Toll (FGCT) v. Alphapharm

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Toll (FGCT) Pty Limited v Alphapharm Pty Limited
Australia: High Court of Australia; Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ; [2004] HCA 52; 11 November 2004
Contract: Construction and interpretation: Whether road transport company’s general terms and conditions incorporated into contract: exclusion clause: contract signed but terms and conditions not read: Conclusiveness of act of signature – Principal and AGENT: Whether consignee bound by contract entered into by another : Whether agent authorised to contract on terms including exclusion clause

In this case, the High Court of Australia, the highest court of appeal in Australia, overruled decisions of the District Court of New South Wales and the New South Wales Court of Appeal, in holding that Toll, a road transport company, could rely upon an exclusion of liability clause contained in its standard trading conditions. The ground for the decision was that cargo claimants had signed a contract purporting to include the conditions, even though the signatory had not read the conditions before signing and the contract was a mere credit application. The court held that a printed provision inserted above the signature space on the face of the contract, inviting the signatory to read the conditions on the reverse, was sufficient notice to the signing party of the existence of the exclusion clause – particularly in circumstances where, as the court found in this case, such exclusion clauses were in common use in the particular transport industry.

DMC Category Rating: Confirmed

Case note contributed by Danella Wilmshurst of Ebsworth & Ebsworth, lawyers in Sydney, the International Contributors to the website for Australia

In 1999, Alphapharm imported into Australia quantities of ’flu vaccine intended for supply to customers in various states of Australia. This was pursuant to a sub-distribution agreement between it and a New Zealand company, Ebos, who was the distributor of the vaccine for New Zealand and the South Pacific. Under this agreement, Ebos would supply the vaccine to Alphapharm’s designated Sydney warehouse and title would pass when monies were paid to Ebos.

Richard Thomson, a wholly-owned Australian subsidiary of Ebos, agreed to look after the collection and storage of the vaccine in Australia. Later, however, Richard Thomson suggested to Alphapharm that the services of a road transport and logistics company, Toll, be used instead. This was agreed. Toll thus became responsible for collecting the goods upon their arrival at Sydney, transporting them to Toll’s warehouse, storing them, and delivering them to Alphapharm’s customers. Alphapharm had no direct dealings with Toll about the terms and conditions of, or payment for, such services.

Prior to work being undertaken, Toll provided Richard Thomson with an Application for Credit which stated, above the space for signatures: "Please read ‘Conditions of Contract’ (Overleaf) prior to signing". Evidence showed that these conditions of contract ("the Conditions") were in a form in common use in the refrigerated transport industry. Not surprisingly, the Conditions contained a clause purporting to exclude liability on a broad basis. A representative of Richard Thomson signed the Application for Credit but gave evidence that he did not read the Conditions. Subsequently, two consignments of the vaccine were rejected by state health authorities as a result of Toll’s failure to keep them within the required temperature range. Alphapharm and Ebos commenced proceedings against Toll, claiming damages for negligence as bailee in the amount of A$683,061.86.

Judgment was entered in favour of Alphapharm and Ebos in both the District Court of New South Wales and Court of Appeal of New South Wales. However, Toll was granted special leave to appeal to the High Court. The issues before the High Court were (i) whether the Conditions formed part of the contract between Richard Thomson and Toll, and (ii) whether Richard Thomson had contracted with Toll as agent for Alphapharm, such that Toll could rely on the Conditions as against Alphapharm.

The District Court (the Court of Appeal upholding the decision) had found in favour of the plaintiffs, Alphapharm and Ebos, on the basis that Toll did not do what was "reasonably sufficient" to give Richard Thomson notice of the existence or content of the Conditions. In a unanimous judgment, the High Court strongly rejected this test as appropriate in the circumstances of the case. The judges noted that that test was applicable in the so-called ticket cases. However, where a person has signed a document knowing it to contain contractual terms, and there is no vitiating element (such as misrepresentation), nor a right for equitable or statutory relief (such as under unfair contract legislation), "the fact that the person has signed the document without reading it does not put the other party in the position of having to show that due notice was given of its terms." Anything to the contrary, the court said, could "subvert fundamental legal policy". In this case, it did not matter that the Conditions were incorporated via an application for credit. There was no evidence to show that applications for credit in the transport industry do not normally contain general terms of contract.

At any rate, the High Court commented that it would be "difficult to imagine" Toll being able to do any more to notify Richard Thomson of the Conditions than to require their representative to sign a document and place his signature immediately below a request that he read the conditions on the reverse before signing.

The High Court also found that Richard Thomson had contracted with Toll as agent for Alphapharm. The Court noted that Richard Thomson had given Toll delivery information and instructions in response to instructions received from Alphapharm. Ebos and Alphapharm received the benefit and bore the cost of Toll’s services. Moreover, although Richard Thomson largely made merely administrative arrangements on behalf of Alphapharm, (a matter considered by the trial judge in finding that Richard Thomson was not an agent of Alphapharm authorised to enter into contracts on its behalf containing such onerous conditions) outbound shipments had to take place pursuant to a contract and rates of freight and terms of payment for those shipments had to be agreed. The evidence "compelled the conclusion" that Alphapharm had authorised Richard Thomson to contract with Toll and agree on freight rates, payment terms and such other standard terms and conditions of contract as were required by Toll. Toll was, therefore able to rely upon the exclusion clause in the Conditions of Contract against Alphapharm, and judgment was entered in Toll’s favour.

The High Court’s judgment shows a certain lack of tolerance for commercial organizations that are "capable of looking after [their] own interests", sign contractual documents, but then argue that they are not bound by the terms of that document because they have not read it. From the other side of the coin, companies seeking to rely on standard terms and conditions, which include the usual exclusions of liability, can be relieved of the somewhat vague requirement of doing what is "reasonably sufficient" to give notice of terms, in order that they be incorporated. Conditions will generally form part of the agreement when set out in a document containing an invitation to read the conditions before signing and the document has been signed by the customer – even if that document is simply a credit application.

The decision might be considered indicative of the approach that the High Court will take in relation to contract interpretation and construction issues in a commercial context generally.


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