BY Design Group Pty Ltd v Blackpool Rock Co Pty Ltd

[2008] WASCA 138

BY DESIGN GROUP PTY LTD -v- BLACKPOOL ROCK CO PTY LTD [2008] WASCA 138

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2008] WASCA 138
Court:	THE COURT OF APPEAL (WA)
Case No:	CACV:125/2006	Heard:	22 FEBRUARY 2008
Coram:	MARTIN CJ PULLIN JA EM HEENAN AJA	Delivered:	2/07/08
No of pages:	25	Judgment Part:	1 of 1
Result:	Appeal dismissed
Category:	B
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Parties:	BY DESIGN GROUP PTY LTD t/as BDG MACHINE TOOLS (ACN 072 486 072) BLACKPOOL ROCK CO PTY LTD (ACN 009 353 922) and BLUE WATERS PTY LTD (ACN 070 284 409) t/as O'CONNOR PATTERNMAKERS
Catchwords:	Appeal Contract law Appellant manufactured and designed a prototype machine for the respondent Machine caught fire Whether warranty of fitness should be implied into the contract Whether the contract contained an implied term that the machine be of merchantable quality Whether the machine should have been operating unsupervised
Legislation:	Civil Liability Act 2002 (WA) Civil Liability Amendment Act 2003 (WA) Sale of Goods Act 1895 (WA), s 14(i)
Case References:	Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1 Blackpool Rock Co Pty Ltd v By Design Group Pty Ltd [2006] WADC 138 Dixon Kerly Ltd v Robinson [1965] 2 Lloyds Rep 404 Fabre v Arenales (1992) 27 NSWLR 437 Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1 Henville v Walker (2001) 206 CLR 459 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109 Jones v Dunkel (1959) 101 CLR 298 Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506 TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57; (1963) 180 CLR 130 Vacwell Engineering Co Ltd v BHD Chemicals Ltd [1971] 1 QB 88

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : BY DESIGN GROUP PTY LTD -v- BLACKPOOL ROCK CO PTY LTD [2008] WASCA 138 CORAM : MARTIN CJ

PULLIN JA
EM HEENAN AJA

HEARD : 22 FEBRUARY 2008 DELIVERED : 2 JULY 2008 FILE NO/S : CACV 125 of 2006 BETWEEN : BY DESIGN GROUP PTY LTD t/as BDG MACHINE TOOLS (ACN 072 486 072)

Appellant

AND

BLACKPOOL ROCK CO PTY LTD (ACN 009 353 922) and BLUE WATERS PTY LTD (ACN 070 284 409) t/as O'CONNOR PATTERNMAKERS
Respondents

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ON APPEAL FROM:

For File No : CACV 125 of 2006

Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA

Coram : CRISFORD DCJ

Citation : BLACKPOOL ROCK CO PTY LTD AND BLUE WATERS PTY LTD t/as O'CONNOR PATTERNMAKERS -v- BY DESIGN GROUP PTY LTD t/as BDG MACHINE TOOLS [2006] WADC 138

File No : CIV 1317 of 2004

Catchwords:

Appeal - Contract law - Appellant manufactured and designed a prototype machine for the respondent - Machine caught fire - Whether warranty of fitness should be implied into the contract - Whether the contract contained an implied term that the machine be of merchantable quality - Whether the machine should have been operating unsupervised

Legislation:

Civil Liability Act 2002 (WA)

Civil Liability Amendment Act 2003 (WA)
Sale of Goods Act 1895 (WA), s 14(i)

Result:

Appeal dismissed

Category: B

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Representation:

Counsel:

Appellant : Mr M L Bennett
Respondents : Mr P Mendelow

Solicitors:

Appellant : Lavan Legal
Respondents : Jarman McKenna

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

Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310
Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1
Blackpool Rock Co Pty Ltd v By Design Group Pty Ltd [2006] WADC 138
Dixon Kerly Ltd v Robinson [1965] 2 Lloyds Rep 404
Fabre v Arenales (1992) 27 NSWLR 437
Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1
Henville v Walker (2001) 206 CLR 459
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109
Jones v Dunkel (1959) 101 CLR 298
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506
TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57; (1963) 180 CLR 130
Vacwell Engineering Co Ltd v BHD Chemicals Ltd [1971] 1 QB 88


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MARTIN CJ:

Summary

1 This appeal is based upon a number of allegations to the effect that the trial judge erred in fact. In my opinion, for the reasons which follow, the findings of fact made by the trial judge were plainly open to her on the evidence, and no error has been established.

The issues joined on the pleadings

2 Blackpool Rock Co Pty Ltd and Blue Waters Pty Ltd together trading as 'O'Connor Patternmakers' (the buyer) commenced proceedings in the District Court against By Design Group Pty Ltd trading as 'BDG Machine Tools' (the seller), claiming damages for breach of contract and/or negligence in relation to the sale of a five axis computer numeric controlled router known as a ShapeMaker, which was sold by the seller to the buyer. In its statement of claim, the buyer alleged that it was an implied term of the contract for the sale of the ShapeMaker that it be fit for the purpose of producing industrial patterns, and that it would be of merchantable quality. The buyer alleged that the seller breached both terms when supplying the ShapeMaker, because the rope, which provides assistance to the vertical travel mechanism, was inadequate and failed, as a consequence of which the cutting head deviated from the programmed path, striking the medium density fibreboard (MDF) base of the material being cut, and the aluminium table on which the material was placed, generating extreme friction, causing a fire which substantially damaged the machine. The buyer further alleged that the seller had breached a term for the provision of services relating to the design and manufacture of the ShapeMaker, to the effect that the services would be rendered with due care and skill because the seller had failed to design and manufacture a product that was safe. Allegations of the same kind provided the basis for the buyer's claim in negligence.

3 In its defence, the seller did not admit that there was a term to be implied in the contract of sale to the effect that the ShapeMaker would be fit for the purpose of the production of industrial patterns. Although the seller admitted that the ShapeMaker was of a description which it was in the course of the seller's business to supply, in its defence, it relied upon an express written term of the contract to the effect that the ShapeMaker would be supplied at a substantially reduced price in return for the seller being permitted to make on-site adjustments and modifications as the basis for the exclusion of the term allegedly implied. In its defence, the

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seller alleged, in the alternative, that the ShapeMaker was fit for the purpose of use in the production of industrial patterns.

4 The seller relied upon the same express term of the contract of sale as the basis for not admitting that the contract contained an implied term to the effect that the ShapeMaker would be of merchantable quality. In the alternative, the seller alleged that the ShapeMaker was of merchantable quality. The seller further alleged that if there were implied terms to the effect that services relating to the design, manufacture and maintenance of the ShapeMaker would be supplied with due care and skill (which it did not admit), those services were supplied with due care and skill. The seller denied negligence and further alleged contributory negligence on the part of the buyer.

The reasons of the trial judge

5 In her reasons, the trial judge summarised the issues which had been joined on the pleadings. She recorded the fact that the parties were agreed that the fire which had occurred on 22 November 2003, caused the buyer's loss and damage in an amount of $103,400 (Blackpool Rock Co Pty Ltd v By Design Group Pty Ltd [2006] WADC 138 at [3]).

6 The trial judge then set out her findings of fact. I will at this stage provide only a brief summary of those findings, as I will refer to those specific aspects that are challenged later in these reasons when dealing with the grounds of appeal.

7 The trial judge found that the buyer was engaged in the business of engineering patternmaking, producing models, patterns and moulds for a variety of different industries. Until the purchase of the ShapeMaker, a manual fabrication method was used to make those patterns and moulds. That process was very labour intensive. The directors of the buyer wished to move to a more automated process, with a view to improving production and profits.

8 The trial judge found that between March and August 2002, the directors of the buyer met frequently with the director of the seller instrumental in the design and manufacture of the ShapeMaker. Her Honour found that the contract for the supply of the ShapeMaker was effected by an offer made by the seller by a letter of 9 July 2002, accepted by the buyer's placement of an order dated 12 August 2002. The ShapeMaker was supplied and installed on 6 May 2003.

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9 The ShapeMaker uses a computer programme to control a cutting tool which moves to specific locations on a work board and shapes a specific work piece. Through this means, a piece of material, made of timber or fibreglass or any other material which can be cut by the tool, can be cut and turned into a finished shape. The cutting tool is enclosed within a support carriage which is moved up and down by a vertical movement feed screw attached to another mechanism which can slide horizontally. When supplied, the weight of the carriage and the cutting head was partially supported by a rope which passed over a pulley located between two gas struts. Those gas struts and the rope system supplemented the vertical travel mechanism. The rope was required to support a considerable weight (at [23]).

10 As the trial judge found at [27], the director of the seller responsible for the design and manufacture of the machine (Mr Pivac) supervised the unloading and installation of the machine, and the training of the operator, Mr Soren Christensen, an employee of the buyer.

11 On 9 July 2003, the rope which provided assistance to the vertical travel mechanism failed, with the result that the cutting head plunged unexpectedly into a work piece. The cutting action stopped immediately. Mr Pivac attended the same day and replaced the rope. The rope supplied with the machine had been 4 mm in diameter. Mr Pivac replaced this with a rope of 8 mm in diameter. Both ropes were manufactured for use in a yachting environment, and were double braided polyester consisting of an open weave braided polyester core with a tightly woven braided polyester cover.

12 As the trial judge found, on 20 October 2003, there was another difficulty encountered in the operation of the ShapeMaker. On this occasion, the rope to which I have referred jumped off the pulley over which it travelled, again causing the cutting action to cease. Mr Pivac attended, reinstated the rope, and also installed a metal guide which was designed to prevent the rope from leaving the pulley as it travelled over it. At [37] of her reasons, the trial judge recorded Mr Pivac's acceptance, in evidence, of the fact that the rope could rub against the installed metal guide in the course of operation. On this occasion, the 8 mm rope which had been supplied on 9 July 2003 was replaced with another 8 mm rope.

13 On 22 November 2003, the ShapeMaker was engaged on the production of the rear section of a mould to be used for the manufacture of a boat. The material being cut was fibreglass cloth bonded to a polystyrene foam shape covered by a surface layer of glass-filled epoxy.

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The cutting work was a finishing cut. The material to be cut was attached to an MDF base board which was placed on the aluminium cutting table within the ShapeMaker machine. Mr Christensen had started the machine on the cutting work during the course of the day, and had left the factory prior to completion of the final cut. This was normal practice. At the time all personnel of the buyer left the factory, the machine was proceeding satisfactorily (see [47]).

14 However, later in the day the machine malfunctioned, the cutter left the programmed route, cutting through the MDF work surface and embedding itself into the aluminium work table. A fire was caused which seriously damaged the machine.

15 In the course of repairs to the machine following the fire, the rope which had been used to support the cutting head was replaced with a chain. A warning sign was placed on the machine advising that the machine was not to be left unattended while in operation.

16 The trial judge reviewed the expert evidence called by both parties as to the cause of the fire in considerable detail. For the reasons she explained, she preferred the evidence and conclusions of the expert called by the buyer, Mr Martin Simms. She therefore concluded that the cause of the fire was the breaking of the rope to which I have referred, and that the use of a yachting rope to support the cutting mechanism was 'somewhat risky' (at [82]).

17 The trial judge found that the ShapeMaker was a good that fell within the operation of s 14(i) of the Sale of Goods Act 1895 (WA). That section provides that an 'implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale' applies:

[w]here the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he be the manufacturer or not) there is an implied condition that the goods shall be reasonably fit for such purpose …

18 Because of her conclusion that the use of a yachting rope to support the cutting head created a significant risk of failure, she concluded that the implied term of fitness for purpose had been breached (see [98]). As a result of that conclusion, she did not expressly determine the other causes of action alleged. She noted that no question of apportionment for
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contributory negligence arose, because the provisions of the Civil Liability Act 2002 (WA) and the Civil Liability Amendment Act 2003 (WA), which might have enabled apportionment of a contractual claim for damages did not apply, because the buyer's cause of action arose before 1 December 2004. The trial judge accordingly entered judgment for the buyer in the amount of $103,400.

The grounds of appeal

Ground 1

19 By ground 1, the seller challenges the conclusion of the trial judge to the effect that a term that the ShapeMaker would be fit for the purpose for which it was supplied, should be implied into the contract of sale. Two reasons are given for that challenge:

1.1 it was not in the usual course of the appellant's business to sell prototype versions of the machine, requiring further developments; and

1.2 the term is inconsistent with the express terms of the contract.

20 The first ground can be shortly disposed of. As I have noted, the seller admitted in its defence that the ShapeMaker was of a description which it was in the course of the seller's business to supply. That conclusion was in any event amply justified by the evidence. The first basis upon which the seller challenges the implication of a warranty of fitness for purpose must be rejected.

21 The second basis for challenging the implication of the warranty of fitness for purpose relies upon the established principle that such a warranty might be excluded by the circumstances of the case (see Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd (1974) 132 CLR 1 at 9). In this case, the seller alleges that the expectation of the parties to the effect that there would be continuing development of the machine after its supply is inconsistent with the implication of a warranty of fitness for purpose.

22 As I have noted, although the trial judge did not particularise the express terms of the contract for sale which she found, it is to be inferred from the terms of her reasons that she regarded the contract to have been formed by an offer to supply made by letter from the seller dated 9 July 2002, accepted by an order placed by the buyer on 12 August 2002. On the hearing of the appeal, both parties proceeded upon the assumption that

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the documents to which I have referred constituted the contract of sale, and there is no reason to challenge that assumption.

23 In order to evaluate the seller's assertion of inconsistency, it is necessary to address the terms of those documents, which comprise the contract of sale.

24 The letter of 9 July 2002 from the seller to the buyer is in the following terms:

Thanks for meeting with us and discussing your requirements. We are pleased to offer a new design of machine that should help you achieve your aims of a more efficient, profitable and accurate pattern making service.

We offer a five axis machine with auto tool change. As we discussed, this machine could be operated in three axis mode while your staff are learning the process. The five axis ability will offer invaluable versatility down the track and allow the machine to shape parts inaccessible to three axis machines. This will be the first of a new range of production machines. We already have three other customers very interested in this new machine (one for surfboards, one for boat seats and one for By Design Group) in WA alone. We will be continually developing the machine and will offer upgrades and options as they become available. For example we will be offering a touch probe and automated probing software that will output curves directly into Pro/Engineer.

Enclosed is a brief specification of the machine. Layout is the same as the drawings given to you at our last meeting. Design has progressed very well. We are now into the detail design phase and will be able to discuss final drawings with you in approximately one month. You will appreciate that the machine we will now be building will be a very capable and attractive proposition. Compared to the machine initially proposed in March, we have added full machine guarding, a Pro/Engineer post processor, extremely ridgid [sic] bed and arch allowing three point levelling and software lead screw calibration.

We plan on retailing these machines for $A200,000. As discussed previously we are offering you a very special and once off deal for the first machine and we ask that you keep the price very confidential. This first machine will be to production standard but we do expect to do significant development with it (at our cost and working around your production requirements) so that we can both get the maximum benefit from it. To the specification shown the machine will cost you $129,000 (installed and commissioned) + GST. Delivery will be in approximately mid October 2002, subject to confirmation of the order by end of July 2002. We are quite negotiable about the payment plan but expect it to be similar to a $30,000 deposit, $89,000 on completion and demonstration prior to

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delivery and the final $10,000 within 30 days of delivery, commissioning and one days cutting.

25 The order that was placed by the buyer with the seller was in the following terms:

12^th AUGUST 2002

ORDER NO: 120802

FOR PURCHASE OF 5 AXIS ROUTER

MACHINE: BDG 5 AXIS ROUTER

MANUFACTURER: BY DESIGN GROUP

CONTACT: MARK PIVAC

…

SPECIFICATION: SEE ATTACHED SPECIFICATION

ACCURACY: 0.5mm WITHIN MACHINE TOTAL ENVELOPE

0.1mm WITHIN 500mm3 ENVELOPE

PAYMENTS: $30,000 DEPOSIT


$89,000 AFTER SUCCESSFUL DEMONSTRATION OF QUALITY, ACCURACY, SPEED.

$10,000.00 WITHIN 30 DAYS OF INSTALLATION, COMMISSIONING AND ONE DAY SUCCESSFUL CUTTING


TOTAL COST: $129,000.00

DELIVERY: DECEMBER 2002

26 The seller submits that the reference in the letter of 9 July to 'continual' and 'significant' development is inconsistent with the implication of a warranty of fitness for purpose. I am unable to see why. A machine that is fit for the purpose for which it is supplied can obviously be upgraded, improved or developed. There is therefore no inconsistency between a term to the effect that the machine will be upgraded or developed after supply, and the implication of a term to the effect that the machine will be fit for the identified purpose at the time of supply.

27 Further, the contractual documents to which I have referred contain provisions which are only consistent with a warranty by the seller to the

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effect that the machine would be fit for the identified purpose. Those provisions can be seen in the assertion that the machine would help the buyer achieve its 'aims of a more efficient, profitable and accurate pattern making service'. They can also be seen in the assertion that 'the machine we will now be building will be a very capable and attractive proposition' and that it 'will be to production standard'. The fact that the machine was required to be fit for the identified purpose at the time of supply is reinforced by the contractual provision to the effect that the most significant component of the purchase price '$89,000', would only be paid 'after successful demonstration of quality, accuracy, speed' and that the balance would only be payable after 'installation, commissioning and one day successful cutting'.

28 In the course of submissions, the seller relied upon the decision in Dixon Kerly Ltd v Robinson [1965] 2 Lloyds Rep 404. However, that case provides no support for the seller's argument. That was a case in which the contract was a contract to build a boat in accordance with specified designs agreed between the buyer and the builder. The essence of the complaint was that the boat, as built, 'heeled more than the buyer liked or found comfortable or agreeable' (at 412). The trial judge found that the boat had not been shown to be 'unseaworthy or hazardous' (at 412), nor had the builder departed from the agreed design and specification. In that context, it is easy to see why the trial judge rejected the proposition that a term to the effect that the boat would not heel more than the buyer wished, was inconsistent with the terms of the contract, because the contract required the builder to construct the boat in accordance with an agreed design and specification. Further, because the boat was found to be fit for the purpose for which it was supplied, in that it was seaworthy and safe to sail, the decision is not relevant to the proposition advanced by the seller in this case.

29 Ground 1 must be rejected.

Grounds 2 and 3

30 Ground 2 challenges the finding of the trial judge to the effect that the implied term had been breached. The grounds for that challenge are:

2.1 The respondents led no evidence to disclose whether or not the ShapeMaker was being used properly and according to the instructions provided by the appellant before and at the time of the fire; and

2.2 The purpose of the ShapeMaker did not include the operation of the machine unattended.

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31 In the course of argument it became clear that ground 2.1 is co-extensive with ground 3, which alleges that the trial judge erred by finding that the 8 mm rope 'was not durable in the absence of any evidence about the manner in which the ShapeMaker was operated'. Accordingly, grounds 2.1 and 3 are conveniently considered together. The submission put in support of each ground is to the effect that it was not open to the trial judge to find that the use of a rope designed for use on yachts (and which had failed) rendered the ShapeMaker unfit for the purpose for which it was supplied in the absence of evidence from Mr Christensen as to the manner in which he was operating the machine, either generally or on the day of the fire. This is an impossible proposition. Evidence was adduced from an expert, Mr Simms, to the effect that the cause of the failure of the machine on the day of the fire was the failure of the rope. He also expressed the opinion that there were clear signs of rope abrasion, being fuzzing on the surface of the rope, and evidence of wear on portions of the machine which suggested that the rope had been rubbing on those parts of the machine. He also expressed the view that the rope was likely to be subjected to added abrasion because the pulley over which it ran was smaller in size than the rope, having been installed at a time when a 4 mm rope was used, and which was not altered when an 8 mm rope was installed. He was also of the opinion that the smaller pulley size resulted in the larger rope being bent through a tight radius, which would have accelerated wear and tear on the rope. He was also of the opinion that the guard installed by Mr Pivac in October 2003, which was found in a horizontal position following the fire, was most likely pulled down from the vertical position in which Mr Pivac said he had installed it by the pressure of the rope. Mr Simms also expressed the opinion that a single rope, of the type supplied with the machine, was not a reliable medium of support and was inadequate. Mr Simms supported his views by the observation that a rope support had previously failed, and after the fire had been replaced by a chain system. In his opinion, the original rope suspended design did not accord with 'good engineering practice'.

32 That evidence was accepted by the trial judge. That evidence was quite sufficient to sustain the conclusion of breach of the warranty of fitness for purpose.

33 The seller's submission relies upon the principle enunciated in Jones v Dunkel (1959) 101 CLR 298. There are a number of reasons why that principle is of no assistance to the seller in this case. It is a principle which is often over-stated (see Fabre v Arenales (1992) 27 NSWLR 437 at 444).

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34 In Jones v Dunkel, it was held that the trial judge had erred by failing to direct the jury that an inference which was open on the evidence might be more confidently drawn when a person who was able to put a true complexion on the facts was not called to give evidence by the person against whom the inference might be drawn, and that person provided no sufficient explanation for the absence of the witness. It is therefore clear that the principle in Jones v Dunkel cannot be used to fill an evidentiary gap, but only to bolster conclusions for which there is some evidence (Jones v Dunkel at 312 per Menzies J; see also Heydon JD, Cross on Evidence (7^th ed, 2004) at [1215]).

35 In this case, there was no evidence whatsoever to support the proposition that the ShapeMaker had been improperly used or programmed. If the seller had adduced some evidence to that effect, then an unexplained failure to call Mr Christensen might have been viewed as adding weight or strength to that evidence. However, the fact that Mr Christensen was not called is quite incapable of sustaining any inference to the effect that the machine had not been properly used.

36 The only assertion of improper use of the machine which was sustained by the evidence was the assertion that the machine had been left to operate unattended. But that was not in doubt. It was established by the evidence adduced by the buyer. Accordingly, on the evidence, there was no live issue upon which the evidence of Mr Christensen could have shed light. There was therefore no onus upon the buyer to explain the failure to call Mr Christensen. But in any case, evidence was adduced which explained why Mr Christensen was not called. That evidence was to the effect that Mr Christensen had been contacted by solicitors acting for the buyer, who found him to be 'entirely uncooperative'. That fact was communicated to the solicitors for the seller prior to trial, in a letter which gave the solicitors for the seller Mr Christensen's telephone number. Mr Christensen was not called by the seller.

37 There is no substance in the assertion that the failure to lead evidence from Mr Christensen precluded the trial judge from finding that the warranty of fitness for purpose was breached and, accordingly, grounds 2.1 and 3 must be rejected.

38 Ground 2.2 relates to the operation of the machine unattended. As enunciated, it confuses the finding of breach of warranty with the finding of causation of loss. That is because the finding of breach of warranty is based upon the inadequacy of the rope as a mechanism of support. The breach was complete at the time the machine was supplied. That breach

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was not remedied prior to the fire. On the evidence, particularly that of Mr Simms, and the photographic evidence relating to the machine, it is clear that the presence or absence of an attendant while the machine was in operation had no bearing upon the adequacy or inadequacy of the rope as a mechanism of support. That is because the machine is a large box-like structure in which the cutting operation takes place entirely within the box. Any person attending the machine must be exterior to it. Such a person would have no capacity to identify or foresee a likely rope failure, or to prevent such a failure from occurring.

39 It is also significant that a key feature of the design of the machine was that it was automated and, once set up and programmed, was capable of completing the work without further operator assistance. In this context, there was no evidence to the effect that the seller advised the buyer that the machine could not, or should not, be operated unattended. There was no warning to that effect affixed on the machine until after the fire. The furthest the evidence for the seller went in this regard was an assertion by Mr Pivac to the effect that he advised the directors of the buyer that it would be inadvisable to allow the machine to operate unattended. However, the directors denied that such a warning had been given by Mr Pivac. The reasons of the trial judge do not expressly resolve that conflict in the evidence. However, the terms in which her Honour refers to that evidence in her reasons, and her conclusion that it was the practice of the directors to allow the machine to operate unattended in the context of their evidence to the effect that they would not have adopted that practice had they been warned against it, supports the inference that she did not accept the evidence of Mr Pivac on this issue.

40 The other evidence on this topic was the evidence of Mr Pivac to the effect that on the day before the fire he had attended the buyer's premises to do some work on the machine. Mr Pivac's evidence was to the effect that because Mr Christensen had left for the day, he wrote him a note outlining the work which he had done on the machine, instructing him to keep an eye on the particular job and to supervise the entire process. However, as the trial judge observed, there was no evidence to the effect that the note was ever communicated to the directors of the buyer, nor was it discovered by them, nor was any request for its discovery made by the seller. The trial judge also observed that notification of the fact of the note was made by the seller very close to the commencement of the trial.

41 As there was evidence of the note from Mr Pivac, this was a topic upon which the principle in Jones v Dunkel was potentially applicable. However, because of the late notification given in relation to the existence

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of the note, and the evidence given as to the reasons for not calling Mr Christensen, in my opinion, the trial judge was correct to conclude that no inference adverse to the buyer on this issue should be drawn from the failure to call Mr Christensen.

42 In relation to Mr Pivac's evidence in respect of the note, the trial judge at [79] found:

[T]hat if such a note had been left it was either not seen by Christensen or not complied with.

43 That finding is, of course, ambiguous on the question of whether the note was left by Mr Pivac or seen by Mr Christensen. If a finding on that question was essential to the proper resolution of a case, that finding would either have to be made by this Court on the evidence before it, or the matter remitted for retrial, as the trial judge is no longer a member of the District Court.

44 For the reasons I have already given, a finding on the question of whether the note was left or seen by Mr Christensen is not relevant to the issue of breach. So the question then becomes: would a finding to the effect that the notice had been left by Mr Pivac and seen by Mr Christensen be relevant to the finding made by the trial judge to the effect that the breach of warranty caused the loss and damage suffered by the buyer?

45 The first observation usefully made in this context is that the trial judge found that the breach of warranty by the seller was the supply of the machine with a supporting mechanism for the cutting head which was at risk of failure. She also found that the failure of the rope caused the fire which caused the buyer to suffer loss and damage. On those findings, the breach of warranty was plainly a material cause of the loss suffered by the buyer - see March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506; Henville v Walker (2001) 206 CLR 459; Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310, per McHugh JA at 358. These authorities also establish that the buyer did not have to prove that the breach of warranty was the dominant or only cause of its loss so long as it was a material cause. So a finding by the trial judge to the effect that Mr Pivac had left the note and it was seen by Mr Christensen prior to the fire, would only be relevant if it would have affected her conclusion that the breach of warranty made a material contribution to the loss and damage suffered by the buyer. A conclusion to the effect that leaving the machine to operate unattended also made a material contribution to the loss and damage suffered by the buyer would not have been to the point,

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and would not have affected the outcome of the buyer's claim. The only way in which the assertion that the operation of the machine unattended was imprudent could have had an impact upon the buyer's claim would have been if it had led to the conclusion that leaving the machine to operate unattended was an intervening act or event which had the consequence that the defect in the machine could no longer be regarded as a material cause of the fire. But, in my opinion, on the evidence adduced, such a conclusion would not have been open.

46 As I have observed, the trial judge accepted the evidence of Mr Simms, for reasons which she enunciated. She therefore concluded that the inadequacy of the rope supporting mechanism resulted in the machine deviating from the programmed course, cutting the MDF base of the material being cut, and embedding itself in the aluminium table, causing sparks which ignited the combustible swarf produced within the machine as a result of the cutting action. On the basis of those findings, the breach of warranty was, on any view, at least one of the material causes of the fire which caused the loss and damage suffered by the buyer. The seller's case, at its highest, could only have been to the effect that if an operator had been present, he or she may have been able to mitigate the loss suffered after the rope broke by turning the machine off. On that view of the matter, the operation of the machine unattended might also be regarded as a material cause of the fire, but, as I have observed, such a conclusion is not to the point, because it would not disturb the conclusion that the breach of warranty was also a material cause.

47 In any event, the evidence did not sustain the proposition that the presence of an operator would have significantly mitigated the loss suffered by the buyer. The only evidence to that effect came from Mr Apgar, who was the expert witness called by the seller. The trial judge was critical of his evidence, when compared to the evidence given by Mr Simms. The view of Mr Simms is that if the fire had ignited as proposed by Mr Apgar - that is, with the machine still running, the distribution of the fine combustible particles from the cutting process within the machine would have spread the fire very efficiently to the other swarf, and any attempt to open up the cabinet to extinguish the fire could have led to a rapid increase in combustion due to the influx of fresh air - perhaps even to the extent of causing an explosion. Mr Simms was also of the view that even if an operator had been in attendance, the fire would have progressed significantly before it was detected by the emission of smoke.

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48 As the trial judge indicated a general preference for the evidence given by Mr Simms to that given by Mr Apgar, when regard is had to that evidence, there is no basis for concluding that a finding to the effect that Mr Pivac had left a note seen by Mr Christensen would, or could, have had any impact upon the conclusions adverse to the seller in respect of either breach of the warranty of fitness for purpose or causation of loss.

49 For these reasons, ground 2.2 must be dismissed.

Ground 4

50 Ground 4 challenges the conclusion of the trial judge to the effect that the failure of the rope 'was a catalyst for the fire'. That expression is to be found in [81] of the reasons for decision of the trial judge. Criticism was directed at her Honour's use of the word 'catalyst'. While it is clear that word may have a technical meaning in the context of chemical reactions, it is equally clear that the word also has a more general meaning which includes 'a person or thing that precipitates an event' (see the Compact Oxford English Dictionary). The trial judge was plainly using the term in the latter sense, to encapsulate her finding that the failure of the rope was the cause of the fire.

51 The submissions advanced in support of this ground essentially came down to the proposition that the trial judge erred by accepting the evidence given by Mr Simms. As I have observed, the trial judge carefully evaluated the evidence of Mr Simms and clearly enunciated the reasons why she preferred the evidence which he gave to that given by Mr Apgar. In that context, an appellate court would ordinarily interfere only if a flaw or error in the process of analysis enunciated by the trial judge was demonstrated, or if the appellate court, after giving appropriate weight to its disadvantage in not having seen and heard the witnesses give their evidence, is itself persuaded that the evidence of the relevant expert should not be accepted (see Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705).

52 A number of general and pejorative criticisms were directed at the evidence of Mr Simms. It is unnecessary to particularise them. I am entirely unpersuaded that there is any substance in them, or that they are of a kind which would justify intervention by an appellate court. The only specific and substantial criticism of the evidence of Mr Simms was based upon his erroneous assumption that the power supplied to the cutter in the machine was not supplied by an AC servo motor. The significance of that false assumption is said to lie in the proposition that an AC servo motor would ordinarily be expected to stop driving the cutter once the cutter

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deviated from the programmed path. The seller's argument is that if Mr Simms had been aware that the motor was an AC servo motor, he could not have advanced the hypothesis that the cutter continued operating after the rope broke, causing sparks which initiated the fire. However, the fundamental difficulty with this proposition is that it was never put to Mr Simms in the course of cross-examination, with the obvious consequence that neither Mr Simms nor the buyer were given the opportunity to give evidence on the subject. It would obviously be unfair to entertain on appeal a proposition which neither Mr Simms nor the buyer were given the opportunity to contravert at trial.

53 There is a further difficulty with the proposition, and that is that it was not supported or enunciated by Mr Apgar. Even though Mr Apgar was critical of the evidence given by Mr Simms in a number of respects, at no point did he assert that Mr Simms' hypothesis was flawed because of his erroneous assumption in respect of the nature of the motor powering the cutting head.

54 Criticism was also directed at Mr Simms because of his reliance upon the significance of the previous failure of the supporting rope, when that rope was half the dimension of the rope in place on the day of the fire. However, when that proposition was put to Mr Simms in cross-examination, he cogently explained why it did not vitiate his conclusions. The trial judge expressly acknowledged that there were errors or defects in the evidence of Mr Simms, which she concluded made no substantial difference to his conclusions (at [76]).

55 For these reasons, the challenge to the finding of the trial judge to the effect that the failure of the supporting rope was the cause of the fire must be rejected, and ground 4 dismissed.

Ground 5

56 Ground 5 also challenges the finding by the trial judge to the effect that the failure of the rope caused the fire. The challenge is made on three grounds:

5.1 The machine was being operated unattended;

5.2 The evidence was insufficient to found the conclusion; and

5.3 The learned trial judge failed to take into account the mechanisms designed to shut down the machine where there had been a malfunction.

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57 The submissions advanced in support of those grounds raise again the issues in respect of the machine being operated unattended, the failure to call Mr Christensen to give evidence, and the proposition that Mr Simms' hypothesis was flawed because the cutting motor would have stopped immediately if there was a departure from the programmed route. All of those issues have been addressed above in relation to other grounds.

58 For the reasons I have given in respect of those grounds, the submissions advanced by the buyer in these areas should be rejected. It follows that ground 5 should be dismissed.

The Notice of Contention

59 The buyer has served a Notice of Contention advancing reasons other than those given by the trial judge to sustain her conclusion that the loss and damage suffered by the buyer was caused by the seller's breach of warranty of fitness for purpose. Those issues only arise if the reasons given by the trial judge are found to be inadequate or flawed. As I have not arrived at that conclusion, it is unnecessary to consider the various issues raised in the Notice of Contention.

60 For these reasons, the appeal should be dismissed.

61 PULLIN JA: I agree with the Chief Justice.

62 EM HEENAN AJA: I have had the benefit of reading in draft the reasons for decision of the Chief Justice. I also agree that this appeal should be dismissed. As the Chief Justice has set out the background of the litigation which led to the decision of her Honour Crisford DCJ in the District Court of Western Australia from which this appeal is brought, and has described the reasons for decision given by her Honour, the issues in the case and the grounds of this appeal, it is unnecessary for me to repeat that detail. I am grateful to adopt the account of these matters given by the Chief Justice and I agree, generally, with his Honour's reasons for dismissing this appeal. There are, however, some observations about issues common to several of the grounds of appeal upon which I shall elaborate.

63 As has been noted, the cause of action for alleged breach of contract relied upon by the respondent plaintiffs accrued, at the latest, on 22 November 2003, when the ShapeMaker was extensively damaged by the fire which had ignited from its faulty operation. This was before the commencement of the provisions of the Civil Liability Act 2002 (WA) and

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the Civil Liability Amendment Act 2003 (WA) and, consequently, no reduction by apportionment for any damages caused by the alleged breach of contract because of contributory negligence was then available - Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1. Furthermore, the agreement between the parties at the trial before her Honour in the District Court that the quantum of damage to the ShapeMaker caused by the fire was $103,400 and, the consequent absence of any detailed breakdown or apportionment of the components of that aggregate amount of damages, meant that there was no examination by the court of how that loss was comprised nor, more importantly, any examination of whether the damages might have been less if there had been earlier detection of the fire and some effective measures to reduce or extinguish it before the full extent of the damage had resulted.

64 Each of these factors is significant because, subject to my following observations about the issue of causation, each refutes the submissions made by the appellant to the effect that the appeal should be allowed because the respondents' staff allowed the machine to operate unsupervised after hours at the workshop on 22 November 2003 when the fire occurred.

65 Before turning to those issues, however, I also consider that the learned trial judge was correct in concluding that this contract for the supply and sale by the appellant of the ShapeMaker contained a condition, implied by s 14(1) of the Sale of Goods Act 1895 (WA), that the machine supplied was fit for the particular purpose for which it was supplied. Not only did the directors of the respondents make known to the appellant's staff their requirements for the ShapeMaker in a series of oral discussions as described in the reasons given by the Chief Justice, but the letter from Mr Pivac, the appellant's design engineer, dated 9 July 2002 (exhibit 4), expressly made known the particular purpose for which the machine was required. The purpose for which the machine was required was for the respondents to achieve its aims 'of a more efficient profitable and accurate patternmaking service'. This letter expressly stated that it 'will be a very capable and attractive proposition' and that it 'will be to production standard'. The same letter shows acknowledgement by the appellant that the respondents were looking to the appellant and, therefore, relying on the appellant's skill or judgment and that the goods were of a description of which it was the respondents' business to supply, thereby satisfying the tests for the application of the statutorily implied term.

66 The appellant submitted that the learned trial judge was in error in failing to conclude that the circumstances of the sale were such as to

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exclude the implication of the statutory condition because of inconsistent provisions within the express terms of the contract, such as the fact that the machine was to be continually developed, that other upgrades and options would be offered as they became available and that a substantial concession on the price would be offered as a one-off deal for the first machine. As the appellant's design engineer said in the letter of 9 July 2002 'we do expect to do significant development with it (at our cost and working around your production requirements) so that we can both get the maximum benefit from it'.

67 I accept, therefore, that the machine which was to be supplied, and which was supplied, was in the nature of a prototype and that continual improvements were contemplated. However, that does not mean or even suggest that it was not to be fit for the purpose required or of merchantable quality and, indeed, the appellant expressly stated that 'this first machine will be to production standard'.

68 The implied condition is not excluded merely because the purchaser orders a new process or some untried process if it is nevertheless clear that the purchaser is relying on the vendor to supply a product suitable for the required purpose - Vacwell Engineering Co Ltd v BDH Chemicals Ltd [1971] 1 QB 88 (discussed at (1970) 33 M.L.R. 446).

69 The appellant cited Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd [1974] HCA 32; (1974) 132 CLR 1 in support of its contention that the statutory term should not be implied. However, Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd was not a case about the exclusion of a statutorily implied term but, rather, whether or not a term of fitness for use commonly implied at common law should not be so implied in a contract for work and labour. As Stephen J observed (at 9) the real issue in the Helicopter Sales (Australia) Pty Ltd v Rotor-Work Pty Ltd case was whether the implication of a warranty of merchantable quality ought to be held to have been excluded by the particular circumstances of that contract. His Honour concluded that the critical factor to exclude such a warranty for that contract was that both contracting parties knew all the relevant facts and had agreed upon an exclusive source of supply and were treating a third party's certification as to quality as being critical.

70 In this present case, there is nothing to suggest that the respondents were prepared to accept the certification of some third party of the sufficiency of the quality of the ShapeMaker, or that they were looking to anyone other than the appellant to warrant the fitness and merchantability

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of the machine. That the machine was a prototype and capable of being improved is no reason to suppose that it need not be fit for the operation required or that it would be acceptable if it possessed a defect or defects which could lead to its destruction entirely at the purchaser's risk.

71 I also agree with the reasons of the Chief Justice for rejecting the second and third grounds of appeal which contend that there was no adequate proof that there had been breach of an implied term because, so it was submitted, there was no evidence led to disclose whether or not the machine was being used properly, and because its purpose did not include the unattended operation of the machine. The evidence of the engineer, Mr Simms, which the learned trial judge accepted, provided a cogent explanation of how the machine failed, by the breaking of the rope after sustained wear and abrasion, which led to the cutting device falling on to the underlying supporting surface, generating heat by friction and igniting combustible material. An opinion advancing a different cause, namely a failure of the operation from programming error, which led to a fire, which in turn caused the rope to break, had a number of weaknesses. It was advanced by Mr Apgar without him having had the benefit of seeing or examining the machine shortly after the fire. Firstly, it failed to suggest what programming error might have led to the initial malfunction and, secondly, it did not account for the signs of wear and abrasion on the supporting ropes or on the pulley as described by Mr Simms. Furthermore, it did not seem to take into account the history of prior failures of the machine due to the supporting rope breaking. There can be no doubt that the learned trial judge was entitled to accept and act on the opinion evidence of Mr Simms and, in my respectful opinion, her Honour was correct to do so. Certainly no error has been demonstrated in that decision or the reasons which her Honour gave for reaching it.

72 There were, however, some criticisms of Mr Simms' opinion. Perhaps the most significant of these was that he assumed that the drive motor in the ShapeMaker was a stepper-motor rather than an AC servo-motor. However, it clearly emerged that this was a mistake without any actual or potential significance. Counsel for the appellant submitted that the mistake meant that Mr Simms had concluded, wrongly, that the machine did not have an automatic cut-out protective device such as accompanies a servo-motor but not a stepper motor. However, Mr Simms nevertheless proceeded on the basis that there was an automatic protective cut-out device contained in the machine and, that for some reason or other, it did not engage on the occasion of the fire. That being so, nothing about this mistake could, or did, detract from Mr Simms' opinion about the circumstances of the machine's failure or the sequence of events which

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led to the ignition of the fire. If more be needed, it can be observed that on the two previous occasions when the machine broke, and was repaired by the appellant, each occasion involving a broken rope, the cutting operation of the machine did stop immediately upon the failure. That suggests the presence of a working protective cut-out device at least on those two occasions and, therefore, the only conclusion which could be reached on the events which happened (the machine not being materially altered in the meantime) was that for some reason or other the cut-out device did not work on this third occasion.

73 Once her Honour had concluded, correctly in my respectful opinion, that it was the failure of the rope which led to the malfunction of the machine, which in turn led to the friction, the fire and consequent damage, it is obvious that it was that defect in the machine which caused the loss for which the respondents claimed, in the sense that it was a material cause of that loss. The appellant has attempted to suggest that there were other concurrent or subsequent causes which led to the damage suffered. Prominent among these suggestions is the appellant's contention that the damage was due to the machine being operated unattended; and that due heed was not taken of a warning note left by Mr Pivac for Mr Christensen.

74 The Chief Justice has already explained how there was no evidence to show that the note alleged to have been left on the machine by Mr Pivac ever came to the attention of either Mr Christensen or other staff or officers of the respondents. On the subsidiary issue of whether or not any significance should have been attached to the fact that Mr Christensen was not called as a witness by either the respondents (plaintiffs) or the appellant (defendant), her Honour concluded, rightly in my respectful view, that no inferences could in the circumstances of the case be drawn from the fact that Mr Christensen was not called by the plaintiffs (respondents).

75 The submission that the partial destruction of the machine by fire was due to it being allowed to operate unattended cannot survive scrutiny because the break in the supporting rope had already happened by the time that the cutting surface began to abrade the underlying base plate and cause the friction which led to the fire. All this took place within confined internal spaces of the machine itself. An operator, even if present, would have been unlikely to discover the defect until the abrasion of the underlying surfaces and the consequent friction had already begun and there was certainly nothing to suggest that this could have been detected and eliminated before the fire developed or engulfed the machine.

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76 During the course of submissions, counsel for the appellant was obliged to acknowledge that this particular submission never passed the point that the effect of the absence of an attendant was a concurrent factor which caused the damage to the machine and consequent loss. An attempt had been made to submit that a point was reached where it was the absence of the attendant which became the sole and effective cause of the damage, but this simply cannot be accepted.

77 The real effect of the submission must be to suggest that, if an operator had been present when the rope broke and the machine malfunctioned, the fact of the failure would have been quickly identified and the damage reduced before it had proceeded as far as it eventually did. With all respect, this appears to me to represent, in substance, if not in form, an argument that the respondents were negligent in their care and management of the operation of the machine, and that their negligence contributed to the accident and the damage which happened. It may also suggest that in failing to have an operator present all the time the machine was working, the respondents failed to take steps which would have limited the extent of the damage which resulted. I have already observed that contributory negligence was not an issue which could be relied upon by the appellant in a defence, or partial defence, of the respondents' claim.

78 There is some suggestion that this argument by the appellant that the continued operation of the machine after hours without an attendant being present was not only the cause of the accident but an example of a failure by the respondents to mitigate damage. In that regard I must repeat that, firstly, I do not regard the failure occurring while the machine was operating unattended as the cause of the loss or damage at all. Even if I were to take a different view on that issue, it could not possibly be regarded as the sole cause or as eliminating or overshadowing the earlier failure due to the defect arising from the breach of the implied term. That was, even on the appellant's argument, a concurrent material cause. That being the case, proof of causation that the breach of contract relied upon did result in actual damage has been demonstrated - Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310.

79 There was no plea by the appellant in its defence of any failure to mitigate damages nor, having regard to the agreement as to the quantum of damages already mentioned, was there any issue at the trial about a failure to mitigate. The onus was on the appellant to allege and prove any failure to mitigate damages - TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57; (1963) 180 CLR 130 and, more significantly, concepts of mitigation of damage, or failure to mitigate, do

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not prevent or interrupt recovery of losses caused by a proven breach of duty: I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109, 121 - 122 (Gleeson CJ), 136 (McHugh J), 155 (Kirby J). They may reduce the damages recoverable but they do not affect the existence of the actionable breach of duty which is a material cause of the damage.

80 I also agree that it is unnecessary to consider the respondents' notice of contention in the light of the conclusion that the learned trial judge was correct in concluding that the respondents were entitled to recover for the proved breach of the statutorily implied contractual term for the agreed amount of the damages caused to this machine.

81 The appeal should be dismissed.