case_title: McDonald v Commissioner of Taxation [2005] NSWSC 2 ; (2005) 187 FLR 461

case_text: Prior to the administrator rejecting the proof of debt for voting purposes to the extent to which it claimed an amount in excess of $1.4m the administrator received from his lawyers a letter of advice dated 19 April 2006, which relevantly provided as follows: 'The issue discussed at our meeting with the directors and Phillips Fox was whether ... the claims of EES and Caltex (to the extent that they have any claims) with respect to costs are debts/claims which are provable in any Deed of Company Arrangement that may be proposed. As we have indicated to you in our view they are not. It is of course a matter for any party propounding a Deed of Company Arrangement to specify in the proposal the debts and claims of creditors which are provable in the Deed (see section 444A(4) of the Corporations Act ). Relevantly however section 444A(4)(i) states that the Deed must specify the day (being a day not later than the day when the administration began) on or before which claims must have arisen if they are to be admissible under the Deed. The word " claims " is not defined in the Act although the definition contained in 553 of the Corporations Act which deals with debts provable in a winding up is often used as the definitions in a Deed as to which claims are provable in the Deed. Whatever definition of claims is incorporated into the Deed however it is clearly the case that the claim must have " arisen " by the time of the Administrator's appointment for the debt to be provable. The question arises whether the asserted right of Caltex and EES to the benefit of Costs Orders is a claim which has " arisen " as at the date that the Administrator was appointment (sic) . In our view the claims had not " arisen " at that date. As long ago as 1899 the Courts had determined (in Bankruptcy proceedings see Re: British Goldfields of West Africa (1899) 2 Ch 7) that the legal costs arising out of Court proceedings are not provable unless an Order is made for the payment prior to the date of the winding up. The New South Wales Supreme Court recently considered this position when determining whether the costs incurred by an applicant in seeking to wind up a company are provable in a subsequent Deed of Company Arrangement in circumstances where no Order had been made for costs with respect to that application prior to the Administrator's appointment. The Court held that such costs were not provable in the Deed of Company Arrangement ( see McDonald v Deputy Commissioner of Taxation [2005] NSWSC 2 ; (2005) 23 ACLC 324). The logic behind these decisions is that the award of costs is a matter which is wholly within the discretion of the Court. While in many cases it is fairly predictable as to how that discretion will be exercised (ordinarily costs follow the event so that the successful party would expect an Order to be made in their favour with respect to costs) until the Court actually exercises its discretion to make an Order it is wholly impossible for an Administrator or Liquidator to make an assessment that the discretion will be exercised in a particular way. It seems to us this is particularly the case in the circumstances of this matter. The issue concerning costs is complicated. There are clearly complex matter to be taken into account in determining what if any Costs Orders should be made and it seems to us those complexities only reinforce the importance of the following the previous authorities and not allowing EES or Caltex to vote with respect to any amount they may claim for legal costs nor to participate in any distribution that may be under any Deed of Company Arrangement that may be proposed. There have been cases which have considered exceptions to this principle. There is some authority for the proposition that contractual arrangements between the parties may alter the legal position. If for instance a party agrees in a contract to be responsible for another parties legal costs then there is an argument that the costs have arisen under that contract and so may be provable. In Re: Pasminco Limited [2002] FCA 231 ; (2002) 20 ACLC 782 considered whether costs associated with pursuing a personal injury action against the Company would be provable. The Court considered alternative views as to the nexus between incurring costs and obtaining compensation for personal injury but reinforced the general principle that costs are not provable in the absence of agreement to the contrary or an Order for their payment. In all the circumstances we confirm that we do not believe EES and/or Caltex should be allowed to vote or prove for their legal costs. To the extent that an Order is made by the Court subsequently those costs will be claimable against the Company and it may be if Caltex and EES intend to pursue their claim for costs (if an order is made in their favour) that it is important for the purposes of any Deed proposal that the directors commit to continuing to resist the making of any Order for Costs and give some consideration as to how any Order against the Company would subsequently be funded. It seems to us little point in proceeding with a Deed of Company Arrangement if the commercial reality is that the Company will subsequently face insolvency by breach of its inability to meet an adverse Costs Order.' 42 In McDonald v Commissioner of Taxation ('McDonald') [2005] NSWSC 2 ; (2005) 187 FLR 461 at 472 [36] Barrett J noted that s 553(1) of the Act directs attention not to the time at which a debt or claim arises but to whether 'the circumstances giving rise to' the debt or claim occurred before the 'relevant date'. 43 In the Australian Law Reform Commission's final report, General Insolvency Inquiry (ALRC 45) ('the Harmer Report'), to which reference will be made hereafter, the recommended provision which ended up as s 553(1) of the Act, as set out above, was as follows (see Vol 2 at 151): ' C1. In the administration of a company that is being wound up in insolvency, a debt or liability, present or future, certain or contingent, being an ascertained debt or liability or a liability sounding only in damages, may be admitted as a claim against the company.' 44 Prior to the passage of the Corporate Law Reform Act 1992 (Cth) s 553 of the Corporations Law provided as follows: '553(1) In every winding up, subject in the case of insolvent companies to the application in accordance with the provisions of this Law of the Bankruptcy Act 1966 , all debts payable on a contingency and all claims against the company (present or future, certain or contingent, ascertained or sounding only in damages) are admissible to proof against the company, a just estimate being made so far as possible of the value of such debts or claims as are subject to any contingency or sound only in damages or for some other reason do not bear a certain value. (2) Subject to sections 206RD, 279 and 556, in the winding up of an insolvent company the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and debts provable and the valuation of annuities and future and contingent liabilities as are in force for the time being under the Bankruptcy Act 1966 , in relation to the estates of bankrupt persons, and all persons who in any such case would be entitled to prove for and receive dividends out of the property of the company may come in under the winding up and make such claims against the company as they respectively are entitled to by virtue of this section.'' 74 In FAI Workers Compensation (NSW) Limited v Philkor Builders Pty Limited ('Philkor') (1996) 20 ACSR 592, Young J, as his Honour then was, held that the prospect of a plaintiff securing an entitlement to costs in winding up proceedings under the Corporations Law did not enable such a plaintiff to contend that a contingent debt was payable by the company to the plaintiff in circumstances where, before a winding up order was made, the company was placed in administration and a deed of company arrangement was thereafter executed following a resolution of the majority of creditors of the company that it should do so. Such resolution had not been supported by the plaintiff. This decision is quite unexceptional and has no real bearing on the resolution of the issues in the present case. As his Honour said at 597: 'As under s 466 there is a personal obligation to bear one's own costs of a winding up petition until the winding up order is made and then a statutory right to get costs which commences as at that day, it does not appear to me that a claim for costs before the order is made can be classed as a contingent debt.' (see also Expile at 673-5 and McDonald at 474-5) 75 After referring to Philcor and Expile Barrett J said in respect of the costs of winding up proceedings in McDonald at 474-5 [45]-[46]: '... The preferable analysis ... is that it is the state of insolvency found by the court to exist that forms the basis of the winding up order. The applicant's debt is the source of the applicant's standing to seek a winding up order. That debt may also cause a presumption of insolvency to apply via the statutory demand process provided for in Div 2 of Pt 5.4 for the purposes of the winding up application. But even then, it is the court's positive decision that insolvency exists, rather than the particular circumstance of non-payment of the applicant's debt, that forms the basis for the exercise of the jurisdiction to make a winding up order.' 90 In McDonald , Barrett J drew a distinction between prospective orders for costs in winding up proceedings and in other proceedings. At 474 [44] his Honour said: 'Where some act or omission of a company occurring before winding up carries within it the seeds of substantive relief in proceedings in which an adverse costs order is likely if the claim against the company is made out, the eventual liability under such a costs order may be seen to have its genesis in the original act or omission. But where the relevant proceeding is for a winding up order which does not, of its nature, entail substantive relief grounded in any particular anterior act or omission of the company, no such link is apparent.' 91 When addressing who may fall within the expression 'the creditors' in s 439C of the Act, it is important to note that there are distinct differences between the terminology used in s 82 of the Bankruptcy Act referable to the determination of 'debts provable', being the applicable section in relation to insolvent companies by virtue of s 553(2) of the Corporations Law prior to the passage of the Corporate Law Reform Act 1992 , that used in s 553(1) of the Corporations Law at that time referable to the determination of debts and claims that were 'admissible to proof' against a solvent company that was being wound up, and that used in the current s 553(1) of the Act referable to the determination of debts and claims which are 'admissible to proof' against a company that is being wound up, whether solvent or insolvent. 92 Firstly, the Bankruptcy Act was concerned with debts and liabilities to which a bankrupt was subject at the date of the bankruptcy, or to which he may become subject before his discharge by reason of an obligation incurred before the date of his bankruptcy. Section 553(1) of the Corporations Law, prior to its amendment in 1992, was silent in respect of any question of prior 'obligation'. It provided for 'all debts payable on a contingency' and for 'all claims' against the company to be admissible to proof against the company. Section 553(1) of the Act is concerned with debts and claims 'the circumstances giving rise to which occurred before the relevant date'. 98 To use Barrett J's expressions in McDonald , the eventual liability of Charben under the costs orders of the Full Court made on 19 May 2006, following the appointment of Charben's administrator on 31 March 2006, had its 'genesis' in the judgment of the Full Court in the plaintiff's favour, handed down on 22 December 2005. One could also say that 'the seeds' of the costs orders were the circumstances occurring before 31 March 2006, namely the delivery of the judgment in the plaintiff's favour on 22 December 2005. 99 In my opinion the plaintiff had, as at the date of the appointment of the administrator to Charben, a present claim for costs to which s 553(1) of the Act applied. Accordingly, subject to compliance with the regulations, the plaintiff would be entitled to vote at the adjourned decision meeting under s 439A-439C of the Act on Friday 23 June 2006 as a creditor of Charben in respect of both the debt of $1.4m which has already been admitted and also in respect of the plaintiff's costs and disbursements.


case_outcome: referred to

case_text: In the case of insolvent companies, the question of whether debts were provable debts fell to be determined in accordance with the law of the Commonwealth relating to bankruptcy and, in particular s 82 of the Bankruptcy Act (see s 553(2) of the Corporations Law ; Anmi Pty Limited v Williams [1981] 2 NSWLR 138 at 163 and Re Autolook Pty Limited; O'Brien v Bills (1984) 2 ACLC 30 at 33).


case_title: Re Autolook Pty Limited; O'Brien v Bills (1984) 2 ACLC 30


case_title: Community Development Pty Limited v Engwirda Construction Company [1969] HCA 47 ; (1966) 120 CLR 455

case_text: In Community Development Pty Limited v Engwirda Construction Company ('Engwirda') [1969] HCA 47 ; (1966) 120 CLR 455 at 459, Kitto J made the following observations in respect of what is meant by the expression 'contingent creditor': 'Not much assistance is to be gained, I think, from observations that are to be found in reported cases as to the import of the word "contingent", and I shall refer to one only. In In re William Hockley Ltd ... Pennycuick J. suggested as a definition of "a contingent creditor" what is perhaps rather a definition of "a contingent or prospective creditor", saying that in his opinion it denoted "a person towards whom, under an existing obligation, the company may or will become subject to a present liability upon the happening of some future event or at some future date". The importance of these words for present purposes lies in their insistence that there must be an existing obligation and that out of that obligation a liability on the part of the company to pay a sum of money will arise in a future event, whether it be an event that must happen or only an event that may happen. A building contract creates, as soon as it is entered into, an obligation upon the building owner to pay the contract price, either as a whole upon a future event or, more usually, by progress and final payments each of which is to be made on a future event. The event or events may not happen, but if and when one of them does happen the building owner, by force of the contractual obligation, must pay the builder a sum of money. It is, I think, nothing to the point that the event may be complex, as where the payment is agreed to be made when the whole or some part of the work has been done to the satisfaction of an architect as expressed in a certificate or to the satisfaction of an arbitrator as expressed in an award: the building owner is bound from the time the contract is made to pay money to the builder upon a contingency; and that in my opinion makes the builder a contingent creditor of the owner.' 72 Barwick CJ agreed with the observations of Kitto J and, inferentially, so did Windeyer J. Owen J found that the petitioning creditor was within the meaning of the expression 'contingent creditor' and therefore entitled to petition for the winding up of Community Development Pty Limited, although his Honour addressed other possible meanings of the expressions 'contingent debt' and 'contingent liability' in reaching that conclusion. 73 In The National Bank of Australasia Limited v Mason [1975] HCA 56 ; (1975) 133 CLR 191 Barwick CJ adopted the same approach as had been adopted by Kitto J in Engwirda . At 200 he said: 'There must be some present obligation to pay out of which the money may become due' for monies to be regarded as 'owing contingently'.


case_text: In The National Bank of Australasia Limited v Mason [1975] HCA 56 ; (1975) 133 CLR 191 Barwick CJ adopted the same approach as had been adopted by Kitto J in Engwirda . At 200 he said: 'There must be some present obligation to pay out of which the money may become due' for monies to be regarded as 'owing contingently'.


case_outcome: distinguished

case_title: FAI Workers Compensation (NSW) Limited v Philkor Builders Pty Limited (1996) 20 ACSR 592

case_text: In FAI Workers Compensation (NSW) Limited v Philkor Builders Pty Limited ('Philkor') (1996) 20 ACSR 592, Young J, as his Honour then was, held that the prospect of a plaintiff securing an entitlement to costs in winding up proceedings under the Corporations Law did not enable such a plaintiff to contend that a contingent debt was payable by the company to the plaintiff in circumstances where, before a winding up order was made, the company was placed in administration and a deed of company arrangement was thereafter executed following a resolution of the majority of creditors of the company that it should do so. Such resolution had not been supported by the plaintiff. This decision is quite unexceptional and has no real bearing on the resolution of the issues in the present case. As his Honour said at 597: 'As under s 466 there is a personal obligation to bear one's own costs of a winding up petition until the winding up order is made and then a statutory right to get costs which commences as at that day, it does not appear to me that a claim for costs before the order is made can be classed as a contingent debt.' (see also Expile at 673-5 and McDonald at 474-5)


case_title: Fisher v Madden as Receiver and Manager of Dataflow Computer Services Pty Limited [2002] NSWCA 28 ; (2002) 54 NSWLR 179

case_text: In Fisher v Madden as Receiver and Manager of Dataflow Computer Services Pty Limited ('Fisher') [2002] NSWCA 28 ; (2002) 54 NSWLR 179 the New South Wales Court of Appeal was concerned to determine whether a payment ordered by the Industrial Relations Commission of New South Wales to be made under s 106 of the Industrial Relations Act 1996 (NSW) would be entitled to priority under s 556(1)(h) of the Corporations Law . In the course of his reasons for judgment Meagher JA adverted to s 553 of the Corporations Law at 183-5 [7] and [13]. In addressing whether any payment ordered to be made by the Commission might qualify as a contingent debt or claim within the meaning of s 553(1) of the Act his Honour said at [13]: '... The word "contingent" is a slippery word. ... In Federal Commissioner of Taxation v Gosstray [1986] VR 876 at 878, Tadgell J said: "An attempt to formulate a universally applicable definition of a contingent debt or of a contingent creditor is difficult ... . A contingent creditor, like an elephant, is rather easier to recognize than to define. The following statement by Pennycuick J in Re William Hockley Ltd ... is well known: 'The expression "contingent creditor" ... must, I think, denote a person towards whom under an existing obligation, the company may or will become subject to a present liability upon the happening of some future event or at some future date'. In Re Gasbourne Pty Ltd [1984] VR 801 at 837, Nicholson J said that he did not regard that description as exhaustive, and with respect I would not disagree. ... " It follows ... that ... one cannot accurately categorise Miss Fisher's rights (if any) as a "contingent" debt or claim. She has the bare right to make a claim, nobody knowing whether it will succeed or not, or if so in what amount, or subject to what terms or conditions. ...' 78 In his reasons for judgment Sheller JA, with whom Beazley JA agreed, said at 193 [44]: '... at the relevant date Dataflow was under no existing obligation to pay a sum of money by way of a retrenchment payment to Ms Fisher immediately or on a future event. Ms Fisher had only a right to take proceedings in the Industrial Relations Commission to vary the contract to that end. ... [46] However Ms Fisher's right under s 106 of the Industrial Relations Act be categorised, her right to invoke the jurisdiction of the Industrial Relations Commission did not until such time as an order was made create any obligation on Dataflow to make a retrenchment payment to her. Moreover, even if the Industrial Relations Commission declared the contract unfair, varied it ab initio and ordered Dataflow to make a retrenchment payment to Ms Fisher, it remains true that at the relevant date of Mr Madden's appointment no amount for retrenchment payment had become payable before, on or after the relevant date.' 79 The position in relation to a claim under the Industrial Relations Act 1996 (NSW) is on all fours with a claim for costs in respect of an application to wind up a company to which s 466 of the Act applies. 80 Following the process of reasoning indicated in Fisher , Gzell J held in Silbermann v One.Tel Limited (No 2) [2002] NSWSC 295 ; (2002) 20 ACLC 846 at 850-1 that an application to the New South Wales Industrial Relations Commission for the variation of a contract of service to include an indemnity against a director's liability in respect of corporate credit cards issued by American Express International Inc and Diners Club Pty Limited did not constitute future claims within the meaning of s 553 of the Act which were admissible to proof against the respondent, One.Tel Limited. 82 After referring to a passage from Sheller JA in Fisher , Gzell J continued at [16]: '... it seemed unlikely to his Honour that the legislative intention was no longer to confine an obligation to one in existence at the relevant date but to extend the category of future claim to any obligation which comes into existence at any time in the future. In my view, such a construction of s 553(1) would place an intolerable burden on a liquidator whose responsibility it is to determine which future claims are to be admitted to proof and in what amounts.'


case_text: Following the process of reasoning indicated in Fisher , Gzell J held in Silbermann v One.Tel Limited (No 2) [2002] NSWSC 295 ; (2002) 20 ACLC 846 at 850-1 that an application to the New South Wales Industrial Relations Commission for the variation of a contract of service to include an indemnity against a director's liability in respect of corporate credit cards issued by American Express International Inc and Diners Club Pty Limited did not constitute future claims within the meaning of s 553 of the Act which were admissible to proof against the respondent, One.Tel Limited.


case_title: Molit (No. 55) Pty Limited v Lam Soon Australia Pty Limited (Administrator Appointed) (1996) 19 ACSR 160

case_text: In Molit (No. 55) Pty Limited v Lam Soon Australia Pty Limited (Administrator Appointed) ('Molit') (1996) 19 ACSR 160 at 170, Branson J cited with approval a passage from Crutchfield's Annotated Corporate Voluntary Administration Law in which he said: '... it is submitted that the correct position is that such future claims [i.e. claims for future rent and future breaches of covenant] are admissible to proof in a winding-up. This appears to be clear from the terms of s 553 itself and s 554B, which provides for the discounting in accordance with the Regulations of debts payable on a future date. See also McPherson, The Law of Company Liquidation (3 rd ed, p376). If the position were otherwise, the clear intention of Pt 5.3A to enable a company, the subject to a deed of company arrangement, to make a "fresh start", free of the claims of creditors arising out of pre-administration dealings, would be frustrated. ' 84 In Molit , Branson J held that a covenant by a lessee to pay rent by calendar monthly payments in advance on the first day of each month during the term of the lease, created future claims with respect to such payments, contingent upon the lease not being determined pursuant to the terms of the lease or otherwise by agreement. Her Honour found that in the deed of company arrangement there under consideration the lessor was a creditor of the company so far as its claims for future rent under the lease were concerned (see 169-70).


case_title: McCluskey v Pasminco Limited (Administrators appointed) [2002] FCA 231 ; (2002) 120 FCR 326

case_text: Prior to the administrator rejecting the proof of debt for voting purposes to the extent to which it claimed an amount in excess of $1.4m the administrator received from his lawyers a letter of advice dated 19 April 2006, which relevantly provided as follows: 'The issue discussed at our meeting with the directors and Phillips Fox was whether ... the claims of EES and Caltex (to the extent that they have any claims) with respect to costs are debts/claims which are provable in any Deed of Company Arrangement that may be proposed. As we have indicated to you in our view they are not. It is of course a matter for any party propounding a Deed of Company Arrangement to specify in the proposal the debts and claims of creditors which are provable in the Deed (see section 444A(4) of the Corporations Act ). Relevantly however section 444A(4)(i) states that the Deed must specify the day (being a day not later than the day when the administration began) on or before which claims must have arisen if they are to be admissible under the Deed. The word " claims " is not defined in the Act although the definition contained in 553 of the Corporations Act which deals with debts provable in a winding up is often used as the definitions in a Deed as to which claims are provable in the Deed. Whatever definition of claims is incorporated into the Deed however it is clearly the case that the claim must have " arisen " by the time of the Administrator's appointment for the debt to be provable. The question arises whether the asserted right of Caltex and EES to the benefit of Costs Orders is a claim which has " arisen " as at the date that the Administrator was appointment (sic) . In our view the claims had not " arisen " at that date. As long ago as 1899 the Courts had determined (in Bankruptcy proceedings see Re: British Goldfields of West Africa (1899) 2 Ch 7) that the legal costs arising out of Court proceedings are not provable unless an Order is made for the payment prior to the date of the winding up. The New South Wales Supreme Court recently considered this position when determining whether the costs incurred by an applicant in seeking to wind up a company are provable in a subsequent Deed of Company Arrangement in circumstances where no Order had been made for costs with respect to that application prior to the Administrator's appointment. The Court held that such costs were not provable in the Deed of Company Arrangement ( see McDonald v Deputy Commissioner of Taxation [2005] NSWSC 2 ; (2005) 23 ACLC 324). The logic behind these decisions is that the award of costs is a matter which is wholly within the discretion of the Court. While in many cases it is fairly predictable as to how that discretion will be exercised (ordinarily costs follow the event so that the successful party would expect an Order to be made in their favour with respect to costs) until the Court actually exercises its discretion to make an Order it is wholly impossible for an Administrator or Liquidator to make an assessment that the discretion will be exercised in a particular way. It seems to us this is particularly the case in the circumstances of this matter. The issue concerning costs is complicated. There are clearly complex matter to be taken into account in determining what if any Costs Orders should be made and it seems to us those complexities only reinforce the importance of the following the previous authorities and not allowing EES or Caltex to vote with respect to any amount they may claim for legal costs nor to participate in any distribution that may be under any Deed of Company Arrangement that may be proposed. There have been cases which have considered exceptions to this principle. There is some authority for the proposition that contractual arrangements between the parties may alter the legal position. If for instance a party agrees in a contract to be responsible for another parties legal costs then there is an argument that the costs have arisen under that contract and so may be provable. In Re: Pasminco Limited [2002] FCA 231 ; (2002) 20 ACLC 782 considered whether costs associated with pursuing a personal injury action against the Company would be provable. The Court considered alternative views as to the nexus between incurring costs and obtaining compensation for personal injury but reinforced the general principle that costs are not provable in the absence of agreement to the contrary or an Order for their payment. In all the circumstances we confirm that we do not believe EES and/or Caltex should be allowed to vote or prove for their legal costs. To the extent that an Order is made by the Court subsequently those costs will be claimable against the Company and it may be if Caltex and EES intend to pursue their claim for costs (if an order is made in their favour) that it is important for the purposes of any Deed proposal that the directors commit to continuing to resist the making of any Order for Costs and give some consideration as to how any Order against the Company would subsequently be funded. It seems to us little point in proceeding with a Deed of Company Arrangement if the commercial reality is that the Company will subsequently face insolvency by breach of its inability to meet an adverse Costs Order.' 85 McCluskey v Pasminco Limited (Administrators appointed) ('Pasminco') [2002] FCA 231 ; (2002) 120 FCR 326 was concerned with the status of claims for legal costs and expenses incurred in prosecuting claims for injury compensation prior to the date of the commencement of the administration of Pasminco Limited and 21 other companies in the Pasminco Group. Prior to the appointment of the administrators there were approximately 442 claims outstanding against three of the Pasminco companies for injury compensation. The Pasminco Group carried on a number of lead and zinc mining and smelting operations. Goldberg J held that the claims for injury compensation were admissible to proof in the administration they being present claims sounding in damages under s 553(1) of the Act, the relevant workplace events giving rise to the claims having occurred prior to the commencement of the administration. His Honour found that the claims for injury compensation were present claims which had to be valued or quantified by the administrator and in respect of which a just estimate of value must be made before the relevant claimants were allowed to vote at a creditors meeting. His Honour proceeded to find that any claims for legal costs and expenses incurred in prosecuting the claims for injury compensation prior to the date of the commencement of the administration were admissible to proof as contingent claims because of their association and connection with the primary claims for injury compensation, even though there had not been any costs orders obtained for the payment of such legal costs and expenses prior to the commencement of the administration. (See 338 at [39]-[41]). 87 The criticism, by way of obiter, of the decision of Goldberg J in Pasminco , by Finkelstein J in McLellan v Australian Stock Exchange Limited ('McLellan') [2005] FCA 585 ; (2005) 144 FCR 327 at 331-3 [12] - [17] may require further consideration in the light of the matters recorded in these reasons with respect to the relevant statutory framework now prevailing as noted under the heading '"Creditors" for the purpose of Part 5.3A decision meetings '. So also the criticism by Chesterman J of the proposition for which Emma Silver Mining Co v Grant (1880) 17 ChD 122 was cited as authority in British Goldfields , in Southern Cross Mine Management Pty Limited v Ensham Resources Pty Limited [2006] QSC 7 at [27] - [35] .


case_title: McLellan v Australian Stock Exchange Limited [2005] FCA 585 ; (2005) 144 FCR 327

case_text: The criticism, by way of obiter, of the decision of Goldberg J in Pasminco , by Finkelstein J in McLellan v Australian Stock Exchange Limited ('McLellan') [2005] FCA 585 ; (2005) 144 FCR 327 at 331-3 [12] - [17] may require further consideration in the light of the matters recorded in these reasons with respect to the relevant statutory framework now prevailing as noted under the heading '"Creditors" for the purpose of Part 5.3A decision meetings '. So also the criticism by Chesterman J of the proposition for which Emma Silver Mining Co v Grant (1880) 17 ChD 122 was cited as authority in British Goldfields , in Southern Cross Mine Management Pty Limited v Ensham Resources Pty Limited [2006] QSC 7 at [27] - [35] . 95 In my opinion it is questionable whether for the purposes of establishing admissibility to proof, at least for voting purposes, it is necessary to be able to identify a prior 'obligation' out of which a debt or liability, or, for that matter, a claim, arises. However, such considerations would, no doubt, bear upon the determination of just estimates of the value of claims that may be made. It is also questionable whether the traditional concepts of 'future' and 'contingent' as applied to 'debts payable by' a company, necessarily have the same connotations when applied to 'claims against' a company within the meaning of s 553(1) of the Act (cf. the observations of Finkelstein J in McLellan at 330 [9] and 333 [16]). 96 In the present case, Mr Aldridge SC, counsel for the plaintiff, submits that his client had, as at the date of the appointment of the administrator to Charben, a 'present' 'claim' for costs in respect of the trial and of the appeal to the Full Court, 'the circumstances giving rise to which occurred before the relevant date', namely the success of the plaintiff on its appeal with the consequential orders made in the plaintiff's favour on 22 December 2005 in respect of the disposition of the appeal and of the proceedings. Therefore, he submits, that such claim was admissible to proof against the company and the plaintiff was entitled to have its value determined in accordance with s 554A of the Act. 97 In the alternative, counsel for the plaintiff submits that the plaintiff had, as at the date of the appointment of the administrator to Charben, a 'contingent' 'claim' for such costs 'the circumstances giving rise to which occurred before the relevant date' with the same consequences.


case_outcome: followed

case_text: In Meehan v Jones [1982] HCA 52 ; (1982) 149 CLR 571, the Court considered a contract which referred to "a satisfactory agreement ... for the supply of a satisfactory quantity of crude oil." In that case, it was submitted that the contract was illusory and that it merely gave a discretion or option to one party as to whether the promise would be carried out. The Court rejected this submission, and although it agreed that it was for the purchaser to determine whether he had entered into a satisfactory agreement for the supply of a satisfactory quantity of crude oil, it also held that the purchaser had an obligation to act honestly in deciding whether the terms of an offer of finance were satisfactory. In addition, Gibbs CJ observed at 578-579 that the expression "satisfactory" could be given content. This observation is relevant in the present circumstances. Although each case must turn on its factual context, in my opinion, the Court can and will give content to the expression "satisfactory deed of release" as expressed in the Offer of Compromise in the present case. 14 Having regard to the evidence, it is my view that the insertion of this requirement played no significant part in the rejection of the Offer of Compromise because there was no reference to it in the challenges to the terms of the Offer made by the plaintiffs'solicitors. The subsequent offer made in January 2006 by the plaintiffs seeking twice the amount offered by the defendants indicates that it was the amount of the award offered by the defendants which was the real cause of the dissatisfaction of the plaintiffs. The requirement relating to a "satisfactory deed of release" was not an operative cause of the rejection. 15 For these reasons, I do not accept that the Offer of Compromise was uncertain, illusory or oppressive in any sense, or incapable of being accepted by a reasonable addressee.


case_outcome: cited

case_text: respondent and its lawyers have made application to the Court to be released from the implied undertaking to the Court which prevents them from making use of one particular document produced to the respondent and to its lawyers in these proceedings under the processes of the Court otherwise than for the purposes of these proceedings (as to which, see Hearne v Street [2008] HCA 36 ; (2008) 235 CLR 125). The respondent has informed me that it proposes to commence fresh proceedings for declaratory, injunctive and other relief against the applicants and others upon the basis that the structures which underpin the applicants' case in these proceedings constitute an unregistered management investment scheme, based upon the Full Court authority of Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd [2009] FCAFC 147. There is no opposition to the respondent being released from that implied undertaking.


case_outcome: applied

case_text: case law on this matter has recently been essayed by Campbell JA (Allsop P and Bastin J concurring) in Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234 at [90] . I gratefully adopt what his Honour there said (omitting the quite exhaustive case citation): The principles that are applicable in deciding whether an agreement that parties have entered is one that is wholly in writing, or partly written and partly oral, include the following: (1) When there is a document that on its face appears to be a complete contract, that provides an evidentiary basis for inferring that the document contains the whole of the express contractual terms that bind the parties: (2) It is open to a party to prove that, even though there is a document that on its face appears to be a complete contract, the parties have agreed orally on terms additional to those contained in the writing: ... Conversely, it is open to a party to prove that the parties have orally agreed that a document should contain the whole of the terms agreed between them: (3) The parol evidence rule applies only to contracts that are wholly in writing, and thus has no scope to operate until it has first been ascertained that the contract is wholly in writing: (4) Where a contract is partly written and partly oral, the terms of the contract are to be ascertained from the whole of the circumstances as a matter of fact: (5) In determining what are the terms of a contract that is partly written and partly oral, surrounding circumstances may be used as an aid to finding what the terms of the contract are: ... If it is possible to make a finding about what were the words the parties said to each other, the meaning of those words is ascertained in the light of the surrounding circumstances: ... If it is not possible to make a finding about the particular words that were used (as sometimes happens when a contract is partly written, partly oral and partly inferred from conduct) the surrounding circumstances can be looked at to find what in substance the parties agreed: (6) A quite separate type of contractual arrangement to a contract that is partly written and partly oral is where there is a contract wholly in writing and an oral collateral contract. (ii) Interpretation First, it has for some time now been indicated "with tolerable clarity" ( Masterton Homes , at [1]) that, in interpreting a contract, one is entitled to consider context, background and surrounding circumstances without the need first to find some textual ambiguity: see Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; (2004) 218 CLR 451 ; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at [40] ; Synergy Protection Agency Pty Ltd v North Sydney Leagues Club [2009] NSWCA 140 at [22] ; Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 ; (2005) 223 ALR 560 at 573-547; Douglas, "Modern Approaches to the Construction and Interpretation of Contracts" (2009) 32 Aust Bar Rev 158. Fourthly, although the present state of the law in this country is not yet settled on whether it is possible to use post-contractual conduct as an aid to construction of a written contract, the more favoured view is that it is not: see Masterton Homes, at [114]; FAI Traders Insurance Co Pty Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343. The criticisms of this view are, in the main, directed at its inflexibility particularly in relational contract settings: see eg GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 ; (2003) 128 FCR 1 at [351] ; see also Unidroit Principles of International Commercial Contracts: 2004 , Art 4.3.


case_text: it has for some time now been indicated "with tolerable clarity" ( Masterton Homes , at [1]) that, in interpreting a contract, one is entitled to consider context, background and surrounding circumstances without the need first to find some textual ambiguity: see Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; (2004) 218 CLR 451 ; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at [40] ; Synergy Protection Agency Pty Ltd v North Sydney Leagues Club [2009] NSWCA 140 at [22] ; Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 ; (2005) 223 ALR 560 at 573-547; Douglas, "Modern Approaches to the Construction and Interpretation of Contracts" (2009) 32 Aust Bar Rev 158. Secondly, the rights and liabilities of the parties to a contract are determined by the "principle of objectivity": Pacific Carriers Ltd , at [22]. As was explained in Toll (FGCT) at [40]: It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.


case_text: it has for some time now been indicated "with tolerable clarity" ( Masterton Homes , at [1]) that, in interpreting a contract, one is entitled to consider context, background and surrounding circumstances without the need first to find some textual ambiguity: see Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; (2004) 218 CLR 451 ; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at [40] ; Synergy Protection Agency Pty Ltd v North Sydney Leagues Club [2009] NSWCA 140 at [22] ; Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 ; (2005) 223 ALR 560 at 573-547; Douglas, "Modern Approaches to the Construction and Interpretation of Contracts" (2009) 32 Aust Bar Rev 158. Secondly, the rights and liabilities of the parties to a contract are determined by the "principle of objectivity": Pacific Carriers Ltd , at [22]. As was explained in Toll (FGCT) at [40]: It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction. The "standard of endeavour" prescribed by a best efforts clause is characteristically measured by what is reasonable in the circumstances having regard to the particular contract in its business setting and to what could reasonably be expected of the party subject to the obligation: see Transfield Pty Ltd v Arlo Internation Ltd [1980] HCA 15 ; (1980) 144 CLR 83 at 101; see also Farnsworth, Contracts , §7.17. Or to put it shortly, the party's obligation is "to do what [it] reasonably could do in the circumstances": Terrel , at 237. It is nonetheless important in this setting to emphasise the importance of context in giving practical substance to the prescribed standard of endeavour. As Gibbs CJ said of a best efforts obligation in Hospital Products Ltd (at 64): ... it is trite to say that the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in a different context must be viewed with caution. Today this probably does no more than emphasise the contemporary significance of context in contractual interpretation: see Toll (FGCT) Pty Ltd at [40]; and, relevantly for present purposes, that a commercial contract is to be given "a businesslike interpretation": International Air Transport Association at [8]; or as Lord Steyn put it ( Mannai Investment Co Ltd at 771): "a commercially sensible construction". Factual Setting


case_text: it has for some time now been indicated "with tolerable clarity" ( Masterton Homes , at [1]) that, in interpreting a contract, one is entitled to consider context, background and surrounding circumstances without the need first to find some textual ambiguity: see Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 ; (2004) 218 CLR 451 ; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52 ; (2004) 219 CLR 165 at [40] ; Synergy Protection Agency Pty Ltd v North Sydney Leagues Club [2009] NSWCA 140 at [22] ; Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 ; (2005) 223 ALR 560 at 573-547; Douglas, "Modern Approaches to the Construction and Interpretation of Contracts" (2009) 32 Aust Bar Rev 158.


case_title: Lion Nathan Australia Pty Ltd v Coopers Brewery Ltd [2005] FCA 1812 ; (2005) 223 ALR 560


case_text: if a written agreement has a history, "that history is part of the context in which the contract has its meaning": International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3 ; (2008) 234 CLR 151 at [8] . Nonetheless, evidence of prior negotiations is, as a rule, to be excised from the "context". The orthodoxy in this country and the orthodoxy recently reaffirmed in English law: see Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 is that the negotiations of the parties prior to their contracting and their statements of their subjective intentions are, as a general rule, excluded by the parol evidence rule and cannot be used in the interpretation of the contract: see generally Lewison, The Interpretation of Contracts , 3.08 (4 th ed, 2007). Given the recent decision of the House of Lords, I would note without disrespect that this rule does not as of course commend itself in all parts of the common law world and, in particular, in parts of the United States: see Restatement of Contracts, Second, §214(c); and generally, Farnsworth, Contracts, §7.12 (4 th ed, 2004); Yoshimoto v Canterbury Golf International Ltd [2001] 1 NZLR 523 at [76]-[78]. Fifthly, a commercial contract is to be given "a businesslike interpretation": International Air Transport Association v Ansett Australia Holdings Ltd at [8]; or as Lord Steyn put it ( Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19 ; [1997] AC 749 at 771); "a commercially sensible construction". The "standard of endeavour" prescribed by a best efforts clause is characteristically measured by what is reasonable in the circumstances having regard to the particular contract in its business setting and to what could reasonably be expected of the party subject to the obligation: see Transfield Pty Ltd v Arlo Internation Ltd [1980] HCA 15 ; (1980) 144 CLR 83 at 101; see also Farnsworth, Contracts , §7.17. Or to put it shortly, the party's obligation is "to do what [it] reasonably could do in the circumstances": Terrel , at 237. It is nonetheless important in this setting to emphasise the importance of context in giving practical substance to the prescribed standard of endeavour. As Gibbs CJ said of a best efforts obligation in Hospital Products Ltd (at 64): ... it is trite to say that the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in a different context must be viewed with caution. Today this probably does no more than emphasise the contemporary significance of context in contractual interpretation: see Toll (FGCT) Pty Ltd at [40]; and, relevantly for present purposes, that a commercial contract is to be given "a businesslike interpretation": International Air Transport Association at [8]; or as Lord Steyn put it ( Mannai Investment Co Ltd at 771): "a commercially sensible construction". Factual Setting


case_text: if a written agreement has a history, "that history is part of the context in which the contract has its meaning": International Air Transport Association v Ansett Australia Holdings Ltd [2008] HCA 3 ; (2008) 234 CLR 151 at [8] . Nonetheless, evidence of prior negotiations is, as a rule, to be excised from the "context". The orthodoxy in this country and the orthodoxy recently reaffirmed in English law: see Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38 is that the negotiations of the parties prior to their contracting and their statements of their subjective intentions are, as a general rule, excluded by the parol evidence rule and cannot be used in the interpretation of the contract: see generally Lewison, The Interpretation of Contracts , 3.08 (4 th ed, 2007). Given the recent decision of the House of Lords, I would note without disrespect that this rule does not as of course commend itself in all parts of the common law world and, in particular, in parts of the United States: see Restatement of Contracts, Second, §214(c); and generally, Farnsworth, Contracts, §7.12 (4 th ed, 2004); Yoshimoto v Canterbury Golf International Ltd [2001] 1 NZLR 523 at [76]-[78].


case_title: Yoshimoto v Canterbury Golf International Ltd [2001] 1 NZLR 523


case_text: although the present state of the law in this country is not yet settled on whether it is possible to use post-contractual conduct as an aid to construction of a written contract, the more favoured view is that it is not: see Masterton Homes, at [114]; FAI Traders Insurance Co Pty Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343. The criticisms of this view are, in the main, directed at its inflexibility particularly in relational contract settings: see eg GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 ; (2003) 128 FCR 1 at [351] ; see also Unidroit Principles of International Commercial Contracts: 2004 , Art 4.3.


case_text: although the present state of the law in this country is not yet settled on whether it is possible to use post-contractual conduct as an aid to construction of a written contract, the more favoured view is that it is not: see Masterton Homes, at [114]; FAI Traders Insurance Co Pty Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343. The criticisms of this view are, in the main, directed at its inflexibility particularly in relational contract settings: see eg GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 ; (2003) 128 FCR 1 at [351] ; see also Unidroit Principles of International Commercial Contracts: 2004 , Art 4.3. What I should emphasise at the outset is that AMC does not rely upon conduct subsequent to the execution of the Distribution Agreement, but which is inconsistent with its terms, to evidence an oral variation of the agreement: cf GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [224]-[231]. Neither has there been any attempt to rely upon subsequent conduct for the purpose of interpreting the Distribution Agreement: see Cheshire and Fifoot's Law of Contract , [10.16] (9 th Aust ed). Distinctly, there is no allegation made that in exercising its cl 41.1.6 power Hamilton breached its duty of good faith and fair dealing to AMC or otherwise acted unconscionably: cf 67 Am Jur 2d, "Sales", §343. (a) AMC's contentions As AMC's submissions as to the inefficacy of the 13 July 2006 notice of termination turns, in the first instance, upon the construction it advances of cl 8.1, it is appropriate to deal with that provision first. The AMC case can be put shortly. It is that cl 8.1 provides the mechanism for setting the "Term" (ie the duration) of the Distribution Agreement. Unless and until either (or both) of the parties gave "the written notice of its desire to terminate" the Agreement, or "to alter its terms and conditions" (such notice to be given 4 years before the expiration of the 5 year term) "the Term in this Agreement was automatically extended for 12 months to make up the Term to 5 years". In other words, subject to the non-occurrence at the end of the first year of the term of the stipulated condition (which, if it had occurred, would have limited the term of the agreement to a further 4 years (the remaining of the initial term), the initial term was automatically extended a further year. In this sense, it allowed for a rolling 5 year term. Further, it provided expressly for four years notification of a party's "desire to terminate" the Agreement. It could not otherwise be terminated (save by later express agreement). Importantly, it could not be terminated under cl 41.1.6. I have earlier indicated that AMC has not pleaded that the Distribution Agreement was amended after its execution so as to vary cl 8.2. I need not enter upon the matter of variation or of the possible significance of the agreement apparently made at the 23 March 2005 meeting to continue automatically to extend the Distribution Agreement each year for a further 12 months "thereby ensuring a rolling 5 year term at all times". However I would make the following observations. Neither the entire agreement clause (cl 45) nor the writing requirement of cl 50.2 provided an impediment to an oral variation of the Distribution Agreement if such an agreement was in fact reached. I considered the efficacy of "no oral modification" clauses at length in GEC Marconi Systems Pty Ltd , at [214]-[222]. The rule to be applied to such clauses reflects the observation made by Cardozo J in Beatty v Guggenheim Exploration Co 122 NE 378 (1919): "Whenever two men contract, no limitation self imposed can destroy their power to contract again". I would add, as I said in GEC Marconi (at [220]): (5) The usual objection raised to depriving a no oral modification clause of legal effect is that it involves a failure to give effect to what the parties have agreed. In the present case GEC Marconi has raised just this objection. The vice in it, though, is that a later oral or implied contract is itself an agreement. As a US commentator recently observed (Snyder, "The Law of Contract and the Concept of Change: Public and Private Attempts to Regulate Modification, Waiver and Estoppel" (1999) Wis L Rev 607 at p 640): The question for the court is not whether to honour the parties' original agreement, but rather which of their agreements should be effective. To say that contract law should enforce the parties' agreement, therefore, does not resolve the issue. The question is whether to enforce the first agreement or the second. The common-law courts addressing [no oral modification] issues chose the second. This choice makes a fair amount of sense; the later agreement probably reflects what the parties want better than their earlier agreement does. I would add that the opinion expressed in the second quoted paragraph is particularly appropriate to relational contracts which, as in the present instance, may be evolutionary in character.


case_text: a commercial contract is to be given "a businesslike interpretation": International Air Transport Association v Ansett Australia Holdings Ltd at [8]; or as Lord Steyn put it ( Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] UKHL 19 ; [1997] AC 749 at 771); "a commercially sensible construction". The "standard of endeavour" prescribed by a best efforts clause is characteristically measured by what is reasonable in the circumstances having regard to the particular contract in its business setting and to what could reasonably be expected of the party subject to the obligation: see Transfield Pty Ltd v Arlo Internation Ltd [1980] HCA 15 ; (1980) 144 CLR 83 at 101; see also Farnsworth, Contracts , §7.17. Or to put it shortly, the party's obligation is "to do what [it] reasonably could do in the circumstances": Terrel , at 237. It is nonetheless important in this setting to emphasise the importance of context in giving practical substance to the prescribed standard of endeavour. As Gibbs CJ said of a best efforts obligation in Hospital Products Ltd (at 64): ... it is trite to say that the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in a different context must be viewed with caution. Today this probably does no more than emphasise the contemporary significance of context in contractual interpretation: see Toll (FGCT) Pty Ltd at [40]; and, relevantly for present purposes, that a commercial contract is to be given "a businesslike interpretation": International Air Transport Association at [8]; or as Lord Steyn put it ( Mannai Investment Co Ltd at 771): "a commercially sensible construction". Factual Setting


case_text: am mindful in this regard of what Hoffman LJ said in William Sindall Plc v Cambridgeshire County Council [1993] EWCA Civ 14 ; [1994] 3 All E R 932 at 940: It is, of course, a principle of construction that words capable of bearing a very wide meaning may have to be given a narrower construction to reconcile them with other parts of the document. This rule is particularly apposite if the effect of general words would otherwise be to nullify what the parties appear to have contemplated as an important element in the transaction. It is evident that the parties clearly did contemplate that, in appropriate circumstances, the licence should be brought to an end, and that cl 41.1.6 provided an "important element" in that scheme. I need not repeat here what I earlier said of the significance of a power to terminate on notice in long term, relational contracts. The submission that cl 8.1 was intended to guarantee a four year notice period before the agreement could be terminated cannot withstand scrutiny. The Agreement provided that AMC had minimum purchase obligations: see cl 10.2; and that if the Term was extended under cl 8.1, the parties would agree "Minimum Purchases for the period of the extension and these [would] be appended to Schedule 4". Clause 10.4 of the Agreement provided that, if AMC did not purchase products as specified in that Schedule, Hamilton could end the Licence "entirely" by written notice to AMC. There was no guarantee of 4 years notice here. Clause 8.1 was not directed to how the Distribution Agreement could be terminated. Its concern was with its Term with whether the agreed 5 year term would be frozen or extended. Considered in light of cl 10.4, cl 10.5 and cl 41.1 but particularly cl 41.1.6, the language of notification of desire to terminate the agreement was intended to do no more than to indicate that the party was no longer prepared to extend the Term but rather, wanted the Agreement to terminate at the end of the then 5 year period specified in Schedule 4. This is how a reasonable commercial party would have understood it in its context.


case_text: do not consider that it was. Though it appeared in clause 8 and by so doing emphasised that the minimum purchases regime would run in tandem with extensions granted under the rolling 5 year term, cl 8.1's function lay in its relationship with cl 10. That dealt with making best efforts to meet the requirements of Sched 4, and the consequences of failure to make the purchases specified in that schedule. It was a contingent condition to the performance and enforcement of the rights and obligations created under cl 10.2, cl 10.4 and cl 10.5. The non-fulfilment of the condition excused AMC further performance of its contractual obligations under cl 10.2 and cl 10.4 for the year of the extension: cf Maynard v Goode [1926] HCA 4 ; (1926) 37 CLR 529 at 540; University of Western Australia v Gray [2009] FCAFC 116 at [117] ; Cheshire and Fifoot's Law of Contract , [20.1]-[20.2] (9 th Aust ed). The failure to agree as required by cl 8.2 would not of itself constitute a breach of contract by either party, although one can envisage circumstances in which one party so conducts itself in relation to the entry into a cl 8.2 agreement as to be in breach of the Agreement or of an implied term necessary to give cl 8.2 business efficacy (eg to enter into "genuine and good faith negotiations for such an agreement": cf United Group Rail Services Ltd v Rail Corporation New South Wales [2009] NSWCA 177. There is no evidence before me to suggest such was the case as at 1 July 2002.


case_title: University of Western Australia v Gray [2009] FCAFC 116


case_title: United Group Rail Services Ltd v Rail Corporation New South Wales [2009] NSWCA 177


case_text: have earlier indicated that AMC has not pleaded that the Distribution Agreement was amended after its execution so as to vary cl 8.2. I need not enter upon the matter of variation or of the possible significance of the agreement apparently made at the 23 March 2005 meeting to continue automatically to extend the Distribution Agreement each year for a further 12 months "thereby ensuring a rolling 5 year term at all times". However I would make the following observations. Neither the entire agreement clause (cl 45) nor the writing requirement of cl 50.2 provided an impediment to an oral variation of the Distribution Agreement if such an agreement was in fact reached. I considered the efficacy of "no oral modification" clauses at length in GEC Marconi Systems Pty Ltd , at [214]-[222]. The rule to be applied to such clauses reflects the observation made by Cardozo J in Beatty v Guggenheim Exploration Co 122 NE 378 (1919): "Whenever two men contract, no limitation self imposed can destroy their power to contract again". I would add, as I said in GEC Marconi (at [220]): (5) The usual objection raised to depriving a no oral modification clause of legal effect is that it involves a failure to give effect to what the parties have agreed. In the present case GEC Marconi has raised just this objection. The vice in it, though, is that a later oral or implied contract is itself an agreement. As a US commentator recently observed (Snyder, "The Law of Contract and the Concept of Change: Public and Private Attempts to Regulate Modification, Waiver and Estoppel" (1999) Wis L Rev 607 at p 640): The question for the court is not whether to honour the parties' original agreement, but rather which of their agreements should be effective. To say that contract law should enforce the parties' agreement, therefore, does not resolve the issue. The question is whether to enforce the first agreement or the second. The common-law courts addressing [no oral modification] issues chose the second. This choice makes a fair amount of sense; the later agreement probably reflects what the parties want better than their earlier agreement does. I would add that the opinion expressed in the second quoted paragraph is particularly appropriate to relational contracts which, as in the present instance, may be evolutionary in character.


case_text: in its reply pleaded that, if compliance with cl 8.2 was necessary to effect an extension under cl 8.1, Hamilton was estopped from relying upon cl 8.2 or else it elected not to rely upon it. I need not consider either of these responses: on election see generally Agricultural and Rural Finance Pty Ltd v Gardiner [2008] HCA 57 ; (2008) 251 ALR 322 at [56] - [67] ; other than to say that the doctrine of election between inconsistent rights seems inapt to circumstances where cl 8, on the assumption being made, is self executing in its consequence. A claim based on estoppel, on the other hand, if it is not simply oral variation in disguise, has real prospects. The circumstances do demonstrate that from 1 July 2000 the parties conducted themselves in a way not envisaged by cl 8.2; that the contractual effect of their so doing was realised on 1 July 2004; but notwithstanding there were no longer agreed minimum purchases, the parties treated the Agreement as remaining on foot with its rolling 5 year term. Even if I am wrong both in the view I have taken both about the consequence of non-compliance with cl 8.2 and about estoppel, my ultimate conclusion would still stand. If the Term expired on 30 June 2004, the parties then continued in a relationship that clearly was contractual in character. No term having been agreed at that time (though this may have been varied by the 23 March 2005 agreement) the licence was terminable on the giving of reasonable notice (which I find 60 days to be in the circumstances), if it was not in fact ended under cl 41.1.6 (on the assumption that the provisions of the old Distribution Agreement were understood to remain applicable to the parties' business relationship insofar as they could continue to apply to it). Conclusion I find, in the circumstances, that the 1999 Distribution Agreement was terminated under cl 41.1.6 on the expiration of 60 days written notice which notice was given to AMC on 13 July 2006.


case_text: aspects of cl 6.2 should be emphasised at the outset. The first is that cl 6.2 imposed reciprocal and, at least in the case of parallel importation, potentially interdependent obligations on AMC and Hamilton. Those obligations could operate upon the same subject matter for the reason that each could relate, as in the present case, to genuine Hamilton products finding their way into the Hong Kong market outside of the Distribution Agreement. Further, when considered together with cl 34, one party's best efforts obligation could require it to do everything reasonable to help the other carry out its best efforts obligation. Secondly , the subclause did not impose a duty on either party to achieve a specific result, rather it was to use best efforts to secure that result: on the difference see Unidroit Principles of International Commercial Contracts : 2004, Art 5.1.4, Comment 1. The content of "best efforts" is considered below. Thirdly , the best efforts obligation was directed at preventing the occurrence of an undesired event, ie the sale "in the Territory" by third parties of products the subject of the Distribution Agreement. In this it was a less common form of the obligation, the more usual form being directed at procuring the occurrence of a desired result, eg the sale or promotion of a product: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64 ; (1984) 156 CLR 41 at 63-64; the exploitation of an invention: Terrell v Mabie Todd & Co Ltd (1952) 69 RPC 234 ; or the advancement of a business: Sheffield District Railway Co v Great Central Railway Co (1911) 27 TLR 451 at 452. The "standard of endeavour" prescribed by a best efforts clause is characteristically measured by what is reasonable in the circumstances having regard to the particular contract in its business setting and to what could reasonably be expected of the party subject to the obligation: see Transfield Pty Ltd v Arlo Internation Ltd [1980] HCA 15 ; (1980) 144 CLR 83 at 101; see also Farnsworth, Contracts , §7.17. Or to put it shortly, the party's obligation is "to do what [it] reasonably could do in the circumstances": Terrel , at 237. It is nonetheless important in this setting to emphasise the importance of context in giving practical substance to the prescribed standard of endeavour. As Gibbs CJ said of a best efforts obligation in Hospital Products Ltd (at 64): ... it is trite to say that the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in a different context must be viewed with caution. Today this probably does no more than emphasise the contemporary significance of context in contractual interpretation: see Toll (FGCT) Pty Ltd at [40]; and, relevantly for present purposes, that a commercial contract is to be given "a businesslike interpretation": International Air Transport Association at [8]; or as Lord Steyn put it ( Mannai Investment Co Ltd at 771): "a commercially sensible construction". Factual Setting In these circumstances did Hamilton, through Mr Stafford, satisfy the "standard of endeavour" prescribed by the best efforts clause? Did it do all it reasonably could do in the circumstances to achieve the contractual object of cl 6.1: Hospital Products , at 64? I think not. Hamilton was supplying to Crafers identically, and very distinctively, presented Products to those supplied to AMC. The best efforts clause did not as of course require it to abstain from so doing. What it did require, though, was that Hamilton do all that it reasonably could to prevent the Product sold to Crafers being resold by a third party in AMC's Territory. Mr Stafford sought contractually to regulate where the Product was to be resold. However, unlike in Hamilton's international distributorship agreements, Mr Stafford did not seek contractually to regulate to whom the Products could be sold. For him to rely upon what Crafers (via Mr Lanham) indicated was the purpose of their acquisition was clearly insufficient in the circumstances. Hamilton had had no prior dealings with Crafers. Theirs was not a relationship of trust. Crafers, on the material before me, did not indicate how it would effectuate its purpose. It could, for example, have sold the Product to an exporter. Further there is not, in the circumstances, any proper basis for concluding that Crafers had contractually bound itself to effectuate its purpose. Given that the Products sold to Crafers were intended for use out of Australia (even if resold in Australia), it could reasonably be expected of Hamilton that it stipulate by type the person or classes of person (consistent with the understood purpose of the purchase) to whom the Products could be resold and this with the object of preventing the Products from finding their way into the export trade. If they did, given their Hong Kong packaging, there would be a likelihood of their finding their way into AMC's territory as parallel imports. And that is what occurred. By way of preface I should note that up until final written submissions the case had been prosecuted by Hamilton on the basis that AMC, as Hamilton's fiduciary, held the two trademarks as constructive trustee for it, the marks having been obtained by it in breach of its fiduciary duty to Hamilton. The constructive trust claim and with it, seemingly, the allegation of breach of fiduciary duty were abandoned in Hamilton's written submissions. I say "seemingly" in relation to the fiduciary claim because it was scarcely addressed in submissions yet it is anything but non-contentious in the propositions it asserts: see Hospital Products Ltd ; Rickel v Schwinn Bicycle Co 192 Cal Reptr 732 (1983); Glover, Commercial Equity: Fiduciary Relationships , 3.48-3.51 (1995); and for the causes of contention in this area of the law see my "Fiduciary Principle" in Youdan (ed), Equity, Fiduciaries and Trusts , 1 (1989); see also Gibson Motorsport Merchandise Pty Ltd v Forbes [2006] FCAFC 44 ; (2006) 149 FCR 569 at [11] - [16] . I will return to this in the context of AMC's copyright ownership claim. It was open to Hamilton and AMC to cast their contractual relationship in a way which could, for certain purposes at least, have obliged AMC to act in Hamilton's interests alone or, distinctly, in their joint interests: cf Gibson Motorsport Merchandise at [7]-[16]. They chose to formalise their relationship as one of supplier and distributor, a type of relationship which characteristically is designed, subject to contractual limitations, to serve the several interests of the participants: see Hospital Products Ltd v United States Surgical Corporation ; Rickel v Schwinn Bicycle Co . The Distribution Agreement, and the parties conduct under in it in relation to the packaging was quite characteristic of this. Dr Keung was permitted to serve AMC's interests in selling products it acquired from Hamilton, by utilising artwork and language which he considered would facilitate the sale of those products in the area of the Agreement, so furthering AMC's own interests. Hamilton, in turn, would thereby have its own interests served to the extent that enhanced sales by AMC would be likely to lead to enhanced orders from Hamilton. While AMC was given latitude in the language so used, Hamilton in turn was able to protect its own interests in this matter. It retained for itself a right to approve all statements made on the packaging because of its exposure to product liability and it insisted that the two language versions had to match (to comply with requirements of the TGA scheme). There was nothing fiduciary in this arrangement though it doubtless required elements of trust, cooperation and reliance by the parties if it was to work effectively. But these element of themselves did not turn a non-fiduciary contractual relationship into a fiduciary and personal one outside of, and potentially inconsistent with, the contract itself: cf Gibson Motorsport Merchandise at [11]. The accepted basis in this country of the equitable jurisdiction to relieve against an actual or threatened abuse of confidential information lies ... in the notion of an obligation of conscience arising from the circumstances in or through which the information was communicated or obtained. Moorgate Tobacco Co Ltd v Phillip Morris Ltd [No 2] [1984] HCA 73 ; (1984) 156 CLR 414 at 438.


case_text: aspects of cl 6.2 should be emphasised at the outset. The first is that cl 6.2 imposed reciprocal and, at least in the case of parallel importation, potentially interdependent obligations on AMC and Hamilton. Those obligations could operate upon the same subject matter for the reason that each could relate, as in the present case, to genuine Hamilton products finding their way into the Hong Kong market outside of the Distribution Agreement. Further, when considered together with cl 34, one party's best efforts obligation could require it to do everything reasonable to help the other carry out its best efforts obligation. Secondly , the subclause did not impose a duty on either party to achieve a specific result, rather it was to use best efforts to secure that result: on the difference see Unidroit Principles of International Commercial Contracts : 2004, Art 5.1.4, Comment 1. The content of "best efforts" is considered below. Thirdly , the best efforts obligation was directed at preventing the occurrence of an undesired event, ie the sale "in the Territory" by third parties of products the subject of the Distribution Agreement. In this it was a less common form of the obligation, the more usual form being directed at procuring the occurrence of a desired result, eg the sale or promotion of a product: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64 ; (1984) 156 CLR 41 at 63-64; the exploitation of an invention: Terrell v Mabie Todd & Co Ltd (1952) 69 RPC 234 ; or the advancement of a business: Sheffield District Railway Co v Great Central Railway Co (1911) 27 TLR 451 at 452. The "standard of endeavour" prescribed by a best efforts clause is characteristically measured by what is reasonable in the circumstances having regard to the particular contract in its business setting and to what could reasonably be expected of the party subject to the obligation: see Transfield Pty Ltd v Arlo Internation Ltd [1980] HCA 15 ; (1980) 144 CLR 83 at 101; see also Farnsworth, Contracts , §7.17. Or to put it shortly, the party's obligation is "to do what [it] reasonably could do in the circumstances": Terrel , at 237. It is nonetheless important in this setting to emphasise the importance of context in giving practical substance to the prescribed standard of endeavour. As Gibbs CJ said of a best efforts obligation in Hospital Products Ltd (at 64): ... it is trite to say that the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in a different context must be viewed with caution. Today this probably does no more than emphasise the contemporary significance of context in contractual interpretation: see Toll (FGCT) Pty Ltd at [40]; and, relevantly for present purposes, that a commercial contract is to be given "a businesslike interpretation": International Air Transport Association at [8]; or as Lord Steyn put it ( Mannai Investment Co Ltd at 771): "a commercially sensible construction". Factual Setting


case_text: aspects of cl 6.2 should be emphasised at the outset. The first is that cl 6.2 imposed reciprocal and, at least in the case of parallel importation, potentially interdependent obligations on AMC and Hamilton. Those obligations could operate upon the same subject matter for the reason that each could relate, as in the present case, to genuine Hamilton products finding their way into the Hong Kong market outside of the Distribution Agreement. Further, when considered together with cl 34, one party's best efforts obligation could require it to do everything reasonable to help the other carry out its best efforts obligation. Secondly , the subclause did not impose a duty on either party to achieve a specific result, rather it was to use best efforts to secure that result: on the difference see Unidroit Principles of International Commercial Contracts : 2004, Art 5.1.4, Comment 1. The content of "best efforts" is considered below. Thirdly , the best efforts obligation was directed at preventing the occurrence of an undesired event, ie the sale "in the Territory" by third parties of products the subject of the Distribution Agreement. In this it was a less common form of the obligation, the more usual form being directed at procuring the occurrence of a desired result, eg the sale or promotion of a product: Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64 ; (1984) 156 CLR 41 at 63-64; the exploitation of an invention: Terrell v Mabie Todd & Co Ltd (1952) 69 RPC 234 ; or the advancement of a business: Sheffield District Railway Co v Great Central Railway Co (1911) 27 TLR 451 at 452.


case_text: "standard of endeavour" prescribed by a best efforts clause is characteristically measured by what is reasonable in the circumstances having regard to the particular contract in its business setting and to what could reasonably be expected of the party subject to the obligation: see Transfield Pty Ltd v Arlo Internation Ltd [1980] HCA 15 ; (1980) 144 CLR 83 at 101; see also Farnsworth, Contracts , §7.17. Or to put it shortly, the party's obligation is "to do what [it] reasonably could do in the circumstances": Terrel , at 237. It is nonetheless important in this setting to emphasise the importance of context in giving practical substance to the prescribed standard of endeavour. As Gibbs CJ said of a best efforts obligation in Hospital Products Ltd (at 64): ... it is trite to say that the meaning of particular words in a contract must be determined in the light of the context provided by the contract as a whole and the circumstances in which it was made, and that decisions on the effect of the same words in a different context must be viewed with caution. Today this probably does no more than emphasise the contemporary significance of context in contractual interpretation: see Toll (FGCT) Pty Ltd at [40]; and, relevantly for present purposes, that a commercial contract is to be given "a businesslike interpretation": International Air Transport Association at [8]; or as Lord Steyn put it ( Mannai Investment Co Ltd at 771): "a commercially sensible construction". Factual Setting


case_text: second of AMC's propositions in support of its case seeks to fix Hamilton with liability for breach of cl 6.2 on the basis that, because of what Hamilton is alleged to have known, it ought to have been aware that the Products were destined for AMC's Territory yet it failed to do what it reasonably could in the circumstances to have prevented this. It is this version of the case as put in submissions to which Hamilton takes objection. I have considerable difficulties with how AMC ascribes knowledge to Hamilton as such and with how it purports to aggregate that knowledge: cf Australian Competition and Consumer Commission v Radio Rentals [2005] FCA 1133 ; (2005) 146 FCR 292 at [177] - [183] . The information to which it refers and which I earlier listed was not, at all relevant times, shown to have been possessed by any one corporate officer. Nor was it all relevantly possessed at the times the initial supplies were made. Mr Blake, for example, only became aware of the sales to Crafers in March 2002, some months after the first sales. Some, but not all of the listed matters may have been known to Mr Stafford. The basis upon which information (held by various corporate officers over time) was to be aggregated to produce the information base for the allegation that Hamilton ought to have been aware that the products were destined for Hong Kong has not been addressed: cf Radio Rentals . Nor is it said at what time Hamilton had that information base. Some of it, for example, was only acquired after the last supply had been made: eg (8) above. I agree with Hamilton's submission that some number of the pieces of knowledge propounded are, as put, unsupported by the evidence or, in my view, are misleading: eg paras (5), (6) and (8). The evidence falls far short of establishing that Hamilton actually knew that the product sold to Crafers was destined for Hong Kong. It equally does not establish that the relevant proper officers of Hamilton were at any time recklessly indifferent to how Crafers dealt with the Product. Nor did it demonstrate Nelsonian blindness to the Product's likely destination. For reasons I give below, it may properly be said that the circumstances known to Mr Stafford may have called for greater vigilance than was demonstrated. What I do not understand, though, is why a concept akin to constructive notice for such is what seems to be being advanced should in the manner proposed be sufficient to provide the knowledge platform to establish liability in the way sought. This is not to say that the knowledge actually possessed by a person subject to a best efforts clause may not be such as to require further inquiry to be made if the person is to do all that he or she reasonably can in the circumstances to secure the covenanted result. I should note in passing that a consequence of the view I have expressed on Hamilton's state of knowledge necessitates the conclusion that it was not guilty of selling its Products into Hong Kong "directly or indirectly" in breach of cl 9.1.


case_text: AMC was in breach of its obligation under cl 6.2. This disentitled it from recovering damages from Hamilton for breach of cl 6.2. The reason for this, it is said, is that being ready, willing and able to perform at the appropriate time is a condition precedent to a cause of action in contract, whether for damages or otherwise. Reliance in this is placed upon Cohen & Co v Ockerby & Co Ltd [1917] HCA 58 ; (1917) 24 CLR 288 esp at 298 and upon some number of well known specific performance decisions. Secondly, by its failure to inform Hamilton of its knowledge, AMC caused the sales that occurred after "31 January 2002" (sic). Thirdly, "the applicant is not able to take advantage of its own wrong". As I understand this in light of Hamilton's pleading and submissions, this defence, in essence, is one of failure to mitigate. None of these defences were enlarged upon significantly in submissions. In light of my findings as to when AMC became aware of the reality of parallel importation but then failed, unreasonably to notify Hamilton thereof (ie in December 2001), its breach of cl 6.2 post-dated that of Hamilton's first sale to Crafers (which was on 12 or 13 November 2001). There is nothing to suggest that, as at the time of Hamilton's breach of cl 6.2, AMC was not ready, willing and able to perform its reciprocal obligation assuming it was relevantly a "concurrent obligation": cf Cohen & Co at 298. As put in its submissions, Hamilton's first defence is that, contrary to my findings, AMC became aware of the parallel importation and failed to notify this, in October 2001, ie prior to Hamilton's breach. It is unnecessary for me to consider the defence further although I would add that I express no view on the question whether it is an available defence for breaches of a provision such as is presently in question.


case_text: second and third defences, in substance, raise issues of causation and of mitigation. There have been no submissions made on the applicable legal principles, but neither are they controversial for present purposes. It is well accepted that (i) the party claiming compensation for loss has the onus of showing the loss was caused by the breach relied upon; (ii) the criteria of causation applied is a common sense one; and (iii) "the act [or conduct] of the claimant may be considered so unreasonable that it operates to break the chain of causation with the consequence that the claimant recovers nothing" for loss thereafter: Furmston (ed), The Law of Contract , 8.86 (3 rd ed, 2007); see also Mallesons Stephen Jacques v Trenorth Ltd [1998] VSCA 58 ; [1999] 1 VR 727 ; Cheshire and Fifoot's Law of Contract , [23.34]-[23.35], [28.38] (9 th Aust ed). As for mitigation, damages are not recoverable for any loss which could have been prevented by the reasonable mitigating action of the injured party: Cheshire & Fifoot , at [23.41]; Carter on Contract [41-340]; see also Farnsworth, Contracts , §12.12. It is for the party in breach to show the claimant has failed to mitigate its damage: TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57 ; (1963) 180 CLR 130 at 138. The claimant is not required to take all possible steps to mitigate its loss, but only those which are reasonable: Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38 ; (1998) 192 CLR 603 at [134] .


case_title: TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57 ; (1963) 180 CLR 130


case_text: second and third defences, in substance, raise issues of causation and of mitigation. There have been no submissions made on the applicable legal principles, but neither are they controversial for present purposes. It is well accepted that (i) the party claiming compensation for loss has the onus of showing the loss was caused by the breach relied upon; (ii) the criteria of causation applied is a common sense one; and (iii) "the act [or conduct] of the claimant may be considered so unreasonable that it operates to break the chain of causation with the consequence that the claimant recovers nothing" for loss thereafter: Furmston (ed), The Law of Contract , 8.86 (3 rd ed, 2007); see also Mallesons Stephen Jacques v Trenorth Ltd [1998] VSCA 58 ; [1999] 1 VR 727 ; Cheshire and Fifoot's Law of Contract , [23.34]-[23.35], [28.38] (9 th Aust ed). As for mitigation, damages are not recoverable for any loss which could have been prevented by the reasonable mitigating action of the injured party: Cheshire & Fifoot , at [23.41]; Carter on Contract [41-340]; see also Farnsworth, Contracts , §12.12. It is for the party in breach to show the claimant has failed to mitigate its damage: TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57 ; (1963) 180 CLR 130 at 138. The claimant is not required to take all possible steps to mitigate its loss, but only those which are reasonable: Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38 ; (1998) 192 CLR 603 at [134] . While an innocent claimant is under no positive duty to take action to mitigate losses resulting from another's breach of contract, that party may not recover damages for that breach in respect of losses which it might reasonably have been expected to avoid: see generally Furmston (ed), at 8.96-8.103; Cheshire and Fifoot's Law of Contract , [23.41]-[23.44] (9 th Aust ed, 2008); Carter on Contract , 41-340 ff. The onus of proof is upon the party in breach to show that the claimant ought reasonably to have taken certain mitigating steps: Wenkart v Pitman (1998) 46 NSWLR 502. The claimant is not bound to take all possible steps to mitigate its loss, only those which are reasonable: Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38 ; (1998) 192 CLR 603 at [134] . As noted in Furmston (ed) at 8.100-8.101, many of the reported cases which have considered whether the claimant has acted reasonably to reduce its loss have involved the refusal of offers made by the party in breach. While it will be regarded as unreasonable to require a claimant to take steps which are likely to injure its commercial reputation: James Finlay & Co Ltd v NV Kwik Hoo Tong Handel Maatschappij [1929] 1 KB 400 ; Metal Fabrications (Vic) Pty Ltd v Kelcey [1986] V R 507 ; in commercial contracts, as Scrutton LJ commented in Payzu Ltd v Saunders [1919] 2 KB 581 at 589, "it is generally reasonable to accept an offer from the party in default. However, it is always a question of fact." In judging what is reasonable in relation to such offers in a commercial matter, the claimant can be expected to view the matter dispassionately without "indulgence in far-fetched resentment": Payzu , at 586.


case_text: no cross-claim has been made by Hamilton in respect of AMC's failure to disclose its knowledge of the parallel importation once it became aware of it, it is unnecessary for me to consider whether that non-disclosure itself was in the circumstances independently actionable as, for example, under s 52 of the Trade Practices Act : cf Metalcorp Recyclers Pty Ltd v Metal Manufacturers Ltd [2003] NSWCA 213. I should make the additional observation that while Hamilton had advanced a positive case of breach of cl 6.2 by AMC, this was for the purpose of establishing that AMC should have given it explicit notice, as of the end of December 2001, of its knowledge of the reality of parallel importation. Hamilton, though, did not go on to show that, having the knowledge it did, AMC otherwise failed to use its best efforts as required by cl 6.2. Of this latter matter all I will say is this. AMC devised a strategy in October 2001 to use leaflets in, and holographic labels on, Urederm boxes to differentiate its product from parallel imported product. Notwithstanding the knowledge it acquired in December, it did not implement the leaflet strategy until April 2002, and the holographic strategy until September 2002. Equally, when Dr Keung conducted his market investigations in August 2002, parallel importation was quickly detected leading to proceedings against Forward Co in October 2002. Before turning to the question of AMC's entitlement to recover damages for loss resulting from Hamilton's breaches prior to the end of December 2001, there is one further matter raised by Hamilton's to which I should refer. It is alleged that AMC had ulterior purposes, and acted in bad faith from August 2002 in asserting Hamilton was involved in the parallel importation. While I accept that Dr Keung knowingly made unsubstantiated and occasionally knowingly false assertions and representations which do him little credit, I do not accept that such subsequent conduct and the climate in which it occurred, have any real bearing on the questions I have to determine in light of my findings. Damages for breach of cl 6.2


case_text: starting point in considering whether, and if so in what amount AMC, is entitled to damages for the claimed lost opportunity is, as it was put in Sellars v Adelaide Petroleum NL [1994] HCA 4 ; (1994) 179 CLR 332 (at 355): ... the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable.


case_text: AMC nor Hamilton have sought to differentiate the questions (a) whether AMC could and would have purchased and resold the U50g tubes sold to Crafers at or around the time the sales were made to Crafers? And (b) whether and in what amount, if at all, it would have made profits from such sales and resales? Authority binding upon me would suggest that such differentiation is necessary in a case such as the present for the reason that the realisation of the chance to make the lost profit would have depended on AMC's own decision to have purchased and resold the product. Proof on the balance of probabilities that it could and would have done so was necessary if AMC was to show that Hamilton's conduct "has caused a valuable loss of opportunity" see Price Higgins & Fidge v Drysdale [1996] 1 VR 346 at 355 (Full Court of Victoria); G W Sinclair & Co Pty Ltd v Cocks [2001] VSCA 47 ; see also Cheshire and Fifoot , [23.16] (9 th Aust ed).


case_title: G W Sinclair & Co Pty Ltd v Cocks [2001] VSCA 47


case_title: Wenkart v Pitman (1998) 46 NSWLR 502

case_text: an innocent claimant is under no positive duty to take action to mitigate losses resulting from another's breach of contract, that party may not recover damages for that breach in respect of losses which it might reasonably have been expected to avoid: see generally Furmston (ed), at 8.96-8.103; Cheshire and Fifoot's Law of Contract , [23.41]-[23.44] (9 th Aust ed, 2008); Carter on Contract , 41-340 ff. The onus of proof is upon the party in breach to show that the claimant ought reasonably to have taken certain mitigating steps: Wenkart v Pitman (1998) 46 NSWLR 502. The claimant is not bound to take all possible steps to mitigate its loss, only those which are reasonable: Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38 ; (1998) 192 CLR 603 at [134] . As noted in Furmston (ed) at 8.100-8.101, many of the reported cases which have considered whether the claimant has acted reasonably to reduce its loss have involved the refusal of offers made by the party in breach. While it will be regarded as unreasonable to require a claimant to take steps which are likely to injure its commercial reputation: James Finlay & Co Ltd v NV Kwik Hoo Tong Handel Maatschappij [1929] 1 KB 400 ; Metal Fabrications (Vic) Pty Ltd v Kelcey [1986] V R 507 ; in commercial contracts, as Scrutton LJ commented in Payzu Ltd v Saunders [1919] 2 KB 581 at 589, "it is generally reasonable to accept an offer from the party in default. However, it is always a question of fact." In judging what is reasonable in relation to such offers in a commercial matter, the claimant can be expected to view the matter dispassionately without "indulgence in far-fetched resentment": Payzu , at 586.


case_title: James Finlay & Co Ltd v NV Kwik Hoo Tong Handel Maatschappij [1929] 1 KB 400


case_title: Metal Fabrications (Vic) Pty Ltd v Kelcey [1986] V R 507


case_title: Payzu Ltd v Saunders [1919] 2 KB 581