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Mudginberri Station Pty Ltd v. The Australasian Meat Industry Employees Union
 ATPR 40-708
15 IR 272
(Judgment by: Morling J.)
Re: Mudginberri Station Pty. Limited
And: The Australasian Meat Industry Employees Union; Jack O'Toole; Trevor Surplice; Dick Annear and Pat Roughan
Federal Court of Australia
Judgment date: 21 July 1986
1. The background to the claim
This is the first case in which an applicant has pursued a claim for damages in respect of loss or damage alleged to have been caused by action taken by an industrial union and its officers in breach of s.45D of the Trade Practices Act 1977 (Cth). On 12 July 1985 I held that the Australasian Meat Industry Employees Union ("the Union") and Messrs. O'Toole, Surplice, Annear and Roughan who are officers of the Union, had engaged in conduct proscribed by s.45D(1), and granted injunctive relief (see
61 A.L.R. 280
). I then stood over the applicant's claim for damages against the respondents. An appeal against my decision having failed (
61 A.L.R. 417
), the claim for damages has been brought on for hearing.
To understand the claim it is necessary to advert to some of the facts referred to in my earlier decision. The applicant conducts an abattoir and meat processing works at Mudginberri Station near Jabiru, approximately 200 kms. east of Darwin. It leases from the Commonwealth an area of about 800 sq. miles upon which it runs and musters feral stock. The abattoir and meat works are situated on some 60 hectares of the leased area. Most of the stock killed at the abattoir are buffalo, but cattle also are slaughtered. The applicant obtains its stock from the properties which it leases from the Commonwealth, from pastoralists who have buffalo and cattle on their properties and from contractors who have the right to take animals from Aboriginal and Crown lands. The applicant holds a licence under the relevant legislation permitting it to process meat and to export it and the abattoir itself is registered as an export abattoir by the Department of Primary Industry. Most of the output from the abattoir is sold to overseas buyers.
The Union is an organisation of employees registered under the Conciliation and Arbitration Act 1904 (Cth). Mr Jack O'Toole is the Federal Secretary of the Union. Mr Trevor Surplice is an organiser for the Union based in the Northern Territory. Mr Dick Annear is the Federal President of the Union and the Secretary of its Queensland Branch. Mr Pat Roughan is a national organiser for the Union.
Because of climatic conditions, killing operations at the abattoir are confined to the period extending from April or May to November each year. Except in the special circumstances referred to in order 12 of the Prescribed Goods (General) Orders made pursuant to the Export Control (Orders) Regulations which find their authority in the Export Control Act 1982 (Cth) before meat can be exported from Australia it is necessary that it be inspected and passed by appropriately qualified meat inspectors. In the absence of a certificate that meat has been properly inspected a licence to export it cannot be obtained, save in cases covered by order 12. Meat inspectors employed by the Commonwealth (who are officers employed in the Export Inspection Service of the Department of Primary Industry) are members of the Meat Inspectors Association, another registered organisation of employees. As the present proceedings were originally framed, the Meat Inspectors Association and two of its officers were joined as additional respondents but the proceedings against them have not been pursued.
2. Events preceding the picket
In June 1984 the Union set up a picket line on the road» leading to Mudginberri Station. Because of the picket, members of the Meat Inspectors Association refused for some time to enter the premises to perform their inspection duties and as a result production at the abattoir ceased. In July 1984, the applicant sought and obtained orders restraining the Union from engaging in conduct proscribed by s.45D of the Trade Practices Act. The dispute which gave rise to the setting up of the picket line arose out of the Union's claim that employees at Mudginberri Station should be paid in accordance with a wage system described as the tally system. This system is the basis of payment of meat workers under some State awards, including the Queensland Meat Industry Award. In 1984 the applicant did not employ labour itself, but engaged contractors who, in turn, hired workmen to carry out work at the abattoir.
According to Mr Pendarvis, who is the applicant's managing director, O'Toole told him in 1984 that the applicant must accept the tally system as prescribed in the Queensland Meat Industry Award and that, if it did not, the abattoir would not be allowed to open. On another occasion in 1984 O'Toole said: "You can take us to Court. By the time the case is heard and the decision is made the season will be over and you will be broke." (T.317) It was subsequent to this conversation that the picket line was set up.
After the orders were made by this Court in July 1984 the picket line was disbanded. Subsequently the Conciliation and Arbitration Commission heard an application by the Union for an award to cover meat industry employees in the Northern Territory.
Pendarvis gave evidence, which was not contested, that in August or September 1984, during the course of the proceedings which led up to the making of the new award, Annear said to him: "You bastards, you are up now but we will fix you up next year." When asked to explain this statement Annear further said: "You bastards have had it your way for a long time but we will close you down next year." (T.319)
According to Pendarvis on 23 April 1985 , during the course of a discussion concerning the form of the award which the Commission was expected to publish soon thereafter, Roughan told him that "if the award did not consider a tally system they would take legal and industrial action to force the tally system into the Northern Territory." (T.322)
I accept Pendarvis' accounts of his conversations with O'Toole, Annear and Roughan. I refer to the conversations for the purpose only of showing that the dislocation of the applicant's business as a result of the 1985 picket was not only foreseeable but, indeed, intended by the Union.
In due course the Commission made the Northern Territory Meat Processing Award, 1984 which came into force on 2 May 1985 . The award did not adopt the tally system as the basis for the remuneration of workers, but instead included a provision enabling the use, on certain conditions, of a system of payment by results. After the award was published the applicant set about employing labour for the 1985 season and was in a position to start operations on 9 May. An appropriate form of agreement was entered into by the applicant with its employees and lodged with the Industrial Registrar in conformity with the terms of the award. The total number of employees whose services were engaged was 44, of whom about 26 were engaged in production of meat, the balance being involved in supervision, maintenance, domestic work and administration.
3. The picket and its effects on the abattoir operations
The applicant commenced operations for the 1985 season on 9 May. The following day the picket line was established and was maintained until 8 September. When Pendarvis asked Roughan why the picket had been imposed, Roughan replied: "There's no tally system in the award. We want to negotiate a tally system. If we can come to a satisfactory arrangement, the pickets will be removed." (T.326) The respondents did not dispute that the first respondent was instrumental in organising the picket line and was responsible for maintaining it. Neither was it disputed that the second, third, fourth and fifth respondents all took part in the maintenance of the picket.
The effect of the picket was seriously to disrupt the applicant's operations. It is the responsibility of the Export Inspection Service, a division of the Department of Primary Industry, to allocate inspectors to the applicant's abattoir. Three inspectors were assigned to Mudginberri. In May 1985 they resided at Jabiru township, which is situated about 15 kms. from Mudginberri Station. In 1984 the inspectors had been accommodated on the Station itself. After the picket line was established in May 1985 the three inspectors were instructed by Mr Gordon McColl, the general secretary of the Meat Inspectors Association, not to cross the picket line. This instruction was not countermanded until 8 September, on which date the picket was lifted. Roughan told one of the inspectors that, if necessary, physical force would be used to prevent them working if they crossed the picket line. On 28 May 1985 , O'Toole informed McColl and others that a black ban would be imposed on anyone who crossed the picket line.
McColl was asked why he gave the instruction that the picket line should not be crossed. His answer was as follows:
"Your Honour, the work that our people do places them in between the meat workers and management in inspection and the actions that they are often called upon to take irritate one or other or both of those parties, and I believe they have a difficult enough task to sort of maintain a balance, and we are concerned that if our people were to cross picket lines they would face danger, physical danger at the time of the picket and afterwards; that particularly but not exclusively in situations like the Northern Territory these people come from other towns and go to work up there and then when the work is finished they have to go back to their own headquarters and work with other meat workers who support the issues, and they are likely to be faced with harassment and they certainly are concerned about that, and for their property. We are concerned that the dispute may well escalate if we were forced to go across the picket line and we are also of course concerned because of our position in the trade union move ment, in the ACTU, and the ACTU have endorsed these pickets or support these pickets." (T.286)
McColl's answer exemplifies the well known reluctance of members of one industrial union to cross a picket line set up by fellow workers who are members of another union.
Dr Prenzler, a veterinary officer employed in the Export Inspection Service and who is not a member of the Meat Inspectors Association, said that on 10 May he travelled from Jabiru to Mudginberri in company with Mr Kohler, one of the three Commonwealth inspectors. Their vehicle was stopped at the picket line and they were engaged in conversation by Roughan. Kohler asked Roughan: "What would the picket line try to do if we intended to go through the picket line into Mudginberri and work?" (T.410) According to Prenzler, who I regard as a reliable witness, Roughan replied to the effect that the picketers would use physical resistance if necessary to prevent them going in to work. Following this conversation Prenzler and Kohler returned to Jabiru. Later the same day Prenzler returned to Mudginberri in company with Kohler and Lyle, another inspector. Prenzler passed through the picket line, but Kohler and Lyle did not do so. In later discussions between Prenzler and Roughan it was agreed that inspectors would be permitted to cross the picket line so that some 29 animals which were in the yard and showing signs of distress could be slaughtered. These animals were slaughtered on 13 May. However, Roughan refused permission for the inspectors to cross the picket line for the purpose of supervising the boning of the animals. I am satisfied that, apart from the isolated occasions to which I have referred, the picketers refused permission for the inspectors to cross the picket line to carry out their duties. I am also satisfied that the inspectors declined to cross the line. The line was abandoned on 8 September and the inspectors resumed their duties the following day.
The requirement that meat be inspected before it may be exported from Australia arises from the provisions of the Export Control Act 1982 and the regulations made thereunder. Subsection 7(1) of that Act provides, inter alia, that the regulations may prohibit the export of prescribed goods either absolutely or unless specified conditions are complied with. "Prescribed goods" includes goods that are declared by the regulations to be prescribed goods for the purposes of the Act (s.3). Meat derived from cattle or buffalo slaughtered at a registered establishment has been declared to be prescribed goods. It is unnecessary to refer to all the relevant provisions of the Export Control Act and the regulations and orders made thereunder. They are referred to in detail in the decision of the Full Court in
Mudginberri Station Pty. Limited v Langhorne
( 19 December 1985 ). The effect of the legislation is that, except in the special circumstances referred to in order 12 of the Prescribed Goods (General) Orders, without inspection by an authorised officer meat cannot be exported from Australia. "Authorised officer" is defined in s.3 of the Export Control Act to mean an officer of the Department of Primary Industry or a person appointed under s.20 of the Act to be an authorised officer. Pursuant to s.20 the Secretary of the Department may appoint persons to be authorised officers for the purpose of the exercise by those persons of the powers of an authorised officer under the Act.
On 13 May, Dr Robert Irwin, the Regional Director of the Department of Primary Industry in the Northern Territory, went to Mudginberri and spoke to the meat inspectors. They told him that, irrespective of any direction that he might give them, they would not cross the picket line if their union directed them not to do so. On 17 May Irwin directed the inspectors to perform their normal duties at Mudginberri but they declined to do so. He issued a further direction to the same effect on 29 May but again the inspectors declined to carry out their duties. On 22 June the Department of Primary Industry suspended the licence of the Mudginberri Station abattoir as an export abattoir since production of meat for export had been suspended because of the refusal of the inspectors to carry out their duties.
The applicant requested the Secretary of the Department of Primary Industry to exercise the power vested in him by s.20 of the Export Control Act to appoint authorised officers to perform the duties which the meat inspectors refused to carry out. The Secretary decided to refuse this request. The applicant thereupon applied to the Court under the provisions of the Administrative Decisions (Judicial Review) Act 1977 (Cth) for an order of review of this decision. The application failed, when heard at first instance, but succeeded on appeal - see Langhorne's Case (supra).
I am satisfied that the presence of the picket line at Mudginberri Station was the effective, indeed the only, cause of the Commonwealth meat inspectors refusing to perform their duties at the Station during the period from 10 May to 8 September.
The evidence also establishes that the presence of the picket line had some effect on the carriage of freight to and from Mudginberri. On 23 May 1985 , Mr Barry Carne, a truck driver employed by Hall's Transport, when stopped at the picket line, declined to deliver a load of cartons because, as he said: "I didn't want any trouble at all for my company." (T.397) There is also evidence, which I accept, that pressure was brought on suppliers of stock not to cross the picket line. However, whilst some contractors who would normally have carried stock and goods to and from the abattoir declined to do so whilst the picket was in place, others ignored the picket.
4. Liability for applicant's losses
I am satisfied that the dislocation of the abattoir's operations between 10 May and 8 September caused the applicant substantial losses. However, the respondents argue that any losses sustained by the applicant were not due to conduct for which they are responsible. They submit that such losses were caused by the failure of the Secretary of the Department of Primary Industry to provide meat inspectors for the abattoir and that they are not responsible for losses caused by such failure.
The claim for damages is founded upon s.82(1) of the Trade Practices Act, which is in the following terms:
"82. (1) A person who suffers loss or damage by conduct of another person that was done in contra vention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention."
However, s.45D (6)(a) and (b) provide as follows:
"(6) Where an organization of employees engages, or is deemed by sub-section (5) to engage, in conduct in concert with members or officers of the organization in contravention of sub-section (1) or (1A) -
- any loss or damage suffered by a person as a result of the conduct shall be deemed to have been caused by the conduct of the organization;
- if the organization is a body corporate, no action under section 82 to recover the amount of the loss or damage may be brought against any of the members or officers of the organization;"
It is common ground that the Union is a body corporate. This being so, and since O'Toole, Surplice, Annear and Roughan are officers and members of the Union, s.45D (6)(b) precludes damages being awarded against them. Accordingly, the claim for damages against those respondents must fail.
The question which remains is whether the losses suffered by the applicant were suffered "by conduct of" the Union that was done in contravention of s.45D(1). In view of my earlier finding that the conduct in which the respondents (including the Union) engaged was, indeed, conduct proscribed by s.45D(1) the real question is whether the applicant's losses were suffered "by" that conduct.
The wording of s.82(1) is somewhat unusual; cf. the reference in s.74B(1)(e) to cases where the consumer suffers loss or damage "by reason that" goods are not reasonably fit for a particular purpose; see also s.74F(1)(e) where the liability of a corporation to pay compensation arises where the consumer suffers loss or damage "by reason of the failure of the corporation" to take certain action therein referred to. Notwithstanding the change in language, I think it is plain that s.82(1) contemplates that there must be a causal relationship between the losses suffered by an applicant and the conduct of the person said to be responsible for those losses. In
Brown v Jam Factory Pty Limited
35 ALR 79
at 88 , Fox J. expressed himself as being of the same opinion, as did Northrop J in
Mister Figgins Pty Limited v Centrepoint Freeholds Pty Limited
36 ALR 23
at p. 59 . In
Anor v Transpacific Pastoral Co Pty Limited
( 18 February 1986 ) Pincus J. said (at p.5) that "by" in s.82(1) means "by reason of" or "as a result of". All these cases were concerned with breaches of s.52 of the Act but that is not of importance for present purposes.
Hubbards Pty Limited v Simpson Limited
41 ALR 509
a claim for damages was made in respect of conduct proscribed by s.48 of the Act. In that case Lockhart J said that there must be some causal connection between the conduct constituting the contravention of the Act and the loss or damage claimed. This decision was affirmed on appeal (
44 ALR 695
) and at p.696 of its judgment the Full Court referred, without dissent, to his Honour's observation as to the necessity for some causal connection between the contravention and the loss or damage claimed.
In my opinion there is a real and direct causal relationship between the losses claimed by the applicant and the conduct of the Union. The applicant's losses flowed from the disruption of its business caused by its inability to carry on normal operations at the abattoir. The applicant's business was, almost exclusively, the production of meat and hides for export. It was necessary that meat produced at the abattoir be inspected by appropriately qualified and authorized inspectors before it could be exported. The setting up of the picket line caused the inspectors to decline to cross the line and to refuse to perform their duties thus closing the applicant's export meat business.
It must have been apparent to the Union that the inspectors might well refuse to cross the picket line. When in 1984 a similar picket line was set up the inspectors refused, at least for some time, to cross the line and to perform their inspection duties and as a result, production ceased. Quite apart from the well known reluctance of members of industrial unions to cross picket lines set up by other unions, the events of June 1984 made it probable that if a fresh picket line were set up in 1985 the Commonwealth inspectors would refuse to cross it. In any event, any doubt whether they would cross the line and perform their duties was dispelled on 10 May, when they refused to do so.
In these circumstances, whatever the degree of causal connection required between the losses suffered by the applicant and the conduct of the Union, that degree of connection has been established in the present case. The refusal of the Commonwealth inspectors to perform their duties was the direct and foreseeable consequence of the setting up of the picket line. Indeed, the picket was intended to produce that result. The damage suffered by the applicant is damage of the kind contemplated by s.45D(1), and the conduct of the Union is one of the classes of conduct which s. 45D(1) seeks to prevent. It would be strange indeed if, in these circumstances, the losses sustained by the applicant were not recoverable under s.82(1).
It would be erroneous to treat the failure of the Secretary of the Department of Primary Industry to provide meat inspectors for the abattoir as the cause of the applicant's losses. Those losses commenced as soon as the picket line was set up and continued whilst it remained in place. It is true that the losses would have been smaller if the Secretary had acted in accordance with the applicant's request to appoint Northern Territory inspectors as authorized officers for the purpose of carrying out inspection duties at Mudginberri, but the losses were caused by the respondents' conduct, not by the Secretary's inaction.
Even if I be wrong in this view, and it is proper to regard the Secretary's inaction as being an additional cause of the applicant's losses, I would nevertheless be of the opinion that all the applicant's losses can be identified as having been caused by the Union's conduct. It would be to deny reality to say that the picket did not cause the disruption of the applicant's business which occurred between 10 May and 8 September. It was within the Union's power and control at all times within that period to stop the losses running. It chose, quite deliberately, to inflict continuing losses on the applicant in the knowledge that the applicant was being unsuccessful in avoiding the losses. None of the losses would have been incurred but for the picket.
In no sense did the failure of the Secretary to discharge his duty under s.20 of the Export Control Act break the chain of causation linking the Union's conduct and the applicant's losses. The respondents rely upon the
of Smith J in
Haber v Walker
(1963) V.R. 339 at 358 where his Honour said that for an intervening act to relieve a wrongdoer from liability for his wrongdoing it must be "an occurrence which is necessary for the production of the harm and is sufficient in law to sever the causal connexion". The Secretary's failure was not necessary for the production of the losses suffered by the applicant. Those losses commenced immediately the meat inspectors refused to cross the picket line and continued until the picket was lifted.
It should also be observed that even if the Secretary had appreciated that he was under a duty under s.20 to appoint authorized officers to carry out inspection duties at Mudginberri, it would not necessarily have followed that the applicant's losses would have been avoided. Quite apart from any delay which might have occurred before other inspectors were found, it would have been a question whether any inspectors would have been prepared to cross the picket line for the purpose of doing the Commonwealth inspectors' work, i.e. certifying meat as being fit for export. In the idiom of the union movement this would have been regarded as "scab labour".
There were several sources (including professional staff from within the Department of Primary Industry and non-union labour from private industry) from which the Secretary might well have been able to obtain qualified persons to act as inspectors. It seems that Northern Territory inspectors would have been approached only in the last resort. The work which they normally perform is similar in many respects to the work performed by Commonwealth inspectors. But there are important differences in the responsibilities of the two classes of inspectors. The Northern Territory inspectors may have regarded work done pursuant to temporary authorization under s.20 as "scab labour" and refused to do it, as may have other persons approached to do such work. Whether the Secretary could have found inspectors who would have crossed the picket line to perform the Commonwealth inspectors' jobs must remain a matter of conjecture.
Mr Langhorne, the Secretary of the Department, expressed the opinion that if the government had appreciated that he was under an obligation to appoint inspectors to carry out inspection duties at Mudginberri it would have acted very quickly to change the law. (T.3333) In the light of his evidence any assistance that the applicant may have derived from action taken by the Secretary under s.20 may well have proved temporary.
The respondents put a further argument that there were two causes of the applicant's losses, i.e. the Union's conduct and the Secretary's failure to appoint authorized officers under s.20. As I understand the argument, it accepts that s.82(1) of the Trade Practices Act extends to a case where there are multiple causes of damage. But, so it is argued, the applicant cannot succeed in the present case because it failed to prove that the respondents' conduct was of itself sufficient to cause the losses. I reject this argument because, for the reasons I have already given, I am of the opinion that the respondents' conduct was of itself sufficient to, and did in fact, cause all the applicant's losses.
Nor do I think there is any substance in a further argument that since the judgment given in these proceedings on 12 July 1985 established a breach of s.45D(1)(b)(i) only during the period up until that date, no damages can be awarded in respect of losses incurred after that date. The evidence establishes that the picket was not lifted until 8 September. I am satisfied that the maintenance of the picket between 12 July and 8 September was further conduct by the Union in contravention of Part IV of the Act. As such, s.82(1) gives the applicant the right to recover the losses sustained by it as a result of that conduct.
5. Measure of damages
I turn now to consider the measure of the damages to which the applicant is entitled. In
Gates v City Mutual Life Assurance Society
(1986) 60 A.L.J.R. 239 at p. 240 -241, Gibbs C.J. said:
"Actions based on ss.52 and 53 are analogous to actions in tort and the remedy in damages provided by s.82(1) appears to adopt the measure of damages applicable in an action in tort. That sub-section refers to loss or damage by the conduct of another that contravened a provision of Pt.IV or Pt.V; it therefore looks to the loss or damage flowing from the offending act of the other person. The acts referred to in ss.52 and 53 do not include the breach of a contract, and in awarding damages under s.82 for a breach of either of those sections, no question can arise of damages for loss of a bargain. The contractual measure of damages is therefore inappropriate in such a case. It has been held in the Federal Court in a number of cases that the measure of damages in tort, and not that for breach of contract, will apply in the assessment of damages under s.82 where there has been a contravention of s.52 or s.53: see
Brown v Jam Factory
35 A.L.R. 79
, at p.88;
Mister Figgins v Centrepoint
36 A.L.R. 23
, at p.59 and
Brown v Southport Motors
43 A.L.R. 183
, at p.186. This view is plainly correct."
In Jam Factory (supra, at p. 88) Fox J said in respect of a claim for damages for loss or damage caused by a breach of s.52:
"The correct way to approach the assessment of damages in this case, in my view, is to compare the position in which the applicants might have been expected to be if the misleading conduct had not occurred with the situation they were in as a result of acting in reliance on that conduct (see
Esso Petroleum Co Ltd v Mardon
 1 QB 801
; (1976) 2 All ER 5). This is the same, or analogous to, the general principle respecting the measure of damages in tort. There was not anything promissory in the state ments relied upon, and no basis exists for adopting the measure of damages applicable in contract. As an action based on s 52 is more appropriately classified as one of tort, it is possible that the measure of damages will always, fundamentally, be based on principles affecting torts."
In Mister Figgins (supra, at p.59) Northrop J agreed with the views expressed by Fox J. The present case is plainly akin to a claim in tort, as was Hubbard. In the last-mentioned case, damages were assessed by comparing the position in which the applicant might have expected to have been if the contravention of Part IV of the Act had not occurred with the position it was in as a result of the contravention. I agree with that approach, which is consistent with the approach taken in both Jam Factory and Mister Figgins. I propose to adopt the measure of damages applicable in an action in tort in assessing the damages sustained by the applicant.
6. Method of calculating damages
The applicant claims that an appropriate, and the most satisfactory, method of calculating its losses is to determine the amount of revenue it lost in 1985 as a result of the picket, to deduct from that sum an amount equivalent to the reduction in its costs due to the diminished production whilst the picket was in place, and then to add certain additional costs which it claims it incurred as a result of the picket. The appropriateness of this method was supported in evidence by Mr Joseph Bracher, an accountant who has specialised for many years in calculating damages for interruption of business. Properly followed, the method should disclose the true measure of the applicant's loss. The approach taken by Mr Justin Gardener, an experienced accountant called by the respondents, was to construct a profit and loss account for the applicant's business in 1985, and to compare that account with a notional profit and loss account for the same period, assuming the business had not been affected by the picket. Any reduced profit (or increased loss) revealed by the comparison, plus any additional costs, was said to be the measure of the applicant's damage. I think that both methods should return the same result provided, of course, the same basic revenue and cost items and assumptions are used. I prefer to use Mr Bracher's approach since, on the facts of the present case, it is less complicated. Further, many of the assumptions made in Mr Gardener's calculations do not coincide with some of the findings of fact I make later in these reasons.
In calculating the applicant's losses I have used my own estimates, based on the evidence, of the income which would have been earned and the costs which would have been incurred but for the picket. I agree with the submission made by counsel for the respondents that it would be unsafe to base these estimates on figures which appear in the applicant's budget for 1985.
I turn now to consider the extent of the applicant's loss of revenue due to the picket. I shall first consider the volume of production that would have been achieved in 1985, and then consider the revenue that would have been derived from that production.
7. Likely 1985 production, but for picket (A) Applicant's estimate
Leaving on one side for the moment an additional claim (the "new chiller claim") to which I shall subsequently refer, the applicant claims that but for the disruption of its business it would have slaughtered and processed 17,762 animals during the 1985 season. This is a net figure after allowing for diseased animals ("condemns") which are unsuitable for meat production. According to the applicant the gross kill figure would have been 18,435, which was calculated using a condemn rate of 3.65% In making these estimates reliance was placed on the actual average net kill per day in October 1985 after the picket was lifted. Adopting a 1985 season average of 384 lbs. dressed weight per head, it estimates that the total production of meat during the year would have been 6,820,800 lbs. dressed weight. It claims that this quantity of meat would have produced 4,665,427 lbs. of boneless meat. This last calculation is made by adopting an estimated yield of 68.4%, this being the actual figure achieved during the 1985 season. I am satisfied that in 1985 the average dressed weight per head was about 384 lbs. and that the yield of boneless meat was about 68.4% per lb dressed weight. Except in one minor respect these last mentioned figures were not challenged.
The new chiller claim is a claim that, but for the picket the applicant would have completed by 1 July 1985 the installation of a new chiller at the abattoir, and that this would have enabled an additional 20 net head to be slaughtered and processed each day save for the last few days of the season. There were 111 kill days between 1 July and 15 November. Thus, so it is claimed, an additional 2220 net head would have been killed. Applying a condemn rate of 3.65% it is claimed that the additional gross head killed would have been 2304. Adopting the 1985 season averages for dressed weight per head and boneless meat yield the applicant claims that if the new chiller had been functioning as from 1 July an additional 852,480 lbs of meat would have been produced, yielding 583,096 lbs of boneless meat.
The applicant claims that total production for 1985, if there had been no picket, would have been as follows:
|Plus chiller claim
|Total Gross kill
|Plus chiller claim
|Total net kill
The condemn rate of 3.65% used by the applicant in estimating the net kill of 17,762 (excluding the new chiller claim) was apparently adopted because it was the condemn rate in 1985 whilst the Northern Territory inspectors were carrying out inspection duties at the abattoir. However, if it be assumed that no picket had been imposed the inspectorial duties would have been carried out by Commonwealth inspectors. There seems no reason to suppose that the condemn rate under their surveillance would have varied much from condemn rates in past years. The rates under their surveillance in 1982, 1983, and 1984 were 1.8%, 1.6% and 1.8% respectively. The average rate for those years was about 1.75% and I think this is the correct condemn rate to adopt when calculating the net production that would have been achieved in 1985 but for the picket. If this rate were to be applied to the abovementioned gross kill figure of 18,435, the resultant net figure would be about 18,112. This figure, when added to the new chiller claim of 2,220 net would give a total net kill figure of 20,332. Consequential amendments would need to be made to the meat production figures if the lower condemn rate is adopted.
(B) Respondents' estimate
The respondents dispute that the applicant would have achieved the levels of production for which it contends. They contend that the number of stock that would have been killed in 1985, but for the picket, is about 15,161 net, calculated as appears in the following table. The table, which is taken from Ex.40, also sets out details of the weight of meat which the respondents contend would have been produced.
|No. of head
|(1) Kill days : May - adjusted budget
|June - budget
|July to November - actual
|(2) Average net head killed per day for each month 1982 - 1984
|(3) Actual 1985 weight
yield (except May
June weights are combined averages for the two months)
The respondents claim that the gross kill would have been 15,393. This estimate is made adopting a condemn rate of 1.5%.
(C) Availability of livestock in 1985
There was much evidence as to the availability of stock for slaughter and as to the applicant's ability to process the numbers of animals it claimed to be able to process at its abattoir. I am satisfied that the applicant could have obtained adequate supplies of livestock to enable it to achieve the kill rate for which it contends. The evidence as to the availability of stock does not consist only of Pendarvis' evidence on the matter. Mr Sullivan, the general manager of Douglas Station, gave evidence that he supplied buffalo and cattle to the applicant in 1982 and 1983. He has considerable knowledge of the market for and availability of cattle and buffalo in the Northern Territory. He said that the supply situation for buffalo in 1985 was excellent and that there was "plenty of stock around". (T.1205) He also said that the applicant would not have had a problem in getting access to 20,000 buffalo in 1985 (T.1205) and that although the buffalo killing programme had led to a reduction over the years in the overall numbers of buffalo, it had not affected the supply of stock to the abattoir. He supplied stock to the applicant between 24 June and 8 September when the picket was in place. He said that he was limited in his ability to supply stock during that period because some truck drivers refused to drive their trucks across the picket line. He nominated several carriers (including Ottley Transport, «Road» «Trains» of Australia and Dodds Transport) whose drivers were apparently unwilling to cross the line. «Road» «Trains» of Australia were his principal carriers.
Mr Alan Woods, the managing director of North Australia Cattle Company Pty Limited gave evidence to the effect that some buffalo had not been turned-off in 1985 because of the lack of a market for them. His company carries on business as a dealer in livestock, contract musterer and advisor to people in the livestock and pastoral industries. Mr Reginald Wilson, who has been a professional musterer of cattle in the Northern Territory since 1981, said that buffalo were plentiful in 1985. He supplied about 1500 head to the applicant after 9 September, and about 1,000 before that date. (T.1212 and 1582)
The evidence satisfies me that had there been no picket line in 1985, the applicant would have been able to acquire as many stock as it required to operate its abattoir at full capacity. However, that is not to say that it would have actually processed the number of livestock it claims it would have processed. I now turn to consider what would have been the level of production.
(D) Kill rate in 1983
According to the applicant (Ex S(3) schedule 9.0) the gross number of stock killed in the 1983 season was 19,679, the net figure after allowing for condemns being 19,362. The respondents' evidence was that the net figure for 1983 was 19,464 (Ex.29). That was a year in which there was no industrial trouble at Mudginberri and the applicant submits that it affords the best guide to likely production in 1985 in the absence of the picket. The season commenced on 11 April and finished on 18 November. The number of buffalo and cattle killed in April 1983 seems very low compared with the rest of that year as may be seen from the following table, which is based upon material extracted from Ex 29:
|Buffalo and cattle killed in April
|Kill days in April
|Average kill per day in April
|Total number of buffalo and cattle killed in 1983 season
|Number of kill days in 1983 season
|Average kill per day in 1983 season
Excluding April, the net kill in the 1983 season was approximately 18,341 on 167 kill days, i.e. an average of about 110 head per day.
(E) Kill rates after picket lifted
The average daily net kill in the period from 9 September to the end of the 1985 season on 25 November was about 108. This average was influenced by the low killing rates immediately after 9 September and at the end of the season when production was coming to an end and climatic conditions were becoming adverse. Pendarvis gave evidence, which I accept, that even after the picket was lifted there were still some continuing effects from it. For instance, the applicant's inability to accept stock from its normal suppliers whilst the picket was in place meant that those suppliers entered into fresh arrangements with other customers, and those arrangements limited their capacity to supply stock to Mudginberri after the picket was lifted.
Between 9 September and 17 October 1985 3,302 buffalo and 587 cattle were slaughtered. During this period there were 33 kill days, the average daily gross kill being about 118. Allowing for the condemn rate of 1.6% during this period, the average daily net kill was about 116 per day. In the whole of October there were 26 kill days and 3003 net head were killed, giving a daily average of 115.5. I think these figures afford a useful guide to what the daily average would have been over the whole season had the picket not been set up, but they do not take account of any increased production which may have been achieved with the completion of the new chiller.
(F) The new chiller claim
I am satisfied that prior to the commencement of the 1985 season the applicant intended to complete the installation of a new chiller by the end of June that year. The new chiller was part of a programme of improvements commenced in 1984. The improvements were required to ensure that the abattoir met the standards required for the export of meat to countries within the European Economic Community. In 1984 over $1 million was spent on the improvements, mainly on the rebuilding of the slaughter room floor. Work on the new chiller was commenced and approximately $56,000 was spent on its construction in that year. This work included completion of the foundations and of the steel structures which support the rails upon which carcasses are hung, and an overhead stucture to hold the cooling equipment. The work remaining to be done included the installation of the cooling equipment which was already on site and the erection of insulation panels. Pendarvis said he had a firm oral quotation of $27,000 to complete the installation of the chiller and that had the 1985 season not been interrupted by the picket he would have expected to finish the installation by the end of June. In his opinion the completion of the chiller would have permitted an additional 20 head per day to be processed.
Pendarvis said that the reason why the work on the chiller was not completed by the end of June 1985 was that he lacked finance to complete it, and that his lack of cash flow deterred him from obtaining finance. The applicant was not flush with funds at the beginning of the 1985 season and I am satisfied that it was the picket and the consequent reduction in the applicant's cash flow that was the reason why work on the chiller was not completed by June of that year.
However, I am not satisfied that if the new chiller had been available from July onwards the applicant would have processed an additional 20 animals per day. There were constraints on production other than the physical capacity of the abattoir. Those constraints included the difficulty of arranging for stock to arrive at Mudginberri in a continuous stream so as to permit optimum production. Another, but less significant, constraint was the capacity of the yards, but this was a problem which could have been easily overcome.
When in February 1985 the applicant prepared its budget for the coming season it budgeted for a net kill of 18,480. This figure was based on an estimated 154 kill days and an average net kill per day of 120 over the whole season. The estimate took account of the planned completion of the chiller. Counsel for the respondents submit that the budget shows that the applicant itself did not believe that the new chiller would have made it feasible to increase production by an extra 20 head per day. I think there is force in this submission but it is somewhat diminished because the budget was apparently prepared on the basis that the operators of abattoirs at Point Stuart and Katherine would be competing with the applicant for stock supplies. The budget noted that the estimated daily kill of 120 should be easily achieved and that "if Pt Stuart and Katherine do not open seasons (sic) kill would increase dramatically". Neither Point Stuart nor Katherine abattoirs were killing buffalo for export in 1985. They were killing buffalo only for domestic consumption in that year. (T.2025)
It appears to have been the case that the existing chiller was not always used to its full capacity and this is another reason for rejecting the applicant's claim that the increase in chiller capacity would have been matched by increased production of 20 animals per day. However, the additional chiller capacity would have given greater flexibility to the applicant's operations and in conjunction with the additional yards which were proposed to be constructed it would have enabled the applicant to better programme the supply and slaughter of stock and so increase the level of production to some extent.
The respondents did not call any witnesses to contest Pendarvis' evidence as to the beneficial effect which the construction of the new chiller would have had on production levels. Whilst the absence of such evidence is no substitute for proof of the applicant's claim, it does make it easier to accept that there is some substance in this aspect of the applicant's case. Mr Byrne, who was employed as the manager of the abattoir at the beginning of the 1985 season, was called by the respondents in the earlier proceedings in which the claim for injunctive relief was determined, but was not called to give evidence on the hearing of the damages claim. It is fairly clear from his evidence that his sympathies lie with the respondents. I would have thought that he, and the numerous other former employees of the applicant who did not work for it in 1985, may well have been in a position to give relevant evidence on the issue whether the construction of the new chiller would have had any beneficial effect on production. However, no such witnesses were called by the respondents. On the evidence as it stands, I have reached the opinion that the construction of the new chiller would have improved the applicant's prospects of achieving higher killing rates, but not nearly to the extent of an additional 20 head per day.
(G) Factors affecting 1985 prospects
There were several factors operating in 1985 which would have made it likely that, but for the picket, the number of stock killed by the applicant would have been high. In 1985 Mudginberri was the only abattoir in the Northern Territory killing buffalo for export. This was in contrast with the position in earlier years when other abattoirs produced for the export trade. I have already referred to the ready availability of stock in 1985. The depreciation of the Australian dollar against other currencies, particularly the Deutschmark, would have made imports from Australia more attractive to foreign buyers. This would have provided an incentive to the applicant to maximize its production so as to take advantage of the favourable export conditions. Further, the completion at considerable expense of the improvements to the abattoir would have provided an additional incentive to put it to optimum use.
(H) Physical capacity of the abattoir
It was practicable to slaughter and process much larger numbers of stock per day than the average daily kill rates to which I have referred. The applicant's records show that kill rates averaging 120 or more were sometimes achieved. For instance, in July 1983 some 3190 stock were killed on 26 kill days, an average of 122.7 per day; and between 17 October and 26 October 1983 some 1102 head were killed on 9 kill days, an average of 122.5 per day. After the picket was lifted in 1985 the average kill per day during the period from 26 October to 6 November was 120.
(I) Basis of respondents' estimate
If the respondents' submission is adopted, the average net kill per day in 1985 would have been about 98. This figure is calculated by averaging the net head killed per day for each month in 1982, 1983 and 1984. However, I do not think it is proper to use averages derived from the experience of past years, unless all those years were comparable to 1985. I do not think they were. 1982 was the first year the Mudginberri abattoir operated under the applicant's ownership. Whilst Pendarvis had some prior experience of the abattoir, he did not have any experience as the owner of it or of any other such undertaking. So far as 1984 results are concerned, that was a year which was affected by industrial action leading to the imposition of a picket. The picket did not last long, but it is not possible to say on the evidence whether it or the industrial dispute which gave rise to it had any continuing effect on production. Moreover, there is evidence (T 1348 et seq) suggesting that the export market for the applicant's production in 1985 may have been larger than in 1984, in consequence of a visit Pendarvis made to Taiwan, Sweden and Germany for the purpose of finding new buyers.
The average daily kills in 1982, 1983 and 1984 were 85.77, 106.36 and 93.28 respectively. The better approach is to use the kill rate in the most comparable of those years, in conjunction with the other evidence, as a guide to likely 1985 production, rather than the average of the three years. Of the years preceding 1985, 1983 provides the best guide.
(J) Conclusion on likely 1985 kill rate
There are so many factors which may have affected total production in 1985 that it is impossible to achieve a high degree of accuracy in calculating the number of head which would have been killed if there had been no picket. The best that can be done is to make an estimate taking into account the whole of the evidence. It is inappropriate to treat the proposed new chiller as a factor separate from and independent of the other factors which would have affected the level of production in 1985. The better approach is to treat it as one of many factors which would have affected the overall level of production for the 1985 season if there had been no picket.
Having regard to all the evidence I think that, but for the disruption of its business caused by the Union's conduct, the applicant would have actually processed about 18,000 animals in 1985. This would have given an average daily net kill of about 116.75. Allowing for a condemn rate of 1.75% the gross kill for the season would have been about 18,321.
These figures are slightly less than the gross and net kill figures in 1983, if April of that year is excluded. Excluding that month, the gross and net kill figures in 1983 were 18,556 and 18,239 respectively (or 18,341 if the respondents' figure is adopted). However, an average daily net kill of 116.75 is higher than the rate achieved in 1983. There were 167 kill days in 1983 from the beginning of May to the end of the season, the average gross daily kill in that period being about 111.
In the light of all the evidence I think the estimates of 18,000 net and 18,321 gross for 1985 are realistic.
8. Likely 1985 revenue, but for picket
Having established the likely production level for 1985, I turn to consider the revenue which might have been produced in that year.
(A) Quantity of meat
Adopting the 1985 season average of 384 lbs dressed weight per head, 18,000 animals would have produced 6,912,000 lbs dressed weight of meat. This would have yielded 4,727,808 lbs of boneless meat, using the actual 1985 season average of 68.4%.
Making an allowance of 15,128 lbs of boneless meat which would have been used by the applicant for its own purposes, there would have been 4,712,680 lbs of boneless meat available for sale.
(B) Meat sales revenue
The applicant claims that 98.5% of boneless meat production would have been sold on the export market and 1.5% on the local market. Although it would have been to the applicant's advantage to sell on the export market since export selling prices considerably exceed domestic selling prices, I reject the claim that 98.5% would have been sold for export. Based on experience in past years only about 96.4% of total production would have been exported. Apparently, some cuts and trimmings of meat are not commercially attractive to foreign buyers. I therefore estimate that about 4,543,024 lbs would have been sold on the export market, and about 169,656 lbs on the domestic market.
There is very persuasive evidence, which I accept, that in 1985 the applicant could have sold its export production to buyers in Sweden, Taiwan and Germany and that $1.20 per lb could have been obtained for most of this meat. The applicant had sales contracts for, or firm prospects of selling substantial quantities of meat to buyers in Sweden and Taiwan pursuant to four contracts or arrangements which may be summarized as follows:
|Taiwan No. 1
|Taiwan No. 2
|Sweden No. 1
|Sweden No. 2
|Average price per lb = $3,802,332 / 3,235,126 = $A 1.20
It is apparent that there was a degree of informality in all the abovementioned arrangements. However the applicant is not obliged to establish that it had firm contracts to sell all or any of its 1985 production. What it has to prove in this part of its claim is the price which, on the balance of probabilities, it would have received for the meat. Quite apart from the telexes which evidence the above transactions, the oral evidence of Messrs Pendarvis, Agnew and Hubl (to whose evidence I shall subsequently refer) establishes that a price of about $A1.20 per lb could have been obtained for meat sold to buyers in Sweden and Taiwan and that such buyers would have purchased at least 3,235,126 lbs of the 1985 season's production.
The quantity available for export after satisfying such buyers would have been 1,307,898 lbs. There was much evidence as to the price that could have been obtained for this meat. This included evidence from Mr Brian Agnew, the principal of Gecel (Aust) Pty Limited, who has had considerable experience in the export meat trade including the export of buffalo meat. According to him the Swedish market would have taken between 500 and 700 tonnes of the applicant's production in 1985, and would have been prepared to pay about $1.15 per lb ex Mudginberri for the bulk of the applicant's production, and $3.44 per lb for the fillet portion of the production, giving an average price of about $1.20 overall. He thought that the balance of the production could have been sold on the German market. He said that prior to the beginning of the 1985 season he was thinking of offering a price some 7-10 cents per lb less than he would have offered for meat destined for Sweden.
The price obtainable on the German market was marginally less than the Swedish buyers were prepared to pay. However, the weakening of the Australian dollar in 1985 may have caused export prices to firm during the year, with consequent benefit to the applicant. Moreover, it is not to be assumed against the applicant that it would necessarily have accepted offers made to it without bargaining for somewhat higher prices.
Evidence was also given by Mr Eckard Hubl, the Managing Director of Tatiara Meat Company Pty Limited, which carries on business as meat processors and exporters. He visited Mudginberri Station in January 1985 to discuss the possible purchase of meat for export to Germany. He appears to have been in the market to purchase up to 2,250 tonnes, and made tentative opening offers to Pendarvis. Apparently no firm arrangement was made, but both parties agreed to watch the movement of the Deutschmark against the Australian dollar. He said that if he had been able to purchase meat from Mudginberri during the 1985 season the purchases would have been made at graduated prices, depending on currency fluctuations. He said the average price would have been somewhere in the vicinity of $1.12 or $1.14 per lb. I think it is fairly clear from his evidence that these prices related to meat other than fillets, so that an average price for both fillet and non-fillet meat would have been in the vicinity of $1.18 per lb. Hubl said that if sales had been made in July 1985 he probably would have offered about $1.10 per lb, but again, this price does not appear to make allowance for the fillet fraction.
The respondents rely upon evidence given by Hubl that normally he would have made a firm offer of purchase by May, that the price he then would have offered was $1.10 per lb, and that he would not have increased his price later in the season. However, I do not think it should be assumed adversely to the applicant that it would have been compelled to sell to Hubl on his terms.
Pendarvis was of the opinion that he could have achieved a price of $1.20 per lb for all meat sold on the export market. He may well have been able to do so, but taking account of all the evidence, I think it more likely that the applicant would have received an average price of about $1.18 per lb for the balance of its export production after it had satisfied its obligations under the particular contracts or arrangements it had with purchasers in Sweden and Taiwan.
The applicant claims that the meat which would have been sold on the local market would have brought an average price of about 86 cents per lb, and I think this is a reasonable estimate.
Accordingly, the total revenue from boneless meat production in 1985 would have been approximately $5,571,375 made up as follows:
|Sales to Taiwan and Sweden -
|@ $1.20 per lb =
|Sales to Germany or other export markets -
|@ $1.18 per lb =
|Sales on domestic market -
|@ 86 cents per lb =
|Total revenue - boneless meat
(C) Failure to appoint quality assurance staff
The respondents submit that even if there had been no picket, the applicant's ability to generate income from the sale of meat for export would have been seriously prejudiced by its failure to employ a sufficient number of quality assurance staff at Mudginberri to ensure compliance with the conditions of the meat export licence issued to it under the Australian Meat and Live-stock Corporation Act 1977 (Cth). It was a condition of that licence that there be three quality assurance staff on site at the abattoir. It is true that when the season commenced on 9th May the applicant did not have sufficient quality assurance staff on site. However, Mr Brownlie, the Chief Manager for Licensing and Control of the Australian Meat and Live-stock Corporation, said that if there had been no industrial trouble at Mudginberri in 1985 his officers would have visited the abattoir about the middle of May to check the position as to quality control. His evidence included the following:
"HIS HONOUR: Supposing you got there and found it was not in conformity with what was required in your book, what would you have instructed your officers to have done?---We would have taken action against Mudginberri's quality control administratively to start with. We would have classified it as B category and told him he had to get the necessary number of inspectors of accredited people there. If he could not recruit those people I would have even put my own staff in there to provide him with the requirement.
MR COWDROY: Would that administrative action end up in a reprimand?---It probably would have.
Apart from that there is nothing at this stage which your corporation could have done?---Nothing that we would have done.
I take it no one has complained about any of the meat produced at Mudginberri?---No to my knowlege." (T 2563-2564)
I do not think that the applicant would have had any difficulty in meeting the requirements of its licence under the Australian Meat and Live-stock Corporation Act, and would have satisfied those requirements if it had been producing meat for export under the surveillance of Commonwealth meat inspectors.
(D) Revenue from hides
The applicant's other source of revenue from its 1985 production would have been the sale of hides. Assuming a gross kill of 18,321 and adopting the actual proportions of buffalo and cattle killed in 1985, the hide production would have been as follows:
The average weight of buffalo and cattle hides produced in the 1985 season was 32.47 kgs and 20.34 kgs respectively. (I have found it necessary to refer in these reasons to both imperial and metric measures because both were used in evidence.) The applicant claims that, but for the picket, it could have sold the buffalo hides at an average price of $1.04 per kg and the cattle hides at an average price of $1.265 per kg. The respondents claim that the applicant would have obtained no more than 70 cents per kg for buffalo hides and $1.15 per kg for cattle hides, and they draw attention to the fact that until an amendment was made to its claim at a late stage of the proceedings the applicant asserted that the prices which would have been obtained for buffalo and cattle hides produced in 1985 were respectively 72 cents and 90 cents per kg. The claim was amended in several respects during the course of the hearing. However, I think it is much safer to rely upon the evidence in the case rather than the way in which the applicant particularised and amended its claim. I gained the impression that some of the amendments were occasioned by the failure of the applicant to ensure that Mr Bracher was fully briefed on all aspects of its operations. This is easy to understand because the applicant's business was in a state of turmoil in 1985.
According to Pendarvis he had an arrangement with Mr F. Phillips, the Managing Director of A.H. Hides
Skins Pty Limited to sell to his company the whole of his 1985 production. He said that the arrangement was that the applicant would be paid $1.15 per kg for buffalo hides and $1.40 per kg for cattle hides and that commission and handling charges would have reduced these prices to 90 or 92 cents net per kg for buffalo hides and $1.15 net for cattle hides. He also said that he discovered later in the season that commission would not be payable on the sales and this was the reason why, as finally formulated, the net selling prices per kg were escalated to $1.04 and $1.265 per kg.
However, the applicant has not satisfied me that these prices would have been obtained. It is true that Pendarvis' account of the agreement he reached with Phillips gains support from some of Phillips' evidence. However, I am satisfied that any discussion that Phillips had with Pendarvis in the course of which Phillips agreed to pay $1.15 and $1.40 per kg must have related to some year other than 1985. The evidence does not satisfy me that the applicant had a firm, or any, arrangement to sell all buffalo and cattle hides produced in 1985 for $1.15 and $1.40 per kg respectively.
However, Phillips' evidence did not rest only on his belief that he had made an agreement with Pendarvis at the beginning of the 1985 season. He gave other evidence, which included the following:
"..... now had you had an orderly delivery of say 15,000 to 20,000 buffalo hides during the season from May to November, would you have purchased them from Mudginberri?---Yes, I would.
And how much would you have paid?---$1.10, $1.15." (T 1648, renumbered T 1822)
The evidence does not clearly disclose whether the applicant would have been liable for handling charges and commission upon a sale at such a price. According to Phillips he had enquiries earlier in the season from buyers prepared to pay $1.15 per kg but he could not make agreements with them because the hides were not available. He said that in June or July 1985 he had enquiries from a buyer at 82 cents, but Pendarvis did not want to take such a low price, and would not drop his price below 92 cents. Again, the evidence does not make it clear upon whom the responsibility for payment of handling charges and commission would have fallen if sales had taken place at these prices. Phillips said that he first took delivery of hides from the applicant in August 1985 and by that time the market had fallen and the price had dropped to 82 cents.
There are inconsistencies in Phillips' evidence and I do not think I can safely act upon his evidence that he would have purchased the whole of the applicant's buffalo hide production at prices between $1.10 and $1.15 per kg. I do not think he was a dishonest witness, but I am satisfied that his recollection of past events and prices was not always accurate. However, I accept his evidence that the market for hides was strong at the beginning of the season and that it weakened to the point where, at the end of the year, prices had fallen quite significantly.
Since nothing had been agreed in writing between the applicant and Phillips before the season commenced in May, I do not think I should assume in the applicant's favour that, in the face of a falling market, it would have been able to dispose of its entire production at the prices which might have been obtainable before the season commenced. Doing the best I can on the evidence, I think that the applicant probably would have obtained an average price of about 82 cents per kg for buffalo hides and $1.265 per kg for cattle hides, both prices being net to the applicant after payment of handling charges and commission. It appears that the applicant did, in fact, receive $1.265 per kg for cattle hides produced in 1985.
I am not unmindful of the fact that evidence was given by Mr Johnston that he purchased a quantity of buffalo hides from Meneling Station during 1985 at 70 cents per kg. (T 2571) However, Johnston was unable to give much detail of the quantity purchased, or the date of sale, except that "it could be 100 tonnes throughout the season." (T.2571) He also said he did not have a licence to export hides, and he seems to have had little experience in the hide export trade. Moreover, there is evidence that the applicant went to some trouble to improve the quality of the hides which it produced and the evidence does not permit a comparison to be made between the quality of the hides sold by Meneling and those produced at Mudginberri. It would have been open to the respondents to call the owner of Meneling Station to prove in greater detail the circumstances surrounding the sale to Johnston, but they did not do so.
Adopting the above prices of 82 cents and $1.265 per kg the revenue which would have been generated from the sale of hides in 1985 would have been as follows:
||15,485 x 32.47 x 82 cents =
||2,836 x 20.34 x $1.265 =
|Total expected revenue from hides
9. Revenue received or receivable from 1985 production
(A) Delay in resuming operations
The respondents submit that the applicant acted unreasonably in delaying until 24 June before recommencing production at the abattoir. On that date production of meat commenced under the surveillance of Northern Territory inspectors. The applicant acted promptly after 10 May in seeking relief against the respondents and by 27 May it had obtained from Beaumont J ex parte orders (suspended until 30 May) requiring them to lift the picket. It was entitled to act on the basis that the Court's orders would be obeyed and that, once the picket was lifted, the Commonwealth inspectors would resume their duties.
The applicant was far from inactive in the period from 27 May to 24 June. Having obtained orders ex parte it moved on 3, 4, 5, and 7 June for continuation of those orders. As well, on 3 June, it was represented at a compulsory conference held pursuant to s.88DC of the Conciliation and Arbitration Act 1904 for the purposes of settling the dispute. On 12 June Beaumont J made orders continuing the orders made by him on 27 May. When these orders were disobeyed proceedings for contempt were initiated on 14 June and heard on 21 June. It is readily understandable that Pendarvis' time and attention were engaged by these legal procedures (all held in Sydney or Melbourne and thus requiring his absence from Mudginberri), leaving him little opportunity to consider whether he should try to re-open the abattoir in the hope that the applicant might subsequently obtain permission to export any meat it could produce in spite of the picket.
By arranging for Northern Territory inspectors to work at Mudginberri the applicant ran the risk of worsening the industrial dispute. It was justified in postponing the taking of that risk until it became clear that the respondents did not intend to desist from their illegal conduct and obey the Court's orders. Moreover, it must have taken some little time to obtain the services of the Northern Territory inspectors and to make the necessary arrangements for them to travel to Mudginberri. In all the circumstances, especially the industrial climate which obtained at the time, it was not unreasonable for the applicant to delay until 24 June before recommencing operations.
I am also of the opinion that there is no substance in a further argument advanced on behalf of the respondents that the failure to recommence operations before 24 June fitted into what counsel described as "a pattern of both overt and covert political support in a campaign of attack upon the first respondent". This support is said to have come from the Northern Territory Government and the National Farmers' Federation. The evidence establishes that the applicant received considerable support from both these sources. The applicant sought advice from an industrial officer of the National Farmers' Federation. After the picket line had achieved its intended result of closing down the abattoir the applicant sought and obtained financial assistance from the Federation to enable it to meet its financial obligations. I shall refer later in these reasons to the considerable assistance that the Northern Territory Government gave to the applicant. However, I am satisfied that the applicant's conduct was motivated by the desire to protect its own legitimate commercial interests and to mitigate its losses. It is grotesque to characterise its conduct as a campaign of attack upon the Union. It did no more than attempt to protect itself against the financial consequences of the Union's actions.
(B) Reduced output under Northern Territory inspectors
During the period from 24 June to 8 September whilst the abattoir was operating with Northern Territory inspectors the applicant slaughtered a total of 5123 animals. This number was made up of 4182 buffalo and 941 cattle. There were 58 kill days during this period, the average kill per day being about 88. The respondents argue that the applicant was able to kill at a higher rate during this period and that its failure to do so demonstrates a failure on its part to mitigate its damage.
Pendarvis said (T 2467) that the number of stock killed during this period was down because the majority of his suppliers would not cross the picket line. He also said (T 2486) that he let it be widely known that operations were to re-commence on 24th June, presumably for the purpose of notifying suppliers of his need for stock. Mr Donald Stewart who supplies stock to the applicant said that his trucks took stock to Mudginberri in May. They were stopped on the «road leading to the abattoir and his drivers were apparently told that they were not allowed to carry any more animals into Mudginberri. On three occasions truck loads of stock were escorted through the picket line by police officers. I am satisfied that after 24 June some truck drivers were unwilling to deliver stock to Mudginberri because of the presence of the picket line and that as a consequence the availability of stock for slaughter was reduced. Some contractors who normally supplied stock to Mudginberri were prepared to, and did, cross the picket line, whilst others were not.
It was put to Pendarvis that he should have taken more stock from properties over which a company controlled by him and his wife had harvesting rights. He said he did not take more stock from these properties out of loyalty to other contractors who normally supplied him with stock.
Pendarvis' ability to attend to the applicant's ordinary business affairs and to run the abattoir efficiently must have been grossly affected by the plethora of litigation between the parties in July and August 1985. One round of the litigation was fought in Darwin but the rest of the litigation was heard in Sydney and would have required Pendarvis to be absent from Mudginberri on numerous occasions. The litigation included an appeal against orders fining the Union for contempt, the application for final injunctive relief, an application for leave to issue a writ of sequestration against the Union, an application for a stay of the orders granting final injunctive relief, an application for a stay of the order granting leave to issue a writ of sequestration, an application for a Mareva injunction , and Langhorne's Case (supra) at first instance.
I am not satisfied that the reduced killing rate during the period of the picket was due to causes within the applicant's control and for which it was responsible. In my opinion the applicant acted reasonably in all the circumstances.
(C) Stockpiling of meat
On 24 June the applicant recommenced the slaughtering of animals and the production of meat. The Northern Territory inspectors did not have authority to certify meat for export since no steps had been taken under s.20 of the Export Control Act to appoint them as authorised officers for the purposes of that Act. Although the meat produced between 24 June and 8 September was saleable on the domestic market the applicant did not take steps to sell the meat as and when it was produced. Instead, it stockpiled the meat in cold storage because, according to Pendarvis, he had some expectation that action would be taken by the Department of Primary Industry to permit the meat to be exported notwithstanding that it had not been inspected by Commonwealth meat inspectors. The value of the meat on the export market was much higher than its value on the local market.
The applicant's decision to stockpile the meat is criticized by the respondents. It is argued that Pendarvis had no reasonable basis for believing that the meat could ever be exported and that it should have been sold for the best available price as and when it was produced. It is common ground that the value of the meat on the domestic market had fallen at the time it was sold by the applicant, and the respondents claim that any damages awarded to the applicant should be assessed upon the basis that the meat ought not to have been stockpiled.
It was open to the Secretary of the Department of Primary Industry, by instrument in writing made under order 12 of the Prescribed Goods (General) Orders to exempt the meat from the application of those orders, including order 10 which prohibits the export of, inter alia, meat unless the restrictions specified in the Orders have been complied with. The exercise of the discretion under order 12 is conditioned upon the Secretary holding the view that there are reasonable grounds for believing that the meat is being exported or has been prepared "in exceptional circumstances". A decision by the Secretary under order 12 is susceptible of review by the Administrative Appeals Tribunal - see orders 112-117 inclusive.
The evidence establishes that if the applicant had made an application to the Secretary under order 12 it probably would have been refused. In fact the applicant did not make such an application, but whilst the picket was in place Pendarvis was actively seeking the assistance of the Minister for Primary Industry and his officers to overcome the problems the applicant was encountering because the Commonwealth meat inspectors were not performing their duties. Plainly Pendarvis was looking to the Minister for any assistance that he could give him and I think it was not unreasonable for him to believe that he had some prospect of obtaining it. The Minister was under both legal and political pressure to come to the aid of the applicant. The legal pressure came from the proceedings (Langhorne's Case, supra, which ultimately proved successful), to compel the Secretary of his Department to provide inspectors for the abattoir. The political pressure came from the support which the applicant was receiving from the National Farmers' Federation which was espousing the applicant's cause.
No doubt political considerations and the applicant's economic difficulties were unlikely to have been given much weight when consideration was given to the applicant's request for assistance. But there were other important considerations which were proper to be considered and which could reasonably have led Pendarvis to believe that his company had some prospect of being permitted to export the meat. These included the facts that the meat had been produced in an abattoir which complied with the standards required of export abattoirs and had been inspected by meat inspectors whose certificates sufficed to permit it to be sold for human consumption on the Australian market. The facts giving rise to the applicant's difficulty bore no resemblance to the facts which gave rise to the horse meat substitution scandal which was mentioned in evidence and which was the subject of a Royal Commission.
The respondents draw attention to the fact that the applicant did not make an application to the Secretary under order 12. This is so, but I do not think it is of significance in considering the reasonableness of Pendarvis' belief that permission might be given to export the meat. He is not a lawyer, and his failure to advert to the terms of order 12 and to make an application under that provision is not indicative of any lack of belief on his part that the Minister might take the appropriate action to permit his company to export the meat.
Pendarvis said, and I accept his evidence in this respect, that between June and November 1985 he was in regular contact with officers in the Department of Primary Industry and that he was not told by any of them that permission would not be given to export the meat. When asked whether he was ever warned by the Minister or his officers that it would be unlikely that the meat would be certified as fit for export Pendarvis said that "they were not encouraging at any point in time about the meat being certified, particularly after they had been bashed about the ears in parliament" (T.2442a) but that they did not ever tell him that it would not be.
I am satisfied that Pendarvis raised with Messrs. Prenzler, Irwin and Langhorne the possibility of permission being granted to export the meat. He appears to have first raised the matter in early July 1985. (T.2349) He said it was not until about 15 November 1985 that he first appreciated that approval was not going to be granted. (T.2438) At that time he had a conversation with the Minister on an informal occasion and, according to Pendarvis, the Minister instructed him to "apply for exemption under certain sections of the Export Control Act, and they would be considered." A telex was thereupon sent to the Minister seeking permission for the meat to be exported, but permission was refused.
It appears from some of the evidence given by Langhorne that the Department considered the possibility of granting permission for the meat to be exported and did not reject the matter out of hand. His evidence included the following:
"HIS HONOUR: Mr Langhorne, some of the answers rather tend to convey that you did, in fact, turn your mind to whether you should exercise or delegate your power under order 12. Did you, in fact, do that?---Yes, we did; I did. I did that at the time that the minister received the telex and I would point out that I was aware that there had been, I believe it was an oral request to the regional director in Darwin in August to have the product exported. Of course, we were under considerable political pressure through the opposition parties and from the Northern Territory government who were lobbying to enable the product, to allow the product to be exported during that period that it was being actually produced and at the end of that period. So, I was fully aware that there were pressures on to allow that product to be exported, so naturally I was looking at the processes that I believed we would have to go through if we were to ever consider granting an exemption and that really, from my point of view, although no final decision was ever made because we did not receive a direct request, I guess one would say that the final firming up of a view came at the time that the minister received the telex request from Mr Pendarvis. The minister gave a view in that telex, although he indicated at the time that he was not a delegate." (T.3339)
Langhorne said he made enquiries to ascertain whether the meat would be acceptable in the Taiwan market. He described the possibility of the meat being exported to that country as being "a possible option, but never a serious consideration on my part". (T.3349)
Langhorne referred to a number of matters which would have weighed with him in deciding to refuse permission for the meat to be exported. Notwithstanding the importance of these matters to Langhorne, I do not think they were such as would necessarily have led Pendarvis to believe that permission to export the meat would certainly be refused. In my opinion if Langhorne had thought that any of the matters were so important as to negate any prospect that the meat would be approved for export he would have communicated that view to Pendarvis well before November.
Pendarvis' expectations appear to have been shared by officers of the Agricultural Development and Marketing Authority ("ADMA") a statutory authority set up by the Northern Territory Government. Mr Stanley Cavanagh, the General Manager of ADMA said that in early 1985 "it was believed that the picket would not last more than a month and that the meat would be able to be reinspected and go on the export market". (T.2493a)
Pendarvis' evidence as to his state of mind at the time when production commenced on 24 June included the following:
"Did you open for production in June hoping that your production, although not initially inspected by the EIS inspectors would in fact be permitted to be exported?---We were absolutely confident at that time, yes, sir. We could not see any reason in the world why a government today, with exports in the situation that they are, would refuse and I still do not, for that matter." (T.2466)
This evidence which was given in February 1986 during the hearing of the claim for damages must be contrasted with evidence given by Pendarvis in July 1985 during the claim for injunctive relief. He then gave evidence that the applicant was incurring losses as a result of the picket, and supported his evidence by reference to a document (Ex D) which was described by his counsel as "a schedule which indicates the difference in return by way of sale of your product on the export market compared with sales on the domestic market." (T.335) In the document a claim was asserted that, inter alia, the applicant was incurring continuing losses which were calculable by reference to the difference between the export value of the meat being produced (stated to be $2.76 per kg) and its domestic value (stated to be $1.77 per kg). This evidence might be thought to be inconsistent with Pendarvis' evidence that although the abattoir was operating under surveillance of Northern Territory inspectors he nevertheless entertained hopes that permission would be granted to export the meat being produced.
I do not think this apparently inconsistent evidence demonstrates that Pendarvis did not entertain some hope that the applicant might obtain permission to export the meat being stockpiled. As at July 1985 the meat could not be exported. It was therefore not unreasonable for Pendarvis to state in evidence that the value of the meat was its value on the domestic market, i.e. $1.77 per kg.
What the applicant had to show to succeed in its claim for injunctive relief was that the respondents were engaging in conduct proscribed by s.45D, that s.45D(3) did not afford the respondents any defence to the applicant's claim, that the respondents were intending to persist in their illegal conduct and that, in the exercise of its discretion, the Court should grant relief. It was, of course, incumbent on the applicant to establish that the respondents' conduct was likely to have the effect of causing substantial loss or damage to its business. But to establish that, it was sufficient for it to prove that it was then suffering an immediate and serious loss of revenue. The possibility (which never eventuated) that the meat might later become exportable and hence more valuable would not have disentitled the applicant to the relief which it sought. Pendarvis would have given a more complete account of the applicant's probable continuing losses if he had given additional evidence of his hopes of ultimately gaining permission to export the meat. But such additional evidence would have been largely irrelevant to the claim for injunctive relief and I do not find it surprising that it was not given.
Pendarvis was not asked in July 1985 whether he had hopes of obtaining permission to export the meat. His failure to mention such hopes does not incline me to disbelieve his evidence that he did entertain them. His decision to stockpile the meat was entirely consistent with, and only explicable by, his hopes that permission would be given to export it.
In the light of all the evidence I am satisfied that there was only a minimal chance that any meat which had not been inspected by Commonwealth inspectors would have been permitted to be exported. But to express that opinion is to be wise after the event. It ignores the circumstances as they would have appeared to Pendarvis at the time when the meat was produced. Moreover, in considering the reasonableness of Pendarvis' decision, regard must be had to the fact that if he had been able to obtain consent to export the meat the applicant stood to achieve a much higher price for it than was available on the Australian market. Pendarvis took a commercial decision which turned out to be wrong, but I do not think it was unreasonable. For all that appears in the evidence, the domestic price of meat might have risen, not fallen, in the latter part of 1985.
As at 24 June there were essentially three options open to the applicant. First, it could have decided not to recommence operations until it had obtained the services of Commonwealth inspectors. It could not have been criticized if it had taken this course because its business was essentially the production of meat for export and in the absence of Common wealth inspectors there was, on any basis, a serious risk that any meat produced would not be exportable. Secondly, it could have decided to recommence operations for the purpose only of producing meat for the domestic market. In this event, it would have sold the meat as and when it was produced, but at a price known to be much lower than might be obtained for it if permission could be obtained to export it. Thirdly, it could have taken the course which it did, that is to say, recommence operations, and hold the meat in store so as, hopefully, to obtain a higher price for it. I do not think that the risks attendant upon taking up the third option, albeit substantial, were so great as to justify the Court holding that it was unreasonable for the applicant to take them. Even if the option taken up by the applicant had resulted in it sustaining greater damage than it otherwise would have incurred, that would not have been the end of the matter. Provided the applicant acted reasonably it is entitled to recover the losses it actually sustained: see
Scottish Finance v Modern Cars and Caravans (Kingston)
 1 Q.B. 764
Esso Petroleum Co. v Mardon
 Q.B. 801 and McGregor on Damages, 14th ed., para. 243.
The respondents go further than submitting that Pendarvis had no reason to believe that permission might be given to export the meat. They submit that at no stage did Pendarvis hold the belief, reasonable or otherwise, that there was any prospect of obtaining consent to export the meat. I reject this submission. Unless Pendarvis held such a belief his decision to defer selling the meat would have been irrational and against the applicant's commercial interests. The applicant was in sore need of revenue in 1985. The obvious and most credible explanation of the decision to defer selling the meat is that Pendarvis believed that the applicant would obtain a higher price for it if permission could be obtained to export it. The explanation advanced by the respondents was that Pendarvis' conduct was motivated by a desire on his part to pursue a political campaign against the Union and its industrial policies. I do not think there is any substance in this argument. I am satisfied that Pendarvis' motivation was to achieve the best commercial result for his company.
As was pointed out by Lord Macmillan in
Banco de Portugal v Waterlow
 A.C. 452
at p.506 caution needs to be exercised in using hindsight to criticize steps taken by a party to protect himself against the wrongful conduct of another. Waterlow was a breach of contract case but his Lordship's observations are equally applicable to a case such as the present. His Lordship said:
"Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticize the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken."
Scott v The Commonwealth
64 F.L.R. 89
and McGregor on Damages, 14th edn, para. 233.
Having regard to all the evidence, I do not think the applicant can be criticized for deferring the sale of the meat produced during the picket in the hope that permission might subsequently be given to export it. The onus of establishing that the applicant acted unreasonably in failing to mitigate its losses rests on the respondents; see
Garnac Grain Co. v Faure and Fairclough
 A.C. 1130
at 1140 and The World Beauty (1970) P.144 and McGregor on Damages, 14th ed., para. 246. This onus has not been discharged.
(D) The ADMA transction
The respondents also argue that the effect of a transaction entered into between the applicant and ADMA was that most of the meat produced before 9 September was sold to ADMA with the consequence, inter alia, that the applicant should be treated as having received the proceeds of sale from ADMA and thus not entitled to recover interest and storage charges incurred in holding the meat in cold storage.
The Chairman of ADMA is Mr Sydney Saville, who is also the permanent Secretary of the Department of Primary Production in the Northern Territory Government. At all relevant times the Minister for Primary Production was Mr Hatton. Saville said that he and the Minister took a decision on or about 2 July 1985 that ADMA should offer assistance to the applicant. The offer of assistance was made because a brucellosis and tuberculosis control programme ("the BTEC programme") was being actively conducted in the Northern Territory in 1985. It was part of the BTEC programme that buffalo should be eradicated. Further, the development of the export trade in buffalo meat was seen as being of importance. Both these considerations meant that it was desirable that the applicant's abattoir should continue working. Saville said that he had discussions with Pendarvis and that it was determined by him and the Minister that advances would be made to the applicant to cover the cost of the production of meat at its abattoir.
Since Saville's evidence as to the nature of the ADMA transaction is of considerable importance it is desirable to refer to the most relevant part of it in some detail. His evidence included the following:
Was a cost of production established in discussions with Mr Pendarvis?---Yes, sir.
Was there an acceptance of the cost which he discussed with you?---Yes. We went through figures that were prepared by Mr Pendarvis and his accountants and we examined and agreed on a cost of production.
Was it ever intended that the authority would purchase the meat?---No, sir.
Did the authority ever purchase the meat?---No.
Was it ever intended that the authority would sell the meat?---No.
Was it ever intended that Mr Pendarvis would retain the money advanced to him for his own purposes and not repay it?---It was intended that the money be repaid.
Was a rate of interest struck?---Yes.
A rate of interest - from memory, it was 14 per cent which was the interest that the organization, ADMA, paid on money borrowed by it. Was it intended that Mr Pendarvis or that the abattoir would pay that interest?---Yes, sir.
When was that? When was the interest rate struck and when was it communicated to him that he would have that obligation to pay interest?---I could not put a date on it but my memory is it was during the discussions of that week of 2 July. It was some time during that period when we were dotting the i's on the procedures.
Was this something which had to be done fairly quickly?---Yes; because, as I understood, the abattoirs would close at any day if assistance was not given.
Did you contemplate at the time that the arrangement was made that it would be a long-term arrangement?---No, it was purely a short-term arrangement.
Why did you believe it to be a short-term arrangement?---Well, the court had ruled that it was an illegal picket and consequently we thought that the picket would be withdrawn, then that the Mudginberri Abattoir would operate normally.
So was very much attention paid, in the early stages, to documentation or the need for it?---No, it was considered purely to be a very short-term arrangement and the arrangements were oral between myself and the general manager.
I think it appeared, at one stage at least and it may have been on more than one occasion, that a document described, I think, as a purchase voucher, was used by your authority. Are you aware of that?---I was not really involved in the detail of it. I have seen a document called a purchase voucher. My memory is that we just used the available stationery. We were not going to go into the stage of printing special stationery for it.
In fact, advances were made from time to time upon the basis of documents produced by Mr Pendarvis?---That is correct.
I think he may have used an invoice; are you aware of that?---I have seen an invoice, yes. An invoice which simply stated the weight and the cost of production of the meat.
Was there ever any intention, or was it indeed ever the fact that the authority bought the meat?---No, sir.
Whose property did the meat remain, at all times?---The meat remained the property of the Mudginberri abattoir.
It is now common ground that, of course, the picket remained on and illegally for some considerable time. You are aware of that?---Yes.
Did it become apparent to you then that some other arrangement would have to be made?---Yes.
Why did some other arrangement have to be made regarding the advances to Mr Pendarvis?---There was a limit to the budget of ADMA and at that time it was a matter of having an increase in the budget which had to go to Treasury Department and/or putting in alternative arrangements. And after discussion, it was decided to put in alternative arrangements as it had continued a lot longer than we anticipated. Did you anticipate (sic) in, or did the authority participate in the arrangement of alternative funding for Mr Pendarvis?---Yes, sir.
Were officers of the authority involved in discussions with the bank that provided the facility ultimately?---I do not think there was any direct discussion between officers of the authority and the bank. That is my memory.
But the authority was certainly interested in the arrangement of an alternative facility, is that so?---Yes.
Was that put in place, to your knowledge?---Yes, it was.
Was the authority repaid the money that it was advanced?---Yes.
Was it paid interest at 14 per cent on that advance?---Yes.
By the way, did the authority take any legal advice at any stage regarding the question whether the authority could enter into the loan arrangement?---Yes, we sought advice and we were assured that it was within the powers of the authority.
From whom did you seek advice?---The exact person I cannot tell you; it was from our Department of Law - officers of the law department in the Northern Territory.
And indeed, I think when the alternative arrangement was made the authority gave a guarantee; is that so?---That is correct.
And the guarantee, or one of the documents, makes provision for the obtaining of a floating charge over Mudginberri's assets?---Yes." (T.2695 - 2697)
Between 2 July and 20 August an amount of $992,659.82 was paid by ADMA to the applicant. On 3 July ADMA sent the applicant a document described as a "purchase order" which bore the words, inter alia, "Confirmation Order only" and "Bulk Order - Purchases - Variable". From time to time the applicant sent documents described as "invoices" to ADMA. The invoices referred to details of various items of buffalo meat and beef and against each item there was a reference to a quantity, a rate and an amount of money. Upon receipt of each invoice ADMA brought into existence a document described as a "payment voucher" which referred to the particular invoice and contained the words, inter alia, - "the above goods and services have been satisfactorily delivered and received in good condition". These documents are, of course, apt to describe goods which are the subject of a sale rather than a transfer of goods by way of security for moneys advanced.
Saville agreed that no document was brought into existence before 29 August 1985 in which the transaction with the applicant was described as a loan. He said, however, that interest on moneys advanced to the applicant was assessed from time to time by an accountant on the staff of ADMA (T 2706). His explanation of the document described above as "purchase order form" was that someone had typed it out in error (T 2711). He also said that the invoices were merely documents which gave authority to ADMA officers to make advances pursuant to the arrangements which had been entered into. He said that he considered that the fact that the meat was in store was security for ADMA's loan. It was put to Saville that when the document of 29 August was brought into existence he thought that it was desirable for political reasons to characterize the previous transactions as an advance rather than a purchase. His reply was as follows:
"It certainly was not in my mind at all. I had always understood it to be an advance. There had never been any occasion where ADMA was concerned in buying the meat. It was an advance all the time. It was considered to be an advance." (T.2714)
He also said that there was never any intention that ADMA would become the owner of the meat and that every time the matter was discussed it was treated as an advance to the applicant. (T.2715)
Counsel for the respondents submit that Saville lied in giving his evidence but I reject this submission. In my opinion he was an impressive, honest and reliable witness. His evidence is supported by the evidence of Mr Stanley Cavanagh, the General Manager of ADMA. I accept him also as an honest and reliable witness. After Saville's initial discussion with Pendarvis in early July Cavanagh was called to Saville's office. Saville told him that the Government was going to support Pendarvis while his abattoir was being picketed, that the support was to be in the form of advances for meat produced each day and that the advances were to be calculated at the rate of $2.30 per kg which was considered to be the production cost of the meat. He was told that the advances were to carry interest at 14% p.a. He said that a formula was adopted for Mudginberri notifying ADMA of the amount of meat being produced. An arrangement was made that the applicant would send invoices from the abattoir each day and that ADMA would pay moneys into the applicant's account as and when invoices were received. He described the sending of invoices as "the simplest way to do it". (T.2494) He further said that it was never intended that ADMA would purchase the meat, or become the owner of it, or attempt to sell it on the domestic or export market and stated that ADMA had no expertise in meat marketing. (T.2494) He also said that at the time the arrangement was made it was believed the picket would not last more than a month.
On 29 August an agreement was made between ADMA and the applicant whereby ADMA agreed to assist the applicant by guaranteeing a loan of $2 million which it was seeking from Westpac Banking Corporation. The terms of the agreement are entirely consistent with the account given by Saville and Cavanagh of the arrangement made with the applicant. The agreement included the following provisions:
"In order to provide financial assistance to Mudginberri Station Pty. Ltd. (hereinafter referred to as 'Mudginberri') in the light of the current industrial action being taken by the Australasian Meat Industry Employees Union (hereinafter referred to as the 'AMIEU') and the Meat Inspectors Association (hereinafter referred to as the 'MIA'), the Agricultural Development and Marketing Authority (hereinafter referred to as 'ADMA') proposes :-
- That Mudginberri be assisted in obtaining a loan facility of up to Two Million Dollars ($2,000,000.00) principal from Westpac Banking Corporation (hereinafter referred to as 'Westpac') by the provision by Northern Territory of Australia to Westpac of an Unconditional Guarantee of principal and interest on the said loan. The Guarantee to be issued in accordance with the requirements of the Agricultural Development Marketing Act of 1980 (as amended).
- The guarantee to be supported by a floating charge registered pursuant to the Companies Act over the meat product produced by Mudginberri prior to 30th November, 1985 held in cold stores where it is lodged prior to sale, and to this end Mudginberri will deliver to ADMA at the time each drawdown under the facility is to be made, valid cold store warrants evidencing title to the meat, the subject of such drawdowns.
- That following receipt of the aforesaid cold store warrants, ADMA will authorise Westpac to allow drawdown from the loan of an amount equivalent to the value of meat covered by the warrants, at a rate of Two Dollars and Thirty cents ($2.30) per kilogram.
- Mudginberri shall call an initial drawdown from the Westpac facility to repay to ADMA the advance of $992,654.82 (together with interest thereon at 14% per annum calculated on a daily basis) which advance has been made by ADMA to Mudginberri for operational purposes."
The agreement was signed by Saville and Pendarvis. Unless it was a sham, and I do not think it was, it is supportive of Saville's description of the ADMA transaction as a loan.
The loan was subsequently made by Westpac, and the money which had been paid by ADMA to the applicant was repaid, with interest.
In contrast with the evidence of Saville and Cavanagh, Pendarvis said on several occasions that the meat was sold to ADMA, and that the transaction with ADMA was not a loan. He said that the applicant was selling meat to ADMA, that he was not aware of any arrangement to pay ADMA interest, and that the meat was "stockpiled by the purchaser". (T.2093-2094) On another occasion, he said that the meat was purchased by ADMA under an arrangement that it would be bought back by the applicant. (T.2097) However, he also said that ADMA was free to sell the meat between July and September 1985 "but they could not sell it on the export market (T.2098) and agreed that the applicant was under no obligation to repurchase it. He also said that during the period from July to September ADMA was the "absolute owner" of the meat. (T.2098)
In other evidence Pendarvis referred to the ADMA transaction in terms appropriate to describe a loan, rather than a sale. He described it as "just a medium to keep us mobile until we organised the $2,000,000 loan with Westpac" (T.2322) and he gave other evidence as follows:
"MR CALLINAN: Well, when did you first have discussions with ADMA regarding the provision of financial assistance?---Prior to the opening of the abattoir under the DPP inspectors on 24 June, sir.
And as a result of those discussions were you provided with any money by ADMA?---Yes, I was.
How much?---$992,000-odd, sir. Was that provided all at once?---No, sir. Was it provided over a period of time?---That is correct.
Over what period of time?---From about 2 July through about 2 September, I believe, sir.
And was its provision from time to time simultaneous with any other event - anything you did in relation to meat produced?---Yes. We were producing meat. Now, we have stated earlier that I would have had to have further finance of about half a million dollars, at least, to carry on my operation. Because we were not able to export that meat and get an immediate cash flow we had to look outside commercial lending institutions for finance.
Yes?---Because we had to hold the meat in store. So, I discussed this with ADMA and with the Minister for Primary Production, Mr Hatton, about how we could accomplish this.
All right; and this money was provided - what - as and when the meat was delivered into cold store in Darwin?---As meat was delivered into cold store, they were invoiced for the amount of meat and a copy of the cold storage docket when the cold store actually received the meat was given to ADMA. ADMA then paid us - or, transferred to our account that number of dollars.
In due course I think, when you obtained the loan from Westpac, you repaid all of the money that had been provided to you by ADMA; is that so?
MR ASHLEY: Before the witness answers, to characterise it as a repayment is an attempt to characterise the nature of the transaction. If he was to say did he pay certain money to ADMA or - - -
HIS HONOUR: To make it neutral, did you pay to Westpac an amount equal the amount which ADMA had paid to you - - -
MR CALLINAN: Had provided to you? Did you understand that? Did you pay to ADMA, when you received money for Westpac, money representing that which you had been paid by ADMA?---I did.
Was that all that you paid?---At that particular time, yes. Later on we paid an additional $12,584 with interest, sir.
What rate was that?---14 per cent, sir.
On what - 14 per cent on what?---14 per cent on the mount of money that we had withdrawn from ADMA between 2 July and 2 September." (T.2459-2460)
In re-examination Pendarvis was asked whether he understood the true nature of the transaction with ADMA and he said he did not understand it "in strict legal terms". (T.2458) I think this was an honest answer.
I am satisfied that Pendarvis' evidence as to the nature of the transaction with ADMA is confused and that his interpretation of its legal affect was erroneous. There are several features of the transaction which make it highly improbable that it was intended to operate as a sale. In the first place, the amount paid to the applicant by ADMA was $2.30 per kg, which was the approximate cost of production. There was no point in the applicant producing meat and selling it to ADMA at the cost of production. Plainly, the applicant hoped to make a profit by selling the meat to advantage when it was able to do so. Pendarvis must have believed that when the meat was sold it would be sold by the applicant, and not ADMA. Secondly, the evidence shows that the applicant was obliged to pay the storage charges on the meat. The position would surely have been different if the meat belonged to ADMA. Thirdly, if the meat had been sold to ADMA, there was no occasion to pay interest at 14% on the moneys paid to the applicant by ADMA. Interest would have been payable only on money lent, not money paid as the purchase price for the meat. Fourthly, the fact that the moneys paid to the applicant were repaid with interest confirms Saville's account of the transaction.
Moreover, Pendarvis' continuing efforts to obtain consent to export the meat (referred to above under "Stockpiling of meat") so that a higher price could be obtained for it are much more consistent with the applicant's continued ownership of the meat than with the notion that ADMA was the absolute owner of it. It is significant that Pendarvis' own description of the interest payment made to ADMA was that it was "14 per cent on the amount of money that we had withdrawn from ADMA between 2 July and 2 September". (T.2460) The term "withdrawn" is quite inapt to refer to proceeds of sale, but is an appropriate description of the receipt of funds from a bank or other source of borrowed funds, such as ADMA was. I found Pendarvis' evidence to be reliable on most issues, and I do not think he gave any deliberately untruthful evidence. However, I think the account given by Saville and Cavanagh of the ADMA transaction is plainly correct.
The respondents submit that since Hatton and Mrs Pendarvis were both present at the conversation which Pendarvis had with Saville when the arrangement was made in July, the applicant's failure to call them as witnesses should cause me to reject Saville's account of the conversation. Had I been in any doubt as to the accuracy or truth of Saville's evidence, this would have been a persuasive argument. But I do not have any such doubt. In my opinion, the ADMA transaction was in the nature of a loan against the security of the meat produced during the picket and was not a purchase by ADMA of that meat.
(E) Meat sales in 1985
I turn now to consider the revenue which the applicant has received, or will receive, from its 1985 production of boneless meat. Some 3,142,742 lbs of such meat was produced and the applicant claims it will receive $3,053,626 for it. This sum is made up as set out in the following table. The table is substantially taken from Ex. S(3), schedule 1.1 as amended in counsel's final submissions.
|Value of Revenue to be derived from 1985 Season Production
|Total production boneless meat for 1985 season - 3,142,742 lbs.
|Export Sales to Sweden
|Available for sale
|Used for Station rations etc. and held at Mudginberri Station for own consumption
|Revenue to be derived
|Export Sales achieved to date
|Balance of sales to Gecel (Aust) Pty. Ltd.
|Various sold ex Cold Stores
|Fillets (average price $3.44/lb)
|* Other ( " " $0.709/lb)
|Fillets ( " " $3,44/lb)
|* Other ( " " $0.709/lb)
|* Other - 305 tonnes at $1.35/KG net to Muginberri i.e. 672,525 lbs x $0.612/lb
|Stock for consumption and rations
|* "Other" refers to non-fillet fraction.
I accept that the meat which has already been sold was sold at the best available prices. The respondents contend that the price of $0.709 per lb attributed to the sales ex cold stores of the non-fillet meat is too low, since Pendarvis said this meat was sold at prices varying between $1.55 and $1.70 per kg. The price of $0.709 per lb is equivalent to $1.56 per kg. However, Pendarvis also said that the average price achieved for the sale of this meat was $1.56 per kg and there does not appear to be any evidence to the contrary. The average price of $0.709 per lb was first asserted in Ex.S(3) which was tendered well before the conclusion of the evidence. The applicant's sales records would have shown that the average sale price exceeded $1.56 per kg, if that had been the case. No such records were referred to in evidence or tendered. In the light of the evidence there is no basis for fixing the average price of the non-fillet meat already sold on the domestic market at a sum in excess of $0.709 per lb.
The respondents criticize the claim that the 305 tonnes of unsold meat will bring only $1.35 per kg net to Mudginberri. They say it will bring a higher price, and not less than $1.50 per kg. As I understand the evidence, which is not entirely clear on this issue, the unsold meat is still in store in Darwin and the best offer which the applicant has so far been able to obtain for it is $1.35 per kg f.o.b. Darwin. This price is equivalent to a price of $1.50 per kg free into store Sydney. Pendarvis said that the meat already sold on the domestic market had been sold ex stores in Darwin, Adelaide and Sydney (T.3356) but as I understand his evidence (at T3359) the meat which is unsold will need to be transported into store in Sydney at a cost of 15 cents per kg. However, he has some expectation of achieving a price of $1.55 per kg free into store Sydney for the unsold meat, and this would give the applicant a net return of $1.40 per kg. I think it is reasonable to adopt this price as the value of the unsold meat.
The respondents did not call any evidence to support a higher value for the unsold meat. It seems likely to me that there would be people with experience in the Australian meat trade who could have been called by the respondents to give evidence that the unsold meat could be sold for a price higher than $1.40 per kg f.o.b. Mudginberri, if that is the case. The absence of such evidence makes it easier to conclude that $1.40 per kg is a reasonable estimate of the value of this meat.
Accordingly, the applicant's calculation of the value of the unsold meat should be increased by $15,250 (i.e. 305 tonnes at an additional 5 cents per kg) with the consequence that the figure of $411,585 in the above schedule should be increased to $426,835. The resultant total value of boneless meat produced should therefore be increased to $3,068,876.
(F) Meat produced after lifting of picket but not exported
The respondents further argue that about 149,000 lbs of the unsold meat was produced after the picket was lifted and wrongly placed in domestic cold store, thus making it unsaleable on the export market. It appears to be the fact that this meat was placed in domestic cold store. The respondents argue that if it had been exported it would have achieved a price higher than the price for which it is likely to be sold on the domestic market. Pendarvis said (T.2909 et seq) that the reason why this meat could not be exported is that it is made up of trimmings which are normally included as part of a larger quantity of meat of superior quality. He said, in substance, that after the picket was lifted the applicant strove to fill orders for superior quality meat such as fores, hinds and fillets and that it was unable to dispose of the trimmings as part of those orders. His evidence on this matter is consistent with the fact that, in any event, in a normal year about 3.6% of total production would have been sold on the domestic market. Bearing in mind the significantly higher price obtainable for meat sold on the export market, it seems improbable that the applicant would have placed this meat in domestic cold store if it could have been exported. I accept Pendarvis' evidence as to why this meat could not be sold on the export market. I do not think its value was reduced because it was placed in domestic cold store.
(G) Hide sales in 1985
The applicant produced a total of 12,399 buffalo and cattle hides in 1985. The revenue derived from the sale of the hides was $252,239 made up as follows:
|Number of hides used for leather
|Number of hides destroyed
|Average weight per hide
|Selling price per kg
|Revenue = 9487 x 32.47 x $0.665 =
|Number of hides used for leather
|Number of hides destroyed
|Average weight per hide
|Selling price per kg
|Revenue = 1589 x 20.34 x $1.265 =
|Mixed (suitable for geletine production only)
|Number of hides
|Net weight of hides
|Selling price per kg
|Revenue = 34,227 x $0.19 =
|TOTAL REVENUE FROM HIDE SALES
The buffalo hides were sold to A.H. Hide
Skins Pty. Limited at 66.5 cents per kg. The respondents contend that Pendarvis could have sold these hides at a higher price earlier in the season and that he ought to have done so. However I do not think he can be criticized for holding out for a better price and for not having the foresight to predict that prices might fall.
Further, I see no reason not to accept the amounts claimed by the applicant as the value of the cattle hides and mixed hides. Accordingly I assess the value of all hides actually produced in 1985 at $252,239.
10. Summary of loss of revenue
I therefore assess the loss of revenue due to the picket at the sum of $2,735,525, calculated as follows:
|Likely revenue from boneless meat production, if no picket
|Likely revenue from hide production, if no picket
|Value of boneless meat produced
|Value of hides produced
|LOSS OF REVENUE
11. Reduction in variable costs
The loss of revenue was offset by substantial reductions in variable costs due to the lower production levels achieved. I now consider the nature and extent of these reductions.
Cost of livestock
The shortfall in boneless meat production in 1985 was 1,585,066 lbs calculated as follows:
|Expected production if no picket
|LESS actual production
According to the applicant, the reduction in the cost of purchasing livestock should be calculated by multiplying 1,585,066 by 61.5 cents since 61.5 cents was the average price per lb boneless weight paid during the 1985 season. In 1985 a total of $1,932,455 was paid for stock from which 3,142,742 lbs boneless weight of meat was produced. However, the respondents argue that 61.5 cents per lb is too low, and that the appropriate figure is 63 cents. This argument is based on evidence given by Pendarvis (T.2384) that, averaged over the entire season, the average price paid would have been about 63 cents because of the fact that carcasses are normally heavier in the earlier part of the season and higher rates per lb are paid in respect of heavier carcasses.
The details of livestock purchases in 1985 appear from the following table, which is extracted from Ex S(3) schedule 5.3.
|Period Head Killed
||Net Weight lbs
||Average Price per Ib Boneless
Pendarvis' evidence that the average price would have been about 63 cents per lb was given without reference to his records. However, his evidence seems generally consistent with Ex S(3) because it can be deduced from the exhibit that the average price paid for all stock purchased from May to August was about 0.626 cents per lb. I therefore think it is appropriate to adopt the average price for which the respondents contend. Accordingly I estimate the saving in variable costs occasioned by the reduced livestock purchases at 1,585,066 x 63 cents, i.e. $1,998,592.
Reduction in payroll
Apart from some small savings which the applicant concedes it made in wage costs, it contends that the amount of wages it has paid, or will be obliged to pay, to its employees for the 1985 season is not less than the amount which it would have been obliged to pay them for a full year's production uninterrupted by the picket. In substance, the applicant contends that, in order to keep faith with its employees and to induce them to stay at Mudginberri whilst the picket was in place, it agreed to pay them the same remuneration for the 1985 season as they would have been likely to have earned in the absence of the picket. But for the picket, their wages almost certainly would have averaged at least $500 per week because of production incentives in the award.
In my opinion the proper approach to this part of the claim is to ascertain the terms of any agreement which may have been made by the applicant with its employees, and then to determine whether it was reasonable for the applicant to enter into any such agreement.
I accept Pendarvis' evidence that if the employees had dispersed after 9 May it would not have been practicable for him to get them to return to work after the picket was lifted. He said that the applicant had employed a good team of men and that it was highly desirable to retain their services. Some twenty-six men were engaged directly in the production of meat, as distinct from hide production and other duties at Mudginberri Station. Pendarvis gave the following evidence as to the arrangements he made with the employees when work ceased because of the picket:
"What arrangement did you make with the men to have them stay on?---That we would pay them $175 a week for the period that they were not working. That was during the period before you started domestic production?---That is correct.
And what was the arrangement with respect to payment of further sums of money - I am sorry. Was it during the period when you were not producing, or was it throughout the period of the picket?---No, it was for the period that we were not producing we were paying them their $175 per week.
That is when you were not producing at all?---At all.
Did you make an agreement with them to pay them further sums of money?---Yes, we did. What further sums of money did you agree to pay them?---We agreed to pay them, as I mentioned earlier, that in the event there was a damages claim and we were successful in the damages claim, that we would pay them that amount of money that they should have earned had the picket not been there and they had been working." (T.2516)
Mr Peter Glenn, a yardman employed at Mudginberri, also gave evidence as to the arrangement that Pendarvis made with the employees. He said that after the picket was imposed he did not do any work but was paid money for staying at Mudginberri. His evidence included the following:
"MR CALLINAN: All right. Can you remember what it was that you were paid?---Yes.
And it was how much?---$175 a week.
All right, thank you. Did you make any other arrangements or agreements with Mr Pendarvis with respect to additional payments?---Yes." (T.2718)
"I will approach it differently. What was your expectation regarding your earnings had there been a normal season and had you been paid at the amount that you had agreed to accept of 26 cents a carton, what you would have expected to earn during the season?---The full season earning 26 cents a carton, I was expecting to earn in the vicinity of $18,000, but during that period when we weren't working we all had a meeting together, all the workers, and we had a meeting later on with Jay and Jay said, if there are any claims or any damages suit or anything like that, he would be putting a claim in for us for loss of wages on the average of that, average payment a week, for the rest of the year, of the year.
If you had not had that assurance would you have stayed working?---Oh, no way known; I would have left straight away.
Was any agreement reached amongst the workmen at the workmen's meeting regarding that offer and that proposed arrangement by Mr Pendarvis?---Yes.
What was that?---We all said that if we all get paid the average wage for the time we were not working we would all stick together and stay at Mudginberri. The feeling was that if we were not going to get anything at all for it we would all pack up our bags and go home. We were not going to stay there.
Had you not been paid, or rather you told me if that arrangement had not been made you would have left. Had you left would it have been practical for you to come back?---No.
Why not?---It costs too much money to fly from say Canberra or somewhere like that up to Darwin and I would not have even thought of going back up there again.
Would you have had to get another job?---Yes." (T.2720-2721)
163. Under cross-examination he gave further evidence as follows:
"So far as anything about payments beyond $175 was concerned, I suggest that you and the other workers stayed on the basis that Mr Pendarvis had a valid claim and if that claim succeeded, and if the claim - if it succeeded - was paid and if there were money available to pay you chaps, then you would get the money?---We would get the money. We were promised money, yes.
It was on those contingencies that you accepted?---Contingencies? Accepted what?
You said you would stay?---Yes.
Not for the $175?---Not for the $175, no." (T.2725)
I think Glenn was a reliable witness. Indeed, his credit was not attacked.
Counsel for the respondents submit that, even if accepted, the evidence does not support a finding that a firm agreement was made between Pendarvis and the employees. In my opinion, the evidence does establish the making of an agreement, but not in the terms claimed by the applicant. According to Glenn, the arrangement was that "if we all get paid the average wage for the time we were not working we would all stick together and stay at Mudginberri". In my opinion, the agreement which was reached was that the payment of what was described as the "average wage" would only be made during the time when the men were not working. I do not think Pendarvis or the men directed their minds to what the position would be if, despite the picket, the abattoir was working and producing meat, albeit at a reduced level of production.
I am not in any doubt that it was reasonable for Pendarvis to make the agreement that was made. As I have already observed the applicant was entitled to act on the basis that the Court's orders requiring the lifting of the picket would be obeyed and that therefore the agreement would be of short duration. It would have been disastrous for the applicant if the men had left Mudginberri. Indeed, had they done so, the damage which it would have suffered as a result of the picket may well have been increased considerably. In fact some 5 men did leave Mudginberri and did not return. Accordingly, only 21 men became entitled to the benefit of the agreement.
It is common ground that, but for the making of the agreement and ignoring the applicant's obligation to pay the minimum award wages between 9 May and 24 June, it would have been liable to pay the men about $185,000 more in wages had it achieved the production levels asserted in its claim. In order to arrive at the reduction in the variable wage cost due to the decreased production, I think the appropriate course is to treat the applicant as having paid, or being liable to pay, approximately $500 per week to 21 abattoir workers in the period between 9 May and 24 June. This is a period of about 6.5 weeks, so the amount of about $3,250 should be allowed in respect of each of the 21 workers. This gives a total sum of about $68,250 which, after deduction from the figure of $185,000 gives a net saving in variable labour costs of about $116,750.
The applicant contends that on any view of the facts, it would have been liable to pay to all its workers the minimum amount due to them under The Northern Territory Meat Processing Award, 1984 which governed the terms and conditions of their employment. I think this submission is correct. According to my calculations each worker would have been entitled, as a matter of law, to a wage of about $300 per week from 9 May to 24 June - see cl. 7 and 33 of the Award. Thus, if I be wrong in my opinion that the applicant made an agreement in the terms I have found, the net saving in labour costs would be about $144,050, calculated as follows:
|Estimated reduction in labour costs
|Less: wages payable
|6.5 weeks x $300 x 21 workers
|Net saving in labour costs
The cost of packaging was $1.038 per carton of 60 lbs, which is equivalent to 1.73 cents per lb. Since the shortfall in production was 1,585,066 lbs I estimate the saving at about $27,422.
Salt and Fluoride
Approximately 20 kgs of salt and fluoride (which costs 17 cents per kg) are used in the preparation of each hide. The shortfall in hide production was 5,922 (i.e. 18,321 less 12,399) and hence the cost saving was approximately $20,135.
Pallets and Packaging for Hides
The estimated cost of packaging is 50 cents per hide. The cost saving was therefore approximately $3,000.
Property Lease Rentals
The applicant concedes that, because of the interruption to production in May and June, its lease rentals abated in those months. The saving was $8,846.
Meat Inspectors' Overtime
The applicant would have incurred liability for additional overtime payable to Commonwealth meat inspectors if the year had been picket-free. It estimated the cost saving at $28,751, but this estimate was based on a budgetted figure which seems to me to have been unrealistic, and counsel for the respondents virtually conceded that this was so. About $10,000 was actually paid in overtime to meat inspectors in 1985, and I think it is reasonable to assume that an additional sum of approximately $8000 would have been paid if production had not been interrupted by the picket. I arrive at this sum by reference to the increased production which would have been achieved but for the picket. I therefore estimate the total saving at $18,000.
Hide Men - Wages
During May and June when the picket was in place the two hide men were not paid their wages. I accept the applicant's calculation of consequent saving as follows:
2 men x $31,200 per annum x 6/52 = 7,200 Commission
The applicant would have been liable to pay commission in respect of the Sweden No. 1 contract which was not fulfilled because of the picket. The commission would have been 5 cents per lb which would have been payable on 418,877 lbs. The saving of commission was therefore $20,944.
Although Pendarvis at one stage of his evidence said that cleaning is a variable expense, he also said that cleaning materials are generally perishable products which absorb moisture and which cannot be kept over a wet season. Nevertheless, some small allowance should be made for saving in cost of cleaning. I estimate the saving at $2,000.
Fuel and Oil
Pendarvis said that there were no savings made in fuel and oil because the generators had to be operated throughout the season in any event, particularly as there was a small amount of meat in store. Nevertheless I think some allowance should be made for fuel, oil and repairs and maintenance of the generators. I estimate the saving at $5,000.
The cost of consulting was bound up with services rendered to the applicant by Mr Des Pearson, who left Mudginberri during the course of the year. The applicant contends that there was no saving in consultants' fees because of the reduced production during the year, but I think that the evidence shows that there would have been a reasonably significant overall saving, which I estimate at $16,000.
Repairs and Maintenance
The applicant claims that there was no saving in respect of this item because the plant had to be maintained and kept in repair. Whilst I accept that this was so, the reduced wear and tear on the plant was probably reflected in lower costs for repairs and maintenance, which I estimate at $6,000.
The applicant had intended to spend a substantial sum of money in 1985 improving its accounting system. This money was not spent, but I do not think it is proper to regard the non-payment as a cost saving in 1985. Ordinary accounting expenses continued unabated. The fact that the substantial sum was not spent does not mean that it will not need to be spent in the future. I therefore do not think there was any significant saving in accounting costs.
Because of the reduction in the applicant's payroll, there would have been a reduction in payroll tax. According to the evidence, payroll tax payable by the applicant was about 5% of wages paid. Since the total saving in wage costs (including meat inspectors' overtime and hide men's wages) was in the order of $142,000 I estimate the saving in payroll tax at $7,100.
Pendarvis said that had it not been for the picket the applicant would have spent about $30,000 on legal fees. When asked what these fees would have been for, he said: "We are doing some work on our lease. That was part of it." I am not satisfied that the applicant made any real saving in respect of legal expenses. Some of the expenses may have been postponed, but they will be incurred in due course.
Insurance premiums, particularly workers' compensation insurance premiums, would have been higher in a full year of production. I estimate that the additional premiums would have been approximately $20,000.
There were no savings in the wages of the administration staff, since all such staff were retained and paid their normal wages. It appears that up to five employees left Mudginberri shortly after the picket was imposed and were not replaced, at least for some period. However, I think that any saving in wages referable to these men would be comprehended within the sum of $116,750 referred to above.
I doubt very much whether any significant savings were was made in respect of items such as entertainment, travel, small tools and power, but I think some marginal savings were probably made because of the decreased activity at Mudginberri in May and June. Doing the best I can I estimate the saving on such items at approximately $5,000.
The total of all the above savings in variable costs is $1,281,989.
It is impossible to be completely accurate in estimating the reductions in variable costs, just as it is impossible to be completely accurate in estimating the value of lost production. Any inaccuracy in one of the estimates may well be counter-balanced by an inaccuracy in the other.
12. Additional Costs
The applicant incurred additional costs as a result of the disruption of its business in 1985. The most significant of these costs was the interest which it had to pay on borrowed funds. It was necessary for the applicant to obtain substantial overdraft accommodation because of its reduced income and the postponement of the time when sales revenue was received. The claim for interest is set out in considerable detail in Ex. S(3), schedule 6. After making allowance for interest charges which the applicant would have incurred in any event, a claim is made for additional interest of $179,637. I think this claim is made out.
The applicant also claims that it incurred additional storage charges because meat was held in store in the expectation that permission would be given to export it. This claim is also set out in considerable detail in Ex. S(3) schedule 6, the amount claimed being $147,066. I think this claim is generally reasonable. However, the amount claimed should be reduced to allow for the fact that, even if there had been no picket some storage charges would have been incurred in any event, including storage charges on meat produced in the 1984 season and still in store at the beginning of 1985. I think the proper amount to allow for storage charges on this meat is about $30,000. I arrive at this sum by reference to experience in past years. Storage charges incurred by the applicant from 1 July 1983 to 30 June 1984 were $25,740 and from 16 September 1984 to 18 August $22,009. Since the quantity of meat produced in 1985 would have been much the same as in 1983, I think it is appropriate to adopt the storage costs incurred in that year, escalated to allow for inflation. Accordingly the claim for additional storage costs should be reduced to $117,066.
The remaining item of additional cost incurred by the applicant was freight. The additional amount claimed is $9,205, particulars of the claim being set out in considerable detail in Ex. S(3), schedule 6. I think the claim is reasonable.
I therefore assess the total additional costs incurred by the applicant at the sum of $305,908.
The respondents submit that the applicant paid too much for livestock whilst the picket was in place, and that its damages should be reduced accordingly. I do not think the applicant paid any more than it was commercially prudent to pay having regard to the desirability of maintaining the goodwill of its suppliers and continuity of supplies from them.
13. Summary of damages awarded
193. For the above reasons I assess the loss and damage incurred by the applicant at the sum of $1,759,444 made up as follows:
|Expected Revenue from 1985 Season
|Revenue received or receivable in respect of 1985 production
|LOSS OF REVENUE
|Reduction in variable costs
|Additional costs incurred
|TOTAL LOSS AND DAMAGE
The applicant originally claimed additional general damages for loss of goodwill caused by its inability to service the needs of its overseas customers in 1985, but this claim was subsequently abandoned.
After the evidence and argument in this case was concluded I heard matter No. VG 36 of 1986, in which the respondents sought orders setting aside the orders made by me on 12 July 1986 . I permitted the respondents to re-open their case in the present proceedings and to tender the record in VG 36 of 1986 and the evidence given in that case. Nothing in that additional evidence causes me to change the views I have expressed in these reasons. It is convenient to express my views on the effect of the additional evidence in my reasons in VG 36 of 1986 rather than repeat them in these reasons, and this I have done.
I order the first respondent to pay the applicant damages of $1,759,444 and judgment will be entered for the applicant against the first respondent in that sum. The claim for damages against the other respondents is dismissed.
197. I will hear the parties on the question of costs.