Badette Pty Ltd v Logistics SC Pty Ltd - [2020] SADC 75

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
BADETTE PTY LTD & ORS v LOGISTICS SC PTY LTD
[2020] SADC 75
Judgment of His Honour Judge McEwen
19 June 2020
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - FORMATION OF CONTRACTUAL RELATIONS - AGREEMENTS CONTEMPLATING EXECUTION OF FORMAL DOCUMENT - WHETHER CONCLUDED CONTRACT
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - INTERPRETATION OF MISCELLANEOUS CONTRACTS AND OTHER MATTERS
TORTS - NEGLIGENCE - GENERAL MATTERS
Claims in contract and negligence for damage to vineyard trellis. Occupancy of vineyard - whether 'Term Sheet' was a legally binding agreement: Masters v Cameron principles.
Responsibility for posts broken during harvesting - whether lease created obligation upon lessee to replace broken posts - alternative claim in negligence.
Evidentiary issues: Number of broken posts - whether plaintiff can establish state of the vineyard at commencement of lease - employee directed to conduct post count not called as witness.
Business records: Emails exchanged between lessor and lessee - whether capable of proving initial post count.
HELD: Plaintiff's primary claims in contract and negligence dismissed.
Masters v Cameron (1954) 91 CLR 353 at [360], [361]; Lucke v Cleary (2011) 111 SASR 134 at [152], considered.

BADETTE PTY LTD & ORS v LOGISTICS SC PTY LTD
[2020] SADC 75
Introduction

The plaintiffs, who trade as Grape Fusion Joint Venture ('Grape Fusion'), effectively own the Schoenthal Vineyard situated at Jungfer Road, Charleston. The defendant, Logistics SC Pty Ltd, which trades as Grape Logistics ('Grape Logistics'), is in the business of carrying out vineyard operations. In 2013 the plaintiff and defendant reached an agreement regarding the vineyard. The nature and terms of that agreement are in dispute. However, it is common ground that the defendant, Grape Logistics, occupied and operated the vineyard for a period of three years from August 2013 until July 2016. The defendant’s operation of the vineyard during this period generated revenue in the order of $1.6 million. Those funds were distributed between the parties pursuant to an agreed formula, and there is no dispute about that.
The primary dispute in this trial regards vineyard trellis posts, alleged to have been broken during the defendant’s occupation and operation of the vineyard. The entire vineyard trellising comprises in the order of 28,000 intermediate posts, as well as strainer posts and diagonals at the end of rows. The plaintiff claims that approximately 7,000 posts were broken during the period of the defendant’s operation of the vineyard. The plaintiff’s primary claim is in contract, seeking as damages, the cost of replacing the posts. The alternative claim is in negligence in the operation of the vineyard by Grape Logistics.
The defendant denies liability in contract or negligence for any broken posts. It is denied that there was any contractual term requiring it to replace broken posts. The defendant also denies any negligence on its part in the operation of the vineyard. Moreover, the defendant submits that the plaintiff has failed to establish the suggested high number of broken vineyard posts.
Issues
The primary issues for determination in this trial can be broadly categorised as follows:
Firstly, the nature and terms of the agreement between the parties. The plaintiff alleges there was a written agreement comprising the ‘Term Sheet’ dated 26 July 2013, signed by the parties. The defendant disputes that this document comprises a binding contract.
Secondly, whether the agreement between the parties included an agreement that Grape Logistics would be responsible for posts broken during the term of its occupancy. That is, insofar as the plaintiff relies on Term 14 of the Term Sheet, whether this amounts to a requirement to replace broken posts at all. Further, whether the plaintiff, in all of the circumstances, is entitled to rely upon this term.
Thirdly, an alternative contractual issue of whether the extent of post breakages during the tenant’s occupancy amounts to a breach of a contractual term to apply good viticultural practice.
Fourthly, and in the alternative to the primary contractual claims, whether negligence has been established, in the allegedly high breakage rate of posts.
Underpinning those issues is the factual and evidentiary issue of whether any particular number, or rate, of post breakages has been proved. This issue turns upon what has been described during the trial as the 2013 and 2016 post counts. In other words, the evidence as to the number of broken posts in the vineyard, at commencement, and at termination of the defendant’s occupancy. That issue of the number of posts broken during the defendant’s occupancy is not merely a matter of damages. The alleged post breakage rate; the number, or proportion of posts said to have been broken during the defendant's occupancy; is the essence of the substantive claims in contract and negligence.
Finally, there are claims in damages for the gutters and hot water service of the vineyard house, and deterioration of the vineyard road. These issues are very much subsidiary to the main issue contested at trial, relating to the broken trellis posts.
The Trial
This is not a trial where the primary issues turn on a contest of credibility or reliability between the oral evidence of witnesses. The defendant did not give evidence, or call any witnesses. A significant number of documents were tendered during the trial. These written exhibits trace the relationship between the parties from negotiations in 2013 to the end of the defendant’s occupancy of the vineyard in July 2016. To a large degree, the issues at trial turn upon a determination of the factual and legal significance of that documentary evidence; in the context of the oral evidence called by the plaintiff.
The plaintiff called a number of witnesses to set out the narrative of events and to introduce and explain the documentary exhibits. In view of what I have said about the nature of the contest in this trial, it is sufficient that I very briefly paraphrase the roles of the witnesses, and the nature of their evidence.
Ian Northcott explained the corporate structure comprising the Grape Fusion Joint Venture. He is the Chairman of the company, Amos Vignerons Pty Ltd which manages the joint venture. Grape Fusion has two vineyards; Schoenthal Vineyard at Charleston and Howard Vineyard at Nairne. At the premises of the Howard Vineyard there are also cellar door, bistro, and wedding function facilities.
Ian Northcott told the court that in late 2012 Grape Fusion decided to refocus its activities on the sales and function activities at the Howard premises, and to outsource vineyard operations, including the Schoenthal Vineyard. Mr Northcott described his role at that time as managing the commercial aspects of Grape Fusion. He entered into discussions and negotiations, and exchanges of emails, with Mr Charles Rosback of Grape Logistics. He prepared the Term Sheet, Exhibit P1, which he signed on 25 July 2013, and Mr Rosback signed on 26 July 2013.
Mr Ian Northcott also provided evidence as to the area, layout, and number of rows and vines, of the Schoenthal Vineyard.
Tom Northcott is Ian Northcott’s son. He obtained degrees in oenology and viticulture at Adelaide University. He then worked at various wineries in South Australia, interstate, and in France before returning to the family business in May 2013. At that time, the Grape Fusion business was being restructured. Tom Northcott described his role as developing the ‘value-add’ side of the business, meaning the wine sales and hospitality functions. His role was also to ‘keep an eye on the vineyards’. He was general operations manager across the Grape Fusion Joint Venture. In that capacity, he had responsibility for the staff of the business.
One of the workers at the Schoenthal Vineyard was a man named Parmpal Singh. When Grape Fusion outsourced the operations of Schoenthal Vineyard, Parmpal Singh was no longer a required employee of Grape Fusion. Mr Tom Northcott discussed with Mr Charles Rosback, of Grape Logistics, whether they would be interested in taking on Mr Singh as an employee, given his familiarity with the vineyard. To facilitate this, Tom Northcott sent Charles Rosback, Mr Singh’s email address.
In about the last week in July 2013, Tom Northcott met with Parmpal Singh at the Howard Vineyard and instructed him to conduct a broken post count of the Schoenthal Vineyard. Mr Tom Northcott did not make any observations, or do any follow up, in relation to Mr Singh carrying out the instruction to conduct the post count. By reference to time sheets, Tom Northcott infers that Mr Singh left the employment of Grape Fusion on 13 August 2013. Mr Northcott is not able to say whether Mr Singh did in fact commence employment with Grape Logistics. He did not have any further actual contact with Mr Singh. He apparently made very belated attempts, during the trial, to locate Mr Singh, using contact data he still had, in his computer and phone.
As to Mr Tom Northcott’s role in the Schoenthal Vineyard operation during the defendant’s occupancy:[1]
Q.In 2013, from around the time that we're talking about, can you give a bit of a picture of the degree of your involvement with the activities and operations at the Schoenthal Vineyard.
A.Under the directive from my employers I was to focus on the value adding side of the business. I did not have a lot of initial involvement in the vineyard at all and, in fact, I don't believe I visited there for quite a bit of time.
Q.What were your activities focussed on.
A.I was focussed on wine production at the contracting winery that we use; bottling and, broadly, sales, including our hospitality business.
[1] T299.9-21.
Mr Tom Northcott gave evidence of the distribution of the proceeds of grape sales from the Schoenthal Vineyard, for the 2014, 2015 and 2016 harvests. The distribution accorded with a formula found in Term 29 of the Term Sheet. He also gave evidence of other discussions, interactions, and correspondence, between Grape Fusion and Grape Logistics during the relevant three years, and he referenced these to specific terms of the Term Sheet.
In 2016, a company called In-Field Agriculture entered into a lease of the Schoenthal Vineyard, following on from the period of occupation by Grape Logistics. In late August or early September 2016, Tom Northcott requested In-Field Agriculture to conduct an audit of broken posts at the vineyard.
When Tom Northcott received data from the In-Field Agriculture broken post count, he was ‘distraught in the sheer number of broken posts presented in these documents’.[2] He drove to the vineyard, and observed the fluorescent tape that had been applied to broken posts. The extent of this throughout the vineyard was ‘quite incredible to see’.[3]
[2] T319.6-7.
[3] T319.37-38.
Tom Northcott agreed that up until that point, he had regarded Grape Logistics as having done a good job with the vineyard.
Benjamin Jonas was a casual worker for In-Field Agriculture in 2016. He described to the court his involvement in the 2016 post count. He observed other vineyard workers participating in the post count.
Tom Ayres is the Managing Director of In-Field Agriculture. In 2016 the core activities of In-Field Agriculture were to manage and maintain vineyards that they either owned or leased, and to do contract work on vineyards. Mr Ayres was aware of, but not directly involved in, the 2016 post count. He described in detail what is entailed in a post count. He struck me as a practical man, with a thorough knowledge of vineyard operations.
There was no substantial challenge to the 2016 In-Field Agriculture post count, and I have no hesitation in accepting those numbers. It was done when In-Field Agriculture had already been in occupation of the vineyard for a month, but no operations had been conducted by In-Field Agriculture that could have made any significant contribution to the overall numbers of broken posts.
It is notable that this post count was thoroughly documented with original post count sheets that were filled in by the workers as the count was conducted. The process as clearly explained by Mr Ayers, was supported by oral and documentary evidence, including original count sheets, and invoices for the workers who checked each post and applied fluorescent tape to the broken posts and the worker who drove the quad bike, and operated the clicker.
In short, this broken post audit was conducted immediately following conclusion of the defendant’s occupancy; it was readily proved by evidence from the workers who carried it out; and their evidence was comprehensively documented by contemporaneous records, properly proved. These are the features one would expect of a broken post audit at a bookend of a tenant’s occupancy, bearing in mind the purpose, and significance, of the audit.
I further note that it is well recognised, and prudent, commercial practice for both parties to a lease or tenancy, of property; or a hiring agreement of a vehicle or machinery; to properly document, and contemporaneously acknowledge in writing, the state of the property at the commencement of the lease or hire. The primary purpose of that process is to avoid disputes, potentially months or years later, as to the state of the property at commencement. Provided that initial inspection, documenting, and signing off, is done properly, that closes off one potential topic of dispute. Any damage beyond what is documented and agreed, can be taken as having occurred during the lease or hiring.
Mr Mark Gilbert has degrees in Applied Science focussing on Viticulture, from Melbourne University and Charles Sturt University. He is the owner of Karrawatta Viticulture SA which is primarily a contract vineyard management business. He was proffered by the plaintiff as an expert witness. His evidence was heard on the voir dire, and following argument, I admitted his evidence on the trial.
He provided evidence to the court regarding the operation of machine harvesters, and how it is that post breakage occurs during harvesting. The harvester is a very large heavy machine which straddles the trellis. At the level of the trellis there is a picking head on each side of the vine. These picking heads consist of plastic or fibreglass rods which oscillate against the vine, to shake the grapes into a catchment device. The picking heads are protected by steel covers. There is a fine tolerance in manoeuvring the machine, especially moving it from one row to another, to avoid the steel covers of the picking heads making contact with the posts. Further, when moving along the trellis of a row, the picking heads need to open up to pass around the posts of the trellis. On some machines, this function is automatic; on others the operator does this manually. There are a number of settings of the machine which need to be set by trial and error in the particular vineyard. These need to address the topography of the vineyard, and features such as how bushy or sparse the vines are.
Mr Gilbert’s evidence, based upon his own experience, observations, and knowledge of the practices and expectations within the industry is that:[4]
…it is a costly exercise repairing broken posts and I would expect on average with an older trellis system, maybe 2% of posts will be broken. A newer trellis system, approximately 1%, around-abouts to my personal vineyards. The vineyards we are involved with throughout South Australia, those averages do relate to those other 40 clients, they would be averages I would use and apply for budgeting purposes as well as practical operations from year to year.
[4] T435.26-35.
Mr Gilbert acknowledged that harvesting, which is normally carried out at night, is a very tricky operation, and even very good operators struggle in some conditions. He has seen post breakages from harvesting as high as 6%.
Mr Gilbert’s evidence displayed what appeared to me to be a thorough knowledge of the operations and practices of vineyards in the region. He acknowledged that he had not visited the Schoenthal vineyard, as the requested report was initially authored by his colleague, Sarah Radford. It was following her unavailability, that he was substituted to give the evidence. I accept his explanation that he was not hampered by not actually visiting the vineyard. Ms Radford’s materials included photographs of this Schoenthal vineyard, which exhibit the standard features, that he is very familiar with. I accept that he played a significant role, in consultation with Ms Radford, in the analysis and discussion leading to her original report.
There is one aspect of Mr Gilbert’s evidence that I put to one side. The conclusions of Sarah Radford, as adopted by Mr Gilbert, include answering specific questions posed about good viticultural practice, relating to post replacement.[5] These questions and answers, in my view go beyond the legitimate role of an expert witness, and impinge upon the ultimate issues I need to decide. The questions, as posed and answered, entail an assumption that post replacement is the responsibility of the tenant. They also entail a premise as to the number of posts broken during the Grape Logistics tenancy, which is certainly in issue.
[5] T450, 451.
For those reasons, and without implying any criticism of Mr Gilbert, I put that aspect of his evidence to one side and have no regard to it.
The gravamen of Mr Gilbert’s evidence is a description of the harvesting process and how it leads to post breakage; and his assertion of a range of 1-2% acceptable or expected breakage, based upon his experience and knowledge.
I found Mr Gilbert to be a suitably qualified, experienced and knowledgeable witness. Whilst he adhered to the 1-2% range, it was not his evidence that this range would be rigidly applicable to all circumstances. Mr Gilbert acknowledged the difficulties in harvesting, and how readily posts can be broken with a slight misjudgement. He has seen significantly higher breakage rates. Moreover, when pressed as to the appropriate or acceptable breakage rate that he proffers, he appeared to some degree to be basing this upon his knowledge of the overall lifespan of a trellis, and reasoning back from that; rather than arriving at that range based upon his own experience and observation of breakages on a year by year basis. In other words, although in his evidence he adhered to the 1-2% range, his reasoning, insofar as those figures are arrived at by dividing back from the expected life span of the trellis, is less definitive or convincing for the purposes of this trial. Similarly, insofar as he expresses a breakage rate as ‘acceptable’, that is not strictly the issue, except insofar as that appears to be a way of expressing what he has actually observed.
In short, I accept his evidence as to the mechanism of post breakages. As to the range of breakages he expresses, I accept this as a rudimentary guide, rather than a precisely delineated range, or a range with universal application.
I turn now to an examination of the primary issues in the case.
The Agreement
The plaintiff’s Statement of Claim pleads an agreement partly written and partly oral. However, at trial, the focus was on the Term Sheet as comprising a binding written contact. I do not understand the plaintiff to rely upon any specific contractual terms beyond those in the Term Sheet. Rather, the conversations and email exchanges, give context to the Term Sheet.

In opening the plaintiff’s case, Mr Hoile submitted:[6]
…the first plank of it is that indeed the term sheet as described was binding between the parties. Given the lack of admission of that fact your Honour will need to make a finding to that effect.
…
It is fair, I think, to assist your Honour and to acknowledge that the primary case of the plaintiffs is contract, pure and simple; that there was a written agreement, it was binding, and it has terms and those terms have a particular meaning which results in the, as it were, the relief that the plaintiffs claim.
[6] T5.17-21; T5.24-.29.
The Term Sheet, dated 26 July 2013, was signed by both parties. It followed negotiations and emails between Mr Ian Northcott and Mr Charles Rosback as to its content. Grape Logistics commenced pruning operations in the vineyard shortly before the signing of the Term Sheet. Thereafter for the term of the defendant’s occupation at the vineyard each party corresponded, interacted, and conducted themselves, in a manner that is readily explicable by reference to individual terms of the Term Sheet. This included a detailed formula for distribution of proceeds of grape sales.
The defendant denies that the signed Term Sheet is a binding contract. Mr Douglas points to the content of the Term Sheet, which he submits is unambiguous, and amounts to ‘no more than a proposal for the subsequent drafting of a lease agreement’, and ‘the document to be used as a stepping stone to come to a lease’.
The Term Sheet, Exhibit P1, includes the following terms:
1.   Background
Grape Fusion Joint Venture (‘GFJV’) and Logistics SC Pty Ltd (trading as Grape Logistics, ‘GL’) propose to reach agreement whereby the GFJV as the intended Lessor and GL as the intended Lessee resolve to execute a legally binding Lease in regard to the Schoenthal Vineyard for an initial period of three years. The details of this Term Sheet are intended to provide the basis of agreement for the subsequent drafting of the Lease Agreement.
34    Lease Agreement
To be prepared at the cost of the Lessor
35    Items to be confirmed
Details highlighted with blue text will require checking and confirmation.
As the High Court held in Masters v Cameron:[7]
Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract.
In each of the first two cases there is a binding contract…
Cases of the third claims are fundamentally different. They are cases in which the terms of agreement are not intended to have, and therefore do not have, any binding effect of their own.
[7] (1954) 91 CLR 353 at 360, 361.
In Contract Law in Australia, the author notes:[8]
Recent cases recognise a ‘fourth’ category, said not to have been identified in Masters v Cameron. This is said to arise if the parties intend to be bound immediately, but expect to make a later more formal document that may, by agreement, contain additional terms. A most peculiar feature of the recent cases is that the category which escaped the attention of the High Court is now the most common. Clearly, the judgment in Masters v Cameron does not lay down prescriptive rules to which parties must adhere. Instead, the object was to identify legally significant points on a continuum of agreements that must logically be an infinite one.
[8] John. W. Carter, Contract law in Australia, 7th edition, LexisNexis Butterworths, 2018 p104.
This fourth category is referred to by Stanley J in Lucke v Cleary:[9]
[9] (2011) 111 SASR 134 at 152.
In my view, the agreement between the parties falls into the so-called fourth category to Masters v Cameron. This was a contract where the parties were content to be bound immediately and exclusively by the terms which they agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms. It was a contract of the kind referred to by Lord Loreburn in Love & Stewart Ltd v S Instone & Co Ltd, referred to with approval by McLelland J (as he then was) in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd.
It was quite lawful to make a bargain containing certain terms which one was content with, dealing with what one regarded as essentials, and at the same time to say that one would have a formal document drawn up with the full expectation that one would by consent insert in it a number of further terms. If that were the intention of the parties, then a bargain had been made, none the less that both parties felt quite sure that the formal document could comprise more than was contained in the preliminary bargain.
…..
In my view, this agreement falls into the fourth category, because the parties had in contemplation that, notwithstanding the terms agreed as set out in the email of 14 October 2010, the provisions of the deed, while reflecting those terms, might include additional matters beyond those terms agreed, as set out in the email of 14 October 2010. Plainly, the terms of the deed go beyond the terms of the email of 14 October 2010, but the deed is not inconsistent with those terms.
Footnotes omitted
The issue in this case is where the signed Term Sheet fits, along the continuum of categories contemplated by the Masters v Cameron, and subsequent cases.
There is some force in Mr Douglas’ submissions based upon the content of the document. The parties are described as ‘intended’ lessor and lessee. The first term states that the parties ‘propose to reach agreement’. The final term refers to topics which will require checking and confirmation.
As against that, there are aspects of the content of the document which point to there being a binding agreement. It is headed ‘Term Sheet: Lease of Schoenthal Vineyard’. The final sentence of Term 1, that the Term Sheet ‘provides the basis of agreement for the subsequent drafting of the lease agreement’[10], fits comfortably with the so called fourth category referred to above.
[10] Exhibit P1 at Tab 12
Based upon the content of the Term Sheet itself, there are legitimate competing arguments upon whether it constituted a legally binding agreement. If I was constrained to a consideration of content only, the issue may have been finely balanced.
However, the evidence extends beyond the document itself.
Firstly, there is the conduct of the parties, leading up to, and at, the date the Term Sheet was signed.
Mr Ian Northcott outlined that both he, and Mr Rosback, recognised a pressing need to have a binding agreement. The defendant was in occupation, and had commenced pruning, or preparatory work for pruning. At commencement of that occupation and operation by the defendant, it had been mutually acknowledged that if agreement could not be reached, Grape Fusion would pay Grape Logistics for those operations.
The scenario described by Ian Northcott, is that occupancy had commenced on July 1 2013, and the necessary operations of a vineyard, necessitated that prompt agreement be reached. On 14 July 2013 Ian Northcott wrote to Charles Rosback, putting a time frame on their arrangement:
‘Should a Heads of Agreement not be forthcoming by 31 July, 2013 then GFJV accepts the obligation to recompense GL for all work performed in accordance with the estimates provided’.[11]
[11] Exhibit D1 at Tab 72 (p238) of Tender book
Mr Ian Northcott’s uncontradicted evidence is:[12]
[12] T35.31-T36.28; T166.35-T167.4; T167.18-.35; T168.5-.9; T168.15-.18; T176.16 -.22.
Q. It is the document that describes itself as a term sheet lease of Schoenthal Vineyard.
A. That is correct.
Q.If you look at the page of the book numbered 109, have you signed it.
A.That is correct, that is my signature.
Q.Can you explain how it was that you came to sign it.
A.The term sheet was written by myself and it reflected discussions between the two parties generally during May and, as a consequence, includes a summary of the discussions for the purpose of execution between the parties.
Q.You said that you prepared this term sheet.
A.I prepared this.
Q.Was this the one and only version of it or had there been prior -
A.No, it wasn't. There were - there was at least one prior draft, possibly others but at least one.
Q.Do you know how it came to be signed, as we can see on p.109, by Mr Charles Rosback. Are you aware of that process.
A.Yes, I am. I prepared the term sheet in the word processor, saved it as a PDF file and transmitted it to the other parties, Logistics SC, by way of email on a day or two preceding 25 July and the document was finally signed on the 26th and returned to me shortly thereafter. By email.
Q.Now we can see the date that it bears is 26 July 2013. What had been going on, if anything, at the vineyard just prior to then.
A.Just prior to that there had been the commencement of seasonal operations preparatory to pruning. If my recollection is correct, there may have been barrel pruning and other matters and it was arranged that in the event the lease wasn't executed, that we would simply pay for those matters, pay for those services.
…
Q.Do you agree that this document was the culmination of your discussions with Mr Rosback before his company entered occupancy of the Schoenthal Vineyard.
A.It was the terms which the two parties agreed to.
Q.Can I suggest to you that when you say it was terms they agreed to it was the terms on which they would consider a lease one to the other.
A.It was to form the basis of a lease.
…
Q.… My question is, that means what it says, when you signed this you understood yourself to be saying 'This recorded the basis on which a future lease would be drafted'.
A.I was not prepared to proceed without a term sheet which clearly established the basis of operation. Yes, I was intending that we would proceed to a subsequent formal lease.
Q.And at the time of signing this document you didn't expect that occupation of the premises would occur until that lease was drafted and signed by both parties, did you.
A.No, to the contrary we agreed that occupation would commence, in effect, from 1 July because the defendant had initiated viticultural activities which were required reflecting requirement to move with pruning and seasonal activities.
…
Q.…You drafted this document, didn't you.
A.Correct, I did.
Q.There's no reason why you couldn't have written that this document immediately bound the parties, is there.
A.Well, correct, but I'm not a lawyer.
…
Q.Well I suggest to you that the parties didn't bind themselves to do anything by this document except consider the lease agreement once it was prepared.
A.I reject that.
…
Q.Why did you use the term 'Heads of agreement' before lease when you've told his Honour that you were always working toward a lease.
A.well underlying the efforts, we had intention - always had intention to have a lease but the important thing was to establish the basic terms in order to have sufficient agreement for a lease to be executed…
I accept Ian Northcott’s evidence that he used the phrases 'Term Sheet' and 'Heads of Agreement', interchangeably.
The evidence of the circumstances surrounding the signing of the Term Sheet, viewed objectively, point to it being a legally binding contract. The commercial reality of the situation called for agreement to be reached. The Term Sheet was negotiated and signed, in that context. It was signed within days of expiry of the 31 July 2013 deadline for reaching agreement, that had been set by the owner.
There is a second aspect of the evidence that tends to confirm the inference that the true objective construction of the signed Term Sheet is that it was a binding agreement. That is the conduct of the parties over the following three years of the defendant’s occupation and operation of the vineyard. I have touched upon this evidence, and I will not set it out in full. In summary, the conduct of the parties over the entire three years, is explicable only on the basis of the Term Sheet. This included distribution of the income generated from grape sales. It included numerous other actions, conversations, and correspondence, that plainly derived from the Term Sheet. Upon signing of the Term Sheet, the parties conducted an ongoing, complex, commercial arrangement, in accordance with it, over the next three years.
Mr Douglas, in his closing submissions appeared to argue that, as a matter of law, the court must not have regard to subsequent conduct in determining the issue of whether the signed document constituted a legally binding contract.[13] However, unless I misunderstood that submission, it is at odds with authority, including Stanley J in Lucke v Cleary:[14]
There can be no doubt that a court can consider evidence of subsequent conduct on the part of parties to determine the issue of whether a contract has come into existence.
[13] T600.26.
[14] Supra at 152 para [71].
Upon this first issue of whether the signed Term Sheet was a legally binding contract, I find that it was. I find it falls within what has been described as the fourth category of the Masters v Cameron continuum. In reaching this conclusion, I note that the content of the Term Sheet gives rise to legitimate competing arguments on this issue of whether it was a binding agreement. However, the evidence of the circumstances at the time it was signed, in my view compel the conclusion that it should be construed as a legally binding contract. This conclusion is fortified by the conduct of the parties throughout the three years of occupancy and operation of the vineyard, as outlined in the evidence of Mr Tom Northcott, and the documents exchanged between the parties during that time.
I find the terms of the contract were in accordance with the Term Sheet.
Responsibility for Post Breakages
The plaintiff claims that the defendant is contractually bound to replace posts broken during its occupation of the vineyard.
The plaintiff specifically relies upon Terms 14 and 15 of the Term Sheet which are as follows:[15]
14. Initial Lessee Inspections
Responsibility of the Lessor to conduct a trellis inspection within one month with the objective of identifying remedial repairs which will become the financial liability of the Lessor.
Responsibility of the Lessee to inspect the vineyard and assess the status of the vines, trellis, irrigation, bores & water storage and to inform the Lessor within 3 months.
The Lessor does not warrant to conduct all capital works identified by the Lessee but will assess all items on the basis of whether it is necessary for the Lessee as a pre-requisite to conduct good viticultural practices.
Thereafter, the Lessee accepts unconditional responsibility for the obligations & liabilities for the ongoing maintenance of the vineyard except otherwise as indicated herein.
15. Good Viticultural Practice
The Lessee agrees to maintain Good Viticultural Practices as at times.
[15] Exhibit P1.
Presumably this should read "as at all times".
Neither of those terms make specific reference to post replacement. The plaintiff’s primary case is predicated on the interpretation that ‘ongoing maintenance of the vineyard’ referred to in the fourth paragraph of Term 14, necessarily includes replacement of broken posts. There are a number of obstacles to this interpretation.
Firstly, the ordinary meaning of the word maintenance would not necessarily extend to replacing an item that is broken. An important consideration would be the significance of the item needing replacement. The dictionary definition of ‘maintain’ is ‘to keep in proper or good condition’. Maintaining a wire fence or trellis may including replacing screws, nails or staples. But it is stretching the ordinary use of the word maintenance to include replacement of posts, which are an integral part of the essential infrastructure which comprises the vineyard. In effect, a vineyard is a series of trellises which are rows of posts and wires, supporting the vines. It is difficult to see the replacement of such an essential and significant part of the overall infrastructure, as maintenance. That type of infrastructure replacement goes beyond the ordinary meaning of the word ‘maintenance’.
Secondly, the structure and content of Term 14 as a whole also points away from this interpretation of the word maintenance in the final paragraph. Term 14 is a cascade and schedule, of responsibilities and time frames. The initial responsibility is for the lessor to conduct a trellis inspection within one month, with the objective of identifying ‘remedial repairs’. Contrast that phrase with maintenance. The next paragraph places the responsibility on the lessee to assess the status of a number of things including the trellis, and to inform the lessor within three months.
The third paragraph of Term 14 specifies that the lessor does not warrant to conduct ‘all capital works identified by the lessee’. This appears to be an acknowledgement that anything required to be done to the trellis is capital works.
To summarise the effect of Term 14: To the extent that broken posts are a fundamental aspect of trellis inspection, the first three paragraphs of Term 14 treat the topic as ‘remedial repairs’ or ‘capital works’. It is difficult to reconcile those phrases with an interpretation of ‘maintenance’ in the fourth paragraph of Term 14 to include post replacement.
The third obstacle to the plaintiff’s interpretation is that it would have been quite straightforward for the Term Sheet to specify replacement of broken posts. In the absence of that plain phrase it is difficult to plausibly argue that it should be inferred from the word ‘maintenance’.
Fourthly, in the context of the commercial reality of this contract, post replacement is plainly a significant issue. The evidence is that vineyard operations routinely cause broken posts. It is an issue that is 'front and centre' in a vineyard operation. The significance, and inevitability, of the issue, militate against inferring it to be the responsibility of the lessee, in the absence of explicit and unambiguous reference to it in the lease.
For those reasons, I reject the submission that Term 14 made the lessee contractually responsible for replacement of broken posts.
Term 14: Compliance by the Plaintiff
Notwithstanding the view just expressed, I shall proceed for the moment upon the hypothesis that Term 14, in referring to ongoing maintenance, does make the lessee responsible for replacement of posts broken during the term of the lease.
There remains a further issue to be addressed before the plaintiff can claim entitlement to a remedy under Term 14. This issue arises from the responsibility placed upon the lessor to conduct a trellis inspection within one month, to identify ‘remedial repairs’. The further responsibilities and obligations of the parties follow on from that. The structure of Term 14 is a staged process. It commences with a clear responsibility on the lessor to conduct a trellis inspection. The plain purpose of that clause is to provide a clearly articulated starting point as to the state of the trellis at commencement of the lease. Responsibility then shifts to the lessee to conduct its own assessment of various types of infrastructure, including the trellis. The plain inference is that any differences, between lessor and lessee, as to the state of the infrastructure, will be identified and articulated within three months. It is only thereafter; in other words, following compliance by the parties with the proceeding paragraphs; that the lessee accepts responsibility for the ongoing maintenance which I am presently hypothesising includes post replacement. This type of contractual term needs to be strictly complied with if it is to be called in aid by a party.

Has the plaintiff complied with its responsibilities under Term 14, so as to be entitled to enforce the terms of Term 14 against the lessee? This brings me to one of the critical factual issues in the trial, namely the 2013 post count.
The 2013 Post Count
The asserted 2013 post count is critical to the plaintiff’s claims, in contract or negligence, for the cost of replacing broken posts. As noted earlier, it is critical not just to quantum, but also to whether the plaintiff can establish any claim at all for breach of contract, or negligence. Until the plaintiff establishes the state of the trellis at commencement of the defendant’s occupancy, it is impossible to reliably attribute any number of broken posts to the defendant. The alleged breach of contract is failure to replace posts broken during the defendant’s occupancy. The alleged negligence is said to arise from the unacceptably high rate of broken posts during the defendant’s occupancy. Either claim requires, as a starting point, the number of posts, if any, that were already broken when the defendant commenced occupancy. In other words, the state of the trellis, at the initial ‘bookend’ of the defendant’s occupancy.
How does the plaintiff propose to establish that critical starting point?
The plaintiff’s pleadings, and submissions have exhibited a degree of fluidity in attempting to grapple with this issue. The plaintiff’s obstacle is an evidentiary one. The asserted 2013 post count is said to have been carried out by Mr Parmpal Singh. He has not been called to give evidence. This gives rise to the plaintiff’s difficulties in somehow generating an evidentiary basis for this critical issue.
I have already summarised the evidence of Mr Tom Northcott, that he instructed Mr Singh to conduct a post count. By relying on the documents comprising Exhibit P44, which appear on their face to be four separate weekly time sheets for Parmpal Singh; together with his own knowledge of events around that time; Tom Northcott concludes that Mr Singh last worked for Grape Fusion on 13 August 2013. Mr Northcott cannot be precise as to the date upon which he directed Mr Singh to do the post count. He thinks it was during the week prior to the August time sheets. The time sheets purport to show Mr Singh working eight days from 1 August 2013 to 13 August 2013, but do not record actual tasks. The time sheets record 4.5 days work on the ‘trellis’, according to the pro-forma time sheet, and 3.5 days on the ‘vine’. ‘Trellis’ and ‘Vine’, are options provided by the printed sheet. It is not suggested the time sheets actually record a post count. At best, they record Mr Singh working on those days, apparently on ‘trellis’ or ‘vine’. Mr Northcott did not see Mr Singh carry out the direction to count posts. He did not see Mr Singh again after Mr Singh (apparently) completed his employment with Grape Fusion on 13 August 2013.
So what does the plaintiff point to as evidence of the number of broken posts allegedly counted by Mr Singh in August 2013? There are no primary count sheets as there are for the 2016 In-Field Agriculture audit. Nor are there invoices. There is no evidence from vineyard workers who participated in, or observed, any post counting in 2013. Contrast that with the 2016 In-Field count, for which the vineyard workers who conducted it, were readily identified from the documents, and called to give evidence. Rather, the plaintiff points to documentary material that emanates from the defendant.
The first thing to note is that these documents are derivative documents. No one suggests they are original or primary records of a post count. At their highest, they can be no more than a summary or spreadsheet, which could only have been generated from primary source material which is not in evidence. As I understand it, the plaintiff submits that this material constitutes business records capable of proving the Singh post count; or this material amounts to an admission or adoption, by the defendant, that it is a record of the post count carried out by Mr Singh and that the defendant admits or adopts the accuracy and reliability of it, insofar as it purports to be a record of the Singh post count.
The first document is what is referred to as Tab 9:[16] which is a chart or spreadsheet that is said to set out or summarise what must have been original data of a 2013 post count.
[16] Exhibit P2 and Exhibit P47.
Sarah Paschke had some role in Grape Logistics: either part owner or staff member.[17] On 20 November 2013, she sent an email to Tom Northcott, and copied it to Charles Rosback. Its subject was ‘Broken Posts Schoenthal Vineyard’. The content of the email was:
Hi Tom
Please find attached
Cheers
[17] Her precise role is not specified in the evidence. Nothing turns on this. I accept that she acted for Grape Logistics in sending the Email.
The attached 19 pages of material are on Grape Logistics letterhead. They comprise various lists or charts, of the various blocks, and vine rows, which comprise the Schoenthal Vineyard. Some of the charts merely record the length in metres of the specific rows; and area of blocks. However, the material also contains a series of sheets showing rows, vine numbers, length in metres; and a column headed ‘broken post count’, with figures included in that column. Those sheets, on the face of them, appear to show a figure for ‘broken post count’ and a figure for number of posts, for the specified row numbers. These are set out separately for each block: The blocks of the vineyard are designated with letters A to Q.
I accept the uncontradicted evidence that the email, and attachment, were sent by Sarah Paschke, of the defendant, to Tom Northcott, of the plaintiff, on 20 November 2013.
The next document is referred to as Tab 83.[18] It comprises a letter dated 1 November 2015 from Charles Rosback to Tom Northcott. This is approximately two years and two months from when Grape logistics took up occupancy of the Schoenthal Vineyard. I set out the letter in full:[19]
[18] Exhibit P5.
[19] Exhibit P5.
Dear Tom
Grape Logistics have completed an inspection of the Schoenthal Vineyard property with the purpose of setting a benchmark for the current and future lease agreements.
Comments are based on observations from July 2013.
Collectively there has been a lot of work carried out at Schoenthal Vineyard during the past two years, in most cases we have made mention of works carried out in the Actions.
Grape Logistics in conjunction with Grape Fusion have continually upgraded the vineyard in its two years of occupancy and both parties have reaped the benefits of a well-managed vineyard.
We have prepared a ‘Benchmark Agreement’ report (as per the attached) which will enable both parties to agree on the state of vineyard prior to occupancy for the sole purpose of an inspection at the conclusion of the lease agreement in the future.
We look forward to finalising the “Benchmark Agreement’ and ask Grape Fusion to review and if in agreeance sign off on the attached document.
Yours sincerely
Charles Rosback
Managing Director
The attachment is headed Benchmark Agreement. It covers a range of aspects of the vineyard, under headings such as trellis, posts, block O redevelopment, general vineyard, irrigation systems, etc. For present purposes, I set out that part of the table which relates to trellis and posts:

Description	Status	Block	Comments	Action
Trellis	Generally the trellis was in very poor condition with an excessive number of visibly broken posts and strainers in a visual inspection at the time of take over. There were many broken and missing wires and all foliage wires had become twisted and required untangling and re-straining. In some cases the foliage wires are missing and will need to be replaced with new wire and broken strainers.	All blocks	Grape Logistics have undertaken a program to repair and restrain foliage in all blocks. An annual program of wire repair is carried out continuously. Many of the broken posts have been removed from the trellis to allow un-restricted safe access for tractors and other machinery. 25 broken strainers were replaced in the months leading into 13-14 season.
Posts	Based on broken post counts done in 2013, 63% of the vineyard was counted and the broken post percentage has been based on this area. The average number of broken posts across the 63% of blocks was 7.7% of all posts are broken. However the accuracy of this count is questionable. Based on the visual inspection carried out at the time of takeover. This number has been calculated using a consistent 6 metre posts spacing and areas of each block to work out a total row length and post number in each block. This may not be representative of the true number of posts broken at the beginning of the lease.	All blocks	An annual program of post replacement has been commenced in 2015 jointly by Grape Fusion and Grape Logistics. Grape Fusion under took to replace broken posts in J, K and L winter 2015. GLOG will replace the foliage wire clips and cordon staples in the wooden replacement posts. Due to the age and state of the trellis posts, this program will need to continue annually on an ongoing basis. Strainers are repaired annually.

I now turn to the first of the plaintiff’s arguments, regarding this material namely, that the defendant has ‘adopted’ the 2013 post count, apparently, or purportedly, carried out by Mr Singh. In his final address, Mr Hoile confirmed what was meant by the phrase ‘adopted’:[20]
HIS HONOUR:    But I want to know what you mean by that. Do you mean by that -
MR HOILE:        That gave it their imprimatur.
HIS HONOUR:    Right, so I really infer that it amounted to the same situation if that email had said 'Here's the post count, and we accept it as accurate'.
MR HOILE:        Yes.
HIS HONOUR:    I infer those terms from what happened?
MR HOILE:        That's my submission.
[20] T530.9-17.
I consider that submission untenable in relation to both the 20 November 2013 email, and attachment, and the 1 November 2015 letter, and attachments.
As to the 2013 email from Sarah Paschke, the content (quoted above) is no more than referring to the attachment. There is no evidence as to how it came about that Sarah Paschke was forwarding that material to Tom Northcott. True it is, that the attached material is on Grape Logistics letterhead, and on the face of it, lists broken post counts. If those two circumstances were part of a composite body of facts and circumstances, it may have been open to draw inferences relating to that email and attachment; and one of those inferences may have been that Sarah Paschke, on behalf of the defendant, was somehow warranting that the attached material accurately comprised the primary data, of a post count that had in fact been conducted, by Mr Singh. That appears to be what Mr Hoile asks me to infer.
On the material before me I am unable to make those inferences. There is no evidence on various aspects of that suggested series of inferences. The mere provision of the figures, by Grape Logistics, and even on Grape Logistics letterhead, without more, does not amount to ‘adopting’ the material. There is no evidence as to how, or by whom, the material came to be on Grape Logistics letterhead. There is no evidence linking it to any primary data from Mr Singh. There is no evidence that Mr Singh actually carried out the count that Tom Northcott directed. If he did, there is no evidence as to what the count comprised. The evidence of Mr Tom Ayres is that a post count, although not especially complex, does entail a number of features. It is more than just looking and counting. Each post needs to be physically pulled to and fro, to reveal whether it is sound. The mere provision by the defendant, of Exhibit P2 (the Tab 9 spreadsheets), without more, falls well short of an inference of ‘adoption’ of anything by the defendant.
I also reject the adoption submission for the November 2015 attachments. This time the letter and attachments do give some insight on their face, as to the purpose of the correspondence. But the argument that this amounts to an ‘adoption’ is contradicted by the material itself. For instance, the defendant notes in the table ‘however the accuracy of this count is questionable’. This is precisely the opposite of an adoption. The table also states ‘the trellis was in poor condition with an extensive number of visibly broken posts and strainers’, and ‘this may not be representative of the true number of posts broken at the beginning of the lease’. Mr Hoile is correct in submitting that other parts of the narrative about trellis and posts are arguably ambiguous. But the point is, when Mr Rosback sent the table to the plaintiff, he included specific qualifiers or counter assertions, such that his conduct in sending it could not possibly be taken as an adoption or warranty of the accuracy of the 2013 post count figures. It was explicitly not an adoption.
Business Records
Mr Hoile’s second argument is that the documents in Exhibits P2 and P5; Tab 9 and Tab 83; can establish the conduct of, and the outcome of, the 2013 post count, as business records. I am mindful that these documents are in evidence. [21] The issue is whether s 53 affords any assistance to the plaintiff as to what can be proved by the documents.
[21] The Sarah Paschke Email and attachments; and the Charles Rosback Email and attachments.
Section 53 of the Evidence Act 1929 (SA) provides:
53—Admission of business records in evidence
(1)An apparently genuine document purporting to be a business record—
(a)     is admissible in evidence without further proof; and (b) is evidence of a fact stated in the record, or any fact that may be inferred from the record (whether the inference arises wholly from the matter contained in the record, or from that matter in conjunction with other evidence).
(2)A document must not be admitted in evidence under subsection (1) if the court is of the opinion—
(a)     that the person by whom, or at whose direction, the document was prepared can and should be called by the party tendering the document to give evidence of the matters contained in the document; or
(b)     that the evidentiary weight of the document is slight and is outweighed by the prejudice that might result to any of the parties from the admission of the document in evidence; or
(c)     that it would be otherwise contrary to the interests of justice to admit the document in evidence.
(3)For the purpose of determining the evidentiary weight (if any) of a document admitted in evidence under subsection (1), consideration must be given to the source from which the document is produced, the safeguards (if any) that have been taken to ensure its accuracy, and any other relevant matters.
(4)In this section—
business means business, occupation, trade or calling and includes the business of any governmental or local governmental body or instrumentality;
business record means—
(a)     any book of account or other document prepared or used in the ordinary course of a business for the purpose of recording any matter relating to the business; or
(b)     any reproduction of any such record by photographic, photostatic, lithographic or other like process.
That statutory provision entails a number of steps.
The first step is that the document is admissible of a fact stated in the record or that may be inferred from the record. The plaintiff asks the Court to find the following facts, or inferences, from the material:
Firstly, that Mr Singh did carry out a (partial) post count of the Schoenthal Vineyard in 2013.
Secondly, that the figures in the material accurately reflect the number of posts that he ascertained were broken.
Given the total absence of contextual evidence as to the relationship, if any, between these documents, and anything Mr Singh did, or recorded, I am unable to see how either of the exhibits is capable of establishing either of those statements of fact, or making out those inferences: either by themselves, or in conjunction with other evidence.
The second step would normally entail the considerations in s 53(2). But these documents are already in evidence, by consent. The question is what use I am entitled, and prepared, to make of the documents. On their face, they prove no more than the sending of emails and attachments in these terms.
The third step is to have regard to the considerations of s 53(3). These would be relevant considerations in any event. Insofar as I am asked to find the facts and inferences which the plaintiff contends for, from these documents:
Source: There is no evidence of the source from which these attachments were produced;
Safeguards: There is no evidence of any safeguards of their accuracy; and
Other relevant matters: Insofar as I am asked to infer that the attachments reflect the work of Mr Singh, the most reliable verification; or qualification; of that, would have been evidence from Mr Singh. The search for Mr Singh commenced during trial. It is likely that a timely and thorough search would have either located him; or established that he could not be located or called.
I reject the submission that Exhibits P2 or P5 (Tab 9 or Tab 83) are capable of proving the outcome of the 2013 post count, either with the assistance of Evidence Act s 53, or otherwise. Alternatively, even if they are capable of proving these facts or inferences, in the circumstances here I am not prepared to make the requested findings as to the outcome of the post count having regard to the considerations I have outlined:
Firstly, the absence of any evidence of the 2013 count being conducted, and the nature, extent, and thoroughness of it, if it was conducted.
Secondly, the absence of any primary documentation of the 2013 post count.
Thirdly, the absence of any evidence from the one person who has been suggested as having actually conducted the 2013 post count.
Conclusions Regarding Alleged 2013 Post Count
Upon the evidence before me I am unable to make any finding as to what, if any, post count was conducted in 2013. I am unable to make any finding as to the number of broken posts at the commencement of the lease of the vineyard by Grape Logistics. I reiterate that I am still proceeding on the hypothesis that Term 14 does make the lessee responsible to replace broken posts, despite my earlier finding to the contrary.
The plaintiffs inability to establish the 2013 post count is fatal to its claim in contract, based upon Term 14, for two reasons.
Firstly, there is no 'bookend' for the commencement of the lease. There is no starting point from which the number of posts broken by the lessee can be determined. Of course, this does not mean the defendant broke no posts. Upon the evidence before me, some level of post breakage is inevitable. But that also means some pre-existing level of post breakage was inevitable. It is not for the court to somehow generate a basis for overcoming a hiatus in the evidence: especially where the issue is critical to the plaintiff's claim.
The evidence before the court is comprehensive and unimpeachable for the bookend at the end of the lease;[22] but totally lacking for the initial bookend. This leaves the court unable to find any actual quantifiable breach of the (hypothesised) contractual duty of the lessee to replace posts broken during the tenancy.
[22] Strictly shortly after, but for present purposes I need not cavil about that.
The second reason the plaintiff's inability to establish a starting point, is fatal to its claim in contract, under Term 14, arises from the structure and content of that Term. The plaintiff has failed to establish its own compliance with Term 14, which is set out in the paragraph above.
The initial paragraph of Term 14 is of critical importance in commercial arrangements of this type, as I have noted earlier in this judgment. In my view, in this lease, it amounts to a pre-condition for reliance, by the lessor, upon the remainder of Term 14. The opening sentence of Term 14 requires the lessor to inspect the trellis to identify remedial repairs which become the lessor's liability. In other words, to establish initial bookend. It is only 'thereafter', as per the last part of Term 14, that the (assumed) responsibility of the lessee arises at all.

As Mr Douglas submits:[23]
And in my submission while my friend's right at the level of principle in saying that what your Honour needs to do is give an objective commercial reading of this clause, it's a clause that's cascading in nature. And its only commercial purpose can be to permit the landlord, if it wants to rely on the demarcation between what was damaged before the lease commenced, and what was damaged once the lease commenced, to scrupulously adhere to its obligations under the first paragraph of item 14, which it didn't do in at least two respects.
[23] T604.38 - T605.10.
I accept that submission. The plaintiff has not established in evidence that it complied with its own obligation under Term 14. It follows, in my view, that the plaintiff is not entitled to claim relief under Term 14. This is not a case where the plaintiff's non-compliance is insignificant, or technical, or irrelevant to the remedy it seeks. The plaintiff's non-compliance; or strictly, failure to establish compliance; is fundamentally relevant, and highly significant, to the remedy it seeks.
The plaintiff also claims in contract under Term 15 which requires the lessee to maintain good viticultural practice. The absence of any starting point for the number of broken posts is fatal to this claim in contract as well.
There is another obstacle to this 'good viticultural practice' claim, that I shall return to after dealing with the topic of negligence.
The Alternative Claim in Negligence
The plaintiff’s claim in negligence is based upon alleged duties, in tort, pleaded in para 15 of the Statement of Claim.[24]
15. At all material times, LSC owed to Grape Fusion a duty to:
15.1 exercise reasonable care, skill and diligence in the management and operation of the Vineyard using good viticultural practices consistent with the long-term health and productivity of the Vineyard;
15.2 manage and operate the Vineyard in a reasonable and professional manner avoiding undue and unnecessary damage to the existing infrastructure of the Vineyard, including the trellising.
15.3 maintain and replace any damage to the trellising that came to the attention of LSC.
[24] Trial Book, p12.
The evidence of Mr Gilbert is that there is a range of breakages, dependent upon mode of harvesting, terrain, age of trellis, type of trellis, and other considerations. So it would be difficult to formulate an overall duty of care based upon a particular number or percentage of broken posts. Even if it was possible, the evidence in this case does not establish a level of breakages, above which the occupier must necessarily have been negligent.
It is one thing to state, as Mr Gilbert does, what broad range of breakage he would expect, based upon his experience and observation in the industry. It is another thing to say a vineyard operator has a duty in part not to exceed a particular figure. Of course, there may well be cases when the level of breakage, or the manner of breakage, is so excessive or egregious as to amount to negligence. The evidence in this case falls short of this. Mr Gilbert's evidence establishes the difficulty in pointing to the post breakages, and inferring negligence:[25]
[25] T472.22-37
Q.You also gave an answer that operating machine harvesters can be a tricky activity to get right, correct.
A.Correct, yep.
Q.You talked about the difficulty of operating those machines, didn't you.
A.Yes.
Q.You would agree as a result of that that mistakes can be made with respect to the operation of those machines even by someone using reasonable care.
A.Correct.
Q.In fact, given that it is so tricky people using reasonable care can still with the best intentions in the world be responsible for trellis breakages, can't they.
A.Yes.
In the absence of a plainly excessive level of post breakages, it cannot be said that the lessee was negligent in its operation of the vineyard.
I return to the 'good viticultural practice' contractual claim. The concept of 'good viticultural practice' may not extend to post breakages at all. I have referred to my caution in attributing to the lessee responsibility that is not dealt with expressly. But assuming good viticultural practice does extend to the issue of post breakages, the plaintiff encounters the same difficulties as for its claim in negligence. Some degree of breakage is inevitable, and therefore within the concept of good viticultural practice.
The remarks I have made regarding Mr Gilbert's evidence, when dealing with the negligence claim, apply here as well: there is a spectrum of potential breakages. The actual number of breakages is due to a range of factors, as Mr Gilbert outlined. Just as that number is not necessarily indicative of negligence; nor is it necessarily indicative of lack of good viticultural practice. In any event, as for the other claim in contract and negligence, the absence of a bookend would also be fatal to the claim in contract based upon good viticulture practice.
Additional Contractual Claims
Separate and distinct from the primary issue in this trial, the plaintiff also seeks damages for additional breaches of the lease agreement. The further claims were:
A claim of $8,124 for repairs to the roads and erosion channels alongside the roads, of the property;
A claim for $3,091 for replacement of the gutters of a residential house on the property; and
A claim for $799 for replacement of a hot water heater allegedly removed from the property by the defendant.
Whilst it is not specifically pleaded, these claims appear to arise from Term 10 of the Term Sheet which is as follows: [26]
Residential House: GL wishes to utilise the house (on an as is basis) during vintage for accommodation by itinerant workers. Any improvements by the Lessee will remain the property of the Lessor. Lessee obligates to maintain the house and grounds on a basis satisfactory to the Lessor.
[26] Tender Book, Tab 11, Term Sheet, Term 10
As to the claim for $8,124, Mr Ian Northcott's evidence was: [27]
[27]      T100.22 - T101.5
… can you explain what that invoice relates to, why was that expense incurred and why is it part of your claim.
A.That expense was incurred by the contracting of Hunter Bros who are earthmovers to take machinery including graders and bucket loaders and a roller in order and delivery of 109 t of limestone rubble which was required to fill in the erosion channels along the sides of the roads in particular and fill in the potholes and then to grade the road to bring the roads back to previous condition.
Q.    Why was that necessary.
A.Because some of the gutters along the side of the road were of the order of half a metre deep and it's an OH and S issue. It's dangerous for operating general machinery.
Q.    Do you have tab 57.
A.    Yes, I do.
Q.    If you look at the amount of the invoice -
A.    Yes.
Q.- I think one can see that, as usual, an $8,00-odd invoice plus GST essentially comprises about three items that are more than $1,000 and then a bunch of others that are less.
A.    Yes.
Q.If we look at them, the biggest one refers to - I think it says 109 tonnes of limestone rubble.
A.    Yes.
Q.    Do you know what that was and what was done with it.
A.Yes, that's five 20-tonne truckloads and that was spread along the primary driveway from the entrance, then turning left to go up to the main sheds. So the bulk of that material was used on the main thoroughfare, not the subsidiary vineyard tracks and the reason for this was that the initial lease was in consideration of operating the vineyard. Subsequently the use of the vineyard sheds and grounds became the basis of a depot for the conduct of operations by the defendant across other vineyards in the Adelaide Hills and consequently there was additional frequency of traffic on the roadways which contributed to the deterioration of the surfaces and consequently this is why the remediation is such a quantum.
Q.What knowledge do you have of the matter that you spoke of; that is to say the use by Mr Rosback of your vineyard not just to manage it but, as it were, a depot, a base for his wider operations. How do you know that.
A.Because we had discussions about that process and we were happy to provide a utility for the benefit of both parties in that circumstance, but part of those discussions were that, further to the initial discussions of the term sheet, was that the facilities, the grounds, and the roads would be adequately maintained.[28]
[28] T103.12-T104.12
I note two aspects of this evidence.
Firstly, the road and erosion repair works carried out, clearly go beyond the obligation in Term Sheet, Term 10 to maintain the house and grounds. The word 'grounds' needs to be read in the context of that specific term, relating to the house. It is unrealistically stretching the meaning of that term to suggest that it creates an obligation to maintain and repair roads and erosion damage throughout the vineyard.
In cross-examination, Mr Northcott asserted he believed the roads were covered under the Term Sheet. He did not nominate a specific term. If his evidence was a reference to Term 10, I consider that is an unrealistic interpretation of that term.
Secondly, in the passage of evidence quoted above, Mr Northcott goes on to suggest there was a further discussion and agreement which went beyond the Term Sheet. However in cross-examination:
Q.Excluding the term sheet and focusing on discussions, you have no recollection of any occasion where anyone on behalf of Logistics SC told you that they would fix the roads on the vineyard
A. Not with myself, no.[29]
[29] T197.6-10
There is no evidentiary basis for a separate agreement to maintain the "facilities, grounds and roads".
I find that the plaintiff has not established an obligation on the part with the defendant for the $8,124. It may be that a portion of that amount is attributable to the grounds relating specifically to the residential house, and therefore within the obligation created by Term 10. However, there is no basis on the evidence to attribute a specific portion of that overall claim to the house grounds. I interpret the evidence of Mr Northcott to be that all, or the major component, of that expenditure, was for the roads and erosion channels throughout the entire property.
I therefore do not need to dwell upon what would have been a further obstacle to the plaintiff's claim in this regard. There is no unequivocal evidence of the state of the roads and the terrain along the roadsides, at the commencement of the lease. Nor is there evidence of when the rain damage referred to by Mr Northcott occurred. The road repair invoice is dated March 2017, nine months after the defendant's occupancy.
As to the claim for the gutters, Mr Northcott's evidence was: [30]
However, the gutters on the house were plastic and were PVC and they were left to just fall off … it was cheaper to replace them rather than attempt to put them back up and reuse them.
[30] T106.23-24, 28-30
Term 10 of the Term Sheet does create an obligation on the lessee to maintain the house, including the gutters of the house. Doing the best I can with the sparse evidence on the topic, I consider there is some merit in this claim. For the gutters to eventually fall off, there must have been a time during which it was apparent they required attention. On the other hand, replacement of gutters is infrastructure, not maintenance. I propose to take a fairly broad axe to this claim and award half of it on the basis that it appears the lessee breached its obligation to maintain the house by ignoring what must have been a clearly apparent state of disrepair of the gutters. This breach has exacerbated the loss. If the lessee had acted earlier by refixing the gutters; or drawing the lessor's attention to the problem; they would not have simply fallen off. Whilst I am extrapolating the evidence a little, I am mindful that the only evidence on the topic is the evidence of Mr Northcott. Doing the best I can with the evidence before me, I will allow half of this claim.
The third additional claim is $799 for replacement of a gas hot water heater which, according to Mr Northcott, the defendant removed at the conclusion of the lease. The evidence on this topic is a little confusing in that it appears there were two hot water heaters. This was another topic upon which Mr Northcott to a degree was acting upon his understanding of events, rather than direct knowledge and observation. However, again, his is the only evidence on the topic. He maintained that the defendants removed and took with them a hot water unit upon completion of their occupancy. There is nothing on the evidence which discloses an entitlement on the part of the lessee to remove and take away the hot water unit, irrespective of precisely how or by whom it came to be installed in the house. I allow this claim.
Summary of Findings and Conclusions
For the reasons outlined, upon the evidence before me, I have made the following findings and conclusions:
1.The Term Sheet was a legally binding contract.
2.The lessee's responsibility, pursuant to Term 14, for ongoing maintenance of the vineyard, did not extend to an obligation to replace broken posts.
3.In any event, if I am incorrect about finding 1., the Plaintiff did not comply with Term 14, and, in all the circumstances, is not entitled to relief pursuant to Term 14.
4.If I am incorrect about findings 2. and 3.; the Plaintiff's claim pursuant to Term 14 fails, because it has failed to establish any number, or rate, of post breakages during the term of the lease.
5.The Plaintiff's claim in contract, pursuant to Term 15 fails because:
5.1.The good viticultural practice term, in the circumstances here, does not extend to an obligation to replace posts broken during the term of the lease.
5.2.In any event, the Plaintiff has not established a number or rate of post breakages during the lease such as to amount to breach of good viticultural practice.
6.The Plaintiff's claim in negligence fails because it has not established a number or rate of post breakages such as to amount to negligence.
7.As to the further claims by the plaintiff;
7.1.The Plaintiff's claim for repairs to roads and erosion channels fails;
7.2.I allow half of the Plaintiff's claim for gutter repairs, namely $1,545.50; and
7.3.I allow the Plaintiff's claim for removal of a hot water heater, namely $799.
There will be judgment for the Plaintiff in the sum of $2,344.50.
I will hear the parties as to costs.