Dispute between Steggles Limited and Yarrabee Chicken Company - Assignment Example

Question 1: (a) The case was about a contractual dispute between Steggles Limited and a chicken grower, Yarrabee Chicken Company. Yarrabee Chicken Company was among a group of chicken growers that had entered into contracts with Steggles. These contracts were in the same form which provided for the Growers to grow chickens based on tunnel growing method. During the initial proceedings of the case, Yarrabee had brought a representative proceeding against Steggles based on Federal Court of Australia Act 1976 (Cth), Part IVA, with claims that there was a breach of contracts by Steggles with the Growers as well as claims for damages for the brach of the contracts. In a joint judgement by three judges (Jacobson, Lander & Foster JJ), it was determined that an appeal should be allowed. The issue was proper construction of clause 7.4(a) of the contract. The clause provided that Steggles would offer “any extra shed capacity” arising during the contract to the Growers in preference to third parties. In regard to proper construction, the issue was specifically whether the phrase “extra shed capacity” referred to description of physical sheds. That is, if it meant an increase in the number or size of existing sheds, or otherwise, the capacity to grow additional chickens by use of existing sheds. (b) In the view of judges on appeal in regard to the pivotal to clause 7.4, the ‘proper construction’ is governed by the principle of objectivity stated in Pacific Carriers Ltd v BNP Paribas (2004) and Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004). The principle of objectivity determines the rights as well as liabilities of the parties to a contract. The contractual relations are not governed by the subjective understandings or beliefs of the parties in regard to their rights and liabilities. What is most important is whether every party by conduct and words would have resulted to a reasonable person in the position of other party to believe. What is referred to as the common intention of the parties to a contract is to be understood in reference to what would understand the language expressed in the agreement by the parties. Determination of the meaning of the terms as used in a contractual document is based on what a reasonable person would have understood the terms to mean. Thus, it usually requires not only the consideration of the text but also the consideration of surrounding circumstances that are known to the parties as well as the object and purpose of the transaction. According to the three judges, the meaning of the phrase “extra shed capacity” must be taken into consideration as a whole in regard to its full contractual context. However, there was a need for some guidance in regard to individual words used such as ‘extra’, and ‘capacity’. According to them, measuring of extra capacity is in reference to the conditions occurring since the date of the contract. Such is clear from the language of clause 7.4 (a). Measuring of extra capacity with reference to conditions occurring on day to day basis would not be consistent with the object of the contract or its language. In regard to the capacity, it need to be determined in regard to any increase in Beresfiled plant’s processing capacity measured in regard to the plant capacity at the date of the execution of the contract. The judge argued that this construction fitted most naturally with the language in clause 7.4 (a) and other contract provisions as well as its object and purpose.   (c) In regard to the implied term by the primary judge was that “Steggles was bound to provide Growers first, and in preference any third party, the capacity to rear any bird to be processed at Beresfield plant”. Her reasons were based on the satisfaction of five conditions by the test stated in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) and adopted by High Court in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982). The main reason for her to view it this way was that: “if it doesn’t mean what was submitted by Growers and Steggles is then free to place birds at the plant for processing at its own discretion, then there is undermining of the entire commercial rationale of the contract”. However, according to the three judges, the term does not necessary give the business efficacy to the contract and without it, the contract is perfectly effective. The effect of the contract was based on the fact that Steggles agreed to provide chicks to the growers. The growers then undertook to grow the chicks but on a fee which is based on efficiency incentive payment regime that the contract stipulated. There was no obligation for Steggles to supply minimum number of chicks or batches and thereby retaining a maximum flexibility for itself in the supply process. The only protection that was provided to the growers by Steggles in return for that benefit was to pay a minimum guaranteed dollar sum. The judges stated that there was nothing in contractual terms that was commercially ineffective. Based on Hospital Products Ltd v United States Surgical Corporation (1984) case, without the implication of a further term, the contract in those terms was “efficacious” and it was not necessary that it was required to avoid an unworkable situation. In addition they stated that the implied term is also inconsistent term stated in clause 5.1, where the effect of that clause as stated by the judges, is to secure absolute control for Staggle over the number of chicken it supplies to Growers. Thus, imposing a barrier on the power of control for Steggles as per implied term would be inconsistent with the effect of clause 5.1 (d) In a commercial contract such as the present one, it is well accepted that it is to be construed broadly and fairly. However, the court has no power for remaking a contract in order to avoid a result that a party may consider unjust. Based on such statements, in an approach to the construction of a contract, if a detailed analysis of words in a commercial contract will result to conclusion that will break the common sense of the business, it must then be made to yield common sense to the business. However, evidence of previous negotiations is ordinarily to be removed from the process of construction. Thus, in the light of the dynamic of commercial relations that exist between these parties, the appeal to the decision was fair and equitable since the efficacy of the business was provided. Question 2: The issue is whether Camira can sue Mackay to recover the damages sustained. The doctrine of the privy of contract In regard to the doctrine of the privy of contract, it is clear that only the people who are parties to a contract are allowed to take as well as enforcing it. A third party beneficiary (that is a person who stands to gain benefit from such a contract) is not allowed to take any enforcement action if there is a denial of the benefits promised. Lack of entitlement is as explained by the case of Tweedle v Atkinson (1861) and the doctrine of privity is recognised in various Australian high court decisions Coulls v Bagot’s Executor and Trustee Co Ltd. (1967). In this case, Mackay and CSC are parties to a contract in regard to the privy to a contract. The two can sue each other in case there is a breach of contract by either party. However, Camira is not a party to that contract and in such situation; Camira is a third party beneficiary who cannot sue Mackay if Mackay fails to pay the amount of damages that Camira is claiming. Such doctrine is explained in the case of Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co [1915] where it was stated that certain principles in regard to the doctrine of the privy of contract are fundamental. One such principle is that only the one who is a party to a contract is entitled to sue on it and the law does not know recognise the third party right of action arising by way of contract. In regard to the doctrine of consideration, it is only the one who has provided consideration that can enforce a promise. Based on this case, it could be argued that Camira could not sue on the basis that Camira had not in any way provided consideration for the promise of Mackay to pay the damages. In regard to the case for Taddy and Co v Sterious & Co (1904), a manufacturer cannot sue a retailer in regard the price of goods since the retailer contracts with the wholesaler, while the wholesaler contracts the manufacturer. Based on our case, Camira cannot sue Mackay in regard to the damages since Makcay contracts with CSC while CSC contracts with Camira. This implies that there is no contract between Mackay and Camira. It is also noting the importance of clause 7. In any way, whether Mackay had agreed that Camira should use the biodiesel for the road train engine, clause 7, even if amended orally stated clearly that in any case, Mackay could not be held liable for any damage on the engine as a result of use of biodiesel. This means that even if Mackay and Camira would become party to the contract, it was clear that Mackay was not liable for any damages sustained by any party in regard to use of his biodiesel on any party’s engine. Remedy in regard to breach of obligation to a third party: This is in regard to the remedies that can be pursued against Mackay which may be in breach of its obligations to Camira which is a third party to the contract. Although Camira is a third party and as well not privy to the contract, it means that Camira has no right for action against Mackay. However, CSC which is a party to the contract can sue Mackay for the damages of Camira where two possible remedies arise: damages at common law as well as specific performance in equity. Based on damages at common law, since remedy for a breach of contract is always to plaintiff, CSC has a possibility of succeeding. The challenge will be the measure of the damages recovered. Critical understanding of CSC’s position in this context is the basic principle for damages assessment in regard to the breach of contract. If there is an indication that there was real loss suffered, the plaintiff can get an award of substantial damages. However, it is possible that the measure of damages recovered by CSC may be nominal since CSC suffered no loss of the breach of Mackay. In other words, the position of CSC is the same irrespective of whether or not Mackay pays the sum of $40,000 to Camira. However, it is only in special circumstances that CSC may suffer real loss in regard to their business relation with Camira where substantial damages may be awarded in reflection of CSC’s loss, not Camira’s loss Coulls v Bagot’s Executor & Trustee Co Ltd (1967). However, CSC may recover damages but the measure of damages will be nominal, thus providing a little reason for CSC to pursue common law damages in Alfred McAlpine Construction Ltd v Panatown Ltd (2001). Based on specific performance in equity, upon specific proof of a breach of contract for Mackay, specific performance may be granted. However, it will not always be granted, unlike the common law damages. The challenge is that if common law damages will be an adequate remedy, the remedy on specific performance in equity may be refused as for the case of Beswick v Beswick (1968). Though, it may be held that Camira has no right on the basis that it is not party to contract, it can be sued for specific performance on the promise of Mackay where Camira may win (Young, Croft, & Smith, 2009). In conclusion, based on the doctrine of the privy to the contract, Camira cannot sue Mackay in order to recover the damages sustained totalling $40,000. However, based on the damages at common law and specific performance in equity, Camira may sue Mackay for the sustained damages. Question 3: The issue is whether Dr. Zola has liability for professional negligence to Rubicon Holdings. For Rubicon to sue Dr. Zola (defendant) for professional negligence, a claim that Rubicon (plaintiff) want to include compensation for expenses incurred in remedying the negligence, it must establish that: There was a duty of care owed to Rubicon by Zola Zola breached his duty of care, and Rubicon suffered damage owing to breach of duty by Zola. It is important to consider the proximity between the plaintiff and the defendant in order to determine if a duty of care exists, the standard of care that was actually taken or expected in the prescribed circumstance by the defendant as well as the contributory negligence of the defendant. In addition, it will be essential to take into account the attitude of the defendant as a professional in the manner in which she delivered or provided the service (Commonwealth of Australia, 2002). Standard of care for professionals According to s 22 of the Civil Liability Act 2003 (Qld), a professional does not breach a duty of care which arises from providing a professional service if it can be established that the way that the professional acted when providing the service was widely accepted was widely accepted as a competent professional practice by a number of respected practitioners. Based on the case, the defendant who is an experienced professional in her field followed the rules of her profession by providing the interim plan first to the owner of the project under question at that time and strongly advised the owner to hire a specialist surveying first to ascertain the exact ground characteristics so that the defendant can strengthen the foundation if necessary. However, the owner ignored and went on erecting the structure. Based on this statement, it can be argued that the defendant did not breach a duty because the advice she provided to the owner of the building at that time was an advice that any professional in that field would have provided. In addition an interim plan means that it was provisional showing that the defendant had not approved the plan as a final one to be used in construction. In the case, it can be argued that it was not warranted that the interim plan that the defendant provided to the owner would exactly achieve the desired result, but he used reasonable skill and care in provision of the service at question. According to Greaves & Co (Contractors) Ltd v Baynham Meilkle & Partners (1975), it is reasonable that in regard to a professional, the law does not usually guarantee the professional will achieve the final desired result, but the law recognises a term that a professional will use reasonable care and skill. Thus, the defendant did not warrant that the interim plan would lead to the desired results but she use reasonable skill and care in regard to advising the owner to hire a specialist in survey. If the owner heeded the advice of the defendant, it is most likely that the current situation would not have occurred. In addition, it can be argued that there is no negligence on the basis on the degree of commitment or performance that the defendant displayed in this case. In regard to the case of Interchase Corporation Ltd v ACN 010087573 Pty Ltd (2000), on evaluation of a property which was not alike to previous properties, the court made its decision not based on the degree of accuracy of the property, but based on the degree of performance of the defendant. In the case under study, it can be argued that the building under construction was unique based on the characteristics of the ground. Thus, it can be argued that the negligence may be determined by the evidence of the performance of the defendant based on the reports and the evidence she will present to the court. For instance, the document containing the interim plan is very essential since it proves that as an experienced civil engineer, the defendant provided the provisional plan which she did not approve to be used as a final plan. In addition, evidence of a written document is also important in regard to the defendant’s advice to the owner not to move on with the plan before consulting a specialist in surveying to get the exact ground characteristics. The defendant can also present her professional qualification which presents her as an experienced civil engineer. Finally, the defendant can also defend herself based on standard of care in regard to contributory negligence. This can be argued based on the fact that the plaintiff who suffered the damages has been guilty of contributory negligence. This is because the plaintiff may have failed to take the required precautions against the risk of this harm during the time she bought the structure (Civil Liability Act 2003 (Qld), s 23). It is necessary for one to have all the documents about a property when buying it. Thus, it can be argued that one of the necessary documents was the plan which in this case was the “interim plan”. The plaintiff could have taken the necessary precaution to prevent this harm by not buying a structure that was build using an interim plan. It can also be considered that the plaintiff could not have entered into a transaction but for the negligence of the seller of the building in providing all the information about the condition of the building. In such situation, the liability in negligence is shifted to the seller. In regard to the case of Kenny & Good Pty Ltd v MGICA (1999), the liability for the extent of loss that resulted is because the negligence advice that of the one who made the affected to be involved into the transaction. In this case, it is due to negligent advice from the seller that the plaintiff bought the property. It can be concluded that Dr. Zola has no liability for professional negligence to Rubicon because she did not breach the duty of care as claimed by the plaintiff. This is based on lack of duty of care, lack of breach of her duty of care. Thus the damages are not related to lack of her duty of care. This is explained by her professional advice to the seller of the building, the degree of her performance as well as the contributory negligence evidence by the plaintiff. References Cases: Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518 Beswick v Beswick [1968] AC 58 BP Refinery (Westernport) Pty Ltd v Shire of Hastings [1977] HCA 40, [26] Codelfa Construction Pty Ltd v State Rail Authority (NSW) [1982] HCA 24; (1982) 149 CLR 337, [347] Coulls v Bagot’s Executor & Trustee Co Ltd (1967) 119 CLR 460 Coulls v Bagot’s Executor and Trustee Co Ltd. (1967) 119 CLR 460. Dunlop Pneumatic Tyre Co Ltd v Selfridge & Co [1915] AC 847 Greaves & Co (Contractors) Ltd v Baynham Meilkle & Partners [1975] 3 All ER 99 Interchase Corporation Ltd v ACN 010087573 Pty Ltd [2000] QSC 13 Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 Pacific Carriers Ltd v  BNP Paribas (2004) 218 CLR 451, [22] Taddy and Co v Sterious & Co [1904] 1 Ch 354 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165, [40] Tweedle v Atkinson (1861) 763 All ER 369. Legislation: Civil Liability Act 2003 (Qld). Federal Court of Australia Act 1976 (Cth) Books/reports: Commonwealth of Australia, Review of the Law of Negligence Final Report 2002 (“the IPP Report”). Young, P, Croft, C, & Smith, M 2009, On Equity: Lawbook Co. Read More