Daycone P/L v Emrich Industries P/L (No 2) - [2016] SADC 15

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
DAYCONE P/L & ORS v EMRICH INDUSTRIES P/L (No 2)
[2016] SADC 15
Judgment of His Honour Judge Cuthbertson
10 February 2016
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - OTHER CASES
Held:
1. Judgment for 1st Plaintiff for $64601.50 plus lump sum in lieu of interest of $15000.
2. Judgment for defendant against 2nd Plaintiff.
Held:
1. Due to conduct of 1st plaintiff and defendant there will be no order as to costs vis a vis the two.
2. Defendant to have 15% of the costs of the action on party / party basis to be agreed or taxed against the 2nd plaintiff.
District Court Act 1991 s 36, referred to.
Cheshire & Fifoot's Law of Contract (9th Australian ed, 2008) 1004 [20.20], considered.

DAYCONE P/L & ORS v EMRICH INDUSTRIES P/L (No 2)
[2016] SADC 15

On 24 June 2015 I delivered my judgment in this matter and invited the parties to make submissions in relation to the final orders I should make and on the question of costs.
I heard the parties on 11 August 2015 and I received further written submissions.
I had found that the contract between the 1^st plaintiff and the defendant was ended by the non-occurring of a condition precedent, namely the successful testing with the 1st plaintiff’s product of the machinery to be supplied by the defendant to the 1^st plaintiff.
The consequence, according to my construction of the contract, was that the 1^st plaintiff should return the machinery which remained the property of the defendant to the defendant and the defendant should return the prepayments made of $83902.50 to the 1^st plaintiff.
On and before the termination of the contract this offer was made by the defendant to the 1^st plaintiff. [1] The 1^st plaintiff, however, refused the offer and made a counter-offer. [2] The counter-offer was never accepted by the defendant.
A considerable time later the 1^st plaintiff invited the defendant to retrieve the machinery less certain parts of it which it wished to retain for its own use.
[1] See Exhibit P8, tab 32.
[2] See Exhibit P13, tab 35.
Thereafter the defendant retrieved certain of the machinery.
There the matter stood until the issue of proceedings.
The trial had proceeded on various bases, the 1^st plaintiff claiming damages for breach of implied warranty of quality of the machinery and on the basis of various misrepresentations said to have been made by the defendant.
The defendant did not specifically plead a condition precedent in the defence and hence the trial has largely proceeded without reference to that issue by either party.
It is the 1^st plaintiff that was in breach of the contract because, as I have held, a consequence of a failure of the condition precedent was that the 1^st plaintiff should have returned the machinery and the defendant should have returned the deposits paid.
I have found neither event happened because the plaintiff did not agree to this procedure.
In failing to return the machinery, the plaintiff was not entitled to expect that the defendant would return the deposit – as the return of the deposit and the return of the machinery were mutual obligations.
The 1^st plaintiff has totally failed in its claims for breach of contract and false misrepresentation against the defendant.
The defendant eventually received the greater part of the machinery back but by the time it was received it was of little value but has made no claim on that account.
The plaintiff was in breach of contract in failing to return intact all of the machinery provided by the defendant which, under the terms of the contract, remained the property of the defendant.
The machinery retained by the plaintiff had cost the defendant $19300. [3]
[3] See Exhibit D60, tab 8.
The 1^st plaintiff has brought its claims on a number of bases which have all failed. One of the items of damage claimed is the deposit of $83902.50 which was paid but not refunded.
Pursuant to s 36 of the District Court Act I am entitled to grant any form of relief that is appropriate. I am entitled, therefore, to grant the plaintiff’s claim on the contract for the return of the deposit of $83902.50 even though it was not properly pleaded.
Similarly I am entitled to allow the defendant’s claim for return of the machinery retained by the plaintiff by offsetting the amount of $19300 even though that was not properly pleaded.
In the event that I am wrong and that the contract no longer subsists, I would arrive at the same result by application of the law of restitution for unjust enrichment.
The law of restitution applies to a contract which has been terminated for non-fulfilment of a contingent condition. Money paid over, with a value of non-monetary benefits conferred, prior to termination, may be recoverable as restitution for unjust enrichment.[4]
[4] Cheshire & Fifoot's Law of Contract (9th Australian ed, 2008) 1004 [20.20].
Accordingly, there will be judgment for the 1^st plaintiff for $64602.50 on the claim.
The claims of the 2^nd plaintiff are dismissed.
Interest
I will award a lump sum to the 1^st plaintiff in lieu of interest for the period from the issue of proceedings to the date of this judgment on the net amount due to it.
I will not award an amount for interest prior to that time as the failure of the plaintiff to obtain the deposit paid during that period was entirely of its own making by the rejection of the defendant’s offer to refund the deposit upon the return of the machinery.
Also, it was always envisaged in the contract that the defendant would have the benefit of the deposit until the sale had taken place upon successful testing of the machinery.
After the issue of proceedings, however, the defendant still did not refund the deposit; hence my award of interest from the period of time from 29 June, 2012, the time of issue of the proceedings, to February 2016, a period of approximately three years seven months.
I will fix an interest rate of 6.5% per annum being approximately 4% above the cash rate as required pursuant to DCSR 208.
The cash rate over the relevant period I will take to be approximately 2.5%.
I therefore award a lump sum in lieu of interest of $15000 to the 1^st plaintiff.
Costs
In the circumstances I have found that the defendant has attempted diligently to comply with its contractual obligation to make all reasonable efforts to successfully test the machinery for the packaging of the plaintiff’s biscuits.
The defendant, being unable to do so, immediately did the fair and reasonable thing and offered to pay back the deposit paid by the plaintiff, and to take back the machinery that it had installed at the plaintiff’s premises. The plaintiff quite wrongly refused to countenance this simple solution to the problem which was in accordance with my decision as to the interpretation of the contract.
Sometime later it permitted the defendant to recover the machinery but it retained part of the machinery it thought could be useful to it.
The failure to settle the matter in accordance with the contract was entirely the fault of the plaintiff up until the time of the issue of proceedings.
Proceedings were issued by the plaintiff for an extraordinary amount of damages said to flow from the defendant’s nonexistent breach of the contract.
If the defendant, at that stage, repeated its original offer it would have been well placed to seek an order for costs, but it did not do so.
The 1^st plaintiff has, in effect, succeeded in the action as it has been successful in obtaining an award in its favour; although not on any basis that has been specifically pleaded.
Having regard to the failure of the 1^st plaintiff to return the machinery in accordance with the contract and having regard to the fact that, after the issue of proceedings, the defendant made no offer as to repayment of the deposit, and the failure of both parties to plead or directly check with the real issues in this case, there will be no order as to costs in favour of the 1^st plaintiff or the defendant in the action between the two.
The 2^nd plaintiff has lost all issues that it raised. I am of the view that the issues raised by the 2^nd plaintiff took up about 15% of the trial time.
The defendant is to have 15% of its costs of the trial as against the 2^nd plaintiff on a party / party basis to be agreed or taxed.
There will be no order as to costs on this application between the 1^st plaintiff and the defendant.
The defendant is to have 15% of costs of this application to be agreed or taxed as between it and the 2^nd plaintiff.
There will be no other order as to costs.