Calabrese v Bill Adams Tiling Pty Ltd No. Scciv-03-1114

CALABRESE v BILL ADAMS TILING PTY LTD
[2003] SASC 376
Magistrates Appeal

DUGGAN J. The appellant commenced proceedings against the respondent in the Adelaide Magistrates Court claiming damages for wrongful termination of a contract for the sale of goods. At the completion of pleadings, the appellant sought summary judgment for the amount claimed by way of damages. The magistrate who heard this application entered judgment for the appellant on the issue of liability and directed that there be a trial to assess damages.
The respondent appealed against this decision. The appeal was upheld after the judge hearing the appeal reached the conclusion that the magistrate erred in concluding that the facts of the matter were beyond controversy. The action was remitted to the Adelaide Magistrates Court for hearing on all issues.
The magistrate who presided over the trial dismissed the appellant’s claim for damages and the appellant now appeals against that decision.
The litigation arose in the following way. The appellant is a stonemason who conducts a business from premises at Gillman. He cuts stone for use in the building industry. The respondent company conducts a ceramic tiling and stonemasonry business. Most of its work is carried out for head contractors.
In early 2002 the respondent became involved in a property development project in Queensland. As part of the project, it was planned to surface certain walls in buildings associated with the development with Wistow stone. The stone is quarried in the Adelaide Hills. The respondent was given responsibility for this aspect of the development and the project architect suggested to Mr Wilson, the respondent’s manager, that the appellant might be an appropriate source of supply for the stone.
The architect had already contacted the appellant who had explained what would be required to provide a veneer of Wistow stone for the walls. Mr Wilson found it difficult to contact the appellant by telephone and, on 14 May 2002, he sent a faxed message to the appellant asking him to call and discuss the supply of the stone.
Eventually, the appellant and Mr Wilson discussed the matter during a telephone conversation on 22 May 2002. On the same day Mr Wilson faxed the appellant to confirm the discussion which included reference to prices.
There was further discussion about the type of stone required and in the last week of June 2002 the appellant faxed a quotation for the supply of Wistow stone veneer at $140 per square metre. On 3 July 2002 Wilson sent a fax to the appellant enquiring whether it was possible to halve the size of the larger category of stone. There was a delay in obtaining a reply which had been requested urgently. However, on 10 July 2002, the appellant indicated that the stone could be cut to the dimensions requested by the respondent but that there would be an increase in price. After some discussion it was agreed that the purchase price would be $145 per square metre. Mr Wilson said in evidence that during this conversation he placed an order for 190 square metres of Wistow stone at that price. He said he confirmed this by sending a fax on the same day setting out the quantity of stone and the price.
There had been some discussion between the two men about the stone being ready for delivery in three months’ time. Because of its importance, this issue is discussed in more detail later in these reasons.
The fax which Mr Wilson sent on 10 July 2002 did not seek a reply and there was none. However, Mr Wilson sent a further fax on 22 July which again set out the terms of the order and requested the appellant to confirm that he had received the order. Mr Wilson said that after sending that fax he received a telephone call from a lady who said that she was the wife of the appellant and that he was interstate but that he was aware of the order and would deal with it on his return.
Mr Wilson said that in September 2002 the architect told him that he had heard that the appellant may have difficulty in obtaining stone from the Wistow quarry. Wilson said he rang the appellant on 5 September. His evidence continued:
“I rang Mr Calabrese, initially asked him how the order was going. He said ‘What order, you have never sent me an order?’ I panicked because, to be honest, time had got away. We’d gone through the ordering in – well, when I spoke to his wife mid-July, we were now in September and I had done nothing during that time. I hadn’t made any phone calls to follow up on the order. I panicked. My main concern is to Mirvac [the head contractor], you know, there’s a responsibility to Mirvac contractually. Rito [the appellant] said, ‘If you fax me the order right now I will see what I can do.’ I faxed him the order straight away; I think there are phone records to confirm that. I then rang the architect back, told him what I had done. He said, ‘Well, we’ve been talking to Wistow Stone, they’re saying Wistow Stone Quarry, they will certainly be able to provide the stone, they’ve provided us with lots of information, they’ve sent us samples, they’ve directed us to their web site, they seem like a very professional set up. Let’s cancel Rito’s order, since he’s done nothing about it, and we’ll order the stone through Wistow – Wistow Stone Quarry.”
Mr Wilson said that later on the same day the appellant telephoned him:
“Yes, he rang me back about, it would have been, half an hour or so later. He said, ‘Yes, I have got your order. We’ve got the stone in stock and we could start on it straight away.’ I actually cut him short and said, ‘Don’t worry about it, we’ve decided we’re going to buy the material elsewhere, we’re cancelling the order.”
Mr Wilson confirmed the cancellation of the order in a letter dated 5 September 2002.
On 20 September 2002 the appellant’s solicitor wrote to the respondent challenging its right to cancel the order and calling on the respondent to adhere to its responsibilities under the contract. The letter stated that the stone would be ready for collection 15 days after confirmation that the appellant intended to proceed.
The appellant gave evidence before the magistrate at the trial and an affidavit sworn by him in support of the application for summary judgment was received into evidence. The appellant referred to the various discussions leading up to the telephone conversation with Mr Wilson on 10 July. He said they agreed on the price of $145 per square metre and Wilson said they needed the stone in three months. The appellant said he told Wilson he would proceed to get the order up and that he would be pleased if an order could be faxed to him in due course.
The appellant said he did not receive the order, but he had dealt with the architect before and he considered the order was “sufficiently placed”. He said he then took steps to get the order ready. He summarised the conversation he had with Mr Wilson on 5 September in his affidavit:
“9On 5 September 2002 Wilson telephoned me on my mobile and said ‘Have you got the order ready?’ I said ‘No, not yet, it will be ready in about 10 days or two weeks. You still haven’t faxed me the order.’ Wilson said ‘Yes, I did send you the order and afterwards I rang your wife and she said “Yes, I received the order”.’ I said ‘Nick, my wife doesn’t get involved in the business’. He said ‘Give me the number and I will resend the order now.’ Now produced and show to me and marked ‘RC3’ is a copy of the fax. It was sent at 10.19 am EST on 5 September 2002. It confirms the cutting in half of the larger 248 mm stone to 124 mm.
10I rang Wilson. My phone records show that this was at 10.13 am CST. Now produced and shown to me and marked ‘RC4’ is a copy of my phone records showing the phone call. I told him I had received the copy of the fax marked ‘RC3’.
11Shortly after my call to Wilson he telephoned me again. He said ‘I hear a rumour about that you have got no access to Wistow Stone’. I said that I had stone in stock or words to that effect. There was a conversation in which I confirmed to him that I had the stone available. He confirmed to go ahead but he phoned again about half hour later. He said ‘You got the fax?’ ‘I will send you a cancellation’. That is all he said, he put the phone down. A fax was subsequently sent to my fax number at 10.46 am EST. Now produced and shown to me and marked ‘RC5’ is a copy of that fax. I refer to the first sentence of the fax. I deny that I had told Wilson that production of the stone veneer had not yet started. Sorting of the stone had been going on for some time. Once the stone is sorted the order would not take that long to prepare. I had indicated 10 days to 2 weeks so that we could work in an unpressured way. If necessary, however, the order could have been got up totally in that order of time, ie two weeks. As at 5 September 2002 I could certainly have had the order ready by the first week of October (the three month period) even if I had not started to sort the stone which in fact I had. There was to pallets already prepared.”
The appellant denied that he told Wilson the preparation of the stone had not started when Wilson called him on 5 September. He said he could have had the order ready within the three month period.
The magistrate appealed from concluded that the parties had not entered into a contract for the supply of the stone. In the alternative, he expressed the view that if a contract had been entered into, there was an implied term that time was of the essence. He held that, in the circumstances as they existed in early September 2002, the respondent was entitled to treat the appellant’s conduct as a repudiation of the contract. Finally, he concluded that the appellant had not established that he had suffered any loss. Each of these findings is challenged by the appellant.
The magistrate determined that the appellant was an unsatisfactory witness and that the evidence of Mr Wilson was to be preferred where it conflicted with the evidence of the appellant. Mr Heywood-Smith QC, for the appellant, conducted the appeal on the basis of an acceptance of the evidence given by Mr Wilson.
The magistrate concluded that there was no contract because the appellant had done nothing to commence preparing the order. He said he suspected that this was because the order had been spoken of but not confirmed. He concluded that there was no explanation for the inaction other than the appellant’s belief that there was no order and hence no contract.
In my view, this analysis of the evidence and its effect in law is flawed. It is clear from the evidence of Mr Wilson that an agreement was formed on 10 July. The parties agreed on a price of $145 per tonne. As I have pointed out, Mr Wilson said that he placed an order on that occasion for 190 square metres of stone at that price. There was an offer to supply the stone at the agreed price and this offer was accepted by the placing of the oral order. The contract was not conditioned upon the receipt of an order in writing. According to the appellant’s evidence he requested that an order be faxed to him in due course, but this appears to have been requested so as to confirm the order, just as Mr Wilson asked for confirmation of the receipt of the written order after he had faxed it to the appellant.
In any event, although the appellant denied receiving the order and said that his wife would not have spoken to Mr Wilson over the telephone as deposed to by Mr Wilson, the magistrate accepted Wilson’s evidence that he did fax confirmation of the order to the appellant. In the light of this finding it is difficult to understand how his Honour based his finding that there was no contract on the appellant’s belief that there had been no confirmation of the order. Furthermore, although the appellant’s reply on the telephone suggested that the confirmation of the order had not been received, further evidence from the appellant and his employer was to the effect that preparation of the order had commenced by the time of this telephone conversation.
It is puzzling why, on Wilson’s evidence, the appellant denied knowledge of the faxing of the order. However, as I have suggested, the denial of the receipt of the fax is not necessarily a denial of the contract and the rest of the evidence, including the fact that the appellant’s workman had started work on the order, points to the existence of a contract. In my view a binding contract was concluded on 10 July.
The next finding of the magistrate challenged by the appellant was the conclusion that performance on time was an essential term of the contract. If performance on time was an essential term, it could not be further argued that this term had been breached. The period of three months referred to in the negotiations had not expired at the time the respondent purported to terminate the contract. If the issue as to time had any relevance, it was in relation to the respondent’s assertion that there had been a manifestation by the appellant of unwillingness or inability to perform the contract so as to give rise to a repudiation entitling the respondent to terminate.
Mr Wilson said in evidence that he was concerned about penalty clauses as to time which were part of his contract with the developer. He said that he asked the appellant when he spoke to him in June how long it would take to prepare the stone. His evidence continued:
“QWhat was his reply?
AIt would take him three months to process it.
QDid you discuss that issue any further?
AAt that stage that wasn’t a problem we were in June and the stuff wasn’t required till October, three months was September.”
Mr Wilson was cross-examined on this topic:
“QYes, you sent a written order after you made your deal on the telephone?
AWe’d certainly agreed all of the details of the order, yes.
QAnd he said he’d supply it?
AYes.
QAnd you, at that time, told him you needed it in three months, is that right?
AThe three months actually came from Rito, it was Rito’s comment that it would take him three months to process it.
QOkay?
AThat fit in with the program from –
QAre you saying that he said to you, ‘I can give you 190 sq m, but it will take me three months to make it’?
AThat’s it, yes.
QI put to you that, in fact, there was some discussion as to when it was needed and that the end result of that discussion was that delivery in October suited you and suited Rito, is that the actual circumstances?
ADelivery in October certainly suited us, that was when the material was going to be required, but the three months came from Rito, it was Rito that told us it would take three months to process. There’s other evidence in court, a fax from Jeff Allett, the architect, he’d had conversations with Rito earlier, in which Rito had told him it would take him reasonable time.
Q.. . . You wanted it in October, that’s true, isn’t it?
AIt is.
QAnd Rito agreed to provide it in October, didn’t he?
AYes, he did.
QBut you would go further and this is where we will disagree that I would put to you that that was simply the agreement of when it would be delivered, you say that in fact he needed three months. He made it clear to you that he needed three months to do it, is that what you’re saying?
AHe said that he needed three months to do it, yes. The negotiations with Rito had gone over several months and by the beginning of June I was getting anxious because Rito had told me it would take him three months to produce it, that’s why I started sending the faxes, pushing him along because I was concerned it was going to take him three months to produce it.”
In his affidavit the appellant stated:
“Wilson said that they needed 190 square metres and that they needed it in three months. He said to me ‘You have plenty of notice’. I said that I would proceed to get the order up.”
He was cross-examined about this issue:
“QDuring the time of your discussions between the 3rd of July and the 10th of July you told Mr Wilson that you would need approximately three months from the date of the order to produce the rock face, that’s correct, isn’t it?
AI would have liked three months yes because it’s a big job and I got other customers with the same stone.”
The magistrate found that it was an implied term of the contract that time was of the essence. It was conceded by the appellant that it was a term of the contract that delivery take place in the three month period, but the respondent argued that this was an essential term. It must be acknowledged that in commercial contracts the inference that time is of the essence will be drawn more readily Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 237 at 555. However, the question remains one of construction and it is appropriate to bear in mind the approach suggested by Jordan CJ in Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 at 641-642:
“The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of a strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor.”
It would appear that the penalty clause in the respondent’s contract with the developer was not brought to the attention of the appellant and it is difficult to infer from the evidence that, at the time of the formation of the contract, the respondent brought home to the appellant that it was insisting on strict performance of a time period. The effect of the respondent’s evidence is that it was given an intimation by the appellant that the stone would be ready in three months and it was content with that situation. In my view time was not made the essence, of the contract. Nevertheless, as I have pointed out, even if time was of the essence the result of the case turns on other considerations.
The time for completion had not expired by the time the respondent purported to terminate the contract. There was still approximately five weeks to prepare the stone. The crucial issue is whether the respondent was entitled to terminate the contract by reason of repudiation by the appellant or because the appellant was wholly and finally disabled from performing his contractual obligations.
As Ipp J said in National Engineering Pty Ltd v Chilco Enterprises Pty Ltd [2001] NSWCA 291 at [49]:
“Repudiation of a contract may be regarded as an anticipatory breach entitling the innocent party to terminate the contract: Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 per Brennan J at 641-644; Sunbird Plaza Pty Ltd v Maloney (1988) 166 CLR 245 per Mason CJ at 262, per Gaudron J at 278-279. In addition, a party may terminate a contract for anticipatory breach where, at the point of termination, ‘the other party was wholly and finally disabled from performing its contractual obligations when the time for performance, so far as it is of the essence, should arrive’ per Gaudron J (at 280) in Sunbird Plaza Pty Ltd v Maloney (see also Mason CJ at 262). As her Honour went on to remark: ‘That total disability must be proved ‘in fact and not in supposition’. – per Devlin J in Universal Cargo Carrier Corporation v Citati [1957] 2 QB 401 at 450’.”
The principles relevant to repudiation were discussed by Mason CJ in Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1988) 166 CLR 623 at 634:
“In Shevill v Builders Licensing Board (1982) 149 CLR 620 at 625-626, Gibbs CJ stated that:
‘… a contract may be repudiated if one party renounces his liabilities under it – if he evinces an intention no longer to be bound by the contract … or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way …’.”
See also Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 33, 40.
There is a difference between evincing an intention to carry out a contract only if and when it suits the party to do so and evincing an intention to carry out a contract as and when it suits the party to do so. In the first case the party intends not to carry out the contract at all in the event that it does not suit him. In the second case the party intends to carry out the contract, but only to carry it out as and when it suits him. It is much easier to say of the first than of the second case that the party has evinced an intention no longer to be bound by the contract or to fulfil it only in a manner substantially inconsistent with his obligations and not in any other way. But the outcome in the second case will depend upon its particular circumstances, including the terms of the contract. In some situations the intention to carry out the contract as and when it suits the party may be taken to such lengths that it amounts to an intention to fulfil the contract only in a manner substantially inconsistent with the party’s obligations and not in any other way.”

The court looks at the objective conduct of the party who is said to have repudiated the agreement. In Laurinda Deane and Dawson JJ held (657):
“Lord Wright’s oft-quoted admonition that ‘repudiation of a contract is a serious matter, not to be lightly found or inferred’ (Ross T Smyth & Co Ltd v T D Bailey, Son & Co [1940] 3 All ER 60 at p 71 is, no doubt, a wise one. It should not, however, be allowed to cloud the fact that an allegation of repudiation of contract in a civil case does not involve an assertion that the alleged repudiator subjectively intended to repudiate his obligations. Thus, it is of little assistance in the present case to identify reasons why the lessor was unlikely to have subjectively desired to repudiate its agreement to grant a lease. An issue of repudiation turns upon objective acts and omissions and not upon uncommunicated intention. The question is what effect the lessor’s conduct ‘would be reasonably calculated to have upon a reasonable person’ (per Lord Herschell L C, Carswell v Collard (1893) 20 R (HL) 47 at p 48; Forslind v Bechely-Crundall 1922 SC (HL) 173 at p 190). It suffices that, viewed objectively, the conduct of the relevant party has been such as to convey to a reasonable person, in the situation of the other party, repudiation or disavowal either of the contract as a whole or of a fundamental obligation under it.”
(See also D T R Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 431; Kyrwood and Others v Drinkwater and Others [2000] NSWCA 126.)
Although all aspects of the dealings between the appellant and Wilson are relevant to the context in which the suggestion of repudiation by the appellant must be considered, the events of 5 September are crucial to this aspect of the matter. Wilson said he rang the appellant after hearing from the architect that the appellant did not have access to stone from the Wistow quarry. In fact the appellant did have access to a supplier of Wistow stone. It is true that the appellant denied receiving the order, but he did not say he would not perform the contract. He asked for the order to be sent immediately and added that he would see what he could do. It would appear that Wilson did not take the appellant’s reply as a refusal to perform the contract or an intimation of inability to carry it out. Instead, he sent the order to the appellant.
When asked why he did so he said:
“I was concerned that he wouldn’t be able to fulfil the order, but there was still the suggestion that he might be able to, I mean, everybody can speed an order up can’t they, if need be.”
However, Wilson then spoke to the architect who appears to have convinced him that it would be preferable to order the stone through the Wistow quarry.
The appellant rang back within half an hour of his first conversation with Wilson and said he had the order, the stone was in stock and he would start on it straightaway. It was at this point that Wilson said he was cancelling the order.
As frustrating as the appellant’s conduct must have been in the eyes of Mr Wilson, at the time of the purported termination it did not evince an intention no longer to be bound by the contract or that the appellant intended to fulfil it only in a manner substantially inconsistent with his obligations.
In the light of the principles to which I have referred, I am satisfied that the appellant’s conduct, although dilatory, did not amount to a repudiation of the contract justifying termination by the respondent.
I am also of the view that the respondent did not establish that the appellant was wholly and finally disabled from performing his contractual obligations, even if delivery within three months of the date of the contract was an essential term. The evidence was to the contrary. The appellant said in evidence that he would have liked three months because it was a big job and he had other customers. However he did not suggest at any time that it would take three months of full-time work to prepare the order. He said he told Wilson on 5 September that he could start the order then, work on Saturdays and Sundays and finish in 10 days. Wilson’s own impression as at 5 September is summarised by his comment in evidence:
“I was concerned that he wouldn’t be able to fulfil the order, but there was still the suggestion that he might be able to, I mean, everybody can speed an order up, can’t they, if need be.”
It cannot be said that total disability to perform the contract on time had been proved in fact and not in supposition.
It follows that there was no anticipatory breach by the appellant. The appellant established wrongful termination of the contract by the respondent and the order dismissing the appellant’s action must be set aside.
The appellant has challenged the further finding of the magistrate that there was insufficient evidence upon which to base an award of damages in favour of the appellant.
The appellant based his claim for damages on the loss of the profit he would have made if the contract had not been terminated. Both parties agreed at the hearing of the appeal that the correct method of assessment in a case such as the present was that put forward by the appellant.
The appellant’s claim to damages was based on the following calculations:
“Contract Sum of 190 square metres of rock face
@ $145 per square metre  $27,550.00
Less slate – large wallers 34 tonne @ $100 per tonne             -$3,400.00
Less cost of 1.5 saw blades  -$1,620.00
Less labour – two men @ $200 per day to produce
15 square metres x 12.666 days (allow 15) to produce
190 square metres  -$6,000.00
Loss of Profit  $16,530.00”
Although the loss of profit thus calculated was $16,530, the appellant’s claim was limited to $9,500 and the appellant did not seek the higher figure before the magistrate or on appeal.
There is no dispute about the contract sum of $27,550. However, the respondent’s challenge was directed towards what it claimed was unsatisfactory evidence as to the anticipated costs of production.
The appropriate time at which to assess the loss was at the time of the alleged breach, namely, 5 September 2002.
Most of the criticism as to the vagueness of the material put forward by the appellant was in relation to the cost or value of the stone to be used in supplying the order. According to the appellant’s case, he was already in possession of the raw stone to fulfil the order at the time it was placed. He said that, at that time, the going price for the raw stone from his supplier was $100 per tonne and this was the figure used in the calculation for loss of profit. He said that by November, 2002 the price had increased to $108 per tonne and a price list from Mr Centofanti, his supplier, was produced to support this evidence. He also said that he had access to more Wistow stone if it was required and Mr Centofanti gave evidence to this effect also.
In cross-examination the appellant said that the stone in his possession from which the order was being fulfilled belonged to another person from whom he had borrowed money. He said that the stone was security for the loan and that after he used the stone for this order he was going to account to the other person for what he had used. Counsel for the respondent challenged this assertion at the trial and put to the appellant that he had given this evidence only because he had been forced to agree earlier in cross-examination that he had been bankrupt between 1996 and 1999. The appellant denied this allegation.
The price or value of the stone which would have been used to fulfil the order if it had not been cancelled was relevant in assessing the profit margin. The appellant’s case acknowledged that the cost of the raw stone had to be deducted from gross profit. His recollection was that the price of the stone would have been $100 per tonne. This seems to be reasonable bearing in mind the later price lists which revealed a slight increase in the price per tonne. Although the appellant said the stone belonged to someone else, he acknowledged that he would have to account for its value to the owner. There was no precise evidence on how much he would have paid to the owner, but it was reasonable to use the market price of the stone at the time of the contract as an estimate of this amount. If the position was as the respondent’s counsel put to the appellant in cross-examination, namely, that the appellant was the owner of the stone, then again the market price at the time of the contract would have been a reasonable basis for the calculation of this component of the production costs. In my view, the evidence on this issue was not so vague as to prevent a proper assessment being made of the profit margin. It should also be borne in mind that the appellant has claimed for a loss considerably less than the loss established by the calculations referred to above.
The appellant then gave evidence that, in order to fulfil the respondent’s order, it would be necessary to use one saw blade and half the life of another blade. The cost of $1620 for saw blades was then included in the deductions made from the gross purchase price. This evidence was not challenged.
The final component of the deductions from the calculation of the estimated profit, the cost of labour, was also established by unchallenged evidence.
In my view, the appellant established a case for an award of damages based on loss of profit. A loss of at least $9500 was established.
In the course of the argument on appeal, the respondent pointed out that some of the stone which had been cut to supply the respondent’s order was sold subsequently for $140 per square metre and that other stone which would have been used for the order was sold for the same amount. It was argued that these sales should have been taken into account in the assessment of the appellant’s loss.
The appellant cut and sold stone in the course of his business. The fact that a profit might have been made on the stone in a subsequent transaction does not deprive the appellant of recovering his loss of profit on the transaction entered into with the respondent. The respondent is not entitled to claim a benefit from a profit made on another transaction which may well have taken place in any event (Thompson (W.L.) Ld v Robinson (Gunmakers) Ld [1955] 1 Ch 177 at 184).
The appeal will be allowed, the orders of the magistrate will be set aside and in lieu thereof there will be judgment for the appellant against the respondent in the sum of $9,500.

[2003] SASC 376

13 November 2003