Fubilan Catering Services Limited v Compass Group (Australia) Pty Ltd

• Jurisdiction: Australia Federal only
• Court: Federal Court (Australia)
• Judgment Date: 09 August 2007
• Neutral Citation: [2007] FCA 1205

FEDERAL COURT OF AUSTRALIA

Fubilan Catering Services Limited v Compass Group (Australia) Pty Ltd

[2007] FCA 1205

TRADE PRACTICES – unconscionable conduct – special disadvantage – taking advantage – lodgment of tender for mining company catering contract by landowner company in Papua New Guinea – preparation of tender in conjunction with experienced catering company – catering company to enter into management agreement with landowner company – catering company acquiring competing tenderer – variation of tendered rates to level acceptable to mining company – whether constituted unconscionable conduct by manager against landowner company – independent advice to landowner company – involvement of landowner company representative in process – no special disadvantage – no taking advantage – no unconscionable conduct

TRADE PRACTICES – misleading or deceptive conduct - precontractual representations – promissory character – alleged failure to honour promises in performance of contract – no express pleading of absence of reasonable grounds – invocation of s 51A of Trade Practices Act 1974 – inappropriate pleading of section – operation of section – evidential burden on representor – persuasive burden not reversed – misleading or deceptive conduct not established – loss and damage – requirement for causal connection – no causal connection to loss

EQUITY – fiduciary duty – whether fiduciary relationship existed – contractual relationship – outside settled categories – reluctance to impose fiduciary relationship – whether fiduciary obligations to landowner company by catering company under Management Agreement with respect to catering contract – no fiduciary relationship – no breach of fiduciary obligation – no relevant loss

TORT – negligence – whether breach of duty of care in performance of Management Agreement by management company in management of catering contract for landowner company – whether loss or damage sustained

CONTRACT - construction of contract – background of contract – commercial purpose - whether breach – no relevant breach – no relevant loss or damage

Trade Practices Act 1974 (Cth)

Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd ( 2003) 214 CLR 51 cited

Australian Competition and Consumer Commission v Samton Holdings Pty Ltd (2002) 117 FCR 301 cited

Commercial Bank of Australia v Amadio(1983) 151 CLR 447 cited

Wardley Australia Ltd v Western Australia (1995) 175 CLR 514 cited

Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526 cited

Marks v GIO Australia Holdings (1998) 196 CLR 494 cited

Ting v Blanche (1993) 118 ALR 543 cited

Phoenix Court Pty Ltd v Melbourne Central Pty Ltd (1997) ATPR (Digest) 46-179 cited

Australian Competition and Consumer Commission v Universal Sports Challenge [2002] FCA 1276 cited

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 cited

Bill Acceptance Corporation Ltd v GWA Limited (1983) 50 ALR 242 cited

Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 cited

Breen v Williams (1996) 186 CLR 71 cited

Phipps v Boardman [1967] 1 AC 46 cited

Norberg v Wynrib (1992) 92 DLR (4^th) 449 cited

Paul Dainty Corp Pty Ltd v National Tennis Centre Trust (1990) 22 FCR 495 cited

Elders Trustee and Executor Co Ltd v EG Reed Pty Ltd (1987) 78 ALR 193 cited

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 cited

Reardon Smith Line Ltd v Hansen-Tangen [1976] 1 WLR 989 cited

Codelfa Constructions Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 cited

Meagher, Heydon and Leeming, Equity Doctrines and Remedies (4^th ed, Butterworths, 2002)

Lehane JRF, “Fiduciaries in a Commercial Context” in Finn P (ed) Essays in Equity (Law Book Co, 1985)

FUBILAN CATERING SERVICES LIMITED (INCORPORATED IN PAPUA NEW GUINEA) AND MINERAL RESOURCES STAR MOUNTAINS LIMITED (INCORPORATED IN PAPUA NEW GUINEA) v COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125), EUREST (SOUTH PACIFIC) LIMITED (INCORPORATED IN PAPUA NEW GUINEA) AND COMPASS GROUP PLC (INCORPORATED IN THE UNITED KINGDOM)

WAD 252 OF 2003

FRENCH J

9 august 2007

PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 252 OF 2003

BETWEEN:

FUBILAN CATERING SERVICES LIMITED (INCORPORATED IN PAPUA NEW GUINEA) First Applicant MINERAL RESOURCES STAR MOUNTAINS LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Applicant

AND:

COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125) First Respondent EUREST (SOUTH PACIFIC) LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Respondent COMPASS GROUP PLC (INCORPORATED IN THE UNITED KINGDOM) Third Respondent COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125) First Cross-Claimant EUREST (SOUTH PACIFIC) LIMITED (INC IN PAPUA NEW GUINEA) Second Cross-Claimant COMPASS GROUP Plc (INCORPORATED IN THE UNITED KINGDOM) Third Cross-Claimant MOROCCO HOLDINGS PTY LTD First Cross-Respondent WILLIAM FENWICK Second Cross-Respondent

JUDGE:	FRENCH J
DATE OF ORDER:	9 AUGUST 2007
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. The application is dismissed.

2. The applicants are to pay the respondents’ costs of the application including indemnity costs in respect of the proceedings against the third respondent;

3. The cross-claim is dismissed.

4. Liberty to the parties to apply in respect of the costs of the cross-claim.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 252 OF 2003

BETWEEN:

FUBILAN CATERING SERVICES LIMITED (INCORPORATED IN PAPUA NEW GUINEA) First Applicant MINERAL RESOURCES STAR MOUNTAINS LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Applicant

AND:

COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125) First Respondent EUREST (SOUTH PACIFIC) LIMITED (INCORPORATED IN PAPUA NEW GUINEA) Second Respondent COMPASS GROUP PLC (INCORPORATED IN THE UNITED KINGDOM) Third Respondent COMPASS GROUP (AUSTRALIA) PTY LTD (ACN 000 683 125) First Cross-Claimant EUREST (SOUTH PACIFIC) LIMITED (INC IN PAPUA NEW GUINEA) Second Cross-Claimant COMPASS GROUP Plc (INCORPORATED IN THE UNITED KINGDOM) Third Cross-Claimant MOROCCO HOLDINGS PTY LTD First Cross-Respondent WILLIAM FENWICK Second Cross-Respondent

JUDGE:	FRENCH J
DATE:	9 august 2007
PLACE:	PERTH

REASONS FOR JUDGMENT

1. Introduction

1 Fubilan Catering Services Ltd (Fubilan) is a subsidiary of Mineral Resources Star Mountain Limited (MRSM). They are the applicants in these proceedings. Both are companies incorporated in Papua New Guinea (PNG). MRSM is the trustee of the Star Mountain Landowner Trust. It holds an interest in the Ok Tedi copper and gold mine in the West Province of PNG in trust for local landowners.

2 At the end of 1999 MRSM won a tender to provide catering services for Ok Tedi Mines Limited (OTML) at the Ok Tedi mine. A landowner company, Fubilan, was set up to provide the services under the OTML Contract. It was a requirement of OTML that a successful landowner tenderer secure the management services of a company with an international reputation in catering of the kind required under the contract.

3 As a result on 6 January 2000 MRSM and Fubilan, together with a statutory corporation, Mineral Resources Development Company Ltd (MRDC) entered into a Management Agreement with two members of the Compass Group of companies. One was the first respondent Compass Group (Australia) Pty Ltd then, and until 9 May 2003, known as Eurest (Australia) Support Services Pty Ltd (Eurest (Australia)). Prior to 19 March 1999 it was known as SHRM (Australia) Support Services Ltd. It is a company incorporated in Australia. The other Compass Group company which was party to the agreement was the second Respondent, Eurest (South Pacific) Ltd (Eurest). It is a company incorporated in PNG. The two companies had been acquired by the Compass Group in November 1999. Under the Management Agreement, Eurest was the manager and Eurest (Australia) guaranteed its performance. The catering contract with OTML, referred to in these reasons as the OTML Contract, was signed by Fubilan on 11 January 2000.

4 The relationship between Fubilan and Eurest was difficult from the outset and continued to be difficult for the life of their agreement. Fubilan, and its consultant Mr William Fenwick, alleged wrongdoing of various kinds by Eurest in connection with the formation and implementation of the agreement. They alleged mismanagement by Eurest and that Eurest (Australia) had obtained and retained the benefit of rebates and discounts in purchasing goods in Australia and PNG for use in the provision of services under the OTML Contract. Fubilan endeavoured to set up its own supply chain with intermediary companies in which it and Mr Fenwick would hold interests. At the end of 2001 Fubilan attempted to terminate its relationship with Eurest and substitute another manager. However OTML’s approval for the termination was necessary and was withheld. Ultimately, and despite the commencement of these proceedings in 2003, the catering contract was renewed in August 2005 on the basis of an ongoing management relationship between Fubilan and Eurest which continues to this day.

5 MRSM and Fubilan commenced these proceedings in 2003 against Eurest, Compass Group (Australia) Pty Ltd, Eurest and Compass Group Plc, the United Kingdom holding company. No less than 18 causes of action were raised. They relied, inter alia, upon the Trade Practices Act 1974 (Cth) (TPA), breaches of fiduciary obligations, negligence and breach of contract. The trial of the action occupied 22 hearing days but much of the evidence was documentary. The total number of documentary exhibits was 523.

6 For the reasons that follow, the applicants fail on all their causes of action. They will have to bear the costs of...