Senior & Anderson

[2011] FamCA 802

FAMILY LAW – FINANCIAL AGREEMENT – Where the Full Court on appeal remitted the question of whether the financial agreement is binding – Whether the financial agreement is binding under s 90G(1) or s 90G(1A) of the Family Law Act 1975 (Cth) as applicable to the agreement made 27 July 2009

FAMILY LAW – STATUTORY INTERPRETATION – Where the majority of the Full Court on appeal agreed on the remittance but differed in relation to the application of the Federal Justice System Amendment (Efficiency Measures) Act (No. 1) 2009 (Cth) (“the Transitional Act”) and the form of s 90G(1) and s 90G(1A) applicable to the financial agreement made 27 July 2009 – Whether the provisions of the Transitional Act are relevant to the form of s 90G applicable to the financial agreement – Whether items 8(7) and 8A(2) and (3) of the Transitional Act and their effect on s 90G(1)(b) and (c) and s 90G(1A)(b) is consistent with the underlying purpose or object of the Transitional Act – Whether regard may be had to the extrinsic materials – Whether the provisions of the Transitional Act were intended to preclude the operation of s 90G(1A) to declare a financial agreement made on or after 14 January 2004 and before 4 January 2010 binding notwithstanding non-compliance with s 90G(1) in circumstances where s 90G(1)(b) is satisfied but s 90G(1)(c) is not satisfied

FAMILY LAW – DECLARATION – Where the husband sought to further amend his amended response to seek an order that the financial agreement be declared binding – Whether the court has the power to declare a financial agreement binding – Whether the provisions of s 90G(1A) must be satisfied before the discretion in s 90G(1A)(c) may be exercised in order to declare the agreement binding pursuant to s 90G(1A)(d) and s 90G(1B)

Hearing Date: 12 August 2011 & 12 September 2011

Date Delivered: 21 October 2011

Judgment of: Young J

135. The rationale for the insertion of 90G(1)(b) in item 2 (as applicable to agreements made on or after 14 January 2004) is to ensure spouse parties received independent legal advice before the agreement is signed in order to make an informed decision. Whereas the rationale for the insertion of 90G(1)(c) in item 2 (as is also applicable to agreements made on or after 14 January 2004) is to enable the “signed statement” to be provided before or after the execution of the agreement to ensure agreements “are not rendered defective” on the basis of the order in which the agreements and statements are signed.

136. Subitems 8(6) and 8(7) reflect the underlying object but extend that object by vesting the court with the discretion to declare the agreement binding on the parties “where each spouse party did not obtain that prior independent legal advice if it is satisfied it would be unjust and inequitable if the agreement did not bind the spouse parties”. The purpose of these items are to enable a court to declare an agreement binding even if s 90G(1)(b) is not satisfied. This suggests that the form of s 90G(1A)(b) as amended by item 8(7) attempts to render s 90G(1A) applicable to a financial agreement in circumstances where the spouse parties have not received independent legal advice but the court determines that the financial agreement should be declared binding notwithstanding the lack of compliance with s 90G(1)(b).

137. Subitems 8A(2) and (3) reflect the underlying object of the Transitional Act as it relates to financial agreements made before the commencement of Schedule 5. The subitems seek to extend the operation of s 90G(1)(b) as inserted by item 2 (that reflects the form of advice required for financial agreements made on or after 14 January 2004 and before 4 January 2010) to include as an alternative, by the operation of item 8A(2), the form of advice required for financial agreements made on or after 27 December 2000 and before 14 January 2004. The additional pre-2004 form of s 90G(1)(b) (and hence s 90G(1)(c) in item 2, with the additional reference to the pre-2004 s 90G(1)(b) inserted by item 8A(3)) was included as an alternative to provide for circumstances in which a legal practitioner provided advice in relation to the pre-2004 requirements for a financial agreement executed on or after 14 January 2004.

165. Section 90G must be applied as amended by the provisions of the Transitional Act. As s 90G(1)(b) is satisfied and s 90G(1A)(b) is not satisfied in relation to the financial agreement between the parties dated 27 July 2009 the financial agreement cannot be declared binding pursuant to s 90G(1B) as the provisions of s 90G(1A) are not satisfied. Accordingly the court cannot make an order declaring that the financial agreement between the parties is binding as the discretion in s 90G(1A)(c) cannot be exercised.

The “Most Wrong” Equity Cases 1990-2003: Attorney General v Blake

ATTORNEY GENERAL v BLAKE
by
R I Barrett

 

Attorney General v Blake [2001] 1 AC 268 is a decision that does not fit principle. In that sense, it is a bad case. Whether it is a bad equity case or a bad common law case is a matter for debate. It may be a bad common law case because it makes an equitable remedy available in a case calling for a common law remedy. It may be a bad equity case because it misapplies the equitable remedy.

It will be recalled that the speech of Lord Nicholls of Birkenhead, with whom all but one of the other members of the House of Lords agreed, begins: “My lords, George Blake is a notorious, self-confessed traitor”. That set the scene for the loss by George Blake of the profits he was receiving from the British publisher of his memoirs written in exile in Moscow. The only peg on which to hang such a deprivation was breach of contract. The contract was an undertaking Blake had signed when he joined the secret service in 1944 not to divulge any official information obtained as a result of his employment either in the press or in book form. The undertaking was expressed to continue after his employment ceased – as it did when he was convicted and imprisoned for espionage. The problem for the Government was that it could not show that it had suffered loss through the publication of Blake’s memoirs. The Government was undeterred. Even though fiduciary duties were over and done with, the House of Lords ordered an account of profits as a remedy for breach of contract.

The House of Lords decision was given on 27 July 2000. The first Australian reference to the aspect of it concerned with account of profits appears to be in the judgment of McKechnie J at first instance in Dalecoast Pty Ltd v Guardian International Pty Ltd [2001] WASC 199 (1 August 2001). His Honour apparently accepted the possibility of following Blake but found the circumstances not to be of the exceptional kind to which the remarks of members of the House of Lords were directed. Two days later, the full Federal Court left no doubt where it stood. In Hospitality Group Pty Ltd v Australian Rugby Union Ltd (2001) 110 FCR 157 (3 August 2001) Hill, Emmett and Finkelstein JJ went straight to Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 and its approval of the venerable principle in Robinson v Harman (1848) 1 Exch 850 that the aim of contract damages is to place the plaintiff in the same position he would have occupied had the contract been performed. When Blake was in the Court of Appeal, the Master of the Rolls had suggested that the law of contract might be considered “seriously defective” if the court could not award disgorgement damages. The Federal Court judges said that, however that may be, the position in Australia is that the loss recoverable for breach of contract is limited as stated in Robinson v Harman, with the aggrieved party entitled only to compensation. They went on:

“If he has suffered no loss, he is not entitled to be compensated. In an appropriate case, the aggrieved party may be able to recover (by a claim in restitution) benefits that he has made available to the wrongdoer; for example, he may be able to recover the price under an incomplete contract or recover possession of goods sold but not paid for. Presently, however, it would be inconsistent with the current principles laid down by the High Court to confer a windfall on a plaintiff under the guise of damages for breach of contract.”

Two months ago, on 27 June 2003, the Full Court in Western Australia gave judgment in an appeal in the Dalecoast case: see Dalecoast Pty Ltd v Guardian International Pty Ltd [2003] WASCA 142. Curiously, perhaps, there was no reference to the Full Federal Court’s decision in Hospitality Group. Worryingly, perhaps, the Western Australia Court – with Murray J delivering the leading judgment and Wallwork and Anderson JJ concurring – dealt with Blake-based submissions on their merits in deciding that an account of profits would not be awarded for breach of contract. The judges appear to have accepted the correctness of Blake – or at least they did not question it – although, in the end, they decided that the conditions it laid down for such a remedy had not been satisfied. In this, they took, as will be seen, the line that has most frequently been taken in England.

Remaining in Australia for the moment, it may be noted that, in the Supreme Court of New South Wales, Blake has been referred to in passing by Mason P in Harris v Digital Pulse Pty Ltd (2003) 44 ACSR 390 (7 February 2003) and by Gzell J in Mainland Holdings Ltd v Szady [2002] NSWSC 699 (22 August 2002). Campbell J mentioned (but did not embrace) an interesting possibility in Town & Country Property Management Services Pty Ltd v Kaltoum [2002] NSWSC 166 (26 March 2002). He raised for consideration the thought that our law may have got, perhaps unwittingly, to the point reached in Blake, but at an earlier time and by a different route, being the road that goes via constructive trust. He pointed to observations in Hospital Products v United States Surgical Corp (1984) 156 CLR 41 by Justice Deane, who was admittedly in dissent, which categorised the defendant’s conduct as breach of contract rather than breach of fiduciary duty and said that a constructive trust might be imposed as the appropriate form of equitable relief in circumstances where a person could not in good conscience retain for himself a benefit, or the proceeds of a benefit, which he obtained in breach of contractual or other legal or equitable obligations. That might be a way in which equity will lead to an account of profits for breach of contract. But it might also be a way that is no more principled than Blake itself. Campbell J’s conclusion was that something more than a mere breach of contract is necessary to justify an account of profits.

How has Blake fared in England? There are at least three cases in which Blake-type relief has been sought but refused and one in which it has been granted. The three are World Wide Fund for Nature v World Wrestling Federation [2001] All ER(D) 50 (Aug) (1 October 2001), AB Corporation v CD Company (The “Sine Nominee”)[2002] 1 Lloyds Rep 805 (19 November 2001) and Experience Hendrix LLC v PPX Enterprises Inc [2003] EMLR 25 (20 March 2003). The case where the claim was successful is Esso Petroleum Co Ltd v Niad Ltd [2001] All ER(D) 324 (Nov) 22 November 2001. In the House of Lords – in Kuddus v Chief Constable of Leicestershire Constabulary [2001] UKHL 29 (7 June 2001) – there has been an observation in passing, citing Blake, that sometimes damages may be measured not by the plaintiff’s loss but by the profit obtained by the defendant from his wrongdoing. The observation was a piece of reinforcement. It was an observation of Lord Nicholls.

The applicability of the Blake doctrine has been seen in all the English cases as turning on the question whether the particular circumstances are of the “exceptional” kind to which the House of Lords referred. Lord Nicholls recognised that his innovation would produce commercial uncertainty. He hastened to attempt to dispel it by saying that an account of profits might be awarded “exceptionally” where “a just response to a breach of contract so requires”. He went on to say something about the “exceptional cases” he had in mind; but, he said, “no fixed rules can be prescribed” – not something, one would think, that seekers after commercial certainty wanted to hear. One important factor, however, will be whether the plaintiff had “a legitimate interest in preventing the defendant’s profit-making activity and hence in depriving him of his profit”. Lord Nicholls found to be of no assistance some other criteria suggested by the Master of the Rolls in the Court of Appeal; and he expressly rejected as insufficient three factors likewise rejected by the Master of the Rolls: the fact that the breach was cynical or deliberate; the fact that the breach enabled the defendant to enter into a more profitable contract elsewhere; and the fact that by entering into a new and more profitable contract, the defendant put it out of his power to perform his contract with the plaintiff.

One of the subsequent English cases in which the exceptional criterion has been found not to be met was the decision of the Court of Appeal in the Hendrix case. The three members of the court there identified three factors as indicative of the exceptional status to which the House of Lords was referring: first, the special and sensitive nature of national security; second, the notoriety which accounted for the magnitude of Blake’s enhanced capacity to earn royalties by breaching his contract; and, third, the fiduciary analogy clearly drawn upon by Lord Nicholls – Blake, of course, was the kind of fiduciary someone is when he or she used to be a fiduciary but is not quite a fiduciary any more.
When one considers these limitations, it seems unlikely that there will be another case that fits the specifications until another notorious self-confessed traitor who has signed a confidentiality contract decamps in highly publicised circumstances and then makes a lot of money by writing his autobiography. That general impression is borne out by the subsequent English cases, with the exception of Esso Petroleum Co Ltd v Niad Ltd. It was held in that case that a service station proprietor who took the benefits of a marketing campaign run by his petrol supplier but did not deliver what he was meant to deliver in order to obtain the benefits was liable to the oil company plaintiff for damages or, at the plaintiff’s option, for an account of profits for breach of contract or for a form of restitutionary remedy. Lord Nicholls’ message about the extraordinary nature of the account of profits remedy, although mentioned, was, it seems, largely ignored. The reasons why the remedy was said to be appropriate were, first, that damages would be an inadequate remedy; second, that there had been breach of what was called a fundamental obligation; third, that there had been several complaints by the plaintiff to the defendant about non-compliance to which the defendant did not demur, although as it turned out, he had been guilty of more widespread breaches than were known; and, fourth, that the plaintiff had a legitimate interest in preventing the defendant from profiting from its breach – whatever that meant in those circumstances. The defendant seems to have been considered a particularly cynical and unrepentant breaker of his contract. It seems to be that, and that only, that sets Esso v Niad apart; and it is just that that was considered insufficient by the Court of Appeal in Hendrix – which, it must be noted, was decided after Esso v Niad.

Blake has been referred to in at least two cases in Canada. In one of them (Amertek v Canadian Commercial Corp (8 July 2003) ONSC 96-CU-113354)), the Esso v Niad line was taken on the basis of the defendant’s “shocking behaviour”. Researches have discovered nothing in New Zealand, although it would be surprising if Blake has not been raised there. In Ireland, interestingly, the Blake approach was considered open, although, on the facts, not applied, as long ago as 1976 in Hickey & Co Ltd v Roches Store (Dublin) Ltd (No 1) [1993] RLR 196 (14 July 1976).

What is the problem of principle with the Blake approach? The remedy of account of profits is for cases where someone misuses a position of ascendancy or influence or trust and obtains something that ought to have gone to a person in a position of protection, vulnerability or beneficial entitlement. Appreciation and accommodation of parties’ positions in those comparative terms is not something with which pacta sunt servanda is concerned.

R.I. Barrett

A paper presented by Justice Peter McClellan Chief Judge at Common Law Supreme Court of New South Wales – To the International Symposium Hangzhou, People’s Republic of China 31 October to 4 November 2006

Australian Administrative Law

Wednesbury Unreasonableness
Wednesbury unreasonableness is the ground of judicial review where the distinction between merits and legality is most obviously blurred, and as such it has been described as “a constant source of judicial torment.” [39]

The Meaning of Wednesbury Unreasonableness
Wednesbury itself was a case involving a decision to deny access to a movie theatre to youngsters on a Sunday, presumably to preserve their moral health. In refusing to interfere with the decision, Lord Greene MR noted that there was considerable overlap between many of the grounds of review that fell within the rubric of “unreasonableness.” In words which have been repeated by countless judges on many occasions his Lordship said:

“It is true that the discretion must be exercised reasonably. Now what does that mean? Lawyers familiar with the phraseology commonly used in relation to exercise of statutory discretions often use the word ‘unreasonable’ in a rather comprehensive sense. It has frequently been used and is frequently used as a general description of the things that must not be done. For instance, a person entrusted with a discretion must, so to speak, direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant to what he has to consider. If he does not obey those rules, he may truly be said, and often is said, to be acting ‘unreasonably.’ Similarly, there may be something so absurd that no sensible person could ever dream that it lay within the power of the authority. Warrington LJ in Short v Poole Corporation [1926] Ch 66 at 90, 91 gave the example of the red-haired teacher, dismissed because she had red hair. That is unreasonable in one sense. In another sense it is taking into consideration extraneous matters. It is so unreasonable that it may be described as being done in bad faith; and, in fact, all these things run into one another.” [40]

This ground came to be known as Wednesbury unreasonableness. It is important to emphasise Lord Greene’s words “something so absurd that no sensible person could ever dream that it lay within the power of the authority.” He added further: [41]

“It is true to say that, if a decision on a competent matter is so unreasonable that no reasonable authority could ever have come to it, then the courts can interfere. That, I think, is quite right; but to prove a case of that kind would require something overwhelming…” (emphasis added).

Wednesbury Unreasonableness: The Border Between Legality and Merits
Courts have repeatedly emphasised that the “unreasonableness” ground “must not be allowed to open the gate to judicial review of the merits of a decision or action taken within power.” [42] The requirement of “something overwhelming” has by and large been taken seriously by judicial decision-makers, so that a decision cannot be interfered with unless it is so unreasonable that it is “obvious” that the decision-maker “is acting perversely,” [43] or it is so unreasonable that the decision is one “for which no logical basis can be discerned” [44] or one that “amount[s] to an abuse of power.” [45] In Minister for Aboriginal Affairs v Peko-Wallsend (1986) 162 CLR 24 Mason J said that a decision may fail theWednesbury test if the decision-maker failed to give appropriate weight to a relevant consideration. [46]

In a later case, Gleeson CJ and McHugh J emphasised that the Wednesbury threshold is high one:

“Someone who disagrees strongly with someone else’s process of reasoning on an issue of fact may express such disagreement by describing the reasoning as ‘illogical’ or ‘unreasonable,’ or even ‘so unreasonable that no reasonable person could adopt it.’ If these are merely emphatic ways of saying that the reasoning is wrong, then they may have no particular legal consequence.” [47]

Types of Wednesbury Unreasonableness
Aside from cases where innappropriate weight has been given to a relevant consideration, Justice Beazley has listed the other types of cases where administrative decisions have been set aside for Wednesbury unreasonableness:

• Where a decision is devoid of plausible justification.
• Where a decision-maker has made an erroneous finding of fact on a point that is fundamentally important in the case.
• Where the decision-maker has failed to have regard to departmental policy or representation.
• When the effect of the decision is unnecessarily harsh.
• When the decision-maker has failed to give genuine, proper or realistic consideration to a matter.
• Where there are demonstrable inconsistencies with other decisions.
• Where there is discrimination without a rational distinction. [48]

These cases could be divided into three broader categories, namely where Wednesbury unreasonableness has been inferred on the basis of “irrationality,” “discrimination” or “disproportionality.” [49] An example of the first category is Minister for Primary Industries and Energy v Austral Fisheries Pty Ltd (1993) 40 FCR 381, where a fisheries management plan was declared invalid for unreasonableness because it contained a statistical fallacy. An example of “discrimination” based unreasonableness is Parramatta City Council v Pestell (1972) 128 CLR 305, where it was held that it was unreasonable to impose a “betterment rate” on industrial buildings but not on cottages, even though the value of both would increase as a result of the works in respect of which the rate was imposed. In relation to the third category, Spigelman CJ has noted that “it can be accepted that a complete lack of proportion between the consequences of a decision and the conduct upon which it operates may manifest unreasonableness in [the Wednesbury] sense.” [50]

The Duty to Inquire
Justice Beazley notes that “another example of Wednesbury unreasonableness is where a decision-maker has not attempted to obtain information relevant to the matter when it is obvious that there is material readily available which is centrally relevant to the decision to be made.” [51] The principle was defined by Wilcox J in the following terms:

“power is exercised in an improper manner if the decision-maker makes his decision – which perhaps in itself, reasonably reflects the material before him – in a manner so devoid of any plausible justification that no reasonable person could have taken this course, for example by unreasonably failing to ascertain relevant facts which he knew to be readily available to him…[I]n a case where it is obvious that material is readily available which is centrally relevant to the decision to be made, it seems to me that to proceed to a decision without making any attempt to obtain that information may properly be described as an exercise of the decision-making power in a manner so unreasonable that no reasonable person could have so exercised it.” [52]

It may be that the administrative decision in that case could have been categorised as one made in bad faith, but as Lord Greene MR noted in Wednesbury the grounds of judicial review quite often overlap.

Duckworth v Water Corporation

[2012] WASC 30

Bankruptcy – Meaning of ‘an action commenced by a person who subsequently becomes a bankrupt’ in s 60(2) of the Bankruptcy Act 1966 (Cth) – Whether action is stayed when the person purports to commence an action in his capacity as trustee and subsequently becomes bankrupt

Hearing Date: 30-31 January 2012

Decision Date: 2 February 2013

Before: Edelman J

82 The effect of the decision in Re Lofthouse is that the Bankruptcy Act 1966, and (necessarily) the 1924 Act which preceded it, effected a break with the historic approach where actions by a bankrupt as trustee for another would not be stayed. Although this conclusion cannot be confidently asserted, there is a reasonable basis to suppose that this break might have been part of an intentionally broader approach in the broad new scheme of the 1924 Act. In any event, for the seven reasons I have described above, at [32] [48], I am not satisfied that the decision in Re Lofthouse is plainly wrong. The conclusion is therefore that an action commenced by a subsequently declared bankrupt is stayed even if that action is commenced, and asserts rights, which the bankrupt holds in his or her capacity as a trustee for another.

84 Section 60(4) permits a bankrupt to continue an action which he has commenced ‘for any personal injury or wrong done to the bankrupt’. At least in relation to Mr Duckworth’s action for damages for ‘unconscionable conduct’ this might be thought to fall within the words of ‘wrong done to the bankrupt’.

Murdoch v The Queen

[2012] VSCA 7

CRIMINAL LAW – Blackmail – Agreement is an essential element of a joint criminal enterprise – Trial judge erred in instructing the jury that to establish blackmail the Crown was obliged to prove that the accused had no reasonable grounds for making a demand – The Crown was required to prove that the accused did not believe he had reasonable grounds for making the demand.

Hearing Date: 31 January 2012

Judgment Date: 31 Janbuary 2012

Before: Buchanan and Bongiorno JJA and Williams AJA

24 The Crown case against the appellant at trial was that the appellant and the Douglases were engaged in a joint or common venture or enterprise. In the course of his charge to the jury, the trial judge said:

[Defence counsel] in his submission to you and in particular in relation to many of the ten points that he made to you, submitted that there was an onus on the prosecution to establish that the three accused had met or had reached an agreement that they should act in this way that the prosecution alleges. That is not an element of the principle of common design and I shall now direct you as to what the elements of the common design are for the purpose of the counts that are before you and this direction applies to the counts or the charges that the accused men face in this trial. … You will immediately see that in order to be guilty as a person engaged in a joint criminal enterprise, three things are necessary:1. The crime must have been in fact committed by someone.

2. The accused must have known of the criminal purpose and agreed to play a part in carrying it out.

3. The accused must have performed an act or acts for the purpose of carrying it out.

It is well settled that the doctrine of common purpose rests upon an agreement, express or implied. As the High Court said in McAuliffe v The Queen:^[1]

The doctrine of common purpose applies where a venture is undertaken by more than one person acting in concert in pursuit of a common criminal design. Such a venture may be described as a joint criminal enterprise. Those terms — common purpose, common design, concert, joint criminal enterprise — are used more or less interchangeably to invoke the doctrine which provides a means, often an additional means, of establishing the complicity of a secondary party in the commission of a crime. … Such a common purpose arises where a person reaches an understanding or arrangement amounting to an agreement between that person and another or others that they will commit a crime. The understanding or arrangement need not be express and may be inferred from all the circumstances. If one or other of the parties to the understanding or arrangement does, or they do between them, in accordance with the continuing understanding or arrangement, all those things which are necessary to constitute the crime, they are all equally guilty of the crime regardless of the part played by each in its commission.^[2]

Manner & Manner

[2012] FamCAFC 6

On appeal from [2011] FMCAfam 1066

FAMILY LAW – APPEAL – Appeal from the orders made by the Federal Magistrate dismissing the husband’s application to restrain the wife from instructing solicitors who had previously acted for the husband – Where it was argued that although the solicitors have not acted on behalf of the husband for a number of years, the prejudice to the husband is of possible significance

FAMILY LAW – APPEAL – Application for leave to appeal – Where the husband contends that leave to appeal was not necessary, as there had been an error of law and because of the serious nature of the application, to deny the husband a right to appeal, where there are proper grounds to argue may cause a substantial injustice to him – Where the wife argued leave was necessary as the orders were procedural in nature – Where it was found that the orders made by the Federal Magistrate were final in nature rather than interlocutory

FAMILY LAW – APPEAL – Where it was submitted that the Federal Magistrate’s approach to the husband’s application was contrary to the Full Court’s decision in McMillan where it was said there only needs to be a theoretical risk of prejudice, not proof of prejudice – Where the Federal Magistrate misunderstood the husband’s application and applied the wrong test – Where the central question is whether the solicitors may have confidential information arising out of a solicitor/client relationship which may be used to the advantage of their present client or to the disadvantage of their former client – Ordered that the wife be restrained from instructing or continuing to instruct her solicitors in the proceedings – Substantive proceedings to be adjourned before another Federal Magistrate – Appeal allowed.

FAMILY LAW – COSTS – Cost certificate granted to the husband for his costs of and incidental to the appeal.

Hearing Date: 28 November 2011

Judgment Date: 23 January 2012

Before: May J

Fryer Holdings v Liaoning MEC Group (Merchantable Quality)

[2012] NSWSC 18

Hearing Date: 30 January 2012

Decision Date: 30 January 2012

Before: McDougall J

CONTRACT – identifying terms of contract – what terms were implied in the contract from the United Nations Convention on Contracts for the International Sale of Goods (CISG) – whether goods supplied were fit for purpose and of merchantable quality – whether implied warranty of fitness for purpose had been breached – whether circumstances of termination had any direct relevance to the quantification of damages

DAMAGES – contract – assessment of damages – whether direct losses were sustained – whether indemnity for compensation could be claimed – whether plaintiff could claim damages for loss of profit due to breach.

19 Were the goods fit for purpose? The test which has been applied in this country is that fitness for purpose equates to being of merchantable quality. See, for example, Castel Electronics Pty Ltd v Toshiba Singapore Pte Ltd [2010] FCA 1028 at [123]. It seems to me that I should follow that test, particularly since it has been applied in other common law jurisdictions.

20 The test of merchantable quality requires that the goods should be in such an actual state that a buyer fully acquainted with both latent and patent defects within them, and not limited to their apparent condition, would buy them without abatement of the price that would be paid if they were in fact in reasonably sound order and condition. See Dixon J in Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387 at 418.