Canvale Holdings Pty Ltd as Trustee for the Volik Trust v Nexus Australia Pty Ltd - [2022] WADC 17

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION:   PERTH
CITATION:   CANVALE HOLDINGS PTY LTD as Trustee for THE VOLIK TRUST -v- NEXUS AUSTRALIA PTY LTD [2022] WADC 17
CORAM:   HERRON DCJ
HEARD:   19-27 JULY 2021
DELIVERED          :   25 FEBRUARY 2022
FILE NO/S:   CIV 1246 of 2018
BETWEEN:   CANVALE HOLDINGS PTY LTD as Trustee for THE VOLIK TRUST
Plaintiff
AND
NEXUS AUSTRALIA PTY LTD
First Defendant
NELSON CHUA
Second Defendant

Catchwords:

Contract - Pre-contractual representations - Whether promissory - Terms implied under s 14 Sale of Goods Act 1985 (WA) - Goods fit for purpose - Merchantable quality

Consumer law - Misleading or deceptive conduct contrary to s 18 Australian Consumer Law - Misleading representation as to operational capacity of packaging machine - Whether representations were in relation to a 'future matter' - Section 4 Australian Consumer Law - Whether representations were relied on - Whether representations misleading or deceptive as to packaging capacity of packaging machine

Damages - Assessment of loss and damage - Breach of contract - Breach of implied term as to fitness for purpose - Packaging machine retained by plaintiff - No evidence as to value of machine at time of purchase or at the date of assessment

Damages - Section 236 Australian Consumer Law - Section 237 and s 243 Australian Consumer Law - Where packaging machine retained by plaintiff - Where no evidence as to value of machine - Whether appropriate to make orders pursuant to s 237 and s 243 for return of machine

Legislation:

Nil

Result:

Damages awarded pursuant to s 236 Australian Consumer Law
Order made for return of packaging machine to first defendant

Representation:

Counsel:

Plaintiff	:	Mr A Hershowitz
First Defendant	:	Mr K O'Toole
Second Defendant	:	Mr K O'Toole

Solicitors:

Plaintiff	:	Paiker & Overmeire
First Defendant	:	James Chong Lawyers
Second Defendant	:	James Chong Lawyers

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

Australian Competition and Consumer Commission v Danoz Direct Pty Ltd [2003] FCA 881
Australian Competition and Consumer Commission v Kimberly-Clark Australia Pty Ltd [2019] FCA 992
Australian Competition and Consumer Commission v Kimberly-Clark Australia Pty Ltd [2020] FCAFC 107
Australian Competition and Consumer Commission v Woolworths Group Ltd [2020] FCAFC 162
GR Engineering Services Ltd v Investmet Ltd [2021] WASCA 136
Henville v Walker [2001] HCA 52; (2001) 206 CLR 459
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41
Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388
Re Bonney Forge Pty Ltd v Press & Shear Machinery Pty Ltd [1988] FCA 121
Re Press & Shear Pty Ltd v Bonney Forge Pty Ltd [1988] FCA 414
Samsung Electronics Australia Pty Ltd v LGElectronics Australia Pty Ltd [2015] FCA 227
Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332
Swick Nominees Pty Ltd t/as Swick Drilling Australia v Norncott Pty Ltd [No 3] [2013] WASC 173
Swick Nominees Pty Ltd v Leroi International Inc [No 2] [2015] WASCA 35; (2015) 48 WAR 376
TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd (1963) 180 CLR 130
Wyzenbeek v Australasian Marine Imports Pty Ltd (in liq) [2019] FCAFC 167; (2019) 272 FCR 373

HERRON DCJ:

Introduction

The plaintiff company Canvale Holdings Pty Ltd as Trustee for The Volik Trust, 'Canvale', trading under the name 'By Nature' carries on the business of producing and packaging health food products such as seeds, grains, powders, dried fruits and blended products.[1] The first defendant company, Nexus Australia Pty Ltd, 'Nexus', is the Australian agent for Seal Pack Technology Co Ltd, a company based in Taiwan, which manufactures and supplies packaging machines.[2] At all material times Nexus was represented by its sole director, the second defendant, Mr Chua.[3]
[1] Amended statement of claim (statement of claim), par 1.3, essentially amended by par 3 of the further amended defence (defence).
[2] Statement of claim, par 2.4, as admitted by par 7 of the defence.
[3] Statement of claim, par 3, as admitted in par 9 of the defence.
In late November 2015 - early December 2015 the parties entered into a contract by which Canvale purchased from Nexus a packaging machine, 'the packaging machine', to package various of Canvale's products in the sum of $121,000 inclusive of GST, which sum included the cost of commissioning the packaging machine. The packaging machine was delivered and installed in Canvale's premises in December 2016.
Canvale encountered difficulties in the operation of the packaging machine. Canvale says that the packaging machine was unable to package its products at the promised speed of 15 - 20 packets per minute and, in particular, is unable to package its powdered products. Because of the difficulties it encountered in the operation of the packaging machine, and after being served with a Department of Commerce prohibition notice, Canvale ceased use of the machine after a few months and the machine has lain redundant and unused since then.
Canvale says it only entered into the contract to purchase the packaging machine because of certain representations made to it, which were also terms of the contract, regarding the packaging machine's capabilities. Canvale says the packaging machine was not fit for purpose and is not of merchantable quality, in breach of the express terms of the contract and also the terms implied by s 14 of the Sale of Goods Act 1895 (WA).[4]
[4] Plaintiff's written opening submissions, 8/7/2021, pars 24 - 26; ts 70.
Alternatively, Canvale says it entered into the contract in reliance upon representations which were misleading and deceptive, contrary to s 18 of the Australian Consumer Law (sch 2) Competition and Consumer Act 2010 (Cth) (ACL).[5]
[5] Statement of claim, pars 16 and 19; Plaintiff's written submissions, pars 28 - 34; ts 70.
It sues the defendants in damages for breach of contract and pursuant to s 236 of the ACL for misleading and deceptive conduct.
Each of Nexus and Mr Chua say that the packaging machine as sold and supplied to Canvale was fit for purpose and was of merchantable quality and say that the machine, if properly configured and if properly and competently operated, is capable of performing satisfactorily in the packaging of Canvale's products.
For the reasons which follow I find:
(a)the parties entered into a contract by which Nexus agreed to supply to Canvale an automatic packaging machine which would, inter alia, package Canvale's products including grains, powders and cereals, in stand-up pouches at a speed of between 15 - 20 pouches per minute;
(b)Mr Chua, who was the sole representative of Nexus, made representations to Mr Kilov acting on behalf of Canvale that the packaging machine would be capable of packaging the cereal and grain products, and also the powdered products, of Canvale at a rate of 15 - 20 pouches per minute;
(c)Mr Kilov relied on the representations to enter into the contract;
(d)the representations were with respect to a 'future matter';
(e)the packaging machine which was supplied by the defendants to Canvale was not fit for purpose and was not of merchantable quality in that it is unable to package Canvale's products at the represented and agreed speed; and further
(f)is unable to package Canvale's powdered products such as cacao powder and maca powder.
I find the defendants were in breach of the contract, including the implied term of fitness for purpose pursuant to s 14 Sale of Goods Act, and engaged in misleading or deceptive conduct contrary to s 18 of the ACL.
Except in respect of two claimed heads of damage, I dismiss Canvale's claim for damages for breach of contract, including for breach of the implied condition pursuant to s 14 of the Sale of Goods Act.
Pursuant to s 236 of the ACL, I award damages as follows:

1

Cost of packaging machine

$110,000.00

2

Interest on loan to purchase machine

$13,613.30

3

Loan set up fee

$355.00

4

Costs of technician and parts to commission packaging machine to perform

$6,422.50

5

Flight and accommodation to Taiwan to meet packaging machine manufacturer

$4,736.00

Total

$135,126.80

I otherwise dismiss Canvale's claim for damages for the loss of opportunity to save additional labour costs.
Further, pursuant to s 237 and s 243 of the ACL, I order Canvale to return the packaging machine to the first defendant, Nexus Australia Pty Ltd.

Background

Mr Martin Kilov is a director of Canvale which has operated under the business name By Nature for about 14 years. The business supplies and packages health foods or organic foods, including powders, seeds, grains and cereals. Some of the products they supply and package are chia seeds, quinoa grain, cacao powder and maca powder.[6] Mr Kilov has had business dealings with Mr Chua since approximately 2011 and over time they became friendly with each other.[7] Prior to 2015 Canvale bought various packaging and sealing machines, including some semi‑automatic packaging machines from Nexus through Mr Chua. They also purchased fillers for the purpose of packaging their products.[8]
[6] ts 102.
[7] ts 103, ts 104.
[8] ts 103.
During 2015 when his business was growing, as were the competition businesses, Mr Kilov was looking for ways to reduce his labour costs in packaging his product into bags. Labour was his biggest expense. He was considering an automated packaging machine that would speed up the packaging process and thereby decrease the labour involved in packaging the products with the consequent anticipated decrease in wages paid.[9] Mr Kilov was outsourcing some of the packaging costs which he described as exorbitant which prompted him into considering purchasing an automatic packaging machine.[10]
[9] ts 103.
[10] ts 103 - ts 104.
Mr Kilov and Mr Chua regularly met casually, usually over lunch at local restaurants, and discussed his business operations. Mr Chua was familiar with his business operations because of the business relationship over the previous four years.[11] Mr Kilov started to talk to Mr Chua about acquiring an automatic packaging machine that reduced the manual component of their packaging operations. He said he wanted a machine which could pack and dispense their bags. Mr Chua was familiar with such machines and explained how they worked.[12] Mr Kilov was unable to point to any precise discussions or recall exactly what was said, however, he recalled that at some point Mr Chua said that he could supply a machine that would achieve what Mr Kilov wanted.[13]
[11] ts 104.
[12] ts 104.
[13] ts 105.
Following the discussions Mr Chua, by email dated 25 March 2015, sent Mr Kilov a quote for a 'Nexus - 9200 fully automatic stand‑up pouch packaging system with a Servo Drive Auger Filler' for a price of $139,000 plus GST. The quote identified the products as 'Powder and Fine Seeds' and the output as '20 - 25 pouches per minute'. Mr Kilov responded later the same day informing Mr Chua that the cost was not affordable to him at that stage but 'hopefully in the not too distant future we can revisit this one'.[14]
[14] Exhibit 4.1; ts 105.
Mr Kilov was unable to precisely recall when or where conversations occurred between he and Mr Chua regarding the specifications of a packaging machine for Canvale's business. However, Mr Kilov recalled a conversation prior to receiving the March 2015 quote in which he informed Mr Chua he needed an automatic machine to pack Canvale's products.[15] He could not recall discussing in detail about the packaging speed of the machine but recalled after receiving the March 2015 quote expressing his joy of the output of 20 - 25 pouches per minute. He did not recall there were any discussions prior to the quote about the output speed.[16]
[15] ts 106.
[16] ts 107.
After Mr Kilov rejected the quote there were intermittent ongoing discussions between he and Mr Chua about a packaging machine. During that time Canvale's ability to afford to purchase a machine was looking more promising and Mr Kilov recalled having discussions with Mr Chua in May. He had a vague recollection of mentioning the matter a few times but specifically recalled there was a meeting over lunch with Mr Chua in May 2015. He told Mr Chua he was still interested in purchasing a packaging machine when his finances looked solid enough to go ahead. Mr Kilov did not recall any other discussions about a packaging machine.[17]
[17] ts 108.
In his evidence‑in‑chief Mr Kilov was asked whether he recalled any discussions with Mr Chua about the machine being able to package 15 ‑ 20 stand‑up pouches per minute. Initially Mr Kilov said he did recall such a discussion in about November or December when Mr Chua said the packaging machine could do 15 - 20 pouches per minute and he said to Mr Chua he thought the machine was able to do 20 - 25 pouches. Mr Chua responded that that was in relation to a different machine at a different time.[18] When asked further questions to clarify when the discussions occurred and what was said, Mr Kilov said he did not recall Mr Chua making a verbal statement that the machine could package 15 ‑ 20 stand‑up pouches per minute, he only recalled seeing it in writing. He then said he could not recall the date on which Mr Chua told him that but it was before he received the written quote.[19]
[18] ts 108 - ts 109.
[19] ts 109.
Mr Kilov also said that after he paid for the quote, he thought in early December, he considered there to be a deal.[20]
[20] ts 109.
Mr Chua did not qualify the packaging capacity of the machine other than by reducing the capacity from 20 - 25 to 15 - 20 pouches per minute which was reflected in the further written quotation provided on 30 October 2015[21] and the revised quotation, which included the cost of commissioning the packaging machine, on 16 November 2015.[22]
[21] Exhibit 1.3.
[22] Exhibit 1.4.
In his evidence-in-chief Mr Chua confirmed Mr Kilov's evidence that they regularly met and had lunch together when they discussed Canvale's business and its operational requirements. Specifically, they regularly discussed the pros and cons of an automatic packaging machine compared to the machines which were currently being used by Canvale which had been supplied by Nexus.[23]
[23] ts 367 - ts 369.
In the course of those regular discussions, Mr Chua said that he told Mr Kilov that the packaging machine should package around 15 ‑ 20 bags as per Mr Kilov's requirements when it was generally packing from 250 to 500 g. To make it more conservative he said to Mr Kilov the machine would be designed to package 200 to 600 g with the free flow products such as chia seeds, quinoas and granules.[24]
[24] ts 370.
In cross-examination Mr Chua confirmed he knew Canvale packaged powders, grains and cereals.[25]
[25] ts 418.
Mr Kilov obtained finance from Macquarie Leasing and payment of Nexus' invoice of 16 November 2015[26] was paid on 4 December 2015.[27]
[26] Exhibit 1.5.
[27] Exhibit 1.7; ts 112.
Both parties agree that upon payment of Nexus' invoice, the parties entered into a contract for Nexus to supply Canvale with a packaging machine.[28]
[28] ts 588, ts 591 (defence counsel); ts 631 - ts 633 (plaintiff's counsel).

The pleadings

It is Canvale's case that the contract entered into with Nexus was partly oral and partly in writing.
Paragraph 13 of the statement of claim pleads:
…
PARTICULARS
The Agreement is partly oral and partly in writing and is comprised of:
i.the Quote [dated 16 November 2015].[29]
ii.the invoice [dated 16 November 2015].[30]
iii.email from Mr Chua to Mr Kilov dated 30 October 2015.[31]
iv.email from Mr Chua to Mr Kilov dated 26 November 2015.[32]
v.Oral discussions referred to at paragraph 8 above.
[29] Exhibit 1.4.
[30] Exhibit 1.5.
[31] Exhibit 1.3.
[32] Exhibit 1.6.
The oral discussions referred to in par 8 are pleaded in the following terms:
8.During the course of the negotiations referred to in paragraph 7 above, Mr Chua on behalf of the First Defendant said to Mr Kilov words to the effect that:-
8.1he could supply a machine that would be fully automated and would enable the Plaintiff to reduce labour costs and increase operational capacity;
8.2the machine would have the capacity to dispense, pack and seal the Plaintiff's products into the Plaintiff's pouches at a speed of 15‑20 stand‑up pouches per minute;
8.3there would be no issues for the Plaintiff in terms of the packaging machine dispensing weights ranging from 200g to 600g of product per pouch;
8.4the machine would be fully automatic
8.5('the Oral Representations').
PARTICULARS
Mr Chua made oral representations to Mr Kilov about the machine on various occasions at various meetings during the period May 2015 to October 2015.
The negotiations referred to are discussions which are said to have occurred between Mr Kilov and Mr Chua after a meeting in May 2015.[33]
[33] Statement of claim, pars 6 - 7.
It is further pleaded at pars 14 and 15:
14.There were express terms of the Agreement that:-
14.1the Plaintiff would pay to the First Defendant the sum of $121,000.00 (including GST) for the Packaging Machine including its commissioning;
14.2the Packaging Machine would pack and seal 15‑20 pouches per minute;
14.3the Packaging Machine would dispense, pack and seal the Plaintiff's range of products;
14.4The Packaging Machine would dispense the plaintiff's products in a range of weights of between 200g and 600g per pouch.
14.5the Packaging Machine would have the capacity to pack and seal the Plaintiff's products in zip lock pouches used by the Plaintiff.
14.6the Packaging Machine would have an embossing station.
15.There were implied terms of the Agreement that:-
15.1the Packaging Machine would be fit for the purpose of being fully automatic;
15.2the Packaging Machine would be of merchantable quality;
15.3the Packaging Machine would be able to meet the Plaintiff's Operational Requirements; and
15.4the Packaging Machine would comply with all applicable legislation or regulations relating to workplace health and safety and for the safe operation of the Packaging Machine.
The plea that it was a term of the contract that the packaging machine would have an embossing station, which is denied by the defendants, was not pursued by Canvale and is therefore ignored in these reasons.
In addition to the oral representations which are alleged to have been made by the defendants, par 11 of the amended statement of claim pleads the following written representations were made:
11.1the Packaging Machine is fully automatic;
11.2the Packaging Machine is capable of packing and sealing 15 20 pouches per minute;
11.3the Packaging Machine would be fit for purposes of packing and sealing all of the Plaintiff's products;
11.4the Packaging Machine would be capable of dispensing between 200g and 600g of the Plaintiff's products per pouch;
11.5the Packaging Machine would be able to pack and seal zip lock pouches;
11.6the Packaging Machine would have five automatic stations including an automatic embossing and date coding station.
11.7The packaging Machine would be constructed of stainless steel.
Although by par 15 the defence admits that on 16 November 2015 Mr Chua forwarded Canvale an amended quote for the sale of the packaging machine, together with a brochure and an invoice, it does not admit that within that documentation the written representations were made.[34]
[34] Defence, par 16.
Paragraph 13 of the defence responds to par 8 of the statement of claim in the following terms:
13.The First and Second Defendants
13.1admit the allegation in paragraph 8.1 of the Amended Statement of Claim.
13.2admit the allegation in paragraph 8.2 of the Statement of Claim save that at all relevant times the Second Defendant said to Mr Kilov words to the effect that the performance of the Packaging Machine was subject
13.2.1to the characteristics of the product being packaged;
13.2.2to the characteristics of the pouches used; and
13.2.3to the competence of the operators at the respective ends of the Packaging Machine.
13.3admit the allegation in paragraph 8.3 of the Amended Statement of Claim save that at the same time the Second Defendant said to Mr Kilov words to the effect that the performance of the Packaging Machine was subject
13.3.1to the characteristics of the product being packaged;
13.3.2to the characteristics of the pouches used; and
13.3.3to the competence of the operators at the respective ends of the Packaging Machine.
13.4do not admit the allegation in paragraph 8.4 of the Amended Statement of Claim and repeat the defence at paragraph 13.2 above.
13.5do not admit the allegation in paragraph 8.5 of the Amended Statement of Claim.

Therefore, the defendants substantially admit the pleaded oral representations made by Mr Chua, on behalf of Nexus, to Mr Kilov on behalf of Canvale, but further plead that the packaging speed representations were qualified by the:
(a)characteristics of the product being packaged;
(b)the characteristics of the pouches used;
(c)the competence of the operators of the packaging machine, and
(d)that the represented capabilities and features of the machine depended on confirmation by the manufacturer, Seal Pack Technology, in Taiwan.
By pars 17 and 18 of the defence, the defendants deny the parties entered into a contract for the purchase and supply of a packaging machine. Paradoxically however, by par 19 of the defence, Nexus admits it was implied that the packaging machine supplied by it would be fit for purpose and would be of merchantable quality, but apparently do not admit the packaging machine would be fully automatic.
By par 18 of the amended statement of claim it is pleaded:
18.In breach of the Agreement:-
18.1the Packaging Machine is not of merchantable quality;
18.2the Packaging Machine is not fully automatic;
18.3the Packaging Machine is unable to pack and seal at a speed which would pack 15‑20 pouches per minute;
18.4the Packaging Machine is only able to dispense 4 of the Plaintiff's 15 core products;
18.5the Packaging Machine does not have an embossing station;
18.6the Packaging Machine is constructed of partly stainless steel and partly aluminium; and
18.7the Packaging Machine cannot dispense the plaintiff's products in a range of weights between 200g and 600g per pouch;
18.8the Packaging Machine does not comply with the requirements of the WA Occupational Safety and Health Act 1994, and the Commission for Occupational Safety and Health Code of Practice for Safeguarding of Machinery and Plant 2009; and
PARTICULARS
i.The Packaging Machine operates at a maximum speed range of 7- 8 pouches per minute.
ii.The Packaging Machine is not fully automatic and requires the same or similar human labour as the Plaintiff's pre‑existing manual machines used for packaging.
iii.The Packaging Machine requires the same or similar human labour as the Plaintiff's pre‑existing manual machines used for packaging.
iv.The Packaging Machine is unable to pack and seal 11 of the Plaintiff's 15 core products.
v.The Packaging Machine takes 35 minutes longer to set up than the Plaintiff's existing manual machines.
vi.The Packaging Machine consistently mis‑feeds pouches.
vii.The Packaging Machine does not contain a guard which prevents the operator from being caught and/or drawn into the moving parts of the machine.
viii.Prohibition Notice (ref: 48300430) issued by the WA Department of Commerce.
ix.The Plaintiff will rely on expert evidence at trial as to the Packaging Machine's performance and capabilities.
Paragraph 19 of the statement of claim pleads:
19.Further and/or alternatively, the Representations were misleading or deceptive or likely to mislead or deceive contrary to section 18 of the Australian Consumer Law in that:-
19.1the Packaging Machine is not fully automatic and requires the same or similar human labour as the Plaintiff's pre‑existing manual machines used for packaging;
19.2the Packaging Machine is unable to pack and seal 11 of the Plaintiff's 15 core products.
19.3the Packaging Machine takes 35 minutes longer to set up than the Plaintiff's existing manual machines;
19.4the Packaging Machine was not able to reduce the Plaintiff's labour costs;
19.5the Packaging Machine was unable to increase the capacity and operational speed of the Plaintiff's production process;
19.6the Packaging Machine consistently mis-feeds pouches;
19.7the Packaging Machine did not have the capacity to dispense, pack and seal the Plaintiff's products into the pouches at a speed of 15‑20 stand‑up pouches per minute.
In response, the defendants plead at pars 22 - 23:
22.As to the allegations in paragraph 18 in the Amended Statement of Claim, the First Defendant and Second Defendant say that
22.1the Packaging Machine was in merchantable condition when it was supplied to the Plaintiff.
22.2the Packaging Machine was 'fully automatic' within the relevant meaning of that phrase when it was supplied to the Plaintiff.
22.3the Packaging Machine was able to perform as specified when it was supplied to the Plaintiff providing
22.3.1the product and pouches used in its operation were appropriate to its specifications;
22.3.2its operators were competent in the operation of the Packaging Machine; and
22.3.3there was no interference by the Plaintiff with the hardware or software of the Packaging Machine, inconsistent with its prescribed use;
22.4The Packaging Machine supplied was to specification;
22.5The commissioning of the Packaging Machine for its safe operation, and its effective operation in terms of its electrical connection to mains power, was carried out by the Plaintiff exclusive of the First Defendant.
22A.The First and Second Defendants say furthermore that to the extent the Packaging Machine did not operate to specification its failure to do so was due to
22A.1inadequate skill or training of the operators employed by the Plaintiff; and, or alternately,
22A.2use by the Plaintiff of incorrect pouches; and, or alternately,
22A.3use by the Plaintiff of an inappropriate compressor; and, or alternately,
22A.4interference by the Plaintiff with the software governing the operation of the Packaging Machine; and, or alternatively,
22A.5mechanical modification by the Plaintiff of the Packaging Machine or its parts; and, or alternatively,
22A.6the failure of the Plaintiff to properly maintain the Packaging Machine.
23.As to the allegations in paragraph 19 in the Amended Statement of Claim, the First and Second Defendants repeat their defences in paragraph 22 hereof.
It is unclear why the defendants admit that Mr Chua made oral representations to Mr Kilov that he could supply a machine that would be 'fully automated' but do not admit he made an oral representation that the machine would be 'fully automatic'. The lack of clarity is compounded when by par 22.2 the defendants plead the packaging machine was 'fully automatic' within the relevant meaning of that phrase. It is not readily apparent whether the phrases 'fully automatic' and 'fully automated' have different meanings. The defendants did not submit there was any significance in the meaning of the different phrases. In circumstances where the defendants admit Mr Chua made the oral representations but submits the representations were conditional,[35] I am of the view there is no difference in the meanings of the two phrases.
[35] Defendants' closing submissions, par 10.

The issues

Although by their defence Mr Chua and Nexus deny the parties entered into a contract for the purchase and supply of a packaging machine, there was no issue at trial that a contract was entered into. As I have mentioned,[36] each of the parties accepted a contract was entered into when Canvale paid Nexus' invoice.
[36] [27].
Although by their written closing submissions the defendants submit a contract was entered into on 15 November 2015 by the plaintiff's written acceptance of the 30 October 2015 quotation,[37] that cannot be correct because a revised invoice and quotation, dated 16 November, was sent by Mr Chua to Mr Kilov by email of 16 November 2015.[38] Therefore the quote dated 31 October 2015,[39] was not accepted by Mr Kilov. Rather, the amended quote and invoice of 16 November 2015 was accepted by Mr Kilov and the amended invoice to include commissioning, in the sum of $121,000,[40] was paid by Canvale on 4 December 2015.[41]
[37] Defendants' written closing submissions, 27 July 2021, par 13.
[38] Exhibit 1.4, pages 53 - 56.
[39] Exhibit 1.3.
[40] Exhibit 1.5.
[41] Exhibit 1.7.
Moreover, during the trial, and at least by the end of the trial, there was really no issue between the parties as to the terms of the contract and the representations, which reflect the pleaded terms of the contract, which were made by Mr Chua to Mr Kilov. In his written closing submissions, counsel for Canvale submitted:[42]
[42] Plaintiff's closing submissions, par 7.
7.On a proper construction of the Agreement, there were terms of the Agreement that:-
(a)Nexus would supply to the plaintiff an 'Automatic Pouches Fill – Seal Packing Machine' (Packaging Machine) which packed stand up pouches;
(b)the Packaging Machine would fill, pack and seal pouches at a speed of between 15 to 20 pouches per minute;
(c)the pouch holder of the Packaging Machine could be adjusted to suit different widths of pouches;
(d)the Packaging Machine had an automatic pouch opening system which operated with a vacuum sucking open pouch and air blowing open pouch;
(e)the air consumption required to operate the Packaging Machine was at least 5 to 6 bars;
(f)bulk samples of the plaintiff's products were required for testing by the manufacturer of the Packaging Machine Seal Pack Technology Co. Ltd (Seal Pack) 21 days before shipment;
(g)the Packaging Machine would pack and seal the plaintiff's products including grains, powders and cereals;
(h)the Packaging Machine would pack and seal and dispense the plaintiff's products in a range of weights between 200g and 600g per pouch;
(i)the Packaging Machine would be able pack and seal zip lock pouches used by the plaintiff.
In both his written and oral closing submissions, the defendants' counsel accepted a contract was entered into and the terms of the contract were as submitted by counsel for Canvale.[43]
[43] ts 591 - ts 592; ts 621 - ts 622.
The issues as they emerged during the trial were whether:
(a)the machine was capable of packaging seed and grain products at 15 - 20 bags per minute;
(b)the packaging machine was capable of packaging powdered products;
(c)the reason for the machine being incapable of packaging powdered products or other products at a speed of 15 - 20 bags per minute, which was substantially based upon the expert opinion of Associate Professor Karrech, was because:
(i)incorrect bags or pouches were used by Canvale;
(ii)the operators of the machine were not properly trained or competent in the operation of the machine;
(iii)the machine was not properly set up or operated by Canvale because of modifications or alterations made to the packaging machine, being the replacement vacuum generators, and suction cups, the partial cutting out of the filler funnel and adjustments made to the computer and software program controlling the machine's operation reduced the efficiency of the machine's operation;
(iv)the suction caps were misaligned; and
(v)insufficient air pressure was maintained to the machine.
Further, in closing submissions the defendants admit Mr Chua made the oral representations to Mr Kilov as pleaded by Nexus but submitted the representations were 'conditional' and further that the representations were not representations as to future matters. Rather, they were representations as to the present specifications and capacities of the packaging machine and the inherent characteristics of the machine.[44]
[44] Defendants' written closing submissions, pars 10, 28 - 29; ts 597 - ts 601.
It was further submitted in closing that if the representations were as to future matters the defendants did not act unreasonably in making the representations and that Mr Kilov did not enter into the contract on behalf of Canvale in reliance upon the representations.[45]
[45] Defendants' written closing submissions, pars 26, 30; ts 590 - ts 593, ts 595 - ts 596.
There is also a further issue as to whether, if I find that Nexus was in breach of contract or in breach of the ACL, by engaging in misleading or deceptive conduct, whether Canvale has proved it has suffered loss and damage, as claimed, as the result of the breaches or the contravening conduct.
By its particulars of damage, Canvale claimed damages as follows:

1.

Cost of packaging machine

$110,000.00

2.

Interest on loan to purchase machine

$13,613.30

3.

Loan set up fee

$355.00

4.

Costs of technician and parts to commission packaging machine to perform

$6,422.50

5.

Flight and accommodation to Taiwan to meet packaging machine manufacturer

$4,736.00

6.

Loss of commercial opportunity (excess labour costs which would not have been incurred if packaging machine was able to perform)

$104,808.00

Total

$239,934.80

The essential areas in dispute regarding the assessment of damages are in relation to the claim for the cost of the packaging machine and the claim for loss of commercial opportunity, assessed on the basis of additional labour costs, which would not have been incurred if the packaging machine was able to perform as represented, or in accordance with the terms of the contract, by packaging Canvale's products, particularly powders, at 15 - 20 bags per minute. Canvale's claim is based upon an assumption that if the packaging machine operated to capacity, Canvale would have reduced its workforce by three employees, thereby reducing its wage costs. Based upon the amended report of Canvale's expert forensic accountant, Ms Melville, Canvale revised downwards its claim for loss of commercial opportunity to the sum of $65,028.[46]
[46] Plaintiff's written closing submissions, par 168; ts 654 - ts 655.

Formation of contract

After Mr Kilov received the quotation of 30 October 2015 he asked Mr Chua to revise the quotation to include the cost of commissioning the packaging machine.[47] He also sent Mr Chua an email of 15 November 2015 informing Mr Chua he wanted to proceed with the purchase of the 'automatic machine' which he thought would 'eventually improve production efficiency'. He then informed Mr Chua:[48]
… One of my biggest selling products is cacao powder in its pure form and I am concerned that it will cake up. Unlike the fruit powder blends I cannot add an anti caking agent because we sell the product as 100% pure. I know we've discussed establishing a minimum which I am comfortable with but in my experiments with the sachet machines we are able to substantially reduce the caking up in the cups by lightly vibrating the turntable. We do this by mounting a second vibrator on top of the cabinet near the turntable shaft.
What I'm hoping for is that the manufacturer will agree to do all of the modifications required to reduce the caking as much as possible. I completely understand that they cannot entirely compensate for products that don't flow freely but I'm certain that with their knowledge and experience they can substantially reduce the caking through vibration etc. Please talk to them and let me know whether they agree to do this as part of the original quote.
…
[47] ts 110.
[48] Exhibit 1.4, page 53.
Mr Kilov concluded his email:
Do the cups work in the same way as my sachet machines? If that is the case then I will need a lot of different size cups due to the varying density of all the products we pack. Please clarify this for me.
Mr Kilov explained that when he was talking about caking he was referring to the tendency of powders to clump. Because cacao powder was supplied as being organic he was not able to include any anti‑clumping additive in the powder.[49]
[49] ts 111.
Mr Chua did not specifically respond to that email, except that on 16 November he forwarded the revised invoice and quotation to include the commissioning charges.[50]
[50] Exhibit 1.4, page 53; Exhibit 1.5.
By its written terms the quotation of 16 November confirmed the quotation was provided to Mr Kilov in response to his enquiry 'regarding your automatic stand up pouch packing requirements'. Under the heading 'AUTOMATIC POUCHES FILL - SEAL PACKING MACHINE' the quotation stated:[51]
…
* Operating Speed, pcs / min: 15 ~ 20
* Operating Speed, pcs / hour: 900 ~ 1200
* The actual speed is subject to the product's dimension, physical features and the material of film).
…
[51] Exhibit 1.4, page 54.
Under the heading 'Features' it is relevantly stated:[52]
[52] Exhibit 1.4, page 55.
…
3.Automatic de‑nesting system: the pouch must meet the de‑nesting condition
* Manually feeds the pouches.
* No pouch no filling.
* The width can be adjusted to suit different width of pouches.
4.Automatic pouch opening system: vacuum‑sucking open pouch & air‑blowing open pouch.
5.FILLING SYSTEM:             1 set
* Mechanism: volumetric cup     * Filling temperature: AMB
* Level sensor: available           * Hopper: 30L, single layer, SUS304
* Agitator/Stirrer: available       *Filling volume adjustment: manual
* Will leave the signal of automatic re‑feeding ready for connection
…
12.Air consumption: at least 5~6 bars.
The price was $110,000 plus GST inclusive of commissioning.
Under the heading 'Terms and Conditions' the quotation stated:[53]
PAYMENT: 40% down‑payment, 50% prior to shipment, 10% upon SAT is completed
DELIVERY: Within 120 day on site upon receipt of order and down‑payment.
VALIDITY: 14 days from date of quotation.
SAMPLE: Bulk samples for actual testing of each size are required 21 days before Shipment.
WARRANTY : Warranty: 12 months from the date of delivery. This warranty does not cover consumption parts and parts failure due to improper use of machine, abused normal wear parts.
[53] Exhibit 1.4, page 56.
The invoice which was also sent to Mr Kilov was for a 'Gravity System Fully Automatic Stand Up Pouch Form Fill and Seal Machine System'.[54]
[54] Exhibit 1.5.
Although the quotation required a final instalment payment of 10% to be made upon 'SAT' being completed, Mr Kilov did not understand what that was a reference to and said he still did not.[55] Mr Chua explained the 'SAT' is a Site Acceptance Test during which the manufacturers', Seal Pack Technology, engineers come to the site, commission the packaging machine and provide training. The final payment is required once the customer accepts the testing and signs off.[56]
[55] ts 112.
[56] ts 383.
Despite the quotation, once accepted, requiring by its written terms payment in three different instalments, Mr Kilov made the payment in full in December 2015 because it was easier to obtain finance in the one amount and also because, having done business previously with Mr Chua, he did not have any concerns and believed there were no untoward risks in proceeding with the purchase of the machine.[57]
[57] ts 112.
Although Mr Chua did not specifically respond to Mr Kilov's email of 15 November, on 26 November he advised Mr Kilov:[58]
Hi Martin,
I can confirm that the 9201 Stand Up Pouch Packer will pack from 200g - 600g, Free Flow Powder, Granules and Cereals (up to 1KG depends on the product texture and pouch size).
Please let me know once the finance / deposit is ready so we can quickly move ahead and hope to have the machine installed by March '16.
Cheers,
(emphasis added)
[58] Exhibit 1.6; ts 111 ‑ ts 112.
Although it was not the subject of evidence given by either Mr Kilov or Mr Chua, on 17 November 2015 Mr Kilov enquired of Mr Chua:[59]
Sorry to nag but would you please find out if the machine manufacturer will include all the cup sizes which I require. Due to the bulk density of the products I think I will need quite a few. Before we finalize the order can I ask that you please send them a sample of each product that we will be packaging so that they can advise whether they are suitable in terms of the sizes we anticipate packaging. I know we discussed the fact that we can simulate the product flow on the sachet machines however I need to know what size limitations I might face due to the different bulk density of each product.
…
We'll chat tomorrow.
[59] Exhibit 4.11.

The email was tendered by counsel for Canvale during his opening address and was not otherwise the subject of any evidence during the trial. It seems likely the email was a follow up from the earlier email of 15 November to which Mr Kilov had not received a response. It is possible Mr Chua's email of 26 November was in response to Mr Kilov's email of 17 November. Although the email was tendered in opening, Mr Kilov was not directed to it during his examination‑in‑chief when he was asked about Mr Chua's email of 26 November 2015.[60] Mr Kilov said he did not remember whether he verbally asked Mr Chua to confirm the packaging sizes or whether he sent him an email but he thought he asked Mr Chua to verbally put it in writing.[61] From Mr Kilov's statement 'Before we finalise the order …' I conclude that he was yet to accept the quotation of 16 November and a contract had not yet been entered into.
[60] Exhibit 1.6.
[61] ts 113.
I accept it was important for Mr Kilov to have the written confirmation[62] that the machine was able to pack his product range in the weight range operated by his business. His two biggest selling sizes were 250 g and 500 g. Mr Kilov was uncertain as to when or how he requested confirmation that the machine would pack from 250 g to 600 g of products but thought he asked Mr Chua to confirm the position in writing after he received the final quotation and before he paid for it.[63]
[62] Exhibit 1.6.
[63] ts 112 ‑ ts 114.
The discussions seeking confirmation that the machine would pack from 250 g to 600 g of products occurred after he accepted the quotation but before he paid the invoice.[64]
[64] ts 114.
Canvale use their own bags sourced by them to package their own branded products but also used bags provided by customers. He mentioned to Mr Chua that the packaging machine would need to operate with both types of pouches, by which he meant a stand‑up pouch with a bottom gusset and no side gusset.[65] When the initial quote in March 2015 was provided, Mr Kilov discussed with Mr Chua whether the machine then being referred to could package pouches with side gussets and was informed that it could not.[66] Canvale's business had only used stand‑up pouches and thereafter the discussions about an automatic packaging machine only related to stand‑up pouches.[67]
[65] ts 114.
[66] ts 115.
[67] ts 115 - ts 116; Exhibits 6 and 7.
Mr Kilov explained that the expression 'free flow' refer to products which flow freely when tipped out. The products can be granular, seeds or powder. If a product is disbursed in lumps and pieces it is not free flowing.[68]
[68] ts 118 - ts 119.
Mr Kilov understood the machine would package fine substances including free flowing powders and granules but might struggle with muesli or nuts and dried berries because the particles are too big.[69]
[69] ts 120.

Terms of contract

I accept that when on 4 December 2015 Mr Kilov accepted the amended quotation and paid the invoice of 16 November 2015, the parties entered into a contract for the purchase and supply of an automated or automatic stand-up pouching filling and sealing packaging machine. The contract is constituted by the amended quotation and invoice sent to Mr Kilov by Mr Chua. It is also constituted by the email sent by Mr Chua on 26 November 2015.[70]
[70] Exhibit 1.6.

Principles of construction

The Court of Appeal (Quinlan CJ & Beech JA) in GR Engineering Services Ltd v Investmet Ltd,[71] recently summarised the principles applicable to the construction of written contracts as follows:[72]
(1)The construction of a contract involves a determination of the meaning of the words of the contract by reference to its text, context and purpose. The starting point for the proper construction of a clause is the language used in the clause. In particular, one starts by identifying the possible meanings that the words chosen by the parties can bear.
(2)Ascertaining the meaning of terms in an instrument requires a determination of what a reasonable person would have understood those terms to mean. That inquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract. The instrument must be read as a whole.
(3)The general principle applicable to the construction of commercial contracts is that they should be given a businesslike interpretation. Absent a contrary intention, the court approaches such contracts on the basis that the parties intended to produce a result which makes commercial sense. This requires that the construction placed on the term or terms in question is consistent with the commercial object of the agreement. However, it must also be borne in mind that business commonsense may be a topic on which minds may differ.
[71] GR Engineering Services Ltd v Investmet Ltd [2021] WASCA 136.
[72] GR Engineering Services Ltd v Investmet Ltd [96].

Whether specification as to speed was conditional

It is the defence case that the contractual term as to the operating speed of the packaging machine was only conditional because of the written terms of the contract by which,
the actual speed is subject to the product's dimension, physical features and the material of film.
It is also the defence case that the representations made by Mr Chua were qualified by the characteristics of the product being packaged and the characteristics of the pouches used and further, that the represented capabilities and features of the machine depended on confirmation by the manufacturer, Seal Pack Technology.[73]
[73] Amended defence, pars 13 and 22; Defendants' written closing submissions, pars 15 - 20.
The defendants submit that Mr Kilov's email of 15 November 2015[74] in which he raises his concerns about the ability of the packaging machine to package cacao powder without an anti-caking agent, and expresses the hope that the manufacturer will do all of the modifications required to reduce caking as much as possible, is an acceptance of the quotation and an acknowledgment that the operating capacity of the packaging machine was subject to the confirmation of Seal Pack Technology and there remained uncertainty as to what products could be satisfactorily processed.[75]
[74] Exhibit 1.4, page 53.
[75] Defendants' written closing submissions, pars 15 - 20.
I reject that submission. Mr Kilov was simply enquiring as to whether the manufacturer was aware of a potential issue which might impact on the operating speed so that the issue could be addressed by the manufacturer when designing and building the machine to ensure it did meet the operating speed of 15 - 20 pouches per minute.
It also ignores the evidence that by email of 16 November 2015 Mr Chua sent a revised invoice and quotation to Mr Kilov which was the quotation and invoice ultimately accepted by Mr Kilov and which I find constitutes the written terms of the contract.
The submission also ignores Mr Kilov's evidence that he did not receive a response to his email. More fundamentally however, the submission is inconsistent with the defendants' acknowledgement that once Mr Kilov accepted the quotation and paid the invoice the parties entered into a contract for the supply of a packaging machine for the price quoted. It is not the defendants' case that the contract entered into was conditional upon the speed being tested in the use of Canvale's products. It is not suggested that if the speed of 15 - 20 pouches per minute could not be achieved after testing that modifications would be made to the machine which would result in an increased price. Looked at objectively, a businessman in Mr Kilov's position, would not have agreed to enter into the contract for the supply of a packaging machine at the quoted cost if there was the prospect the machine was not able to meet the operating speed of 15 - 20 pouches per minute or that such a speed could only be achieved with modifications resulting in an increased cost. He had rejected the earlier quotation in March 2015 because he was not able to afford the cost. Although by November 2015 he was able to afford the cost of the revised quotation the cost was significantly less than the March quotation of $139,000 plus GST.[76]
[76] Exhibit 4.1.
In my view the term is ambiguous. Although it is clear the expression 'actual speed' is referring to the operating speed, it is unclear whether the reference to 'the product's dimension, physical features and the material of film' is a reference to Canvale's grains, powders and cereals which were to be packaged or is a reference to the pouches into which the grains, powders and cereals were to be packaged.
I find the word 'product's' is referring to Canvale's grain, cereal and powdered products which were to be packaged.
That is confirmed by Mr Kilov's email to Mr Chua of 15 November 2015[77] as to whether the manufacturer would agree to incorporate modifications required to reduce caking 'as part of the original quote'. In the concluding paragraph Mr Kilov also sought clarification as to how the cups worked and that he 'will need a lot of different size cups due to the varying density of all of the products we pack'. In his email of 17 November 2015 to Mr Chua[78] he followed up with Mr Chua as to whether the manufacturer would include all of the cup sizes which Mr Kilov required because he needed to know what size limitations he might face due to the different bulk density of each product. He also stated:
Before we finalise the order can I ask that you please send a sample of each product that we will be packing so that they can advise whether they are suitable in terms of the sizes when anticipate packing'.
[77] Exhibit 1.4, page 53.
[78] Exhibit 4.11.
Although Mr Kilov was not asked any questions about that email, in my view he was asking Mr Chua to send samples of his products which were to be packaged. He was not referring to pouches.
Although Mr Kilov was not asked any questions about what he was referring to when he was talking about cup sizes it likely he was referring to the volumetric cups to be used for measuring the product to be dispensed into the stand-up pouches.
It is likely the language and terminology used in the quotations sent to Mr Kilov were directly taken from the quotation sent by Seal Pack Technology to Mr Chua and Nexus on 15 September.[79] The description of the packaging machine is in identical terms in each document as is the 'Features' description. The only difference appears to be that in the Seal Pack Technology quotation there is a photograph of an unguarded machine whereas in the quotation sent by Mr Chua to Mr Kilov the machine is guarded. In the Seal Pack Technology quotation there is a reference under the heading 'product specifications' to nuts of a solid granule type. Next to the words 'Filling volume' is 'please advise'.
[79] Exhibit 4.57; ts 425.
The Seal Pack Technology quotation referring to container type states 'stand‑up pouch only' and goes on to state 'multiple layers laminated, total thickness over 165 u recommended'. Next to the description 'container dimension' is stated 'according to the actual sample of client'.
Properly constructed the term 'the product's dimension, physical features' in the Nexus quotation is a reference to Canvale's products which were to be packaged, that is grains, powders and cereals. It is not a reference to pouches.
However the reference to 'and the material of film' is less clear. In my view the wording refers to the pouches which were to be used by Canvale for packaging its products.
However it does not follow from that construction that it was a term of the contract that the operating speed of the packaging machine to be supplied to Canvale would be less than the stipulated operating speed. It was not a term of the contract that any particular type of stand-up pouches were required to be used. The only requirement was that they be stand‑up pouches. In discussions leading up to the contract being entered into Mr Chua advised Mr Kilov that the packaging machine could only package stand-up pouches.[80] There were no discussions or recommendations about any particular stand-up pouches being used. There were no discussions about pouch specification. I accept Mr Kilov's evidence that he would never buy a machine that would only package Nexus' pouches[81] because his customers would reject it. Canvale packaged their products in stand-up pouches provided by customers and also in pouches provided by Canvale. Mr Chua was familiar with Canvale's operations and knew, or would have known, what type of pouches were used by Canvale.
[80] ts 231.
[81] ts 233.
Mr Kilov was not asked to send the stand-up pouches he used to be tested by Seal Pack Technology. I accept that had he been asked he would have sent the pouches to Taiwan to ensure that they would actually work with the machine being built.[82]
[82] ts 235.
Significantly, the quotation does not provide for Canvale to notify Nexus or Seal Pack Technology of the specifications of the pouches it intends to use, nor for the pouches to be tested.
It is therefore not a term of the contract that only certain types of stand‑up pouches were required to be used.
Properly constructed, the qualification term in the quotation, which is a part of the contractual documentation, means that the actual speed for filling, packing and sealing the pouches is in a range between 15 - 20 pouches per minute depending on the dimension and features of the product used at the time and/or the material or film of the pouch used at the time.
Such a construction is consistent with pt VII, headed 'Terms and Conditions', which provides, inter alia:
SAMPLE: Bulk samples for actual testing of each size are required 21 days before Shipment.
In my view this is a requirement that Canvale provide samples of its products, namely grains, powders and cereals, for testing purposes. The requirement to provide samples is not for the purpose of Seal Pack Technology requiring samples to design and manufacture the packaging machine. That is clear from Mr Chua's email to Mr Kilov of 26 November 2015, which I have found is part of the written documentation constituting the agreement entered into between the parties, which confirms the type of products which can be packaged and in what quantities and confirming that once the deposit is ready, they 'can quickly move ahead and hope to have the machine installed by March 2016'.[83]
[83] Exhibit 1.6.
The reason for testing with Canvale's products by the manufacturer, Seal Pack Technology, was to enable them to make any adjustments or modifications during the design and manufacture of the packaging machine to ensure it met the represented and stipulated operating speed. The reference to the actual speed of the packaging machine being subject to the product's dimensions, physical features and the material of film is not to be construed as conditional upon Canvale's products and the pouches it used being tested by Seal Pack Technology. Nor was it conditional upon confirmation being received by Seal Pack Technology that the operating speed could be met.
Nor were those terms a qualification of the representations which were made regarding the operating speed of the machine. They were, for example, not representations that the machine might not be able to achieve an operating speed of 15 - 20 pouches per minute, or whether the operating speed depended upon confirmation being received by Seal Pack Technology.
Except for the plea that the packaging machine would have an embossing station, I find there were express terms of the contract as pleaded in par 14 of the amended statement of claim. In summary, I find that upon a proper construction of the contract, the terms of the contract were:
(a)Nexus would supply to the plaintiff an 'Automatic Pouches Fill – Seal Packing Machine' (Packaging Machine) which packed stand up pouches;
(b)the Packaging Machine would fill, pack and seal pouches at a speed of between 15 to 20 pouches per minute;
(c)the pouch holder of the Packaging Machine could be adjusted to suit different widths of pouches;
(d)the Packaging Machine had an automatic pouch opening system which operated with a vacuum sucking open pouch and air blowing open pouch;
(e)the air consumption required to operate the Packaging Machine was at least 5 to 6 bars;
(f)bulk samples of the plaintiff's products were required for testing by the manufacturer of the Packaging Machine Seal Pack Technology Co. Ltd (Seal Pack) 21 days before shipment;
(g)the Packaging Machine would pack and seal the plaintiff's products including grains, powders and cereals;
(h)the Packaging Machine would pack and seal and dispense the plaintiff's products in a range of weights between 200g and 600g per pouch;
(i)the Packaging Machine would be able to pack and seal zip lock pouches used by the plaintiff.
(j)The cost of the packaging machine was $110,000 plus GST inclusive of commissioning.
(k)Payment of the purchase price was in three separate instalments commencing with a down payment of 40%.
(l)Within 120 days of receipt of the purchase order and the down payment, the packaging machine would be delivered.
Except as to par 15.4, which is not admitted by the defendants, and in respect of which the defendants plead at par 19A of their amended defence that compliance with all applicable legislation regarding workplace health and safety was the sole responsibility of the plaintiff, I also find as pleaded in par 15 of the amended statement of claim, there were implied terms of the contract that:
1.the Packaging Machine would be fit for the purpose of being fully automatic;
2.the Packaging Machine would be of merchantable quality;
3.the Packaging Machine would be able to meet the Plaintiff's Operational Requirements; and
In these reasons I have found it is unnecessary to make findings as to whether it was an implied term of the contract that the packaging machine, as supplied, would comply with all applicable workplace health and safety legislation and have intentionally not made any findings in respect of that issue.
By par 13 of the amended statement of claim Canvale also pleads the contract entered into between the parties is comprised of the oral discussions or representations made by Mr Chua to Mr Kilov about the operating capacity of the packaging machine. Whether a representation made in the course of negotiations gives rise to binding contractual obligations, as a term of the agreement, will depend upon the intention of the parties. To be contractual, the representation must be promissory. Whether the parties intended to create a contractual liability as to the accuracy of the representation is to be ascertained objectively.[84]
[84] Swick Nominees Pty Ltd t/as Swick Drilling Australia v Norncott Pty Ltd [No 3] [2013] WASC 173[166] (Swick Nominees v Norncott) and cases cited.
Later in these reasons I make findings as to the representations which were made by Mr Chua on behalf of Nexus to Mr Kilov.[85] Earlier at [16] ‑ [22] I referred to Mr Kilov's evidence about what discussions occurred between he and Mr Chua before the written quotations were provided and before Mr Kilov accepted the November 2015 quotation and paid the invoice. Given his claim in both contract and for misleading and deceptive conduct was, at least in part, based upon oral representations and discussions made by Mr Chau on behalf of Nexus, and given the defendants admitted the pleaded oral representations were made but said they were conditional upon various factors including testing of Canvale's products, Mr Kilov was surprisingly unclear about the discussions and what was said and represented by Mr Chua. In my view, Mr Kilov had no reliable memory about what was discussed and essentially relied upon the documentation. I am unable, on the basis of Mr Kilov's evidence alone, to make any findings about what was discussed between he and Mr Chua in the lead up to the contract being entered into. Although by email on 15 November 2015[86] Mr Kilov raised a concern as to how the packaging machine would cope with the packaging of cacao powder when an anti-caking agent could not be used, and whether modifications to the machine would be required, and asked Mr Chau to talk to the manufacturers and let him know whether they could make the modifications as part of the original quote, he never received a response from Mr Chua and did not discuss his inquiry with him.[87] Given Mr Kilov's concern about the ability of the packaging machine to package one of his biggest selling products and his written inquiry as to whether the manufacturer could make any necessary modifications to package cacao powder as a part of the original quote, it is surprising the matter was not followed up by Mr Kilov and there were not discussions between he and Mr Chua about his inquiry. However, given my findings regarding the documentation by which the contract entered into was constituted, it is unnecessary for me to make any findings about whether any oral representations were contractual.
[85] [197] - [199].
[86] Exhibit 1.4, page 53.
[87] ts 111 - ts 112.

Meeting at the premises of Seal Pack Technology in Taiwan

At the time Mr Kilov accepted the quotation and paid the invoice there had been no discussions about he and Mr Chua travelling to Taiwan to observe the machine under operation.[88] Mr Chua later verbally advised him that the machine was ready for testing and Seal Pack Technology required his actual products to be sent to them in Taiwan to allow testing of the products with the machine to be undertaken. He told Mr Chua he would send over 14 of Canvale's core products.[89] Mr Chua sent him an email of 22 April 2016 providing him with Seal Pack Technology's address.[90] The products were shipped to Seal Pack Technology on 5 May 2016.[91] The following products were sent:[92]
[88] ts 120.
[89] ts 121.
[90] Exhibit 1.6.
[91] ts 121; Exhibit 1.10.
[92] Exhibit 1.13; ts 122.
1 x breakfast mix pail (7.66 kg)
1 x shredded coconut pail (5.98 kg)
1 x coconut chips pail (3.5 kg)
1 x chia seeds pail (12.84 kg)
1 x white quinoa pail (13.24 kg)
1 x cacao crackle cookies pail (14.3 kg)
1 x paleo chocolate pail (18.6 kg)
1 x organic super greens pail (6.88 kg)
1 x snack mix pail (11.7 kg)
2 x mesquite powder pails (17.56 kg total)
3 x cacao powder pails (23.12 kg total)
2 x maca powder pails (17.12 kg)
1 x goji berries pail (9.64 kg)
1 x crunchy coconut cookie bites pail (14.1 kg)
1 x cacao nibs pail (9.95 kg)
Mr Kilov was never requested to send bags to Taiwan to be tested.[93]
[93] ts 122.
Mr Chua later informed him that it was customary to meet with the manufacturers and view the machine in operation. He accepted it was a good idea and arrangements were subsequently made for he and Mr Chua to travel to Taiwan.[94] However, there was never any discussion about a factory acceptance test being conducted.[95]
[94] ts 122.
[95] ts 122 - ts 123.
Mr Kilov and Mr Chua attended the meeting in Taiwan in July 2016.
Mr Kilov viewed the machine packaging only quinoa for less than five minutes. Only Mr Chua spoke to him because, he said, nobody else spoke English other than at a basic level of greeting. Therefore, all of his communications were with and through Mr Chua. He did not have any direct conversations with Mr Wilson Yu of Seal Pack Technology.[96]
[96] ts 123.
Mr Chua informed him that they could not demonstrate any of the other products because the products shipped by Mr Kilov had been spoiled due to the high humidity in Taiwan. However, Mr Chua assured him that all of the tests had been performed prior to the products spoiling and everything was fine.[97] Having viewed the machine only operating with quinoa for less than five minutes, Mr Kilov's overall impression was that the machine looked good. Although Mr Kilov witnessed some little glitches during the operation of the machine it looked reasonable to him and he accepted the assurances given by Mr Chua that any glitches were part of a new machine and would be ironed out when the machine was commissioned in Perth.[98]
[97] ts 123 - ts 124.
[98] ts 125.
Mr Chua confirmed that the only product that was trialled during the visit to Taiwan was quinoa which was very similar to chia.[99] Chia was later used to test the packaging machine during the commissioning process at Canvale's premises.[100]
[99] ts 437.
[100] ts 400.
Mr Chua also explained that they had built an extra station without any further charge, which would allow Mr Kilov to fit electronic components and integrate and run another auger filler, which he had previously purchased from Nexus and was using as the standalone machine, with the packaging machine. Any additional electronic components would cost a further $10,000 to $15,000.[101] Mr Chua advised him that he could use his auger machine with the packaging machine so that he could use two dispensing stations running side by side at the same time.[102] Mr Chua explained that having two dispensing stations operating side‑by‑side would enable two products, such as peanuts and raisins, to be packaged together rather than putting them into a blender, which made economic sense to Mr Kilov and caused him to agree to the extra cost.[103] Mr Kilov advised Mr Chua to go ahead and fit the further electronic components for the additional cost of $10,000 to $15,000.[104]
[101] ts 124.
[102] ts 124 - ts 125.
[103] ts 125.
[104] ts 125.
After they had returned to Perth Mr Chua sent Mr Kilov an email of 15 August 2016 advising the additional costs to integrate Mr Kilov's existing auger into the packaging machine would be 'around $10K ‑ $15K subject to the final trial'.[105]
[105] ts 127 - ts 128; Exhibit 1.20.
Subsequently, on 29 August 2016, Mr Kilov wrote to Mr Chua requesting a quote from him for different sized pouches 'in 110 micron with open zip'. He sought a quote from Mr Chua for such bags because Mr Chua had recommended using 110 micron bags which is a very thin bag. Mr Chua subsequently quoted for such bags but Mr Kilov did not accept the quote or purchase any bags through Mr Chua.[106]
[106] ts 128; Exhibit 1.20.
Before those email exchanges Mr Kilov, after he had viewed a video of the machine in operation, which was provided to him by Mr Chua, sent an email to Mr Chua on 22 July 2016 expressing concern about the operation of the suction cups at the blowing and bag filling sections. The email reads:[107]
Hi Nelson
I've had another look at the video[108] of the new machine and I'm concerned that there are only two suction cups at both the air blowing section and the bag filling section. It will work for small bags but the larger bags cannot open to the maximum aperture with only one suction cup on each end For the medium size bags we need two suction cups each end side of the bag and for the large bags we need three suction cups each side of the bags. I simulated the opening action using the suction cups on the bag labelling machine and I'm 100% sure that without the additional suction cups the large diameter outlet shaft / funnel we require to avoid caking will not go into the bag.
I know that the mods can be done here but I'd be more comfortable if Wilson[109] does as much as possible in Taiwan before the machine leaves. If we need to get bits and pieces made here there could be a few days lead time which will be a waste of Wilson's time.
Thanks.
Regards
Martin
[107] ts 129 - ts 130; Exhibit 1.20.
[108] Exhibit 19.3.
[109] Mr Wilson Yu, principal of Seal Pack Technology; ts 481.
On 23 July 2016 Mr Chua informed Mr Kilov that he would get Mr Yu 'to install more suction cups as required at the factory'.[110]
[110] Exhibit 1.20; ts 129.

Mr Wilson Yu

Mr Yu has been the principal of Seal Pack Technology for 10 years. The company has been in business for 30 years. The business involves designing and manufacturing packaging machines for cups and pouches.[111]
[111] ts 481 - ts 482.
Mr Yu gave evidence by video-link from Taiwan. Although Mr Yu was able to be assisted by an interpreter who was present in person in court, Mr Yu did not require the interpreter's assistance to give his evidence. Mr Yu spoke English reasonably well and appeared to understand and be able to respond to the questions asked of him by counsel without the need for the assistance of the interpreter. However, Mr Yu did speak with a heavy accent and although at times I had difficulty fully understanding what he said and I did need to confirm by reference to the transcript (sometimes by having my staff listen to the audio of indecipherable parts to supplement the transcript) what was said, I am satisfied I was able to follow his evidence. I also had similar difficulties with respect to the evidence of Mr Chua and at times needed to have recourse to the transcript to confirm what he said in evidence.
In December 2015 Seal Pack Technology received the order from Nexus for an automatic pouch filling machine on behalf of By Nature. In May or June 2016 Mr Yu received 15 different sample products from Mr Kilov upon which tests were conducted before Mr Kilov and Mr Chua came to Taiwan for the FAT (factory acceptance test).[112] Some of the granule products could not be packaged because they were not free flow. Also some powders were tested. Videos of the tests were taken and provided to Mr Chua.[113]
[112] ts 482.
[113] ts 482.
Mr Yu met Mr Kilov and Mr Chua in July 2016 when they visited Seal Pack Technology's factory for the FAT.[114] They met over one or two days for one or two hours to test the machine.[115] Most of his discussions were with Mr Chua rather than Mr Kilov, because Mr Chua was their agent, and there were further conversations between Mr Chua and Mr Kilov. However Mr Kilov asked him some questions which he answered in English.[116] In this regard Mr Yu confirmed Mr Kilov's evidence that Mr Kilov mainly discussed the machine's operation with Mr Chua rather than with the Seal Pack Technology representatives.
[114] ts 483.
[115] ts 483.
[116] ts 483.
He explained to each of Mr Chua and Mr Kilov the results of the product testing. Mr Kilov said that it was ok and that if it was necessary to fit another system into the machine he could do that because he had another feeder in his factory.[117] There was enough space on the packaging machine for them to install a second feeder.[118]
[117] ts 483 - ts 484.
[118] ts 484.
Mr Yu said they discussed and recommended using a second feeder because the testing of powders showed that the machine's feeder was not good enough to package powder and that another feeder, an auger feeder which Mr Kilov was already using, should be installed.[119] After a drawing and a quotation were sent to Mr Chua and after Seal Pack was informed it was ok they then started to manufacture a second feeder.[120]
[119] ts 484.
[120] ts 485.
Mr Yu said he explained to Mr Kilov that during the testing of Mr Kilov's products the feeder only worked with free flow products and some products became stuck inside the feeder, which led to them discussing the need for a second feeder to be used for the non-free flow powders. They discussed using a second feeder for powders and the first feeder for granule products, but some granule products, such as coconut chips were also non-free flow and would stick inside the first feeder.[121] Mr Kilov responded favourably because he already had another auger feeder which led Seal Pack Technology to then start to redesign the packaging machine to integrate the auger feeder into the machine.
[121] ts 485.
As they did not receive any pouches from Mr Kilov they used pouches that they sourced from a local company CIG. Mr Kilov was informed that the pouches should have a minimum thickness of 165 microns.[122]
[122] ts 486.
After the second filler was added to the machine it was again tested before it was shipped to Perth. The machine ran well on testing.[123]
[123] ts 487.
Mr Yu placed an operation manual within the toolbox before the machine was shipped to Perth.[124]
[124] ts 487 - ts 488; Exhibit 4.66.
In cross-examination Mr Yu agreed that when they tested the products sent to them by Mr Kilov the machine was not able to package free flow powders.[125] The reason Mr Yu discussed with Mr Kilov the need for a second filler with an auger was because the fitted funnel filler (which did not have an auger), did not work with free flowing powders.[126] Mr Yu agreed he knew that free flowing powders would not work on the funnel which was in place in the packaging machine.[127] In re-examination Mr Yu said that he suggested using the auger filler as a second station for all powders rather than the gravity filler in the packaging machine.[128] In relation to the factory testing of the maca and super greens powders they used plastic containers in which to dispense the powders because they had not been provided with any pouches. Although most of the powders dropped into the containers some powders stuck to the inside of the fillers which is why they were not free flow powders.[129] However he maintained that although some of the powders were dispensed out of the containers they still dropped into the containers which he regarded as acceptable, particularly as less product would be dispensed out of the pouches, which are smaller, than out of the open containers.[130] He further explained that the use of an auger filler was to obtain a more accurate filling result but the gravity filler was acceptable for use.[131] He did not agree that the disbursing of dust from containers or pouches when powders were being packaged was unacceptable.[132] The use of a second feeder which is an auger feeder provides for bigger quantities of powders to be packaged and for the machine to be able to run faster.[133]
[125] ts 494.
[126] ts 494.
[127] ts 494, ts 496.
[128] ts 504.
[129] ts 495 - ts 496.
[130] ts 496.
[131] ts 496.
[132] ts 497.
[133] ts 497.
Initially in cross-examination Mr Yu maintained that he demonstrated powders being tested while Mr Kilov was present but agreed there was no video taken of powder being tested.[134]
[134] ts 498.
I do not accept Mr Yu's evidence that he tested powdered products in Mr Kilov's presence. The evidence is contrary to the evidence of Mr Kilov and Mr Chua, which I accept, that the only test conducted in Mr Kilov's presence was using quinoa. The evidence of Mr Kilov is further confirmed by the video taken of the packaging machine being demonstrated to Mr Kilov during the visit to Seal Pack Technology's premises in July 2016.[135]
[135] Exhibit 19.3.
Mr Yu clarified that the discussion about installing a second feeder which was an auger feeder occurred during the commissioning of the packaging machine in Mr Kilov's premises. He was not sure whether Mr Kilov's auger was suitable to fit in to the space for an additional feeder which is when he arranged for drawings to be prepared to integrate an auger.[136]
[136] ts 498 - ts 499.
When asked whether in discussions with Mr Kilov in Taiwan he referred to the pouches needing to be 110 microns and not 160 he said he remembered he referred to 165 microns.[137]
[137] ts 500.
Mr Yu agreed in cross-examination that Mr Kilov provided him with various pouches, including see-through pouches, to try when they were testing the machine in Canvale's premises.[138]
[138] ts 501.
In re-examination Mr Yu confirmed that some of Mr Kilov's powders were able to be processed by the machine but some powders could not which led to them suggesting a second filler with an auger should be used for all powders.[139]
[139] ts 504.
There is a conflict in the evidence of Mr Kilov and Mr Yu about the reason for a second auger filler being integrated into the packaging machine in the space for an extra station. I accept Mr Kilov's evidence that the discussion centred around a second filler with an auger being integrated into the packaging machine because it offered the ability to package two separate products at the same time. I do not accept there was any discussion with Mr Kilov recommending a second auger filler be used for the purpose of packaging powders.
In his email of 15 November 2015 to Mr Chua,[140] Mr Kilov confirmed that one of his biggest selling products was cacao powder and that he hoped that the manufacturer would agree to do all modifications required to reduce the caking as much as possible. Although no response to that email was received, he was provided with the revised invoice and quotation on 16 November 2015.[141] Later, on 26 November 2015, Mr Chua sent an email to Mr Kilov confirming that the packaging machine would 'pack from 200g - 600g, Free Flow Powder, Granules and Cereals'.[142] There was no suggestion in those emails, or in the quotation which was accepted by Mr Kilov, that there were any difficulties with packaging powders using the machine which was to be designed and supplied for the quoted price.
[140] Exhibit 1.4, page 53.
[141] Exhibit 1.4, pages 53 - 56.
[142] Exhibit 1.6.
Neither do I accept there was any discussion at Seal Pack Technology premises in Taiwan with Mr Kilov that there were difficulties packaging powders. Indeed, Mr Yu did not consider the dispersal of powder from the containers as seen on the video taken at Seal Packs' premises as problematic.
Mr Yu also appeared uncertain about when he said such a discussion took place. Initially he gave evidence that the discussion occurred at the meeting in Taiwan. However, he later said that the discussion about installing a second feeder occurred during the commissioning of the packaging machine in Mr Kilov's premises. Of course by then, the contract had been entered into and the purchase price had been paid.
In my view Mr Kilov only entered into the contract for the packaging machine because he was reassured by Mr Chua that the packaging machine for which he had been quoted would process Canvale's powders. He would not, in my view, once having paid the invoice and entered into the contract, have so readily agreed to paying an extra 10 to 15 thousand dollars if the reason given to him was that a second auger filler was necessary to package powders. Having entered into an agreement to purchase a packaging machine which he believed packaged powders he would not, in my view, have readily agreed to pay a further 10 to 15 thousand dollars upon learning that the packaging machine could not in fact package powders. I find the only reason he agreed to pay an extra 10 to 15 thousand dollars was because he was informed the second auger filler would achieve an additional function over and above that which he believed the packaging machine was already designed to do.
Further, had there been discussions that the packaging machine was unable to package Canvale's powdered products, either after the meeting in Taiwan or during the commissioning process, those conversations would have been confirmed in writing. The absence of any contemporaneous documentation confirming such discussions is consistent with there being no such discussions.
Finally, I note the defendants do not plead, and it is not part of the defendants' case, that the parties agreed a variation to the contract that an auger filler station be integrated into the packaging machine at a further cost of ten to fifteen thousand dollars, for the purpose of packaging powdered products. The evidence of Mr Chua and Mr Yu is inconsistent with the defendants' pleaded case.

Delivery and commissioning of the packaging machine

Despite a term of the written contract providing for delivery of the machine within 120 days of the order and down payment, the machine was not delivered until early December 2016.[143] No reason for the delay in delivery was given to Mr Kilov.[144]
[143] ts 130, ts 137.
[144] ts 130.
By email of 31 October 2016, Mr Kilov was advised by Mr Chua to purchase an air compressor which would deliver 600 L per minute for the new machine.[145] Mr Kilov later purchased a 160 L air compressor which was delivered on 18 November 2016.[146]
[145] Exhibit 1.23.
[146] Exhibit 16.1; ts 133 - ts 134.
The packaging machine was delivered already assembled. Before the technicians from Seal Pack Technology arrived, Mr Chua started to show Mr Kilov how the machine operated.[147]
[147] ts 137.
The Seal Pack Technology technicians were present for five days, during which time they made adjustments to the machine and operated it. Mr Chua was present throughout the commissioning of the machine as was Mr Kilov.[148] No formal training was provided, rather, while the machine was operating, Mr Kilov asked questions about the machine's operation which were responded to by Mr Chua.[149]
[148] ts 138.
[149] ts 138 - ts 139.
Mr Yu recalled he and his installation team were in Perth installing and commissioning the machine from 6 - 12 December 2016.[150] They tested the machine by testing the pouch feeding and seeding quality and also by testing the speed.[151]
[150] ts 489.
[151] ts 489.
He met and spoke with Mr Kilov on the first day. The air and power had not been connected to the machine, nor had the pouches been provided, causing them to wait for an electrician to perform the power and air connections which happened on the Tuesday, the second day.[152]
[152] ts 489 - ts 490.

At [105] - [109] the Full Court said:
105In a 'no transaction' case, the purchaser will have discovered, some time after becoming aware of the true position, that what he, she or it bought is not what the representor had asserted. In most cases, the asset purchased will have become impaired or less valuable because some event has revealed a flaw in it. But there can be cases where, after a time, the purchaser, having used the asset, realises that it is not what it was represented to be, even though it has retained its market value. Here, for example, if Mr and Mrs Wyzenbeek had realised a week after taking delivery of Cadeau that she could not undertake ocean voyages, but AMI had gone into liquidation, it could not be an answer to a claim under ss 82 or 87 for the other Marina parties to say that Mr and Mrs Wyzenbeek had suffered no loss or damage. They held an asset that they did not want because it was not what the Marina parties had represented her to be. Had they sold Cadeau immediately and sustained a loss, that would have been recoverable from the other Marina parties together with all the costs incurred in the acquisition and sale.
106A 'no transaction' case is a legal construct to accommodate the position of a person who claims to have been injured by entering into a contract by, or induced by, conduct or a representation of someone, including by a person who was not a party to the contract. The construct would be unnecessary in a case between contracting parties where rescission of the transaction with restitutio in integrum is still possible, including if the Court can make allowances for deterioration of the subject-matter of the transaction which, in some instances, can also include a claim for damages: cf: Alati v Kruger (1955) 94 CLR 216 at 222-225 per Dixon CJ, Webb, Kitto and Taylor JJ. It is not necessary for present purposes to discuss the juridical requirements and constraints governing the making and resolution of claims to rescind based on innocent, negligent or fraudulent misrepresentations.
107The Trade Practices Act and its analogues contemplate the ability of the court to give a similar remedy in an appropriate case. However, where the innocent party seeks relief against a person who is not the contractual counterparty, ordinarily, damages or statutory compensation is the only available remedy because the innocent party cannot hand back, or restore, to the third party the property or subject matter of the contract as might be ordered in a claim for rescission. The point to be made is that in a 'no transaction' case, where restitutio in integrum is not possible, if the Court finds for the injured party it must then calculate a monetary sum, as damages, to put him, her or it in the position that the party would have been in had the transaction not occurred. In cases of a contract induced by fraud, as Dixon CJ, Webb, Kitto and Taylor JJ explained in Alati 94 CLR at 223-224:
equity has always regarded as valid the disaffirmance of a contract induced by fraud even though precise restitutio in integrum is not possible, if the situation is such that, by the exercise of its powers, including the power to take accounts of profits and to direct inquiries as to allowances proper to be made for deterioration, it can do what is practically just between the parties, and by so doing restore them substantially to the status quo: Erlanger v. New Sombrero Phosphate Co. [(1878) 3 App Cas 1218, at 1278, 1279]; Brown v. Smitt [(1924) 34 CLR 160, at 165, 169]; Spence v. Crawford [[1939] 3 All ER 271, at 279, 280]. It is not that equity asserts a power by its decree to avoid a contract which the defrauded party himself has no right to disaffirm, and to revest property the title to which the party cannot affect. Rescission for misrepresentation is always the act of the party himself: Reese River Silver Mining Co. v. Smith [(1869) LR 4 HL 64, at 73]. The function of a court in which proceedings for rescission are taken is to adjudicate upon the validity of a purported disaffirmance as an act avoiding the transaction ab initio, and, if it is valid, to give effect to it and make appropriate consequential orders: see Abram Steamship Co. Ltd. v. Westville Shipping Co. Ltd. [[1923] AC 773]. (emphasis added)
108Likewise, in a no transaction case, if the court finds that the injured party would not have entered into the transaction, this enables the court to use its remedial powers available under ss 80, 82 and 87. Those powers are extensive enough to make orders appropriate to place that party in the position where, although he, she or it may still hold property the subject of the impugned transaction, the wrongdoer will be ordered to pay compensation or damages in a sum that, together with the value of what the innocent party still holds (or is 'left in hand'), will 'do what is practically just between the parties' so as to, in effect, restore him, her or it to the position that he, she or it would now obtain had the transaction not occurred: cf: Alati 94 CLR at 223-224.
(emphasis added)
At [118] the Full Court said:
The purpose of s 82 is to compensate a person who has suffered loss or damage by misleading conduct that contravened the TPA, where that conduct was a cause that materially contributed to the loss or damage. The statutory purpose of s 52 is to prescribe a norm of conduct (not to engage in conduct that is misleading or deceptive) and to give a person whom the representor has misled or deceived a remedy under ss 82 and 87 for the loss or damage the representee suffered by that contravening conduct.
The Full Court then assessed the measure of damages on basis of the Astonland measure of damages being the amount expended on the purchase of the property, less the true value of the property 'left in hand' assessed at or about the time of the trial. In that case, unlike in this case, (and in Swick Nominees) there was evidence of the depreciated value of the vessel which enabled the Full Court to assess the present value of the vessel.[463]
[463] Wyzenbeek [122] - [128].
That approach to the measure of damages is of course not available to me in this case because there is no evidence as to the current value of the packaging machine.
I have earlier referred to Murphy v Overton Investments Pty Ltd. In the context of the claim for damages based on the purchase price, in circumstances where Canvale has retained the packaging machine, it is helpful to again refer to Murphy v Overton Investments Pty Ltd, where at [31], the High Court said:
… the difference between price and value will often be an important element in assessing the damage suffered by a person who, by a misrepresentation, has been induced to buy an item of property. As the trial judge said, there may also be questions of consequential damage. It would be wrong, however, to assume that in every case of misrepresentation (leave aside other forms of misleading or deceptive conduct) the only kind of damage which may be suffered, and compensated or redressed by orders under Pt VI of the Act, is any difference between price and value or any consequential losses. In particular, care must be exercised before seeking to apply what it described as the "rule in Potts v Miller" to claims made for relief under Pt VI of the Act. This is especially so when it is recalled that while the only monetary remedy for the tort of deceit is damages, a far wider range of remedies is available where contravention of the Act has caused or is likely to cause loss or damage to a party to the proceeding.
(emphasis added)
In approaching the assessment of Canvale's claim for damages on the basis the measure of loss is the purchase price and associated expenses, or losses, the reference to 'loss or damage' in s 236 should be given no narrow meaning and the measure of loss is not constrained by contractual or common law remedies. As was said by the High Court in Astonland:[464]
The wide language of [s 236] is compatible with a legislative desire to broaden the scope of recovery, not to keep it within the bounds of some comparison with the common law.
[464] Astonland [62], citing Murphy at [44].
I also accept that:[465]
The deduction of true value at the acquisition date from the price paid is no more than a guide to the assessment of damages under [s 236]. [Section 236] does not in terms refer to that method, and the width of [s 236] permits other approaches to the assessment of damages so long as they work no injustice.
[465] Astonland [65].
I have not been provided with any authorities which have considered the application of s 237 and s 243 and made an order directing the return of a defective machine when a claim for damages is made on the basis of the purchase price of the machine. Nor have I been able to find any such cases. Although Wyzenbeek is perhaps authority that the proper measure of damages in circumstances where the injured party retains a defective machine is the difference in value between the defective machine and the purchase price, and in that sense does not assist Canvale, the authorities to which I have referred emphasise the wide statutory powers available pursuant to the ACL to make orders to fully compensate an injured party, relevantly, a party who has suffered damage as a result of misleading or deceptive conduct.
In Re Bonney Forge Pty Ltd v Press & Shear Machinery Pty Ltd,[466] Foster J held that the proper measure of damages for the supply of a defective manufacturing machine was to make an order avoiding the contract and directing the respondent to return to the applicant the deposit paid and that the respondent be entitled to the return of the machine.[467] However, in that case, the respondent acknowledged the machine was defective from the time of its delivery and there was no contest that if liability was established in favour of the applicants, the appropriate orders included an order for the return of the machine to the supplier respondent. Although there was an appeal against the first instance decision, the appeal did not concern the relief granted and in any event, the appeal was dismissed.[468]
[466] Re Bonney Forge Pty Ltd v Press & Shear Machinery Pty Ltd [1988] FCA 121.
[467] [45].
[468] Re Press & Shear Pty Ltd v Bonney Forge Pty Ltd [1988] FCA 414.
I have earlier[469] referred to Canvale's failure to plead a claim for relief pursuant to s 237 and s 243 of the ACL.
[469] [409].
Pleadings ensure a basic requirement of procedural fairness and a statement of claim must state the case sufficiently clearly and define the issues which are in dispute between the parties to allow the defendant a fair opportunity to meet the case brought against it.[470]
[470] Swick Nominees v Norncott [36].
Although a prayer for relief pursuant to s 237 and s 243 was not pleaded in the statement of claim, by its written and oral opening submissions Canvale put the defendants on notice of the proposed claim. The basis of the claim was maintained in closing submissions. Regrettably, despite assurances the matter would be discussed between counsel, the position was not otherwise clarified. The defendants did not address this basis of Canvale's claim, either in their opening or closing submissions, which were primarily focused on liability and the claim for the lost opportunity to save labour costs. Of course, the defendants primarily fought Canvale's claim on the basis the packaging machine was not defective and operated in accordance with the terms of the contract and the representations as to its operating efficiency. Although they had the opportunity to do so, the defendants did not, in any meaningful way, address Canvale's claim for damages on the basis of the recovery of the purchase price.
Further, although relief pursuant to s 237 and s 243 was not specifically pleaded I am satisfied the prayer for relief claiming 'further or alternative relief' is adequate to encompass an order for relief pursuant to those sections if it is necessary to do so to provide full relief for the defendants' misleading and deceptive conduct. I am satisfied those sections provide me with the power and give me a broad discretion to grant relief for misleading or deceptive conduct so at to make such orders as I think appropriate to compensate an injured party, as distinct from an award of damages for breach of contract. Although when considering the claim for damages for breach of contract I was not persuaded that the different factual circumstances in this case to that in Swick Nominees, where in this case Canvale has been unable to use the packaging machine in any useful way before being forced to cease operation once served with the Department of Commerce prohibition notice, unlike in Swick Nominees where the defective compressor was operated over a period of two years, I am of the view that in assessing the relief to be provided pursuant to the ACL the fact that Canvale has not operated the packaging machine for any extended period is a reason why an order pursuant to s 237 and s 243 for return of the packaging machine to Nexus should be made.
In all of the circumstances, despite the failure of Canvale to plead a claim for relief pursuant to s 237 and s 243, but where the defendants were put on notice Canvale sought relief pursuant to those sections and where the defendants claim the packaging machine is not defective and has value, and where I have found that Canvale has established liability against the defendants, and given the wide powers pursuant to the ACL to do justice to the parties, I have formed the view that justice would not be served if Canvale was deprived of an award of damages because of the failure to plead a prayer for relief pursuant to s 237 and s 243.
I also acknowledge that by its terms, s 237(1) empowers a court to 'make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct' 'on application' of the injured person. The issue of whether Canvale has made the necessary application was not the subject of any submissions before me. I proceed on the basis that by its opening and closing submissions Canvale has made an application and that I have the power to make any appropriate order or orders pursuant to s 237 and s 243.
As I have found, Canvale would not have purchased the packaging machine but for the misrepresentations made by the defendants. Canvale would not have purchased the machine if they knew it could not package its products at a speed of 15 - 20 pouches per minute and if it knew that it could not package its powered products. Canvale is therefore entitled to be awarded damages as though the transaction, the purchase of the packaging machine, did not proceed. However, the measure of damages cannot be assessed on the Astonland principle, as explained in Wyzenbeek, because there is no evidence of the estimated value of the packaging machine which has been retained by Canvale. Canvale operated the machine over a period of a few months during 2017. Modifications and adjustments were made to the machine. The machine has apparently not been operated since Canvale was served with the Department of Commerce prohibition notice in March 2019. To award damages to Canvale on the basis of the full purchase price without allowing for the fact that Canvale has retained the packaging machine which must have some value, but which is unknown, would be to overcompensate Canvale for its loss. Having regard to the wide language of s 236, and that it permits other approaches to the assessment of damages so long as no injustice is caused, I have formed the view it is reasonable to award damages to Canvale on the basis of the acquisition cost of the packaging machine but also to make an order, pursuant to s 237 and s 243, that Canvale return the packaging machine to Nexus. I make that order even though relief pursuant to those sections has not been pleaded and even though it has not been the subject of any detailed submissions from the parties. To award damages on the basis of the full purchase price without making any allowance for the fact that Canvale has retained the packaging machine would, in my view, cause an injustice to the defendants because Canvale would be placed in a better position then had the transaction to purchase the machine not taken place. To refuse to make any award of damages to Canvale in circumstances where I have found Canvale would not have purchased the machine if it was aware the machine could not meet the represented manufacturing capabilities and where the defendants have maintained the packaging machine does meet the promised packaging capabilities, would not do justice to Canvale. That is so even though Canvale has not proved the value of the machine it retains. It is unknown what work, and the cost of it, would be required to address the issues raised in the Department of Commerce prohibition notice. It would not be fair to the defendants if Canvale was permitted to retain the packaging machine and have the opportunity to again operate the machine. On the other hand, if as the defendants maintain, the packaging machine is able to operate efficiently, notwithstanding my findings as to its defective operating capacity, it is in my view fair to the defendants that they have the machine returned to them and they have the opportunity to benefit, if they are able to, from the machine. They are the local distributors of the machine and have a close relationship with the Taiwanese manufacturers. If anyone is able to take steps to make the packaging machine productive, the defendants would be in the best position to do that.
Therefore, pursuant to s 236, I award damages to Canvale in the sum of $110,000, being the purchase price paid for the packaging machine.[471]
[471] Item 1 of Canvale's particulars of damages.
Turning to the other claimed heads of damage, I am satisfied that the amount claimed for interest on the loan to purchase the machine in the sum of $13,613.30,[472] is a cost caused by the defendants' misrepresentations, as is the loan set up fee of $355,[473] and I award each of those amounts.
[472] Item 2 of Canvale's particulars of damages.
[473] Item 3 of Canvale's particulars of damages.
In relation to the claim for the costs of Mr Barrat for attending Canvale's premises in a futile attempt to remedy the defects in the machine, I am satisfied the costs claimed are reasonable and are causally related to the misrepresentations. Had the defective machine not been provided to Canvale by the defendants, costs would not have been incurred by Canvale. I am satisfied the costs are reasonable and therefore award Canvale the sum of $6,422.50 as claimed.
I am also satisfied that the costs claimed which were incurred in relation to the trip to Taiwan to meet the Seal Pack Technology technicians were only incurred because of the misrepresentations made by the defendants as to the packaging capability of the machine. If Mr Kilov had not been induced to enter into the contract to purchase the defective machine, he would not have flown to Taiwan and incurred the associated costs. I am therefore satisfied it is reasonable to award Canvale the costs as claimed of $4,736.
Further, I order, pursuant to s 237 and s 243, that Canvale return the packaging machine to Nexus.

Summary

In summary I award damages to Canvale calculated as follows:

1 Cost of packaging machine $110,000.00

2 Interest on loan to purchase machine $13,613.30

3 Loan set up fee $355.00

4 Costs of technician and parts to commission packaging machine to perform $6,422.50

5 Flight and accommodation to Taiwan to meet packaging machine manufacturer $4,736.00

Total $135,126.80

I will hear further from the parties as to the orders which follow from these reasons. I will also hear the parties as to costs.

I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
KG
Associate to Judge Herron
24 FEBRUARY 2022

1	Cost of packaging machine	$110,000.00
2	Interest on loan to purchase machine	$13,613.30
3	Loan set up fee	$355.00
4	Costs of technician and parts to commission packaging machine to perform	$6,422.50
5	Flight and accommodation to Taiwan to meet packaging machine manufacturer	$4,736.00
Total	$135,126.80