Christies Foundations v Linke No. DCCIV-00-65

CHRISTIES FOUNDATIONS PTY LTD v JAYNE LINKE
[2000] SADC 115

Judge Lunn
Civil

The plaintiff company carries on the business of a foundation contractor for building work and also does some other general excavation and demolition work. Its directors are Michael and Raelene Walker. Mr Walker runs the day to day operations of the company and his wife does the bookkeeping. It employs seven other people. In the financial year ending 30 June 1999 it had a turnover of almost $600,000, but only a small profit if depreciation was ignored. It had only a small capital base and little money in the bank.
On 18 August 1998 the plaintiff acquired a new Kubota KX121-2 excavator (“the excavator”) for $64,100. It was acquired from Research and Development Engineers Pty Ltd trading as Kubpower (“Kubpower”), which was the South Australian dealer for such excavators. On the same day it also acquired a used Mitsubishi tipper truck (“the truck”) for $30,000. The truck was of a particular size and type which was able to carry the excavator. The plaintiff arranged through its finance broker, Greg Sutton of Capital Contacts, to wholly lease the excavator and the truck from GIO Finance Ltd (“GIO”) for terms of five year for lease payments of $2,500 per month. On 19 August 1998 the plaintiff took out a business insurance policy with SGIC over the truck for a sum insured of $35,000 and over the excavator for a sum insured of $65,000. On 26 March 1999 the plaintiff purchased from Stallion Engineering for $1,790 a set of aluminium ramps to be used for driving the excavator onto the back of the truck.
On 2 June 1999 the truck, while carrying the excavator and the aluminium ramps, was involved in a road accident with the defendant’s car. Apportionment of liability has been agreed at 90:10 in favour of the plaintiff. (There is no counterclaim from the defendant.) It was uneconomic to repair either the truck or the excavator and they were both treated under the plaintiff’s insurance policy with SGIC as being written off so that the plaintiff was entitled to recover under that policy the amounts payable for total losses of the items insured. This action does not seek recovery of the plaintiff’s losses in the accident which were covered by its insurance with SGIC, but only with other consequential losses of the plaintiff for which it was not insured. The aluminium ramps were damaged in the accident and have not been repaired.
At the time of the accident the plaintiff had several contracts in hand for the performance of foundation work. It was hampered in the performance of these by the loss of the use of the excavator. On about 7 June it hired from Kubpower a similar, but somewhat older, excavator for $250 per day which it then used for the excavation work in its business. At about the same time it also hired a truck from one of its employees, Terry Hill, for $90 per day which was suitable for carrying the hired excavator.
On 3 June 1999 the plaintiff had made a claim on SGIC for the loss of the excavator and the truck. Assessors for SGIC investigated the matter. It apparently took them some time to determine that neither could be economically repaired and were to be treated as write-offs. Employees of SGIC told Mr and Mrs Walker that the items would be replaced as quickly as possible. Mr Walker looked in magazines and newspapers for advertisements for suitable replacement items and spoke to various dealers, but there was no suitable equivalent second hand items available in Australia. The plaintiff’s leasing payments to GIO were continuing even though the excavator and the truck had been written off. It was informed by Capital Contacts that until its existing leases to GIO were paid out it would be impossible for it to arrange similar finance on a replacement truck or excavator. The plaintiff did not have sufficient financial resources to be able to acquire replacement items without obtaining substantial finance.
By a letter of 23 June 1999 SGIC offered to pay the plaintiff $31,000 for the write off of the truck and by a letter of 8 July $56,500 for the write off of the excavator. These offers were based on the market values of the excavator and the truck at the time of the accident and not on what it would cost the plaintiff to replace them with similar new items. The plaintiff rejected these offers. It contended that it had arranged the policy with SGIC on the basis of amounts payable in the event of total losses which would enable the purchase of new replacement items. SGIC was relying upon clause 10.3(1)(d) of the policy which it claimed gave it the right only to pay the market value at the time of the loss and not the full sum insured. There were a number of subsequent discussions between the plaintiff and SGIC about the matter. The plaintiff continued unsuccessfully to inquire for replacement items but limited in price to the amounts which SGIC was offering.
On 25 August SGIC relented and agreed to pay the full sums insured for both the excavator and the truck. It paid these sums to GIO on 2 September which discharged the plaintiff’s obligations under the existing leases and thus removed the bar to it raising finance to acquire further equipment.
At about this time there was a change in the nature of the plaintiff’s business which meant that it was doing more foundation work for domestic dwellings than it had previously. It decided that it would be better for it to acquire a Ditch Witch excavating machine and a Bobcat front end loader than it would be to replace the excavator with another machine of the same type. If the accident had not occurred, at about this time the plaintiff would have sought to acquire a second hand Ditch Witch machine, but would have retained the excavator. It would not have sought to acquire a Bobcat.
The plaintiff made enquiries for a second hand Ditch Witch, but could not locate one. It always intended to buy a new Bobcat. On 14 September it acquired a new Bobcat for $40,000 subject to GIO agreeing to finance the purchase by leasing it back to it. GIO approved the lease on 20 September. The Bobcat had to come from interstate which produced some delay. On a date which was not disclosed in evidence, but which was probably a few days before 15 September, the plaintiff agreed to acquire a new Ditch Witch trencher for $58,394 subject to a lease of it being granted to it by CBFC Ltd. This was granted on 15 September. There was a delay in the Ditch Witch becoming available for delivery because some modifications had to be made to it to make it suitable for the plaintiff’s purposes.
In August the plaintiff had located what it believed would be a suitable used Isuzu truck at North East Isuzu but it was not then available, and in any event the plaintiff was not then able to procure the necessary finance for its acquisition. Shortly after 2 September the plaintiff ascertained that this truck was no longer available through North East Isuzu, but it subsequently located the same truck being offered for sale by Freeman Trucks. On 14 September it agreed to acquire that used Isuzu truck for $38,600 subject to GIO agreeing to lease it to it. GIO approved the lease on 20 September. It was then necessary for some modifications to be made to the truck so that it would be suitable to cart the Ditch Witch and the Bobcat. These took about a fortnight. This truck, with the necessary modifications, was not collected by the plaintiff until 15 October. The plaintiff then used it to collect the Bobcat and the Ditch Witch which had both become available for delivery earlier, but which had not been collected because the plaintiff had no vehicle suitable to transport them. The plaintiff’s claim for the hire of the replacement excavator from Kubpower was until 15 October and the truck from Mr Hill until 19 October. In all of its arrangements for leasing the replacement items the plaintiff had used, and relied upon, Capital Contacts.
If the plaintiff had chosen to acquire a new Kubota KX121-2 excavator in September 1999 to replace the similar machine which had been written off, it could have obtained it from Kubpower for $65,000 plus tax. Once an order had been placed with Kubpower which was subject to a lease being approved by GIO Kubpower would not have taken any steps to fulfil it until GIO confirmed that it would enter into the lease. This would be likely to have involved a delay of about a week. Once the lease had been approved it would then have taken about two to four weeks until it would have been available for delivery to the plaintiff. In a substantial part this delay would have been attributable to the time needed for another supplier to deliver to Kubpower certain special buckets which were needed by the plaintiff as attachments for the excavator to enable it to perform the particular types of trenching work which it carried out. Thus, even if the plaintiff had ordered a replacement Kubota excavator as soon as practicable after the previous leases with GIO had been paid out, it would still have taken until early in October for that machine to be delivered. If the plaintiff had taken this course presumably similar alterations would have been needed to the Isuzu truck to make it suitable to carry the new Kubota excavator.
I accept the evidence of each of the witnesses. Insofar as Mr Walker gave any contradictory evidence about when he first ascertained that SGIC would pay the full insurer value of the items, I find that it was only on or shortly before 2 September 1999.
The defendant disputed the plaintiff’s entitlement to the hire charges for the replacement truck and excavator from immediately after the offers were received from SGIC respectively on 23 June and 8 July until SGIC paid the full amounts due under the policy on 2 September. The defendant’s counsel submitted that the plaintiff had not proved that its loss for this period causally flowed from the defendant’s negligence. I do not agree. It was a foreseeable head of damage resulting from the defendant’s negligence that for the plaintiff to maintain its business income it would need to hire temporarily a replacement truck and excavator until it was able to acquire suitable similar items for itself. The plaintiff did not have the financial resources to acquire such alternative items, and its impecuniosity is not to be held against it: Burns v Man Automotive Pty Ltd (1986) 69 ALR 11. I accept that it could not raise the necessary finance to acquire a further excavator and truck until the existing leases to GIO were paid out. The only ways in which it could replace the truck and the excavator were through either obtaining the benefit of the money payable under the insurance with SGIC or the recovery of the amounts from the defendant. The latter alternative was not suggested to be the reasonable one in the circumstances and it would have been more protracted than what occurred. (In July Mrs Walker had told a representative of the defendant’s insurer that the hire costs being incurred would be claimed against the defendant, but there was no offer forthcoming from the defendant to facilitate the purchase of replacement items and so to terminate the hirings.) The apparently wrongful refusal of SGIC to pay the full insured value of the items delayed the plaintiff being able to replace them, but it did not override and displace the effect of the defendant’s negligence in depriving the plaintiff of the use of the truck and the excavator in this period. As a matter of commonsense the defendant’s negligence was still a significant cause of the plaintiff’s need to hire the replacement items in this period. It was unreasonable to expect the plaintiff to accept $12,000 to $15,000 less from SGIC on its original offer than it was entitled to under the insurance policy and thereby prejudice its ability to replace the excavator and the truck with suitable new items. Accordingly, I allow as part of the damages the hire charges claimed up until 2 September.
I accept the defendant’s contention that it should not have to bear the consequences of the plaintiff’s decision not to replace the excavator with a similar machine but to take the opportunity to obtain two different machines which were better suited to its then purposes. As a matter of reasonableness the plaintiff’s entitlement to hire charges after 2nd September is to be assessed on what was the appropriate period after that date which it should have taken for the plaintiff to obtain a replacement truck and excavator. For the reasons given above I find that it would have taken until early in October for a replacement excavator to be delivered. There is no reason why Mr Hill’s hired truck could not have been used to take delivery of such a new excavator early in October and so any delay in taking delivery of the other machines while awaiting a suitable truck to be available to collect them is irrelevant. I allow hiring charges for the excavator up to and including 5 October, but not thereafter. (Monday, 4 October was a public holiday.)
As stated above it would seem the truck should have been available for delivery on about Tuesday, 5 October. There was some suggestion in the evidence that the plaintiff delayed taking delivery of it and the other machinery because it wanted to complete some outstanding work with the hired excavator. This is not the responsibility of the defendant. In relation to the truck I also only allow hiring fees up to and including 5 October, but not thereafter.
There was no dispute that the plaintiff should recover the $292.50 charged by Kubpower to estimate the cost of repairs to the excavator. The evidence does not establish any more than that the plaintiff lost about $300 on each of three jobs from immediately after the accident until the replacement excavator was hired. Insofar as Mr Walker and Mr Hill may not have been fully occupied in this period I do not accept that it is shown to have resulted in any further loss to the plaintiff. I only allow loss of profit to the plaintiff of $900.
The plaintiff claimed $2,100 for loss of the aluminium ramps. The evidence was that they were damaged in the accident, but not repaired. In their damaged state they were not safe to use with a machine as heavy as the excavator. However, the plaintiff has been using them in their damaged state for loading the Ditch Witch and the Bobcat because these are much lighter machines. There was no evidence of the estimated cost of repairs to the ramps or any other evidence about the quantum of this loss. I can allow nothing on this head of damage.
Paragraph 6 of the Statement of Claim pleaded:
“The plaintiff claims against the defendant for any liability which it may have to (Kubpower) with respect to the hire of the replacement excavator plus any interest payable, any liability for the costs of the solicitors for (Kubpower) in connection with the said action, and for the costs of the plaintiff’s solicitors in respect of the said action.’

Kubpower had sued the plaintiff in action 305/2000 in this Court for the hiring fees, interest and costs. I was told that the plaintiff had defended this action on the basis that it was a term of its contract with Kubpower that the hiring fees were not payable until it received payment on its claim against the defendant. That action has not yet been brought to trial. At the outset of the trial before me it was agreed that the issues raised by paragraph 6 should be left in abeyance pending the outcome of this other action. Insofar as costs in that action were claimed as damages in this action I indicated that I would probably refer the quantum of such costs to a Master for an inquiry. It was agreed that I should give an interim judgment on the other parts of the claim and adjourn consideration of paragraph 6. I point out that if the other action is not resolved by agreement of all parties it will be necessary for the defendant in this action to be joined in it so that it is bound by the determination there of factual issues in that action which are relevant to this action.

Late in the trial I allowed the plaintiff to amend the Statement of Claim to plead a new paragraph 7 as follows:
“The plaintiff seeks damages for any goods and services tax which it may be liable to pay to the Commissioner of Taxation with respect to all sums and benefits awarded to the plaintiff.”

It was agreed that I should defer consideration of this paragraph until it was known what, if any, GST was assessed on the award to the plaintiff and then, if necessary, deal with the issue of its recoverability from the defendant. Accordingly, I only enter an interim judgment at this stage for the claims in paragraphs 1 to 5 of the Statement of Claim.

As the hire charges due to Kubpower and Mr Hill have not been paid no pre-judgment interest is to be allowed on those amounts. I allow a lump sum in lieu of interest on the damages for loss of earnings of $75.
There will be an interim assessment under s38 of the District Court Act as follows:

Hire charges for excavator to 5 October 1999 $ 30,292.50

Hire charges for truck to 5 October 1999 10,440.00

Cost of estimate of repairs to excavator 292.50

Loss of earnings 900.00

Interest 75.00

Sub total 42,000.00

less 10% for contributory negligence 4,200.00

Amount of interim award $ 37,800.00

Further consideration of the claims in paragraphs 6 and 7 of the Statement of Claim is adjourned to a date to be fixed.

[2000] SADC 115

14 September 2000