Australian Vegetable Company Pty Ltd v Farm Fresh Distribution Pty Ltd
[2003] VSC 480
•5 December 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 7777 of 2001
| AUSTRALIAN VEGETABLE COMPANY PTY LTD & EZI EXPORT AND IMPORT SERVICES PTY LTD | Plaintiffs |
| v | |
| FARM FRESH DISTRIBUTION PTY LTD | Defendant |
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JUDGE: | SMITH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16,17,18,19,22,23 and 24 September 2003 | |
DATE OF JUDGMENT: | 5 December 2003 | |
| Australian Vegetable Company Pty Ltd & Anor v Farm Fresh Distribution Pty Ltd. | ||
MEDIUM NEUTRAL CITATION: | [2003] VSC 480 | |
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CONTRACT – Breach – Contributory negligence – Damages – Provision of cool room facilities.
NEGLIGENCE – Breach of duty – Contributory negligence – Damages – Provision of cool room facilities.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D. G. Robertson | Mahons with Yuncken & Yuncken |
| For the Defendant | Mr T. R. Messer | Hall & Wilcox |
HIS HONOUR:
The proceedings
The first plaintiff, Australian Vegetable Company Pty Ltd (AVC) and the second plaintiff, EZI Export and Import Services Pty Ltd (EZI) are companies controlled by David William Young. AVC was engaged in the business of importing and selling vegetables. EZI provided logistics services to companies including AVC. The Defendant, Farm Fresh Distribution Pty Ltd (Farm Fresh) operated coolroom facilities in a warehouse at 105 Coode Road Footscray.
On about 12 April 1999, EZI entered into an agreement with Farm Fresh for the use of cool room facilities and equipment at the Coode Road premises. EZI in turn made the coolroom facilities and equipment available to AVC.
In July and August 2000, AVC imported a large quantity of white Chinese garlic. Pursuant to the arrangements between it and EZI and EZI and Farm Fresh, the bulk of the garlic was stored in the latter’s coolrooms, being coolrooms 6 and 7.
The plaintiffs allege that the refrigerating equipment servicing coolrooms 6 and 7 ceased to operate on or about 30 September 2000 or 1 October 2000. They allege that as a result the temperature inside the coolrooms rose to a level at which the previously dormant growth mechanism in the garlic commenced to operate. They allege that this resulted in 21,700 cartons of garlic becoming unsaleable by early November 2000 because by then the garlic in those cartons was shooting. They seek damages for losses flowing from the malfunction of the coolrooms.
Plaintiffs’ case
The statement of claim filed by the plaintiffs alleges that the second plaintiff, EZI, provided coolroom facilities to the first plaintiff, AVC, and that there was an implied term of its arrangements with AVC that the temperature in the coolrooms would be maintained at a temperature proper for the storage of that plaintiff’s perishable goods. The defendant in its defence stated that it did not plead to that allegation and, accordingly, it is deemed to have admitted it[1].
[1]Order 13.12.
The primary claim against the defendant, as pleaded, is that of the second plaintiff, EZI. It pleads an agreement with the defendant under which the defendant in consideration of certain monies paid, or payable, provided coolroom facilities at 105 Coode Road Footscray. It alleges that it was a term of the agreement that:
(1)it might store perishable goods for itself and its customers in the coolrooms at temperatures selected by it; and
(2)the defendant would maintain the temperature of coolrooms at the temperatures selected by it, the second plaintiff EZI.
As to the second term, the second plaintiff, EZI, alleges that it was partly in writing. EZI relies on the written agreement dated 12 April 1999 between it and the defendant in which it was stated that the coolroom facilities would be "fully maintained". EZI also alleges that the second term was to be implied from the fact of an agreement to store perishable goods at a temperature selected by second plaintiff, from the fact that the defendant had control of the refrigerating equipment which maintained or was supposed to maintain the selected temperature of the coolrooms and alleges that the term was necessary to give business efficacy to the agreement.
Alternatively, the second plaintiff, EZI, alleges that the defendant owed a duty of care to it to maintain the temperature in the coolrooms at temperature selected by it. The particulars of negligence relied upon are a failure to take proper care of the equipment in coolrooms 6 and 7, a failure to have any proper system of maintenance for the equipment, a malfunction in the equipment and a failure to have any proper system to monitor the temperature in the coolrooms.
The first plaintiff, AVC, alleges in the statement of claim, in the alternative, that it entered into an agreement with the defendant for the storage of its perishable goods at a temperature to be selected by it which the defendant would maintain. This was not pressed. In the end it relied on an alleged duty of care owed to it to maintain the temperature in the coolrooms at temperature selected by it. It relied upon the same particulars of negligence.
Defendant' s case
The defendant accepts that it entered into an agreement with the second plaintiff, EZI, to supply cool store facilities at the Coode Road premises and that pursuant to the agreement it made coolrooms 6 and 7 available to the second plaintiff, EZI. It does not accept that the agreement had a term as alleged by the plaintiffs. It accepts, however, that there was a term that it provide normal maintenance to the refrigeration services that serviced the coolrooms.
It also accepts that the refrigeration to those coolrooms failed at about the time alleged by the plaintiffs and accepts that the coolrooms contained substantial quantities of garlic at the time. In fact its case is that the coolrooms were, at the relevant time, over-filled with garlic. It also accepts that the temperature inside the coolrooms had risen prior to a refrigeration expert making the refrigeration systems operational again on the morning of 2 October 2000.
The defendant does not accept, however, that the change in temperature was a cause of the garlic in the coolrooms commencing its growing process. If it was, the defendant also alleges that the plaintiffs suffered no loss because it would not have been able to sell the garlic if it had not deteriorated.
If, however, the plaintiffs establish that the defendant is liable to compensate one or other or both of them, the defendant alleges that EZI caused or contributed to any loss and damage by its negligence. A number of matters have been alleged:[2]
• leaving the cool room doors open;
•failing to take reasonable steps to obtain the services of a refrigeration mechanic to repair the refrigeration systems;
•failing to take reasonable steps to contact John Tart, an employee of the defendant; and
•failing to make other arrangements for the cold storage of the garlic on or at any time after 1 October 2000.
[2]One matter alleged was "leaving the cool room doors open". In the end the issue was not relied upon by the defendant. This was understandable because of the lack of evidence supporting the allegation or any causal connection.
It had alleged in its original defence as particulars of contributory negligence that the second plaintiff had set inappropriate temperatures in the coolrooms, had interfered with the temperature settings and had failed to cool the rooms to an appropriate temperature before storing the garlic. These allegations were subsequently deleted from the Defence.
Finally, the defendant alleged that the plaintiffs failed to mitigate their loss. The allegation made was that the plaintiffs failed to make other arrangements for the cold storage of the garlic on or after 1 October 2000. In final addresses, counsel for the defendant indicated that his clients did not persist in this allegation.[3] I note that it has not been alleged, for example, that the first plaintiff failed to mitigate its loss by making greater attempts to sell garlic prior to early November 2000. As a result, there was no detailed evidence as to selling activity in the period.
[3]579.
It follows that the issues to be considered are:
•the terms of the contract between the second plaintiff and defendant and whether they were breached;
•whether the defendant breached a duty of care owed to the plaintiffs in the manner alleged;
•whether any breach of contract or duty of care was a cause of the triggering of the growth process in the garlic;
•whether the plaintiffs suffered any loss as a result of the triggering of the growth process in the garlic and, if so, what it was;
•whether the second plaintiff negligently caused or contributed to any loss in the manner alleged.
Terms of contract and breach
There was some debate as to the implied term alleged by the plaintiffs in the contract between the second plaintiff and the defendant. It is unnecessary to resolve that debate because the defendant concedes that the contract required that it "fully maintain" the coolroom facilities. It is clear on the evidence that the defendant failed to maintain the facilities in a number of crucial areas. It did not maintain the alarm system or a modem designed to alert its employees to failures of the facilities. The cause of the failure of the refrigeration system was loss of 60 percent of the refrigerant resulting from a control line outside the coolrooms being rubbed through and broken. On the face of it, this was not something that would suddenly happen and the defendant led no evidence to suggest that it did. On the evidence of Mr Herman, it is plain that at the critical time there was no one on the staff on site with the necessary expertise to maintain the refrigerating system for the relevant coolrooms. He apparently is trained in refrigeration mechanics but was on leave and the person he put in charge, Mr Fitzgibbon, was an accountant. I am also satisfied that the company that the defendant had used to maintain the equipment had black listed the defendant for non-payment of bills and the defendant had not engaged anyone in its place. The clear conclusion is that in the absence of Mr Herman there was no one on the staff and no contractor engaged to maintain refrigeration equipment. It plainly had not and was not at the critical time maintaining, let alone fully maintaining, the coolrooms 6 and 7 and their equipment. Thus breach of contract is made out.
Duty of care and breach
The defendant did not challenge the existence of a duty of care owed by it to the plaintiffs in relation to the maintenance of the coolrooms. In the circumstances, it would not be possible to dispute the existence of such a duty.
It was plainly in breach of that duty of care having regard to the matters mentioned above constituting the breach of contract. The defendant’s failure to maintain the alarm systems and the refrigeration equipment itself and its failure to have any maintenance system in place amounted to clear negligence on its part.
The critical and controversial issues are the remaining issues: causation, loss and its measure and contributory negligence.
Causation
It was common ground that the refrigeration equipment serving coolrooms 6 and 7 failed sometime between 3.00 pm on 30 September 2000 and 8.00 am on 1 October 2000. On the evidence, this occurred because 60 percent of the refrigerant was lost and the resulting loss of pressure caused the compressors to switch off, as they were designed to do.
It was also common ground that there was a growth process in the garlic that could be triggered by appropriate conditions. The defendant and its expert called the process vernalisation. It appeared to be common ground that the optimum temperature for this to be triggered was 5 degrees Celsius and above[4]. The plaintiffs' case is that this process was triggered by the increase in temperature in the coolrooms that occurred with the failure of the refrigeration system. The defendant's case is that that was not the cause and that the process had already commenced prior to that failure. It was common ground that once started, the process could not be stopped.
[4]Up to 8 degrees and in one view up to 18 degrees.
It seems that there is an ongoing process of respiration in a garlic bulb which will produce some heat. In natural conditions, however, the bulb will remain dormant for some months in the sense that the chemical changes needed to start the growth process lie dormant. I accept the evidence of Mr Young for the plaintiff that under natural conditions a bulb of white Chinese garlic will lie dormant until approximately 1 September. Placing such garlic in a coolroom, however, helps to delay the process and allows garlic to be kept for between six and eight or nine months from harvest. This had been achieved by the plaintiffs in the previous year using the similar coolroom facilities of the defendant in the same way.
I accept the evidence that the garlic when initially placed in the coolrooms had a bulb temperature between 0 degrees Celsius and 1 degree Celsius. Until 30 September 2000 the air temperature in the coolrooms was maintained at 1 degree Celsius. The temperature of the bulbs in the coolrooms was not monitored. Temperatures were taken of bulbs prior to loading for delivery to customers after being taken from the coolroom and left on the warehouse floor ready for dispatch. The delivery documents record temperature of four degrees Celsius "on loading". The plaintiff argued that this suggests that the temperature in the coolrooms of the garlic would have been significantly below four degrees Celsius. The probabilities are that for the period prior to 30 September 2000, the temperature of the bulbs in the coolroom would have been ½ to 1 degree Celsius warmer than the air temperature. This was the evidence of Mr Wood, an expert called for the plaintiff.
The defendant relies upon the evidence of Mr White, a produce surveyor, who attended the premises on the morning of Monday, 2 October 2000 and measured the temperature of the garlic in different positions in the coolrooms. The temperature of the garlic he measured in coolroom 6 was approximately 14.5 degrees Celsius and the garlic in coolroom 7 ranged between 14.9 degrees Celsius and 17.2 degrees Celsius. It also relies on the evidence of Mr Wood, an expert called by the plaintiff, that it would take several days for the core temperature of the garlic to reach the point where dormancy is broken through normal garlic respiration, coming off an initial temperature of 1 degree. The defendant argues that, therefore, the bulb temperatures at the time of the failure must have been significantly elevated and that the only explanation for that was that the "vernalisation process" had commenced prior to the failure. This argument assumes that no extraneous heating occurred
In support of this argument, the defendant also alleges that the earlier commencement of "vernalisation" occurred because the coolrooms were over stacked. It relies on evidence of Mr Herman, its managing director, and Mr Tart and Mr Morham, both presently employed staff of the defendant, that the coolrooms were full to overflowing prior to 30 September 2000.
I am satisfied that their evidence is exaggerated. While I accept that at times there were pallets on the floor of the coolrooms, I accept the evidence of Mr Young that he kept cartons in refrigerated containers on the premises and also stored cartons in other coolrooms elsewhere. I also accept his evidence that the system he employed was to keep cartons in the refrigerated containers until the whole container could be unloaded. I also accept his evidence that orders for garlic were met on the basis that the first cartons into the coolroom were the first cartons removed. I am also satisfied that Mr Young, who was in charge of the operations for the plaintiffs, was well aware of the need not to over-fill the coolrooms, he being experienced in the operation of coolrooms and the storage of vegetables in them including garlic. Examination of the actual figures support the conclusion that the evidence called for the defendant was exaggerated. No doubt there was a very large quantity of garlic stored in the coolrooms and looking back it may be that the defendant's witnesses’ recollection reflects that fact. I suggest that it is also significant that when Mr Herman reported the second plaintiff's claim to the defendant's insurers on 22 February 2001 for the loss of 21,700 cartons of garlic he did not allege any fault on the part of the second plaintiff and stated that what had happened was that the temperature had been set high over the weekend at plus 15 degrees Celsius or that the cooling down progress had been halted and only started again after the thermostat was reset to 1.5 degrees Celsius. Mr Herman also is, and was, experienced in the operation of coolrooms and the storage of vegetables.
There is, in any event, an explanation advanced by the plaintiff for the dramatic increase in temperature, one which I accept.
It is not disputed that the air temperature in the coolrooms rose from 1 degree Celsius at 3.00 pm on 30 September 2000 to 5 degrees Celsius at 8.00 am on 1 October 2000. The ambient temperature in the coolrooms was then ideal for the triggering of “vernalisation”. By 1.00 pm it had risen to 8 degrees Celsius. Early on the Monday, it had risen to 10 degrees Celsius. I accept the evidence of Mr Cummins who runs a refrigeration consulting company and designed the coolrooms in question, that the compressors in the refrigeration equipment would have been automatically turned off but the pumps and fans would not have been.[5] I also accept his evidence that if they continued to operate without the refrigeration equipment they would heat the coolrooms. I also accept his evidence that once the garlic ceased to be dormant it would itself generate heat resulting, with the heat of the pumps and fans, in a rapid increase in temperature in the absence of any refrigerative effect from the refrigeration equipment.
[5]This was also the evidence of Mr Dodds and was not challenged.
I am satisfied that the fans and pumps were still operating at the time the refrigeration failed and continued to do so[6]. There is no evidence that the fans or the pumps were switched off. Whether deliberately or inadvertently, witnesses were not asked. The reasonable inference is that the parties accept that they continued to operate. The probabilities are, therefore, that they continued functioning while the refrigeration systems were not operating.
[6]Counsel for the defendant asserted there were two fans and one pump in one coolroom and one fan and one pump in the other.
Mr Herman gave evidence that there was very little heat generated by the fan motors. He said that .75 horse power only was required to operate them. Mr Hill, the defendant’s expert was invited to accept that figure as the horse power figure for all fans and pumps and assumed a total figure of approximately 2.5 horse power. He then translated that figure to 2.5 kilowatts which he claimed was the power used in a standard electric jug. I note that Mr Cummins, the plaintiff’s expert said that you could have 12 kilowatts of power generated by the fans and pumps.
I do not believe that Mr Herman’s figures can be accurate bearing in mind, for example, that the fans were supposed to change the air in the coolrooms every minute.[7] This was substantial equipment. The above facts were not put to the plaintiffs’ witnesses.
[7]According to Mr Hill, an expert called for the defendant.
Another issue raised for the defendant was that the fans would not have blown warm air into the coolrooms because they blew air over a large tank of water kept at minus 1 degree Celsius.
Mr Cummins said that if the fans and pump were operating they would generate heat. This issue was not tested with Mr Cummins with the result that he did not directly comment on the effect of the water tank. It is reasonable to assume, however, that with his expertise and experience and having designed these particular coolrooms, he would have been well aware of the presence of the tanks and borne them in mind when expressing his opinion.
The defendant relies upon the evidence of an expert, Mr Hill. He gave evidence supporting the conclusion that "vernalisation" had commenced prior to the failure of the refrigeration equipment and that the failure of that equipment made no more than a few weeks difference in the date when sprouting commenced.
Unfortunately, when he first considered the matter and formed his initial opinion, he was misinformed about salient facts. He was not told what type of coolroom was involved and assumed it was a high humidity room providing up to 100 percent relative humidity. He also proceeded on the basis that the cartons were tightly stacked and the coolrooms probably overfull. He also said that he “could only assume” that there was a lack of knowledge and experience on the part of the person storing the garlic or no real attempt to delay the inevitable product degeneration, there being no mention of vented cartons or stacked racking. He was also told that it was alleged that the cooling system was defective, that the temperature in coolroom 7 rose because of the removal of evaporator fan blades on 16 October 2000 and that the temperature in coolroom 6 rose because a door was left open on 24 September 2000. He also stated that no evidence of faulty refrigeration had been conveyed to him. The refrigeration system behaved “as I would expect refrigeration in a holding room." He also said that the refrigeration failure scenario was improbable because of the alarm system which he apparently assumed to be working. Notwithstanding frequent comments throughout his report about information that was needed, he was prepared to express the opinion that the responsibility for degradation of the garlic rested with the owner of the garlic "for choosing not to use equipment and practices that would have extended the product shelf live (sic) to the required time by use of best practice principals (sic)".
I may be doing Mr Hill an injustice, but it seems to me that his original opinion revealed a serious lack of objectivity and care. I came to the further conclusion that in giving his evidence he was also keen to argue the defendant's case. An explanation for that was a continuation of that lack of objectivity caused at least by the initial misinformation.
There is other evidence that supports the plaintiff's case. The plaintiff appears to have used the same approach as was used in 1999 to successfully store large quantities of garlic for 6 months . Further, the plaintiff kept as a control sample, a container of garlic which arrived on 8 August 2000. In it, the cartons were block stacked -- that is, that they were not separated. They were kept at a temperature of 1 degree Celsius. In February 2000 it was half full - containing 1,200 cartons. They had not sprouted. According to the defendant’s expert Mr Hill, if the temperature in the coolroom and the container was the same (and that of the coils) and the block stacking caused less air circulation, container storage would be less likely to preserve the garlic than coolroom storage.
The probabilities are that the breakdown of the refrigeration system triggered the "vernalisation" of the garlic in the coolrooms resulting in the garlic sprouting in early November 2000. The combined heating effect of the fans and pumps and the vernalisation process would have caused the increase in temperature in the coolrooms and the garlic. The probabilities are also that, but for the failure of the refrigeration, the first plaintiff would have been able to attempt to sell the 21,700 cartons of imported White Chinese garlic until at least February 2001.
Before leaving this issue, I note that an issue was raised about the coolrooms being high humidity coolrooms and their suitability for the storage of garlic. I accept that such coolrooms are not ideal but the level of humidity can be reduced by the use of anti-freezing agents. In the present case, there was no evidence of damage from humidity such as moulds and staining. In any event, the problem preventing the selling of the garlic was a different one - vernalisation.
Loss and damage
The plaintiffs claim damages for the loss of 21,700 cartons of garlic in the sum of $311,000. The second plaintiff claims costs associated with the disposal of the 21,700 cartons as follows:
Tipping fees
$4,288.50
Hire of trailers to cart discarded product to tip
$ 210.00
Trucks to tip, driver, labour relating to collection
and removal of defective product from coolroom$1,473.50 (reduced from $3,000)
The plaintiffs also claim container detention fees of $9,240.00 incurred while holding a refrigerated shipping container for storage of cartons after the refrigeration failure.
Finally, the plaintiff claims the loss suffered in purchasing garlic from a Sydney agent to ensure continuity of supply to Woolworths of $3720.00 together with cartage of $2500.00.
The defendant does not dispute the quantum of the claims for consequential tipping costs and expenses, being expenses incurred by the second plaintiff. Further, it does not dispute that if the second plaintiff establishes a breach of contract on its part, or negligence, it is liable to reimburse the second plaintiff in those amounts.
In relation to the claim for damages arising from the loss of the garlic, the defendant argues that the second plaintiff suffered no loss in that any loss suffered was suffered by the first plaintiff. It also argues that the plaintiffs have not established any loss in the sense that they have not established that the garlic could have been sold if it could have been marketed over a longer period. It is put that the plaintiffs have failed to prove on the balance of probabilities that but for the failure in the coolrooms on 1 October 2000, the 21,700 cartons of garlic could have been sold. In that context, the defendant conceded that the failure of the refrigeration system did have some impact in speeding up the vernalisation process that might occur but alleges that it did so by no more than a matter of weeks. The defendant also argues that the highest the plaintiffs' evidence case can be put is that the first plaintiff could have offered the garlic for sale but the plaintiff had not established either the quantities or the prices at which sales might have occurred. Although the defendant did not use the expression, my understanding of the argument is that the defendant is saying that at worst, the first plaintiff was deprived of an opportunity to sell the 21,700 cartons of garlic for a period after early November 2000 when the sprouting occurred.
There was a debate about the correct approach to assessing any damages claimed by the second plaintiff, it being the bailee of the cartons.[8] Counsel for the plaintiffs submitted that they could claim the full market value of the goods damaged whether the claim was made for negligence or breach of contract. The defendant submitted that the second plaintiff was confined to the cost of replacement. Referring to The Albazero,[9] counsel submitted that damages were intended to be compensatory and should be confined to the financial loss sustained.
[8]Citing Millar v Candy (1981) 38 A. L. R. 299,314; Tanenbaum v W. J. Bell Paper Co Ltd (1956) 4 D. L. R. (2d) on 7 ; Palmer, Bailment, at 314.
[9][1977] A C 774,841.
The debate on this and some other issues tended to proceed on the assumption that the garlic was destroyed. It seems to me that the correct analysis is that garlic was damaged but not destroyed on 30 September or 1 October 2000 and that the consequence was that the period during which the first plaintiff was able to sell the garlic was significantly shortened from a probable five months to one month. The assessment of damages for the first plaintiff is to be determined, using the approach it has advanced, by considering whether it would have sold all the garlic. Alternatively, if it is unable to prove on the balance of probabilities that it would have sold all the garlic at the price alleged but for the damage to the garlic, it will then be necessary to consider whether it has proved that it lost the opportunity to do so and the value of that lost opportunity.
As to the second plaintiff, it is liable in breach of contract to the first plaintiff and accordingly the damages it can recover from the defendant will depend upon the quantum of its liability to the first plaintiff and any expenses it may have incurred which flowed from the negligence or breach of contract of the defendant.
I turn, therefore, to the question whether the first plaintiff has proved on the balance of probabilities that, but for the failure of the refrigeration machinery, it would have been able to sell 21,700 cartons of garlic in between November 2000 and February 2001.
The defendant has raised a number of issues. The first is that there was no evidence that the first plaintiff was unable to meet any orders placed by Woolworths at any time in the 2000/2001 season. The defendant argues that this is significant because Woolworths was the principal customer. The defendant also argues that there is no evidence of any other potential purchaser who would have purchased the garlic if it had been available.
As to Woolworths, the defendant argues that the overwhelming inference to be drawn from the evidence was that there was no market with Woolworths for garlic sized 50 to 55 mm. It relies upon the fact that Woolworths only placed two orders for garlic of that size totalling 3000 cartons and this occurred in August and September 2000 but the first plaintiff took delivery of 16,598 cartons of white garlic of that size. The defendant also draws attention to the fact that the first plaintiff first took delivery of 2,250 cartons of 500 gram packs of garlic in August but did not receive an order for such packs from Woolworths before 20 April 2001 which was probably met from a later delivery. The defendant also argues that the first plaintiff's sale figures showed that in the year 2000, it sales peaked in August 2000 before suffering a significant decline and that this was to be compared with the sales pattern in 1999 where October sales matched August, and November was the third strongest month. Total sales in 1999 to Woolworths were 41,027 cartons. The defendant submits that the evidence points to the plaintiff having an oversupply of garlic – including evidence of a decline in prices.
The plaintiffs do not contest the proposition that there is no evidence of orders received but not fulfilled but refer to the fact that a total of 32,388 cartons were sold to Woolworths which included the sale of 12,738 cartons between November 2000 and April 2001. It also sold 8050 cartons to other purchasers in the season including 3740 between November 2000 and May 2001. It in fact sold a total of 62,118 cartons, a quantity in excess of that imported from China. To do so, it had to acquire further garlic, including the 1860 cartons purchased from Murphy in December, the loss on which is the subject of a separate claim. I note also that the final shipment from China of 4650 cartons in about December 2000, was not sufficient to meet the Woolworths orders at that time. The plaintiffs, however, have not been able to produce any records of other purchases. I accept the explanation that documents have been lost in the course of several moves and a takeover.
The plaintiff also relies upon the evidence of Mr Young that he had a market in Fiji to which he had sent 3000 cartons in shipments in October and November for prices of $14.50 and $15. I accept that evidence. I also accept his evidence that he had to stop exporting, but the quantities that might have been sold cannot be established with any precision.
As to the issues raised in respect of the Woolworths potential sales, I accept the plaintiffs’ case that while there were only two specific orders for a small quantity of garlic sized 50 to 55 mm, Woolworths was prepared to accept garlic of that size within orders specifying garlic sized 55 to 60 mm. The only delivery rejected on the grounds of size was an early delivery where it was found that some of the garlic was under 50 mm. There is no evidence that any delivery was rejected on the basis that the size ranged between 50 to 55 mm. I refer to the evidence of Ms Pin-Socchim, Woolworths national buyer, that Woolworths specified that it would buy both sizes. I also accept the evidence of Mr Young, supported by some documentary evidence that the garlic shipments contained garlic of both sizes and the Woolworths orders were supplied on a first in first out basis. The probabilities are that Woolworths received garlic sized 50 to 55 mm in response to some orders for 55 to 60 mm.
The defendant also points to the lack of sales of the 500 gram packs prior to the October incident. I accept the plaintiffs’ case, however, that it did not intend to sell the 500 gram pre-packed garlic until January 2001 after the conclusion of the loose garlic season. As a result, the lack of evidence of sales is not itself a significant matter. On the other hand, the plaintiffs cannot point to evidence of sales at or near the price alleged in support of their claim.
The plaintiffs also rely upon the evidence of Ms Pin-Socchim that Woolworths regarded itself as having a commitment to the first plaintiff to purchase garlic that it had acquired for the purpose of supplying Woolworths. She also gave evidence that Woolworths would have helped Mr Young to move garlic if he had sought assistance from it. I accept this evidence but it does not support the conclusion that the first plaintiff would have sold the 21,700 cartons at the rate of $16 for the prepacked garlic and $14 for the loose garlic. It does, however, support the proposition that the first plaintiff would have been able to sell all the garlic. Ultimately, I would have thought that that conclusion must follow - at least on the balance of probabilities, and subject to the further question of the price that could be obtained. There is evidence of sales to Woolworths as low as $11 - $12. I accept the evidence, however, that these were promotional sales. The probabilities are that all the garlic could have been sold but the question is -- at what price?
Mr Young gave evidence that he could have sold the remaining garlic at the price of $16 for prepacked and $14 for loose garlic per carton. Counsel for the plaintiffs urged me to accept this evidence on the basis of his experience in the market.
Counsel also relies upon an analysis of Woolworths’ prices in relation to prepacked garlic which it is said remained at $17 through the season. The plaintiffs also rely upon the market survey evidence of the Melbourne Vegetable Market, a document produced by the defendant. They say that it suggested a range for prepacked traditional Chinese garlic (not white garlic) of between $10 and $15 between 8 September 2000 and 30 January 2001. I note also from the survey that in that period it had recorded a best price being received of $18 for pre-packed and loose traditional garlic and that most sales for loose garlic were between $12 and $15. Mr Young gave evidence that the survey is based on what agents told the people conducting the survey and that the agents were always conservative in their pricing in such surveys. This was not challenged.
An issue in using this evidence is that it is clear that the Chinese white garlic was seen as different. But it was seen as a premium product. Therefore, the price of traditional Chinese garlic gives some guidance. Other evidence relevant to the market price of the white garlic was the following.
•purchases by the second plaintiff from Murphy, to service Woolworths’ order of 1,860 cartons at $16, sold to Woolworths for $14 (in respect of which a claim of $2 per carton is claimed;
•sale to Depoi, an agent in Adelaide, 22 August 2000 – 100 cartons at $12
•sale to Vemark, a Melbourne agent, 30 January 2001 – 100 cartons at $12 and 100 cartons at $13;
•sale to Moraitis, a Melbourne agent, 21 November 2000 to 8 February 2001 – 320 cartons ranging from $10 to $13;
•sales to BGP produce, a Melbourne agent, in July 2000 – 500 cartons ranging from $13 to $14;
•sales to T Costas, August to October 2000 at $14 and $12.
Mr Young explained that prices below $14 were generally given as a favour – they had a practice of helping each other.
Mr Young's estimates of $16 for pre-packed garlic and $14 for loose garlic are within the upper limits of actual and quoted prices. Generally, I regarded him as a witness conscious of his obligations and complying with them. A conclusion, however, (on the balance of probabilities) that the 21,700 cartons would have been sold, requires slightly lower prices. I accept that the garlic was of high-quality, but there was a lot of it. Further the plaintiffs’ own sales pattern shows a troubling lull for several months after August. As to the month of October, in 1999, there were significant sales. In October 2000, however, there were very few even though someone with Mr Young's knowledge of garlic would have known that he had little time in which to dispose of it. I also note that the market reports record generally a good supply of pre-packed and loose traditional Chinese garlic but generally a slow demand during the relevant period. The price for loose traditional Chinese garlic appears to have ranged between $10 and $15 and $10 and $18 in different times with, as counsel argued, most sales between $12 and $15 and best sales of $18. It does not record the range of most sales for pre-packed traditional Chinese garlic but gives the same price range generally at $10 to $15 and best prices of $18. It should also be noted that a factor that could affect price was the size of the garlic.
Weighing up the evidence, there can be no doubt that the first plaintiff would have been able to sell all the premium white garlic at the bottom of the traditional garlic range - $10 for most sales of loose garlic and $10 for pre-packed garlic. As to selling it for higher prices, I am satisfied on the balance of probabilities that that would have occurred. The uncertainties identified, however, warrant a conservative approach. Weighing up the evidence, I am satisfied that on the balance of probabilities all the garlic would have been sold at an average price of $14 for the pre-packed garlic and $12 for the loose garlic and damages should be assessed on that basis. It is unnecessary, therefore, to consider the lost opportunity alternative.
As to the claim for the loss on the Woolworths transaction where the garlic was purchased from Murphy, the defendant's challenge was on the issue of liability and causal connection. I am satisfied that garlic was purchased to meet a commitment to Woolworths. The loss was a direct result of the defendant's breach of contract and negligence and was reasonably foreseeable by the parties. The plaintiffs also claimed the cost of cartage of this garlic - $100 per pallet for 25 pallets. In the end, that item was not challenged.
As to the claim for the container detention fees, the plaintiffs, through Mr Young, conceded that that cost was incurred because Mr Young believed it was necessary to have a control sample to protect the plaintiffs' position in the dispute with the defendant, the defendant refusing to accept responsibility. I accept that this loss also was a direct result of the defendant's breach of contract and negligence. It was also reasonably foreseeable by the parties and should be allowed.
Contributory negligence
By the conclusion of the hearing, the defendant had reduced the contributory negligence allegation to two matters. The first concerned the alleged failure of the second plaintiff to secure the attendance of a reasonably competent refrigeration mechanic at the premises on 1 October 2000. The defendant argues that the attempt made was wholly inadequate. The defendant relies on the evidence of Mr Dodds that there were refrigeration mechanics permanently on call who could have fixed the refrigeration system, that such mechanics number in the hundreds and a significant number work on a "round-the-clock" basis.
Counsel for the plaintiffs submits that, in all circumstances, it could not be said that the second plaintiff had failed to exercise reasonable care in its attempts to obtain help from a refrigeration mechanic. Counsel submits that the primary responsibility was that of the defendant. Further, Mr Young, acting on behalf of the plaintiffs, tried to contact the refrigeration mechanic, Mr McEwen, whom he knew was used by the defendant. That mechanic refused to come, citing a failure on the part of the defendant to pay for previous attendances. Counsel submits that having been given the name of another mechanic by Mr McEwen, Mr Young attempted to contact that mechanic, Mr Dodds, but could not make contact. Counsel submits that he left a message for Mr Dodds but he did not respond. Counsel also relies upon the fact that Mr Young also attempted to contact Mr Fitzgibbon, the person left in charge by Mr Herman while he was on leave. He was again unsuccessful, but he again took the precaution of leaving messages for him.
Mr Young could have done more. The first issue is whether in not doing more than he did he contributed to the damage. On this and all other elements of contributory negligence the defendant carries the onus of proof.
In light of the evidence, I am not satisfied that the failure of the second plaintiff, through Mr Young, to do more to get help contributed to the eventual loss of the garlic. By the time he was aware of the problem the temperature had already reached levels ideal for vernalisation to occur. While he attempted to get help the temperature continued to rise.
If it be assumed, however, that his failure to get help contributed to the eventual loss of the garlic, it is necessary to consider whether, in exercising reasonable care for the plaintiffs to avoid injury to them he should have done more than he did. It seems to me that he did all that could be reasonably expected in the circumstances. The problem lay in equipment which was the property of the defendant not the plaintiffs. Under the agreement between the second plaintiff and the defendant, it was the responsibility of the defendant to "fully maintain" the equipment. Mr Young was placed in a difficult position in attempting to repair equipment which was not owned by the plaintiffs and for which the plaintiffs were not responsible. He attempted to contact the refrigeration mechanic that he knew was used by the defendant and, when he refused to help, contacted a refrigeration mechanic recommended by that person. When that attempt was also unsuccessful he did not have available to him the name of a refrigeration mechanic whom he could be confident would be acceptable to the defendant to work on the equipment. He then contacted the defendant's representative and was also unsuccessful. On each occasion he left messages.
If there was a want of reasonable care on the part of the second plaintiff which contributed to the loss, is it just and equitable having regard to that plaintiff’s share in the responsibility for the damage that it should bear some of the loss? This requires, inter alia, a consideration of the relative importance of the acts of the parties.[10]
[10]Podreberseck v Australian Iron and Steel Pty Ltd [1985] 59 ALJR 492, 494.
If the defendant had taken reasonable care to discharge its obligations, the alarm systems would have attracted attention and the problem would have been addressed very shortly after it arose and before temperatures rose significantly. When Mr Young discovered the problem it had obviously been a problem for a significant period of time as revealed by the level of ambient temperature which had reached the critical dormancy breaking level. Thus, the want of care on the part of the defendant not only created the problem but created major difficulties for the second plaintiff’s attempts to address the problem. In those circumstances, even if Mr Young could have done more, it would not be just and equitable to reduce the damages recoverable when regard is had to the plaintiffs’ and defendant’s share in the responsibility for the damage.
The other matter put by the defendant is that Mr Young should have secured the attendance of John Tart, the defendant's foreman. It is argued that he lived near the premises in a boat on the Yarra and that Mr Young knew where he lived.
This argument faces a number of problems. First, for the above reasons, I am not persuaded that if Mr Young had secured the attendance of Mr Tart it would have made any difference – the vernalisation had probably started.
Further, it would not be just and equitable to require the second plaintiff to share in the responsibility for the damage on this basis. Mr Tart was not a refrigeration mechanic and, when he attended on the Monday morning, he was unable to start the refrigeration machinery. He then spoke to Mr Fitzgibbon. Accordingly, contacting Mr Tart would not have helped directly but at best would have informed the defendant’s officer of the problem and it would then have been up to that person to arrange for a refrigeration mechanic. The longer the delay by the defendant in getting a refrigeration mechanic the less significant was any failing on the part of Mr Young to take steps to have the problem solved. In addition, the need to contact Mr Tart arose out of the failure of the defendant to "fully maintain" the refrigeration equipment - in particular the alarm system, the modem and a failure to have any operating plan to deal with such emergencies immediately.
Conclusion
The plaintiffs are entitled to recover damages from the defendant for:
(a)the ultimate loss of 21,700 cartons of garlic on the basis of $14 for pre-packed cartons and $12 for cartons of loose garlic,
(b)the loss and expenses associated with the purchase of garlic to supply Woolworths totalling $6,220.00,
(c) container detention fee of $9,240.00,
The second plaintiff is also entitled to recover from the defendant the costs and expenses associated with disposing of the 21,700 cartons of garlic totalling $5,972.00.
I will give the parties a further opportunity to be heard on the quantification of item (a) above and as to the final form of the orders.
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