Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [No 3] - [2010] WASC 141

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: ATTORNEY-GENERAL OF BOTSWANA -v- AUSSIE DIAMOND PRODUCTS PTY LTD [No 3] [2010] WASC 141

CORAM: MURPHY J

HEARD: 12-16 OCTOBER, 23 DECEMBER 2009 & ON THE PAPERS

DELIVERED : 23 JUNE 2010

FILE NO/S: CIV 1139 of 2008

BETWEEN: ATTORNEY-GENERAL OF BOTSWANA
Plaintiff
AND
AUSSIE DIAMOND PRODUCTS PTY LTD
Defendant

Catchwords:

Contract - General principles - Construction and interpretation - Nature of terms

Contract - Remedies for breach of condition - Recovery of advance payment - Total failure of consideration

Private international law - Choice of law - Contract - Proper law of contract - C.i.f contract for the sale of goods

Sale of goods - C.i.f contracts - General principles

Sale of goods - Remedies for breach of condition - Right of rejection - When buyer deemed to have accepted goods - Section 35 Sale of Goods Act 1895 (WA)

Legislation:

Sale of Goods (Vienna Convention) Act 1986 (WA), s 5, s 6
Sale of Goods Act 1895 (WA), s 5(1), s 5(3), s 14(i), s 14(ii), s 14(iv), s 20, s 27, s 34, s 35, s 54, s 55, s 60(1)

Result:

Action dismissed

Category: B

Representation:

Counsel:

Plaintiff: Mr M L Bennett & Mr M P Bruce
Defendant: Mr T Cox

Solicitors:

Plaintiff: Lavan Legal
Defendant: Crawford Legal

Case(s) referred to in judgment(s):

Akai Pty Ltd v The People's Insurance Co Ltd [1996] HCA 39; (1996) 188 CLR 418
Ankar Pty Ltd v National Westminster Finance (Australia) Ltd [1987] HCA 15; (1987) 162 CLR 549
Arcos Ltd v EA Ronaasen & Son [1933] AC 470
Attorney‑General of Botswana v Aussie Diamond Products Pty Ltd [No 2] [2009] WASC 301
Australian Broadcasting Commission v Australasian Performing Right Association Limited [1973] HCA 36; (1973) 129 CLR 99
Automasters Australia Pty Ltd v Bruness Pty Ltd [2004] WASCA 229
Baltic Shipping Co v Dillon (The Ship Mikhail Lermontov) [1993] HCA 4; (1993) 176 CLR 344
Barber v Inland Truck Sales Ltd (1970) 11 DLR (3d) 469
Bonython v The Commonwealth of Australia [1948] HCA 2; (1950) 81 CLR 486
Burroughs Business Machines Ltd v Feed‑Rite Mills (1962) Ltd (1973) 42 DLR (3d) 303
Burroughs Business Machines Ltd v Feed‑Rite Mills (1962) Ltd (1976) 64 DLR (3d) 767
Carr v JA Berriman Pty Ltd [1953] HCA 31; (1953) 89 CLR 327
Cehave NV v Bremer Handelsgesellschaft mbH (The Hansa Nord) [1976] QB 44
Cerealmangimi SpA v Toepfer (The Eurometal) [1981] 3 All ER 533
Champtaloup v Thomas (1976) 2 NSWLR 264
Comptoir d'Achat et de Vente du Boerenbond Belge S/A v Luis de Ridder Limitada (The Julia) [1949] AC 293
Damberg v Damberg (2001) 52 NSWLR 492
Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32
Finch Motors Ltd v Quin (No 2) (1980) 2 NZLR 519
Fisher, Reeves & Co Ltd v Armour & Co Ltd [1920] 3 KB 614
Gamer's Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd [1987] HCA 30; (1987) 163 CLR 236
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1
Geroff v CAPD Enterprises Pty Ltd [2003] QCA 187
Hancock Prospecting Pty Ltd v BHP Minerals Pty Ltd [2003] WASCA 259
Hart v MacDonald [1910] HCA 13; (1910) 10 CLR 417
Hyundai Heavy Industries Company Ltd v Papadopoulos [1980] 1 WLR 1129
Immer (No 145) Pty Ltd v Uniting Church in Australia Property Trust (NSW) [1993] HCA 27; (1993) 182 CLR 26
JS Robertson (Aust) Pty Ltd v Martin [1956] HCA 2; (1956) 94 CLR 30
Khoury v Government Insurance Office (NSW) [1984] HCA 55; (1984) 165 CLR 622
Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd [2007] HCA 61; (2007) 233 CLR 115
Kwei Tek Chao v British Traders & Shippers Ltd [1954] 2 QB 459
Lumbers v W Cook Builders Pty Ltd (in liq) [2008] HCA 27; (2008) 232 CLR 635
Maggbury Pty Ltd v Hafele Australia Pty Ltd [2001] HCA 70; (2001) 210 CLR 181
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
Manifatture Tessile Laniesa Wooltex v J B Ashley Ltd (1979) 2 Lloyd's Rep 28
Margaronis Navigation Agency Ltd v Henry W Peabody & Co of London Ltd [1965] 2 QB 430
McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; (2000) 203 CLR 579
McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457
Mcdougall v Aeromarine of Emsworth Ltd (1958) 1 WLR 1126
Mendelsohn‑Zeller Inc v T&C Providores Pty Ltd [1981] 1 NSWLR 366
Morrison v Clarkston Bros (1898) 25R 427
Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India (The Kanchenjunga) [1990] 1 Lloyd's Rep 391
Neilson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54; (2005) 223 CLR 331
Pacific Carriers Pty Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Pacific Film Laboratories Pty Ltd v Federal Commissioner of Taxation [1970] HCA 36; (1970) 121 CLR 154
Panchaud Freres SA v Establissements General Grain Co (1970) 1 Lloyd's Rep 53
Playcorp Pty Ltd v Taiyo Kogyo Ltd [2003] VSC 108
Power Curber International Ltd v National Bank of Kuwait [1981] 1 WLR 1233
Public Utilities Commission of City of Waterloo v Burroughs Business Machines Ltd (1974) 52 DLR (3d) 481
R G McLean Ltd v Canadian Vickers Ltd (1970) 15 DLR (3d) 15
Roxborough v Rothmans of Pall Mall Australia Ltd [2001] HCA 68; (2001) 208 CLR 516
Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634
Schmoll Fils & Co Inc v Scriven Bros & Co (1924) 19 Lloyd's Rep 118
Shevill v Builders Licensing Board [1982] HCA 47; (1982) 149 CLR 620
Stocznia Gdanska SA v Latvian Shipping Company [1998] 1 WLR 574
Taylor v Combined Buyers Ltd [1924] NZLR 627
The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] 225 FLR 1
The Commonwealth v Verwayen [1990] HCA 39; (1990) 170 CLR 394
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165
Tool Metal Manufacturing Co Ltd v Tungsten Electric Co Ltd (1955) 1 WLR 761
Town of Mosman Park v Tait [2005] WASCA 124; (2005) 141 LGERA 171
Tropical Traders Ltd v Goonan [1964] HCA 20; (1964) 111 CLR 41
Wallis, Son & Wells v Pratt & Haynes [1910] 2 KB 1003
Wallis, Son & Wells v Pratt & Haynes [1911] AC 394
Wanganui Motors (1963) Ltd v Broadlands Finance Ltd (1988) 2 NZBLC 103,372
Whitecap Leisure Ltd v John H Rundle Ltd (2008) EWCA Civ 429

Table of Contents

Introduction................................................................................................................................ 6
The evidence - overview............................................................................................................ 6
Facts............................................................................................................................................ 9

The invitation to tender and the period to September 2003................................................... 9
Payment of the deposit......................................................................................................... 14
The manufacture, despatch from Australia and payment of the balance: October 2003 to August 2004 15
The spare parts...................................................................................................................... 17
September 2004 to October 2004......................................................................................... 17
Mr Adamson's attendance in Botswana 4 ‑ 13 November 2004.......................................... 19
Correspondence between the parties in the period 15 November 2004 to March 2005...... 19
Mr Adamson's attendance in Botswana 7 ‑ 19 April 2005................................................... 21
The engagement of Minetech and the period July to December 2005................................. 22
Attendance of Mr Hanias and Mr Adamson in Botswana in early 2006.............................. 24
Communications in the period March to October 2006....................................................... 29
January to late June 2007..................................................................................................... 31

The pleadings............................................................................................................................ 41

The plaintiff's pleaded case.................................................................................................. 42
The defendant's pleaded case............................................................................................... 44

The expert evidence.................................................................................................................. 48

The plaintiff's expert............................................................................................................. 48
The defendant's expert.......................................................................................................... 51
Conclusions on expert evidence........................................................................................... 54

The contractual documents....................................................................................................... 54
The proper law of the contract and the Sale of Goods Act 1895 (WA).................................... 58
The background legal considerations relevant to the proper construction of the contract....... 62
Termination.............................................................................................................................. 70
The terms of the contract on its proper construction................................................................ 73
The commissioning obligation on the proper construction of the contract.............................. 78

Nature and scope.................................................................................................................. 78
Whether termination available for breach of the commissioning obligation properly construed 80
The plaintiff's pleaded commissioning obligation................................................................ 87

Advance payment; entire contracts.......................................................................................... 89

Principles.............................................................................................................................. 89
Application of principles...................................................................................................... 90

Conclusion................................................................................................................................ 90

MURPHY J:

Introduction

This case involves a restitutionary claim for approximately $1 million. The money was paid by the Department of Geological Survey of the Republic of Botswana (the Department) to the defendant under a contract made in 2003, involving the supply and commissioning of a drilling rig. The Department undertakes drilling for mineral exploration and geotechnical and water well drilling in Botswana. The plaintiff is the person authorised under a Botswanan statute to bring these proceedings on behalf of the government of Botswana.
The plaintiff puts its claim on two bases. The first is that the consideration under the contract wholly failed, because the defendant failed to commission the drill rig. The second is that, on the proper construction of the contract, the payment was conditional upon performance of all the defendant's obligations, including its promise of commissioning, the non‑fulfilment of which entitled the Department to the return of the sum paid.
The defendant contends that commissioning of the rig was completed in late February/early March 2006, and says that, in any event, the goods were accepted and the Department cannot recover in restitution.
For the reasons which follow, I find that the plaintiff has not made out his case.

The evidence - overview

Many of the underlying facts are not in dispute in this matter. The principal differences centred around the events of late February/early March 2006 when, on the defendant's case, the commissioning of the rig was completed.
The plaintiff called three witnesses of fact and one expert witness. The three witnesses of fact were Mr Morake Molatlhegi, Mr Moruti Ntloedibe and Mr Moeng Bareki. Each gave evidence‑in‑chief by witness statement. Affidavits of Mr Molatlhegi that had been sworn on 1 April 2008 and 19 May 2008 (pars 1 ‑ 8) in relation to an earlier summary judgment application were also tendered, the former by the plaintiff and the latter by the defendant. The plaintiff objected to the tender of Mr Molatlhegi's affidavit of 19 May 2008, particularly, as I understand it, on the basis that it could not be admitted as to the proper construction of the contract entered into between the parties. I indicated that I could not see it as admissible for that purpose, but that I would reserve the overall question of admissibility. I accept the plaintiff's submission that the affidavit would be inadmissible for the purpose of construction. I accept its tender only insofar as it deals with the placing of the orders for the equipment and the payment of the respective sums of $999,728 and $73,060. Paragraphs 1 ‑ 8 of that affidavit are admitted for those purposes only.
Mr Molatlhegi has held the position of Superintendent at the Department since 2004. In 2002 he was the Chief Technical Officer of the Department and he was responsible for overseeing the purchase and commissioning of the drill rig. Whilst I consider that, generally speaking, he gave his evidence as truthfully as he can recollect, he appeared to me to prevaricate somewhat in responding to questions in cross‑examination, and to be anxious to put forward his view of events, whether or not it was directly responsive to the particular question being asked of him. Part of the reason for this, I think, is that the events concerning the purchase of the drill rig achieved some notoriety in Botswana. The matter had been raised in the news in Botswana and had also been raised in parliament. I formed the impression that Mr Molatlhegi sought, subconsciously, to portray his role in the events in a favourable light. Mr Molatlhegi (like the defendant's witnesses) misstated in his witness statement the timing of the visit to Botswana by Mr Adamson and Mr Hanias of the defendant in late February/early March 2006. The error (like that of Mr Adamson and Mr Hanias) arose, I think, from an attempted reconstruction of the events by reference to certain contemporaneous documents which proved to be incomplete on the subject matter of the visit. I also found Mr Molatlhegi's evidence somewhat confusing regarding certain of the events which occurred between 1 July and 3 December 2007. Having made those observations, he no doubt gave his evidence honestly, to the best of his ability.
Mr Ntloedibe is a Principal Technical Officer with the Department. He had previously been a drilling foreman, and had undertaken further studies in Canada. He was responsible for overseeing the Department's drilling programme, and the operation of its drilling equipment and drill crews. Although he tended to be at times somewhat argumentative, I found Mr Ntloedibe to be, generally, a reliable and impressive witness. Mr Ntloedibe had, it seems to me, the most direct and immediate interest, having regard to his position within the Department, in the operation and functioning of the drill rig in question. Of all the witnesses in the case, I regarded his evidence as to what occurred in late February/early March 2006 as, by and large, the most cogent and reliable, although I think the passage of time has also diminished his accurate recall of all the details. As noted below, there were occasions where I have preferred the evidence of the defendant's witnesses over his evidence.
Mr Bareki, in the course of cross‑examination, appeared to be somewhat unfamiliar with all the contents of his witness statement. I also found some aspects of his evidence in cross‑examination concerning the events after July 2007 somewhat confusing although other aspects seemed to me to be quite reliable. Nevertheless, overall I thought he attempted to give evidence honestly as best he could recall about the events in which he directly participated. He also corroborated a number of aspects of Mr Ntloedibe's evidence in relation to the events of late February/early March 2006. To the extent that there were contradictions between the two, however, I generally preferred Mr Ntloedibe's evidence.
The defendant's witnesses of fact were Mr Adamson and Mr Hanias. Mr Adamson had been involved in the supply of Edson drilling equipment since 1996. Mr Hanias had been in the drilling industry for over 35 years. He started in the industry as a drill technician. He is presently a director of the Australasian Drilling Association. He was an impressive witness in his grasp of technical matters and his knowledge of the drilling industry. In this transaction, Mr Adamson was the more 'hands on' of the two, and Mr Hanias, in effect left the day‑to‑day management of the transaction to Mr Adamson. In my view, both Mr Adamson and Mr Hanias attempted to give their evidence truthfully although Mr Adamson, in particular, seemed to me to be somewhat unsure of all the detail and timing of the events in late February/early March 2006. Both witnesses had, in their original witness statements, misstated the timing of their arrival in, and departure from, Botswana in late February/early March 2006. Both Mr Adamson and Mr Hanias said that they spent approximately three days on site in relation to the commissioning of the rig in late February/early March 2006. Mr Ntloedibe (exhibit 80A, pars 6, 10) had said, as did Mr Molatlhegi, that they were on site for two days. I think they are incorrect in that regard. At trial, there appeared to emerge common ground that Mr Hanias and Mr Adamson arrived in Botswana on 27 February, that the rig left for site on 28 February, and that it became bogged en route to site. It is also common ground, now, that Mr Adamson and Mr Hanias left the site where the drill was operating on Friday 3 March, and departed Botswana on Saturday 4 March. On the timing of the bogging, Mr Ntloedibe said, and I accept, that the rig became bogged at 7.00 pm on 28 February and was freed the next morning, 1 March 2006. I find that the rig arrived on site on 1 March 2006. I accept the evidence of Mr Hanias and Mr Adamson that they spent approximately three days on site with the rig, and I find that their time on site with the rig was for most of 1 March, and for 2 and 3 March 2006.
In a number of respects the evidence of the plaintiff's witnesses and the defendant's witnesses in relation to the events of late February/early March 2006 was not materially different. One important respect in which the evidence of Mr Ntloedibe (and Mr Bareki and Mr Molatlhegi) differed from that of Mr Hanias and Mr Adamson was in relation to the reason for the absence of any diamond core drilling on site during the visit by Mr Hanias and Mr Adamson in late February/early March 2006. I refer to this issue in more detail later in these reasons but at this juncture, I would record that I prefer the evidence of Mr Ntloedibe and Mr Bareki on this point. I think that the evidence of Mr Adamson and Mr Hanias is mistaken in this regard, although not from any deliberate attempt to mislead.
Generally speaking, I think the recall of each witness of fact at trial was diminished where contemporaneous documents were not available to stimulate recollection, but I think Mr Molatlhegi's evidence, and Mr Adamson's evidence to a similar but slightly lesser degree, were most affected in that regard.
Two expert witnesses were called. The plaintiff called Mr Kevin Ewing as an expert witness. For reasons later explained, I did not find his evidence of any assistance. I preferred, generally, the evidence of the defendant's expert witness, Mr Graham, although ultimately the expert evidence has not been material in the resolution of the case.

Facts

The invitation to tender and the period to September 2003

By an invitation to tender dated 28 April 2003, sent to the defendant under cover of a facsimile dated 6 May 2003, the Department called for tenders for the supply of a multi‑purpose drill rig, associated equipment, and certain services. The invitation for tender contained detailed specifications as to the required drill rig and associated 'standard equipment', a truck‑carrier vehicle, standard equipment associated with the vehicle, and drilling spare parts. The rig was evidently intended to be a mobile drill rig that could be moved from place to place. Specifications were set as to the rating, the size, the speed and other identified features of the various pieces of equipment (Specifications). It also stipulated that tenderers should make provision for training, commissioning, warranties and the supply of manuals, and for tenderers to specify delivery time in compliance with 'Botswana Supplies Regulations' (the regulations were not in evidence).

In relation to training and commissioning, the invitation to tender provided:
E) Training - The supplier will be responsible for training [in Botswana] Technicians (drillers) on how to operate the rig.
F) Commissioning - To be carried out in Botswana by applying all methods of drilling on a site to be decided by Geological Survey Department. (emphasis added)
The invitation to tender concluded with a provision for tenderers to specify a 'total price' for the 'Drill Rig, Compressor, Carrier‑Truck, accessories covering [the other specified items and services] including delivery to Lobatse/Gaborone, Commissioning and Training'.
The defendant submitted a quotation, dated 13 May 2003, for the supply of an Edson 6000W multi‑purpose drill rig and other equipment. The quotation commenced with the words ' … thank you for giving us the opportunity to submit our quotation for the above tender', and said, in effect, that the Edson 6000W 'in all ways either complies with or exceeds' the Specifications.
The defendant's quotation outlined the drilling capabilities, including diamond core drilling and reverse cycle, and the scope and nature of the items to be supplied, including a compressor, a Mercedes Benz truck, and spare parts. Under the heading 'General Specification' it referred to 'Commissioning and Training Program. Delivery to Gaborone, Botswana'.
The last page of the defendant's quotation dated 13 May 2003 stated relevantly:
Total Quotation: Our quotation based on the above specification is One Million and Seventy two Thousand, Seven Hundred and Eighty Eight (A$1,072,788.00) Australian Dollars.
Delivery:The drill rig will be delivered ex works 20 weeks from the placement of your purchase order and completion of the commercial arrangements. The drill rig will then be shipped from Fremantle to Durban, South Africa and then by road to Gaborone, Botswana.
Warranty:A 12 month warranty period on workmanship and equipment subject to adherence to the maintenance schedule will be in place after handover. The carrier warranty will be Mercedes Benz's normal vehicle warranty.
Payment Terms: Our standard payment terms are 20% Deposit on placement of your purchase order. The balance will be by an Irrevocable Letter of Credit confirmed and negotiated at an Australian Bank at [sight] of conforming shipping documents.
Total Price:The total price of the Drill Rig, Compressor, Carrier Truck, Accessories covering (B1) including delivery to Lobatse\Gaborone, Commissioning and Training (A$1,072,788.00) One Million and Seventy Two Thousand Seven Hundred and Eighty Eight Australian Dollars. (Original emphasis in bold, emphasis added in italics)
Mr Molatlhegi was impressed by the defendant's quotation as the Department already owned and operated an Edson multi‑purpose drill rig, which worked well.
On 16 June 2003, Mr Molatlhegi, on behalf of the Department, spoke by telephone to Mr Adamson of the defendant. Neither Mr Molatlhegi nor Mr Adamson gave evidence‑in‑chief of this conversation but I infer that it occurred from the terms of Mr Adamson's facsimile of 17 June 2003, referred to below. I also infer, from that facsimile, that in that conversation, Mr Molatlhegi asked Mr Adamson to address, in writing, the points which are the subject matter of Mr Adamson's facsimile. In cross‑examination, Mr Molatlhegi said, in effect (ts 197), that around this time he had asked Mr Adamson to specify the minimum number of weeks that would be spent in commissioning the rig, and that Mr Molatlhegi had suggested a five‑week period of commissioning. I accept this evidence and infer that the facsimile of 17 June 2003 was partly in response to that enquiry by Mr Molatlhegi.
The 17 June 2003 facsimile from Mr Adamson to Mr Molatlhegi referred to their telephone conversation the previous night. The facsimile addressed five matters. The first matter involved providing a breakdown of the dollar value of each of the spare parts. The spare parts were detailed and their prices totalled $77,338. The second matter was headed 'Project breakdown', and stated:
Drill Rig A$593,877.00
CompressorA$106,803.00
Carrier/Truck A$265,450.00
FreightA$18,720.00
Commissioning/
TrainingA$10,600.00
SubTotalA$995,450.00
Spare PartsA$77,338.00
TotalA$1,072,788.00
The third, fourth and fifth matters were in these terms:
3.Commissioning of the drill rig and operator & maintenance training will take 3 weeks.
4.Button bit grinder A$2,000.00
4.[sic]Project schedule
Design will commence on receipt of your official purchase order. Construction will commence when the letter of credit is confirmed.
Delivery will be 20 weeks ex works from the date of your purchase order provided that the letter of credit is received within 2 weeks of order confirmation.
I hope this is the information you are looking for. If you require any further information please do not hesitate to contact me. (emphasis added)
On 30 June 2003, in response to a request from Mr Molatlhegi, the defendant forwarded to the Department a copy of its certificate of incorporation.
On 20 August 2003, Mr Adamson on behalf of the defendant wrote to the Department and confirmed that the defendant's tender included all sea freight, clearance and document charges from Perth to Botswana.
By facsimile dated 22 August 2003, Mr Adamson of the defendant advised Mr Molatlhegi of the Department that the defendant's 'standard terms' included a 20% deposit because 'the total Project [including] the Drill Rig and Carrier are manufactured on demand to the specification as per the ... tender'. Although the facsimile referred to 'standard terms', the defendant did not in these proceedings allege that the relevant contract between the parties incorporated a document called 'standard terms', or tender such a document.
On 10 September 2003, the Department requested the establishment of an irrevocable documentary credit with Barclays Bank. The request was for the payment of $999,728, by acceptance of a draft drawn on the confirming bank on sight of specified documents. The documents specified were signed commercial invoices showing the c.i.f. value, negotiable marine bills of lading to order and bank‑endorsed, certain transport documents, a marine and war risk insurance policy for 'not less than the CIF invoice value plus 10%', and other documents including an inspection certificate. The beneficiary was to be the defendant. Confirmation charges were to be to the beneficiary's account. The request stated that part shipments were not allowed and that shipment would be no later than 31 January 2004. The credit was to be valid up to the end of February 2004.
By cl 2 of the application, the Department agreed, in effect, to pay Barclays Bank in Botswana an amount in sufficient time to enable transfer of the funds to the point at which the draft was to be drawn under the letter of credit, on or before the date when it fell due. By cl 11, the Department authorised the bank to hold the documents called for in the documentary credit and the merchandise to which they related, and the insurance, as security for all liabilities incurred by the bank in connection with the provision of the letter of credit.
Mr Molatlhegi said that a documentary credit was issued on 10 September 2003 (exhibit 78, pars 8 ‑ 9). I infer that an irrevocable letter of credit was issued by Barclays Bank in accordance with the Department's application. It is referred to in the confirming credit referred to below.
The ANZ Banking Group Ltd in Perth was the confirming bank. By letter dated 15 September 2003, the ANZ bank confirmed to the defendant that Barclays Bank had issued an irrevocable documentary credit for $999,728, set out the terms of the credit, and undertook to honour drafts drawn under the letter of credit. The terms substantially reflected the terms of the application for credit. The confirmation included:
DRAFT DRAWN UPON CONFIRMING BANK AT SIGHT FOR 100% OF THE CIF.
On 16 September 2003, Mr Adamson wrote to Mr Molatlhegi and said that manufacture of the drill had commenced, and asked for the release of the 20% deposit.
Mr Adamson wrote to Mr Molatlhegi a second letter on 16 September 2003 and indicated certain difficulties with the letter of credit. He asked that certain amendments be made to it, including changing the latest date of shipment to 31 March 2004 and the expiry date to 31 April 2004, and required payment of the 20% deposit in accordance with the defendant's quotation of 13 May 2003. There was no complaint in relation to the value of the credit, being $999,728.
On 17 September 2003, the Department wrote to Barclays Bank seeking amendments to the letter of credit as requested by the defendant, including the payment of a 20% deposit as 'advance payment against an invoice'. Mr Molatlhegi said (exhibit 78, par 10), and in any event I would also infer, that Barclays Bank made the requested changes and amended the credit. I infer that Barclays Bank notified the ANZ bank accordingly, and that the ANZ bank confirmed the amended credit.
By letter dated 18 September 2003, the defendant sent the Department an invoice for a 20% deposit in the sum of $214,557.60. This sum represents 20% of $1,072,788.00, being the full amount in the defendant's quotation of 13 May 2003.

Payment of the deposit

It is admitted on the pleadings that on or before 9 October 2003, the Department paid the defendant $199,945.60 (ie, 20% of $999,728). Mr Molatlhegi's affidavit of 1 April 2008 (exhibit 78, par 11) indicates that the drawing was made under the letter of credit, on or about 8 October 2003. I also infer that by or at around this time, Mr Molatlhegi and Mr Adamson had agreed that the deposit payable would be 20% of the amount in the letter of credit, and not 20% of the total price referred to in the defendant's quotation of 13 May 2003. In this regard, I note that Mr Molatlhegi in cross‑examination (ts 178) said that the Department had initially obtained funding from the government to purchase the rig, but not the spares. He also deposed, in his affidavit of 19 May 2008 (exhibit 117, par 5), that the Department 'made a decision to place an initial order for the rig and only the most essential spare parts. Those items cost a total of $999,728'. I infer that around this time, Mr Molatlhegi had told Mr Adamson that the Department would order the rig and essential spares for $999,728, and that he would order the bulk of the spares, at a price of $73,060, separately, when further funding became available.

The manufacture, despatch from Australia and payment of the balance: October 2003 to August 2004

By facsimile dated 23 October 2003, Mr Adamson wrote to Mr Molatlhegi in relation to the supply of an auger in relation to another transaction. In relation to the transaction the subject of these proceedings, he said:
2. Manufacture has commenced on the 6000W and the major long leave time components have been ordered. The hydraulic package will let in the next 2 weeks as manufacture proceeds. A more detailed report with component delivery dates will issued [sic] when final delivery of components is confirmed.
On 20 November 2003, Mr Adamson wrote again to Mr Molatlhegi. He reported on items which had been the subject of 'Forward Purchasing', including the Mercedes Benz and the compressor, and indicated the dates when they were expected to be available. He also reported on the 'Design and Manufacturing Schedule', and set out the dates by which the manufacture of components of the rig were to be completed, and ready to be packed for shipping. The estimated date for packing for shipping was said to be 15 March 2004.
On 25 February 2004, Mr Adamson wrote to Mr Molatlhegi explaining that certain delays had occurred, particularly in relation to the machining of the gears and shafts for the rotary heads, which was being undertaken by a gear‑cutting company. The letter concluded:
Although overall the manufacture of the drill rig is only slightly behind schedule we are concerned that we not [sic] have sufficient time to conduct a full and comprehensive testing schedule.
Therefore we are asking that the Letter of Credit latest shipping date be extended to the end of April with the expiry date extended to the end of May.
We apologise for the delay, but we feel it is in the best interests of the project that we ensure that the drill is properly commissioned prior to shipment.
On 2 March 2004, the Department requested Barclays Bank to amend again the letter of credit to change the latest date of shipment to 30 April 2004 and the expiration of the credit to 31 May 2004. I infer that the changes were made, as requested by the Department.
By letter dated 9 March 2004, the Department provided the defendant with information concerning the clearing of goods on arrival in Botswana. The facsimile concluded:
Don't forget to fax us a full invoice of spares for the rig spares so that we can process telegraphic transferring of payment into your account before the end of our financial year here. This is very urgent and crucial.
On 13 May 2004, the defendant rendered a further invoice showing a net sum due of $799,782.40, being the amount of $999,728, less the amount of $199,945.60 (being the 20% deposit).
I infer that the shipping documents were presented to the ANZ bank. The bill of lading was in evidence. It was a clean, multi‑modal bill. It referred to the letter of credit. The plaintiff, in its submissions, contended that 'documents' were not 'shipped' in accordance with the letter of credit, and referred to certain matters put to Mr Adamson, and to his answers in his cross‑examination (ts 417 ‑ 424). I did not regard that evidence as an admission that the proper shipping documents were not presented - Mr Adamson said that payment would not have occurred without presentation of the proper documents. Whilst his opinion is not evidence of the fact, and as an opinion I place no weight on it, I infer, based on the commercial nature of the transaction, that nearly $1 million would not have been paid by the ANZ bank except upon presentation of the proper shipping documents.
The rig was shipped from Fremantle around 25 May 2004. The rig arrived in Gaborone, via Durban, on 8 July 2004. Insofar as shipment occurred after 30 April 2004, it was beyond the date mentioned in the last amendment to the letter of credit. I infer that the letter of credit was amended again to permit shipment by 31 May 2004, or that the stipulation was waived by the banks involved, with the concurrence of the Department. I so find on the basis put that it is highly unlikely that the ANZ bank would have put itself at risk by paying such a large sum contrary to the terms of the credit without the concurrence of Barclays Bank, and that Barclays Bank would not have concurred without approval by the Department. Mr Molatlhegi also said (exhibit 78, pars 14 ‑ 15) that it was agreed to extend delivery to the end of May 2004.
It is admitted on the pleadings that on or before 24 July 2004, the Department paid $799,782.40. Mr Molatlhegi's affidavit of 1 April 2008 (exhibit 78, par 11, 'MM7') indicates that this amount was also drawn under the letter of credit, as amended, on or about 24 June 2004.

The spare parts

Spare parts, a rod rack and certain other items were sent by the defendant to the freight forwarder in early/mid‑August 2004. They were the subject of an invoice from the defendant dated 12 August 2004. They were to be shipped around 16 August 2004 but there was a delay due to problems associated with the dispatch by the freight forwarder. They were subsequently shipped on or about 30 August 2004. It is admitted on the pleadings that on or before 12 August 2004, the Department paid $73,060. There is no evidence indicating that this amount was paid under the letter of credit which, as I have indicated, was in the sum of $999,728. I infer from Mr Molatlhegi's affidavit of 19 May 2008 that the sum of $73,060 related to the bulk of the spare parts, which were the subject of a separate order by the Department some time in July 2004.

September 2004 to October 2004

On 28 September 2004, Mr Adamson wrote to Mr Molatlhegi. He said that the spare parts and accessories were clearing customs in Durban, and that the shipment was expected in Botswana in the following week. He also said:
4.I anticipate that I will be in Botswana for 10 to 14 days to assemble components that were removed for shipping, maintenance and operation instruction and drill rig commissioning. A more complete program will be outlined prior to my arrival.
5.Please advise if workshop facilities, tools and staff will be available to assist me in assembly and commissioning of the drill rig.
In early to mid‑October 2004, by the exchange of the correspondence referred to below, the parties agreed that commissioning would be undertaken in two stages, with one stage being commissioning at the Department's premises in Gaborone in about late October 2004, and the second stage being test drilling at a site near Lobatse, at some future time to be determined.
On 6 October 2004, Mr Adamson wrote to Mr Molatlhegi and said:
Referring to my facsimile [of 28 September 2004] and our subsequent telephone conversation.
Our commissioning will be in two parts.
The first part will be as indicated in the above facsimile.
The second will be carried out by an experienced drill technician at a date to be agreed and preferably at a site close to Lobatse. This part of the commissioning will take approximately two weeks.
We look forward to receiving your comments as soon as possible so that the required arrangements can be made.
Mr Molatlhegi's reply, dated 7 October 2004, was in the following terms:
1.I would like to advice [sic] on the following. In relation to the commissioning of the rig:
2.We don't have problem with period and time on [your fax].
3.We suggest that the second period of the OF Commissioning by your Technician be 3 to 4 weeks because it involves drilling and test of DTH [down‑the‑hole] and Coring Techniques.
4.We have two sites available for commissioning:
•Site A is in the Kalahari Desert about 463 km West of Lobatse
•Site B is also in the Kalahari Desert about 275 km west of Lobatse
•The tarred road is about 95% of both distance
5.Our Country will be going for elections on the 30^th August, therefore we will loose [sic] 3 days off site.
6.Can you arrange your plans based on the above information, our staff including the Mechanic will be available for help.
On 11 October 2004, Mr Adamson wrote:
I confirm that the first stage of commissioning will be carried out either immediately before or immediately after the three day break in Botswana for your elections at the end of October 2004.
On 15 October 2004, Mr Adamson informed Mr Molatlhegi that he intended to arrive in Gaborone on 4 November 2004.
The spare parts arrived in Gaborone on 25 October 2004.
On 29 October 2004, Mr Adamson informed Mr Molatlhegi that he would be in Gaborone on 4 November 2004 and that in his absence 'arrangements for the second commissioning period' would be made by the defendant's head office.

Mr Adamson's attendance in Botswana 4 ‑ 13 November 2004

Mr Adamson was in Botswana in the period 4 ‑ 13 November 2004. The drill rig was in the Department's yard in Lobatse at this time. In this period, Mr Adamson unpacked the rig from its plastic covering and noticed that there had been damage to the radiator and the mast‑foot. He considered that the damage had occurred in transit, and he arranged to have the damage repaired. Mr Adamson assembled and started up the rig. There were delays in the drill rig responding to the hydraulic controls which operated the rig. Mr Adamson told Mr Molatlhegi that the delays were to do with the pilot pressure system. Mr Adamson said, and I accept, that the pilot pressure system operated the rotary head and the winches. Mr Adamson told Mr Molatlhegi that when he returned to Australia he would consult with the company that had designed and supplied the hydraulic system.

Correspondence between the parties in the period 15 November 2004 to March 2005

On 15 November 2004, following his return to Australia, Mr Adamson forwarded Mr Molatlhegi the specification sheet for the Mercedes Benz truck.
On 16 November 2004, Mr Molatlhegi wrote to the defendant in these terms:
Thank you for assisting us on the vehicle capacity. I think it's better for us to bring the following observation made as far as the new rig commissioning is concerned:
1.Compressor was not loaded and the air gauge is not supplied.
2.Drill rig DTH work plate is not supplied we suggest that the plate must be able to accommodate 12" Hammer circumference.
3.Locking Pins for angle drilling are not available.
4.Wire-line Haul Winch and Pins missing from the spares.
5.Ladder for climbing up the mast not provided.
6.Oil Seal for the pump.
7.Water Swivel for DTH drilling.
8.The working lights are not enough we need two bright and one deem [sic] for derrick, engine area and control panel respectively.
9.The Carrier truck tyres are 365XR20 NOT 1400x R 20.
10.Air dust collector for the rig engine is missing I think you overlooked this.
I think this information will assist your office in preparing for the final and Part II of the commissioning by Technician. I suggest this must be done before the end of year especially the supply of outstanding items which are needed for commissioning to avoid Christmas Shut downs delays in shipment. (original emphasis)
On 23 November 2004, Mr Adamson replied by facsimile:
1.There is an air gauge on the panel. When I returned to Perth I checked the air circuit and noted that the gauge fitting on the pipe should be upstream of the isolation valve. From memory I think the fitting is downstream of the gauge. If you can confirm this let me know and I will supply another fitting. If the operators are not happy with the gauge as fitted let me know and I will try to source an alternative.
2.The largest DTH plate [which] Edson currently supplies takes an 8" hammer. We are at the moment redesigning the plate to accommodate 12".
3.These pins were in the spares and will be resupplied.
4.Haul winch cable will also be resupplied.
5.Mast ladders are not a standard item and because of regulation in various areas are supplied to specification. In this case no ladder was specified and when we checked the build list for your existing drill no ladder was mentioned.
6.The oil seal leakage was corrected.
7.The DTH swivels are in the manufacturing program for manufacture as soon as possible. I will advise on delivery and price shortly.
8.We supplied 2 flood lights that cover the mast and engine area's [sic]. We can supply 1 soft light for the control panel.
9.We are still waiting for Mercedes to come back to us. At this stage I think the problem with the larger tyres is the twin steering.
10.I didn't notice the missing collector. Are you referring to the tapered plastic piece under the main filter?
We are still reviewing the technician issue. With the items that need to be manufactured and shipped to Botswana, prior to the last visit, I believe that it will be unlikely that any visit will happen before the end of the year.
On or about 2 March 2005, the Department moved the rig in its yard in Lobatse in order to make way for work being undertaken in the yard by building contractors. When moving the rig, its mast broke. The Department advised the defendant of the occurrence. Mr Adamson, in a facsimile dated 4 March 2005, suggested that it appeared that the hinge mounting plate on top of the pivot mounting had broken away and that the damaged plate would need to be removed and re‑welded.
Mr Adamson also referred, in his facsimile of 4 March 2005, to the question of the irregular hydraulic control, and said that it was being caused by the low control pressure at the pilot control valves in the control panel. He suggested a gauge be fitted and that the pressure be set to 70 lbs per square inch to improve performance.
Mr Adamson at this time (ts 444) considered, and I accept, that the fracture to the mast had rendered the drill unsafe. Accordingly, on site drilling for the purposes of the second stage of commissioning was not possible.
On 11 March 2005, Mr Adamson wrote to Mr Molatlhegi again and suggested that certain repairs be carried out to the damaged pivot area. He suggested that the drill not be used until the repairs were carried out and the pilot operation pressure was reset.
The down‑the‑hole swivel equipment referred to in item 7 of Mr Adamson's facsimile of 23 November 2004, which was not part of the Department's order for the rig in question, was the subject of further correspondence by Mr Adamson on 22 March 2005. (The equipment was the subject of a separate order by the Department dated 11 July 2005, for which the defendant invoiced the Department $9,350 on 12 July 2005.)

Mr Adamson's attendance in Botswana 7 ‑ 19 April 2005

At around this time, Mr Adamson made arrangements to travel to Botswana, in order to supervise the repair of the broken pivot and to inspect the mast and controls. He arrived on 7 April 2005 and left on 19 April 2005. During this period, he arranged for the fractured mast to be sent to be repaired at a welding and fabrication workshop, and then returned to the Department's yard at Lobatse. Before leaving, Mr Adamson advised Mr Molatlhegi and Mr Ntloedibe that he would arrange for a Botswanan contractor, Minetech, to carry out work on the pilot pressure system of the drill rig. He indicated that on‑site commissioning could not be undertaken at that stage.

The engagement of Minetech and the period July to December 2005

In August 2005, the defendant made arrangements for Minetech to install valves with a view to improving the control response of the drill rig's hydraulic system. Minetech had been recommended to the defendant by Parker Hydraulics, the company which had supplied the pilot pressure system for the rig.
On 24 August 2005, the Department wrote to the defendant and said:
Thank you for your fax dated the 21st August 2005. We are concerned with the delay in commission the drill rig and hand it over to us [sic]. The Department would like your Company to submit a plan of how you would attend this matter because its long overdue and we have lost production for almost one year now. The plan must clearly state when do you expect Minetech to finish the work on the rig and when do you plan to start Commissioning the rig.
By about October 2005, it also became evident that the two hydraulic cylinders used to lift the mast to its vertical position, known as tilt rams, were damaged. The defendant made arrangements for replacement rams to be shipped from Australia to Lobatse, and installed by Minetech.
On 19 October 2005, the Department wrote to the defendant and said:
The Department of Geological Survey received the new Edson 6000 drill rig on the 8^thJuly 2004. The rig is now one year three months in our yard. It has not yet been commissioned by test drilling on site as per Tender specification. According to the tender No19/2‑20/2001 2002 the drill rig commissioning should have lasted for five weeks but it's still not done. We would like to bring the following to your attention:
ØThe drill rig is one year three months old to date, however it has not been commissioned and handed to Department of Geological Survey.
ØInitially we had expected the commissioning to last for Five weeks upon delivery as per tender agreement but to date this has not been done.
ØYour engineer was delayed by two months to attend a pre commissioning inspection of the rig.
ØAfter the arrival of your engineer for pre commissioning inspection, some spares were not supplied and it took six months to supply and commissioning was resumed on the 19^th April 2005.
ØNo test drilling has been done so far to confirm other functions of the rig.
ØCommissioning has since been pending since end of April 2005 after your engineer has replaced some parts and repair the mast since the rig continued to malfunction. This problem is six months old now.
ØThere are lots of repairs being carried out on the rig though it is new. This is a serous course [sic] for concern.
The purpose of purchasing the rig was to alleviate Water problems faced by our Country and to carry out Mineral exploration. All these have failed due to delay in commissioning and hand over. You will recall that I have raised a similar complaint (ref to fax dated 24/08/05 which you did not respond to.
The Department of Geological Survey is giving your Company up to Mid November 2005 to complete the commissioning and hand over of the rig, failing which we will demand our money back and request you to come and collect the rig because you did not fulfil the tender specifications of Tender No: 19/2‑20/2001 2002.
Looking forward to your reply. Please acknowledge receipt of this letter.
On 31 October 2005, the defendant replied:
We do acknowledge that preparing this drill rig for commissioning has taken much longer than usual. We also advise that we are moving as quickly as possible to resolve this matter and make the rig ready to go to the field.
We take your point and share your concern about repairs to the unit not leaving it in an as new state. To this stage all repairs have been on an as new status with any replacement equipment being new. To ensure that this continues we have ordered replacement tilt rams to replace those that have been damaged. We expect these in store this week when they will be shipped by air to Gaborone. Minetech will be asked to install these rams and complete installation of the revised mast tilt hydraulics.
Minetech will also be asked to carry out a full check of all operations of the drill rig to ensure that the unit is ready for the field.
When the drill rig is taken to the field either Minetech or ourselves will provide commissioning supervision for approximately one week as per our normal commissioning schedule.
The above schedule should ensure that the rig is ready to proceed to the field and commence operational work.
I can assure that we are committed to completing the project.
On 16 November 2005, the defendant invoiced the Department for the two new tilt rams. The invoice described the price as 'No charge'.
Around December 2005 Minetech replaced the tilt rams. The defendant paid for the replacement work.

Attendance of Mr Hanias and Mr Adamson in Botswana in early 2006

By facsimile dated 30 January 2006, Mr Adamson informed Mr Molatlhegi that the down‑the‑hole equipment would be shipped soon and that he was trying to arrange for himself and Mr Hanias of the defendant to visit Botswana on 13 February 2006.
On 14 February 2006, Mr Adamson advised Mr Molatlhegi that he and Mr Hanias would arrive in Gaborone on Monday, 20 February 2006, and leave on Saturday, 25 February 2006. He said that they would be 'completing the drill commissioning'. By facsimile dated 16 February 2006, Mr Adamson advised the Department that their visit would likely be postponed for one week.
On Monday 27 February 2006, Mr Adamson and Mr Hanias arrived in Gaborone. The following day, Tuesday 28 February, the rig was driven to a site approximately 90 km from Lobatse, for on‑site commissioning. The rig became bogged en route. It was freed the next morning and arrived on site that day, 1 March 2006. At the site, the rig was set up for drilling under the supervision and direction of Mr Adamson and Mr Hanias. In total, Mr Hanias and Mr Adamson spent approximately three days, between Wednesday 1, Thursday 2 and Friday 3 March 2006, on site working with the rig.
During the period 1 to 3 March 2006, when Mr Adamson and Mr Hanias were present, down‑the‑hole drilling was undertaken; diamond core drilling was not undertaken. Mr Hanias said (ts 557) and I accept, that diamond core drilling operations are the same or similar to down‑the‑hole drilling operations, although diamond core drilling uses a diamond tip drill with a core barrel, the drilling occurs at a lower speed, and certain ancillary equipment is different.
Over the course of the three days, four principal problems were identified. There was a compressor failure; the water injection pump failed; the tilt rams recently replaced by Minetech became bowed; and it was apparent that the valves which had been installed by Minetech had not adequately improved the responsiveness of the hydraulic controls.
In relation to the compressor, an Atlas Copco representative attended the site during Mr Hanias' and Mr Adamson's visit, and corrected the problem. The representative found that a temperature safety shutdown gauge was set too low. He adjusted the setting, tested the compressor again, and it then operated satisfactorily.
In relation to the water injection pump, that item of equipment required repair or replacement, and Mr Hanias thought it would be cheaper and quicker to replace it. In the meantime, test drilling was carried out using another pump: a 'Bean pump'. I accept the evidence of Mr Hanias and Mr Adamson to the effect that this was a minor problem and that it was a simple operation to use the Bean pump in its place (Adamson ts 507 ‑ 511). I accept Mr Hanias' evidence that this would not have hindered ongoing drilling (exhibit 115, par 68).
In relation to the tilt rams, the problem was one of 'over‑stroking'. Whilst the tilt rams successfully raised the mast to the vertical position, the hydraulic pressure which operated the tilt rams was too high, which meant that the rams kept pushing even though the mast was upright. The result of this extra pressure against the vertical mast was that the tilt rams became bowed.
Mr Adamson agreed that this was a matter of concern. Mr Hanias, who did testing of the hydraulic tilt rams on site, agreed that it needed to be fixed. He said (ts 555):
All right. You tell me what was the discussion on site when Mr Adamson was present?‑‑‑The discussion was that we had a bowed - bowed rams, and we'd obviously done our inspections and I knew they were overstroking and we had to correct that situation. We had two choices to correct it; we could put stop‑tubes in so they didn't overstroke or we could choose to put new cylinders in. We chose, for the long‑term benefit of the situation, to put new cylinders in.
Mr Hanias and Mr Adamson took measurements of the tilt rams and advised the Department that upon return to Australia, the defendant would arrange for the manufacture of new tilt rams that had a different stroke and rod configuration.
In relation to the hydraulic controls, it was apparent that the Minetech work had not fully remedied the problem. Mr Adamson, in cross‑examination, said that the hydraulics was a 'complex issue' (ts 514). Mr Adamson considered that it was necessary to make alterations to the load sense lines.
On Saturday 4 March 2006, Mr Adamson and Mr Hanias departed for Australia.
By this time, the drill rig had completed down‑the‑hole drilling to a substantial depth - approximately 80 m. Mr Adamson and Mr Hanias said in their witness statements that in the period of their attendance there was no equipment on site to undertake diamond core drilling. They referred to the fact that the Department subsequently purchased a universal swivel, being a component for diamond core drilling. Mr Molatlhegi said, and I accept, that the swivel later purchased was a spare. Moreover, I accept the evidence of Mr Ntloedibe and Mr Bareki that there were the necessary components for diamond core drilling on site. I accept the evidence of Mr Hanias and Mr Adamson that they did not see the diamond core drilling equipment on site, but I think that they have assumed, wrongly, that because they did not see it, it was not there.
I also accept Mr Ntloedibe's evidence that at the conclusion of the visit to site, Mr Adamson suggested to Mr Ntloedibe (exhibit 80, par 75) that the Department continue down‑the‑hole drilling, and then do some diamond core drilling, to see if any further problems emerged in connection with the operation of the rig.
Mr Adamson and Mr Hanias said that they provided training in operation and maintenance during their time on site. I accept that there had been some training in the operation and maintenance of the rig, but in the limited time on site, it was not extensive training.
After Mr Hanias and Mr Adamson left, Mr Ntloedibe and the other Department employees continued down‑the‑hole drilling for a further 30 m. Mr Ntloedibe (exhibit 80, pars 76 ‑ 79) said, in effect, and I accept, that no further difficulties with down‑the‑hole drilling were encountered at this time, and that the down‑the‑hole drilling 'worked well' (ts 302). Mr Molatlhegi also said in cross‑examination that the down‑the‑hole drilling 'went fine except for these hiccups like the foam injection [water] pump and the compressor not working' (ts 269).
Whilst the hydraulic controls needed improvement, and the tilt rams and water pump needed to be replaced, the rig worked well in the performance of down‑the‑hole drilling operations. The bowed tilt rams did not impede drilling once the mast was in place. Rather, the significance of the bowing was that it created a difficulty in lowering and raising the mast. This was a problem because the mast would need to be lowered every time the rig moved to a new place to do drilling, and then raised again for the drilling operation.
After Mr Hanias and Mr Adamson departed, the Department then changed the drill rods and commenced diamond core drilling. There was no evidence from the plaintiff as to how long the Department attempted diamond core drilling, but I infer that it did so for at least a day or so after the departure of Mr Adamson and Mr Hanias from Botswana on 4 March 2006. Mr Ntloedibe and Mr Bareki gave the following evidence, which I accept, as to what occurred on the Department's attempts at diamond core drilling. (See Ntloedibe, especially exhibit 80A, pars 37 ‑ 44.)
In the course of attempting diamond core drilling two issues arose. First, the issue of the responsiveness of the hydraulic controls became more stark. The Department technicians could not accurately control the speed of the drill head, due to problems with the pilot pressure system. That is because diamond core drilling requires greater accuracy than down‑the‑hole drilling. Too much speed will cause the drill bit to become blunt and wear it out too early. Too much pressure will result in the cuttings clogging the annular space. If the annular space becomes clogged, water will not be properly fed to the drill bit, which entails the risk that the bit becomes overheated and solidifies with the rock. This can result in the loss of the equipment in the hole.
Secondly, at around this time, the wire winch line which is used in diamond core drilling to haul up the core to the surface, failed to operate. Mr Hanias gave evidence, which I accept (ts 557 ‑ 558), that the 'old fashioned' way of diamond core drilling was to take the rods out of the ground, empty the core barrel and then put the core barrel back into the ground. He said that Boart Longyear had developed a wire line system which allowed the core to be retrieved by taking out the inner sleeve of the core barrel through the rods. He agreed that an inoperative winch line would diminish the capacity to effectively carry out diamond core drilling.
Having encountered difficulties in carrying out diamond core drilling, the Department then left the rig in the field, with the mast upright, under the guard of two employees of the Department.
There was an issue on the evidence as to how things were left between the Department and the defendant at the conclusion of the site visit by Mr Hanias and Mr Adamson on 4 March 2006, regarding repairs to the rig. Mr Molatlhegi's evidence was to the effect that Mr Hanias and Mr Adamson said that they would return in two weeks to fix the hydraulic circuit and complete the commissioning (exhibit 78, par 57). Mr Ntloedibe said that Mr Adamson and Mr Hanias had said that they would return to Botswana to effect repairs (exhibit 80, par 74). He did not say that Mr Adamson and Mr Hanias had said that they would return within two weeks. Mr Adamson did not refer to the conversation in his witness statement, but he accepted in cross‑examination, in substance (ts 518 ‑ 519), that the arrangement was that the defendant would have the drill fixed before it would be put into general use by the Department.

Mr Hanias, in his witness statement (exhibit 115, par 81), said that he and Mr Adamson had advised the Department that 'the issues concerning the rams and hydraulics would be rectified' by the defendant. In cross‑examination, Mr Hanias said, in effect, that he had told Mr Molatlhegi that it would take two weeks once they returned to Australia to get the parts that would be needed to fix the rig.
Mr Hanias also said that he had told Mr Molatlhegi that he 'wanted to do a follow‑up trip to Botswana once things had been repaired'. He also said (ts 565) that he believed that the rig had been commissioned by the time of his departure on 4 March 2006. The following exchange in cross‑examination occurred:
Did you honestly hold the belief that the rig, in its state that you left it in, had been successfully commissioned?---Yes, with the problems we had notified and everybody knew about and we were taking steps to rectify.
With your undertaking to fix those problems?---With my undertaking that we would pay the cost of fixing those problems, yes.
And do it on an expedited basis and return?---As quick as physically possible.
I do not accept Mr Molatlhegi's evidence to the effect that Mr Adamson and Mr Hanias said that they would return in two weeks. The logistics of securing the requisite parts and organising the work were such that the defendant's officers could not have sensibly concluded, or undertaken to, or informed the Department that, they would be back in two weeks.
I find, in light of the evidence of Mr Hanias, Mr Adamson and Mr Ntloedibe to which I have referred, that the arrangement with the Department on 4 March 2006 was that Mr Adamson and Mr Hanias would, on their return to Australia, organise spare parts which they said they expected would take two weeks to source, and then make arrangements for the identified problems to be rectified, at the defendant's cost, as soon as possible. They also said that at least one of them would return to Botswana to check the operation of the drill rig around the time of, or shortly after, the execution of the repair and modification work.

Communications in the period March to October 2006

I infer from Mr Adamson's letter to Mr Molatlhegi of 10 March 2006 (see below) that Mr Molatlhegi spoke to Mr Adamson at some time between 6 and 10 March 2006 regarding the difficulties experienced in relation to the use of the hydraulic controls in diamond core drilling.
On 10 March 2006, Mr Adamson wrote to Mr Molatlhegi and said that he considered that the problems being experienced with the functions of the drill rig were related to air in the pilot control system and that the air needed to be bled from the system in a similar way that air is bled from a brake system. Mr Adamson also said that he was in discussion with Parker Hydraulics about the air in the pilot system.
At this time, the rig was still in the field, 90 km from Lobatse, guarded by two employees of the Department. As events transpired, the rig remained in the field for about one and a quarter years.
On 13 March 2006, the defendant ordered two new tilt rams, pursuant to the arrangement referred to in [78] and [94] above.
On 23 March 2006, Mr Molatlhegi wrote to the defendant and said:
The Department of Geological Survey would like to remind you that the following issues were will [sic] have to be addressed in order to have the rig in good and operational condition these were picked up during the drilling to commission the rig on site these are:
1.Controls respond time
2.Wire-line winch not working
3.DTH table not suitable for large diameter drilling
4.Haul-winch shift slew pins
5.Hydraulic Mast raised Cylinders bent
6.Hydraulic Clamp quick couplers
7.Mast Locking Pins
8.Air line flow control valve too far from the operator
9.Lights not fitted.
10.Air delivery, Mud, connections too close to the compressor
11.Drive Shaft for Coring
12.Bean pump leaking at parking
13.Gauges pressures and batteries
14Compressor speed not automatic or not dependent on air‑volume
15.Brake out spanner
16.No spirit level
The Department evidently intended, and conveyed by this letter its intention, that the defendant should provide all such equipment and carry out all such works at the defendant's cost.
Most of the items listed above were put to Mr Adamson and Mr Hanias in cross‑examination (ts 435, 520, 566 ‑ 567). The effect of their combined evidence, which I accept, was as follows. Item 1 related to the issue regarding the responsiveness of the hydraulic controls. Item 2 related to the wire winch used for diamond core drilling. Item 11 appeared to relate to diamond core drilling, although its nature or significance had not been explained by the Department or understood by the defendant. Nor, I would interpolate, was there evidence before me as to the precise nature or significance of item 11. Item 3 was a matter previously raised by the Department with Mr Adamson or Mr Hanias, but had not been in the original specification by the Department. It was, in effect, I infer, a modification to carry out larger diameter drilling. Item 7 related to pins that had been despatched but had been lost in transit. They were not a 'big‑value item' and were being replaced. Item 8 was said by Mr Hanias to be an 'interpretation issue', and his attitude was 'if it can be fixed and make people happy, go ahead'. I infer from this that in his opinion, which I accept, it was an item the operational significance of which could be a matter of debate, but he was prepared to have it altered. Item 9 was not a 'big‑ticket' item and the defendant intended to add certain lights. Item 10 was an item which Mr Hanias said that he had not understood, and which was not explained in the evidence before me. Item 12 was presumably intended to be a reference to leakage from the 'packing' (not 'parking'), and was probably the result of a leaking seal. Item 13, insofar as it referred to batteries, related to the batteries on the rig. Mr Hanias was not sure of the reference to gauge pressures, and I note that this item was not explained in the evidence of the plaintiff. Item 14 related to the compressor. Items 15 and 16 were tools, and item 16 was not a drill rig part.
I infer that item 5, and also probably item 6 on the list, related to the bowed tilt rams. I also infer that item 4, like item 7, was not a 'big value' item and that these were pins which were intended to be replaced.
On 28 March 2006, the defendant sent to the Department a statement of outstanding amounts totalling $14,926.40, of which the Department paid approximately $4,000 on or about 24 May 2006.
On 23 April 2006, the defendant arranged for the supply of the two replacement tilt rams, to be invoiced to the Department at nominal value, pursuant to the arrangement referred to in [78] and [94] above. The invoice referred to 'warranty replacement', as did the bill of lading dated 10 May 2006. They were despatched on 10 May 2006. By 11 July 2006 the tilt rams had arrived in Durban and were awaiting transport to Botswana.
In September/October 2006, the rotary drill head of the Department's other Edson drill broke. Mr Bareki reported this to Mr Molatlhegi. Mr Molatlhegi asked Mr Adamson if the new rig's spare head could be used by the Department as a replacement for the other Edson rig. Mr Bareki was responsible for overseeing the repairs to the other rig. He encountered problems with leaking oil when he tried to fit the spare head, and, in the end, the spare rotary head was not used as a replacement for the head on the other Edson rig. Mr Adamson told Mr Molatlhegi that he would look at the spare rotary head on his next trip.
On 27 October 2006, the new water injection pump and accessories were air‑freighted by the defendant to the Department in Botswana, pursuant to the arrangement referred to in [75] and [94] above. They were also recorded on the invoice and bill of lading as 'warranty replacement'. Throughout the time between March 2006 and late 2006, Mr Molatlhegi spoke to Mr Adamson about once a month about the progress of the proposed repairs/modifications. On or about 30 October 2006, the new tilt rams and water injector pump were received by the Department in Gaborone.

January to late June 2007

By facsimile dated 17 January 2007, Mr Adamson advised Mr Molatlhegi that he was still trying to schedule a time to travel to Botswana.
In early 2007, Mr Molatlhegi spoke to Mr Hanias by telephone and asked him to expedite the outstanding work. Mr Hanias asked Mr Molatlhegi to provide a list of local companies that could be engaged to carry out the work. Mr Molatlhegi suggested two companies, one of which was a company called Fluid Systems, in Gaborone. Mr Molatlhegi said in his statement that, in this conversation, Mr Hanias said he would return in May. Mr Hanias said in cross‑examination that he told Mr Molatlhegi that someone from the defendant would return to Botswana, but that he did not give a date. I prefer Mr Hanias' evidence on this, as it is unlikely that Mr Hanias would specify a date until he had at least made tentative arrangements with a local company to carry out the work.
Shortly after this time, Mr Adamson suggested to the Department that the mast be lowered, and the rig driven to Gaborone for the work to be carried out. Mr Molatlhegi, however, would not lower the mast or move the rig for fear that, in doing so, it might be further damaged. The mast was capable of being lowered, and the rig capable of being moved, despite the bowed tilt rams, as evidenced by the events of June 2007 (see [114] below).
On 30 March 2007, Mr Franken of Fluid Systems wrote by email to Mr Hanias and offered, in effect, to undertake any work required by the defendant in relation to the rig for the Department. Fluid Systems had done service and repair work for the Department over a number of years.
On 7 June 2007, Mr Adamson responded, on behalf of the defendant, to Mr Franken's email of 30 March 2007. He said that the rig needed 'modification/repair' and asked if it could be done under the defendant's supervision at Fluid Systems' premises in the week commencing 25 June 2007. He said that the work would involve fitting the two new tilt rams, a directional control valve, and some general repairs to a gear box, and that some welding would be required. Mr Franken replied on 11 June 2007 and said that the job could be done on 25 June 2007.
On 12 June 2007, Mr Adamson wrote to Mr Franken of Fluid Systems and said that the rig was in the field near Kanya with damaged tilt rams. He enquired whether Fluid Systems had field service technicians who could 'attend the site and replace the rams so that the mast could be lowered and the rig moved to Gaborone' for the other work to be done. Mr Franken replied on the same day, stating that a service vehicle could be sent to change the rams.
On 19 June 2007, Mr Adamson wrote to Mr Franken and said that he would arrive in Lobatse on 25 June 2007, and asked whether a service vehicle could meet him the following morning (26 June 2007) with a view to travelling to the site, changing the tilt rams, lowering the mast, and bringing the drill rig to Fluid Systems' yard in Gaborone. He said that once the drill rig was at Fluid Systems' workshop, he expected that the work could be carried out over the next few days. Mr Franken replied the same day, saying that one of their fitters would meet him at Lobatse on the morning of 26 June 2007. Later that day, Mr Adamson wrote to Mr Franken again and advised him that Mr Molatlhegi was their contact at the Department and that the work would be to the defendant's account.
Mr Adamson arrived in Botswana on 24 June 2007. He went to the site on or about 26 June 2007 with an employee of Fluid Systems. He decided not to change the tilt rams on site, as the area was too dusty and he thought the hydraulics might become contaminated. The mast was lowered and the rig was driven to Fluid Systems' workshop in Gaborone.
On arrival at Fluid Systems' workshop in Gaborone, the tilt rams were replaced, and a directional control valve in relation to the hydraulics, was installed. Fluid Systems sent an invoice to the defendant dated 25 June 2007 as an initial payment for this and certain other work, which the defendant paid. After replacement of the tilt rams, Mr Adamson said, and I accept, that the mast appeared to work satisfactorily.
Mr Molatlhegi, Mr Bareki and Mr Adamson met with Mr Mezieres of Fluid Systems on 30 June 2007. In the course of that meeting, a list of 12 items was made for the repair or modification of the rig. Mr Bareki said that the list was generated from things which he told Mr Adamson required repair. Mr Adamson said that he and Mr Mezieres compiled the list. I find that it was probably generated from the suggestions of all those present.
The list was handwritten by Mr Adamson, a copy was given to Mr Molatlhegi and Mr Mezieres, and Mr Adamson retained a copy. It was in these terms:
1.Strip and repair wireline winch drive.
2.Fit detent kit to new direction control valve.
3.Fit dash 6 hose in place of dash 4 on load sense line bleed and test.
4.Ask Percy to start and test run compressor.
5.Adjust rollers on head frame.
6.Fit panel to underside of control panel.
7.Fit power beyond sleave and reconnect oil cooler hose.
8.Refit side panel to control panel. Bolts in truck cab.
9.Fit new batteries to drill engine, compressor engine and truck.
10.Fit new water pump. Fill oil chamber with gear oil.
11.Move drill engine air cleaner to left hand side near engine.
12.Remove lower plate on rotary head and fit pick up pipe
I accept Mr Adamson's evidence regarding the nature of the items 1, 2, 3, 4, 5, 7, 10 and 12 on the list (ts 524 ‑ 528). I accept Mr Bareki's evidence concerning items 6 and 8 (exhibit 81, pars 65, 67). Item 1 of the list related to the wire haul winch used in diamond core drilling. Items 2 and 3 related to the issue of the responsiveness of the hydraulic controls. The new directional control valve, with a detent kit, facilitated fine feed. A dash 6 hose has a greater bore size than a dash 4 hose and would increase oil flow to the rapid feed wireline and rotation circuits, thereby increasing responsive speed. Item 4 concerned the checking of the compressor. Although the compressor had been remedied by Atlas Copco on site, Mr Adamson thought it should be checked again as it had not been used since February/March 2006. Item 5 related to rollers that needed adjustment, particularly to enable finer control required for diamond core drilling. Mr Bareki said, and I accept, that he had noticed in March 2006 that some adjustment was required. Item 6 was an item which Mr Bareki wanted to be fitted. He said that the other Edson drill owned by the Department had such a control panel. Item 7 also related to the hydraulic controls, and was to be fitted to the new directional control valve, although the slow-fast speed operation was working without it. Item 8 involved refitting a side panel which had been removed when the rig first arrived at Fluid Systems' premises from site. Item 9 related to batteries which, I infer, had gone flat through disuse. Item 10 related to the fitting of the water injection pump. Item 12 was intended to allow better lubrication to the bearings when the mast was positioned at a certain angle.
Item 11 involved a change in location in the air filter. Both experts in this case have agreed that the original location of the air filter (valve) 'would not have prevented commissioning': see [166] below.
By the end of 30 June 2007, in relation to the four problems identified at on‑site commissioning on 1 ‑ 3 March 2006, and in the day or so after 3 March 2006:
(a)the compressor had been fixed on site and was working satisfactorily;
(b)the tilt rams had been replaced and were working satisfactorily;
(c)the replacement water pump had arrived and was to be installed, at the defendant's cost, by Fluid Systems;
(d)a directional control valve had already been installed and paid for by the defendant, and the other items in connexion with the responsiveness of the hydraulic controls had been identified and arranged to be attended to by Fluid Systems at the defendant's cost; and
(e)the winch line was arranged to be fixed at the defendant's cost.
On or about 2 July 2007, Mr Adamson left Gaborone for Australia. Before leaving, he confirmed to Mr Molatlhegi that the work would be paid for by the defendant. He also agreed to have the carrier truck serviced at the defendant's cost.
Mr Molatlhegi said (exhibit 75, pars 77, 80), and I accept, that he spoke to Mr Adamson before he left Botswana on or around 2 July 2007. The precise nature of the conversation is somewhat difficult to gauge from the way the evidence was given by Mr Molatlhegi. The effect of it, I find, is that Mr Adamson said that after repairs and modifications had been effected, he would return to Botswana to check the rig.
The work that was undertaken is recorded in Mr Franken's email to the defendant on 7 December 2007 (referred to below). I find that the work referred to in the list of 30 June 2007, apart from testing the compressor, had been undertaken by about October 2007.
On 19 July 2007, Mr Mezieres of Fluid Systems emailed Mr Adamson and requested the defendant to send to Fluid Systems the specifications on the pumps and hydraulic valve banks. On 20 July 2007, Mr Adamson supplied certain technical information to Mr Mezieres.
On 24 July 2007, Mr Franken of Fluid Systems wrote to Mr Adamson and said that they had stripped the cable winch, and found that the shaft that couples the motor drive to the planetary drive was not coupling internally. He requested drawings of the winch assembly. Mr Adamson supplied the drawings on 25 July 2007. On 28 July 2007, Mr Adamson informed Mr Franken that he would be overseas for a few weeks, and nominated another officer of the defendant as the person whom Mr Franken should contact to advise on the progress of the job and to whom any questions should be directed.
According to Mr Molatlhegi, he and Mr Bareki were both anxious to have the work effected as quickly as possible (ts 220, 223). I accept this. Both gentlemen attended with Mr Adamson at Fluid Systems' premises on 30 June 2007 when the list was drawn up, both contributed to the creation of the list, and both had a keen interest in having the work undertaken. Mr Bareki said in his witness statement (exhibit 81, par 74), and I accept, that, following July 2007, he had been to Fluid Systems' premises to check on the progress of the repairs to the rig. Although certain aspects of his evidence were somewhat confusing, I accept his evidence in cross‑examination (ts 339) when asked whether he reported back to Mr Molatlhegi: 'Everything - everything - that I discussed with Mr Frenken [sic] I was going back to my boss'. Insofar as Mr Molatlhegi suggested the contrary, I do not accept his evidence. I find that Mr Bareki kept Mr Molatlhegi informed of the progress of the repairs, as known to Mr Bareki from his visits to the Fluid Systems workshop.
Mr Bareki also visited Fluid Systems to discuss other jobs in the second half of 2007. He made inquiries from time to time on the progress of the repairs to the rig. The first time was in August 2007. Eric, an employee of Fluid Systems, told Mr Bareki in August 2007 (ts 339) that the wire line winch was being repaired and that it would take a long time. Mr Bareki said, and I accept, that Fluid Systems were very busy at this time.
The evidence of Mr Molatlhegi and Mr Hanias, which I accept, was to the effect that in September 2007, Mr Molatlhegi telephoned Mr Hanias (ts 569) and asked about the status of the rig. Mr Hanias said, in effect, that he would review the matter and that someone would get back to Mr Molatlhegi.

The commissioning obligation on the proper construction of the contract

Nature and scope

Accordingly, I am unable to accept that, on the contract properly construed, the commissioning obligation corresponds with the plaintiff's (or for that matter the defendant's) pleaded case. The terms as I have found them are, to a considerable extent, a blend, with some refinements and qualifications, of each party's case.
The nature and scope of the obligation to commission the rig was, in my view, contained in the terms referred to in subpars (c) and (d) of [262] above (the commissioning and training terms). Those terms were, in my view, warranties for the reasons explained in [285] ‑ [288] below. The commissioning obligation was not of the nature pleaded by the plaintiff in subpar (d) of [146] above, which I will call 'the plaintiff's commissioning term'. Some further observations should be made on this. First, the question of construction involves the parties' presumed objective intention as at the formation of the contract, whereas the plaintiff's construction of the contract appeared to me to be, at least in part, influenced by the series of events which actually occurred after the goods were received in Gaborone by the Department.
Secondly, the plaintiff in its submissions drew attention to Mcdougall v Aeromarine of Emsworth Ltd (1958) 1 WLR 1126. In that case, there was a sale of goods involving a yacht. The statutorily implied conditions of fitness for purpose and merchantable quality were expressly negatived (1131). Nevertheless, there were other express terms to the effect that the buyer could reject the goods if the buyer was not reasonably satisfied of the performance of the craft at a designated trial run, in relation to which its satisfaction was to be indicated by executing a memorandum for that purpose (1127, 1131 ‑ 1132). In construing the contract as a whole, Diplock J (as his Lordship then was) considered the interrelationship between the exclusion clauses negativing merchantable quality and fitness for purpose, with the scope of the provisions entitling the buyer to reject the goods if they did not perform to the buyer's reasonable satisfaction (1131 ‑ 1132). His Lordship also held that in that case, a provision concerning the interim passing of property, which was for the purpose of protecting the buyer in the event of the seller's insolvency, did not operate on the facts to pass any property, but that if it did, any property passed defeasibly, subject to the right of the buyer to reject the goods if the seller failed to perform the contract by delivering a craft, the performance of which was to the reasonable satisfaction of the buyer (1130).
In the present case, however, in the contract between the defendant and the Department, there was also the suitability condition. Unlike in Mcdougall v Aeromarine of Emsworth, there were no express terms here giving the Department a right to reject if the rig did not perform to its reasonable satisfaction. Nor, do I think, were any such terms necessarily implicit in light of the suitability condition, which would itself operate to safeguard the underlying object of the transaction from the buyer's point of view. The property in the goods could revest in the seller in this case at the election of the buyer if the goods were, in fact, not suitable within the meaning of the suitability condition. Whether or not the goods were suitable in the context of this contract, could be expected to be demonstrable in the process of commissioning and training on site in Botswana. Of course, if in the commissioning of the rig it was not shown to be suitable, the seller would be in breach of the suitability condition, not because it had failed to test drill so as to demonstrate compliance with the matters pleaded in the plaintiff's commissioning term, but because the rig was, objectively, not suitable within the meaning of the suitability condition.
Accordingly, the plaintiff's case is not established with respect to the nature and terms of the contract said to form the contractual background against which breach and the claim for restitution are to be considered.
Although I have found the commissioning obligation to be different from that pleaded by the plaintiff (and the defendant), I nevertheless proceed to consider for completeness whether, on the nature of the commissioning obligation as I have found it, the plaintiff was entitled to terminate the contract on 3 December 2007 and sue for the recovery of the price. This raises questions including the nature of the contractual obligations, the nature of any breach found and rights of, and restraints on, termination in light of the answers to questions of construction and breach. I am cognisant that the analysis is inextricably bound with the starting point of the terms of the contract as I have found them, which differ from each party's pleaded case. Later in these reasons I consider the position with respect to the plaintiff's pleaded commissioning obligation in the event that I am wrong in my analysis of the contract and its terms.
I should also reiterate at this point that nothing in the succeeding parts of these reasons involves any finding as to whether or not the goods were fit for purpose, or of merchantable quality, or suitable within the meaning of the suitability condition as at 3 March 2006 or 3 December 2007, or at any other time - these matters were not issues in the case.

Whether termination available for breach of the commissioning obligation properly construed

In my view, the obligation to commission which I have found was not a condition of the contract, any breach of which would justify termination. It was an aspect of a composite obligation to commission and provide training for a period of time and it could not have been intended that any breach, however slight (but beyond the de minimis rule), in connexion with the provision of commissioning and training, could justify termination of the whole contract.
Further, in my view, the commissioning and training terms (referred to in (c) and (d) of [262] above) were warranties, on the proper construction of the contract. The essential obligation to be undertaken by the defendant was to supply and have shipped the drill rig and other items, including manuals and spare parts, to the Department in Gaborone. The performance of that obligation involved property passing to the Department in exchange for the price, conditional upon the property being revested if the goods were not subsequently found to be in conformity with the contract, including if they were not suitable within the meaning of the suitability condition. If the goods were so conforming, the absence of commissioning and training by the defendant would not diminish the attainment of the underlying object of the transaction.
On the contract's proper construction, the commissioning and training terms were important, but not essential features, which were collateral to the principal object of the transaction. The general nature and function of the goods, being an Edson drill rig with which the Department already had some familiarity and experience, the requirement to provide manuals, and the right to revest property in the goods if they were not suitable, tend to indicate, in my mind, that the contractual requirement for the defendant itself to provide commissioning and training was one the breach of which would sound only in damages.
Considering the question as a matter of presumed intention at the formation of the contract, if the defendant were to breach the term by not providing training and commissioning at all (as might have happened, eg, if the defendant had gone into liquidation after shipment), it may be supposed that the Department by itself, or by a contractor, would commission the rig and test it under load, with a view to ascertaining its suitability. The costs of that exercise would be adequately compensable by damages. There were, no doubt, real advantages in the defendant itself providing commissioning and training, and, correspondingly the provision of commissioning and training by others might be expected to involve more time and expense. Nevertheless, the additional inconvenience of that course could be expected to be sufficiently alleviated by a claim in money terms. It could not, in my view, be presumed from the nature, subject matter and terms of the contract that the parties intended that if the defendant had manufactured the rig (which was itself a substantial undertaking with a 20 week lead time), procured the Mercedes Benz truck and the compressor, and shipped the rig, the truck, the compressor and spare parts to Botswana, the Department could, nevertheless, reject the goods without knowing that they were not suitable within the meaning of the suitability condition. That result would seem to me to flout business sense.
If, however, I am wrong in finding that the commissioning and training terms were warranties, and if, on the proper construction of the contract, they were, instead, intermediate terms, the next question is whether the defendant was in breach of the terms and whether the Department was entitled to terminate for breach of the terms.
In my view, the obligation to commission and provide training was partly, but not wholly, performed. The defendant performed the commissioning and training terms to the extent that it attended in Botswana in November 2004 to unpack the rig, set it up, and remedy certain defects which were capable of being remedied in Botswana. It also arranged for modifications or repairs to the hydraulic control system, and generally had the rig prepared for on‑site drilling. This also involved the defendant arranging for Minetech to undertake work in 2005. The defendant returned in early 2006 to undertake on‑site test drilling. That involved down‑the‑hole drilling to the depth of 80 m, in the course of which certain items were observed to require replacement (the tilt rams and the water pump), and further modifications were seen to be required to the hydraulic controls. Nevertheless, the down‑the‑hole drilling worked well. There was also some limited training provided.
On the other hand, the defendant, in my view, breached its obligation to commission the rig insofar as it failed to carry out any test diamond core drilling on site. That breach did not itself, however, go to the root of the contract, so as to deprive the Department of substantial part of the benefit to which it was entitled under the contract: cf Koompahtoo Local Aboriginal Land Council v Sanpine [54] ‑ [55]. The fundamental nature of the contract was one of sale, and the relationship created was one of buyer and seller, in which the buyer had the collateral benefit of the seller being obliged to commission, and train the buyer in the operation of, the goods sold. The breach was not wholesale, in that much of the commissioning and some training obligations had been performed, as noted earlier. The consequences of the failure to carry out test diamond core drilling by the defendant itself were not great, in that the task of testing diamond core drilling was undertaken by the Department in the defendant's absence. Diamond core drilling, as I have found, is the same or similar in operation to down‑the‑hole drilling. The Department's evident familiarity with diamond core drilling from using its existing Edson rig, the Department's acceptance of that task on site after having seen and been involved in operating the rig in down‑the‑hole drilling to a depth of 80 m, and the evident expertise of people such as Mr Ntloedibe, indicate that the Department was not unfamiliar with diamond core drilling operations so as to be incapable of fitting the rods or ignorant of the mechanisms to be employed in the course of diamond core drilling. The actual difficulty in carrying out diamond core drilling which transpired, proved to be the consequence (albeit significantly exacerbated) of the same problem which had arisen with down‑the‑hole drilling, namely the responsiveness of the hydraulic controls. At the time of breach, the Department was aware that the hydraulic controls had been agreed by the defendant to be the subject of repair or modification work. Accordingly, even if the commissioning and training terms were intermediate terms, in my view, the failure by the defendant to carry out test diamond core drilling on or about 3 March 2006 was insufficient to justify termination on the basis of a breach of those terms.
If I am wrong in the foregoing, and the failure to carry out test diamond core drilling on or about 3 March 2006 gave rise to a right to terminate the contract, either on the basis that it was a breach of a condition or a sufficiently serious breach of an intermediate term, in my view, the right to terminate was lost. It is to be recalled that the right to terminate involves the termination of obligations with respect to further performance, and as the Department had no further obligations to perform, any exercise of the right to terminate involved, in substance, the exercise of a right to reject the goods.
The Department knew, on 3 March 2006, that the defendant did not intend to complete the second stage of commissioning in relation to test diamond core drilling. It did not, as a consequence, terminate on 3 March 2006 and require the defendant to take the rig back. Accordingly, it did not terminate for the defendant's breach in failing to carry out test diamond core drilling. Instead of terminating, it agreed to carry out test diamond core drilling itself, with a view to identifying any further problems with the rig which had not emerged in the course of down‑the‑hole drilling. It then sought to carry out test diamond core drilling in the next day or so, when the exacerbation of the slow responsiveness of the hydraulic controls was noted, and the problem with the winch line was observed. These problems were thereafter advised by the Department to the defendant in the period up to and including 23 March 2006, with a view to requiring the defendant to correct them at its cost. In the meantime, the goods were retained in Botswana by the Department. The property in the goods remained with the Department and the goods were under the control and in the possession of the Department, albeit that the goods were located in the field.
Although the Department, in its letter of 19 October 2005, had threatened rejection if commissioning were not complete by mid‑November 2005, that threat was not carried out. The Department was kept informed by the defendant in its letters of 31 October 2005, 30 January 2006 and 14 February 2006 of the then intended commissioning to be undertaken in the field, and the Department participated in that commissioning process in early March 2006.
There was not, after 19 October 2005, and prior to 3 December 2007, any intimation by the Department that it was still contemplating rejection, or that rejection was a course of action which the Department was pursuing or intended to pursue. The Department's insistence on the performance of the contract up to October 2005 despite the then already significant delay particularly in the second stage of commissioning; its failure to reject in mid‑November 2005 despite its threat to do so if commissioning had not been completed by then; its participation in the second stage of commissioning in early March 2006; its understanding by 3 March 2006 that the drill worked well for down‑the‑hole drilling; and its knowledge of the defects that became apparent in early March 2006 and of the defendant's arrangements to have them fixed, provide an important backdrop to what happened after 3 March 2006.
In the context of the above background factors, the Department's retention and use of the drill for test diamond core drilling after 3 March 2006, and its requirement by and on 23 March 2006 that the defendant carry out certain works at its cost, signified a retention of the goods after the lapse of a reasonable time, without a termination or rejection, and hence a deemed acceptance of the goods.
I would also mention here that there was no proof that the defects were of such a nature that they constituted a breach of the suitability condition - the plaintiff did not assume the burden of proving that matter (or that the goods were unfit for purpose or unmerchantable). Accordingly, there was no established right to reject the goods as being unsuitable within the meaning of the suitability condition (or unfit or unmerchantable) by about 23 March 2006. The only right to terminate, on the present hypothesis, arose by reason of the failure to complete commissioning by doing test diamond core drilling.
Having regard to the matters in [293] ‑ [296] above, the plaintiff lost, after 3 March 2006 and by about 23 March 2006, any right to terminate for breach of the commissioning and training term to carry out test diamond core drilling, because it had not by then terminated the contract and instead had accepted the goods.
If I am wrong in finding that there was acceptance by 23 March 2006, I find that, in any event, there was acceptance after 23 March 2006, and at or prior to November 2007, for the following reasons.
In addition to the factors referred to in [293] ‑ [296] above, the Department's persistence in procuring the defendant's continued performance of the contract in circumstances where the drill remained out in the field for about 15 months; the Department's awareness of the progress of the defendant in despatching the replacement tilt rams and water pump; its monthly contact with the defendant throughout the remainder of 2006; the fact that by about 30 June 2007 the tilt rams had already been replaced and were working satisfactorily, and the directional control valve had been installed, at the defendant's cost; the Department's participation in the drawing up of the list of work and its concurrence in the remediation work including by Fluid Systems at the defendant's cost; and its willingness to use the spare head for its other drill, all without any intimation of rejection since 19 October 2005, lead me to conclude that, properly characterised, a reasonable time had elapsed and there was an acceptance within the meaning of s 35 of the Act. Even though in the period 30 June 2007 to November 2007 the goods were located in the workshop at Fluid Systems, Fluid Systems were merely a bailee and the Department remained the owner of the goods.
In the circumstances referred to in the preceding paragraph, there was a deemed acceptance of the goods after 23 March 2006, by at least July 2007.
If I am wrong in finding that there was a deemed acceptance by July 2007, I would find that there was a deemed acceptance by at least November 2007, by which time the other repairs and modifications had been effected, to the Department's knowledge.
For completeness, I would add that the matters pleaded by the defendant and referred to in subpars (a), (b) and (c) of [156] above did not, in my view, constitute acceptance as they were merely administrative steps signifying the physical receipt of the goods.
I would add, parenthetically, that even if the lack of responsiveness of hydraulic controls in diamond core drilling, the problem with the tilt rams, and the winch line problem, revealed from the down‑the‑hole and diamond core test drilling undertaken in early March 2006, had been pleaded and proved as indicating unsuitability for the purposes of the suitability condition (or as breaching implied conditions of fitness for purpose or merchantability) I would not have reached a different conclusion, notwithstanding the plaintiff's submissions (on 8 February 2010) to the effect that the Department retained the right to reject the goods up to 3 December 2007 for the purposes of the law outlined in the Canadian cases referred to in [238] above. My reasons are as follows.

First, the testing of the rig had been completed and the defects identified by mid‑March 2006. The compressor had by then already been corrected, on site. As from at least 23 March 2006, it was plain that the Department positively required remedial and other works to be undertaken at the defendant's cost. Its conduct went beyond simply forbearing from rejecting whilst acquiescing in the defendant insisting on carrying out repairs. The Department, cognisant of the delays over the next 21 months, then left it until after the works had been completed, before purportedly rejecting the goods. Moreover, the defendant had not, in my view, expressly or impliedly represented, in the period after 23 March 2006, that it would not treat the Department's delay in rejecting the goods as an acceptance of the goods. On the contrary, it had described, in its communications after 23 March 2006, the replacement of the tilt rams and the water pump as being under warranty. The delay, after 23 March 2006, in the context of the circumstances referred to in [293] ‑ [296] and [300] above, would indicate to me that there was deemed acceptance by at least July 2007, alternatively November 2007, by reason of the expiration of a reasonable time without intimation of rejection.
Secondly and further or alternatively, the Department's letter of 23 March 2006 was itself, in my view, inconsistent with the maintenance of a right to reject based on unsuitability. Even assuming for present purposes that items 1, 2, 5, 6, 7 and 11 of the 23 March 2006 letter were relevant to suitability within the meaning of the suitability condition (or merchantability or fitness for purpose), items 3, 8 ‑ 10 and 12 ‑ 16 of the 23 March 2006 letter (see [99] and [101] above) were, nevertheless, not established as relevant to the rig's suitability (or its fitness or otherwise for purpose, or its merchantability). Also, items 3, 8 ‑ 10 and 13 ‑ 16 went beyond matters which, prior to 23 March 2006, the defendant had agreed to rectify.
Similarly, and again on the assumption referred to in the preceding paragraph, the Department's conduct in requiring the items in the list of 30 June 2007 to be completed at the defendant's cost was also inconsistent with the maintenance of a right to reject. Only items 1 ‑ 3 and 7 of the items in the list of 30 June 2007 related to the problem with the wire haul winch for diamond core drilling and the problem with the responsiveness of the hydraulic controls for diamond core drilling. None of the other items in the list of 30 June 2007 were shown to establish that the rig was unsuitable (or unfit for purpose or unmerchantable).
Thirdly, and in any event, there was no pleaded case by the plaintiff to the effect that after the completion of the works by November 2007, the goods were not then suitable (or fit for purpose or merchantable). Nor was there a pleaded case that termination was or could have been effected on such a basis on 3 December 2007 (or at the alternative pleaded time of termination, 6 February 2008).

The plaintiff's pleaded commissioning obligation

I will now consider the position in the event that I am wrong in my view as to the proper construction of the contract concerning commissioning, and I will assume that there was an obligation to commission as pleaded by the plaintiff.
The obligation to commission, pleaded by the plaintiff in the plaintiff's commissioning term, required the defendant in effect to carry out test down‑the‑hole and diamond core drilling so as to demonstrate a reasonable and continuing functional capacity to conduct drilling for mineral exploration, geotechnical and water‑well purposes. I will also assume, as the plaintiff contends, that the plaintiff's commissioning term was a condition or essential term.
The plaintiff's commissioning term could be breached in two ways. It could be breached if test drilling in one or both forms (down‑the‑hole and diamond core drilling) was not carried out. Alternatively, it could be breached if test drilling was carried out, but the defendant failed to demonstrate, in the process, a reasonable and continuing functional capacity to conduct drilling for the purposes specified.
In this case, there occurred a breach of the plaintiff's commissioning term in both senses. There was a breach in the former sense, by not carrying out test diamond core drilling (breach number 1). There was also a breach in the latter sense insofar as the tilt rams were shown to require replacement (breach number 2). The bowed tilt rams meant, in my view, that the rig was not demonstrated to have a reasonable and continuing functional capacity within the meaning of the plaintiff's commissioning term. I find that the need to replace the water pump is not a breach in the latter sense - the absence of the water pump did not, in my view, reveal that the rig did not have a reasonable and continuing functional capacity, as indicated by the evidence of Mr Hanias and Mr Adamson. The rig would still have a reasonable and continuing functional capacity by the use of the Bean pump. The compressor problem had been corrected on site. The difficulty with the hydraulic controls was not, in my view, sufficiently great in connexion with down‑the‑hole drilling to characterise the rig as not having a reasonable and continuing functional capacity. However, had test diamond core drilling been carried out by the defendant (as it subsequently was attempted by the Department), the exacerbated problem of the lack of responsiveness of the hydraulic controls and the failure of the winch line would have been revealed. In my view, those revelations would have indicated that there was, on account of those matters, not a reasonable and continuing functional capacity in connexion with diamond core drilling within the meaning of the plaintiff's commissioning term. I will call this breach number 3.
The Department knew of breaches number 1 and number 2 (and insofar as relevant for present purposes breach number 3), by at least 23 March 2006. Assuming the plaintiff's commissioning term was a condition, the Department could have terminated the contract, arranged to have the goods collected and sued for the return of the purchase price. Yet it did not terminate on account of breaches of the plaintiff's commissioning term.
In relation to breach number 1, for the reasons in [293] ‑ [296] and [300] above, the right to terminate was lost.
In relation to breaches 2 and 3, for the reasons in [305] above, and for reasons essentially the same as those referred to in [306] ‑ [308] above, the right to terminate was lost.
In relation to [306] ‑ [307] above in this context, items 3, 8 ‑ 10 and 12 ‑ 16 in the 23 March 2006 letter were not shown as establishing that the rig did not have a reasonable and continuing functional capacity to conduct drilling for the specified purposes. Also, only items 1 ‑ 3 and 7 of the 30 June 2007 list were shown to be relevant to whether the rig did have a reasonable and continuing functional capacity to conduct drilling for the specified purposes.
In relation to [308] above in this context, there was no pleaded case to the effect that after the completion of the works by November 2007, the goods did not have a reasonable and continuing functional capacity to conduct drilling for the specified purposes, or a pleaded case to the effect that termination was or could have been effected on such a basis on 3 December 2007 (or 6 February 2008).
Accordingly, for the foregoing reasons, the plaintiff has not established a right to terminate and reject the goods on 3 December 2007 based on breaches of the plaintiff's commissioning term, and hence has not established a right to sue in restitution for a total failure of consideration. As I have indicated, no other ground for termination was relied upon.

Advance payment; entire contracts

I will now consider the transaction from the perspective of the law with respect to advance payments and the law with respect to entire contracts, upon which principles the plaintiff relies in the alternative.

Principles

A payment in advance made under a contract (as opposed to a deposit) may be recoverable by the payer if, on the proper construction of the contract, its retention by the payee is conditional upon performance of the payee's obligations under the contract: McDonald v Dennys Lascelles (477); Baltic Shipping Co v Dillon (The Ship Mikhail Lermontov) [1993] HCA 4; (1993) 176 CLR 344, 351 ‑ 353 (Mason CJ, Brennan & Toohey JJ agreeing), 385 ‑ 387 (Gaudron J), 389 ‑ 391 (McHugh J). The basis for recovery of an advance payment has a superficial, but not close, resemblance to the concept of an entire contract: Baltic Shipping v Dillon (351) (Mason CJ).
An entire contract, or more accurately an entire obligation, is one in which the consideration to be provided in return for the payment of money is entire and indivisible: Baltic Shipping v Dillon (350). If a contract or obligation is entire, its complete performance is a condition precedent to payment or counter performance: GEC Marconi Systems v BHP [703].
In Baltic Shipping v Dillon Mason CJ said (350):
The concept of an entire contract is material when a court is called upon to decide whether complete performance by one party is a condition precedent to the other's liability to pay the stipulated price or to render an agreed counter‑performance. If this were a case in which the appellant sought to enforce a promise to pay the cruise fare at the conclusion of the voyage the concept would have a part to play; then, if the appellant's obligations were entire, on the facts as I have stated them, the appellant's incomplete performance of its obligations would not entitle it to recover.
When, however, an innocent party seeks to recover money paid in advance under a contract in expectation of the entire performance by the contract‑breaker of its obligations under the contract and the contract‑breaker renders an incomplete performance, in general, the innocent party cannot recover unless there has been a total failure of consideration. If the incomplete performance results in the innocent party receiving and retaining any substantial part of the benefit expected under the contract, there will not be a total failure of consideration.

Application of principles

As a matter of construction, in my view, retention of the price of approximately $1 million in this case was not conditional on both the supply of the goods and the complete performance of the commissioning and training terms. There was no express term in the contract to the effect that retention was so conditional. Nor in my view could a term be implied to that effect. Property in the goods was to pass on the presentation of the c.i.f. documents, subject to the condition subsequent that property could revest if the goods were not in conformity with the contract upon examination. If the goods were in conformity with the contract, including being suitable, there could, in my view, be no presumed intention that the Department's retention of the goods should be defeasible because commissioning and training had not been provided by the defendant. If the goods were not in conformity with the contract, including not being suitable, the property in them, having passed defeasibly, could be revested in the defendant by the Department rejecting the goods and claiming recovery of the price on the basis of a total failure of consideration. I refer also to the discussion in [278] ‑ [281] and [286] ‑ [288] above.
Further, even if the money were paid 'in expectation of the entire performance' (cf Baltic Shipping v Dillon (350)), in my view, the plaintiff cannot recover on the basis of a total failure of consideration where it attained the property in the goods, and never lawfully exercised its right to reject them. It has, in those circumstances, received and retained a substantial part of the benefit expected under the contract, and there has, accordingly, been no total failure of consideration.
If no commissioning and training were provided at all, that component cost of the total price may have been recovered as a total failure of what may be seen as a severable part of the consideration (see [196] above). Alternatively, perhaps on the contract's proper construction, the parties may be presumed to have intended that the defendant's retention of $10,600 was conditional upon its performance of the commissioning and training terms. However, the plaintiff's claim is not put on those bases and, in any event, commissioning and training were provided to the extent outlined earlier.

Conclusion

For the foregoing reasons, I would dismiss the plaintiff's action.