Burando-Hill Pty Ltd v Smith
[2012] WADC 134
•6 SEPTEMBER 2012
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: BURANDO-HILL PTY LTD -v- SMITH [2012] WADC 134
CORAM: EATON DCJ
HEARD: 6-9, 12-16 DECEMBER 2011 & 19-23 MARCH 2012
DELIVERED : 6 SEPTEMBER 2012
FILE NO/S: CIV 2444 of 2010
BETWEEN: BURANDO-HILL PTY LTD
Plaintiff
AND
GRAEME DOUGLAS SMITH
ELENA SMITH
Defendants
Catchwords:
Contract - Implied terms - Collateral warranties
Trade practices - Misleading and deceptive conduct - Fitness for purpose - Merchantable quality
No provisional assessment of damages
Legislation:
Trade Practices Act 1974 (Cth)
Sale of Goods Act 1895 (WA)
Result:
Judgment for the plaintiff in the sum of $30,244.27
Defendants' counterclaim dismissed
Representation:
Counsel:
Plaintiff: Mr P A Kyle
Defendants: Mr P Mendelow
Solicitors:
Plaintiff: Haynes Robinson
Defendants: Blatchfords Lawyers
Case(s) referred to in judgment(s):
George Wills & Co Ltd v Davids Pty Ltd (1957) 98 CLR 77
Jillawarra Grazing Co v John Shearer Ltd (1984) ATPR 40-441
March v E & MH Stramare (1991) 171 CLR 506
McGrath, Re; Pan Pharmaceuticals Ltd (in liq) v Australian Naturalcare Products Pty Ltd [2008] FCAFC 2; (2008) 165 FCR 230
North East Equity Pty Ltd v Proud Nominees Pty Ltd [2012] FCAFC 1
Readymix Holdings International Pty Ltd v Wieland Process Equipment Pty Ltd (No 2) [2008] FCA 1480
Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Watson v Foxman (2000) 49 NSWLR 315
Contents
The Pleadings
The Statute Law
The X20 system
The evidence as to the formation of the contract
Findings of fact
The alleged representations as pleaded
Were those alleged representations contractual warranties?
The representation as to liquid fertiliser
The evidence as to the delivery of the X20 system
When did seeding commence?
The defendants' preparation for the commencement of seeding
The course of seeding
Events following the completion of seeding
Other expert evidence as to the defendants' seeding equipment
The optimum time for seeding
The harvest
Reflections on the evidence generally
Damage to the brushes, the brush lead and the spring
Are terms to be implied?
Section 14 of the Sale of Goods Act 1895 (WA) and s 71 of the Trade Practices Act 1974 (Cth)
The representation as to assistance and service
A provisional assessment of damages?
Conclusions
EATON DCJ: The defendants are husband and wife who were, in 2009, trading in partnership as 'Gecka Farming & Engineering Services'. Graeme Smith was a qualified motor mechanic who went on to obtain higher qualifications including a diploma in mechanical engineering. They moved to Broomehill in the Great Southern region of Western Australia in 1980 where they commenced farming in a small way while developing an engineering business as they did so. Gradually farming took over from engineering as their primary occupation.
They began farming in their own right at Broomehill East on 260 acres purchased in 1980. They purchased a further 740 acres in 1985 and then, in 1987 a further 1,000 acres of adjacent land.
In March 1999 they entered into a share‑farming arrangement with Glen and Janina Parker at Gnowangerup, some 23 km east of the Broomehill farm. That continued for eight seasons until the Parkers left in about 2006. Thereafter the Smiths' leased that property and farmed there in their own right as well as at Broomehill East. That continued until the end of the 2009 season.
In the late 1990s the defendants purchased 2,830 acres at Nyabing. They owned that property until 2006 when it was sold and leased back from the purchasers. The defendants continued to farm there until the end of the 2009 season.
In summary, at the commencement of the 2009 season the defendants were farming at three locations: Broomehill East comprising 800 hectares, Gnowangerup comprising 1,040 hectares and Nyabing comprising 1,132 hectares a total of 2,972 hectares. Mr Smith said that the three properties comprised 3,335 hectares but that must have been in error.
Their farming involved the cultivation and harvesting of canola and cereal crops and sheep for meat and wool. Their financial statements for the year ending 30 June 2007 disclosed income from wool, sheep trading and the sale of barley and wheat. The income from grain would have been, predominantly, the proceeds of the 2006 harvest. The financial statements for the year ending 30 June 2008 disclose the same sources of income plus a small amount for the sale of oats. The financial statements for the year ending 30 June 2009 disclosed the same sources of income plus an amount of $93,101 from the sale of canola. In that year wheat sales generated almost three quarters of the defendants' farming income.
So far as division of labour and responsibility in the farming partnership was concerned; Graeme Smith was the manager and Elena Smith played a support role, undertaking clerical and bookkeeping tasks.
The defendants had, over the years, used granular fertiliser which, said Graeme Smith, was becoming increasingly expensive. Some years ago he became interested in converting to liquid fertiliser and made enquiries in that regard. In the 2007 cropping season the defendants began, by way of experiment, the use of liquid phosphoric acid. In that season, for that purpose, they acquired equipment for the distribution of liquid fertiliser from Liquid Systems of South Australia.
For the 2008 seeding the defendants used a 360 horse power CAT 85C Challenger tractor acquired in April 2001. It towed a Flexi‑coil seeding bar which had been acquired in September 2002 having been purchased second‑hand. Behind that was a Flexi‑coil air‑seeder cart, also purchased second‑hand several seasons before.
For the 2009 cropping season Mr Smith contemplated sowing canola, wheat, barley and oats using both UAN (urea, ammonia, nitrate) and phosphoric acid in liquid form as fertiliser to be applied simultaneously with the seeding in an integrated system.
That had been partly attempted in the 2008 cropping season when the defendants employed a mixture of granular fertiliser and liquid phosphoric acid. To do so, modifications were made to the air‑seeder. One of the three tanks, each designed to hold either granular fertiliser or seed, was converted to hold phosphoric acid. The air‑seeder was further modified by incorporating a system provided by Liquid Systems of South Australia. In fact, the local supplier of that facility was a Wagin dealer for the South Australian company. The defendants, having acquired the system, fitted it to the air‑seeder. It had some polypropylene components which, in operation, proved unsuitable when used with phosphoric acid. Corrosion was a significant problem. After discussing those problems, particularly relating to certain valves, with the Wagin dealership Graeme Smith, in September of 2008, contacted KZ Valve of Nebraska in the United States of America seeking information on stainless steel valves for liquid phosphoric acid application.
The plaintiff, Burando-Hill Pty Ltd, was a company engaged in the business of selling farm equipment. It promoted itself as a distributor of precision agricultural instruments, carried on business primarily at Katanning in the Great Southern region of Western Australia and maintained a branch office at Geraldton in the Great Northern region.
Katanning and Broomehill are some 20 km apart by road. The defendants were regular customers of the plaintiff. Graeme Smith was acquainted with Alan Garrity, an employee of the plaintiff working at the Katanning office. He said that in November 2008 he spoke with Alan Garrity about the problems encountered by him during the 2008 seeding arising from his change to liquid phosphoric acid as a fertiliser, its use in conjunction with the equipment acquired from Liquid Systems of South Australia and his own modifications to the air‑seeder.
The discussions between the plaintiff and the defendant resulted in the plaintiff preparing a quote on 20 November 2008 for a quantity of equipment comprising, inter alia, an X20 console kit, a GPS (global positioning system) kit, an electric air‑seeder control kit, a mini ECU (engine control unit) and two liquid drive looms. The amount of the quotation, including GST, was $33,264. There was, in addition, an endorsement indicating a delivery time of approximately 14 weeks.
A 'loom' traditionally is an apparatus for weaving yarn or thread into fabric. In this trial the words 'loom' and 'harness' seem to be synonymous and have been used interchangeably. They mean the apparatus which brings together the various conduits which must pass between each component part of the seeding system. Given that the system adopted by the defendants for the 2009 season comprised four components, there would need to be at least three looms.
Quotation 1815 included the note 'exact lengths from tractor to tank need to be known prior to ordering for loom manufacture'. The reference to 'tank' is a reference to a liquid cart which was, at that stage, in contemplation by the defendants. When asked, in evidence‑in‑chief, about the reference to manufacturing a loom in quotation 1815, Mr Garrity said:
That refers to, obviously, the distance between the tractor to the – to the air‑seeder bar itself, and then from the bar to the air‑seeder tank and then through – from the air‑seeder tank through to the liquid cart.
Those lengths, he explained, varied depending upon the plant being used by a particular farmer. Not all farmers used the same tractor, the same seeding bar and the same air‑seeder tank. Mr Garrity explained that the Topcon X20 system was made to suit a number of air‑seeders then in current use throughout Australia in circumstances where the purchaser might be looking to convert from a mechanical to an electrical drive.
A copy of quotation 1820 (1/19) had some handwritten notes said by Mr Smith to be in Mr Garrity's handwriting. They noted, he said, the length of harnesses required, being 11 metres from the tractor to the seeding bar and 15.5 metres from the seeding bar to the air‑seeder cart. Mr Garrity said, in evidence‑in‑chief, that those measurements were supplied to him by Mr Smith. Mr Garrity said, in cross‑examination, that he included those measurements in the order forwarded to Topcon as being the required lengths of those two looms.
There were further discussions between the plaintiff and the defendant which resulted in a further quote dated 27 November 2008. It was for the supply of equipment described as follows:
X20 base console kit without GPS
Receiver/antenna - utilise J.D. system in place
Includes guidance software, seeder control software and maplink (VRC) program
electric motor air‑seeder control kit for VRC‑2 tank
comes with motors, MDECU, interface,
SAHFT speed sensors, bin level sensors, fan pressure sensors, speed sensors, tract/implement and chassis extension harness
mini ECU - to control third liquid channel
liquid drive harness - to suit generic 3 wire valve assembly - does not include valves - for 3 liquid tanks.
The total price of the equipment quoted was $24,908.40. The quote was endorsed with the following:
The above prices do not include installation in machine - the kits supplied by Topcon contain a comprehensive installation diagram to aid in on‑farm installation.
Again, the quote referred to a lead (delivery) time of approximately 14 weeks.
On 23 December 2008 the defendants accepted a quote. Graeme Smith said:
With the - the second quote, we assessed the quote or I assessed the quote, and then on 23 December, I then rang Burando Hill to say that I accepted the quote with the amendments, and I - I faxed through the quote that night with the amendments written on it from 1815.
The reference to '1815' is a reference to the first quote. The second quote mentioned was numbered 1820. Graeme Smith specifically said that he did not fax 1820 but rather 1815. At the foot of his copy of that quote he wrote:
Ordered 23 Dec 2008. Peter Colwell. By mobile. Should be here 31 March.
The plaintiff required a deposit. The defendants paid $2,030.15 to the plaintiff on 27 February 2009. They continued, during the 2009 cropping season, to deal with the plaintiff, ordering and receiving various parts and equipment. It would seem that beyond the amount referred to there was no further payment made.
On 11 November 2009 the plaintiff sued the defendants by way of a general procedure claim in the Magistrates Court of Western Australia seeking to recover an amount of $31,421.27. On 24 November 2009 the defendants gave notice of their intention to defend. In due course the plaintiff provided a statement of claim and the defendants provided a statement of defence and counterclaim.
On 1 July 2010, by consent, orders were made in this court that the proceeding in the Magistrates Court be transferred to this court.
On 19 October 2010 the plaintiff filed a statement of claim in this court. On 3 November 2010 the defendants filed a defence and counterclaim.
The Pleadings
By its claim the plaintiff pleads that between February 2009 and June 2009 it sold and delivered goods to the defendants particularised as follows:
Particulars of Goods Sold and Delivered
Date of Sale
Goods
Price
06/02/09
1 x remote switch box calibrator
$539.00
06/02/09
Bertolini pump
$1,193.50
27/02/09
X20 base consol kit without GPS
$9,350.00
27/02/09
Electric motor air seeder control kit
$14,190.00
27/02/09
Mini ECU
$2,750.00
27/02/09
3 x liquid drive harnesses
$1,386.00
03/04/09
Air chamber set
$404.80
04/04/09
Viton mechanicals seal
$49.50
04/04/09
Cable terminal pack
$4.40
22/04/09
2 x 3 pin cable connector
$17.60
22/04/09
6 x cable connector pins
$67.32
22/04/09
6 x Packard 3 circuit connection kit
$99.00
19/05/09
3 x 16 7.5 hem extension harness
$924.00
19/05/09
2 x electric drive motor extension harness (3m)
$369.60
23/05/09
3 x packets of 370 mm cable ties
$151.80
25/05/09
1 x 550mm cable ties
$160.05
26/05/09
4x2 way Packard connectors (male)
$20.46
26/05/09
2 way Packard connectors (female)
$20.46
26/05/09
Tee-banjo
$6.48
26/05/09
3 x 25mm nipple
$7.59
26/05/09
Tee - 40mm
$10.12
26/05/09
4 bolt valve
$62.81
26/05/09
10 x hose clamp
$26.40
26/05/09
Bush (bsp)
$3.08
26/05/09
Bush (Teflon)
$7.48
03/06/09
Nipple
$18.10
03/06/09
Bush
$15.98
03/06/09
Bush (quarter inch)
$11.36
03/06/09
2 x 530mm packet of cable ties
$151.36
04/06/09
2 x 2 pin plackard plug
$34.87
04/06/09
3 circuit connection kit (Packard)
$33.00
04/06/09
Camlock cutler (female)
$14.34
04/06/09
Camlock adaptor (male)
$6.05
04/06/09
Camlock cutler (female)
$12.23
04/06/09
Male thread and barb
$1.68
04/06/09
50 x Hose clamp
$154.00
Total
$32,274.42
The plaintiffs plead that the defendants had paid only the sum of $2,030.15 to the plaintiff on 27 February 2009 and that, despite demand, had failed to pay the balance of the purchase price.
By way of amended defence and counterclaim in this court the defendants plead that they did agree to purchase the goods so particularised but did so in reliance on certain representations said to have been made by the plaintiff and in consideration of certain warranties given.
The representations referred to are particularised as follows:
(a)the X20 system would be provided by the plaintiff to the defendants in good working order and in good time prior to the commencement of the 2009 cropping season in early May 2009;
(b)the X20 system was suitable for use by the defendants to apply liquid fertiliser to the defendants' crops;
(c)the X20 system would provide increased efficiency and add value to the defendants' farming activities;
(d)the X20 system would be accompanied by a full professional back-up service by the plaintiff or its agents, in the phases of installation, commissioning and operation so as to be fully operational and operative; and
(e)the X20 system would be fit for the purposes of the plaintiff as pleaded.
Each of those representations was pleaded to have been made in trade or commerce and to be misleading or deceptive or likely to mislead or deceive contrary to s 52 of the Trade Practices Act 1974 (Cth). The defendants claim that, in reliance upon those representations, they were induced to purchase the X20 system and have suffered loss and damage as a result of the plaintiff's conduct.
Further, or alternatively, the defendants plead that the representations referred to constituted collateral warranties that, in the event that they purchased the X20 system, it would have the attributes pleaded and that the plaintiff would timeously provide to the defendants the professional back-up and service pleaded. The defendants claim that the plaintiffs breached each of those warranties.
The defendants further claim or alternatively claim that it was an implied term or condition of the agreement to purchase the X20 system that it would be reasonably fit for purpose and of reasonable quality, relying on s 71 of the Trade Practices Act and/or s 14 of the Sale of Goods Act 1895 (WA). The defendants claim that the X20 system was neither fit for purpose nor of reasonable quality.
Further, and in the alternative, the defendants claim that it was an express term of the agreement to purchase the X20 system (or, in the alternative, an implied term) that the system would be ready for use by them in good time prior to the commencement of the 2009 cropping season in or about May 2009. They claim that it was not ready for use in good time prior to the commencement of the 2009 cropping season in or about May 2009 and that they suffered loss or damage as a result.
In summary, the defendants claim that they are not liable to pay the plaintiff the sum claimed or any sum at all and that they are entitled to set‑off against that claim the loss or damage which, they say, they have incurred. They seek to set‑off any amount for which they might be liable in respect of the cost of acquiring the X20 system. In addition, they seek damages under s 82 of the Trade Practices Act and, under s 87, such further or other relief as the court thinks fit. They seek, in addition, damages for breach of contract, interest and costs.
By their amended reply and defence to counterclaim the plaintiff denies that the defendants relied on any representation made by it or that it gave any warranties as alleged. It asserts that on 20 November 2008 Graeme Smith told Alan Garrity, at the plaintiff's office in Katanning, that the defendants were interested in purchasing a Topcon air‑seeder controller retrofit kit and that in response to the defendants' enquiry the plaintiff prepared and sent to them the quote numbered 1815. The plaintiff pleads that on or about 25 November 2008 Graeme Smith told Alan Garrity that he did not require a GPS and requested that the plaintiff provide a new quote. It pleads, further, that Alan Garrity told Graeme Smith that a new quote would be provided, adding that the kit was designed to be installed by the purchaser who would be responsible for installation and for any modifications made. The plaintiff pleads that on 27 November 2008 a new quote numbered 1820, was provided, that the defendants required modifications to the kit the subject of the quote and that, in late December 2008, the defendants accepted that quote. The plaintiff pleads that the kit was delivered on 18 February 2009 without a harness which was still being manufactured. The defendants, allege the plaintiff, installed and commissioned the kit with the occasional assistance of the plaintiff but denies that it made any representation to the defendants to the effect that it would install or commission the kit or any part thereof or provide any back-up service in that regard. The plaintiff denies responsibility for any malfunction resulting in fluctuating fertiliser or seed application rates. It denies that it had any obligation to rectify any problems encountered by the defendants in the use of the kit. It admits that the sowing of the defendants' canola crop could not be commenced in early May 2009 but says that the delay was caused by the defendants' seeder and liquid cart not being ready for use at that time. The plaintiff denies that the X20 system had any faults as alleged or at all and that if there were any faults encountered they arose by reason of the failure of the defendants to install or commission the system properly.
Notwithstanding its denial of the alleged representations and warranties the plaintiff said that, if it is found to have made any of the representations relied upon by the defendants, it had reasonable grounds for making those representations. In any event, the defendants were not induced to purchase the system by reason of any such representation.
The plaintiff denies any alleged collateral warranty and that it acted in breach of any such warranty.
As to the system's fitness for purpose and use, the plaintiff pleads that if it was not ready for use by the defendants in good time prior to the commencement of the 2009 cropping season such failure was not the responsibility of the plaintiff which was not in breach of its agreement to supply the system to the defendants.
In summary, the plaintiff pleads that the defendants are not entitled to any set‑off against the plaintiff's claim or to any damages. To the extent that the defendants might have suffered damage arising out of the use of the X20 system they failed to mitigate their own loss by reason of their own incompetent installation and commissioning of the system.
By way of completion I mention that the defendants filed and served a reply to the plaintiff's defence to their counterclaim which serves principally to join issue with the plaintiff as to matters of evidence without further widening the scope of the dispute between the parties. In summary, the defendants' counterclaim revolves around the alleged representation and warranties made at or about the time of purchase, the alleged breaches of those representations and warranties then and later and as to the fitness and quality of the system provided.
The Statute Law
The defendants rely upon s 52 of the Trade Practices Act 1974 which provides that a corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Both parties place reliance in their pleadings on s 51A of that Act which provides that where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading. The defendants plead that if any representation made by the plaintiff was as to a future matter there existed no reasonable grounds for the making of the representation. The plaintiff denies that the representations alleged were made but says that, if they were, there were reasonable grounds for making them.
The defendants rely upon s 71 of the Act which provides that where a corporation supplies goods to a consumer in the course of a business, there is an implied condition that the goods supplied under the contract for the supply of the goods are of merchantable quality except that there is no such condition, by virtue only of the section, as regards defects specifically drawn to the consumer's attention before the making of a contract or if the consumer examines the goods before the contract is made, as regards defects which that examination ought to reveal.
The section further provides that where a corporation supplies goods to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation, or to the person by whom any antecedent negotiations are conducted, any particular purpose for which the goods are being acquired, there is an implied condition that the goods supplied under the contract for the supply of the goods are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him or her to rely, on the skill or judgement of the corporation or of that person.
There can be no doubt that the plaintiff is a corporation and that the dealings as between the plaintiff and the defendants in late 2008 and in 2009 were in trade or commerce. Section 52 makes no reference to representations or warranties but rather to engaging in conduct. The giving of a representation or the making of a warranty may amount to conduct. Given that, in the matter before me, the plaintiff was conducting a business and the defendants were, at the material times, a customer of that business, there can be no doubt that the plaintiff, at the material time, engaged in conduct involving the defendants. What was done and said by the plaintiff and the defendants in the course of that conduct is a matter of evidence and whether what was done or said involved representations or warranties are matters of law.
The X20 system
At the centre of the action is a product called the X20 system. The user manual for the product, in its introduction, describes it as a control system designed to compliment an air‑seeder by controlling the rate of any product that is being sown or spread by the seeder.
KEE Technologies Pty Ltd traded as 'Topcon Precision Agriculture' at Regency Park, South Australia (hereinafter referred to as Topcon). On 30 January 2009 Topcon raised tax invoice 73236 directed to the plaintiff in respect of an order placed on 16 January 2009 by Craig Moynihan, an employee of Topcon. The invoice related to an X20 base console kit, a retrofit electric two tank kit to suit Flexi‑coil, a mini ECU and three liquid fertiliser control system hook‑up looms. The invoice referred to the customer as 'Smith'.
It is common ground as between the parties that the plaintiff sold to the defendants an X20 base console kit without GPS, an electric motor air‑seeder control kit, a mini ECU and three liquid drive harnesses. Those items would appear to be the items referred to in quote 1820 dated 27 November 2008 said to be invoiced to the defendants on 27 February 2009. They would appear to be the items the subject of Topcon invoice 73236 dated 30 January 2009. I propose to refer, as a matter of convenience, to those items as comprising the X20 system. Mr Smith understood that the price quoted to him did not include any labour component or the cost of installation. He accepted that installation of the system and its integration with his then existing equipment was his responsibility.
The plaintiff rendered invoice 128507 to the defendants dated 6 February 2009 (2/291). That invoice refers to two items purchased by the defendants from the plaintiff, one being a 'remote switch box calibrator' for $490 and the other being a 'Bertolini pump' for $1,085. The former was an optional extra to the X20 system. It would enable remote calibration of the air-seeder. It was not part of the X20 system, the subject of the original quotation. Mr Garrity said that it was not in contemplation or discussed at the time when quotes numbered 1815 and 1820 were prepared because it was not a component available at the time. I accept that Mr Moynihan later made Mr Garrity aware of the product and that Mr Garrity, in turn, suggested it to Mr Smith as being a useful option. Mr Smith took that advice and ordered that additional component on about 6 February 2009.
The X20 console, by which the operator might control the system from the cab of a tractor, was to be mounted in the cab with an electronic control unit. It, in turn, is connected to a Motor Drive Electronic Control Unit (MDECU) by way of a loom. The MDECU is then connected by way of a loom with each tank on the air‑seeder and the liquid cart. According to the X20 seeder control operation manual the MDECU is mounted on the air‑seeder, usually underneath or between the tanks, and contains the control circuitry to control the drives fitted to each tank. The manual confirms that the X20 console can be configured to control granular or liquid products. The system, according to the manual, had been designed to operate five separate tanks, all of which could be calibrated independently, regardless of the product being used in each.
For the 2009 season the defendants were intent on seeding canola and three cereals, barley, oats and wheat. They were intent on using liquid fertilisers, rather than granular, as had been the case in previous seasons. Mr Smith said, in evidence that he needed to be able to control six individual channels. He needed more than the air‑seeder with its three compartments. With that in mind he obtained a quote from the plaintiff for the provision of a liquid cart to be towed behind the air‑seeder providing extra capacity. He said in evidence:
If I was going to order the liquid cart and go down the phosphoric acid trail, I had to have the X20 system because it was the only system at that point that I could see was going to handle what I wanted to do.
In January 2009 Mr Smith, having obtained a quote, ordered a new liquid cart to be manufactured by Needilup Engineering (WA) Pty Ltd of Ongerup, Western Australia. That company issued tax invoice 1886 to the defendants on 13 April 2009 for the supply of a liquid fertiliser cart with a diesel motor fuel tank and control valve for the sum of $20,350, inclusive of GST (exhibit G).
Mr Smith said, in evidence‑in‑chief, that the liquid cart was delivered in April 2009. When asked as to its function he said:
The function of the liquid cart is to carry two grades of fertiliser. One grade being UAN, urea ammonium nitrate, and the other one is to carry phosphoric acid. The phosphoric acid has always been food grade phosphoric acid of 81% or 85% and though its blended down to 2 to 1 ratio to keep the freezing point up on it.
Mr Smith was challenged in cross‑examination with the proposition that the liquid cart provided by Needilup Engineering was delivered to him considerably later than April 2009. He responded by producing a cheque butt numbered 816312 dated 17 April 2009 in the sum of $20,350 payable to Needilup Engineering, purporting to evidence a cheque drawn on that day.
The liquid cart was to be towed behind all of the other seeding equipment. It needed to be integrated both electronically and mechanically with the other components. For the 2009 season, therefore, the seeding combination would be the CAT 85C challenger tractor towing the Flexi‑coil seeding bar with the Flexi‑coil seed‑cart behind that and with the newly acquired liquid cart at the rear.
The evidence as to the formation of the contract
The negotiations which led to the formation of the contract were tri‑partite, involving discussion as between Mr Smith and Mr Garrity (acting on behalf of the plaintiff) and as between Mr Smith and Mr Moynihan (acting on behalf of Topcon). Mr Garrity arranged the meeting between Mr Smith and Mr Moynihan and was present during part of the discussion between them. Of those three, I heard evidence from Mr Garrity and Mr Smith but not Mr Moynihan.
The first meeting was between Mr Smith and Mr Garrity at the plaintiffs' Katanning premises in November 2008. It took, according to Mr Smith, 15 to 20 minutes. Mr Smith said it was in early November. Mr Garrity said it was in mid‑November.
There is a fundamental dispute as to how that meeting came about. Mr Garrity said that Mr Smith came to the plaintiff's office and asked him about the Topcon seeding system. Mr Smith said that he had never heard of Topcon before that meeting and had never visited the Topcon website. I do not accept that evidence. Mr Smith holds a diploma in mechanical engineering. He acknowledged that he had a considerable interest in, and knowledge of, computerised machines. The evidence demonstrates that he was an innovative farmer and a regular user of the internet. Mr Garrity said that when he was approached by Mr Smith in November 2008 he was told by him that his research on the internet had led him to the conclusion that the Topcon X20 system might provide a solution to his problems. I do not accept that Mr Smith had no knowledge of it prior to his discussion with Mr Garrity in November 2008.
In a letter to Wade Longmuir dated 4 August 2011 (4/967) the defendants' solicitor advised:
Graeme's research before he made contact with Burando-Hill Pty Ltd, (with regards to the Topcon controller) indicated that in America there was a trend to move away from using granular fertiliser in favour of liquid fertiliser … Having made his initial enquiries including about the position in America/Canada, he made contact with Burando-Hill Pty Ltd who were the agents of Topcon in Western Australia. In essence, Graeme indicated to Burando-Hill that he was interested in purchasing the Topcon X20 system.
Mr Smith, in evidence‑in‑chief, said that he needed a control system to operate the proposed seeding combination for the 2009 season. That, he said, is why the X20 system was purchased. At the first November meeting he and Mr Garrity talked about the problems encountered during the 2008 season. He said that Mr Garrity told him that the plaintiff was the newly‑appointed dealer for Topcon. He would make enquiries given the defendants' problems and needs.
Specifically, Mr Smith said:
I needed a system that would control six individual channels and that is the three liquids, a seed and two fertilisers and at that point of time Alan said to me that he did not think that they - they had the capabilities to do that, but he would make enquiries.
Counsel for the defendants then asked Mr Smith whether Mr Garrity said anything other than that he would make enquiries. Mr Smith replied:
Well, he - he said to me that he - they were the newly appointed agents for Topcon and that this system that they were going to - or could supply, would be able to meet my requirements.
Again counsel pressed the witness further and he said:
What Alan told me was that a child could operate this, and I asked him about - I - I advised him of what - that I was using workers, and was it compatible to use workers. And he advised me that, 'yes but you'll need some computer experience.' And that was - that was all that was mentioned at that point.
There is, it seems to me, a curious inconsistency as to the proposition that Mr Garrity said that he would make enquiries as to the defendants' problems and needs and the assertion, when pressed, by Mr Smith that, in that conversation, Mr Garrity was recommending the X20 system as the answer to the defendants' problems and that a child could operate it.
Mr Smith said that there was a second meeting but counsel pressed him again as to what was said at the first meeting. Mr Smith said he told Mr Garrity that he did not want to be faced with the same problems he had encountered in the 2008 season and wanted 'full back‑up service' from the plaintiff. He said that Mr Garrity replied 'It's not a problem, we can do this'.
Mr Smith said that, at the conclusion of the first meeting, he went away to consider his position, including other options besides the X20 system. He said that, having left that first meeting, he was content that the plaintiff could supply and service the product. Mr Smith then returned to the content of the first meeting, recalling that Mr Garrity had suggested to him that he talk to Topcon or their representative, a person by the name of Craig Moynihan. He would be able to provide 'a lot more information on the system and its capabilities'. Mr Moynihan would be in Katanning shortly and could answer Mr Smith's questions.
Several days later there was a telephone call, said Mr Smith, from Mr Garrity to advise that Mr Moynihan would be available for a discussion. Mr Smith drove into Katanning and went to the plaintiff's offices. There he met Mr Moynihan and Mr Garrity. He explained the problems of the 2008 season to Mr Moynihan. Mr Moynihan made enquiries of him as to his equipment and provided him with a brochure for the X20 system. There was general discussion about the capacity of the system but no mention of price. He was, he said, assured that there would be 'full back‑up service'.
Mr Smith said that Mr Moynihan advised him that with the X20 system he could only have five stations, not six as stipulated by Mr Smith. He then said 'Mr Moynihan made it very clear that the system could handle anything that I required, and it went far past my requirements, notwithstanding that it could not operate with six stations'. At the conclusion of this second meeting Mr Smith said that he was advised that Mr Garrity and Mr Moynihan would provide a quote. Mr Smith said that, during the second meeting, Mr Garrity again told him that the plaintiff could meet his requirements and would be able to provide him with full back‑up service. He said:
Yes, I left the meeting after that, and I went away again to consider my position and wait for the quote to come in from Burando Hill.
Two quotes, as already mentioned, were provided. Mr Smith said that on 23 December 2008 he phoned acceptance of a quote, speaking with Peter Coldwell, a representative of the plaintiff because Mr Garrity was on holidays.
Subsequently Mr Smith was asked to provide information as to the lengths of all looms. He says that he measured 'everything up' and delivered the requisite information.
In cross‑examination Mr Smith described the first meeting as being 'a preliminary inquiry'. It took about 15 minutes. He accepted that Mr Garrity had not seen his seeding equipment and that he had a cursory knowledge of it. Mr Smith asserted that Mr Garrity told him that the X20 system would be more than suitable for his purpose. At the end of that meeting he wanted to go away, consider his position, and see what else was available.
In cross-examination Mr Smith agreed that, at the second meeting, Mr Garrity, having introduced him to Mr Moynihan, was present for part of the discussion which ensued as between he and Mr Moynihan. Mr Smith confirmed that Mr Moynihan told him that the X20 system was simple to operate. That comment was, he said, made in the presence of Mr Garrity who added that 'a child could operate it'. Mr Smith was not certain about when Mr Garrity was present during his conversation with Mr Moynihan stating that 'he came and went from that meeting'. He agreed that Mr Moynihan told him that, for the purpose of the 2009 cropping season, there was a need to order early as the X20 system had to come from the United States of America with a delivery period of about 90 days from the time of order to the time of delivery. I am satisfied, having heard the evidence of Mr Fleming, that the X20 system was manufactured in South Australia. It is highly unlikely that Mr Moynihan, an employee of Topcon, would have said to Mr Smith that it had to come from the United States of America.
Mr Smith was told that he had to provide specifications on the lengths of the bars and looms so that components could be specifically ordered from the United States to meet his requirements.
Mr Garrity recalled talking to Mr Smith about the possibility of buying some machinery from the plaintiff in mid‑November. He asked about the Topcon seeding system because he was interested in retrofitting his Flexi‑coil air‑seeder to become 'variable rate capable and GPS controlled'. Mr Garrity said that Mr Smith intended on designing or constructing his own three tank liquid fertiliser system with the seeding and application of fertiliser to be controlled by a central computer which would have flexible variable‑rate seeding capacity and liquid fertiliser control. He said that he knew very little about the Topcon system at the time as it was quite new to him. He accepted that the plaintiff was, at the time, a dealer for Topcon. Mr Smith, at that first meeting, requested a quote for supplying of the X20 system and described the equipment he was then operating and intended, in the 2009 season, to operate.
Following the provision of a quote to Mr Smith he suggested to him that he should meet with Mr Moynihan who was the Western Australian sales manager for Topcon and who visited Katanning from time to time. Mr Smith agreed. Mr Garrity arranged a meeting which, he said, took place in December 2008 at the plaintiff's office in Katanning. He introduced Mr Smith to Mr Moynihan. He was present for part of the conversation that ensued. He had other work that he needed to attend to. He returned to the conversation as it was coming to an end. He did not hear Mr Moynihan tell Mr Smith that the X20 system was simple to operate.
In cross‑examination Mr Garrity said that when he joined the plaintiff as a salesman in January 2008 the Topcon X20 system was well established in the market.
As to the first meeting in 2008 Mr Garrity said that there was no discussion about the problems experienced by Mr Smith during the preceding season. The discussion, he said, was about converting to the Topcon seeding system. Mr Smith wanted a system to control three liquids and two granules. Mr Smith approached him about the X20 system, having done some research on the internet and with an understanding that the system was an option for him. He told Mr Smith that the plaintiff had not sold that particular system and that, based on the information provided the Topcon X20 might suit his requirements. Mr Smith asked him for a quote and he provided one.
Mr Garrity agreed that he told Mr Smith that the Topcon X20 was not a difficult system to operate but denied saying that a child could operate it.
As to the defendant's equipment Mr Garrity said that Mr Smith informed him that he had a Cat tractor with a John Deere steering, GPS system and a Flexi‑coil 50 series air‑seeder. He accepted that Mr Smith may have said that he needed full back-up service. When asked to elaborate he said:
'I can recall that – my recollection of it all, Graham had questioned the – the – obviously, the service availability and that we would obviously do the best within our capabilities as – like, myself and Burando‑Hill within our capabilities of the system and I suppose that's where the conversation was – was closed'.
When asked to clarify further he said that he told Mr Smith that the plaintiff would provide support service to the best of its abilities and when asked to clarify further he said 'like, telephone support.'
Mr Garrity agreed that he suggested to Mr Smith, at that first meeting, that it would be a good idea to speak directly with Mr Moynihan of Topcon. He made that suggestion because of Mr Smith's interest in the technical aspects of the system, an area in which Mr Garrity was not sufficiently proficient.
At the second meeting Mr Garrity had a recollection of Mr Smith explaining his intended use of phosphoric acid. During that meeting he left the two to talk, returning towards the end. He agreed that he would have assured Mr Smith that, if he was to purchase the Topcon X20 system, there would be support service from the plaintiff. He agreed that he told Mr Smith that he and Mr Moynihan would confer and prepare a quote. He had, at that stage, already prepared the first quote without Mr Moynihan's assistance. He would enlist the support of Mr Moynihan for the preparation of a further quote. Mr Garrity could not recall saying to Mr Smith that the plaintiff would provide full back‑up service 'as they had the backing of Topcon'.
At the second meeting Mr Smith took a brochure from the plaintiff's counter during his discussion with Mr Moynihan. That brochure is entitled 'X20 Complete Precision Ag System' (3/675). The last page includes a summary of the specifications for the X20 system. The brochure is a product of Topcon and makes a number of general claims. It says:
The X20 console adds value throughout the farming cycle, providing increased efficiency and enhanced capabilities to tractors and sprayers'. First and most simply, it can be a rate controller … for liquid, granular, or injection control systems.
It further claims that the X20 can also be used for single and multiple product variable rate control, all from a colour touch screen. It describes the console as 'user friendly'. The X20 system utilises a global positioning system in rural application and is adaptable for spraying, seeding/planting, spreading and fertilising.
Findings of fact
To a substantial extent the defendants rely upon words spoken in the course of discussions as between Mr Smith and Mr Garrity and/or Mr Moynihan. For example at par 13(c) of the further amended defence and counterclaim the defendants plead that Mr Moynihan, in the presence of Mr Garrity, told Mr Smith that the X20 system was simple to operate and that the plaintiff, being Topcon's appointed dealer for sales and service in Katanning, would be able to serve all the defendants requirements. At par 13(e) Mr Garrity is alleged to have told Mr Smith words to the effect that:
'Nothing was too difficult for the plaintiff to address as there was full back-up service by the plaintiff and by Topcon as the plaintiff was the sales and service distributor in Katanning for Topcon.'
I am conscious of the need to take special care when it is asserted that words spoken conveyed a misleading impression. As McLelland CJ said in Watson v Foxman (2000) 49 NSWLR 315, 318 – 319:
Where the conduct is the speaking of words in the course of a conversation, the words spoken must be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances.
In many cases (but not all) the question of whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase, or grammatical construction rather than another rather than another, for the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self‑interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
I found Mr Garrity to be a truthful witness, doing his best to recall the details of conversations and events which occurred almost four years ago. I find that there were two meetings attended by Mr Smith at the plaintiff's offices of Katanning during November 2008. The first, which lasted for 15 or 20 minutes, was between he and Mr Garrity. Mr Smith was enquiring about the X20 system, he having already carried out some research on the internet as to its capabilities. Mr Smith, in that first meeting, described his existing plant to Mr Garrity and spoke of his requirements for the forth‑coming season. I find that Mr Garrity agreed that the X20 system might meet those requirements.
I am not satisfied on the balance of probabilities that Mr Garrity told Mr Smith that a child could operate the X20 system. I do accept that he told Mr Smith that a worker with some computer experience would be able to do so. I accept that Mr Smith enquired as to after‑sale service and that Mr Garrity said that the plaintiff would provide such service within its capabilities or words to that effect.
I find that, following the recommendation of Mr Garrity, there was a longer second meeting between Mr Smith and Mr Moynihan of Topcon. Mr Garrity was present for the introduction and returned to the conversation towards the end but was absent in the interim. I accept that, during the second discussion, Mr Smith explained to Mr Moynihan the problems of the 2008 season, referring, in particular, to his difficulties with the use of phosphoric acid. Mr Moynihan explained to Mr Smith that the X20 system could accommodate five stations but not six. I accept that there was again discussion about after‑sale service and that there was an assurance given that there would be support.
Mr Smith told Mr Garrity that he was contemplating the design and construction of his own three tank liquid cart. On 27 November 2008 Mr Garrity sent an email to Mr Smith attaching a quote (1/23‑27) and two photographs of a liquid cart bearing the plaintiff's name. Obviously, the cart was part of the plaintiff's stock. The photographs were provided to Mr Smith as an option to consider. The quote contained the following:
The above prices do not include installation in machine – The kits supplied by Topcon contain a comprehensive installation diagram to aid in on‑farm installation.
As mentioned, the quote specified a lead time of approximately 14 weeks before delivery.
In terms of par 9 of the defendants' further amended defence and counterclaim, I accept that Mr Smith told Mr Garrity, at the first meeting, that he wanted to convert to the use of liquid nitrogen fertiliser using a three‑tank liquid cart while retaining the option of using granular fertiliser delivered through the Flexi‑coil air‑seeder. As to par 9(b), I accept that the defendants required compatibility with their existing machinery plus a three‑tank liquid cart still to be either constructed or purchased. The system was required for seeding canola, wheat and barley. I do not accept that Mr Smith informed Mr Garrity in the terms of par 9(d) principally because Mr Smith would have been well aware that he was purchasing a system which required on-farm installation.
As to par 10 of the defendant's further amended defence and counterclaim, I find that Mr Garrity, at the first meeting, told Mr Smith that the X20 system might meet his requirements.
As to par 13(c) of that pleading, I do not accept that Mr Moynihan told Mr Smith that the plaintiff would be able to service 'all the defendant's requirements' which included that the system be assembled and fully operative in good time before the commencement of the cropping season in May 2009 with full back‑up service in assembling, commissioning and in operation of the system. The reason for rejecting that proposition is that, firstly, the plaintiff was very clearly selling the defendants a system which required on‑farm installation by the purchaser and, secondly, the matter of the commencement of seeding in any given season was always at the discretion of the farmer concerned and beyond the control of a provider of farming equipment.
In their pleadings the defendants repeatedly use the phrase 'full back‑up service.' Mr Smith, in his evidence, repeatedly used that phrase. The phrase is not used in the brochure taken by Mr Smith from the plaintiff's office and is not mentioned in either of the quotes provided to the defendants.
So far as par 13(e) of the defendant's further amended defence and counterclaim is concerned I am not satisfied on the balance of probabilities that Mr Garrity told Mr Smith words to the effect 'nothing was too difficult for the plaintiff to address as there was full back‑up service by the plaintiff and by Topcon as the plaintiff was the sales and service distributor in Katanning for Topcon'.
I do find that the plaintiff had not sold an X20 system prior to that sold to the defendants.
Simon Hill, a director of the plaintiff agreed that, at the relevant time, the plaintiff was a supplier of agricultural machinery. In particular he said that the plaintiff specialised in the sale of innovative farming techniques. He agreed that the plaintiff would provide service to its customers.
Mr Hill and Mr Garrity were, at material times, representatives of the plaintiff being director and employee respectively. Mr Moynihan was an employee of Topcon. The plaintiff was Topcon's selling agent or 'authorised dealer.' Mr Smith, at the two meetings in November 2008 was a potential purchaser of the X20 system. Both Topcon and the plaintiff stood to gain by the sale eventuating. The agent, the plaintiff, arranged for Mr Smith to discuss matters with its principal, Topcon. To the extent that, at the second meeting, Topcon acted in aid of its agent and assisted in the presentation of the second quote, they both made representations to the defendants. The precise nature of those representations is to be determined.
The alleged representations as pleaded
The defendants plead that the matters pleaded in pars 9 to 14 of their further amended defence and counterclaim constituted representations by the plaintiff to Mr Smith as follows:
X20 system would be provided by the plaintiff to the defendants in good working order
This allegation cannot be sustained on the evidence. That is because the system compromised a number of component parts which had to be installed and commissioned on‑farm. The X20 system was not, of itself, an operational system in the sense that, for it to be in good working order, it had first to be installed and commissioned (including calibration) on compatible farming equipment in the form of a tractor, seeding bar, air‑seeder and supply tanks.
In general terms, all those involved in the discussions leading up to the order being placed, were fully aware of what was being acquired and the need for on‑farm installation and commissioning. There is no evidence before me that any of those involved in the discussions made specific reference to the system being provided in 'good working order'. That is presumably because, firstly, the system being purchased was newly manufactured and, secondly, the question of whether it ultimately worked depended upon successful installation and commissioning.
There is a suggestion in the evidence, which I will come to later, that a particular component part of the system provided by the plaintiff was not in good working order when provided to the defendants. It is fair to say that, notwithstanding the absence of any specific reference by the parties to the individual component parts of the system being supplied in good working order, it is implicit, having regard to the fact that the defendants were purchasing newly manufactured equipment from the plaintiff that that would be so.
In closing submissions, dealing with the pleaded representation as to full back-up support, counsel for the defendants said:
It didn't include installation at that price and if he wanted to pay an additional price he could get installation. But more fundamentally is that installation is a different concept. What back-up service includes is, we would say, and Mr Smith gave evidence of this, matters such as commissioning, calibration and assisting with all aspects of getting machinery into good working order so that seeding could be undertaken.
The first representation pleaded by the defendants is that the X20 system would be provided by the plaintiff to the defendants in good working order and in good time prior to the commencement of the 2009 cropping season in early May 2009. The passage quoted above suggests that the defendants, in closing submissions, seek to resile from the pleading of a representation that the X20 system would be provided to the defendants in good working order, suggesting that the plaintiff's representation was, in effect, not only to provide the X20 system but also that, by virtue of their back‑up service, the system would, following commissioning, calibration and assistance 'with all aspects' of the machinery, be in good working order. The reference to 'machinery' in counsel's closing submission must be taken to be a reference, not to the X20 system per se, but rather to the whole of the defendants seeding apparatus. I take the view that the closing submission made by counsel for the defendants is not supportive of the proposition that the plaintiff represented to the defendants that the X20 system would be provided to them in good working order. I find that there was no representation as pleaded.
That the X20 system would be provided in good time prior to the commencement of the 2009 cropping in early May 2009
There is no doubt that all of those involved in the discussions leading up to the order being placed by the defendants were aware that it was their intention to have the X20 system installed and effectively operational for the forth‑coming season. That involved, being effectively operational for the commencement of seeding. The defendants placed their order on 23 December 2008. The quote provided to them referred to a lead time of approximately 14 weeks or 98 days. That period would expire on about 31 March 2009. The commencement of the 2009 cropping season would not have been known to the plaintiff in November 2008. Mr Smith being, in effect, the manager of his own farm and the architect of his proposals for that season was, of all those involved, in best position of having some idea as when it might be feasible to commence seeding but even that prognostication would depend upon a number of factors then unknown to him including, firstly, the weather and, secondly, his own ability to successfully complete the installation and commissioning of the X20 system on his own farming plant and machinery. He was, as at November 2008, still contemplating precisely what that plant and equipment would comprise. He was yet to either acquire, by way of design and construction or purchase, a three‑tank liquid cart.
I find that the plaintiff did not make a representation to the effect that the X20 system would be supplied to the defendants in good time prior to the commencement of the 2009 cropping season but rather that the system would be provided in about 14 weeks from the date on which the order was placed.
The X20 system was suitable for use by the defendants to apply liquid fertiliser to the defendant's crops
I do accept that the plaintiff represented to the defendants that the X20 system would be suitable for use by the defendants to apply liquid fertiliser to their crops. The discussions leading up to the order being placed made it very clear what Mr Smith was contemplating for the 2009 season in terms of the use of liquid fertiliser.
The X20 would provide increased efficiency and add value to the defendants' farming activities
This alleged representation relies, not upon words spoken by either Mr Garrity or Mr Moynihan but upon the brochure taken by Mr Smith from the plaintiff's office during the second meeting in November 2008. That brochure contained the following:
The X20 console adds value throughout the farming cycle, providing increased efficiency and enhanced capabilities to tractors and sprayers.
There is evidence, which I accept, that the X20 system was well established in the market as at November 2008 and was in use in farming applications not only in Western Australia but also in other states. The brochure directed itself to the way in which the X20 system could be adapted to the various functions of cropping which included spraying for weed and pest control, spreading solids, GPS control guidance of farming equipment, fertilising, seeding and planting. Clearly, the brochure, being a product of Topcon, was prepared with the intent of promoting the X20 to its target audience, Australian farmers. To the extent that this was a representation it was not to the effect that the defendants, by acquiring the X20 system would achieve added value throughout their farming cycle or increased efficiency and enhanced capabilities to their tractors and sprayers. In the case of the defendants, as they well knew, much would depend on their successful and installation and commissioning of the system and their subsequent operation of it. They would have readily understood the generalised statement as not pertaining to them in particular.
The X20 system would be accompanied by a full professional back‑up service by the plaintiff or its agents in the phases of installation, commissioning and operation so as to be fully operational and operative
As already mentioned, I do accept, as a matter of fact, that Mr Smith enquired at both meetings in November 2008 about after‑sale service and that Mr Garrity assured him that there would be after‑sale service or support. I do not accept that any representation in that regard made by the plaintiff to the defendants involved the use of the phrase 'full professional back‑up service' or 'full back‑up service'. I do accept that the plaintiff represented to the defendants that it would provide service or support to the defendants in the phases of installation and commissioning and, to some extent, in operation but not to the extent of warranting that the support and service would ensure that the system would be 'fully operational and operative'.
In terms of Mr Longmuir's assessment of yields in tonnes per hectare, both sides of the equation are dependent upon Mr Smith's evidence. I am asked to rely upon his evidence to the effect that the documents in the trial bundle as to delivery of grain and canola evidence, in total, the 2009 harvest and I am asked to infer, based on Mr Smith's evidence, that the number of hectares seeded is in accordance with what was proposed in the 2009 seeding program less his estimates of those areas that could not be or were not seeded. As mentioned, in the absence of any precise record of either the seeding or the harvest in 2009, I am being asked to rely, in effect, on the truthfulness and accuracy of Mr Smith. I need not comment further as to the former. As to the latter, his evidence of seeding by reference to the aerial photographs marked from memory while investigating the prospect of an iron ore mine in Honduras, is less then reassuring.
Both Brenda Joyce Shackley and Wayne Roger Smith gave evidence of an expert nature. The former gave evidence for the defendants. The latter gave evidence for the plaintiff. Both are agronomists. Both gave evidence about yield penalty, a phrase well understood in agronomic circles. Both have presented reports which form part of the evidence in this matter (B J Shackley: 4/1025 to 1029 and W R Smith: 4/915 to 923).
Ms Shackley relied upon sowing trials conducted in 2003, 2007, 2008 and 2010 to arrive at yield penalties for wheat. The years excluded from analysis being 2004 and 2006 were, she said, particularly dry years and 2005 had problems with water‑logging.
She had more difficulty in assessing yield penalties for barley because sowing trials were not specifically located in the Katanning area and she was not familiar with them. Grain penalties for barley are, she concluded, estimated to be slightly higher than those for wheat when sowing is delayed from late May to mid‑June.
As to canola grain yield, she again said that there were difficulties in making an assessment due to a lack of data in that area.
In cross‑examination she said that in conducting the trials referred to, particularly with respect to wheat, there is an assumption of a level of competence commensurate with those of a competent wheat farmer. There was also an assumption as to the use of appropriate farming practices including the choice of seed varieties, fungicides, herbicides and fertiliser.
Ms Shackley concluded that the defendants' crops would have been affected by water‑logging in June 2009. She accepted that she was not able to say precisely what happened at the defendants' farming properties in 2009, beyond the information provided to her, which was largely as to the rainfall in that year at those properties and as to the varieties of wheat and canola grown. I should bear in mind also, that I should disregard, in her report, references to PYCAL. That is an acronym for 'potential yield calculator' produced by another expert who did not give evidence, a Dr Meredith Fairbanks.
Mr W R Smith concluded that there was also no correlation and certainly no significant correlation between rainfall and yield. There were, he said, other larger factors involved in agriculture that determine a crop yield. Models using rainfall and a date of sowing to come up with a predicted yield are inadequate, he said:
'It is therefore irrelevant to use any model or extrapolation of neighbours performances to say what another paddock would have yielded. There is too much variation in agriculture to make those conclusions.
Cameron Taylor, a certified practising accountant based in Katanning, gave evidence on the matter of quantum of damage from an entirely different perspective. His report is exhibit K. He conducted a detailed analysis of five years of data comprising the defendants' financial statements and other materials. He then compared the defendants' performance with industry averages in the relevant region. He concluded:
I don't believe that the partnership can justifiably claim to be able to achieve the financial results as shown by the farm benchmarks. Having conducted a detailed analysis of financial statements and supporting documentation, it is my opinion that, given the difficult 2009 season endured by all farmers in the area, the financial outcomes from the key indicators of this partnership are relatively consistent with their expected performance, and not necessarily or obviously restricted by unusual or extraordinary external factors.
Looking at cropping income and expenses in isolation he concluded that net grain income for the partnership fell well short of farming benchmarks in previous years while claiming to 'massively exceed farm benchmarks in the 2009 season.' In that financial year all farms in the area of the defendants' properties had a considerable drop in income and profits or incurred losses. The defendants' 2009 financial performance was, he concluded, in line with profits previously achieved.
The defendants' claim, in their final written submissions, that the report of Mr Taylor misses the point of the proceedings. The damages claimed are, of course, in terms of loss of yield, that is, a loss of revenue for grain sold. The defendants' criticise his report because of the assumptions which, they say, are incorrect, namely that the number of hectares farmed for wheat, oats and barley in 2009 remained the same as farmed in preceding seasons and that sales were carried forward only from yields produced in that year or the previous year disclosed in the books of account, but from no further back.
In its final submissions the plaintiff suggested the only criticism levelled against Mr Taylor's analysis was his assumption of the area being farmed by the defendants.
I am inclined to the view that a correct approach to the assessment of the defendants' claim for damages would be that based on a reliable assessment of the actual yield, preferably on a paddock‑by‑paddock basis, as compared with expert assessment of what might hypothetically have been achieved were it not for the presence of certain factors. The principle witness relied upon in that regard is Wade Longmuir. The independence of his evidence is, in my view, called into question not by reason of his own integrity but by reason, rather, of the involvement of Mr Smith in providing him with instruction and a context which was not factually correct and instructions from the defendants' solicitors to Mr Longmuir which were equally problematic.
Assessment of damages, even on a provisional basis, in this case is problematic. There were three pleaded factors giving rise to alleged loss of crop yield and, hence, less of income to the defendants. They were delayed sowing, erratic sowing and erratic application of fertiliser. In their re-amended particulars of damages the defendants do not seek to separate those three factors in terms of damages suffered by reason of each. Their expert evidence in that regard was confined to the pleaded consequences in terms of loss of crop yield resultant upon late sowing.
On reflection, given my misgivings about the basis of the proposed assessment of damages advanced by the defendants, the more holistic approach adopted by Mr Taylor may be the only satisfactory method of approaching the claim for damages. If I were to adopt that approach the defendants would fail to prove their damages.
In all of the circumstances, I have decided that, in the particular circumstances of this case, it is not appropriate for me to attempt a provisional assessment of damages.
Conclusions
The defendants counterclaim is based upon three principle contentions. The are, firstly, that, but for the various alleged breaches of the plaintiff in its alleged failure to deliver the X20 system and to provide 'full professional back‑up service' the defendants would have commenced seeding in late April early May of 2009. Secondly, there was, subsequent to the commencement of seeding, erratic distribution of seed attributed by the defendants to a faulty electric motor and finally, fluctuating delivery of fertiliser attributed by the defendants to a malfunction in the X20 system. As to the first, my finding is that the defendants, in the preparation of their seeding plant and equipment, were struggling to integrate all components of that equipment which included, of course, the newly acquired liquid cart and all of the plumbing associated with it and the expansion and renovation of the seeding bar and tines. They were, I find, as a matter of fact, not ready to commence seeding by the break of the season on 22 May 2009 and were little further advanced when Mr Garrity called at the Broomehill East property on 25 May 2009. I do not accept, as mentioned, that the defendants were occupying their time in otherwise pointless renovations of their plant and seeding equipment and stocking their spare parts store with items acquired from time to time from the plaintiff. To the extent that there were problems in the final delivery of components of the X20 system (which did not include the remote calibrator) such problems were not causative of the late commencement of seeding by the defendants. In that regard I apply the approach taken by the High Court in March v E & MH Stramare (1991) 171 CLR 506. I conclude that any problem with the delivery of component parts of the X20 system (excluding the remote calibrator) and any deficiency in the after‑sale service provided by the plaintiff to the defendants could not fairly and properly be considered a material cause of the defendants' failure to commence seeding their canola and cereal crops, at what would otherwise have been an optimum time. For the former, as mentioned, that would have involved seeding a portion of the canola program before the break of the season and the remaining portion thereafter before moving, in early June, to the cereal program.
To the extent that the defendants rely upon varying distribution of seed as the cause of their problems leading to alleged lower yields in the 2009 season, there was a problem with the metering mechanism of the centre tank of the air‑seeder detected by Mr Garrity during his visit on 25 May 2009. On the evidence, that problem persisted throughout seeding such that upon the cessation of seeding that mechanism was removed, as observed by Mr Hill on 16 July 2009. The acquisition, on about 15 June 2009 from McIntosh and Son of Katanning of parts charged with an after‑hours fee, suggests that repairs were being carried out on a metering box, probably for the middle tank, even after the reversion to the chain drive.
I have already indicated that I am not prepared to draw an inference to the effect that the mangled and damaged spring and brushes were part of what was supplied by the plaintiff to the defendants. I accept that those items were found by Mr Bailey of Kojonup Auto Electrics but draw no factual conclusions as to how the damaged observed by him was done.
As already observed, the fluctuating distribution of fertiliser is, well and truly, on the probabilities, associated with the operation of the KZ valves. I place no reliance on the evidence of Mr Lake in that regard.
The failure of those valves was not a failure of the X20 system. It was, demonstrably, a system capable of integrating the delivery of seed, granular fertiliser and liquid fertiliser. In the case of the defendants during the 2009 season, the various problems encountered by them cannot be attributed to the X20 system, its merchantability or fitness. The problems encountered by the defendants, putting aside the effect of frost and extreme heat during the month of October 2009 on their crops, cannot be attributed, in my view, to any misleading or deceptive conduct on the part of the plaintiff or to any breach of an implied condition or warranty.
The defendants carry the onus of proving their claim on the balance of probabilities. I conclude that they have comprehensively failed to do so. There will be judgment for the plaintiff on its claim in the sum of $30,244.27. The defendants' counterclaim is dismissed. I will hear the parties as to costs.
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