This really does not progress the matter.
80
The respondents say that all that Alphapharm need establish and did establish was that it had a
right to immediate possession of the vaccine. They say that the appellant’s submission confuses legal title
with possessory title. Payment or non-payment does not affect Alphapharm’s title to sue Finemores.
81
The respondents support their submission with reference to The Sanix Ace [1987] 1 Lloyd’s LR
465, 468, 470; Leigh and Sillavan Ltd v Aliakmon Shipping Co Ltd [1986] AC 785, 808-9, 812; The
Winkfield [1902] P 42; RG and T Anderson Pty Ltd v Chamberlain John Deere Pty Ltd (1988) 15
NSWLR 363, 369 and Palmer on Bailment 2nd edition page 308.
82
The respondents put an alternative argument, one that was rightly rejected by the trial judge that
Alphapharm had some equitable title in the vaccine which enabled it to sue for their loss. How such an
equitable right is asserted as against Finemores is unclear, but even if it existed, it would not give sufficient
title to enable Alphapharm to sue in its own name for loss.
83
The requirement that a person have some title before it can sue in trespass to goods, conversion or
for loss by a bailee is an ancient one. However, all the plaintiff had to plead under the traditional system of
pleading was that the subject goods were goods “of the plaintiff.”
84
In Armory v Delamirie (1722) 1 Stra 505; 93 ER 664; [1558-1774] All ER Rep 121, the finder
of a jewel though he had not sufficient property to retain it against the true owner, did have title to maintain
trover against a goldsmith who had become a bailee from the finder.
85
A more recent example is the decision of Yeldham J in RM Campbell Vehicle Sales Pty Ltd v
Machnig 22.5.1981 BC 8100047 where a company whose goods were owned by a finance company under
a bailment plan had sufficient property in them to sue a carrier for loss as a bailee.
86
Dr Bell says that in such cases, the finder had title by physical possession. However, in the instant
case, the Alphapharm representative with the authority of the true owner physically appropriated part of the
supply of vaccine and labelled it, and took dominion over it.
87
There is really no magic about this aspect of the case. The same property is required whether the
controller of a chattel sues in trespass, conversion or as a bailor. He or she has to plead that the chattel is the
chattel of the plaintiff. The chattel is property of the plaintiff if he or she has de facto possession (see
Pollock & Wright at pp 18-9). A person who has de facto possession has title as against all the world save a
person with a better title.
88
Furthermore, there is no such notion of nominal damages for loss of the property of a possessory
owner; see The Jag Shakti [1986] AC 337, 347 and The Sanix Ace.
89
I should also note that the proposition that because Ebos was paid for the vaccine by Alphapharm
after the destruction, it suffered no loss is too facile. The loss occurred when the destruction took place. At
that date, Ebos had not been paid. The mere fact that a third party later satisfies the person who suffers loss
by a defendant’s act, does not usually exonerate the defendant. Indeed, the fallacy of this particular aspect
of the defence was exposed by Hobhouse J in The Sanix Ace at 468 and see RG and T Anderson Pty Ltd
v Chamberlain John Deere Pty Ltd.
90
Accordingly, I would uphold the trial judge’s finding on this issue.
91
5.
It is not necessary to deal with the issues raised in the notice of contention. It is clear
from what has already been said that RT is not bound by any indemnity clause.
92
Some submissions were made as to whether his Honour correctly found that Finemores’ warehouse
was a designated warehouse. I consider that it was open to his Honour to have so found. However, in the
light of the above reasons, the point is irrelevant.
93
There was also some consideration given during the oral argument as to whether there was some
significance in the dates on which RT became a customer and whether the second consignment was in a
different plight to the first. Again, I do not consider it necessary to explore these matters.
94
6.
The Orders I would propose are thus as follows:
On the appeal: appeal dismissed with costs.
On the cross-appeal: cross-appeal dismissed, no order as to costs.
95
BRYSON J: I agree with the orders proposed by Young CJ in Eq, and except as now stated I
agree with his Honour’s reasons for disposition of the appeal. I will state my reasons for upholding the
conclusion of the learned Trial Judge that the third respondent Richard Thomson Pty Ltd did not have a
contractual obligation to the appellant Toll (FGCT) Pty Ltd (Finemores) in the terms of Condition 8 on the
back of the Application for Credit. (This condition relates to indemnity to the carrier in respect of any
demand or claim brought by and on behalf of the Customer’s Associates related to the contract.) It was this
conclusion which led his Honour to dismiss the First Cross-claim, brought by the appellant (Finemores)
against the third respondent (Richard Thomson). To examine whether Condition 8 was part of the
contractual relationship between Finemores and Richard Thomson is to examine what in fact were the terms
of the contractual relationship reached between those two companies.
96
Counsel for Finemores placed reliance on the decision in L’Estrange v. F. Graucob Ltd [1934] 2
KB 349 in which Scrutton LJ said (402-403): “In Parker v. South Eastern Railway Co. 2CPD 416 Mellish
LJ laid down in a few sentences the law which is applicable to this case. He there said (421): ‘In an
ordinary case, where an action is brought on a written agreement which is signed by the defendant, the
agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he
has not read the agreement and does not know its contents’.” At 403 having set on one side ticket cases and
other cases related to unsigned documents Scrutton LJ said: “When a document containing contractual
terms is signed, then, in the absence of fraud, or, I will add, misrepresentation the party signing it is bound,
and it is wholly immaterial whether he has read the material or not.” This sentence must be understood
from the earlier citation of Parker as directed to a document which is itself a written agreement on which an
action may be brought. Maugham LJ the only other member of the Court of Appeal also referred (at 405)
with entire approval to the passage from Parker v. South Eastern Railway Co. The facts in L’Estrange and
their Lordships’ observations show that their attention was directed to a written agreement which a party
had signed and had been established to be the parties’ agreement. There was no doubt in that case what the
agreement was; the purchaser had signed the document headed “Sales Agreement”, addressed to the vendor,
and made a payment on account, and the vendor had responded by sending an order confirmation and
delivering the machine. For such a case L’Estrange v. F. Graucob Ltd states an important principle which
should not be departed from. When it has been objectively established that the terms of an agreement are
contained in a document which the parties have signed there is no room for subjective examination of what
a party understood their document to mean, or of any miscarriages in the mental processes that led him to
sign it.
97
At the most general level, a document to which the parties signed their names at the time is
inherently more likely to express their intentions than their later evidence about their pre-contract
discussions, behaviour and states of mind. Courts decide whether parties intended to form a contract by
considering what is objectively indicated by the parties’ acts and conduct, including statements they made
and documents they signed or dealt with. Courts do not act on what were subjectively the actual states of
the parties’ minds. This objective approach is deeply entrenched. It does not depend only on L’Estrange v.
F. Graucob and does not appear to me to be reasonably open to debate. The objective theory of contract
was discussed in Taylor v. Johnson (1982) 151 CLR 222 by Mason ACJ Murphy and Deane JJ at 428-429.
In Wilson v. Anderson (2002) 76 ALJR 1306 at 1308-1309 para [8] Gleeson CJ stated the law of
construction of written contracts in terms of this objective test, and referred to his Honour’s judgment in
Australian Broadcasting Corporation v. XIVth Commonwealth Games Ltd (1988) 18 NSWLR 540.
98
The principle referred to in argument in this case as the principle in L’Estrange v. F. Graucob is a
well-established principle for which there is much other authority, including authorities referred to by
Sheller JA in Lief Investments Pty Ltd v. Conagra International Fertilizer Co. (Court of Appeal, 16 July
1998). In my understanding the Court of Appeal accepted and acted on the principle in that case. Sheller
JA referred to Gordon v. McGregor (1909) 8 CLR 316 Isaacs J at 323-4 citing A & J Inglis v. John Buttery
& Co. (1878) 3 App Cas 552 Lord Blackburn at 557. Sheller JA also referred to Maybury v. Atlantic Union
Oil Co. Ltd (1953) 89 CLR 507 Dixon CJ Fullagar and Taylor JJ at 518: “Once an agreement is made in
writing it is treated, unless the parties are shown otherwise to intend, as the full expression of their
obligations.” It also appears to me that the principle underlay the decision of the Court of Appeal in Air
Great Lakes Pty Ltd v. KS Easter (Holdings) Pty Ltd (1985) 2 NSWLR 309. Interaction between the written
agreement and claims to modify it by reference to pre-contract behaviour is a well-trampled battle ground –
see for example “Can Contract Trump Estoppel” Nick Seddon, (2003) 77 ALJ 126 – and the law does not
need to extend the weaponry.
99
A clear statement was made in Hardwick Game Farm v. Suffolk Agricultural Poultry Producers’
Association [1966] 1 WLR 287 by Diplock LJ at 339: - 340:
The task of ascertaining what the parties to a contract of any kind have agreed
shall be their legal rights and liabilities to one another as a result of the contract
is a familiar one in all systems of law. It is accomplished not by determining
what each party actually thought those rights and liabilities would be, but by
what each party by his words and conduct reasonably led the other party to
believe were the acts which he was undertaking a legal obligation to perform.
There are some rights and liabilities which arise by implication of law from the
nature of the contract itself such as a contract of sale of goods or land, a
contract of carriage or bailment, a contract of service or a contract of insurance.
In offering to enter into a contract of a particular kind a party leads the other
party reasonably to believe that he undertakes a legal obligation to perform all
those acts which a person entering into a contract of that kind usually performs,
unless his words or conduct are such as would make it reasonably clear to the
other party that this is not so and also makes it clear which of those acts he does
not intend to undertake to perform and which of them he intends to undertake to
perform only in some other and specified manner.
In English law this general rule has become subject to a special rule that where
parties have agreed to embody their contract in a written document they are
presumed to have agreed to be bound by all the terms included in the written
document and by no other terms except those which arise by implication of law
from the nature of the contract itself; and this is so whether they have both read
and understood the written document or not. Whatever the historical origin of
this rule, which since 1677 may well have been influenced by the Statute of
Frauds, its justification today is that it is so well established that any party to a
contract by agreeing that its terms shall be embodied in a written document so
conducts himself as to lead the other to believe that he intended the written
document to set out all the rights and liabilities of each party towards the other
which do not arise by implication of law from the nature of the contract itself.
This is the relevant distinction between contracts which the parties have agreed
shall be embodied in a written document and other kinds of contracts. The ticket
cases are examples of the former. The only question there is whether the party
proffering the ticket has so conducted himself as to lead the other party
reasonably to believe that the written term upon which he seeks to rely formed
part of the terms upon which he was willing to contract. He may fail because he
has not taken reasonable steps to draw the term to the attention of the other
party. But if he has taken such reasonable steps it matters not that the other
party has never read the term and would not have entered into the contract if he
had read it. His acceptance of the ticket without demur as embodying the terms
of the contract is conduct which would lead the other party reasonably to believe
that he intends to contract upon its terms and not otherwise.
100
There have been many expressions of distaste or dissatisfaction with the principle in L’Estrange v.
F. Graucob Ltd, one of them in the opening sentence of the judgment of Maugham LJ at 405 in that case,
and many others in texts and academic writings, to some of which we were referred. There are grounds for
dissatisfaction with this hard rule, but it is a practical necessity for the Court of Appeal to accept and not
depart from the objective indication of a signed agreement in writing. If the courts listened to parties whose
evidence swore away their written words and explained the workings of their minds they would not do
justice to other parties who acted on the basis of what those who harboured misunderstandings had actually
said and not on the unknowable intentions they had failed to express; and litigation would be endless. The
principle in L’Estrange v. F. Graucob Ltd forms part of a skein of law which includes means by which its
rigour can be relieved against, in the law relating to the defence of non est factum, in equitable relief
available against unjust contracts, and in statutory regimes which confer powers on the Court to relieve
against unjust contracts; these parts of the law are formed around and assume the existence of the principle.
101
In L’Estrange v. F. Graucob Ltd their Lordships did not address whether or not a document, signed
or unsigned, was intended by the parties to be included in the agreement which they reached; that is a
question of fact which must be decided before attempting to apply the principle. In deciding the question of
fact, the fact that a party has signed a document which purports to be contractual or part of a contractual
arrangement, even though evidence shows that he signed it in the course of negotiation before the point of
achieving finality, is a powerful indication of intention to be bound by it at the later point of achieving
finality; it is a powerful indication because of well-known cultural practices about the use of one’s signature
as a token of assent.
102
For a long time courts have used a test of reasonable notice when deciding whether conditions
excluding or limiting liability have been incorporated in agreements. A test of reasonable notice was
accepted in the High Court in Balmain New Ferry Co Ltd v. Robertson (1906) 4 CLR 379, Griffiths CJ at
386, by the House of Lords in Hood v. Anchor Line [1918] AC 837 at 844, 845 (Viscount Haldane) and has
been applied in many later cases. The excluding clauses have been set out or referred to in many ways such
as by a notice on a ferry wharf, by statements on the backs of railway tickets or steamer tickets, by
conditions printed on the back of commercial documents of various kinds issued at various points in the
transactions, and by references in such documents to conditions to be found at other places. The facts have
been so various that reduction to categories is of little value. In Oceanic Sun Line Special Shipping
Company v. Fay (1988) 165 CLR 197 at 228-229 Brennan J said:
If a passenger signs and thereby binds himself to the terms of a contract of
carriage containing a clause exempting the carrier from liability for loss arising
out of the carriage, it is immaterial that the passenger did not trouble to discover
the contents of the contract. But where an exemption clause is contained in a
ticket or other document intended by the carrier to contain the terms of carriage,
yet the other party is not in fact aware when the contract is made that an
exemption clause is intended to be a term of the contract, the carrier cannot rely
on that clause unless, at the time of the contract, the carrier had done all that
was reasonably necessary to bring the exemption clause to the passenger's
notice: Hood v. Anchor Line (Henderson Brothers) Ltd. (1918) AC 837, at pp
842, 844; McCutcheon v. David Macbrayne Ltd. (1964) 1 WLR 125, at p 129;
(1964) 1 All ER 430, at p 433; Thornton v. Shoe Lane Parking Ltd. (1971) 2 QB
163, per Lord Denning M.R. at pp 169-170, and per Megaw L.J. at pp 172-173.
In differing circumstances, different steps may be needed to bring an exemption
clause to a passenger's notice, especially if the clause is an unusual one.
103
In Liaweena (NSW) Pty Ltd v. McWilliams Wine Pty Ltd (Court of Appeal, 5 December 1990)
Handley JA, in the course of discussing the effect of misrepresentation of the effect of the document in the
course of negotiation, said “The underlying question is whether the appellant ‘did what was reasonably
sufficient to give the plaintiff notice of the condition.’ See Parker v. The South Eastern Railway Co. (1877)
2 CPD 416 at 424. See also The Balmain New Ferry Company Ltd v. Robertson (1906) 4 CLR 379 at 386
and the Council of the City of Sydney v. West (1965) 114 CLR 481 at 485, 491.” In Remath Investments No.
6 Pty Ltd v. Chanel (Australia) Pty Ltd (Court of Appeal 24 December 1992) the Court of Appeal referred
to Liaweena v. McWilliams Wines and to the test there stated and reviewed the authorities relating to that
test at some length. In the course of their review the Court of Appeal said “However it is a question of fact
in each case whether a party relying on an exclusion clause has done what was reasonably sufficient to give
the plaintiff notice of the clause.” In the light of these decisions, to which the Trial Judge referred, his
Honour took the correct approach by treating the question whether the conditions on the reverse of the
application for credit had been incorporated in the parties’ contract as a question of fact, and in addressing
that question of fact by deciding whether Finemores did what was reasonably sufficient to give Richard
Thomson notice of the conditions.
104
The same stage in the proof of facts has to be passed where an exempting clause, or any other
clause is contained in a document which a party did sign as where it is contained in a document which a
party did not sign. The party who alleges that the document is or is part of the contractual arrangement
which the parties intended to make must prove that the document was intended by both parties to form part
of their contractual arrangements. Depending on the circumstances, the fact that the document was signed
would usually be of very great weight as evidence of the intention of the party who signed it, so great as to
appear conclusive, especially in a commercial context.
105
The present facts are different from the facts in Liaweena and Remath in that the contested
document was in fact signed on behalf of Richard Thomson. There is in my opinion no difference in legal
principle between signed documents and documents which are not signed for decision whether in fact a
document is incorporated into an agreement. There is a considerable forensic difference between signed
and unsigned documents: the difference is in the force of the claim on the attention of a tribunal of fact of a
signature on a document as an indication of the intention of the party signing the document to be bound by
it. It is for this reason, and not because the boundary of any legal principal marks off signed documents
from unsigned documents, that case law almost always addresses documents which have not been signed.
Signature is usually a very strong indication for an intention to be bound, but does not exclude consideration
of facts and circumstances which may show that it was not.
106
In Le Mans Grand Prix Circuits Pty Ltd v. Iliadis [1998] 4 VR 661 the Court of Appeal of Victoria
divided on whether a document signed by the plaintiff which in its terms exempted the defendant from all
legal liability to him was a contract between the parties. The issue was whether there was a contract
between them at all, not whether the document was incorporated in a contract which otherwise existed.
Tadgell JA with whom Winneke P agreed addressed L’Estrange v. F. Graucob Ltd and other case law and
opinion on this subject on pp666-667. His Honour said of L’Estrange v. F. Graucob, at 666/20:
In that case, and in all others that I can find in which the principle for which it
stands has been expressly or inferentially applied, there was an undoubted
contract or the existence of a contract was not in issue: the question was whether
the party signing the document containing terms was bound by them – whether
they formed part of the contract … When the question is whether there is a
contract between parties, the signature of one only of them to a document
presented by the other cannot necessarily and by itself determine the question:
one needs to know the circumstances in which the document was presented to the
party who signed it.
107
In the dissent of Batt JA at 670 his Honour said, apparently referring to this passage:
But Tadgell JA is speaking of a document signed by only one party to a putative
contract when he says that the signature cannot necessarily and by itself
determine whether there is a contract between the parties: one needs to know the
circumstances. I accept that, at least as a general proposition.
108
Their Honours’ differing conclusions appear to me, with respect, to flow from differing evaluations
of the evidence and in particular of the significance of the document’s being in contractual form and signed.
It seems from the passage from the judgment in the County Court set out at 664 that there had not been
findings on that subject, so that the Court of Appeal made its own findings. Both judgments include
references (Tadgell JA at 666-667, Batt JA at 673) to academic and other criticism of the rule in L’Estrange
v. F. Graucob. It is, with respect, valuable that this material was reviewed, but finally what Le Mans Grand
Prix Circuits v. Iliadis shows, in my view, is that the questions whether there is a contract between the
parties, and whether the supposed contract is one document or more, or incorporates a document, fall to be
decided before L’Estrange v. F. Graucob can be applied, and the fact that a document in a contractual form
has been signed by a party is a powerful indication favouring a finding that it was intended to be
contractual, but not necessarily conclusive. Well-considered and powerful arguments supporting each of
two outcomes were given.
109
In Mauritz v. Hegedus [1999] WAS CA 1061 the Full Court of the Supreme Court of Western
Australia, when dealing with a disclaimer which was in fact signed by the plaintiff, treated the question
whether the plaintiff was bound by the document as turning on whether the defendant gave reasonable
notice to the plaintiff of the existence of terms in the document. The Full Court found, on the facts of that
case, that the actions taken by the defendant in requiring the plaintiff to sign the disclaimer before
performance of the agreement amounted to reasonable notice; but the Full Court did not regard the decision
as concluded by the fact that the plaintiff had signed the disclaimer.
110
On behalf of the appellant it was contended that Mauritz v. Hegedus should either not be followed
in this Court or should otherwise be distinguished, and it was submitted that there was no authority for the
approach taken by the Full Court, or for requiring reasonable notice to be given of unusual or onerous terms
even in the case of a contract which has been signed. It was submitted that the approach taken by Owen J
was inconsistent with what was said to be a clear distinction drawn by Brennan J in Oceanic Sun Line in the
passage which I have set out. I do not regard the approach made in Mauritz as inconsistent with the
observations of Brennan J, notwithstanding the clear terms of the first sentence in the passage from Oceanic
Sun Line which I have set out. The question whether a document, signed or unsigned, is or is part of a
contract is anterior to the proposition stated by Brennan J in the first sentence. In my respectful view, on the
unusual facts before them, the Full Court’s approach to the question of incorporation of the disclaimer was
not erroneous. Their conclusion that the disclaimer had contractual force would, I suppose, accord with the
usual outcome where tribunals of fact address signed documents contractual in form; but the issue of fact is
an issue which must be decided.
111
When a contract is formed by a series of communications and by behaviour of parties in relation to
those communications, it is a question of fact what parts of those communications were intended by the
parties to be terms of their contract. Where an agreement has been completely reduced to writing and
signed by all parties the exercise is extremely simple; where the Court has the task of examining a series of
communications and acts, some of which are on paper and signed but some of which are acts of parties
dealing with the written material, the identification of the parties’ intentions about which parts of their acts
and communications were to be contractual conditions may not be simple at all. A finding of fact about
what the parties’ intentions were with respect to one document in the series, or to something written in that
document, is not dictated by the terms of the document, or by the fact that a party signed it. The fact that a
particular document in the series was signed is an important indication favouring a finding that the parties
signing it intended to be bound by it; but does not preclude paying regard to what the document says, how
the parties treated it, and the facts and events which led to it being signed; and a whole view of the evidence
may lead to a finding that the parties did not intend that the document and any promises or obligations in it
should be part of their contract. It is for the tribunal of fact to consider the whole body of material and come
to a finding about the parties’ intentions.
112
In the present case the finding of the Trial Judge was, in substance, that the parties did not intend
that the conditions on the back of the Application for Credit should be terms of their contract. The Trial
Judge addressed the question whether what the defendant did was reasonably sufficient to give the plaintiff
notice of the condition as if this question related to an obligation, and an obligation which applies both to
the existence and also to the content of the condition; in doing this his Honour used language drawn from
the decisions to which he referred. To my mind the true exercise can be masked by language which speaks
in terms of an obligation of a party to give notice of the existence or content of a condition. There is no legal
obligation. What is necessary is proof that what was reasonably sufficient was done. If it was not done the
condition is not included. In a system where contractual intentions are judged objectively, doing what was
reasonably sufficient is enough. In a subjective system it would not be enough: it would be necessary to
prove that the other party actually knew.
113
Of first importance for understanding the relevant facts and the communications between the
parties is the perishable nature of the goods. The Trial Judge dealt with this, appropriately in the first
sentence of the judgment: (Red 50)
Medeva Pharma … is a pharmaceutical manufacturer in the United Kingdom. It
there produces an influenza vaccine name as Fluvirin. Fluvirin is extremely
sensitive to temperature. It must be kept at all times within the temperature
change of +2°C to +8°C, including when being stored or transported.
There is obvious risk of loss when such goods are manufactured in the United Kingdom,
transported to Sydney, kept in storage there and then further transported by land to Brisbane. The
possibility that someone involved in storage and transport would seek contractual variation of what
would otherwise be liabilities under the general law ought reasonably to have been obvious to all
engaged.
114
Medeva Pharma was not a party to this litigation. The second respondent and second plaintiff Ebos
had an agreement with Medeva to distribute Fluvirin in the South Pacific including Australia. Richard
Thomson, the third respondent and cross-defendant in the First Cross-claim, is a subsidiary of Ebos and
carries on business as a general medical wholesaler to the primary care market and private hospitals, and
was responsible for distributing and marketing Fluvirin within Australia, which it did in its own name
although on behalf of Ebos. Ebos as distributor made a Sub-distribution Agreement with the first
respondent Alphapharm (which is not otherwise related to Ebos) for Alphapharm as sub-distributor to
distribute a certain number of Fluvirin doses in Australia during 1998. In 1998 the vaccine was stored in
Richard Thomson’s warehouse and distributed from there by Alphapharm. The Sub-distribution Agreement
was extended to cover the 1999 season, Alphapharm to take 300,000 doses and Richard Thomson to market
up to 50,000 doses to its own customer base. Richard Thomson needed additional cold storage to deal with
the volume of product for 1999 and sought cold storage from the appellant Finemores. Finemores had
acquired a new depot with facilities for refrigerated storage at Greenacre in November 1998, and operated a
fleet of refrigerated vans.
115
On 20 January 1999 Mr McGee, General Manager of Richard Thomson, had a telephone
conversation with Mr Cheney, State Manager of Finemores. The conversation is mentioned in a fax
message which Mr McGee sent Mr Cheney later that day and it should be taken that anything material
which was stated in the telephone conversation appeared again in the fax message. The fax message was in
these words: (Blue 1/41)
As discussed this am, we had need of refrigerated transport guaranteed between
2° - 8°C for consignments both intra and inter-state. At this point we do not
know specifics but here are some jobs that you can base your costs on.
…
2.
Several consignments of 1-2 pallets to Adelaide, Perth, Brisbane &
Melbourne.
These are highly perishable vaccines for flu inoculation in humans. It is
therefore vital that you can assure us of being able to maintain and evidence
your part of the cold chain from pick up to drop off. These goods are also of
high cost and therefore could you please advise what insurance cover will be and
what security you provide as the goods cannot be easily replaced if lost.
116
Mr Cheney replied by a fax message on 12 February 1999. This message comprised four pages.
There was a cover sheet and the second page was in the form of a letter dated 11 February 1999 (not 12
February) in these terms (Blue 1/72):
Re: Quotation for Freight Rates
Further to our recent discussion regarding the transportation of your products to
various interstate locations, we are pleased to have the opportunity of providing
our quotation.
For your information we are also enclosing a profile of our company, Finemores
GCT Pty ltd is currently in the process of acquiring Quality Assurance
Certification, which will confirm our already distinguished level of service. A
further feature of our service is that we have transit cold stores available in
Victoria, New South Wales, Queensland and South Australia.
Please note we are not common carriers and all cartage is subject to the
conditions as stated on the reverse side of our consignment note, a copy of which
is attached. We do not insure goods and our trading terms are strictly 14 days
from the date of invoice.
To ensure that your goods travel at the required temperature, each one of our
refrigerated vans use a ‘Parlow Card’ to record the temperature throughout the
entire journey. Whilst not every transport company follows this procedure, it is a
standard policy for our company.
We trust you will find our rates competitive and that you will avail yourself of the
service we provide. Following acceptance to our quotation, it would be very
much appreciated if you would complete the Credit Application and sign the
Freight Rate Schedule accepting our Rates and Conditions and fax back to our
office at your earliest convenience.
If you have any queries regarding our quotation or the attached information,
please do not hesitate to contact myself at any time.
117
The third page had a heading which included “Freight Rate Schedule” and “Effective from 12
February 1999” for various destinations including “Sydney to Brisbane cost per pallets base $110.00,” and
charges for Sydney storage including separate charges for storage at $5 per pallet per week, for handling in
and out, for picking orders and for shrink wrap.
118
The fourth page of the fax message did not have a heading. It contained eight paragraphs each
introduced by a point, and they dealt with labelling, exchange of pallets, various controls over use of pallets,
waiting time, rate bookings and times of pick up. This sheet concluded with a space for a signature
introduced by “Freight Rate Schedule and Conditions accepted by:
Signature.”
119
It is to be noted that the letter page said “We do not insure goods” which literally answered a
question in the message of 20 January 1999. There was nothing anywhere in the fax message about an
indemnity for liability incurred by Finemores for any loss, or about exempting Finemores from liability for
loss. The letter also said: “Our trading terms are strictly 14 days from the date of invoice” but also asked
that following acceptance of the quotation Richard Thomson complete the credit application. This meant
that credit had to be applied for, by a credit application, with the plain implication that the 14 day trading
terms may or may not be available, depending on Finemores’ decision on the credit application. The
message also asked Richard Thomson to sign the freight rate schedule accepting rates and conditions and
fax them back; there were both rates and conditions in the freight rate schedule. The conditions on the
fourth page which had the provision for signature did not mention any other document or conditions such as
a Consignment Note or conditions stated on the reverse side of the Consignment Note.
120
Although Finemores at that time had a form of Consignment Note with conditions on the reverse
side, no copy was in fact included in the fax message. Unless the recipient knew Finemores’ business
system and actually knew of the Consignment Note and the conditions on the reverse side, the reasonable
understanding of the message was that the sheet following the freight schedule, with eight points of
conditions, was what was mentioned in the message. The writer of the letter of 11 February probably
intended that conditions on the reverse side of Finemores’ Consignment Note were to be included in any
contractual arrangement for cartage, but the recipient of the message would not understand this unless he
knew about the Consignment Note and conditions from earlier dealings with Finemores, or was informed of
them in some other way. Without that information the recipient would naturally think that he knew what the
conditions were from reading the message including the freight schedule and the fourth page of the
message. So the prospect of misunderstanding was present already. The conditions on the reverse of the
Consignment Note include an exclusion of liability as a common carrier, an exemption from liability and
provision making insurance available at the consignor’s expense, but no indemnity.
121
Later Mr McGee and Mr Philip Gardiner-Garden, who was the Operations Manager of Richard
Thomson, visited Finemores’ depot and inspected the facilities; they made another visit soon afterwards
accompanied by Mr Killick from Medeva; Mr McGee then instructed Mr Gardiner-Garden to proceed with
arrangements.
122
On 17 February 1999 Mr Gardiner-Garden went to Finemores’ premises and saw Mr Cheney. In a
meeting which was not hurried, he was shown a form called “Application for Credit”; this must be the credit
application mentioned in the message of 11 February 1999, but until 17 February no-one at Richard
Thomson had been shown this document or told what was in it. The Application for Credit is a printed
form, part of Finemores’ business system, and included spaces for a number of items of information
relevant to applying for credit. The nature of the document was indicated on the front of the form by the
words “Application for Credit” in capital letters across the top. Under the words “Application for Credit”
were the printed words “This Application for Credit will be considered and if approved, granted on the basis
of the following information.” Apart from that there was nothing which in terms asked for Finemores to
extend credit to Richard Thomson. The spaces called for details about the applicant, which were filled in so
as to show Richard Thomson’s name, address, nature of its business and contact references including its
accountant; it was also shown that it was a subsidiary of Ebos Group Ltd; its address was given as were the
names of two directors and credit references to three other traders. There was then a printed authorisation to
exchange information with other credit providers, and reference to the Privacy Act. The last two printed
statements on the form were:
Trading terms: Nett 7 days (unless otherwise confirmed in writing).
Please read “Conditions of Contract” (overleaf) prior to signing.
123
The words at the top and whole document indicate that the applicant was to understand that stages
of consideration of the application, approval and grant had to take place after the Application for Credit was
given to Finemores, that no commitment about the outcome was given and that approval might perhaps not
be granted; with the plain implication that the applicant was not to rely on having credit if it asked for any
services from Finemores until there was an approval and until grant of approval was communicated to it.
124
There was no clear evidence of the date on which the Freight Rate Schedule was signed: it may
have been signed when the Application for Credit was signed with the date 17 February 1999; Mr GardinerGarden left these documents with Mr Cheney. The details in the Application for Credit may have been
filled in during this visit.
125
On the back of the Application for Credit form were 15 printed conditions including Condition 8,
about indemnity, on which the First Cross-claim is based, and Condition 6 which exempted Finemores from
liability to Richard Thomson. Mr Gardiner-Garden’s evidence was that he did not read the Conditions of
Contract before signing the document and that if he had done so he would not have signed it but would have
referred it to Mr McGee or the financial controller of Ebos; he did not do that. The Trial Judge accepted Mr
Gardiner-Garden’s evidence, and accepted that Mr Gardiner-Garden did not know what was printed on the
back of the document.
126
Alphapharm sent Ebos a purchase order in December for 350,000 doses for delivery in February
1999. On 21 January 1999 Alphapharm received an order from Queensland Health for delivery of 87,000
doses to an address in Brisbane; Alphapharm on 12 February sent a message to Mr Gardiner-Garden with
details of quantities required for delivery including 28,160 doses for Brisbane. Consignments of vaccine by
air from the United Kingdom were landed in Australia on 18 and 19 February 1999 and transported by
Finemores to Finemores’ depot at Greenacre. Finemores invoiced Richard Thomson for freight from the
airport to the warehouse and for storage in the warehouse, and were paid. Late in February 1999
Alphapharm invoiced Queensland Health for the price of 28,160 doses. Mr Gardiner-Garden told
Finemores’ warehouse manager that vaccine would soon be required for delivery, and by fax message of 24
February 1999 he gave the warehouse manager shipping details for consignments including 28,160 doses
for Queensland Health. Alphapharm’s manager went to Finemores’ depot on 25 February and made up two
cartons on pallets for consignment to Brisbane. He inserted a temperature recorder into each carton, secured
the cartons on pallets and labelled the pallets with the address of Queensland Health. On 25 February Ebos
invoiced Alphapharm for vaccine including the doses to be delivered to Queensland.
127
Also on 25 February Finemores issued a Consignment Note showing Richard Thomson as the
party liable to pay the freight. The Consignment Note (Blue 1/103) indicated the consignor only by a box
headed “Who pays freight” naming Richard Thomson. Included in the Consignment Note was a box that
said “We hereby accept Conditions of Contract on reverse” but this was signed by an employee of
Finemores, not by anyone on behalf of Richard Thomson, or of Alphapharm. On the reverse of the
Consignment Note there were printed 23 “Conditions of Cartage”. They are not the same as the 15
“Conditions of Contract” on the back of the Application for Credit, or the 8 points in the Freight Schedule.
This may well be an example of the form of Conditions of Contract which the sender of the message of 12
February intended to include but did not.
128
A temperature record for the consignment was set in motion at 12.43pm on 25 February, possibly
indicating that the pallets were laden on Finemores’ truck at that time (Blue 1/110) and the vehicle left
Finemores’ premises on 26 February and travelled to Brisbane; they were stored in Finemores’ Brisbane
facility and then delivered to Queensland Health on Monday 1 March. The temperature monitors were
returned to Alphapharm and showed that on 26 and 27 February, on several occasions and for significant
periods the temperature range of 2° to 8°C had not been attained or had been exceeded. Queensland Health
rejected the consignment by a letter dated 5 March 1999.
129
Another consignment of 28,160 doses from Finemores’ premises to Commonwealth Serum
Laboratories at North Ryde New South Wales was packed by Alphapharm’s manager at Finemores’ depot
on 4 March, remained in cold store until 5 March and was then delivered to Commonwealth Serum
Laboratories, when it was found that the vaccine had been stored overnight on 4 to 5 March below
temperature range; this consignment was also rejected.
130
These events led the Trial Judge to award damages to Alphapharm and Ebos for the loss of the
value of the two consignments. In the First Cross-claim Finemores claims a contractual entitlement to an
indemnity against those damages from Richard Thomson.
131
The Trial Judge found (Red p68):
The circumstances in which the Application for Credit form came into Mr
Garden’s possession are not clear on the evidence. The document itself was
signed on 17 February. Mr Garden could not remember the circumstances of his
signing it. It provided for information to be supplied to Finemores on the basis
of which Finemores would be able to make a decision about whether the
applicant would be likely to pay Finemores’ charges promptly. It seems to me
that on analysis there was then an offer by Finemores to accept bailment of
goods on the basis of the Freight Rate Schedule and Conditions set out in the fax
of 12 February 1999 together with its being satisfied about Richard Thompson’s
creditworthiness on the basis of the information contained in the Application for
Credit. Finemores appears to have been satisfied about creditworthiness.
Richard Thomson accepted the offer by arranging for Finemores to collect the
goods at the airport and transport them to its store.
The question for decision then is whether the “Conditions of Contract” on the
back of the Application for Credit formed part of the contract.
132
The Trial Judge accepted Mr McGee’s evidence that he took the two documents enclosed with the
message of 12 February to be the freight rates and conditions referred to and decided that the conditions on
the back of the consignment note did not form any part of the contract between Finemores and Richard
Thomson. This part of his Honour’s decision was not challenged on appeal; in any event challenge would
be ineffectual as the conditions on the back of the Consignment Note did not include any indemnity.
133
When considering Liaweena (NSW) Pty Ltd v. McWilliams Wines Pty Ltd (1991) ASC 56-038 the
Trial Judge said:
In this case I accept that Mr Garden did not realise that there were conditions on
the back of the Credit application, especially conditions of a kind which so
radically affected the contract. However, I do not think that he was induced not
to read them because of any misrepresentation, however innocent. …
I also respectfully accept the statement in that case that the underlying question
is whether the defendant “did what was reasonably sufficient to give the plaintiff
notice of the condition.” I also note the statement in Remath Investments No 6
Pty Ltd v Chanel Australia Ltd NSW CA 24/12/92 that this obligation applies not
merely to the existence but also to the content of the conditions.
Mr Garden had already read a document containing rates and conditions. He
was then presented with another document which on its face related to matters
relevant to his company’s creditworthiness. All that was done to give him notice
was the single sentence above the space provided for his signature which read
“Please read ‘conditions of contract’ (Overleaf) prior to signing.” Had he
noticed the sentence, he would have been quite justified in assuming that overleaf
there were conditions relating to the terms upon which credit would be extended
to his company. Conditions about cartage and storage had been set out in the
previous document. There was nothing in the Application for Credit document
itself, in the surrounding circumstances or in anything that Finemores had said
or done that should have alerted him to the fact that the document contained
conditions which so radically affected the contract.
I am satisfied that Finemores did not do what was reasonably sufficient to give
Richard Thomson notice of the existence or of the content of the conditions of
contract on the back of the Appliction for Credit form. Those conditions did not
therefore form part of the contract between Finemores and Richard Thomson.
134
Finemores’ letter to Richard Thompson dated 24 February 1999 was not mentioned in the
judgment under appeal. It said (Blue 1/101):
We would like to take this opportunity of welcoming you as an account customer
with Finemores GCT Pty Ltd.
Your account number is 2RTTH1, please quote this number when placing orders
or making enquiries. Our terms of trading are STRICTLY NETT (14) DAYS from
receipt of Invoice. Your prompt and regular weekly remittance direct to the
above postal address would be most appreciated.
An additional copy of Conditions of Contract is attached for your convenience.
Should you have any queries with the account or difficulties that will hinder your
remittances, we would appreciate you contacting our Credit Manager.
We look forward to a long and mutually beneficial association and would assure
you of our closest co-operation at all times.
135
The written communications are not altogether clear, quite apart from the difficulty about what
conditions they included. The letter of 11 February refers to trading terms of 14 days; the Application for
Credit refers to trading terms of 7 days, and the letter of 24 February grants 14 days. Until receipt of the
letter of 24 February it had not been stated whether credit could be granted at all; credit was basal to the
arrangement contemplated from 12 February 1999 onwards; and it could not be known whether approval
would be for credit for 14 days or 7 days; or whether credit would be withheld. The letter of 11 February,
although politely expressed, indicates that there would be no credit dealings without approval, and until
approval the express communications showed no agreement on anything. Even with the letter of 24
February what the parties agreed on was not altogether clear from their documents, as that letter said “An
additional copy of Conditions of Contract is attached for your convenience”. Whatever was attached was
not put in evidence; for reasons stated by Young CJ in Eq with which I agree, leave was not granted to
tender additional evidence identifying whatever the enclosure was. In this state of the evidence it is
necessary to act on the basis that the outcome would not be affected if the terms of the enclosure were
proved.
136
The evidence includes material of considerable force favouring a finding that the parties did intend
to include the conditions on the back of the Application for Credit in their contractual arrangements. At
some time in the course of their communications, probably on 17 February and certainly not when the
communications began, Finemores gave Richard Thomson, probably in the person of Mr Gardiner-Garden,
the form of Application for Credit, in circumstances where he had an opportunity to see what it said and to
sign it; and, among many other things, it said “Please read ‘Conditions of Contract’ (overleaf) prior to
signing”; and there were conditions of contract overleaf; and he did sign it. The parties were engaged in
commerce and dealing at arm’s-length and each was in charge of its own affairs, in no way dependent on
the other for guidance; and there was no great hurry about signing the Application for Credit. There was
some hurry, as the arrival of goods from the United Kingdom was expected and Richard Thomson needed
storage. Mr Gardiner-Garden’s signing the document and giving it back to Finemores is an objectively
strong indication that Richard Thomson intended to be bound by everything on both sides of it.
137
If it had been for me to find the facts at first instance these circumstances would have seemed to
me to be quite weighty. However they were not the only facts before the tribunal of fact. In response to
Richard Thomson’s statement of 20 January to the effect that Richard Thomson needed refrigerated
transport and wanted to know costs, Finemores had in a considered message on 12 February stated that all
the cartage was subject to conditions, and had enclosed a page of conditions; and the conditions on the back
of the Application for Credit were not enclosed; the possibility that there would be further conditions to
those enclosed was not mentioned at all, nor was the possibility that there might be another document with
conditions on the reverse side which Finemores also wanted to be part of the contemplated arrangement.
The message of 12 February 1999 including the letter dated 11 February 1999 was not an offer open to
acceptance by a simple indication of acceptance; it was not so according to its terms and the parties did not
treat it in that way. It spoke of itself as a quotation. Further communications and dealings before reaching
agreement were obviously contemplated. The parties’ behaviour accorded with this. The Application for
Credit was mentioned in a request to complete it; the request politely made it clear that completion of the
Application for Credit was essential, and in the same sentence Finemores asked Richard Thomson to sign
the Freight Rate Schedule accepting rates and conditions which were quite different to those later found on
the back of the Application for Credit. There was no evidence that, when dealing with the Application for
Credit, Finemores in any way pointed out to Mr Gardiner-Garden that there were conditions on the reverse
or that Finemores wished any conditions to be added to what they had earlier required; that is, not in any
other way than by inclusion of the words “Please read Conditions of Contract (overleaf) prior to signing” in
the document. Those words took the form of the request to read some material, not the explicit form of a
stipulation that conditions overleaf would be part of the arrangements.
138
The Application for Credit was not altogether clearly an indication that the conditions were to be
part of the contractual arrangement; the document described itself as an Application for Credit and its own
terms clearly indicated that that was what it was. The document indicated its own pre-finality, and pointed
to further consideration, approval and grant of credit. Its terms generally indicated against any
understanding that it stated the terms on which dealings were to take place in a new and different way to
what had been stated earlier. Mr Gardiner-Garden did not realise that there were conditions on the back of
the Application for Credit, and nobody told him that there were, let alone told him that he should read them.
There was no finding that there was any discussion at all about the conditions on the back of the Application
for Credit, whether as to their existence or their content. The conditions, particularly Condition 8 are in no
way what one would reasonably expect or suppose would be found incorporated in an Application for
Credit. A request for a condition like Condition 8 was not extraneous to the proposed transaction or the
dealings overall; it is not at all surprising, in relation of the nature of the goods and their susceptibility to
damage, that such a condition should be sought. However any reasonable person would be astonished to
find that he was asked, as a condition of being given 14 days’ credit, to indemnify his supplier from claims
arising out of the transaction; unless it was pointed out to him he would never think it might be there.
139
There was in my view a reasonable basis for the Trial Judge to find as he did that Condition 8 did
not form part of the parties’ contract, on the basis that Finemores did not do what was reasonably sufficient
to give Richard Thomson notice of the existence or content of the conditions. If on the same body of
evidence it had been for me to find the facts at first instance I may well have made a different finding; to me
the signature, by a business executive acting in commerce, of a written document containing a request that
he read conditions of contract on the back of the document or anywhere else, is an objectively strong token
of his acceptance of the conditions, whether or not he actually adverted to what the conditions said, or even
to their existence. It does not fall to me to find the facts, but to consider whether the finding of the Trial
Judge was wrong. His Honour’s conclusion was affected, to a significant degree, by his Honour’s view of
the evidence including oral evidence of Mr Gardiner-Garden and (it may be) of other witnesses who had
been cross-examined before him. Far from holding that the finding was wrong, I am of the view that there
was ample basis for it, and it should not be upset.
140
In the course of argument the appellant’s counsel addressed the significance of the letter of 24
February. One of alternative positions he took was, in substance, that taken by the Trial Judge: that by
acting in ways which would be covered by the agreement towards which the parties had been negotiating
the parties’ behaviour indicated that agreement had been reached at or by the time goods were consigned to
Brisbane on 25 February. Those acts were that Finemores collected goods from air transport, transported
them into store, stored them for some days before 24 February and then on 25 February embarked on
transporting them to Brisbane. In his Honour’s view this showed that Finemores appeared to have been
satisfied about creditworthiness. In this view the letter of 24 February merely confirmed what had become
obvious, and I infer that the Trial Judge saw that letter as having no significance.
141
Counsel for Finemores contended as an alternative that the point at which the series of messages
and communications which began on 20 January reached agreement was 24 February 1999 when the letter
of that date was posted to Richard Thomson; and referred to the postal acceptance rule as showing that that
was so. There is no finding establishing when the letter was posted or when it was received; for that matter
there is no finding and there appears to have been no evidence that it was sent through the post at all. In my
opinion there is no room for the application of the postal acceptance rule as no earlier step in the
communications involved use of the post and there had been no indication that the post would be used for
any purpose; the Application for Credit form does not refer to communicating grant and approval by post.
In Tallerman & Co. Pty Ltd v. Nathan’s Merchandise (Victoria) Pty Ltd (1957) 98 CLR 93 at 111 Dixon CJ
and Fullagar J said:
The general rule is that a contract is not completed until acceptance of an offer
is actually communicated to the offeror, and a finding that a contract is
completed by the posting of a letter of acceptance cannot be justified unless it is
to be inferred that the offeror contemplated and intended as his offer might be
accepted by the doing of that act: see Henthorn v. Fraser [1892] 2 Ch 27 at 35,
36 per Kay LJ.
Although there have been many postal acceptance cases, and some of them appear anomalous, if
the postal acceptance rule has a basis in principle it can only be that indicated by Dixon CJ and
Fullagar J in the passage cited, that is that the party intended that his offer might be accepted by
posting the letter of acceptance. In the present case there is no indication at all of such an
intention.
142
What would follow from pursuit of this alternative is that the last communication in the series took
place when the letter of 24 February was received by Richard Thomson. If the favourable inference were
drawn that it was posted on 24 February general knowledge of the ordinary course of post would indicate
that it was probably delivered on or after 26 February, as Finemores’ address was in the Melbourne suburb
of Rowville and Richard Thomson’s was at Greenacre: neither is in a central business district. It is
improbable that the letter was received before the doses were laden on the vehicle and a Consignment Note
issued on 25 February or before the vehicle left Finemores’ depot on 26 February. The letter says and does
nothing to show that the conditions on the back of the Application for Credit had earlier been incorporated
into the parties dealings and if it said anything to incorporate them, the letter, coming as it did at the end of
the negotiations, could not force them in. A finding which included the letter of 25 February in the parties’
agreement would not disturb the finding that the conditions on the back of the Application for Credit were
not incorporated in the agreement.
143
An additional matter is that such a finding would show that agreement was reached after Finemores
undertook cartage of the doses to Brisbane. From this would follow that even if Condition 8 were
incorporated in the agreement which emerged, it would not apply to the first consignment to Brisbane, and
that part of Finemores’ First Cross-claim could not succeed for that reason.
For these reasons I agree with the orders proposed by Young CJ in Eq.
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LAST UPDATED:
11/04/2003