Tyre & Tube Australia (Services) Pty Limited v Martins Stock Haulage (Scone) Pty Limited

The first defendant, Martins Stock Haulage (Scone) Pty Limited (Martins Stock Haulage), and the second defendant, Gordon Martin Pty Limited trading as Gordon Martin Bulk Haulage (Martin Bulk Haulage) (together, the Martin Group), operate a road transport business. Martin Stock Haulage transports sheep and cattle, and Martin Bulk Haulage transports bulk goods, such as grain and mining equipment, by truck around the eastern parts of Australia.

Mr Henri Gordon Martin (Mr Martin Snr) and his son, Mr Jason Martin (Mr Martin Jnr), are the directors of the Martin Group. They are the third and fourth defendants respectively.

From April 2012 until 15 January 2015, the Martin Group had a contract with the cross-defendant, Colonial Tyre Service Pty Limited (Colonial), to supply, fit and service the tyres on the Martin Group’s fleets of trucks and trailers (the Colonial Agreement). The director of Colonial is Mr Allan Carver who had, through various companies for a number of years, been involved in supplying tyres and associated services to the Martin Group. Colonial is now in receivership and did not participate in these proceedings, although I am satisfied that it was properly served and was on notice of the hearing.

Under the Colonial Agreement, Colonial provided services to the Martin Group on a “CPK” (cents per kilometre) basis, meaning that the Martin Group paid Colonial an agreed number of cents for each kilometre travelled by each of the trucks and trailers in its fleets and in return Colonial supplied tyres for those trucks and trailers, replaced those tyres when necessary and provided associated services such as wheel balancing, pressure maintenance, tyre rotation, puncture repairs, re‑treading and re‑grooving.

The Martin Group also paid Colonial for other services such as roadside assistance for damaged or punctured tyres. These services were referred to as “exceptions” and were invoiced and paid for separately from the monthly CPK amount.

In order for Colonial to calculate the CPK amount owing each month, the Martin Group provided to Colonial from the trucks’ GPS readings information concerning how far each truck and trailer had travelled in the month.

Colonial acquired tyres to be fitted to the Martin Group’s fleets from the plaintiff, Tyre & Tube Australia (Services) Pty Limited (TTA).

It is TTA’s case that in early February 2014, the contractual arrangements between the parties were changed so that TTA started to supply tyres directly to the Martin Group and the Martin Group agreed to pay to TTA the amount it previously paid to Colonial. TTA claims that in breach of the revised contractual arrangements, the Martin Group has failed to pay amounts owing by it. In this proceeding, TTA claims those amounts. It also claims those amounts from Mr Martin Snr and Mr Martin Jnr under guarantees they are said to have given of the Martin Group’s obligations. In the alternative, TTA claims an order that the Martin Group provide it with information concerning the distance travelled by each truck and trailer in the fleets since July 2014 fitted with a tyre or tyres supplied by TTA so that TTA can accurately calculate the amount due to it in respect of the period from July 2014.

TTA also pleads an alternative case based on an estoppel.

The Martin Group denies that there was any contract between it and TTA or that it engaged in any conduct giving rise to an estoppel. In the alternative, by its cross-claim, it claims that if it is liable to pay TTA it is entitled to recover money it paid to Colonial on the basis that that money was paid under a mistake.

For the reasons that follow, I have concluded that there was no agreement between TTA and the Martin Group and that the alternative case based on an estoppel must fail.

The Colonial Agreement is evidenced by a letter dated 11 March 2012 from Colonial to the Martin Group setting out the CPK rate that Colonial proposed to charge the Martin Group for each type of truck in the fleets and an acceptance of those rates signed on behalf of the Martin Group on 1 April 2012 by its commercial manager.

The terms on which Colonial acquired tyres from TTA prior to February 2014 are set out in an Application for Commercial Credit dated 23 November 2012, which was signed by Colonial, and standard terms and conditions attached to that application for credit. Also attached to the application for credit was a Deed of Guarantee & Indemnity signed by Mr Carver by which Mr Carver guaranteed the amounts payable by Colonial. The standard terms and conditions included the following:

Colonial was persistently late and fell substantially behind in paying TTA for tyres that it had ordered. By December 2013, Colonial owed TTA in excess of $450,000 and TTA was no longer prepared to supply it with tyres on credit.

In about late December 2013 or early January 2014, Mr Bloxham, the sole director of TTA, had a meeting with Mr Carver during which Mr Bloxham proposed an arrangement by which (to quote from affidavit evidence given by Mr Bloxham) “Tyre & Tube supplies tyres to the Martins directly and Colonial does the servicing. All the billing would come through Tyre & Tube and the difference between the wholesale price of the tyres and CPK payments by the Martins is either reimbursed to Colonial, or used to pay off the debt Colonial has with Tyre & Tube”.

Mr Carver indicated that the proposal was acceptable to him and that he would speak to Mr Martin Snr about it.

Neither Mr Carver nor Mr Martin Snr gave evidence. However, according to Mr Bloxham, in late January 2014 he and Ms Beaver, who at the time was TTA’s Operations Manager, had a further meeting with Mr Carver. During that meeting, Mr Carver indicated that he had spoken to Mr Martin Snr and that Mr Martin Snr had agreed to deal directly with Tyre & Tube and to open up credit accounts with TTA. Mr Carver then explained how the arrangements between the Martin Group and Colonial worked and, according to Mr Bloxham, assured him that the arrangement was “very profitable”.

At the end of the meeting, either Mr Bloxham or Ms Beaver gave Mr Carver two Application for Commercial Credit forms to be signed by each of the Martin Group companies. The forms were in substantially the same terms as the Application for Commercial Credit signed by Colonial and included guarantees to be executed by Mr Martin Snr and Mr Martin Jnr in substantially the same terms as the guarantee executed by Mr Carver.

Mr Carver arranged for Mr Martin Snr and Mr Martin Jnr to execute the Application for Commercial Credit forms and guarantees and returned the executed documents, which were dated 4 February 2014, to Mr Bloxham in early February 2014.

On 1 February 2014, TTA and Colonial also entered into a “Tyre Supply Agreement”.

Relevantly, that agreement contained the following terms:

At the same time that TTA prepared the Tyre Supply Agreement that was signed by it and Colonial, it prepared a Tyre Supply Agreement to be signed by the Martin Group, Colonial and TTA. That agreement had as one of its terms the following:

In accordance with the new arrangements, Colonial continued to provide purchase orders to TTA and TTA supplied tyres in accordance with those purchase orders. The first purchase order issued by Colonial to TTA was dated 3 February 2014. Colonial continued to provide associated services to the Martin Group. TTA invoiced the Martin Group for the amount payable under the Colonial Agreement. Mostly, the CPK data required in order to prepare those invoices was supplied to TTA by Colonial, but on one occasion the Martin Group emailed the relevant information directly to TTA with a copy to Colonial.

Generally, the CPK data was provided to TTA in the second month after the period to which the invoice related and the invoice was issued later that month and paid at the end of the month or early in the following month. So, for example, the CPK data in respect of February 2014 was provided by Colonial to TTA on 8 April 2014. TTA issued an invoice for the amount calculated in accordance with those data on 14 April 2014 and the Martin Group paid the invoice on 1 May 2014.

From time to time, TTA also issued the Martin Group exceptions invoices for damaged tyres in accordance with instructions given by Colonial.

Contrary to TTA’s expectations, the amount invoiced to the Martin Group each month was not always sufficient to cover the costs of tyres supplied in the month in respect of which the invoice was issued. On 12 May 2014, Mr Bloxham wrote to Mr Carver and Mrs Carver, who also worked in Colonial’s business, concerning that matter. In that email, Mr Bloxham relevantly said:

The position did not improve and, on 15 June 2014, Mr Bloxham sent Mr Carver an email setting out a proposal to ensure that TTA was paid. The email concluded:

It is not entirely clear from the evidence what happened then. However, the matter was not resolved and in early September 2014 Mr Bloxham and Ms Beaver met with Mr Carver during which there was a conversation to the following effect:

Following that conversation, on 5 September 2014, Ms Beaver wrote to Ms Kelly Harvison, the Commercial Manager of the Martin Group. It appears that the text of the email was suggested by Mr Bloxham. In that email Ms Beaver said:

Mr Heinrich, the National Manager of the Martin Group, replied to that email on 5 September 2014. In that reply, Mr Heinrich said:

TTA did not respond to that email. From that time on, TTA was not supplied with CPK data. Nonetheless, it continued to send invoices to the Martin Group based on estimates of the distances travelled by each truck and trailer in the Martin Group fleets.

On 21 October 2014, TTA commenced proceedings against Colonial and Mr Carver in the District Court seeking to recover the wholesale cost of the tyres that it had supplied to Colonial, including tyres that were installed on the Martin Group’s trucks. However, it appears that it did not pursue those proceedings.

TTA contends that the Applications for Commercial Credit and attached standard terms signed by the Martin Group created contracts between TTA and the Martin Group and that it was a term of those contracts that the Martin Group would pay any invoices issued by TTA within 30 days of the date of the invoice. Alternatively, or in addition, TTA contends that the following were express or implied terms of the two agreements:

The basis on which the terms are to be implied was never clearly spelled out by TTA. To the extent that the terms are express, TTA relies on the conversations between Mr Bloxham and Mr Carver, who is said to have been acting as the Martin Group’s agent in negotiating the terms of the contract on which TTA relies.

As to estoppel, TTA relies on both a promissory or equitable estoppel and, in the alternative, an estoppel by convention.

As I have said, TTA’s primary case is that the Applications for Commercial Credit and attached standard terms signed by the Martin Group created contracts between TTA and the Martin Group by which the Martin Group was bound to pay invoices issued by TTA. It relies on cl 1 of the standard terms for that contention.

In my opinion, that case must be rejected. TTA accepts that cl 1 cannot be interpreted as requiring the Martin Group to pay any invoice that TTA happened to issue to the Martin Group. It accepts that the invoice had to be in respect of tyres fitted to trucks in the Martin Group’s fleets; and it accepts that the invoices had to be issued for amounts calculated in accordance with the CPK rates set out in the Colonial Agreement. But those terms are not to be found in cl 1 or any other clause of the standard terms. If they exist at all, they must be found elsewhere.

TTA submits that the additional terms are express oral terms arising from the conversations between Mr Bloxham and Mr Carver or alternatively that they are to be implied.

As to the first limb of this submission, TTA submits that Mr Carver was acting as the Martin Group’s agent in negotiating the variations to the supply arrangements, and it submits that the effect of the conversations was that the Martin Group would pay the CPK rate for tyres fitted to its trucks and trailers.

I do not accept either of those contentions. There is no evidence that Mr Carver had actual authority to negotiate and to agree the terms of a supply agreement between TTA and the Martin Group. Mr Carver had no position with the Martin Group; and there is no evidence at all to suggest that the Martin Group engaged him to negotiate a supply agreement.

Similarly, I do not think that Mr Carver had ostensible authority to negotiate and to agree the terms of a supply agreement on behalf of the Martin Group. In order for ostensible authority to exist, there must be a holding out by someone with actual authority that the agent has authority to enter on behalf of the principal into a contract of the kind in question: Quickfund (Australia) Pty Ltd v Prosperity Group International Pty Limited (In Liq) [2013] FCAFC 5; at [70], referring to Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 at 502-3; Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Company Pty Ltd [1975] HCA 49; (1975) 133 CLR 72. There was no holding out by the Martin Group that Mr Carver had authority to enter into a contract on its behalf. Mr Martin Snr and Mr Martin Jnr signed the Applications for Commercial Credit and gave them to Mr Carver to give to TTA. But that cannot amount to a representation by Mr Martin Snr or Mr Martin Jnr that Mr Carver had authority to agree other terms. The Martin Group permitted TTA to invoice it directly for amounts payable by it to Colonial. But it does not follow from that that it was holding out Mr Carver or Colonial as someone who was entitled to bind the Martin Group to an obligation to pay TTA directly for tyres fitted to its trucks.

The terms contended for by TTA are not to be found in the conversations between Mr Bloxham and Mr Carver. It is apparent that what was agreed between Mr Bloxham and Mr Carver is that Colonial would agree that amounts payable to it by the Martin Group under the Colonial Agreement would instead be paid to TTA and that to permit that to happen the Martin Group would send invoices to TTA for the amounts the Martin Group owed Colonial. It is apparent from its conduct that the Martin Group agreed to those arrangements for a period of time. But the fact that it agreed to those arrangements does not mean that it agreed to be liable to pay TTA for tyres fitted to its trucks.

TTA submits that the court should draw adverse inferences against the Martin Group in accordance with the principles stated in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 because Mr Martin Snr and Mr Martin Jnr were not called to give evidence. It also submits that, applying the rule in Browne v Dunn (1893) 6 R 67 (HL), in the absence of cross-examination of TTA’s witnesses, including Mr Bloxham, it is not open to the Martin Group to advance a case that is inconsistent with the evidence given by TTA’s witnesses. But in my opinion, these rules are of no assistance to TTA in this case. It was for TTA to prove its case. The Martin Group’s position is that the evidence led by TTA did not do that. In particular, the evidence given by Mr Bloxham did not prove that Mr Carver acted as the agent for the Martin Group and it did not prove the oral terms for which it contends. It did not need to call evidence to rebut a case that was not proved and it did not need to put in cross-examination of TTA’s witnesses a case that was not inconsistent with the evidence given by those witnesses. I accept that submission.

TTA does not explain clearly how its case on implied terms is put. The case appears to be that the Applications for Commercial Credit and standard terms constituted or evidenced a contract between the Martin Group and TTA and that the terms for which it contends should be implied in that contract as a matter of fact to give that contract a sensible commercial operation.

There are, however, a number of difficulties with that contention.

First, on their face, the Applications for Commercial Credit and standard terms do not create or evidence a contract. Rather, they set out the terms that are to govern a contract that would be formed if and when the Martin Group placed an order for tyres and TTA accepted that order in writing. So much is clear from cl 15 of the standard terms. There is no evidence that the Martin Group placed orders for tyres with TTA. All orders for tyres were placed by Colonial. For the reasons I have given, Colonial was not acting as the agent of the Martin Group in placing those orders. In particular, there was no holding out by the Martin Group that Colonial had authority to place orders on its behalf.

A curious feature of the case is that Mr Martin Snr and Mr Martin Jnr signed the Applications for Commercial Credit. It appears that from TTA’s point of view, they were asked to do so in advance of the parties agreeing on a tripartite agreement under which the Martin Group would guarantee to pay amounts payable by Colonial for tyres supplied for the Martin Group’s trucks and trailers, which was never signed. In the absence of evidence from Mr Martin Snr and Mr Martin Jnr, it is a matter of speculation why they signed the applications. But the absence of an explanation from them cannot elevate the applications to something which on the face of them they are not.

Second, in order for the terms to be implied they would have to satisfy the requirements set out by the Privy Council in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 at 282-3, which were approved by the High Court in Secured Income Real Estate (Australia) Ltd v St Martins Investments Pty Ltd [1979] HCA 51; (1979) 144 CLR 596 at 605-6. Those requirements are that:

It is not necessary to deal with each of these conditions separately. The difficulty with the terms contended for by TTA is that they do not fit with the standard terms. The standard terms contemplate that orders will be placed for tyres by the Martin Group, TTA will deliver those tyres and invoice the Martin Group for them and the Martin Group will pay those invoices within 30 days. But on the implied terms contended for by TTA, it was entitled to invoice the Martin Group not for the wholesale cost of the tyres but for the amount payable to Colonial for the services it provided. Moreover, it submitted that it was entitled to continue to invoice the Martin Group even after Colonial stopped ordering tyres to be installed on Martin Group trucks, at least until TTA had recouped the wholesale price of the tyres that it had supplied. TTA is unable to explain how those terms met any of the conditions set out in BP Refinery. They are terms that TTA hoped to agree, but could not. They are not terms which are an obvious incidence of the documents signed by the Martin Group.

Third, the conclusion that there was no agreement between the Martin Group and TTA for the supply of tyres is consistent with what happened once the arrangements between them was terminated. On termination of the arrangements, TTA did not demand that the Martin Group pay for tyres that had been delivered and not paid for, as might be expected if an agreement had been reached. Rather, it sought to recover the costs of the tyres from Colonial.

TTA accepts that in order to make out a promissory or equitable estoppel it must prove, to use the words of Priestley JA in Austotel Pty Limited v Franklins Selfserve Pty Limited (1989) 16 NSWLR 582 at 610:

In the present case, TTA submits that it assumed that a contract had come into existence between the Martin Group and it and that the Martin Group had created or encouraged that assumption by:

TTA submits that it suffered detriment by supplying tyres on credit for which it has not been paid and that it would be unconscionable for the Martin Group to resile from assumption because it has had the benefit of the tyres.

TTA accepts that in order to make out a conventional estoppel, it must prove that:

In the present case, TTA submits that both parties operated on the basis that there was a contract between them and that consequently the Martin Group is estopped from asserting that there was not, although the precise terms of the contract on which the parties are said to have operated were not clearly identified.

In my opinion, the facts necessary to ground either estoppel are not made out. In particular, the most that could be said is that TTA assumed that if it continued to supply tyres for use on the Martin Group trucks in accordance with orders placed by Colonial, Colonial would direct that the Martin Group pay the amounts due to Colonial under the Colonial Agreement to TTA and the Martin Group would comply with that direction. That is what was agreed in the conversations between Mr Carver and Mr Bloxham. The Martin Group created or encouraged that assumption by paying invoices issued to it by TTA. But I do not think that it encouraged TTA to believe that it was agreeing to do more than that, or that both parties acted on an assumption that went beyond that. Orders for tyres were still placed by Colonial. The amount paid by the Martin Group was calculated in accordance with the Colonial Agreement. The Martin Group refused to sign a tripartite agreement that would have imposed greater obligations on it. It did sign the Applications for Commercial Credit and Mr Martin Snr and Mr Martin Jnr signed the Deeds of Guarantee and Indemnity. But in my opinion, the assumptions on which TTA says it relied do not follow from those documents.

Nothing that the Martin Group did suggested that the arrangements in relation to payment would continue for any particular period of time. Consequently, I do not think it could be said that the Martin Group made or encouraged an assumption that the payment arrangements would last indefinitely or until TTA had recouped the amount owed to it by Colonial or some other time. Consequently, it was not unconscionable for the Martin Group to bring the arrangement to an end when it did.

It follows that the cases based on estoppel are not made out.

The Martin Group has been successful in defending the claim against it. Consequently, it is not necessary to deal with its cross-claim against Colonial. However, in my opinion, it was reasonable for the Martin Group to file a cross-claim against Colonial. At a minimum, it had a reasonable claim that if TTA was entitled to recover amounts from it, then it was entitled to recover that proportion of those moneys that it had paid Colonial. On that basis, the Martin Group should be entitled to recover the costs it has incurred in relation to the cross-claim from TTA. On the other hand, Colonial did not participate in the proceedings and there is no basis for making a costs order in its favour.

It follows that the orders of the court are: