Continental Ace Pty Ltd v Flender (Australia) Pty Ltd

[2002] NSWCA 184

CITATION:	Continental Ace Pty Ltd v Flender (Australia) Pty Ltd [2002] NSWCA 184
FILE NUMBER(S):	CA 40622 of 2001; 40624 of 2001
HEARING DATE(S):	2 May 2002
JUDGMENT DATE:	24 June 2002
PARTIES :	Continental Ace Pty Ltd (Appellant) v Flender (Australia) Pty Ltd (Respondent)
JUDGMENT OF:	Handley JA at 1; Stein JA at 2; Brownie AJA at 3

LOWER COURT JURISDICTION :	District Court
LOWER COURT FILE NUMBER(S) :	47 of 2000 54 of 2000
LOWER COURT JUDICIAL OFFICER :	Delaney DCJ

COUNSEL:	Appellant: Mr G K Burton Respondent: Mr G A Sirtes
SOLICITORS:	Appellant: Thompson Norrie Solicitors Respondent: ALR Lawyers
CATCHWORDS:	Contract - construction - no question of principle.
LEGISLATION CITED:	N/A
CASES CITED:	N/A
DECISION:	The appeals dismissed with costs.

40622/01
40624/01

HANDLEY JA
STEIN JA
BROWNIE AJA

Monday 24 June 2002

CONTINENTAL ACE PTY LTD v FLENDER (AUSTRALIA) PTY LTD

JUDGMENT

1 HANDLEY JA: I agree with Brownie AJA.

2 STEIN JA: I agree with Brownie AJA.

3 BROWNIE AJA: The respondent sued the appellant in two District Court actions, claiming the balances due for work done and materials supplied in respect of three different engineering projects. The two actions were heard together by Delaney DCJ, and the respondent succeeded, except in respect of some items no longer in issue. The two appeals were also heard together. The principal matters argued on appeal concerned two grounds of defence and a cross-claim, asserted in relation to one project, concerning the provision of machinery for a mine in Thailand.

4 To state matters shortly, the appellant contracted with the Electricity Generating Authority of Thailand (“EGAT”) to provide a conveyor system for the mine, and the appellant subcontracted out to the respondent the task of providing some conveyor drive units. The terms of the subcontract incorporated the terms of the head contract. Putting aside for the moment some issues concerning relevantly minor matters of detail, there were two principal questions that were argued on appeal.

5 First, the appellant relied on a provision in the subcontract, to the general effect that it was only liable to pay money to the respondent when EGAT had approved of the Subcontract Work, and when EGAT had paid the appellant for that work; and neither of these conditions was satisfied. This was referred to, for brevity, as the “pay when paid” clause, and defence.

6 Secondly, EGAT had foreshadowed that, pursuant to the terms of the head contract, it would make a claim for liquidated damages against the appellant, but it had not actually made a formal claim, by the time of the hearing, and there was evidence from the appellant itself to the effect that EGAT’s claim would be disputed, and that the appellant hoped to compromise the claim. The appellant said that, pursuant to the terms of the subcontract, it was entitled (up to a certain limit) to be indemnified by the respondent in respect of any liquidated damages it had to pay to EGAT. It raised this matter as a defence of set off, and in the alternative, it made a cross-claim against the respondent for damages, equivalent to any liquidated damages it would later have to pay to EGAT. At trial, the respondent asserted that, at worst from its point of view, there should be a finding in its favour on the question of liability, and the further hearing adjourned, until the appellant was in a position to have its damages assessed.

7 Amongst the documents forming part of the head contract there was a “Volume 1 Commercial Conditions”. Within that volume there was a Section E headed General Conditions and a Section F headed Special Conditions. Clauses within those two sections of the volume were prefixed with the letters E and F.

8 Clause E-2 provided: -

“The intent and spirit of the Contract is to provide for the Work, herein specified, to be executed within the time specified in the contract, to the detail and for the purpose designed. It is hereby understood that the contractor, in accepting the contract, agrees to supply everything necessary to accomplish this, notwithstanding any omission(s) in the Specifications or Drawings …”

9 Clause E-9 provided generally that the Engineer appointed by EGAT was to perform technical inspections and to supervise the Work, and to have what might be described as the usual authorities given to supervising engineers in relation to a contract of this type; and clause E-17 provided for inspection of the work whilst it was in progress. It continued:-

“After the work had been completed, the Contractor shall inform EGAT to that effect. After being so informed, EGAT may make all necessary inspections and tests to determine whether the completed Work conforms to the requirements of the Specifications.
Should the result of the inspections or tests fail to satisfy the requirements of the Specifications, EGAT may at its own volition and option refuse to accept the work and require the defective portions to be corrected. Until the necessary corrections, re-inspections, and re-tests have been made to EGAT’s satisfaction, the terms and conditions of the contract shall not be considered fulfilled.”

10 Clause E-23 provided:-

“All Equipment and materials supplied and all work performed under this Contract shall be subject to inspection by EGAT, the Engineer, or the Inspector. EGAT, the Engineer, or the Inspector shall have the right to inspect all Equipment and materials during manufacture and prior to preparation for shipment and to witness any and all tests and examinations which are required under this Contract to be approved by the Engineer.
Final inspection will be made in accordance with approved drawings, a copy of which shall be made available by the contractor for reference by EGAT’s Inspector. The Contractor shall notify EGAT, the Engineer, and the Inspector at least twenty-one (21) days in advance when and where the Equipment or materials will be available for each inspection, test, or examination. EGAT’s acceptance of any services, Equipment, or materials covered by the Contract Documents, or any inspection or witnessing of any test or examination, shall in no way relieve the Contractor of his responsibility to supply services, Equipment, or materials as required by the Contract.
Unless otherwise provided, whether inspections take place at the Contractor’s factory or at the factory of a subcontractor, the Contractor shall supply all labor, materials, apparatus, and instruments necessary for performing the inspections or tests required by EGAT’s the Engineer, or the Inspector.”

11 Clause E-39 contained an arbitration clause, in familiar terms, providing for the arbitration of disputes in the court of Arbitration of the International Chamber of Commerce in Paris.

12 Clause F-4 dealt with the scope of work. It provided:-

“The Contractor will be responsible for the complete design, manufacturing, testing, pre-assembly, delivery CIF port, inland transportation, insurance, dismantling, relocation, erection, testing and commissioning of the Second Lignite Handling System-Relocation and Extension as stipulated in the time schedule.
The Contractor shall be responsible to ensure that Contractor’s and subcontractor’s Work and supply is in accordance with all requirements of these Specifications…”

13 The clause went on to specify what Work was included. Sub clauses 1 and 3–6 provided that the Contractor was to design the Work, and to provide for testing at various times and in various ways. It was to submit all contractual documents, as defined in the Technical Specifications.

14 Clause F-22 provided for the payment by the Contractor to EGAT of liquidated damages in the event of delay.

15 Another document forming part of the head contract was a volume titled “Technical Specifications (Mechanical)”. Clause 1.5.1 of that document provided:-

“Notwithstanding the acceptance of a bid and drawing forwarded therewith, or reference to those drawings in the official order, the contractor shall deliver to EGAT the drawings, calculations and instructions set out in Sections 1.5.1 to 1.5.8 herein at the times indicated in Section 1.5.8 of this specification. The Contractor shall not commence manufacture or purchase of component parts until he receives EGAT’s written approval of such drawings, calculations, etc., as provided in Section 1.5.2. Such drawings shall be binding on the contractor unless otherwise approved by EGAT.”

16 Clause 1.3.7 provided for the drawings (in various forms: transparencies, prints, and diskettes) and calculations to be provided to EGAT for preliminary approval prior to manufacture and for review by EGAT prior to delivery. Clause 1.5.8 provided for a timetable, but the detail of this is not presently relevant.

17 The subcontract, made between the appellant and the respondent, provided for the incorporation into the subcontract of the terms of the head contract (referred to as “the Main contract”), and various other documents. Clause 8 provided:-

“Notwithstanding the General Conditions of Subcontract and clause 5 of this Subcontract Agreement the Subcontractor shall only be entitled to payment of the Subcontract Price (or progress payments on account of Subcontract Price) upon the Subcontract Work being approved by the Principal and upon payment by the Principal to the Contractor in the terms of the Main Contract for that Subcontract Work.”

18 The expression “the Subcontract Work” was effectively defined in Recital D:-

“The contractor desires to have provided and performed by the Subcontractor in accordance with the Main Contract and upon the terms and conditions hereinafter appearing the plant works and things mentioned in scope of work hereto (the Subcontract Work) which form part of the works comprised in and to be provided an performed by the contractor under the Main Contract.”

19 The scope of the work to be done was defined in a document called Attachment A, referred to at [23] below. Clause 3.1 of the General Conditions of Subcontract provided:-

“The Subcontractor shall accept and be bound by and perform and observe all Principal’s decisions to the same extent and in the same manner as under the Main Contract the Contractor is bound by and required to perform and observe the same …”

20 Clause 4 is adequately enough summarised for present purposes by its heading:-

“CONTRACT PROVISIONS TO APPLY MUTATIS MUTANDIS”

21 Clause 6 provided:-

“LIQUIDATED DAMAGES
6.1 The Subcontractor will reimburse to the contractor Liquidated Damages at the rate of one tenth of one percent (0.1%) of the Subcontract Price per calendar day in respect of the whole of the Work for which it may be put in connection with or by reason or in consequence of:-
6.1.1 any failure by the Subcontractor to complete the Subcontract work or any part thereof by the date required as aforesaid,
6.1.2 any failure by the Subcontractor to proceed with and complete any part of the Subcontract Work with due diligence and in a competent and proper manner,
6.1.3 any other delay, breach of contract or default whatsoever on the part of the Subcontractor in relation to the due and punctual performance of its obligations under this Subcontract, and the Subcontractor will indemnify and hold the Contractor harmless from and against all payment obligations and liabilities, including and without being limited to any and all liability for liquidated damages, which the Contractor may at any time incur or suffer under the Main Contract by reason of any such failure or other delay, breach of contract or default.
6.2 The total amount of Liquidated Damages shall be limited to ten percent (10%) of the Subcontract Price.”

22 Clause 10 provided:

“INDEMNITIES
The Subcontractor shall indemnify and hold harmless the Contractor from and against all payments which the Contractor may be required to make and all obligations and liabilities whatsoever which the Contractor may at any time incur to the Principal, the Owner or any other person under the Main Contract or otherwise by reason or in consequence of, or otherwise in connection with, any failure on the part of the Subcontractor duly to fulfil and perform all of its obligations under the Subcontract.
The Subcontractor shall indemnify and hold harmless the Contractor from and against all liabilities and all obligations to indemnify the Principal and the Owner which the Contractor may incur, or become involved in, under the Main Contract conditions, which arise out of, are incidental to or consequent upon, or are in any way directly or indirectly related to the Subcontract Work or anything done or omitted to be done by the Subcontractor, or which otherwise occurs, in connection with the Subcontract Work, save only any such liabilities or obligations which arise from and are solely attributable to any act or negligence on the part of the Contractor or any persons for whom the contractor is solely responsible. The foregoing provisions of this paragraph shall apply in accordance with the provisions of the Main Contract.”

23 Attachment A described the scope of work and the price breakdown for the various items of work, in detail. Within that document there was a clause 1.1 which provided:-

“SCOPE
The Subcontractor shall perform and complete the scope of work hereinafter called the Subcontract Work, which, shall comprise of the following:-
1.1 The Subcontractor shall supply all labour, supervision, materials, equipment, plant, consumables, fasteners, slings, supplies and tool necessary for the design, supply fabrication, manufacture, assembly, surface treatment, testing, packing and delivery, CIF Port of Thailand (Incoterms 1990) of specified Equipment for the Conveyor Drive Units for the Main Contract.”

24 Clause 1.2 identified the equipment to be provided for the conveyor drive units: reducers, fluid couplings, brakes, and drive bases; and these were to be assembled. Succeeding provisions provided in detail for the work to be done, and clause 2 provided that there was not included in the subcontract work either the supply of electric motors, or the installation or erection at site of the drives.

25 Another document, also forming part of the subcontract, was titled Attachment B. It made it clear that it was the obligation of the respondent to design the reducers, fluid couplings, brakes and drive bases. Another document, titled Attachment C, provided for a detailed programme to be followed.

The “pay when paid” defence

26 This defence turns primarily upon the provisions of clause 8 of the subcontract, read together with recital D and the relevant parts of attachment A: see [17] - [19] and [23] - [24]: the respondent was not entitled to be paid for “the Subcontract Work” until it had been “approved” by EGAT, nor until EGAT had paid the appellant for that work.

27 The appellant submitted that EGAT had not “approved” of the Subcontract Work. It said that this work included submitting drawings to EGAT for approval (clause 1.3.7 of the Technical Specifications, part of the head contract: see [16]), procuring that approval and then manufacturing the equipment or components approved (clause 1.5.1 of those specifications: see [15]), and then taking steps to enable the equipment or components to be tested, to the satisfaction of EGAT (clause E-9 of the head contract: see [9]).

28 There are difficulties with this. First, clause 8 of the subcontract, set out at [17], makes the right of the respondent to be paid conditional upon EGAT approving of “the Subcontract Work”. That is, what EGAT had to approve was the end product, or the finished work, rather than the individual steps that might be taken towards that end. Thus, for example, if the respondent had failed to submit drawings concerning some component for approval, but had simply delivered the manufactured component, which EGAT then inspected and found satisfactory for its purpose, the appellant could not be heard to say that EGAT had not, to that extent, approved of the subcontract work. Similarly, if there was some default in arranging for EGAT to test such a component, but EGAT nevertheless accepted the component as satisfactory, the appellant could not be heard to say that the condition precedent to it being liable to pay the respondent in respect of that component had not been satisfied. The head contract contained various mechanisms for the protection of EGAT, and the subcontract incorporated these terms, but there was nothing to prevent EGAT from waiving conditions inserted into the head contract for its benefit, and there is no sound reason for construing clause 8 of the subcontract in the manner for which the appellant contends.

29 Secondly, the appellant pointed to provisions in the head contract (clauses E-17 and E-23: see [9] and [10]), requiring steps to be taken to enable EGAT to make inspections and conduct tests during the progress of the work, but that is a different requirement to the requirement of clause 8 of the subcontract, that EGAT approve “the Subcontract Work”.

30 Thirdly, there are evidentiary problems involved in linking up any supposed failure to satisfy the condition mentioned in clause 8 of the subcontract with any specific sum of money. The appellant pointed to various steps in the manufacturing process where, it said, the respondent had not obtained the approval of EGAT, but it was unable to point to evidence demonstrating, in respect of any such failure, any particular sum of money that therefore was not payable.

31 Next, the appellant submitted that EGAT did not pay the appellant in terms of the Main Contract for the Subcontract Work. Significant delays occurred and EGAT wrote to the appellant reserving “the right to impose liquidated damages as per Article F-22”, which is summarised at [14]. There were further communications, and in general terms EGAT made it reasonably clear that it was likely to seek to invoke the provisions of Clause F-22. However, by the time of the trial, matters had not really progressed any further.

32 The appellant was not able to point to any circumstance showing expressly that EGAT had refused or neglected to pay for the Subcontract Work, as distinct from not paying a significant fragment of the money payable under the head contract. EGAT was complaining about a number of things, including the late performance of the work the subject of the subcontract, and on the appellant’s case the respondent’s breach of the subcontract was a cause, if not the cause of that late performance.

33 The appellant invited us to infer that EGAT had retained the relevant money in circumstances that fell within Clause 8 of the subcontract: “… payment by the Principal Contractor in terms of the Main Contract for that Subcontract Work”. However, although it is easy to see the possibility that the Subcontract Work might have been the cause of some of the dissatisfaction expressed by EGAT, the evidence does not permit the Court to draw the relevant inference.

34 The evidence showed that, out of the contract sum payable under the head contract, EGAT retained approximately $1.1 million; that EGAT had expressed dissatisfaction about a number of matters, some only of which were related to the subcontract between the appellant and the respondent; and that EGAT expressed an intention to make a claim against the appellant for liquidated damages. However, the evidence does not establish how the sum of about $1.1 million was made up. For all that appears it may simply have represented a percentage of the sum otherwise payable by EGAT to the appellant. The Court was not referred to any evidence showing that EGAT referred to any matter, within the description of the Subcontract Work, as having not been paid for. Rather, EGAT appears to have had regard only to the terms of the head contract, and to its rights against the appellant; and it retained what it apparently regarded as a sufficient sum of money to constitute a fund out of which any damages payable by the appellant to EGAT might be paid. Putting it another way, EGAT might, so far as the evidence shows, have paid the appellant for the whole of the work the subject of the subcontract, or none of it, or some fragment of it.

35 On this view, there is no need at this stage to explore further the details of the supposed failure to satisfy the conditions mentioned in clause 8 of the subcontract, or the disputed question of causation, but some of these matters are referred to below in relation to a different topic. This defence fails.

Liquidated damages

36 As already mentioned, EGAT foreshadowed deducting from the sum it proposed to pay to the appellant pursuant to the head contract some liquidated damages, and the appellant contended that the respondent was obliged to indemnify it for this, up to the monetary limit mentioned in clause 6.2 of the General Conditions of the subcontract, set out at [19] above. The appellant’s great difficulty was that, at the time of the trial, there was no sum of money that it had paid, or which had been deducted from moneys otherwise payable to it or which was shown to be properly payable by it. All that had happened was that EGAT had in substance threatened to make a relevant deduction from the sum otherwise payable under the head contract. In these circumstances the appellant argued that, on a balance of judgments which might ultimately be given, the respondent would owe it money, so that, eventually, an order might be made under Part 31 rule 23 of the District Court rules, setting off the various judgment debts.

37 As it did in relation to the question whether EGAT had not paid the appellant for the work the subject of the subcontract, the appellant invited the court to infer that some part of the money that EGAT had retained represented a sum of money for liquidated damages payable by the appellant to EGAT, and in respect of which the respondent was obliged to indemnify the appellant. However, the submission suffers from the same evidentiary difficulty: EGAT has not, it seems, made any attempt to differentiate between what are, from its perspective, a number of sources of dissatisfaction, some only of which might possibly be attributable to any fault on the part of the respondent.

38 As an alternative, the appellant raised the same factual matters by way of cross-claim, and at trial sought an adjournment of the hearing, until the amount of its cross-claim could be assessed. It pointed to no loss it had sustained – just to the loss it might sustain if EGAT succeeded in obtaining liquidated damages from it. The learned trial judge refused the adjournment sought, and on appeal the appellant contended that the adjournment should have been granted. I do not agree. At that stage there was no crystallised loss as distinct from the possibility of a loss. Plainly enough, it was not in the appellant’s commercial interests to accept damages assessed on the basis that there was a chance that it would have to pay money to EGAT. On its own evidence, it expected the sum claimed to be compromised, but it sought an indefinite adjournment. It was common ground at trial that, if the adjournment was refused, and it was later determined that the respondent was liable to indemnify the appellant in respect of any liquidated damages payable to EGAT, no estoppel would arise against the appellant.

The appellant’s cross claims

39 At trial, the appellant prosecuted various relatively minor cross-claims against the respondent. Only three of these are now in contention. The first relates to some modifications that the respondent carried out to the drive bases, mentioned at [24]. Commencing in September 1998, there was correspondence passing between the parties as to whether, in accordance with the provisions of the subcontract, the respondent had provided appropriate drawings to the appellant, for the appellant to pass on to EGAT, for approval by EGAT. The respondent took the stance that it had done what the subcontract required it to do, that the subcontract required it to produce finished products by a nominated date, that the subcontract did not prevent it from commencing work before EGAT approved the drawings, and that in any event the drawings had been approved, in the relevant contractual sense. The appellant took the stance that what the respondent was doing constituted a breach of the provisions of the subcontract, and that the respondent should not have started work.

40 Then, on 14 May 1999, the appellant sent to the respondent a “revised purchase order”, dated 30 July 1998 so as to reflect an amendment to the appellant’s original purchase order of that date and recording that the original price was increased, by $22,000, by reference to a note reading: “Additional price to revise drive bases to suit [identified matters] in accordance with [an identified drawing, revision E]”. Subsequently, the respondent modified the drive bases, and the appellant paid the respondent in accordance with the terms of the revised purchase order. Nothing further seems to have happened in this connection until the litigation was on foot, and then the appellant, by its cross-claim, claimed repayment of the $22,000. It is not clear to me upon what principle of law the claim for repayment in these circumstances is made. The appellant said that the modification work was “unauthorised work”, but that is hardly an accurate description. Mr Page, a witness called for the appellant, said that the expense was incurred because the respondent had carried out “unauthorised work”, that is, starting to manufacture the bases before EGAT had approved the relevant drawings; but as he acknowledged, he knew that the respondent was carrying out the work, in accordance with the revised purchased order, expecting that it would be paid for this work, and nothing further was said about the matter until the cross-claim was filed.

41 Delaney DCJ found that the drive bases had to be altered, but not by reason of any fault or neglect on the part of the respondent, accepting the evidence of Mr Gleeson, a witness for the respondent, who said that the respondent had pointed out to appellant that the respondent proposed to manufacture the equipment, in accordance with the contractual time table, unless notified to the contrary; and there had been no such notification. Additionally, Mr Gleeson explained that a requirement of EGAT as to one feature of the bases was not made known to the respondent until December 1998, some months after the formation of the subcontract. Nothing was put forward on appeal that would justify overturning the finding accepting the last mentioned piece of evidence.

42 The second of the cross-claims now in contention was a claim to recover the sum of $16,599.86, said to represent the cost to the appellant of sending Mr Page to Germany between 25 August and 1 September 1999. In chief, Mr Page said that he made the journey “in order to expedite the manufacture of the equipment and its delivery under the subcontract”, and that the costs represented “my airfares, accommodation, meals and my time spent in this task instead of other responsibilities I had”.

43 However, his Honour accepted the evidence of Mr Gleeson that, by 25 August 1999, the manufacture of the equipment was complete, and on appeal it was not suggested that this finding should be overturned. Instead, the appellant pointed to delays that had occurred, supposedly as the result of the contractual defaults of the respondent. As Mr Page put it, he made the journey “to break the log jam” which had occurred concerning these delays.

44 In cross-examination Mr Page agreed that, between the time he arrived in Germany on 26 August, and the time he left to return to Thailand on 1 September, he made another journey to London. He said that the expense involved in the London trip was not included in the sum claimed, but the appellant, despite a challenge, provided no other information at all as to how the sum claimed was made up, and it seems that his Honour was content to reject the claim on this basis alone.

45 His Honour also referred to the evidence concerning another meeting, which took place in Germany on 14 August 1999, when various problems generally associated with delay were discussed; and he found that, as at late August, there were problems that needed to be resolved. However, he found that they were not such as to require Mr Page’s presence. Additionally, the problems included late delivery to the respondent (strictly, its parent company, which was manufacturing the equipment for the respondent) of the motors to be installed into the drive units, and this was not a matter for which the respondent was criticised.

46 The appellant submitted that his Honour’s reasons for judgment on this point were inadequate. They are not as complete as one would like to see them, but there seems to be no real point in examining the detail of the evidence now, for on any view the appellant has not justified the quantum of the amount claimed, and there is no sensible basis in the evidence for awarding any other figure. Further, there is no sensible basis in the evidence for apportioning the cost of the journey as between the respondent’s supposed breaches and the breaches of others, and no basis for apportioning the costs between the supposed delay in manufacture, found not to have occurred, and the other difficulties referred to. Further, it seems that the carriage of the equipment from Germany to Thailand had already been arranged, as at 25 August.

47 The remaining matter in dispute concerns some airfreight costs involved in relation to a different project, known as “Baalbone”. In relation to this project, once again, the respondent was a subcontractor to the appellant. Delays occurred, and certain equipment was sent by air rather than by sea from Germany to Australia, as had been intended. This resulted in an additional cost being incurred, of $19,670. The respondent sent to the appellant an invoice asserting that this sum was due from the appellant to the respondent. Mr Baker, then an employee of the appellant, made a note dated 18 December 1998 on this invoice, referring to the entry for $19,670, and saying: “Pay only 50% of this dollar value plus rest of invoice. Flender were late. Continental agreed to pay 50% of air freight cost.” Ms Brown, an accounts supervisor employed by the appellant who had no other knowledge or means of knowledge about the matter, gave evidence that she acted in accordance with these instructions of Mr Baker.

48 The evidence also includes a copy of a letter from the respondent to the appellant dated 3 September 1998, in which the respondent made it clear that it sought payment from the appellant for the air freight, and a letter from the appellant to the respondent dated 21 September 1998, in which the appellant noted that its client (The Wallerawang Collieries Limited) was prepared to pay half of the additional charges flowing from the air freight, and the appellant suggested that it and the respondent each pay one quarter of the additional charges. It seems that this relatively trivial dispute was then allowed to lie dormant, until the relationship between the parties was poisoned by the dispute concerning the Thai project.

49 The appellant asserted that the respondent had agreed to pay half of the freight costs, but the only evidence as to this consisted of Mr Baker’s note quoted above, and it is to be observed that this note said only that the appellant had agreed to pay half of the costs, and not that the respondent had agreed to do so. His Honour summarised the evidence and the submissions of counsel. The submissions included a reference to the failure of the appellant to call Mr Baker, or to explain the failure to do so. The evidence was only to the effect that Mr Baker no longer worked for the appellant, and not that he was in any other sense unavailable. His Honour said that the evidence of Ms Brown was inconclusive, and found that the appellant had not discharged the onus of proving that the respondent had agreed to pay half of the costs in question.

50 On the evidence, this finding seems to be incapable of successful challenge. The appellant submitted, however, that there was no basis shown for drawing an inference adverse to it from its failure to call Mr Baker. It is not clear to me that his Honour drew such an inference, but if he did, I consider that it was open to him to do so. In any event, in my view, the appellant did not discharge the onus of proving that the respondent agreed to pay half of the costs concerned.

Conclusion

51 The appeals should be dismissed with costs.

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