Burks Island P/L v Tugal & Ors No. DCCIV-95-488 Judgment No. D3536
[1996] SADC 3536
•20 December 1996
Court
DISTRICT COURT OF SOUTH AUSTRALIA
Judgment of His Honour Auxiliary Judge Rogerson
Hearing
11/10/96 to 06/11/96.
Catchwords
Contract for sale and removal of pine trees in forest - breach of pre--emptive condition by defendant - contract terminated by plaintiff - plaintiff provided a means of access in forest which in wet weather caused delays in counterclaimant's removal of timber from the forest.
Representation
Plaintiff BURKS ISLAND PTY LTD:
Counsel: MR M HOILE - Solicitors: PIPER ALDERMAN
Defendants TUGAL PTY LTD AND SOUTH EAST AGRIBUSINESS PTY LTD AND BRIAN ALEXANDER SMIBERT:
Counsel: MR P CUTHBERTSON - Solicitors: W S DEGARIS &; CO
DCCIV-95-488
Judgment No. D3536
20 December 1996
(Civil)
BURKS ISLAND PTY LTD v TUGAL AND OTHERS
Civil
Auxiliary Judge Rogerson
The plaintiff in this action is a proprietary company which owns land near Beachport called Burk's Island.Some of the land was a pine plantation.The plaintiff entered into a contract with the defendant company to clear the pines.This contract of 14 May 1994 had been preceded by a contract made in December 1993.The plaintiff was dissatisfied with the defendant's progress and terminated the contract on 28 April 1994.The second and third defendants were guarantors of the contract of 14 May 1994.That contract was by agreement varied on 17 August 1994.It was terminated by the plaintiff in September 1994 on the ground of failure by the defendant to pay to it the sum of $28,000 due on 1 September 1994.A notice of default was given by the plaintiff on 2 September 1994.
The third defendant had control of the two defendant companies and a number of other companies engaged in a variety of activities.He and the second defendant are sued as guarantors of the first defendant's obligations.The plaintiff company claims damages for breach of contract, namely, a failure by the first defendant company to pay $28,000 due on that date as a royalty, and sues the second and third defendants on their guarantees.The defendant, as I will refer to the first-named defendant, in its amended counterclaim alleges breach of contract by the plaintiff.I will make frequent reference to dates in the course of this judgment.All are in 1994, unless another year is specified.
In company with counsel for the parties, inspected the plaintiff's property at Burk's Island on 14 October 1996.I found the view of great assistance when hearing and considering the evidence given at the hearing.
There were on the land three blocks of pinus radiata.Block A was to the north west of Block B [later divided into Blocks B1 and B2] and Block C. Blocks B and C were contiguous.Block A was separated from them by a road. The defendant, Tugal Pty Ltd, undertook, acting through the third defendant, to clear-fell the blocks.The plaintiff was anxious to see each block completely cleared before felling began on the next.The defendant began felling in Block A under a contract made on 7 December 1993.Progress was slow.The defendant got permission to take timber from B1 while continuing to work on A. In the event, the plaintiff terminated the contract in April 1994, essentially because of the defendant's slow progress.The contract with which this case is concerned was made on 14 May.Under it the defendant undertook to have on the land by 19 May a "Steyer" processor, which removes the limbs from fallen trees, a forwarder and a "Kara" saw bench.By agreement a different make of saw bench was obtained and nothing turns on the defendant's failure to obtain a "Kara" bench.The Steyer, as I will call it, and the forwarder were required to be in good working order on 19 May.There is no doubt that the forwarder was in good working order but difficulties were experienced with the Steyer, to which I will refer in due course.Under the contract the defendant was obliged to pay $20 per metric tonne for standing timber to be removed.The price for timber processed by the saw bench was $8 a cubic metre, which is near enough to a tonne:there is considerable wastage of wood in milling.
The contract of 14 May permitted cutting in B1, B2 and C if a feller was at the same time employed in A.However, the defendant was not permitted to cut timber in B2 until felling the trees on B1 was completed.The defendant was not allowed to remove timber from the land except as shown on a plan, which was intended to be annexed to the contract, but was not, or as otherwise agreed. Timber had to be weighed at a licensed weighbridge, though for a weighbridge at the premises of a firm "Cellulose Limited" the gross weight, and the tare weight of the truck, were to be recorded, rather than the weight of the timber only.Felled timber other than saw bench timber was to be removed from the land within seven days after felling.Property in timber cut and/or removed from the land was not to pass to the defendant until it had paid the plaintiff. The defendant was obliged to take all precautions to avoid damage to roads, fences, gates, etc., excluding fair wear and tear.
The defendant was obliged to remove from the land standing timber in any calendar month of an amount equal to 70 tonnes of timber for each business day. It had by clause 4 of the agreement to pay $28,000 on account to the plaintiff on the day on which the contract was executed.Clause 5 of the Agreement provides "except as herein otherwise set out" the payment of royalties was to be made on the first business day of each calendar month in respect of timber removed from the land in the previous calendar month.Clause 13 of the Agreement states that:
"Notwithstanding anything else herein or in the Conditions of Sale, the Purchaser agrees to pay the sum of twenty eight thousand dollars ($28,000) on the first day of each calendar month with the first payment due on the first day of July 1994 until the standing timber has been clear felled and removed from the said land with such payments to be applied against standing timber felled and removed in the immediately preceding calendar month......"
There are provisos to this provision which allow the vendor (plaintiff) to terminate the agreement if standing timber to the value of $28,000 has not been removed and paid for in two consecutive calendar months, or for breach of any provision of the Agreement other than that which requires the purchaser (defendant) to remove an amount of standing timber equal to 70 tonnes for each business day.I note that, with 20 working days a month, and timber to be paid for at $20 a tonne, 70 tonnes of wood a day would produce $28,000 a month.The defendant took timber for the 3 months 30 May to 31 August, and paid $84,000 royalties.One payment of $28,000, which might perhaps be classified as a deposit, was made at the commencement of operations, and 2 payments in arrears made at the end of July and of August.The plaintiff thus received $84,000, for which it gives credit in its Statement of Claim.The defendant made no payment on 1 September, causing the plaintiff to terminate the contract. Under the contract that payment would have been for timber removed in August. Clearly the sum of $28,000 paid in advance at the inception of the contract was credited by the plaintiff against the debt for timber removed in August.Thus, timber was removed during 3 months, at the rate of $28,000 a month, and the sum of $84,000 was received by the plaintiff in respect of these 3 months, some in advance, some in arrears.
The defendant seeks to justify its apparent breach of contract in failing to make payment on 1 September 1994 by alleging that the plaintiff was in breach of its obligation under paragraph 28 of the Schedule to the agreement of 14 May.That paragraph is as follows:-
"The Vendor undertakes to maintain the access farm track marked on the said plan sufficient for entry and egress by trucks engaged by the Vendor [sic:a clear mistake:it is agreed that the word should be "Purchaser"] for carriage of the felled standing timber and the Purchaser shall notify the Vendor on each day that it considers that the farm track is unable to be used for transport of the felled standing timber."
No plan was in fact annexed to the agreement.The contract of 7 December 1993 did have a plan annexed to it.A track runs in a generally eastward direction along the north west edges of Blocks B1 and C, having passed Block A on its north western end.The route followed an unmade farm track and climbs fairly steeply as it approaches Block B1.Under the contract of 7 December 1993 the choice of the front or of the block on which to commence was the defendant's, but it undertook not to fell timber on any other block until all timber had been felled on the chosen block, which was Block A.However, the plaintiff allowed the defendant to start work on Block B before Block A was clear-felled. It appears that the timber on Block B was of a type more profitable to the defendant.The defendant undertook, however, to leave a feller on Block A.
There was in the December 1993 agreement no provision of the kind of Clause 28 of the May agreement, perhaps because the ground could be expected to be unaffected by rain in the summer months.This would almost certainly not be the case in the months of, or, at least, after May.The defendant, however, chose under the May agreement to use the track, the "northern track", which he had specified in the December 1993 agreement, and commenced to use it in May. The plaintiff, however, alleges that on 7 March the defendant had chosen to use the alternative track.The rainfall shown in statistics from a Bureau of Meteorology station at Beachport, a few kilometres away, was accepted by the parties as likely to have been similar to that which fell on the plaintiff's property.I note that 45 mm of rain was recorded at Beachport for the period 26 to 31 May.In June the first 10 days were clear but between 11 and 27 June 140.8 mm fell.In the first 10 days of July only 6.8 mm fell but thereafter the rainfall was 129.5 mm.There was 55.2 mm between 1 and 25 August (inclusive).Up to 6 September only 2.8 mm fell, though there was 37.8 mm thereafter.Up to 15 October the defendant was permitted to remove already felled timber.The rainfall up to 9 October was 48.8mm.Over 8 days of carting 22 loads were removed between 5 and 15 October.
On 23 May the defendant wrote to the plaintiff saying,
"I note Brian Bennett" [the manager of Burk's Island] "has fixed the track today to enable access to B1 ......I believe more work may be required as winter sets in, however I can liaise with Brian [Bennett] on this."
It seems that not long after that date the northern track chosen by Mr Smibert became impassable to semi-trailers.Forwarders were used to load the semi-trailers at a lower point.On 5 July Mr Smibert wrote to the plaintiff saying that for the past month the forwarder had to traverse from the east of B1 to the west to load trucks due to no access on the northern track.He said that he was most concerned at the winter difficulties which might occur on the access tracks.[The plural "tracks" is used, though only the northern track had been chosen by the defendant and on the terms of the agreement of 14 May, there was no liability on the plaintiff to maintain any other track.]He refers to a "meeting last week" and says that since then there had been only 10 mm of rain but that even that amount had deteriorated the track.He said
"It is most urgent that a proper track is formed to enable continued winter access.Further rain before the track is formed will make the job more difficult for the contractor and will also restrict our ability to log safely and consequently to maintain the agreed tonnage."
The letter goes on:
"As agreed last week, the cost of providing access on the northern track would be unnecessary if the western track was upgraded to a suitable standard and access is provided between B1 and B2 and C."
Mr Smibert said that he was arranging for a Mr Teagle to inspect the track [i.e. the track being used as an alternative to that first chosen by Mr Smibert] and said that if access was not to a suitable standard by onset of the wet they would have to cease operations until spring.
The meeting referred to in that letter was held on 30 June.A quotation was obtained from Mr Teagle, which was given on 13 July, for cutting a track through B and rubbling the alternative track.Mr Raphael said that in a telephone conversation with Mr Smibert he asked Mr Smibert whether he wanted to use the original track or the alternative track.He told Mr Smibert to reply to a letter from the plaintiff's solicitors and to say in it which track he wanted to be upgraded.He said to him that they would put in a track, but only if Mr Smibert put his choice of track in writing, and would vary the 14 May Agreement.He said that Mr Bennett put rubble on the track near the pit [shown on page 30 of P1].
The defendant attributes its inability to reach a daily output of 70 tonnes to the condition of the alternative track, though it was he who originally chose the northern track.That track became unusable shortly after work began under the May contract.It was the plaintiff's duty to maintain that track and some work was done on it.However, Mr Smibert, with the plaintiff's agreement, agreed that instead of the track specified in the agreement he would use the alternative track.That track is fairly level compared with the hilly northern track.Mr Bennett recorded working on a track on 13 days between 23 May and 29 June.He said that it was the alternative track on which he and other employees worked.He said that the northern track was, apart from two occasions, not used by the defendants and that it was the alternative track which was used to remove timber from B1.
In a letter dated 15 July Mr Smibert said to the plaintiff's solicitors that the northern track became "inaccessible" to their trucks and that an attempt by the defendant to improve access on it was not successful.He said that since 1 June the defendant had used the alternative track, but that this made it necessary to traverse the forest to gain access to the east of B1.He says that the plaintiff had used a contractor to improve a section of track [semble, within B1] to enable safer traversing by the forwarder.Mr Smibert then said that the machine and road making material at the plaintiff's disposal was not of sufficient standard to enable road building of a standard to accept the continuous access and egress of heavy vehicles.He said that it was now the case that access had become impossible and went on to say that he expected Clause 28 of the May agreement to be honoured.He said that if there was no access for the defendant's vehicles until the end of winter its losses would be substantial.He said that he required the alternate access to be built immediately and that until access was provided the plaintiff could not expect any form of royalty for the lost days.No doubt Mr Smibert had in mind the provisions of Clause 28 of 11 May agreement.
Mr Raphael on 16 July replied that the corner [ie near the saw mill] had been rubbled and that the access track [the alternative track] was passable to semi-trailers.He then referred to the absence of the Steyer processor for longer than the two days for which Mr Smibert had said it would be absent.
On 18 July the defendant sent a 'fax' to the plaintiff saying that the alternate track was not in a condition to accept heavy traffic and would soon break down to a condition where it could not be repaired for several months. He suggested that rubble be raised as a first priority and that other quotations be raised for the road making.
It is clear that by late July Mr Raphael had become willing to rubble the alternative track, which runs between B1 and B2, and B2 and C, but that he waited for the making of an amending agreement which specified that that was the only track which would be used.He contends that the track from the pit to near the gate to B1 and B2 was properly rubbled.The matter was, however, dragged out by fairly profitless correspondence about the terms of the amending agreement into which the plaintiff sought to include matters other than the track, but eventually the parties were ad idem that the alternative track was the only one to be used, although the agreement was not formalised until 17 August in the amending agreement.That having been done and other quotations obtained, Mr Teagle's quotation of 13 July was accepted by the plaintiff in late August.He was asked to do only the first item, namely to raise 2,000 metres of rubble from the pit, and to "doze" [ie level], the track over the hill top [between B1 and B2].On 27 August Mr Raphael sent to his father and brother [members of the plaintiff company] a copy of the agreement dated 17 August and advised them that Mr Teagle was to begin to raise rubble on 5 September.
According to Mr Raphael's evidence, Mr Teagle was, in the first instance, intended to do the now agreed track only as far as the boundary of B in the first instance which, however, he now contends was fit to be used as far as the turnaround, but it seems that he was meant later, at least if the condition of the track was not good, to top and grade the track shown in the amended agreement, ie, the track between B1 and B2 and along B2's boundary with C.He said in the witness box that if the defendant did not pay the $28,000 due on 1 September on time he would have only raised rubble for their own requirements. I note that the payment due on 1 August had not been made on time.In a message of 3 August [Exhibit P17] Mr Raphael records that over the telephone Mr Smibert said that the defendant's cheque was in the bank, as Mr Raphael had told him that the amendment would be okay.This clearly refers to the amended agreement of 17 August.
On 29 August Mr Smibert wrote to the plaintiff.He said that if the extraction meterage was not being limited by the access he would have no concerns about the limited access.He said that the defendant had had no truck access to the forest for three months, necessitating loading trucks many hundreds of meters away from the optimum loading points.This, he said, had extended loading by, at times, several hours.Their forwarder had travelled three times the distance normally expected.Their meterage, he said, had been affected by limited access.These allegations are denied by the plaintiff, though it says that the forwarder did take timber which was to be processed on the property to the spot mill.This, of course, freed the semi-trailer to do the long journeys.
A facsimile message from Mr Raphael to the defendant says:
"As per clause 1.3 of the said agreement, please ensure that payment is deposited into our account and confirm by facsimile today." [ie 1 September]
Mr Smibert's secretary sent a facsimile to the plaintiff on 2 September saying that Mr Smibert had gone to Adelaide on 1 September and as yet had not returned.She was sure that he would attend to the matter as soon as possible upon his return.The plaintiff sent a Notice of Default on 2 September alleging non-payment of the sum of $28,000 on 1 September.No payment was received and the plaintiff terminated the agreement on 8 September.
One of the counterfoils of the defendant's cheque book is Exhibit P41.It records a cheque for $28,000 to be paid to the plaintiff for timber royalties. The date on the counterfoil appears originally to have borne the date 5.9.94. The figure "5" has been overwritten by a figure "1".The next cheque is one for $6,102.15, misdated 6.9.97.The Australian Taxation Office returned that cheque.A new cheque was written and was debited to the defendant's account on 20 September.
The share capital of the defendant was $5.Its operations were expensive and, though it received almost $73,000between 1 and 13 July, and $69,505 between 1 and 3 August, it was near or over the limit of its overdraft facility.The overdraft reached $134,610 on 16 August, but was reduced by advances from other companies controlled by Mr Smibert so that on 1 and 2 September it was about $99,000.By 6 September the overdraft had increased to $110,472.42.On 8 September Tugal received an advance of $20,000 from a company controlled by Mr Smibert which reduced its indebtedness to $99,939.A credit of $6102.15 arose from the mis-dated cheque above referred to, the amount of which was, as I have said, paid on 20 September.The defendant's overdraft limit was $95,000. Excesses had been met by transfer from other companies controlled by Mr Smibert, and by sales.The defendant's debit balance would have been further increased by $28,000 if the plaintiff had been paid on 1 September.On 6 September the manager of the defendant's bank, Mr Pfeiffer, after receiving an internal memorandum from the bank's zone lending manager, Mr Penney, dated 31 August, wrote to Mr and Mrs Smibert, informing them that the present level of lending was the maximum the bank would be prepared to advance until a revised reduction programme had been put in place.Both Mr Pfeiffer and Ms Penney gave oral evidence, to which I will hereafter refer, about being prepared to recommend to higher authority that the defendant be given further credit, notwithstanding the then recent limitation of overdraft just mentioned.
I turn to Clause 28 of the Schedule to the contract of 14 May, as amended on 17 August.The amending agreement is as follows:
"The provisions of Clause 28 of the Schedule is the said agreement" [that of 14 May] "shall have no effect from (the) date on which that portion of the new access track .....is completed by the Vendor and the Vendor will not thereafter be under any obligation to maintain the original access farm track marked on the plan to the said agreement" [I note again that no plan was marked on the plan annexed to the agreement of 17 May] "but it will maintain the access farm track constructed under this agreement and the Purchaser shall notify the Vendor on each day it considers the access farm track is not able to be used for the transport of felled standing timber."
The schedule's plan shows a track running south east to the turn-around point [shown by a square], and then runs north east between blocks B1 and B2, to the western corner of block C, where it again turns at a right angle to run south east along the western edge of block C.
The primary issue in this case is the impact of Clause 28 of the Schedule upon Clause 6 of the Schedule, which required the defendant to move in any month standing timber to an amount equal to 70 tonnes for each business day in that month.At $20 a tonne over 20 days this was approximately equivalent to the payment of $28,000 a month.The plaintiff argues that Clause 13 of the Agreement takes primacy over everything else in the Agreement or the Conditions of Sale, including Clause 28 of the Schedule.It is clear from the evidence that the defendant did not meet its obligation under Clause 6 of the Schedule. From Exhibit D21, it seems that the weight of 3 truckloads of timber would amount to 70 tonnes, more or less, depending on the weight of individual loads, some of which vary considerably.
The defendant, on the plaintiff's records, took out three loads a day on one day in May, two days in June [on one day the defendant says it removed four loads], three loads on 4 July, three loads on 18 and 19 August and, according to the defendant, one load in September prior to the termination of the contract.After termination, the defendant removed, between 26 September and 15 October, two loads a day on four occasions, three loads a day on five occasions, and four loads a day on four occasions.This is a high rate compared with the removals over periods of similar duration prior to the termination of the contract.Only 276.32 tons of CSR logs were removed under the May contract and Exhibit D46 shows that this was in the months of June and July.A total of 1916.65 tonnes of the more profitable preservation timber was on the defendant's figures removed from May 10 to 15 October.Some loads of timber, I was told only 2, though I think this is doubtful - were not weighed, and some timber which had been felled was destroyed by the defendants, in the sense that it was made unsaleable.
Clause 13 of the Agreement is in strong terms.It begins:
"Notwithstanding anything else herein or in the Conditions of Sale the Purchaser agrees to pay the sum of $28,000 on the first day of each calendar month ......"
The plaintiff's right to terminate the agreement for any breach of the Agreement does, however except , a breach of Clause 6, the defendant's obligation to remove an amount equal to 70 tonnes for each business day.
Clause 28, however, provides for the case of the inability of the defendant to transport felled standing timber by reason of the track being unable to be used for transport.If the purchaser were to notify the vendor of such unfitness some legal consequence ought, in my view, to follow, and it would seem to be one which excused the purchaser from its obligation to remove 70 tonnes on each business day.As the sum of $28,000 matches, as the plaintiff's counsel pointed out, 70 tonnes a day at $20 a tonne it would seem that notwithstanding the introductory words of Clause 13 of the Agreement,the obligation to pay $28,000 a month might be relaxed by lack of the ability to enter or egress. But that relaxation would depend on the notification to the plaintiff of the defendant's inability to use the track on each day on which the purchaser considered the track unable to be used.
I turn now to the evidence about the condition of the alternative track, notwithstanding that it was not until 17 August that the plaintiff was under a formal contractual obligation to maintain it.There can be no doubt, however, that the plaintiff informally agreed to the use of the alternative track and had had about 12 days work put into its construction as well as some time spent on it on later occasions at, according to Mr Bennett's evidence, the request bythe defendant or its workers.Lack of access was clearly in the interest of neither party.
The plaintiff's position was, however, better than the defendant's, which had borrowed considerable sums for equipment to harvest and transport the timber. Under the contract the plaintiff would be entitled to $28,000 a month even if the defendant removed little or no timber.I think, however, that the plaintiff was genuinely anxious to have the forest cleared so that it could use the land for pasture.Again, if more than $28,000 of timber was removed in any month the plaintiff would receive more in payment and hence, no doubt, its insistence on the defendant keeping and producing records of the weights of loads from the weighbridges which were to be used.
There was much evidence on the subject of the condition of the alternative track, both expert and lay.I will deal firstly with that of the expert witnesses on that matter, who were Mr Grounds, Mr Jones and Mr Cavagnaro.The first-named was asked by the plaintiff's solicitors to prepare a report, which he did after inspecting the alternative track.He said that he had taken samples at seven locations with a hand auger to a depth of up to 0.45m and had used a dynamic cone penetrometer at 13 locations at depths of up to 0.9m.He tested on both favourable and less favourable areas of the track as well as on an adjacent unsurfaced track.
Mr Grounds reported that the track was about 0.8 km long and ranged between about 3.0m and 3.5m in width.The track was largely in a small swale with the natural ground surface gently rising each side of the track.I refer to his summary of surface course thicknesses in Exhibit P29, which included reference to three potholes, being 75, 70 and 10-20 mm deep.
I will set out verbatim paragraphs in his report hereunder:
"4.1 Subsurface Profile
The access track appears to have been surfaced with a natural material won from an adjacent borrow pit.From an engineering viewpoint, the surfacing material (basecourse) can be described as a brown, fine to medium grained silty sand with a varying proportion of light brown sandy limestone gravel.The limestone gravel ranges up to about 85mm in size and at the eight locations investigated was visually assessed to comprise between about 10% and 40% (by mass) of the surfacing material.The limestone gravel was generally friable and was generally broken down during sampling or could be readily broken by hand pressure.The thickness of the surfacing material typically ranged between about 60mm and 150mm as shown in Table 1.However, in the base of potholes and ruts in the access track surface the surfacing layer was generally thinner, ranging between about 20mm and 60mm at the locations sampled.
TABLE 1: SUMMARY OF SURFACE COURSE THICKNESSES
Location Approximate Chainage (m) Thickness (mm)
1 80 100
2 180 95
3 280 150
4 335 75 (pothole)
5 380 60
6 480 120
6a pothole 1 70
6b pothole 2 10 to 20
7 580 145
8 620 150
Note: CH 0.0m at farmhouse end of access track
DCP tests indicate that the upper 100mm to 200mm of the access track profile would typicallyhave an average insitu CBR of about 20%, indicating moderate stiffness.In surface depressions where water had ponded, some softening of the upper pavement profile was evident, with CBR values of about 6% in the upper 200mm.
Underlying the surface course of silty sand and limestone gravel, the natural soil (subgrade) comprised a 50mm to 100mm thick layer of dark grey brown sand overlying a light brown and yellow brown sand which extended to the limit of the investigation (450mm).The upper dark grey brown sand was the former topsoil layer and numerous fine roots were evident in this zone.
The DCP tests indicate that the strength and stiffness of the subgrade material generally reduced with depth.Insitu CBR values in the upper 300mm of subgrade typically ranged between about 10% and 20%, whilst below a depth of about 600mm, CBR values as low as about 5% are evident in some locations.The lower CBR values at depth are not considered to be particularly significant from a pavement design viewpoint.
4.2 Surface Conditions
The surface of the access track is characterised by the presence of numerous depressions or hollows which are typically confined to the two wheel paths. The depressions range between about 50mm and 150mm deep and are generally associated with wheel ruts and potholes, which are defects commonly observed in unsealed road pavements.Photographs 2, 3, 4 and 5 show general views of the surface depressions.The potholes and ruts occur at irregular intervals along the access track.In some sections, three or four may occur within a 10m to 20m length, whilst other sections are relatively free of such defects.In most instances, the thickness of the surface course in the potholes and tuts is thinner than elsewhere and in places shoving [sic]of the surface course and underlying subgrade has occurred.
Some wheel ruts extend over a distance of several metres, whilst the smaller potholes are typically about 1m in length and therefore provide a much more severe change in the surface profile.Due to recent rain, some potholes contained up to about 20mm of water at the time of the site visit.Softening of the upper 10mm to 20mm of the profile was observed in some potholes where water was ponded.
The ruts, and in particular the potholes, create an uneven surface which would impair riding quality and limit vehicle speed along the track.
Apart from the potholes and ruts, the surface of the access track was relatively smooth (Refer to Photograph 6) and free from closely spaced corrugations which often occur on unsealed roads.The surface was firm and no evidence of soft, slippery or boggy patches (which would be expected to adversely affect trafficability) were observed.Whilst some softening int he upper 20mm or so was noted in some water filled potholes, the softening was not considered sufficient to adversely affect trafficability.No significant tyre prints were left after trafficking by a small 4WD ute.
The surface condition of the adjacent unsurfaced access track used by off-road log carriers was also in a relatively sound condition.No extensive wheel ruts were noted and tyre imprints were generally less than 5mm deep (Refer to Photograph 7).This suggests that the natural soils provide a reasonable foundation material for road pavements.
The longitudinal and transverse drainage conditions along the access track were relatively poor and it would be expected that during heavy rainfall, water would pond on the pavement surface or near the edge of the track.No evidence of wash-outs were observed suggesting that erosion of the access track from runoff from the adjacent hills is not a significant issue.The natural sandy soils are expected to be of relatively high permeability so that vertical drainage would be expected to occur relatively quickly and as a result surface water would not remain ponded adjacent to the track for extended periods.
5.0ASSESSMENT OF TRACK SUITABILITY FOR USE BY LOGGING TRUCKS
5.1 Design Loading
It is understood that the access track is required to provide access for three unladen semi-trailer trucks and three laden semi-trailer trucks per day, five days per week for a period of 12 months.Assuming the laden trucks were loaded to a maximum permissible axle loadings for public roads, and adopting typical axle loadings and configurations for unladen semi-trailer trucks (Reference 1), the design traffic loading for the access track would be expected to be of the order of 2600 Equivalent Standard Axles (ESAs).A design traffic volume of 2600 ESAs is relatively low, consistent with a minor residential street.For comparison, design traffic volumes for major arterial roads commonly range between 1 and 100 million ESAs.
5.2Assessment of Structural Adequacy
The function of the access track is to provide temporary access for a limited number of trucks at speeds considerably lower than normally expected on public roads.The access track is not intended to form part of a road network linking towns or the like and therefore the design, construction and maintenance requirements must necessarily differ from those commonly adopted for public roads.In particular, it would not be unreasonable to expect that compared to public roads, the access track would be constructed of lower quality materials and have less favourable characteristics with respect to riding quality, surface roughness and maintenance requirements.
Surface observations and DCP testing indicate that the track would be able to support the wheel loads applied by a semi-trailer without excessive distortion, although regular maintenance would be required during the design life. Furthermore, the surface of the track was not observed to be slippery, soft or boggy, conditions which would be expected to adversely affect trafficability.
Conventional pavement design procedures involve assessing an appropriate design CBR for the subgrade material and based on a design traffic loading (number of ESAs) selecting an appropriate thickness of surfacing (basecourse) material from published charts or equations.The thickness of basecourse is commonly determined on the basis of limiting stresses and strains in the underlying subgrade to an acceptable level.The pavement basecourse material for unsealed roads would normally be expected to have a CBR at the design insitu moisture condition of at least 60%.
Assuming that the underlying sand subgrade has a insitu CBR of 10%, then conventional engineering design procedures indicate that the required thickness of pavement surfacing material would need to be about 100mm for a design traffic loading of about 2600 ESAs.
Since the thickness of the surfacing layer is thinner than 100mm in places and the insitu CBR of the surfacing layer is likely to be less than 60%, some permanent deformation of the subgrade and access track surface would be expected during the design life.Such permanent deformations would need to be graded in order to improve rideability and reduce the incidence of soft, boggy areas forming during extended wet periods.
5.3Material Quality
A laboratory testing program would need to be undertaken to reliably assess the engineering properties of the surface course material to allow comparison with published guidelines for unsealed public roads (eg NAASRA - Reference 2). However, based on a visual assessment, it would appear that the material used as the surfacing course would comply with some of the requirements for an unsealed basecourse material given in Reference 2, but would possibly fail to meet the suggested limits for other tests (eg CBR).However, it should be noted that unsealed pavements in remote regions are often constructed using materials of lower quality than recommended by NAASRA and pavement performance is satisfactory.
Overall, it is judged that the surfacing material used in the track construction is suitable provided regular maintenance of the access track is undertaken during the design life.
5.4Riding Quality
The numerous potholes and wheel ruts in the surface impair the riding quality of the access track, even for passenger cars.It would therefore be expected that trucks would need to proceed relatively slowly in order to reduce the risk of structural damage to springs, chassis and the like.
Coffeey Partners International Pty Ltd are not experts in the field of truck driving and can offer no opinion on such aspects as the maximum allowable speed and potential damage which could be caused to trucks.A trial run with a laden semi-trailer would appear to be of use to assess riding quality and operational constraints.
6.0 SUMMARY
Based on the observations made at the time of the site visit and the results of the limited laboratory and insitu testing, the following comments are provided to address specific issues identified in the brief from Piper Alderman:
ù the condition of the access track would not appear to be unreasonable given the functional requirements of the pavement identified in Section 5.1 of this report.The condition of the track is judged to be similar or better than logging access tracks observed by the author in other parts of South Australia;
ù with the exception of some localised weaker areas associated with surface depressions where water was ponded, the strength and stiffness of the surface course and underlying natural subgrade soils are currently considered adequate to allow access for a laden semi-trailer with axle loadings not exceeding the legal axle loading for public roads;
ù the presence of numerous potholes and ruts in the access track surface would be expected to adversely impact on the riding quality.Trucks would need to operate at relatively low speeds to maintain driver comfort and reduce the potential for structural damage to both trucks and the pavement.This would result in an increased travel time along the access track compared to a similar distance along public roads.However, it is considered that an experienced logging contractor should have expected that the operational speed along an access track would be less than for a public road;
ù regular maintenance of the access track would be necessary during the 12 month design life.Without regular maintenance, it would be expected that the condition of the access track could deteriorate to a state where trafficability was severely impaired;
ù it would be preferable that the maintenance work would include increasing the thickness of the surface course and improving surface drainage;
ù it is understood that the access track has generally not been re-graded since placement of the surface course some 4 to 5 months ago. During this time it is understood that the track has been trafficked by laden semi-trailers and it would be expected that the condition of the track has gradually deteriorated to its current state.Since the access track is currently considered trafficable, it follows that the track would most probably have been trafficable during the last 4 to 5 months.Since the properties of the surface course and subgrade materials do not appear to be particularly sensitive to moisture content changes, trafficability is unlikely to have been significantly affected by rainfall.However, some localised softening of the surface course may have occurred after heavy rain, particularly where water may have ponded for some time."
Mr Grounds said in his oral evidence that regular maintenance of the surface of the track by grading would have to be done.He was cross-examined, and agreed that if at some point the track was totally unusable it would make the whole track unusable.He agreed that he had assumed an axle loading of 36-40 tonnes.A loading of 42.5 tonnes would mean more frequent maintenance.He said that he would not expect extended periods of ponding on the edge of the track as the water would drain away into the natural sands, but on the track itself water ponded where there was a pothole or rut.These were numerous. He said that he would find it very surprising if it had been found to be very slippery.He said that when a vehicle started off was when you were going to get wheel slip.Asked about the stilts of trailers sinking into the ground if unattended, he said that the little wheels on the stilt would have a point load much higher than conventional tyres and might well sink into the ground if not supported by pieces of timber, but did not see any areas where he would expect wheels under a static loading to slip.He would expect some permanent deformation of the sub-grade and surface where the surface layer was thinner than 100mm, which would need to be remedied by maintenance, or the situation would become worse.
Mr Grounds was quoted parts of a report of another witness, and said the "trafficking" of natural soils without surface material would result in relatively rapid deterioration, but with the addition of a surface wearing course trafficability would be improved, but you would not without some maintenance work being done, get 2600 equivalent standard axles.He said that the writer of the part of a report quoted to him was talking about tracks which had not been surfaced with any material, such as limestone, rubble and that the performance of such tracks would be significantly deterrent to the type of track which he had looked at.He said that if one load rather than three loads per working day was taken over the track it would reduce the loading of 2600 ESAs by about a third and that you could possibly get away with a slightly thinner wearing surface than 100mm, which might be 75mm.
Mr Jones, a consultant engineer, provided a report for the defendant dated 13 June 1995.He went to the tracks and took samples of soil which he sent to Golder and Associates for examination.Four of the samples were taken from the northern track and only one from the alternative track.Mr Jones described the alternative track as relatively flat.Sample 5 [on photograph 5] was, he said, 300m down the track.
Mr Jones' letter of 13 June 1995 is largely a brief precis of the report dated 30 May 1995 from Golder and Associates.He was asked by Mr Cutherbertson for his view, based on that report and on his own experience of the suitability of the alternative track for logging truck movement.He said:
"logging in the winter, during the winter months, they would probably become untrafficable to heave [sic: semble 'heavy'] trucks or heavy equipment of any kind."
He was asked if there was a difficulty once the surface skin had been penetrated, and said:
"It's the nature of these soils that they can take a certain amount of traffic and then they break through, the top breaks and subsidence takes place.The tracks just bog up."
In cross-examination, he agreed that photograph 5 of Exhibit P29A showed two tracks alongside each other, one which appeared to have a surfacing of limestone rubble, but that the other appeared to have no surfacing at all.He said:
"we took a sample in the sand just to the side of the track",
when he was asked if the sample was from the track to the left hand side of the photograph, which apparently had no surfacing at all.Of the two tracks, he said, one appeared to have a surface and one did not.He took his sample from the natural ground on the side of the track [my emphasis].He said that he was interested in what was under the (surfaced) track, ie the soil itself, prior to any surfacing by limestone rubble.He said that he had not been asked to express an opinion as to the surface with rubble on.I then allowed a question, objected to by Mr Hoile, on the terms that he would be able to cross-examine on any new material introduced.Mr Jones said that generally in the South East with soils of that type and from traffic anticipated, there would be a minimum of 300mm of limestone rubble placed over the top.
In that further cross-examination, he said that he did not use the dynamic cone penetrometer of which Mr Grounds spoke.He had the instrument but did not take it with him on the inspection.He said that he could not dispute what Mr Grounds had said about the California bearing ratio of the soils of the tracks, showing that 100mm of limestone rubble would have a surface sufficient for access and egress of three fully laden trucks per day over a period of one year.He had made no attempt to analyse or apply the California bearing rates.Mr Jones said that his experience would not agree that 100mm was sufficient.Most of the paving used in many of the mills would have 300mm underneath it.There would, in those places, be certainly more than three passages a day.He said that he could not dispute Mr Grounds' opinion the California bearing rates was in the order of 20%.He said that he could not dispute Mr Grounds' opinion that to achieve 2600 Equivalent Standard Axles, as he would have no way of knowing.He could not dispute it.His opinion was he said not related at all to the rubbled track but simply to the soil.He said that his observation to the soil being clayey was limited to the northern track.He said that it was necessary to achieve some run-off from the surface of the limestone otherwise the wheels would create ruts which would get wet and slowly disrepair as some drainage was necessary.He said that it was important periodically to maintain the track and in particular to fill in potholes and wheel ruts, as if this was not done in a short space of time there could be severe impairment of the track.He was asked if the limestone rubbled track was regularly maintained, the potholes topped up and the wheel ruts limit access should be practical [sic: quaere "practicable"] and quite feasible.He said that access would certainly be maintained for longer.
Mr Cuthbertson did not seek further to re-examine the witness.
Mr Cavagnaro is a civil engineer and has as his field of interest geotechnical engineering, which is the study and practice of soils, rocks, pavements and building foundations.In 1995 he was working with Messrs Goldner Associated Pty Ltd.His work is referred to and incorporated in a report partly compiled for the defendant by Mr Jones.Exhibit D13 was largely the result of Mr Cavagnaro's work.His task in the compilation of Exhibit D13 was the analysis of the soil samples taken by Mr Jones from the plaintiff's land.He had not himself seen the site from which they were taken.There were two samples from the alternative track, taken by Mr Jones.The upper sample, with the depth 1 to 120mm, was a silty sand and the other from 120 to 250mm was a fine to medium sand.They were very similar in appearance but the upper sample had more silty fines in it than the lower sample.I note that the first four samples were from the northern track.
Mr Cavagnaro said that it had been his understanding that the soils examined by him were taken from tracks formed by vehicles driving across the surface, without the use or addition of any kind of imported material.His view was that the soil would not be suitable for use as a sub-grade or as an unimproved pavement surface.The soil from location 5 [by the edge of the alternate track] would not be suitable on its own.He had not been supplied with any material described to him as being an imported rubble, or metal.
Mr Cavagnaro said in his report:
"When conditions on a particular section of track became impassable, the vehicles were forced to take alternative routes and develop a second track adjacent to the first one."
His conclusion was, he said, based on inferences drawn from the photographs. It was suggested to him that sample 5 was taken from soil off the white rubble and into what appeared to be dark brown sand.He agreed that the samples were dark brown.He could not comment on the suggestion that the white material in the middle of the photograph was imported rubble.He was not asked to examine any such material.The photographs, he said, showed use by a vehicle but he could not determine of what size it was, nor could he say whether the ruts in the dark brown sand on the left were caused by a 6-wheel drive forwarder.
I note that Mr Grounds' inspection was on 29 September 1994 and that Mr Jones' inspection must, I think, have been made in May 1995, about eight months later. Mr McDonnell used the track when clearing the north west half of B2, which he began to do in about June 1995.He was asked to describe the condition of the track, and said that on the basis of what they were used to working on it was average to a bit below average.He said that they had used the turnaround (shown on p30 of Exhibit P1 by a square where the track runs at a right angle) for loading but had also loaded at the top of the hill by the fence line of B1 and B2.
Mr McDonnell said that he had raised the question of the state of the track with Mr Bennett on only one occasion.He had asked him to fill in some potholes in the track, which Mr Bennett did within a day or two.Mr McDonnell said that he could not recall being at the plantation when it was raining but he was certainly there when it was muddy and the conditions were not ideal.He said the areas where there was limestone near the surface would keep water after rain and would bog up pretty quickly, but that where the soil was deep the ground dried out pretty rapidly.He was asked if he recalled experiencing any real difficulties in getting timber out on the trucks by the alternative access track.He said that they might have an odd day where it had rained, when they would not come to the top of that hill.What they would do as an alternative if it rained overnight was to work off the back half of the compartment for a day or two, and would move back when the ground dried out.
In cross-examination, he referred to the plan in Exhibit D1 to show the routes by which he removed the timber from B2 and C.He said that he and Mr Bennett had looked at the original access route but that he had immediately dismissed it as unsuitable.[He later said it would be impossible to get a 42 tonne load out.]He said that they had, before beginning to fell trees, moved cut logs from the top of the hill and forwarded them to the bottom.They shifted material from the turnaround point, also from opposite the pit.They had taken a small percentage out of the forest, but most of it was in heaps on the forest edge.Mr McDonnell said that it was standard industry practice to move timber to the track over a distance of 500 metres.
Mr McDonnell had said in examination-in-chief that at the time there had been a good demand for timber for preservation, but that he never took anywhere near 89.5% of preservation timber from B2 or C.He would be very surprised if they would have cut half that amount.In cross-examination he said that there was large demand for preservation timber and that they cut as much as was reasonably practically available.
Mr McDonnell said in re-examination that it took two to four days to clear already felled timber from A and ten days to a fortnight to clear A of standing timber.He said that a good hand feller could fell about 20 tonnes of timber a day but that the processwhich his firm used, which cut down the tree as well as processing it, could fell about six or seven times as much.
Mr Cole gave expert evidence.He was formerly the assistant director of the Woods and Forest Department.He inspected the plantations on 5 and 6 December and submitted the report which is Exhibit P27.He refers to them as I, II and III, rather than A, B, and C.He referred to the trees remaining in Lot A, saying that 5-600 tonnes of timber was at risk of windthrow, and said that there was a fire hazard in the large perimeter of debris left at the felling faces of all three areas.He said that log of the age of the subject timber was not attractive to many processors and that there was a surplus of similar material closer to the S E utilisation system which makes such material difficult to market.
His report refers to the defendant's operations as follows:
"2. Cut timber remaining on the property has little value now.
The offcuts are of no commercial value.
There are recently cut and still usable logs lying within all the plantation areas.I doubt whether any would be of interest to a user unless they were retrieved as part of an operation aimed at tidying the site or continuing logging.The condition of this material will not change significantly until the rains begin in 1995 then they will deteriorate rapidly.Total volume of this is estimated at about 200 tonnes in lengths from 2.4 to 5.4m.
The remaining cut log lies in various stacks adjacent to plantations or near the spot mill site is already beyond the usable condition.Total volume estimated at 400 tonnes.
3.Felled timber condition.
The rate of deterioration depends on conditions at the time of cutting.Logs cut at the end of operations dried quickly and although some end checking (small splits) is evident, the bulk of this log could still be processed without significant loss of timber grade.Unfortunately almost all of this is scattered and in a variety of lengths complicating any effort to recover the estimated 200 tonnes.Once rains and higher humidity start, fungal growth will develop, causing, first stain and loss of appearance, then eventually progressive fibre weakening.The effect is greater in young log such as this.
The fact that much of the 400 odd tonnes of stacked log is low grade poorer form material means that at best it was unattractive as a utilisation prospect and now being stained and checked is of no commercial interest.
4. I believe the question of marketability of cut log has been answered in 2 and 3.However I am not sure of the ownership of this material.
5. The rate of deterioration of cut material is subject to weather but some degrade will begin within 2-4 weeks of cutting.Log form, age, and size all affect the speed with which its value decreases to nil but for young material of mostly indifferent quality and located well away from processing facilities like this I would expect it to be of no value after 6 months.
6. Remaining stands vary and except in one limited instance are not significantly affected by the actions of Tugal Pty Ltd.
That instance lies in area I where 2 strips of standing timber, only a few rows wide, remain of the S E section of that area.
Trees within these strips are unstable and subject to windthrow.In fact some have fallen since operations ceased and upper level damage is in progress. Some 5-600 tonnes is at risk.
Although there will be minor losses from windthrow in any areas where some felling face has been opened no significant damage is likely in my view.
Probably the most serious problem arises from a large perimeter of debris left at the felling faces of all 3 areas.This constitutes a fire hazard and may also increase vulnerability to insect attack this year.
Incidentally I noted very limited old evidence of Sirex but no new infestation, so perhaps control measures in adjoining plantation areas have assisted.
I have included some details of each of the 3 areas as appendices for convenience.However, I should mention that log of this age is not attractive to many processors and there is a surplus of similar quality material closer to the S E utilisation system which makes this material difficult to market.
7.Tugal Pty Ltd operations.
Ground inspection indicates the standard of operation varied during the whole 9 months.There are signs of either failure to supervise field operators, or lack of operator skill, or more likely a varying combination of both.The variety of log specifications, the collection of some logs but not all and what appears to be frequent changes in operational system increased waste and probably operator frustration.
It is hard to believe that any one with experience in pine utilisation would have seen this project as other than extremely difficult.
Two products in high demand in 1994 were vineyard poles and quality sawlog. The former requires good form low taper stems with fine limbs, a combination that is almost always associated with well stocked plantations.Because of the very poor stocking of much of the Burk's Island planting the possibility of selecting sufficient volume to bother about separation from other log was limited to a few dispersed patches.
Quality sawlog suitable for other than packaging grade timber is rarely cut from stands less than 20 years of age and then only when stem form and limb size are exceptionally good.Very little of the Burk's Island resource fits those specifications.
I class most of this resource as pulpwood and low grade mill log.Both are available in quantities surplus to the level of current demand closer (and therefore less expensive) to the utilisation plants of the Green Triangle region.
My discussion with Mr Bennett confirm there were numerous machinery and workforce problems.Average delivery over the 9 months was less than 25 tonnes/day which could not be financially viable.
I can only guess that the project started with unfounded optimism and operational changes made in an attempt to reduce difficulties as they became obvious probably only made the situation worse.
In my view the project could only have succeeded with an exceptional and unusual combination of circumstances."
He says that the defendant's operations does not seem to have affected the remaining stand in either value of marketability.He then discusses access:
"9. Access.
The only potential problem in the basis of 70+/day output rate appears to be over approximately 1 km from the W edge of area II to the spot mill site.
I could see no evidence of any real transporting failure prior to the cessation of the Tugal operation.
In my view the current state of that part of the track would not sustain all weather traffic at 70+/day without excessive damage to the track and associated transport downtime.
A restart of operations should include reforming and rubble surfacing this section together with some improvement of access over 600-700 m between areas II and III.
There is a need to attend to egress from the standing (Southern) part of area II which has been partly blocked by dozing that N S track.
Some development of access between the N & S parts of III might be worth discussion with any new contractor."
Mr Cole said that his remarks about the track were based on observation and experience, and he had undertaken no testing or analysis.
In his oral evidence Mr Cole discussed the various product categories of timber, which he had said in his report was a difficult exercise.He said that a harvester could shift about 2/3 of a tree from one product category [saw log, pulpwood or preservation type] to another.He said that he would say that a suggestion that 89.5% of the whole forest would be preservation timber was ridiculous.However, the product mix could be shifted, and there was at the time quite a high demand for preservation timber.
Mr Cole said that there was a range of part loads of a large number of products left lying around, none of which in any one location was in sufficient quantity to make up one single load.
Mr Cole said that there were difficulties in dealing with materials less than 20 years old [apart from some trees in A this was largely the case in the rest of the forest].He said that the fact that Burk's Island is far from the processing plant would mean that cheaper timber would be available.Demand had to be high before people would stretch out for it.He said that there was a surplus of young material, which would be nearer the processing plant than Burk's Island was and which was generally of a better form.He remarked that a suggestion of $13 a tonne being paid for pulp wood by CSR was very limited, and would have said that it was unlikely that it would buy any at all.CSR might buy it but only as a carrot to produce further sales.
Mr Cole then referred to Appendix B to his report, remarking that B2 was the most valuable of all areas.Block C was exceptionally stony with difficult access and was poorly stocked, with unattractive trees but 4 to 5 hectares had trees of good form and were moderately well stocked.If retained they would produce valuable log in a few years.
Mr Cole said in cross-examination that when he had said in his report that the [alternative] track would not sustain all-weather traffic at 70 tonnes a day without excessive damage and associated downtimehe wasin actual fact suggesting that it would need some maintenance to do so.A black soil derived from limestone would cause difficulty, as it tended to be high in clay content and became greasy quite quickly. This caused slippage and difficulty in steering, and operator skill was very important.A skilled contractor would recognise the signals and adjust accordingly.The track was certainly going to require a certain amount of, an increased degree of, maintenance. Maintenance would be by rubble delivery - on time - which would be sufficient to get you out of trouble.If it was left too late and track deterioration went beyond its early stages the haulage system would come to a halt.Mr Cole, it became clear, had no knowledge of the incidence of liability for maintaining the track in this case.The reforming and re-surfacing of the track before the re-start of operations would have been fairly minor works. 70 tonnes a day could not in winter be sustained.Mr Cole, it will be recalled, said that the only potential problem to an output of 70+ tonnes a day appeared to be from the western edge of area II [ie the western edge of B1] to the spot mill site.
Mr Cole said that the alternative track would not be a very appropriate access for semi-trailers to take logs from the N E side of B1.He went on to say that there was another track there anyway so (it) would be the logical ...... [at this point he was cut short by Mr Cuthbertson's next question.If he was referring to the northern track that, as is known, had proved to be impassable.]
Mr Cole said that he would find it hard to believe that 60% of the material which came out of the forest would be preservation timber, but if counsel was talking about the proportions of material which were finally marketed in one form or another it was possible.But he could give no answer unless he knew what other products they were talking about.
Mr Cole said that he had driven along the northern track but was not asked to provide any report in relation to it.He said that he did not see it as being other than one of the mix [semble: six] routes that could be used for future extraction.Both tracks had portions which were going to be suspect in certain conditions.If there were more routes the more you could survive without track upgrading.
Mr Newman, an eminent forester, was called by the defendant.Much of his report, Exhibit D49, is devoted to matters affecting damages:the counterclaim was extensively amended at the trial, apparently because of what Mr Newman had said in his report.I will, if necessary, refer to these matters if my findings are in favour of the defendant.On the issue of the liability he was asked to assume that access on the areas marked 1 - 5 on Mr Jones' report was extremely poor in winter periods.The next sentence in the request for his opinion also set out by Mr Newman in his report, I find hard to make sense of: perhaps some words have been omitted?
After a well-grounded objection by Mr Hoile, a question about road construction was withdrawn by Mr Cuthbertson.Mr Newman said that if the northern track was open to semi-trailer traffic, a hand feller, a Steyer processor and a forwarder would be able to remove 70 tonnes of timber a day.He said that the northern track would have advantages over the alternative track.He said:
"Well, I mean the issue as I would see it is the operation consists of a person cutting the trees down, but that the rest of that operation being done by the Steyer and on that basis starting from that side it was dealt with the aspect and therefore it was easier for the Steyer to work.But the disadvantage of coming round to what effectively is the south-westernside is the transit distance."
He said that he meant the transit distance for the forwarder.
Mr Newman said that if 70 tonnes a day were not being moved with the equipment available, one would have to look for other causes than the amount of equipment.The causes one could imagine were machinery failure, personnel failure, access failure, or the number of hours worked.
In cross-examination the witness said that Mr Smibert had told him that there was rock in the quarry which was available to be put on the road but which had not been.He said that seen from a distance it seemed to him that it was likely to be suitable.He agreed that the alternative track gave access to the centre of lot B in a way that the northern track did not.
Mr Bennett is the manager of the plaintiff's farm.He kept a diary of events on the farm.About two or three months after the December contract was made he said that Mr Smibert and he drove along the alternative track to the gateway which leads to B1 and B2.He said felling of A began on 14 January.He recorded the trucks leaving their property, whether they carried a full or a partial load.The truck driver signed the entry.He said on 7 March 1994 a meeting took place at which he, Mr Raphael, Mr Smibert and Mr Biggins [an employee of Mr Smibert] were present.By that time about 40% of A had been felled.Mr Smibert drove them to the north west corner of B1 where Mr Smibert said there was more preservation timber, and that they would be able to harvest more timber.He said that they discussed extracting the timber from B1.Mr Smibert asked if it was possible for him to use the alternative route as it would give him access to the middle of B1 and B2.The track was then a two-wheel farm track, with no surface.They went along the alternative track almost to the gateway of B1 near which there was a flat area which they agreed was a good possible site for the turnaround point for loading timber.There was a discussion about some points on the track needing to be rubbled because the track was a bit sandy, and they agreed that the plaintiff would try to bring the track up to a standard where it was useable by semi-trailers.He described equipment which they had which could be used for road making.Next day and the day after he began putting a topping on the track, flattening it and levelling it.They used rubble from the rubble pit and spread it from the pit to the turnaround point, where he put a quite extensive pad to allow room for a semi-trailer to be parked.
Mr Bennett said that the four or five fellers in A used chain saws, and worked in different areas of the block.He said that he had put rubble over the alternate track to an approximate average depth of 100mm, the depth possibly varying between 150 and 50mm.He said that trucks and trailers had used the track going to the turnaround even while they were making it to go to where the empty semi-trailers were parked, i.e. the turnaround.He said that he was never asked to do something on the track by Mr Smibert or his workers.He said that the defendant's forwarder was ineffective.It was replaced about the same time as the Steyer processor arrived, on 18 May.He said that he then saw the Steyer in operation.He said that it was extremely unreliable between the day of its arrival and its being taken away for repair on or about 5 July.A minimum of twice a week a mechanic or electrician came from Mt Gambier to attend to it, and the defendant's own staff also worked on it.He could not recall a single day on which it did not break down, and on one occasion the head broke off and fell to the ground.
Mr Bennett said that up to the Steyer leaving the forest for repair he did repair work on the track on numerous occasions.It was part of his duties to check the condition of the track, which he did daily, and if something was not right he did something about it.He said that the workers would say that the track was a bit rough and ask him to work on it, but only once did they ask him to repair a particular point, which he did by putting more rubble down, spreading it, and rolling it.He said that quite a quantity of timber which had been taken out of the forest was stockpiled just outside the gate to B and the rest carried away.
Mr Bennett said that with the exception of one or two loads, all the timber removed from B was taken out on the alternate, not the northern, track.He said that he engaged an earthmover to bulldoze a piece of track within B which was causing difficulty to the forwarder.No further complaint was made about that track, and no complaint was made by the semi-trailer drivers about the alternative track being inaccessible, but at their request he did work on it from time to time.
Mr Bennett said that the Steyer processor was off the property for about 2 << weeks in July.Some hand felling was done during its absence.Mr Bennett was referred to p73 of Exhibit P1, a letter of 15 July, in which Mr Smibert said that he had independent advice the track was not accessible and that a corner where an accident occurred was in a dangerous state.Mr Bennett said that he was told that a truck had slipped sideways and had to be pulled onto harder ground.He said the next day he put more rubble on the area so that the track was accessible again.He said from time to time rain made the track wet but not, he believed, inaccessible.
Mr Bennett said that when the Steyer came back from Mt Gambier it was a "different" machine and performed quite well from that time.He did no work on the track in August, which he recollected as being the single most productive month of the contract.He said that on 13 July he had sought a quotation from Mr Teagle [and two other contractors] for raising sufficient rubble to top the track from the rubble pit to an area between B and C, and to further level the track earlier worked on by earthmovers in Lot B.The new levelling work was to make the track between B1 and B2 fit for trucks, not for the forwarder.
No other work was done on the track by Mr Teagle because the plaintiff terminated the contract about the time when he was raising the rubble.Mr Bennett said that trucks continued to use the alternative track while Mr Teagle was working on the levelling of the hill track, [i.e. the track between B1 and B2].He said that no further work was done on the tracks before Mr McDonnell came to the property, but once he began the job he, Bennett, did work on the track on three or four occasions, usually filling in potholes, for a total of about four hours during the period at which Mr McDonnell was there [It will be recalled that Mr McDonnell removed only the timber from half of B2 by way of the track.].
Mr Bennett referred to damage to fencing by Mr Smibert's workers, to timber destroyed by one of them, and to the fact that some loads taken after termination were not weighed.He said that Mr McDonnell finished felling block A in eleven days.
In cross examination Mr Bennett agreed that Mr McDonnell had been given permission to remove timber by way of tracks which the defendant was not permitted to use.He said that he could not remember if he had shown Mr McDonnell the northern track.He said that Mr McDonnell took out 13 loads of timber which had been fallen by the defendant:the timber was deteriorating. He had seen Mr Smibert trying to get a truck up the hill on the northern track. It was he who had asked him to rubble that track.He said that prior to the meeting on 7 March it was the northern track which was to be used.The loads taken out by it were taken on trucks at the bottom of the hill.[There is evidence that the forwarder loaded the trucks there.]He thought that the first trees felled on B1 were on the western side, but the bulk of the work was done from west to east.He did not see an incident where a truck had slid sideways on the alternative track and had to be pulled forward.Mr Smibert told him of it.He said he was never given fuel by the defendant but on one occasion he was given fuel in return for welding equipment.He said that there was never an occasion when his trucks were out of fuel and could not be used on the track.Entries in his diary about "no fuel" referred to his bulk supply. He said that there were no days when he did not have fuel to work on the track and told the defendant's employees so.He said that the farm telephone was cut off for one night and that the plaintiff was short of cashflow for a time but did not think that he had told the defendant's people.
Mr Bennett said that he had rubbled the alternative track in March.The ground was dry then but it was sandy near the gateway, so he rubbled that and a few other spots on the alternative track.He said that the trucks had got up to the gates above the turnaround on a couple of occasions, but that most of the time the forwarder brought timber to the turnaround.He said that the semi-trailer never waited near the spot mill to load pines from B1, with the exception of one or two loads which were loaded at the bottom of the hill near the corner of B1.He said that he had never pulled out a truck with a tractor, but had given the Tugal men timber to put under the legs of the trailers, which had the wrong sort of bottoms, to stop them sinking into the ground.
He said that the tractor which they had could not rip up rubble but could only scrape up small pieces of rubble.If saw log was going out he recorded it after the trucks were loaded.He calculated the loads from the volume, and recorded the tonnage.
Mr Bennett said that it was as a result of the meeting [on 30 June] between him, Mr Raphael, Mr Biggins and Mr Smibert that caused him to get a quotation from Mr Teagle.Mr Raphael might have said that he would fix up the track and extend it as far as B2 and C, but he could not recall the exact words.He denied that he had told Mr Biggins that it would be all right to fell the trees over [on to?] the fence as it was going to be replaced anyway.He said that they had cut the fencing on B1 one place allow the forwarder to get through but in other places the forwarder had simply driven over the fence.There were six or seven breaches.He said that they had to replace part of the fence of A, some in B2 and C, and that in all about 2000m of fencing needed to be replaced. He said that in June, July and August, Mr Smibert complained about access. It was not continually, but on occasions.
He said that the strainer posts in the fencing which was replaced by Mr Bellinger were supplied by the plaintiff without charge but they had had to buy the fence posts.
Mr Raphael and Mr Smibert both gave lengthy evidence.Before referring to it in greater detail than hitherto, I think it may be helpful to consider the evidence, mostly heard at Mt Gambier, of the men working in the operations conducted by Mr Smibert on Burk's Island.
Mr Simmons drove the forwarder in B2.He referred to slippery conditions in the forest [in respect of which it is not claimed that the plaintiff has any responsibility].He began work in June.The men worked from north east to south west.He said that he loaded the trailers at the turnaround until it got wet and they had to move back along the track to near the pit.He carried logs there on the forwarder.He said trucks got bogged, probably about twice a week when it was really wet.They would pull the truck out with the forwarder.He said that trailers left unattended at the turnaround, which had become pretty boggy, would sink and if they did you would have trouble hooking the prime mover up to the loaded trailer.Blocks of wood were used to alleviate the problem but you had only to move an inch or two and you could not hook the truck up to the trailer, and when you did it would start getting bogged itself.The driver would have to leave the truck hooked up and he, Mr Simmons, had to cart the wood to where the driver could leave the trailer or load the trailer hooked up.It took half an hour to load the forwarder, half an hour to get to the pit area if they travelled the full distance to it, half an hour to unload on the truck and half an hour back.The forwarder could not be loaded to its maximum because it would get bogged - only 7 to 8 tonnes as opposed to 12 tonnes could be carried.Rubble laid at the loading pad did not help as it was too late to lay any rubble.He said that very rarely did the forwarder have to wait for wood to be put on it.He said that on occasions he had to dump wood to avoid the driver having to unhitch the trailer.He said that they drove parallel to the track to avoid ruining it any further.It would have been easier to unload the forwarder at the end of the northern track, which would have meant less travelling.He had very rarely, in eight years' work as a forwarder, had to travel as far [as in this case].It was taking three rather than two loads of the forwarder to load the trailer.
Mr Simmons said that when a truck became bogged they would dig a bit or put dry limbs or posts under the tyres, and if that did not work they would have to get the machine [semble: forwarder] to hook a chain up to it and pull it free. Sometimes the truck was not actually bogged but its wheels would spin around particularly if the truck was unloaded.In his opinion, the main problem in getting timber out was the alternative access road.He said that when it got really wet he could not drive his work vehicle to where his machine was.He could only get to a certain point, and then have to walk.This was towards the end, when it was right in the middle of winter.He said that the distance over which the forwarder was driven to the pit was about a kilometre.
In cross-examination he said that after the Burk's Island job he had worked for Mr Smibert as a sub-contractor for about five weeks.He said that he had left the Burk's Island job before it had finished to set up a business with his father.
He said that when the Steyer was in Mount Gambier for repairs he caught up with the wood already felled by the Steyer but then had to wait for its return.He said that there was a couple of problems with the Steyer, and a few people came to try to fix it up.He recalled the names of a number of those put to him by Mr Hoile.The Steyer had had hydraulic, electrical and mechanical problems, including the rotator.He did not agree that before it went to Mt Gambier it did not operate effectively.It was not 100% of what it could do but it still produced the amount of wood which had to be produced.There were minor problems when it came back from Mt Gambier.He then said that it was a bit hard to answer a suggestion that before that it was not operating efficiently: it depended on what is "efficiently".
Mr Simmons said that he had stock-piled logs at the spot where the spot mill was.He said that he stockpiled logs near the turnaround when they had to.He said that only rarely did they load logs on to a trailer as the trailer would sink.The wood was stock-piled and later loaded on to a trailer when the truck came back.
Mr Simmons said that when conditions on the track were difficult they would leave their cars by the turnaround.They could drive from the pit to the turnaround, but with some fun and games, as it was pretty slippery.He said that he saw a truck get bogged and need assistance to move from another vehicle.The driver of the prime mover had taken the unloaded trailer over the edge of the rubbled area on to where there was only soil.On another occasion the same driver turned around on the turnaround area and became stuck, not bogged, and he had to pull him out.This was on the track itself.He had done his U-turn on the "padded" area but just on to the track he became stuck, or started to slip, so he pulled him onto dry ground.This was an unloaded trailer, which gets stuck easier than a full trailer in those conditions:He recalled no other occasion of having to use his forwarder, though he had heard of some trouble around the pit area, where the saw bench was.In that area there was a lot of vehicle movements - cars, trucks, forwarder going to the saw bench, and traffic dumping material in the pit.He said that it was not the best spot but by then the turnaround pad was so boggy that they could not use it or stop anywhere on the track.The truck drivers stopped coming to the turnaround and started to use the pit area, about a month before he left the job.He did some removing of timber from A.He agreed that timber from A was loaded onto semi-trailers near the pit area and that the semi-trailer picked up there timber from the saw bench at A.He said that it was the case that trucks with their trailers were unable to get to the turnaround.He did not know who had told him that, but if the trucks could not get in they had to stop at the next spot, which was where the sawmill was.
Mr Simmons then described a third instance of a semi-trailer being stuck at the turnaround.He had himself tried to drive it out, but had to use the forwarder to pull it out.He said that he was usually working inside the forest but he did remember a couple of times when an unloaded trailer had to be pulled out.He could recall no case where a loaded trailer was unable to get out.
Mr Simmons said that if the northern track had been accessible he could have loaded one trailer there and the next one at the turnaround [of the alternative track].There was, in this case, only one access track, so he had to come out there.He agreed that getting the forwarder over the rough terrain at the northern end of B was very difficult and it was easier to go to the access track [between B1 and B2].The terrain at the north west corner of B1 was very bad but it was not so bad at the north east corner of B1.He agreed that the only occasions on which he would forward timber from B down to the pit was when the timber, or some of it, was destined to go to the spot mill.If he had timber on the forwarder which was not going to the spot mill he would either stockpile it or load it directly on to a trailer at the turnaround.
In cross-examination Mr Smibert was questioned about Ex.D46.He said that on Mr Hoile's assumptions, the value of timber taken was $79,673.60.He agreed that that was close to the $84,000 paid as royalties.He denied that his letter of 5 July [p.64 of P1] was intended to describe difficulties which he anticipated might arise in Winter.It was not a smokescreen to avoid the fact that the Steyer was not going to be able to work for about 3 weeks in July.He agreed that there was never an occasion when he was unable to get a truck out from the place he had chosen to load it, with the exceptionthat if they were bogged for awhile, but they always got the truck out.He agreed that it was Mr Simmon's evidence it was on only 3 occasions that he had had to assist a stuck truck and that it was his evidence that those trucks were unloaded.He could not dispute that on 2 of those occasions the unloaded truck got stuck at the turnaround and that on the other occasion it got stuck near the spot mill, nor would he dispute that when the truck got stuck near the turnaround it was that the driver had slipped off the edge of the rubbled area onto the bare paddock. He said that it was Mr Simmons' suggestion that on the other occasions, near the spot mill, the truck had also got off the rubbled area and onto bare earth.
Mr Smibert was questioned about Ex P35.He said that the plaintiff company was set up solely and wholly for Burk's Island and nothing else.He said that after termination of that contract Tugal did small jobs.He did not deny that he had told Mr Pfeiffer that since the termination he had harvested a small forest and that he held preservation timber from it. He could not recall if he had told Mr Pfieffer that after that job he had spent 3 weeks on essential maintenance on the Steyr and the forwarder.He said it would be the case that he told Mr Pfeiffer that apart from 46,000 treated posts he had about $220,000 worth of debarked timber which was to be sold.He told Mr Pfeiffer that the Burk's Island contract had been terminated because of the non-payment of $28,000, not because he had withheld payment.It was the same thing.He would have said to him that he was not unhappy with the termination of the contract because he anticipated having another forest to go to in Victoria.
Mr Smibert agreed that Ex D38, showed a debit balance brought forward of $110,000 on 6 September, about $15,000 over the overdraft limit.The transfer of $20,000 was from Inturn and was to bring down the plaintiff's overdraft. His secretary would have written the cheque butt apparently recording a cheque of $28,000 for the plaintiff, but that he assumed that he had signed it. [semble: the cheque]The reason why thecheque was not presentedto the plaintiff was not that he knew that the bank would dishonour it.He was aware that at the time the cheque was drawn Teagle was actually working on Burk's Island but said that he had not been given the go-ahead to place rubble in the bank [as noted above, Mr Raphael intended to defer work on the track until the defendant had paid the $28,000 due on lst September].He said that he knew that Mr Raphael and he were playing legal games on the question.He knew that Mr Teagle was ready to do the work on a few days.He was asked why he didn't give to the plaintiff the cheque which he had already written and said that he was waiting for Teagle to do the work.He agreed that if the cheque had been presented on 8 September it would have sent his overdraft up to around $130,000, way above his limit of $95,000.He was asked if his associates companies no longer had in September the ability to top up the defendant's overdraft account.He said that he had access to shares to do that.He said that the associate companies were probably fairly high: [semble: near their borrowing limits].He was asked if it was not the case of his group of companies having hit the wall and that there were simply no funds available against which to draw the $28,000 cheque for the plaintiff.He said that he would have to check his records.[The records were then dealt with].
Mr Smibert denied that all the trailers, including that which had small [8" to 10"] wheels on its legs, used to sink and slide in the slush.He said a trailer having metal plates on its legs was no different.He said that the trailers sank into the ground even when their legs were supported by railway sleepers.It was extremely difficult to stop the legs sinking into the ground.
Mr Smibert said that the accounts of the defendant had never been discovered. He knew that such documents were relevant;he understood that he had to discover all relevant documents.It was an oversight that they had not been discovered.
Mr Smibert said that he had hoped to make a million dollars out of the plaintiff's forest.He was asked why, in that case, he had not paid the $28,000 due on 1 September.He said that he had had 3 months of sheer frustration, was denied reasonable access to the forest to get timber out.He did not expect the plaintiff to cancel the contract when it had been in default for so long [apparently in respect of access].He said that the defendant still had the ability to find the money by selling shares, which usually took 7 days.However, he had no doubt that the bank would support him.He said that it was not the case that the cheque sent to the Australian Taxation Office took the defendant over its bank limit.He did not agree that the defendant was hopelessly under-capitalised for the venture.He said that the defendant could not have been established without advances from its associate companies of $200,000.He agreed that the performance of the defendant up to 30 June had in no way been affected by problems with access.He had not expected that the defendant would sell much timber up to 30 June.By 30 June 1995 its sales of treated posts were almost $600,000 dollars:this was considerably less than his expectation.Its gross profit was $400,000, and yet it managed to make a total loss almost $250,000.He said that they had no further income from timber from September/October.He was challenged on this and then said that the timber which he sold from September 1994 to June 1995 was taken from Burk's Island and then processed.
After further examination on the question of the finances of the defendant and other companies controlled by Mr Smibert he was asked why one of those companies did not write the cheque for $28,000 due on 1 September and so preserve his right or expected right to make more than $l,000,000 clear profit. He said that he was negotiating about the state of the track.He denied that his story about access for an invention to cover the defendant's inability to perform under the contract.
Mr Smibert said he had read the contract before cutting up the felled timber, and that he rang up Mr DeGaris and took advice from him on this idea of slicing up otherwise merchantable timber into lengths of less than l.8m.He said that it was his own idea, and that it was a stupid thing to do.He said that it was to avoid having to cart the timber out, but then admitted that it was a matter of payment.He said that in a roundabout way his idea was to change valuable timber into useless timber so that he could avoid paying for it.
Mr Smibert agreed that in the first week of September he was getting out timber at a rate which had never before been achieved, and it was in that period that he realised that he had not paid the $28,000.He said things had improved even before Teagles began to raise rubble to do the track.He said that problems with the track would have been over when Teagles had finished the track.He agreed that the track was drying out and that they were getting into a position where he could get out their loads.He said that access was still an issue as they could not get up to where the timber was.He was asked why if he had difficulty with B1 he did not take the men into A, and finish that off. He said that most of the timber remaining in A was to go to the spot mill.He agreed that it had been at his own choice that he had commenced to clear the forest in A, and that that meant he had to clear it before moving to another block.However, he approached Mr Raphael to get permission to fell B1 before completing A as the timber there was more valuable to him.He had got out the best of the preservation timber by then;but left l faller in A.
Mr Smibert said that he did not at the meeting of 7 March see Mr Bennett working on the alternative track and the turnaround.He asked him to do part of the Northern track.It was not correct that he made these requests on about 23 May.He denied that on 7 March he and Mr Biggin had said that they wanted to use the alternative track and that it was not correct that Mr Bennett extracted rubble from the pit and worked on the alternative track and the turnaround.Mr Smibert was then asked why in his diary, in spite of his many business interests, the only person whose conversations he had notedwas Mr Raphael.There was, Mr Hoile suggested, only one other person mentioned and that he was a person with whom he was in dispute which led to litigation.Mr Smibert said that it could possibly be that he had more detailed records with Mr Raphael than anyone else.He said that it was on advice, including advice from his solicitor, that in dealing with the plaintiff he ought to be careful and keep a record as the plaintiff was well known at suing people.He denied that theentry dated 7 March was made when he became aware that there was going to be litigation.He said other persons had advised him to record any conversation that he had with Mr Raphael.He was asked why, having that information, he entered into a new contract and said that it was because they had committed themselves in the first [i.e. December] agreement and because it was financially advantageous to them.
Mr Smibert denied that he had told Mr Raphael he would remove the forest at a rate of between 5 to 10 loads a day but said that he had told the plaintiff that he couldn't see any difficulty getting 70 tonnes a day.He agreed that he had told Mr Raphael on 2 May that the Steyer would be on the property by 19 May and that it was in good working order and condition.He was aware that without a promise to remove 70 tonnes of timber a day and have a Steyer in good working order the plaintiff would not have entered into a new contract.He said that neither of them would.He said that the promise of 70 tonnes a day depended on the defendant having access.He agreed that that was why clause 28 of the Schedule was introduced.He said that he had told Mr Raphael that he wanted to have a track to a standard that they could get their vehicle in.He said that he had a concern that the track was not good enough for the winter.He said that before 5 July he had had numerous discussions with Mr Bennett about access and talked to Mr Raphael.He was aware that under the contract a notification that the track was unable to be used had to be given in writing, which included a fax.He said that he had not done so before 5 July, but that on 30 June Mr Raphael had agreed to put in an access track from the pit to the turnaround up the hill into and between B1 and B2, down the hill to the corner of lot 6 and that he could do them within a week.He denied that his letter of 5 July [p.64 of Ex.P1] was a smokescreen to cover the fact that the Steyer needed repairs.
Mr Smibert agreed that after 1 September the tracks were drying out and that the extraction rate of timber had picked up.He said they did not have access to the side of the forest where they wanted to fell.He agreed that the Steyer was then working in B2 and timber being removed by the alternative track.
Mr Smibert said that he had told Mr Raphael on 7 March that he could remove 4 to 5 loads of timber a day with a Steyer processor, but denied that he said the alternative track was more convenient than the Northern track.He denied that he had driven along the alternative track with Mr Raphael and Mr Bennett and showed them where he wanted the turnaround.He said that some of the timber removed in the 5 days from 7 March came from B1 but did not know how much and was unsure if it came out on the alternative track by semi-trailer.He denied telling Mr Bennett that he wanted to use that track.He was positive that he had not asked Mr Bennett to rubble the turnaround on the alternative track.He said that rubble was put on to the Northern track on 8, 9 March, and some near the track on the top of the hill on the Northern track.He said that he had not made notes in his diary only when he anticipated that there might be litigation, and that he had not made the notes of conversations in his diary until long after the conversations took place.
Mr Smibert denied that after felling B1 he took out preservation timber but left hundreds of tonnes of other timber lying, including the logs cut up by Mr Taylor at hisinstructions.He said that Mr Bennett tried to oblige them by putting down rubble on the track but that there were times when he didn't have the funds or didn't have any rubble.He said that Mr Bennett did not have the equipment to raise rubble.
Mr Smibert said that some timber from B1 was taken to near the spot mill, though timber was stacked near the turnaround or by the gate to B.He said that the defendant, Mr Biggin and Mr Carlin did not gain an advantage at the expense of the plaintiff by using merchantable timber [or $20 a tonne] into spot log.
Mr Smibert agreed that some of Mr Attiwill's accounts for work done on the Steyr in July 1994 were still unpaid.He agreed that other creditors were still to be paid.He agreed that since the termination of the contract the defendant had had difficulties in making payments to creditors.
Later in his evidence Mr Smibert said that on 1 September he did not have a cash flow problem.He had no difficulty in paying the cheque [$28,000]on that day but believed that he had the right to withhold payment and compel Mr Raphael to honour his agreement [to form the track].By 5 September he knew that Teagles were working on raising rubble and had already moved the Steyr into B2.He said that he had the ability to write the cheque, or that the bank manager would agree, or that he could sell shares, or borrow from an associate company.He said that he had the cheque there all ready to go but was waiting for the track to be done.
Mr Smibert agreed that the lines which he drew as the route of the alternative track on 30 June ran only from the pit to the turnaround and up to the gate but then said that the track Mr Raphael agreed to do went further, into B and to the corner of C and had said that he would do it within a week.I have to say that I doubt whether Mr Smibert's evidence can stand against the other evidence on the point.However, the agreement of 17 August does clearly indicate, though almost 7 weeks later, that the track was to run through B to the corner of C.
Mr Smibert agreed that although the contract allowed him to put 720 tonnes of logs through the spot mill he had sold 280 tonnes more than that through it. He agreed that he owed the plaintiff $20 a tonne for that timber, but gave a reason for taking the timber.He said that at termination of the contract about 100 tonnes had left the property as square log.There was other spot log and CSR log in the forest at termination, and they put that through the mill. The total, he thought, was 400 tonnes of spot log.He said that the 10 tonnes of merchantable timber which were burned were burned with the blessing of Mr Bennett, and that he had no knowledge of failures to have loads weighed.He said that it was hard to believe that Mr Taylor had cut as much as 180 tonnes of timber.
He said that 137 tonnes of spot log had been paid for by cheque to the plaintiff.He repeated that his reason for not paying $28,000 on 1 September was that the contractors had not been given permission to do the track.He said that he notified Mr Raphael that he was withholding the cheque until he knew that the plaintiff was going to do the track agreed to in the agreement of 17 August.He said that he did not withhold payment because of inability to pay.
I have briefly referred above to the evidence of Mr Pfeiffer and Mr Penney.Mr Pfeiffer was cross-examined about the letter on the files (Ex. P40) which he said set out the limits established with respect to the facilities of the various companies in the group and in the defendant's case, referring to the maximum (of $95,000) which the bank would be prepared to advance until a revised reduction programme had been put in place.He was asked if the matter was one for his discretion, if it meant what he said.He replied:
"Well, at that time, and I mean when -if things happen later on, we look at it on an individual basis and whilst those things we said it - it's generally what should happen, but circumstances change and provided satisfactory information is given by both the customer and information that comes to hand told as well that - these things do get varied but it would depend on - I mean, whilst that's there, the thing I'm trying to say is that the things vary and nothing is basically set in concrete.If there were things that changed, well then we would look at it and I've had many instances where limits were perhaps to the maximum, but then circumstances change and the bank may be prepared to lend additional funding."
I asked Mr Pfeiffer if he meant that the reduction of the debt had to be done before advances could be made over the maximum which he referred to, and he replied that he thought that they needed a revised cash flow budget and an up-dated situation for all facets of the business because, he thought at the time of the submission they did not have a revised cash flow.
There were other records of the bank about the accounts of the companies controlled by Mr Smibert but I do not think that I need say more than that the defendant was some $1,600 within the overdraft limit on 26 September but over the limit of $95,000 on a number of occasions.More to the point, Mr Pfeiffer and Mr Penney said that if the defendant were to be forthcoming from the sale of stock he could, although (head office in) Adelaide said it would not want the limit to go higher,have recommended a higher limit, if Mr Smibert satisfied the bank that money was forthcoming.
Mr Penney said that if Mr Pfeiffer had in September recommended approval of an overdrawn cheque to the extent of $28,000 over the limit he would have approved it.I note, however, that by 6 September the defendant's overdraft was $110,472 and that after a payment in on 8 September was $99,939, so that the honouring of a cheque for $28,000 on 1 September, or even on 6 September, would have caused the defendant's debt to the bank to increase considerably beyond the limit of $95,000 which Mr Pfeiffer's letter of 6 September said was to be the limit of the defendant's overdraft.Mr Smibert might well, after reading that letter - probably on 7 September, - have felt that a cheque for $28,000 drawn on 5 September would not be honoured.
Under the contract of 14 May the plaintiff clearly wished to avoid what had happened under the earlier contract of December 1993, under which the defendant had removed only 71 loads in almost 4 months.He was assured by Mr. Smibert that the defendant could remove 3 loads every working day and approximately 60 loads a month, which would be about 1,400 tonnes a month.The price of timber, $20 a tonne, amounts to the $28,000 which the defendant undertook to pay on the first day of every month in respect of timber removed in the previous month. As noted above $28,000 was paid in advance under clause 4 of the agreement of 14 May.When the plaintiff terminated the contract in early September he had been paid $84,000and was owed $28,000 for timber taken in August.In great part, that $28,000 was cancelled out by the pre-payment above referred to.
Clause 13 of the May agreement asserts precedence over all other terms of the agreement and the conditions of sale attached thereto.Clause 6, however, permits some adjustments to the 70 tonnes a day requirement which there is a shortfall following a surplus in a previous month.
As has been noted above it was only on 6 days, according to the tally kept by the plaintiff, that 3 loads of timber were removed by the defendant.The plaintiff took no action on this shortfall,of which at least some was caused by the breakdown of the Steyer processor.The plaintiff, however, made it clear in August that he expected payment of the royalty of $28,000 to be made on time though he took no action when the defendant's payment was late. However, when payment for timber taken in the month of August, and due on 1 September, was not made the plaintiff served a Notice of Demand on the defendant and gave a notice of termination of the contract on 8 September.
The defendant's case is essentially that the plaintiff failed to provide it with reasonable access to the forest when it was well aware that the access to the forest was inadequate.It relies on clause 28 of the Schedule to the May agreement.The provisions of the amending agreement of 17 August are also relevant, in particular clause 2, which provides that alternative track should be constructed in stages.There is a proviso that the plaintiff should only have an obligation to construct the portion of the access track across B and along the boundary of B and C if there be no existing breach of the defendant's obligations under the May and August agreements.There was a clear breach of the May agreement in the defendant's failure to pay $28,000 on 1 September.
Much evidence was led about the condition of the track from the pit to the turnaround.I have set it out above.If the condition of the track was a factor in the defendant's failure to remove 70 tonnes of timber a day it must be said that it was not the only one.The Steyer processor which the defendant used was not fully overhauled before it was taken to the forest, and it required frequent visits from technicians to keep it working well.Eventually it had to be taken away for overhaul and the amount of timber removed in July was only 21 loads.In June, however, only 23 loads had been removed.On the last 20 days of June 140.8mm of rain fell.The first 10 days of June and July produced little rain, but in July 130 mm fell on and after 11 July.Up to 25 August 55.2 mm of rain fell:up to then 27 loads were removed.The Steyer processor had by then been overhauled.There were under 3 mm of rain up to the 8 September when 11 loads were removed.In the period between 24 September and 15 October the defendant removed 36 loads:the rainfall was 64.6 mm.I have noted earlier in this judgment that these figures of loads removed may be a few loads more than I have stated.The difference is not substantial.
It is the defendant's contention that it was the state of the alternative track which caused it to fail to meet its obligations to remove 70 tonnes of timber a day and that it was merely to put pressure on the plaintiff to improve the track that it failed to pay to the plaintiff the $28,000 due on 1 September. The plaintiff says that the reason for the non-payment was the defendant's inability to pay.
Almost all the witnesses had something to say about the track.I have read every word of the evidence and discerned in a good deal of it some lack of objectivity.I note, however, that in cross-examination the evidence of some of the witnesses was less favourable to one or other of the parties than their examination in chief had been.I saw the track, though it was not after recent rain.It seemed to me at the view that the turnaround, and the ground at its edges, was an area where some of the trouble might have been experienced, and this view was confirmed by the defendant's evidence of the difficulties experienced with unloaded trailers, the forward legs of which on some occasions sank into the ground, and which were prone to slip on the surface of the track at turnaround when unloaded.It seems to me, having considered all of the evidence, that the state of some of the track was such as to have made the progress of the timber removing slower than would a better track over the distance of some 800m- a very small part of the truck's journeys, however.I found the evidence of Mr Grounds to be far and away the most reliable of that of the experts on road surfaces called by the parties.Mr McDonnell used the track in the following year beginning in about June.No further work had been done on it after the termination of the contractand, indeed, in the month preceding the termination.Mr McDonnell said that the condition of the track compared to what they were used to be working on day-to-day to be "average to a bit below average".He said that he had on only one occasion raised the question of the state of the track with Mr Bennett.He said that he asked Mr Bennett to fill in some pot holes, which Mr Bennett did within a day or two. After finishing half of B2 he said that they had used another route to remove the rest of the timber, which he got permission to use from neighbouring farmers.He said on an odd day, because of rain, he would not take the trucks to the gateway on the hill above the turnaround.He said that they never stopped work because of rain or that type of thing.This evidence confirms to some extent the evidence of Mr Raphael that the track was useable.However, the work proposed to be done by Mr Teagle would no doubt have made it better.
I cannot attribute to the state of the track to the turnaround more than a small part of the shortfall below 70 tonnes a day.The few incidents of vehicles being in difficulty described by the defendant's witnesses, particularly Mr Simmons and Mr Hayes, cannot have accounted for any considerable amount of lost production.The state of the turnaround itself was, however, the cause of difficulties to the defendant.With days being short in June and July the time available for getting trucks to their destinations in Mount Gambier and Millicent and back might of itself have made it harder for the defendant to carry 3 loads every day, particularly to the former.
The contract was terminated because of failure to pay on 1 September, or in the days of grace allowed by law, $28,000 for timber taken in August.Although it may be otherwise I feel that in the light of the bank's attitude to the already exceeded overdraft of the defendant as shown in its letter of 6 September, it may be that Mr Smibert, in spite of having, I infer from the counterfoil, written a cheque for $28,000 on 5 September, felt that it was pointless to send it to the plaintiff at a time when Tugal's overdraft, even without the debit of $28,000, was about$99,400 on 2 September, and about $110,472 on 6 September. At the end of September the defendant came just within its overdraft limit in spite of having received $20,000 from Inturn.I note that the bank did not hold Tugal to its overdraft limit in September or October, but I think that Mr Smibert would in early September probably not have known that the bank would allow Tugalto further overdraw its account, at least by as much as $28,000.
It is impossible not to feel sympathy for the defendant and for Mr Smibert personally.Obviously the forest could have been worked more efficiently out of the winter months, when days were short and ground conditions were worse. Mr Smibert foresaw some problems with access, hence clause 28 of the Conditions of Sale.He did complain about the state of the track on a number of occasions but I have seen or heard of no notification having been given on each day when Mr Smibert or someone on his behalf notified the plaintiff that he considered that the track was unable to be used.[The provision for notification must, after the informally agreed change of track, be taken to apply to the alternative track].And as I have said the track itself was generally useable, though I have no doubt that it could have been in better condition.The turnaround was, however, in my view, inadequate.Tractors on occasions could not be pulled unladen on it, and the rubbled area was not large enough, nor was the rubbling at that point deep enough or of adequate make-up.It is ironic that work on a professional upgrading of the track would have begun if the defendant had paid the amount of $28,000 due on 1 September.
It seems clear that Mr Raphael, perhaps because of the slow rate of removal of timber, was aware of the possibility that the defendant would not or could not pay $28,000 on 1 September, and that he had made up his mind to terminate the contract given the opportunity which failure to pay would give him.If Mr Smibert had been aware of what Mr Raphael intended I think that he would have made efforts to put the defendant into funds.The bank's letter of 6 September must have been a blow to him.He could hardly have known, having considered that letter, that there was still a chance that higher authority in the bank might relent and give authority to pay a cheque for $28,000.If the defendant had been lent that money or had been treated with forbearance by the plaintiff I think that he might well have proceeded to complete what would have been a profitable contract, albeit more slowly than he had promised.But the plaintiff clearly had the right to terminate the contract and, perhaps because of the defendant's chronically slow progress, which came on top of its even slower progress under the December contract, chose to exercise its right.
The defendant's difficulties cannot be attributed more than in part to the means of access provided for it.The poor working and later complete breakdown of the Steyer processor caused much lost production, and Mr Cole criticised the efficiency of other aspects of the defendant's operation.Nevertheless I find that the state of the turnaround and, to a lesser degree, the trade did impede the defendant's operations to some extent.
The defendant was, by the contract, required to notify the plaintiff on each day that it considered the track to be unusable.I have no record it be having done so.However, a number of complaints about the alleged condition of the track were made by the defendant, particularly on 5, 15 and 18 July. On 18 July Mr Smibert complained of having lost days over the previous month. The plaintiff's solicitors, however, on 19 July denied in a letter to Mr Smibert that "the track is as inaccessible as you maintain",
but once again referred to the question of which of the two tracks was to be upgraded, and to the need formally to alter the 14 May agreement [to which, as I have said, no plan was attached specifying which track was to be used].I have to say that while I find the plaintiff's insistence on a formal amendment by another deed understandable, I think that the length of time spent in reaching agreement on the terms of an amending agreement was largely caused by the plaintiff's attempt also to vary other matters in the 14 May agreement was longer than it ought to have been.I do not think that the defendant's complaints about the track were always well-founded, but in my view some were, notwithstanding Mr Bennett's work on the track in May and June.Mr Bennett, however, had no equipment with which to raise rubble from the pit and clearly from Mr Teagle's later operations rubble was necessary.Moreover, Mr Bennett's last recorded work on the track was on 29 June:he may, as suggested by a witness, have been able to get no more rubble from the pit.The plaintiff in my view took an unnecessarily long time to engage the services of Mr Teagle's firm even after the agreement about the track on 17 August.I have no doubt that the track was rarely, if ever, totally unusable, but equally have no doubt that in some circumstances its use caused some difficulties to the defendants which would not have occurred if the track had been better.
The main cause of delay was, however, in my view of the evidence, the condition of the turnaround area.To state the matter shortly, the area of the turnaround was barely large enough adequately to allow any room for error in a prime mover with semi-trailer attached seeking to turn around, so that on occasions the trailer went on to the boggy unsurfaced ground.A cause of greater delay and lost production was the fact that the trailer's front wheels sometimes sank into the ground, making it on some occasions impossible to leave them loaded overnight, ready for the return of the prime mover.Given the distances which the timber had to be taken it would seem likely that fewer loads would be removed.
It is not possible to calculate with any accuracy the amount lost to the defendant by reason of the slipperiness of the track and the penetrability by the wheels of vehicles of the turnaround and the ground at its edges.If more timber had been taken the plaintiff would have been entitled to more as royalty, but the defendant would have made a profit, after treatment, by sale of the timber.I arrive at the figure of loads lost to the plaintiff by looking at the number of loads actually removed in comparison with those taken in drier conditions, and at the daily rainfall.I estimate that about 15 further loads could have been removed if the surfaces had been better.Most of this would have been the more desirable preservation timber at about $70 a tonne.15 loads would have amounted to 353 tonnes.I assess the defendant's loss at $24,710 gross.On 353 tonnes it would have to pay $7060 as royalties. Excess royalties of $2678.80 had been paid to the plaintiff.Deducting $2648.80 from $7060 leaves further royalties due to the plaintiff of $4311.20.
I was asked to reserve to the Master the matter of the claim made in para 17(5)(d) of the Statement of Claim.I was told at the beginning of the trial that it was not intended to pursue that matter but the plaintiff said in closing that he wished the matter to remain open.I cannot, by its nature, determine the matter now.There is, I note, also a potential claim in respect of Capital Gains Tax.No evidence was led and no submissions were made on the matter.
If the defendant fails to satisfy this judgment, the plaintiff intends to pursue its right under the guarantee given by the second and third defendants in clause 11 of the May Agreement.Their liability is a secondary one, and is joint and several.It is claimed by para 11 of the agreement to be both guarantee and indemnity, and to be a principal obligation.I have doubts about the circumstances in which the secondary liability implicit in guarantees may be made a principal liability.I give liberty to apply in the cause of any difficulties arising.I give judgment for the plaintiff against the first defendant in the sum of $137,711.68.The first defendant is to have judgment on the counterclaim for $24,710, minus $4391.20 for royalties unpaid, after crediting the defendant with $2678.80, namely $20,318.80.
It is a decision which I make with some regret.But the defendant was aware of the pre-emptive provisions of clause 13 of the agreement when it entered into the contract and it did not seek to have clause 28 of the Schedule given equal status to it.The defendant may well have had the right to terminate the contract for breach of clause 28 of the Schedule but, committed as it was to meeting its heavy financial commitments for equipment, etc. and being desirous of taking advantage of the market in treated timber posts, it proceeded with clearing the forest in spite of considerable, but to some extent, foreseeable difficulties.If it had contracted to start the work in September rather than June none of its troubles was likely to have arisen.
ORDER:
ù By agreement single judgment on the claim and the counterclaim in the sum of $117,392.88.
ù Interest calculated at $17,249.14.
ù The plaintiff is to have 90% of its costs of and incidental to the claim and counterclaim to be taxed or agreed.
ù Liberty to the plaintiff to apply to enter judgment against the second and third defendants in the event the first defendant fails to satisfy any demand for payment of the judgment and/or the costs.
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