Draper v Davis - [2005] SADC 78

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
DRAPER v DAVIS & ORS
Judgment of His Honour Judge Clayton
13 July 2005
LANDLORD AND TENANT - FORM AND CONTENTS OF LEASE - CONSTRUCTION OF LEASES
EQUITY - GENERAL PRINCIPLES
Plaintiff (lessor) claimed rent and damages for breach of lease of land and hay processing plant. Defendants (lessees) alleged lease was induced by misrepresentations as to the capacity and condition of the plant and that plaintiff was in breach of conditions.
HELD:
1. The plaintiff did not misrepresent the capacity of the plant and the defendants were not induced by the alleged representations to sign the lease.
2. As a matter of construction the lease did not contain the alleged condition.
3. There was a collateral contract pursuant to which the plaintiff agreed to commission the plant to make it operate under a normal operating load.
4. The plaintiff did commission the plant but the commissioning was defective in certain respects.
5. The defective commissioning of the plant was a breach of the collateral contract which entitled the defendants to damages but not rescission of the lease.
6. Plaintiff accepted the defendants' repudiation of the lease and was entitled to unpaid rent at the time of repudiation and damages for loss of the lease.
7. In the alternative the defendants affirmed the lease by remaining in possession and using the plant from February 2002 when they would have been aware of alleged defects until October 2002 when they vacated the premises.
8. Plaintiff re-entered premises and used same as a machinery shed. Damages reduced by one-fifth on account of plaintiff's use of premises.
Fair Trading Act 1987 s56 , referred to.
Chappell v Gregory (1864) 55 ER 631; Wettern Electric Ltd v Welsh Development Agency (1983) 2 All ER 629; Gott v Gandy (1853) 118 ER 984; Liverpool Council v Irwin & Another (1977) AC 239; Hart v Windsor (1843) 152 ER 1114 at 1122; Solle v Butcher (1950) 1 KB 671 per Denning LJ at 695; Gillespie Bros & Co v Cheney Eggar & Co (1896) 2 QB 59 at 60; Walton Stores (Interstate) Ltd v Maher (1988) 164 CLR 387; Shevill v Builders Licensing Board (1982) 149 CLR 620; Wood Factory Pty Ltd v Kricitos (1985) 2 NSWLR 105; Progressive Mailing House Pty Ltd v Tabali (1995) 57 ALR 609; Fink v Fink (1946) 74 CLR 127 at 143; British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673; Nadreph Ltd v Willmett & Co [1978] 1 All.ER 746; Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286; Cheshire and Fifoot's “Law of Contract” 6th Australian Edition paras 406 & 746; Halsbury's Laws of Australia Vol 16 paras 245-3215; Carter & Harland "Contract Law in Australia" 4th edition paras 2117 & 2135, considered.

DRAPER v DAVIS & ORS
[2005] SADC 78
The Action

The plaintiff claims rent, damages and interest for breach of a lease of land on which a hay processing plant is erected. By counterclaim the defendants claim a declaration that the lease was lawfully rescinded, repayment of rent paid and damages for misrepresentation, breaches of the lease and breaches of an agreement by the plaintiff to commission the plant
On its face the lease is a binding agreement. In the defence the defendants claim that they were induced to enter into the lease by misrepresentations, that there were conditions which were fundamental terms of the lease and conditions precedent to the obligations of the defendants to perform their covenants under the lease, that the plaintiff failed to observe the conditions and was in “fundamental breach of the lease” so that the defendants were not obliged to perform the covenants on their part and are “entitled to restitution of rent paid as a total failure of consideration”.
In addition, the defendants allege that as a result of misrepresentations they were entitled to rescind the lease “and, by their conduct in abandoning the property in about October 2002, did lawfully rescind the Lease ab initio and thereupon became and remain entitled to restitution of rent paid as for a restitutio in integrum”. The defendants say that because they have lawfully terminated the lease the plaintiff is not entitled to sue for any non-observance of its terms.
The defendants claim relief pursuant to the Fair Trading Act 1987. They counterclaim repayment of $165,000 being the first year’s rent and $4,740.86 being the cost of repairing plant and equipment. Claims for loss of production time and loss of profits were abandoned at the trial.
At common law a lessor has no implied obligation to put leased premises into a proper state of repair at the commencement of the tenancy. Chappell v Gregory[1], Wettern Electric Ltd v Welsh Development Agency[2]. Similarly, in the absence of an express provision, a lessor is not required to repair the premises during the term of the lease. Gott v Gandy[3], Liverpool Council v Irwin & Another[4]. The classic statement is that of Parke B in Hart v Windsor[5]:
“We are all of the opinion ... that there is no contract, still less a condition, implied by law on the demise of real property only, that it is fit for the purpose for which it is let. The principles of the common law do not warrant such a position; and though, in the case of a dwelling-house taken for habitation, there is no apparent injustice in inferring a contract of this nature, the same rule must apply to land taken for other purposes - for building upon, or for cultivation; and there would be no limit to the inconvenience which would ensue. It is much better to leave the parties in every case to protect their interests themselves, by proper stipulations, and if they really mean a lease to be void by reason of any unfitness in the subject for the purpose intended, they should express that meaning.”
[1] (1864) 55 ER 631
[2] (1983) 2 All ER 629
[3] (1853) 118 ER 984
[4] (1977) AC 239
[5] (1843) 152 ER 1114 at 1122
Unless a lessee is protected by a warranty the lessee has the obligation of satisfying itself that the premises are fit for the purpose for which they are to be used. The lease in question contains no express warranty as to the fitness of the premises.
The common law is now modified by provisions such as section 56 of the Fair Trading Act 1987 which may provide relief where misrepresentations by a party, which amount to misleading and deceptive conduct, induce the lessee to enter into the contract. In this case, the defendants allege they were induced to enter into the lease by the plaintiff’s misrepresentations.
The resolution of this action turns on the defendants’ misrepresentation claim, a claim that the plaintiff was in breach of an obligation to commission the plant and the defendants’ claim that there were breaches by the plaintiff of conditions in the lease. The ultimate question is whether the purported rescission of the lease by the defendants was justified.
The plaintiff disputes the counterclaim and asserts that the defendants’ purported rescission was not a genuine consequence of the matters complained of, but was part of the defendants’ plan to establish their own hay processing plant at Callington.
In order to effect rescission of a contract all that is required are clear words or conduct that indicate to the other party that the contract is cancelled. The role of the Court is to either ratify the rescission or decide that it was not justified, as the case may be. Cheshire and Fifoot’s “Law of Contract” 6^th Australian Edition at paragraph 746.
Rescission of a lease can be available after the lease has been executed and partly performed: Solle v Butcher[6]. However, if the defendants were entitled to rescind, a question arises as to whether the defendants affirmed the lease by reason of their delay. They enjoyed the benefit of the lease from 10 June 2001 until October 2002 and had the use of the plant for most of that time. It is necessary to ascertain when the defendants learnt of the matters which are said to give rise to the right to rescind.
[6] (1950) 1 KB 671 per Denning LJ at 695
As I have mentioned, the lease is, on its face, a binding agreement. In practical terms the real question in this case is whether there is some basis for setting aside the lease. In those circumstances, it is convenient to consider first the matters raised by the defence and the counterclaim.
Some Background
The plaintiff has extensive landholdings in the Keith area. On part of the plaintiff’s land there is a hay compression plant and a hay cube mill. The cube mill made cubes about one inch square which could be used for stock feed. The compression plant made bales which could be packed into sea containers for export. The plaintiff’s business was diverse and included general farming, growing hay/lucerne, seed cleaning, as well as the processing of hay into cubes and bales. He ceased the hay processing business in about 1996 as a result of ill health.
The defendants, Mark and Lindsay Davis, were dairy farmers in the Adelaide Hills. Mr Mark Davis had previously been the manager of a brick factory. Mr Emmet was an accountant. Mr Tumes was a management consultant. None of the defendants had previous experience with a hay compression plant.
The defendants agreed to lease, as joint lessees, the land upon which the plant was constructed for a period of five years commencing on 10 May 2001. The agreement is evidenced by a Memorandum of Lease dated 10 June 2001. The initial rental was $150,000 plus GST. That rental was to be reviewed and increased in accordance with the terms of the lease.
In his evidence the plaintiff maintained that the defendants’ primary purpose in leasing the land was to operate a dairy, but correspondence between the parties puts it beyond doubt that there was to be a lease of the cube mill and compression plant per se. I am satisfied that ultimately the defendants’ primary purpose was to operate a hay exporting business from the premises. The plaintiff had previously conducted such a business himself until he retired because of ill health and the plant then remained dormant for several years.
The form of the Memorandum of Lease is unremarkable. The area which was leased, namely, the 5-hectare portion of the land on which the cube mill, hay compression plant and a weighbridge were situated, formed only a small part of the property holding of the plaintiff and his family. The area which was the subject of the lease would not, by itself, have been sufficient to conduct a dairy.
Clause 1(r) of the lease required the defendants as lessee:
“To operate the hay cube mill and hay compression plant situated on the land hereby leased to a standard acceptable to the Regulations set down by the Department of Labour and Industry. The Lessee releases to the full extent permitted by law the Lessor from all claims and demands of every kind in respect of or resulting from such standard not being maintained.”
In clause 2(b) the plaintiff gave the use of the hay cube mill and hay compression plant to the defendants and in clause 2(d) agreed to refer to the defendants any enquiries in relation to hay export and sales. Clause 3(p) of the lease provided:
“Any improvements or additions made to, or new technologies incorporated in, the hay cube mill and hay compression plant situated on the land hereby leased made by the Lessee are at its cost and the Lessee has no right of reimbursement or contribution by the Lessor in respect of same.”
The defendants made the initial payment of rent and commenced business under the name of Australian Lucerne Seed & Cube Supplies.
On 7 February 2002, Mr Tumes, requested that he be released from the obligations under the lease. That request was refused by the plaintiff. Mr Tumes has ceased to have any involvement in the defendants’ business, but unfortunately for him he remains party to the lease.
The business was not as successful as the defendants had hoped and they defaulted in paying the rent for the second year. On 4 July 2002, Mr Mark Davis wrote to the plaintiff on behalf of the defendants and asked to delay payment of the rent due for the 2002/2003 year. The letter reported on the progress of the defendants’ business to that time and discussed prospects for the future. Mr Davis said that the hay baling equipment had been a huge disappointment and had cost time and money due to mechanical failures and the inability to produce bales of export quality. The letter stated that the market required a bale that was 46 kilograms in weight and was neat and tidy with three plastic straps. Even on the defendants’ case, the plaintiff never represented that his plant could produce such a bale. Mr Davis wrote that to produce such a bale they needed to place the bale under more pressure than the plaintiff’s plant could exert.
The plaintiff replied on 1 September 2002 advising that he was unable to give further time to pay beyond 25 October 2002.
On 16 October 2002, Mr Emmett wrote to the plaintiff advising that the defendants had concluded it would not be possible to continue operating from the property. The letter raised a number of complaints about the machinery and asserted that the parties had “agreed” that the machinery would be commissioned and be in good operating condition prior to the defendants taking over the plant. Mr Emmett wrote that the defendants were unable to continue operating from the site because of the continued breakdown of the equipment and the realisation that the end product was unsaleable on the export market. He asked the plaintiff to agree to a mutual termination of the lease agreement. Mr Davis’s letter of 4 July 2002 had referred to mechanical failures and the inability to produce marketable bales, but did not complain that the machinery had not been commissioned and was not in good operating condition when the defendants took over.
On 30 October 2002, the plaintiff’s solicitors offered a settlement which the defendants’ solicitors impliedly rejected on 12 November 2002. The defendants’ solicitors alleged that the defendants were induced to enter into the lease as a result of representations; they asserted that the plaintiff claimed that he had a very profitable business and inter alia agreed to commission the equipment and ensure that it was in good order to commence the business and was safe. The letter particularised for the first time the individual complaints which now form the basis of the defendants’ misrepresentation claim. The majority of the complaints relate to the performance of the hay processing plant. The letter also repeated the claim that the plant was not ready for use when handed over by the plaintiff in September 2001 and asserted that the equipment was not safe to use so that inspection by the Department of Labour and Industry would have shut the operation down. The defendants offered to meet with the plaintiff.
The plaintiff’s solicitor responded on 3 December 2002 denying the defendants’ allegations.
The defendants walked off the property and have refused to make further payments of rent.
Whether the plaintiff made misrepresentations which induced the defendants to sign the lease is a question of fact to be determined by the evidence. The traditional questions in a misrepresentation case arise. Were the representations made, were the representations false, and were the defendants induced by the misrepresentations to enter into the lease?
There is the further question of whether the complaints set out in Mr Emmett’s letter were justified and if so whether those complaints or the alleged misrepresentations provided a valid basis for the defendants to rescind the lease. At the trial the plaintiff argued that the letter was an attempt to justify the defendants’ decision to leave the premises for other reasons.
In addition to the alleged misrepresentations the defendants allege that the plaintiff was in breach of terms of a contract and of the lease that the plaintiff would on or before 1 September 2001 repair and commission the hay-cubing mill and hay compression plant and provide details of an enquiry from a company in Western Australia.
The Alleged Misrepresentations
To be actionable a misrepresentation must relate to an existing fact or past event rather than be a prediction as to what may happen in the future. That distinction is relevant to statements attributed to the plaintiff as to the capacity of the plant. Representations as to the performance achieved by the plaintiff in the past must be distinguished from promises, in the nature of a warranty, as to what the defendants might achieve in the future. The distinction between past facts and promises as to the future is also relevant when considering the alleged representations by Mr Draper that he would commission the plant.
The alleged misrepresentations are extensive. Some relate to the capacity or output of the plant, while others relate to the condition of the plant.
In paragraph 2.1 of the defence it is alleged that on 20 October 2000 the plaintiff represented to the defendant, Mr Mark Davis, over the telephone, that he had a very profitable business, that bales of hay compressed by the plant weighed more than 44 kilograms, that over 23 tonnes of hay could be packed into each container, that between 570 and 600 bales could be packed into each container, that he ran the plant with three or four people, that strapping bales with metal bands satisfied his customers, that the baling equipment could produce almost 1,000 bales during a normal day, that the ram of the compression plant had a compression force of 200 tonnes and that the hay compression plant produced compressed lucerne hay as well as oaten hay.
In paragraph 2.2 of the defence, the defendants allege that the plaintiff repeated the representations at a meeting between Mr Mark Davis, Mr Tumes and Mr Draper in mid to late January 2001. They also allege that on that occasion Mr Draper represented that he had made the investments set out in a list of shares which he produced from his profits, that he had used the plant for approximately three years and that it had been so profitable that he had recovered establishment costs of $1.5 million. There is a further complaint relating to samples of cubed hay said to have been provided by the plaintiff.
In paragraph 2.3 of the defence, the defendants allege that on 10 February 2001 the plaintiff represented that if the defendants leased the property he would commission the equipment and ensure that it was in good order to recommence business. They also allege he again represented that the hay export business was very profitable.
In paragraph 2.4 of the defence the defendants allege that in March 2001 the plaintiff represented that mechanical components of the lease would be a cube making plant, a container loading plant, a weighbridge and a gantry and that all components would be commissioned ready for use. It is alleged that the plaintiff represented that the weighbridge was certified for use.
The representations alleged in paragraphs 2.3 and 2.4 of the defence, that all components would be commissioned for use, are promises or terms as to the condition of the plant which the defendants could have had inserted in the lease, whereas the representations in paragraphs 2.1 and 2.2 of the defence relate to the past performance and profitability of the plant. Contrary to the defendants’ submission, I find that there is no term in the lease which prescribes to the condition of the plant.
In paragraph 2.5 of the defence there is also an allegation that on 26 April 2001 the plaintiff represented that a Western Australian business had offered to lease the plant and that the plaintiff would supply details of that business after the defendants had signed the lease and paid the deposit.

By the time of trial the defendants had no complaint about the hay cubing plant. Mr Mark Davis gave evidence that it was performing to the manufacturer’s specification. Mr Emmett gave evidence that the difficulties with the cubing plant were resolved. The defendants’ complaints and the conduct of the case were mainly concerned with the hay processing plant.
Evidence as to the Alleged Misrepresentations by the Plaintiff
Mr Mark Davis and his father, Mr Lindsay Davis, were looking to expand their dairy farming business. They placed an advertisement in the Stock Journal which produced a response from the plaintiff who had two properties in the Keith area, Mount Monster and West Brecon.
On 18 October 2000, Mr Mark Davis and his wife visited Keith on their way back from Mount Gambier and met the plaintiff who showed them over the properties. They drove around West Brecon, a property of about 4,500 acres. At the time West Brecon was leased to another person but was likely to become available within the next year or so. They also inspected Mount Monster including Mr Draper’s dry land lucerne seed crops. Mr Davis asked questions about a very large shed on the property and Mr Draper told him that he used to operate an exporting plant. Mr Davis said that caused his ears to prick up because he had been looking for an agricultural venture that was “value adding”. He asked if he could inspect that plant. Mr Draper obliged. Mr Davis said he instantly considered using the plant to recommence exports, to buy hay from farmers, value add it and on sell it. Mr Draper told him that the plant was closed due to ill health and it was getting too hard. Mr Davis said that Mr Draper told him that he had spent $1.5 million to build the entire complex which he had recouped in the three years he was operating. Mr Davis assumed that Mr Draper must have made half a million dollars for each year of those three years. In a shed he saw one plant which made hay into cubes and another plant which compressed bales of hay so that they could be stacked into sea containers for export.
They inspected the cubing plant which was in a state of disuse and rusted. Mr Draper made representations about the output of that plant which are no longer relevant to this action.
Mr Davis and Mr Draper had a separate discussion about the hay compression plant which was the genesis of representations upon which the defendants’ claim relies. Mr Davis gave evidence that as they walked through the plant Mr Draper described the operation of the hay compression plant. Mr Davis said he was very curious and asked questions in response to which Mr Draper told him:
·They processed oaten hay as well as lucerne hay.
·They were getting 23 to 24 tonnes of hay in each container.
·They were getting bale weights that were averaging 44 kilograms of hay in each bale.
·They were making 1,000 bales each day.
·Mr Draper ran the plant with three to four people, one running the baler, one loading hay onto the hay creep going into the teaser, and another strapping the bales in the compression room.
·There were two rams, one on each plant, which were of 200 tonnes capacity which was the force required to achieve a 44-kilogram bale.
·Initially two persons were required to apply the metal straps, but a procedural modification allowed one of the persons to be dispensed with.
·They were making 1,000 to 1,100 bales per day.
·They were getting 570 to 600 bales per container.
·He put two metal bands around the bales which was acceptable to his customers.
They discussed a bale accumulator and a grab, of which Mr Draper was quite proud, which were used to stack the compressed hay bales into containers. Mr Davis could not recall the number of bales that the grab could handle.
Mr Davis said that when he was told about the two metal bands used to tie the bales he asked, “is that all?”, because he thought the bales did not look very presentable and looked “straggly”. He thought it would have made them harder to ship in a container because they were not perfectly square and had bowed back. The plant was not operating at the time of the inspection.
Counsel for the plaintiff has challenged the evidence of Mr Davis as to the October representations. In support of his case, the plaintiff argued that it is unlikely that Mr Davis would have been interested in such a level of detail on his first introduction to a hay compression plant. To persons other than the cognoscenti the figures relating to the hay compression plant would have been meaningless.
Mr Davis gave evidence that the longer the discussion went the more thought he gave to the possibility of restarting the export business. He did not communicate those thoughts to Mr Draper. He said he discussed with his wife whether they could put a dairy farm on the land and build it up over time, whether they could use the cubing mill and hay compression plant in some way and whether they could use the lucerne seed cleaning business which Mr Draper told him had huge potential. Mr Davis said they were contemplating everything and there was much to digest on the spot.
Mr Davis said that he telephoned Mr Draper on 20 October 2000 to verify information and to make sure that the lead did not go cold. They discussed the cubing plant and the hay compression plant. He said that while there were slight discrepancies in some of Mr Draper’s figures they were generally what Mr Davis recalled. Mr Davis said he asked Mr Draper to confirm everything he heard the first time around including the tonnage of hay that he was getting into his containers and the weight of the bales that they were making. Mr Davis said he told Mr Draper that he was interested in knowing whether the rams were 200 tonne rams and Mr Draper said they were and that he may be able to provide information to back that up. Mr Davis’s statement that he was interested at that time in whether they were 200 tonne rams is a matter which I discuss later. Mr Davis said that Mr Draper confirmed he was getting 23 to 24 tonnes in each container and that he was getting 570 to 600 bales in each container. He did not recall whether it was exactly 570 or 600, but it was in that range. Mr Davis said that Mr Draper seemed confident about the figures.
On 23 October 2000, Mr Davis wrote to Mr Draper enclosing a proposal for the future development of both properties. Mr Davis proposed continuing with lucerne seed as the main enterprise and to install a dairy in the southern part of the “pellet shed”. As to the “pellet factory” Mr Davis proposed that he would get the factory back into working order within one to two years, initially for his own use in the dairy. He said that once it was working efficiently he would “look at the possibility of finding potential markets for the products” and use the performance of his own dairy feedlot as a marketing strategy. His proposal for West Brecon was that “fodder would also be produced for processing through the fodder factory”. There was no reference to the hay compression plant. It can be assumed that the proposal for the “pellet factory” was concerned with the cubing plant only, because there was no reason to compress hay for use in an on-site dairy. Hay is compressed into bales for the purpose of packing it into sea containers for export. Also the proposal refers expressly to pellets which are a different commodity from bales of hay. There was nothing in the letter which indicated that the hay compression plant was of interest to Mr Davis at that time.
Some time after 23 October 2000, Mr Davis contacted Mr Emmett and Mr Tumes individually. Mr Emmett was his accountant and taxation adviser and Mr Tumes was a friend. Mr Tumes was keen to become involved in the project and wanted to inspect the property.
Mr Davis said the plan to establish a dairy was abandoned in about November 2000 and interest then centred on the lucerne seed business.
Mr Davis wrote to Mr Draper on 10 January 2001 about the lease of Mount Monster. The letter, which was said to be further to discussions, discussed various aspects of the lucerne seed crop, but was silent as to the hay cubing and hay compression plants.
In January 2001, Mr Davis visited the property with Mr Tumes. Mr Davis said that on arrival, during the course of a conversation, Mr Draper handed him two sheets of paper. One, Exhibit D13, page 7, gave details of the cube mill and the other, Exhibit D13-8, details of the compression plant. The latter document refers to “2 x 200 tonnes presses with separate hydraulic power packs each with 100 hp and 35 hp electric motors”. On my findings, nothing had happened to that point in time which would have made the specifications of the hay processing plant relevant so as to cause the plaintiff to give those documents to the defendants. For reasons, which are discussed below, I find that the two documents containing specifications of the processing plant were not given to Mr Mark Davis until about May 2001.
Mr Davis said that in January 2001 they discussed a gantry which was on site and Mr Draper told him that the gantry was essential to take containers off the back of a truck. He said he discussed with Mr Draper “the production costings and outputs and capacity of the export hay mill” and received the same responses that he had on the previous occasions - 44 kilograms and 23 to 24 tonnes in every container. Again Mr Draper provided the information in response to specific questions from Mr Davis.
Mr Davis said that during a discussion at Mr Draper’s house, Mr Draper handed him a list of shares which he claimed to own and stated that the shares had been purchased with money that came from his Mount Monster company, from his hay exporting business and his lucerne seed venture. Mr Draper denied giving such a list to Mr Davis and disputed the accuracy of the document which was produced. On its face the document appears to be regular. I find that Mr Draper did give the document to Mr Davis. There is no other explanation for the document being in Mr Davis’ possession. Mr Davis said that at that meeting, after the discussion about the share portfolio, he asked Mr Draper whether he would be interested in selling the export hay and cube business as opposed to just leasing it, but Mr Draper was not willing to sell because he had some tax issues. A half-hearted allegation by the defendants that Mr Draper would not sell the business, because that would have required him to make disclosure of details of his trading which a lease enabled him to avoid, was not pursued
Mr Davis said that he made notes of the discussion, but the notes were not produced. Mr Davis has moved house and was unable to locate the notebook.
Mr Tumes gave evidence of the meeting in January 2001. He thinks it was around 12 January 2001. He said Mr Davis explained to Mr Draper that Mr Tumes worked for Ernst & Young, that he had a lot of financial valuation experience and was putting together models and spreadsheets to prepare a financial assessment on the venture. They spent a couple of hours inspecting the hay compression plant and Mr Draper explained the operation of the plant. Mr Tumes said that Mr Davis asked Mr Draper to confirm figures. As to the number of bales produced in a day, Mr Draper said “a thousand. Roughly one thousand, eleven hundred bales”. Mr Tumes took it as 1,000. Mr Tumes said there was a discussion about the weight of hay in a container and Mr Draper said 23 to 24 tonnes. As to the bale weight Mr Draper said 44 kilograms. Mr Draper said he thought he could get roughly 570 or 575 bales into a container. Following a discussion about the number of employees Mr Tumes formed the belief that four people were required for an 8-hour day. Mr Tumes said that Mr Draper told them the cost of strapping was $5.00 a tonne and old bales that were lying around indicated that metal straps had been used. There was discussion about the ram of the hay compression plant, but Mr Tumes could not recall specifically what was said. He did not understand what the others were talking about. He was mainly concerned with how many kilograms you could get into a bale, how many bales you could get into a container and how many bales could be produced in a day. As to lucerne hay, Mr Tumes believed that Mr Draper said that he could not compress lucerne hay, but Mr Davis contradicted Mr Draper and expressed the contrary view.
Mr Tumes observed that the machinery had not been running for quite a while, was not in a good state, needed to be commissioned and that quite a bit of work had to be done. He said it was pretty well rusted and in a state of disrepair.
During the inspection, Mr Tumes took photographs of the shed, plant and other items. One photograph depicts Mr Davis and Mr Draper in conversation with Mr Davis taking notes. The photographs are evidence that by this time the defendants were interested in the hay compression plant.
After the inspection of the plant, they went to Mr Draper’s home for scones and Mr Draper gave them the list of shares. Mr Tumes believed that Mr Draper raised the topic of his share portfolio to show that the plant had been successful.
The meeting concluded with Mr Davis saying that the defendants were gathering further evidence and needed to organise finance before they would be in a position to proceed.
Mr Davis said that the defendants worked on their costings to apply for finance. The first proposal for finance, Exhibit D15, is dated February 2001. I refer to the proposal in more detail below.
On 22 January 2001, Mr Draper wrote to Mr Davis and referred to their discussion “about the lease of Mount Monster”. The letter contemplated a lease of the whole property and referred to many topics, but it was silent as to the hay compression plant.
On 5 February 2001, Mr Draper wrote to Mr Davis referring to a conversation that day amending a previous proposal for the lease of “Mount Monster”. The letter contained no mention of the cubing and hay compression plants.
Mr Davis, in consultation with the other defendants, wrote a comprehensive letter to Mr Draper on 9 February 2001, advising that the size of the project was larger than Mr Davis had anticipated and that Messrs Emmett and Tumes had formed a partnership with him. The partnership was called “Australian Lucerne Seed & Cube Supplies”. Mr Davis wrote that they had carefully researched the extent of the market and were convinced that over time the business could expand with the use of the hay compression and cube mill plant. Mr Davis wrote that the rental of $480,000 which was being asked for the annual lease of the entire property was higher than expected, that the situation changed if the hay compression plant and the cube mill were taken into account, but that assumed the equipment was in good operating condition. The letter made adverse observations about the appearance of the plant. Mr Davis estimated that at least $50,000 would be required to service the equipment and get it into an operational state. He said substantial additional sums would be required to get both pieces of equipment into safe working condition to meet Occupation Health and Welfare standards for export quality produce. Mr Davis wrote that if the equipment was recommissioned the business would be viable, but without the use of the hay compression plant and cube mill machinery the whole of the business would struggle with an annual rental of $480,000.
Mr Davis’s letter contained a counter offer. It proposed separate leases for the land, the hay shed and seed cleaning equipment on the one hand and the large shed, cube mill and compression plant on the other. The offer was conditional upon an inspection of the cube mill and hay compression plant confirming that recommissioning would cost less than $50,000. If the cost of commissioning the two plants exceeded $50,000 the second lease would only provide for the use of the shed excluding the machinery. The counter offer included a proposal that part of the rent be a royalty of $12.50 per tonne on all product produced by either the cube mill or the compression equipment. The letter said that the reason for the changes in the proposal included the need to generate sufficient cashflow on top of borrowings and capital injection to support the development of the machinery to a continuous export quality.
Mr Davis’s letter establishes that the partners were aware of the condition of the hay compression plant and that they believed that work was required to develop the machinery to “continuous export quality”, whatever that means. It also introduces the concept of “commissioning’ the plant and shows an awareness of occupational, health and safety issues. The letter does not suggest that Mr Draper was, at that time, under any obligation to bring the hay compression plant to any state of repair, but on the contrary suggests that the defendants contemplated commissioning the plant themselves provided it did not cost more than $50,000.
The letter shows that by 9 February 2001 the defendants had changed their focus. Mr Davis gave evidence that at that time the partners believed that the most important facet of the business would be the hay compression business. He said they communicated that view to Mr Draper.
Mr Davis, Mr Tumes and Mr Emmett met with Mr Draper at the Keith property on 10 February 2001 and the letter of 9 February 2001 was handed to Mr Draper. They inspected the plant. Their purpose was to inform Mr Draper where they stood with the proposal and to discuss the letter. Mr Draper immediately rejected the counter offer. The suggestion of a royalty in lieu of rent caused him to become angry.
Mr Draper gave evidence that up until February 2001 the partners had not said that they were going to use the cube mill, but were orientated to build a dairy. The letter of 9 February 2001 which included a reference to the cube mill and the hay compression plant seems to be the first written notice that Mr Draper had of the partners’ change of focus.
Mr Emmett said that a purpose of the visit on 10 February 2001 was to ensure that the information put into spreadsheets was accurate. He had not seen the plant and had not met Mr Draper. He wanted to assure himself that the property was as stated. The spreadsheets that Mr Emmett referred to are feasibility studies into which the allegedly misrepresented figures were inserted. The defendants assert that the spreadsheets establish reliance on the misrepresented figures. I consider that assertion later.
Mr Emmett said that Mr Draper gave him the impression that during the time he operated the plant he was producing more than 1,000 bales per day, that he was getting high average weights, in excess of 40 kilograms per bale, that he ran the plant with a maximum of three to four people and he identified a number of satisfied customers.
Mr Emmett said that on 10 February 2001 he inspected the plant and formed the view that it was in an extremely rundown state. He asked how much it would cost to get it up to full production capacity again, and Mr Draper said it would take very little. Mr Emmett said Mr Draper did not raise anything which was contrary to his expectations. Mr Draper told the partners that he was doing 8,000 tonnes per year. Mr Emmett gave evidence that Mr Draper told him that he had been able to pay off the cost of the equipment and the set up cost in a period of three years. Although Mr Draper did not say what the cost was Mr Emmett assumed that it was approximately $1.5 million.
Mr Davis gave evidence that the meeting on 10 February 2001 concluded with Mr Draper agreeing to split the property into two separate leases. Mr Davis said that the defendants offered to spend a fixed amount of money fixing the plant up, but Mr Draper said “he would recommission the plant if we were going to take the lease over”. Mr Draper said that to help the defendants out he would reduce the rental from $180,000 to $150,000 per annum.

Exhibit P7 is a letter from Mr Draper dated 11 February 2001, in which he agreed to separate leases for the land and the cube mill. For the “cube mill, compression plant, and land” he proposed a rental of $150,000 per annum indexed with a deposit on signing the lease. Mr Draper wrote: “Lessor at his expense, to run Cube Mill in operating condition on or before the 1 9 01”. Although loosely expressed, I think it is clear that offer to run the cube mill included the compression plant. By that time Mr Draper was clearly aware that the partners were considering the use of the hay processing plant.
Mr Davis said that he responded to the letter of 11 February 2001 and told Mr Draper that they needed more time to pursue finance and that they were looking at the cube mill and using it for export.
Messrs Emmett, Tumes and Davis next visited the property in March 2001 to show it to Mrs Davis and Mrs Emmett. Mr Emmett said that he inspected the plant which was not in good condition. He said it looked like it had been turned off in mid-production. During the inspection some machines were turned on, but Mr Draper declined to activate others because they required repairs. Mr Emmett said that Mr Draper indicated that the gantry would be operational, but they needed a licensed operator.
Mr Emmett observed that electrical wires had not been covered by conduit and were just buried under the ground. Mr Emmett said that the defendants were insistent that they would not be leasing any of the equipment unless it was put back into its production condition and that Mr Draper told him that he was very happy to put it back into that condition again, but that was conditional upon the defendants paying half of the rent. Mr Draper said it would take six to eight weeks and that he would have experts come in and give him advice on how things were to be refurbished. Mr Emmett said that the defendants then asked Mr Draper to go ahead. Mr Emmett said that Mr Draper was happy to do that subject to the payment of money. Later Mr Emmett corrected his evidence and said it was subject to signing a lease rather than the payment of money.
In February 2001 and April 2001 the defendants prepared comprehensive applications for finance. The February application sought a loan of $900,000. The April application sought a loan of $500,000. Those applications contemplated a lease of the entire property. The hay compression and cubing plant formed only a minor part of the proposals. Both proposals stated that the financing of the plan would enable the recommissioning of both the pelletising and compressed bale machines. Both proposals also stated that production of pellets and cubes would be on a modest basis initially whilst improvements were made to ensure export standards and continuity of supply.
The fact that the defendants were seeking finance to commission both plants could indicate that initially they did not look to the plaintiff to commission the plant. In any event, the defendants recognised that the plant was in need of repair.
The defendants’ case was that spreadsheets included in the applications for finance included the information misrepresented by the plaintiff. However, the evidence does not demonstrate how figures provided by the plaintiff were taken into account. The figures do not appear in the spreadsheets in their raw form. For example, the spreadsheets contain no specific reference to bale weights, container weights or the number of bales in a container. There is no evidence of specific calculations which included the allegedly misrepresented figures. The spreadsheets were part of the proposals for finance which dealt with the entire business and were very comprehensive. At the time the spreadsheets were prepared the hay processing business was a minor consideration.
In late April 2001, Mr Davis rang Mr Draper again. Mr Draper was looking for a final answer. Mr Draper told him that he had been approached by a Western Australian business that was considering leasing the hay compression plant to process hay that they would grow on his farm. Defendants’ counsel suggested that Mr Draper was trying to place the defendants under pressure to make a decision. If he was, I do not attach any significance to that. Mr Davis told Mr Draper that the defendants were still seeking finance and Mr Draper allowed them further time.
Mr Emmett said there was a meeting between the defendants and Mr Draper in late April 2001, immediately prior to the lease being entered into. Two lending institutions had declined the second proposal for finance. That caused the defendants, in mid-April, to confine their proposal to the production equipment for cubes and bales. The prospect of a lease of the hay plant alone had been discussed with Mr Draper at a meeting in Keith in late April. Mr Emmett said that at the meeting in late April Mr Draper said that there was another company interested in producing on the site and that would give the defendants an almost immediate cash flow. He said that made the proposal even more attractive. Mr Emmett could not remember the exact words of Mr Draper. Later in his evidence Mr Emmett acknowledged that there was never any guarantee of business from the Western Australian company.
A letter from the plaintiff to Mr Mark Davis confirmed a discussion on 26 April 2001 relating to a proposed lease of the cube mill for $150,000 paid annually in advance with a right of first refusal over the balance of the land.
On 30 April 2001, Mr Davis wrote confirming the partners’ intention to take up the lease of the cube mill and hay compression plants alone. The letter listed seven “conditions” required for the defendants to proceed. Mr Davis proposed an annual rental of $150,000 plus GST with half to be paid on execution of the lease and the balance to be paid “once the cube mill and bale compression plants are both up and running, and fixed to an agreed standard that will ensure their operation under normal production load”. The letter proposed that a second rental instalment should be paid no later than 1 September 2001, but that date could be brought forward to 1 July 2001 “subject to the owner having completed all necessary repairs to the mill”.
Mr Emmett said the criteria to be met before payment of the balance of the first year’s rent was required were introduced by him and his colleagues “to ensure that the equipment was up to production standard” before they took over. He said they had indicated to Mr Draper that it was essential that the equipment was operational prior to the season starting.
Another “condition” in the letter dated 30 April 2001 was that Mr Draper would, upon payment of the first rental instalment, provide the contact details of the Western Australian company that was “currently interested in taking up a lease on the mill”.
Mr Emmett said that he received telephone notification from Mr Draper that he was prepared to go ahead with the proposal on the conditions in the letter of 30 April 2001. The defendants then went ahead and arranged finance.
The evidence as to the events following 30 April 2001 is sparse, but a lease was prepared by solicitors and signed on 10 June 2001. There is no stipulation in the lease as to the condition of the plant. There was no evidence of the circumstances of the preparation of the lease. The term of the lease was five years commencing on 10 May 2001, although the defendants did not sign the document until June 2001 and did not commence their business on the premises until about September 2001.
After payment of the initial instalment of rent the plaintiff wrote to Mr Davis advising that commissioning was in full progress and the staff were enthusiastic and had started spray painting. Mr Draper carried out work including painting and the replacement of a clutch on the cube mill. He thereby acknowledged some obligation to commission the plant. The nature and extent of that obligation is a matter which is considered below.
On 14 August 2001, Mr Draper wrote advising Mr Davis that he had been making lucerne hay cubes over the previous two weeks and would be prepared to demonstrate the cube mill machinery.
Minutes of Meetings of Defendants
Some insight into the negotiations between the parties can be gleaned from minutes of the defendants’ partnership meetings.
Minutes of a meeting held on 16 April 2001 show that the partners were, at that time, still pursuing their application for finance and were contemplating a business which extended beyond the cubing and hay processing plant. The partners discussed the need to obtain heavy-duty machinery for the hay processing plant. That minute contradicts the defendants’ claim in paragraph 2.4 of the defence that in March 2001 Mr Draper indicated that the mechanical components in the lease included container-loading equipment.
On 10 May 2001, the partners discussed the possibility of meeting with Mr Draper and an independent consultant “to evaluate condition of processing equipment to determine what needs to be done”. The minutes included a note that the defendants were to “Fax through our initial Terms & Conditions to Willis on the 8^th of May, to also include in contract quality of equipment and in what condition must the equipment be working in - Action: MD”. There is some doubt as to the actual date of the meeting because while the heading refers to 10 May 2001, the footer to the document describes the document as “Minutes for 07May01” and there is a reference to a fax to be sent on 8 May 2001. In any event, there is no evidence of a fax in the suggested terms being sent to Mr Draper on 8 May 2001 or at all.
The next set of minutes relates to a meeting on 17 May 2001, which recorded that the partners needed to inspect the state of the processing equipment, document what work was required on the processing equipment and build it into the lease. There is no evidence that was ever done. Another minute recorded the need for two front-end loaders and the possibility of negotiating with Mr Draper to obtain the use of “a front-end loader or other equipment”. That minute again establishes that the defendants knew that container loading plant was not included in the lease.
The minutes record that Mr Draper had given Mr Mark Davis specifications of the plant. The probabilities are and I find that the specifications to which the minutes refer are the two sheets headed “Cube Mill South of Keith” and “Compression Plant” (Exhibits D13, page 7 and D13-8). Exhibit D13-8 refers to two 200 tonne presses with separate hydraulic power packs each with 100hp and 35hp electric motors. There is no other specification of plant in evidence to which the minutes could refer. The minute reads: “Specification of Plant - Willis has given to MD, Grant to look over.” The clear inference is that the specification had been given to Mr Davis recently and that Mr Emmett had not seen the specification previously. Those inferences are inconsistent with the defendants’ claim that they relied on the specification that it was a 200 tonne press when they decided to enter into the lease. The minute does not discuss the significance of the specification. Mr Davis said in evidence the specifications were given to him in January 2001. I prefer the contemporaneous note in the minute and find that the oral evidence of Mr Mark Davis is mistaken and that the two documents were handed to Mr Davis in May 2001.
The minutes of 17 May 2001 referred to an amended business plan which looked only at the processing equipment. The defendants’ priorities included signing a lease and getting the processing equipment up and running. They contemplated a first cut of hay in September 2001 and their intention was to have the operation set up by that time.
A meeting of partners was held on 29 May 2001. The minutes show that the partners had obtained a quote for the cost of setting up a hay processing plant. The minutes also refer to a quote from a transport company of $330 per container to Keith. There is no record of any discussions about the condition of the processing plant. Mr Draper was going to Queensland for two months.
Minutes of a meeting on 26 June 2001 refer to a proposed site visit on the weekend of 6 and 7 July 2001. By that time the lease had been signed. The agenda for the weekend included testing the production plant with poor quality hay until the partners were comfortable with the way that it worked to make sure there were “no show stopping issues”, to document any problems with the processing equipment and to process sample products with export quality hay to give customers. The minutes also recorded that the defendants proposed to consider how they would re-engineer the processing equipment and establish processes to make production more efficient and effective. There is another note that Mr Davis was to ask Mr Draper about the use of a front-end loader.
Minutes of a meeting on 26 July 2001 record that pressure was to be applied to Mr Draper to have the pellet section made operational as soon as possible. The minutes indicate that the partners discussed the need to revisit cashflows and budgets. Many other matters were discussed, but the minutes made no reference to the hay compression plant.
Exhibit P37 is an email message dated 9 August 2001 from Mr Mark Davis to the other partners. The message contains a lengthy discussion of concerns with the hay compression plant and shows an awareness of some matters which have become the subject of complaints. They included the use of metal straps, the layout of the plant and the compression of lucerne hay. The document stated:
“If you put lucerne bales on the bale creep and sent them thru the teaser you are going to cause a huge amount of leaf loss and basically make the hay useless. This is not a problem for oaten hay as it does not have lots of small leaves ... The best solution is to just process oaten hay - HA HA! …”
The partners’ knowledge of difficulties with lucerne hay is relevant to one of the alleged misrepresentations, which I discuss below. The jocular reference to purchasing oaten hay might have been a reference to the fact that oaten hay was unavailable because of a drought.
A record of a visit to Keith on the weekend of 24 and 25 August 2001 shows that by that time the partners had considered the use of plastic instead of metal straps. The partners were also considering a re-design of the hay compression unit. At that time the defendants had not put the hay compression plant into production. The defendants considered leasing a forklift.
Credibility of Witnesses
None of the witnesses was satisfactory.
Mr Draper is getting on in years and is hearing impaired. He obviously found giving evidence an ordeal. His evidence was erroneous in many respects. For example, his evidence that the defendants leased the land for a dairy is clearly wrong. He was eager to distance himself from any suggestion that he knew that the defendants intended to operate the hay compression plant. Similarly, his claim that he never agreed to commission the plant, but only offered to demonstrate the plant, is clearly wrong.
Despite Mr Draper’s denial, I think that in January 2001 he did give Mr Davis and Mr Tumes a list of shareholdings and that subsequently he also gave Mr Davis the documents, which are, exhibits D13, page 7 and D13-8, which contain specifications of the plant, but I have found that Mr Draper did not provide those specifications to Mr Davis until May 2001. It follows that Mr Draper did represent that his business was profitable and that he did discuss the performance of the plant with the defendants. It is most improbable that the performance of the plant would have never been discussed between a potential lessor and lessee and I do not accept Mr Draper’s denial. I can understand why early discussions about the hay compression plant may have escaped his memory because Mr Davis had approached him to lease a dairy and the focus was on a much larger and more diverse business. I treat the evidence of Mr Draper with reservation.
Mr Mark Davis was an unsatisfactory witness. He began his evidence at the start of the defendants’ case, but required a break when he felt unwell. It was some time before he resumed his evidence. I do not criticise Mr Davis for being indisposed, however, during the interval the defendants were required to make further discovery. Documents which were produced demonstrated that Mr Davis had not been frank in his initial evidence about issues such as the use of plastic straps and the decision to move to Callington. Evidence such as his statement that “it was very crucial” for the defendants to get an order from the Western Australian business was an exaggeration. There was never any certainty of business from that source. Most fundamentally, while I accept that Mr Draper discussed the output of the hay processing plant with the defendants at some time, I do not accept Mr Davis’s evidence that on 18 and 20 October 2000 Mr Draper made the representations upon which the defendants’ case is based. While Mr Davis was able to recite the core figures, which are central to the alleged representations, he was not able to give evidence of the conversations which placed the figures into context. His poor recollection of other matters, such as the Callington negotiations, is to be contrasted with his claimed recollection of the conversation on the occasion of his first visit to Keith on 18 October 2000. For example, Mr Davis was asked questions about the purchase of plant from Golden Plains Fodder in about October 2002. By the time of the negotiations with Golden Plains Fodder he had more than a year's experience with the Keith plant. He was able to give evidence of the alleged misrepresentations by Mr Draper as to the capacity of the Keith plant, but, so far as the purchase of the plant from Golden Plains Fodder was concerned, Mr Davis could not recall the negotiations with the vendor. In contrast to his evidence about the Keith negotiations his answers with respect to Golden Plains culminated with the statement “I don't recall what specifics we would have talked about”. The Golden Plains negotiations are relevant to the plaintiff’s assertion that the defendants did not vacate the property because of the matters complained of, but moved to Callington to establish their own hay compression plant. The defendants did not volunteer evidence as to the Callington arrangements, which included the purchase of the plant from Golden Plains Fodder, and what evidence the defendants did provide was provided reluctantly. The answers of Mr Davis with respect to the Golden Plains negotiations stand in stark contrast to the detail of his evidence about the alleged conversations with Mr Draper about two years earlier.
When questioned, Mr Davis was unable to describe the configuration of the bales stacked in a container. The plaintiff could fit 576 bales into a container. Mr Davis’s could not explain in evidence the configuration which he adopted or why he could only fit 500 bales into a container. He gave the impression he did not understand the task and was making up the evidence as he went. The number of bales that could be stacked in a container is an important element of the counterclaim. Mr Davis’s evidence as to the daily output of the plant was inconsistent and his evidence as to breakdowns and other problems with the plant was generally vague and unconvincing.
The evidence of Mr Tumes and Mr Emmett is subject to the same criticism as the evidence of Mr Davis. In their initial evidence-in-chief they were quick to recite the core figures upon which the defendants’ claim relies, but when asked to elaborate they were not able to relate conversations which put those core figures into context.
It is clear that the defendants have collaborated in the preparation of their case. Given their joint liability that is not unnatural, but the consequence is that the evidence of each of them wass contaminated by their discussions.

Prior to the trial the defendants had not discovered records of their production at Keith. Initially, they had counterclaimed $68,750 for lost production time to fix broken plant and machinery together with loss and damage of $522,500 allegedly incurred as a result of the representations made by the plaintiff. Those claims were deleted by amendment and abandoned after the trial commenced. Whether the claims were ultimately pursued or not the pleadings had made the defendants trading at Keith material for the purpose of discovery. The activities of the business at Keith were central to the defendants’ misrepresentation claim. The defendants’ production records relating to the Keith business should have been discovered from the outset. The withholding of discoverable documents by the defendants is, by itself, a cause to doubt their veracity. Mr Emmett said he understood the obligation to provide documents relevant to the proceedings, but said he was not aware that he had to produce documents relating to the weight of compressed hay that could be fitted into a sea container. No topic could have been more relevant to the counterclaim. The defendants’ financial reports and documents relating to the establishment of the Callington business were also relevant and should have been discovered. The defendants eventually made discovery of some of those documents during the course of the trial.
In paragraph 3 of the defence, the defendants alleged that the compression plant could only compress a bale weighing 35 kilograms. The discovered documents revealed that allegation to be incorrect. Other allegations such as the allegation in paragraph 3 of the defence that the defendants could only pack an average of 19 tonnes of hay per container and not more than 20 tonnes on any occasion were also revealed by the discovered documents to be incorrect. Exhibit P22, which is a consolidation of information in the defendants’ records, shows that, of the ten containers listed, one container weighed 20.1 tonnes, one weighed 21.54 tonnes and a third weighed 20.04 tonnes. Three containers contained bales averaging 41.02, 43.08 and 40.09 kilograms.
In the defence the defendants counterclaimed damages of $522,500. In his opening, counsel advised that was an “exaggerated” figure which was no longer sought and I was told that the claim “on that score” was a little in excess of $200,000 plus interest plus costs. I was told that in addition there was a claim for the profit that would have been made at Callington with the business the defendants had at Keith. On the second day of trial, counsel announced that the claim for “lost opportunity to profit” would not be pursued.
Mr Emmett was also quick to recite the allegedly misrepresented figures (1,000 bales, 40 kilograms per bale, three to four people), but was unable to relate the conversations which had elicited those figures from Mr Draper. Later, when asked whether Mr Draper said anything about the number of bales that he was able to achieve per container. Mr Emmett said “I seem to recall it was in excess of 500 bales per container. I don’t recall the exact number that he quoted, but as he was going through the information, the details that he had fed through to Mr Davis were confirmed”. That evidence was no more than a conclusion designed to support the defendants’ case. As I have mentioned, Mr Emmett was incapable of recalling the conversations which put the figures into context.
Mr Emmett was cross-examined about the minutes of meetings of partners. He was unable to recall the answers to many of the questions put to him. For example, he could not recall an inspection of the premises on 6 July 2001 and could not recall whether the compression plant was operating prior to 1 September 2001. Mr Emmett was cross-examined about the last page of the lease agreement which contains the signature of Mr Draper and Schedule 3, which reads:
“Schedule 3
Important Notice
Exclusion of Warranty of fitness for purpose
...
The landlord does not warrant that the premises that you are about to lease will, for the duration of your lease, be structurally suitable for the type of business that you intend to carry on.”
At first Mr Emmett could not recall seeing the page and suggested that the page could have been attached to the lease after the defendants had signed. He had interpreted the provision as being adverse to the defendants’ case. In fact, the provision is not adverse to the defendants because it deals with an inconsequential subject matter, but Mr Emmett’s suggestion that the document may have been a forgery indicates an inability to concede the obvious. Mr Emmett maintained his position and when cross-examination took the matter further he suggested that he might have raised his concerns about the clause with the solicitors who prepared the lease. It is clear that he never did that. Raising the matter with solicitors is inconsistent with having no memory of the clause. His answers demonstrate a propensity to say whatever he thought suited the defendants’ cause.
I have doubts as to the provenance of the material put forward by the defendants. For example, the name, “Fodderco Australia”, appears in a feasibility study purporting to have been prepared in April 2001 (Exhibit D13, page 28), but the defendants did not adopt the name “Fodderco Australia” until much later. When cross-examined, Mr Emmett agreed that pages 28 and 29 of Exhibit D13, the proposal for finance created in April 2001, were not part of the business plan. He said the defendants’ solicitor made a mistake in putting the document together. He said the two pages “just inadvertently got caught inside of the plan”.
The evidence of Mr Emmett about the representations as to the capacity of the hay compression plant is to be contrasted with his evidence as to the cubing plant. He could not recall how many tonnes of lucerne cubes could be placed in a container. There is no logical reason why he should remember the figures which were relevant to the hay compression plant, but not the cubing plant. The inference, supported by the lack of evidence of the discussions in which the representations as to the hay compression plant figures were made by Mr Draper, is that Mr Emmett has simply recited the core figures which he knew the defendants’ case was based upon. He attempted to explain his inability to give evidence of figures on the basis that he had read back through some minutes that had indicated figures, but the minutes did not contain the figures about which he was being questioned. The minutes from which he had refreshed his memory were not identified. One cannot tell to what extent Mr Emmett’s evidence was based on a perusal of minutes rather than an independent recollection of the conversations. The following exchange in cross-examination illustrates the absence of an independent recollection of the key conversations:
"QDo you recall what Mr Draper said as to the production capabilities of the mill.
AAt this moment no, I don’t, I don’t recall.
QBut you recall, do you, what Mr Draper said about how many bales could be produced per day on average in respect of the hay processing plant.
AI don’t think I’ve actually specifically stated that the number of bales that were going to be produced on any particular day. Mr Draper at one stage - and I don’t recall whether this was on February 10 or in March or July or whatever date - he advised us of production figures, he was consistent in the figures that he told us. I don’t recall whether they occurred on that meeting on 10 February.
QDo you really recall what Mr Draper said about how much weight you could put into a bale.
ASorry.
QDo you genuinely recall - an independent recollection - of the meeting on 10 February, how much weight you could put into a hay bale.
AOnce again, Mr Draper gave us a lot of information that day, that information was then fed into the spreadsheet so that we would have an accurate model we could work to.
QI know all of that. Can you try and answer the question.
AI am. I don't recall whether Mr Draper said it was a fine day on that particular day. He gave us a lot of information. That information was documented. We wrote notes on it.
QYou've given very specific evidence about what Mr Draper said on 10 February, haven't you.
AYes, I have.
QI'm asking you whether or not you still adhere to the evidence you gave in respect of the quantities of the hay compressing plant, in light of your evidence that it was a long time ago.
AIn light of that evidence, Mr Draper gave us a lot of information, we then documented that information, I went back afterwards to look at that information and the information was consistent.”
Mr Emmett was cross-examined about where the information provided by Mr Draper found its way into the business plan, but he was unable to indicate where. Mr Emmett’s evidence of the important question of the bale weights came down to this:
"QWhat is your evidence, now, as to what Mr Draper told you as to what the bales weighed
AI think I said last time during the course of that particular meeting that there were a number of questions that were raised with Mr Draper and that Mr Davis and Mr Tumes were taking notes. I think during that time you were also asking me about specific instances and I said I didn’t recall, there was nothing that raised my interest of Mr Draper stating things which were not what our expectation was.
QSo the answer is you don’t recall, there was nothing that caught you by surprise, as it were.
AThat’s correct.
QSo in relation to 10 February you simply don’t know what Mr Draper said about the weight of each bale. Is that right, you simply don’t recall now.
AI don’t recall.”
In those circumstances I cannot have confidence in any of Mr Emmett’s evidence as to the alleged misrepresentations by Mr Draper. His initial evidence-in-chief as to the core figures can only be interpreted as a willingness to say what he knew was required to support the defendants’ case.
The evidence of each of the defendants as to the representations varied. Although minor, the variations demonstrate a lack of consistency and cast doubt on the accuracy of each defendant’s evidence.
I think there is merit in the criticisms of Mr Tumes’ spreadsheets made by plaintiff’s counsel, but I need not scrutinise the spreadsheets in detail because the defendants have not demonstrated where or how they took the allegedly misrepresented figures into account or how the misrepresented figures caused them to make errors which distorted their decision-making process.
I do not accept any of the defendants who gave evidence, as a reliable witness. Their oral evidence cannot be relied upon for the purpose of making any finding as to the precise representations made by Mr Draper, whether the representations were relied upon by the defendants, the performance of the plant during the time that the defendants operated it or the alleged difficulties they experienced with the plant.
The Defendants’ Defence and Counterclaim
The defendants claim to have rescinded the lease upon which the plaintiff’s claim relies. It is therefore appropriate to consider the defendants’ counterclaim before considering the plaintiff’s claim. The counterclaim raises a number of unrelated matters which require separate consideration. I propose to consider the different matters in the order they are raised in the defence and counterclaim.
The October 2000 Representations as to the Capacity of the Hay Processing Plant (Paragraph 2.1 of the Defence)
In his evidence, Mr Davis said that each of the alleged representations had first been made during his initial inspection of the property on 18 October 2000 and that they were subsequently confirmed in the telephone conversation on 20 October 2000.
Mr Draper denied making any of the representations upon which the defendants rely. In his evidence, Mr Draper recalled the first visit in October 2000, but did not recall a telephone call. He said there was no conversation about the capacity of the compression plant either in October or the following months. He thought that Mr Mark Davis, Mr Emmett and Mr Tumes attended at the second visit in January. He said there was no mention of the cubing mill or compression plant during the second visit and any conversation about the mill only came at a later stage when the defendants were almost ready to take over. Initially they were orientated on building a dairy. Mr Draper said there was never any discussion about his share portfolio, because that was private.
Mr Davis said that he noted the representations of Mr Draper in a book, but the book was not produced. His wife was present during the first inspection, but she did not give evidence.
In his evidence about the first meeting on 18 October 2000 Mr Davis said that he asked questions to which Mr Draper responded. Specifically he said he asked Mr Draper “what sort of weights were you getting into your containers when you were shipping the product and what was the compression force” to which Mr Draper replied “they were getting bale weight that was averaging 44 kilograms of hay in each bale”. Mixing container weights and bale weights in that way may have been the result of nervousness, but it also demonstrates a determination to recite the core figures irrespective of the question. I find it difficult to accept that on the first inspection of the property on 18 October 2000 Mr Davis would have been sufficiently savvy to enquire about the compression force. On Mr Davis’s evidence all of the information which Mr Draper provided was in response to his questions. When asked to describe the discussion as to the product that Mr Draper was making and how he achieved that product Mr Davis said “... I was asking him about the compression rams and how they worked and what sort of force they were putting onto the bale to achieve the compression that was required to get the weights in the containers” and “he told me that there were two - there were two rams there, one on each plant, they were 200 tonne capacity and that was the force that was applying to achieve a 44 kilogram bale”.
Mr Davis said that during a telephone conversation on 20 October 2000 he asked Mr Draper to confirm everything he heard at the first meeting. Mr Davis said that so far as the rams were concerned he “wanted to know that they were 200 tonne rams and he (Mr Draper) said that they were and he may be able to provide me at some stage with some information to back that up”. On 20 October 2000, Mr Davis had no reason to want to know that they were 200 tonne rams. He needed to learn much more about the hay compression process before that figure could assume any relevance. I think it is highly improbable that a conversation such as that deposed to by Mr Davis would have taken place on 20 October 2000.
The representations alleged in paragraph 2.1 of the defence relate to the performance of the hay compression plant. It is likely that the performance of the plant was discussed between the parties at some time, but it is highly unlikely that a discussion on either 18 or 20 October 2000 would have descended to the level of detail alleged. Mr Davis inspected both properties with a view to establishing a dairy. He had not seen a hay processing plant before. There was no reason for him to ask detailed questions about the performance of the hay compression plant on 18 or 20 October 2000. At that time Mr Davis did not have the background knowledge which his questions assume. Mr Draper did not know that Mr Davis had any interest in leasing a hay compression plant and he had no reason to volunteer the information. The figures, which are the subject of the alleged representations, would have been meaningless to a person who had no previous experience of exporting hay. The hay processing plant was only a small component of the extensive business which Mr Davis was being shown.
Initially the defendants contemplated a lease of the entire property at a rental of $480,000 per annum. The evidence suggests that it was not until six months after the first meeting in October 2000, when the applications for funding had been unsuccessful, that the cube mill and the hay compressing plant became the main object of the defendants proposed business.
I accept the plaintiff’s submission that the claimed ability of Mr Davis to recall the detail of conversations in October 2000 can be contrasted with his inability to recall the detail of other important aspects of the claim. It is telling that none of the spreadsheets, estimates, minutes of meetings or other documents of the defendants make reference to the allegedly misrepresented figures in a way which corroborates the defendants’ oral evidence.
More fundamentally, the alleged representations are not mutually consistent. If individual bales weighed 44 kilograms and between 570 and 600 bales could be packed into each container, the load in each container would have been 25.08 to 27.6 tonnes, not 23 tonnes. On their face the figures which the defendants claim to have relied upon were incompatible and if the defendants had given any thought to the alleged representations they should have known that the figures were inconsistent and could not have been correct.
The objective evidence, such as the correspondence between the parties, shows that the hay compression plant did not become significant in the negotiations until February 2001. Mr Davis’s three-page letter, which was written immediately after the telephone call on 20 October 2000, does not refer to the compression plant or cubing mill at all.
While it is likely that the parties did discuss the topics which are the subject of the alleged representations at some time, the evidence does not satisfy me that the plaintiff made the representations on the occasions alleged. The time when the representations were made is relevant to the question of reliance and the precise terms of the representations are relevant to the question of falsity. I cannot speculate for the purpose of finding actionable representations.
I am not satisfied that the plaintiff made any of the representations said to have been made during Mr Davis’s first inspection of the property on 18 October 2000 or alleged to have been made during the telephone call on 20 October 2000.
In view of the findings, which I make below about the falsity of the alleged representations and reliance, my inability to make precise findings as to the terms and time of the representations becomes inconsequential.
Representations as to Capacity of the Plant in mid to late January 2001 (Paragraph 2.2 of the Defence)
I am not satisfied that the evidence establishes that the plaintiff repeated the representations as to the capacity of the plant at a meeting at the plant in mid to late January 2001. As I have said, it is likely that the topics were discussed between the parties at some time, but I am unable to make precise findings. As with the October representations my inability to make precise findings becomes inconsequential because of my findings as to falsity and reliance. My inability to make findings as to whether the representations were made, is not based on an acceptance of Mr Draper’s denials that he made the representations, but my difficulty in accepting the oral evidence of the defendants.
Falsity of the Alleged Representations as to Bale Weight, Number of Bales, Container Weight
The freight cost was a set amount per container. Therefore the important figure was the total weight of the hay in each container. The number of bales and the bale weight are the components that make up the weight of the hay in the container.
The alleged representations as to the weights of bales and containers were statements of what had been achieved by Mr Draper. They were not warranties as to the future performance of the plant.

Most of the defendants’ complaints related to the ability of the plant to process oaten hay bales. The defendants processed some lucerne hay early in 2002, but it was not until September 2002 that they attempted to process oaten hay bales.
The plaintiff’s evidence is that his proficiency at compressing hay and loading the bales into containers improved with experience. The evidence indicates that the defendants also improved their performance with experience, but by the time the defendants first processed oaten hay in about September 2002 they had already decided to leave the premises at Keith and establish a plant of their own at Callington. Mr Emmett and Mr Davis gave evidence that by July or August 2002 the defendants had decided to find other premises from which to carry on their business.
There are records which show the weights of bales and containers exported by Mr Draper. Exhibit P1-117 is a shipping document dated March 1996 which shows that Mr Draper had achieved an average of 41.948 kilograms per bale for five containers which contained a total of 2,864 bales at an average of 572 bales per container. The average weight of the bales in the separate containers was 40.43 kilograms, 40.88 kilograms, 42.44 kilograms, 42.46 kilograms and 43.52 kilograms.
Exhibits P11 and P12 are records of the plaintiff’s business which had been found by the defendants after they took possession of the premises. They contain a running record of the containers shipped by the plaintiff. They confirm that the plaintiff regularly packed more than 560 bales into a container, that many containers held more than 23 tonnes of hay and that bale weight regularly averaged in excess of 40 kilograms per bale. In some containers the bales averaged more than 44 kilograms.
On the basis of the records of the plaintiff’s business I find that the alleged representations as to the bale weights, the number of bales per container and the container weights were not materially false.
There is also evidence of the container weights achieved by the defendants when they were processing oaten hay in September and October 2002. If the first two containers are omitted as being unreliable samples on the basis they were packed when the defendants were gaining experience, the last eight containers packed by the defendants contained bales averaging over 40 kilograms per bale, not 35 kilograms per bale as alleged in paragraph 3.1 of the defence. In one container, bales packed by the defendants averaged over 43 kilograms. If the defendants never packed more than 500 bales into one container, that is likely to be a consequence of their inexpertise. If they had persevered and continued with the Keith business there is no reason why the defendants would not have improved their proficiency and achieved the same number of bales per container as the plaintiff. The plaintiff established that it was physically possible to pack 576 bales into a container. 576 bales at an average weight of only 40 kilograms per bale would have resulted in a container weighing just over 23 tonnes.
Mr Draper said that Mr Davis had not employed skilled employees. It is obvious that the defendants had not achieved the same level of proficiency as Mr Draper. That is demonstrated by the defendants’ inability to stack more bales into each container. If the defendants were unable to achieve the same performance figures as Mr Draper had, that is likely to be a consequence of their inexpertise.
For present purposes the relevant statistics are those achieved by the plaintiff. I find that the alleged representations as to the weight of hay that could be packed into a container, if made, were not false in any material way.
The Number of Employees Required (Paragraph 2.1(iv) of the Defence)
I accept the evidence of Mr Draper and I find that he ran the plant with three to four people. There is no evidence that Mr Draper needed more than four people to run the plant. A video film shows Mr Draper operating the plant with four people.
There is no clear evidence as to the number of people that the defendants in fact utilised or the way in which they were deployed, but that is inconsequential because the representation was concerned with the number of employees engaged by the plaintiff.
Initially, the defendants’ financial reports were not discovered. When they were produced Mr Emmett was cross-examined about the number of employees. The reports disclose minimal payments by way of wages and that there were only two employees engaged in the business for any length of time. The records do not assist the defendants’ case as to the number of employees required to operate the hay compression plant.
I find that the evidence does not show any representation as to the number of workers required to operate the plant to have been false.
The Use of Metal Straps (Paragraph 2.1(v) of the Defence)
It is apparent that the defendants contemplated the use of an alternative method of packing from the outset. Why they did that is not clear. There is no evidence to support the defendants’ allegation that Mr Draper knew that two metal straps around a compressed bale were no longer acceptable or that he made representations which he knew to be false.
In September 2001 the defendants purchased a machine to apply plastic straps. The allegation in paragraph 3.5 of the defence that plastic straps could not be used is not correct. In fact, the defendants did use plastic straps. The defendants’ purchase and use of a plastic-strapping machine was only revealed during the trial when Mr Davis resumed evidence after further discovery of documents lead to the production of the invoice for its purchase. The invoice and the evidence that Mr Davis gave after production of the invoice demonstrated his earlier evidence to have been less than candid.
I find that it has not been proved that the alleged representation was false.
The Daily Output (Paragraph 2.1(vii) of the Defence)
The alleged representations as to the plaintiff’s daily production relate to a past fact, that is the output achieved by Mr Draper. There is no evidence which shows that Mr Draper did not produce 1,000 bales per day. A video recording made before the dispute arose confirms that an output of 1,000 bales per day was possible. I accept the evidence of Mr Draper that he did produce 1,000 bales a day. Also, I accept the plaintiff’s submission that because it was a representation as to a past matter, evidence as to the defendants’ production is not relevant. I reject the opinion evidence of Mr Ridge on that topic which was based upon inaccurate assumptions which were not established.
Additionally, the evidence as to the defendants’ production was unpersuasive and confused. The defendants’ evidence never distinguished between production with one press operating and production with both presses operating. The plea in paragraph 3.6 of the defence was:
“The defendants, engaging five (5) workers, compressed a maximum of 550 bales in an eight (8) hour shift. The average achieved by the defendants using four (4) workers was between 350 and 400 bales per eight (8) hour day.”
The evidence did not establish the plea. How a fifth worker would have made a difference is unexplained. No record of the defendants’ actual production was produced. The evidence of Mr Davis on the topic was vague. Initially he said “it varied dramatically from 150 to 300 bales a day”. Subsequently, he said “later in the piece when we were doing the oaten hay I believe one 12-hour day with extra staff we achieved ... somewhere around 400, maybe it was 450, I do not recall exactly, bales”. The letter of 12 November 2002 from the defendants’ solicitor complained that the defendants were unable to produce 500 bales in a shift with production generally around 400 to 450. Paragraph 5.6 of the defence refers to a maximum of 550 bales. Mr Davis was not a satisfactory witness and I am not prepared to rely upon his evidence as to the defendants’ daily production.
As I have mentioned, the relevant statistic for present purposes, is the daily production of the plaintiff. I find that there was no false representation by Mr Draper as to the daily output of the hay compression plant.
Ram Compression Force (Paragraph 2.1(vii) of the Defence)
The defendants complain that Mr Draper incorrectly represented that the ram of the hay compression plant had a compression force of 200 tonnes.
I accept the opinion of Mr Ridge that the compression force generated in the main ram could be up to a maximum of 124 tonnes. I do not accept his opinion that the main ram has a compression force of less than 112 tonnes, because that opinion is derived from an incorrect assumption as to the weight of the bales produced by the presses.
I am satisfied that by handing Mr Davis the document which is Exhibit D13-8, Mr Draper overstated and misrepresented the compression force of the rams: however by itself, that misrepresentation does not lead anywhere. I am not satisfied that the defendants relied upon the representation.
The force generated by the rams was sufficient for Mr Draper to carry on his business. There is no reason why the compression force specification would have had any significance to the defendants which caused them to rely upon it. A stated compression force of 200 tonnes by itself said nothing about the weight of the compressed bales that could be produced.
I do not accept Mr Davis’s uncorroborated evidence that in early 2001 he had been told that another hay compression plant had rams with a force of 200 tonnes and he was therefore keen to ascertain whether Mr Draper’s plant had 200 tonne rams. There is no evidence that at the time of the alleged representation by Mr Draper, Mr Davis or any of the defendants had knowledge of the specifications of the bales produced by other businesses.
It appears from Mr Ridge’s report that Yorke Hay Wallaroo, which the evidence suggests was one business the defendants may have had in mind, used rams with a force of only 110 tonnes, not 200 tonnes. Mr Ridge’s report suggests that the rams used by Yorke Hay Wallaroo were not dissimilar from the plaintiff’s. If the defendants’ objective was to get rams with a compression force similar to Yorke Hay Wallaroo they achieved that.
After cross-examination the evidence of Mr Davis came down to this:
“HIS HONOUR
QWhen did you ask Mr Draper if he could back-up the claim that Chris's had 200 tonnes of power.
ASomewhere - the time frame would be before we went into the lease, but I do not recall the date. It may have been after one of our visits, when he was telling me the capacity of his presses. I would have asked him whether he had any documentation on them and he come back, maybe not the next time I visited, but maybe the time after I was on a site visit, and he just came down
QWhat caused you to ask him that question.
AWell, I just, John Tumes had previously seen some paper processing equipment and he had heard that they were using 200/250 tonne rams. I wanted to check they were a similar capacity that everyone else was using.
XXN
QYour evidence is that these figures had absolutely no meaning to you, this figure of 200 had absolutely no meaning to you.
AIn terms of?
QThat's your evidence, isn't it.
AThe 200 tonne of compression capacity would not have meant anything to me if there wasn't an industry standard of what other people were using.
QIt meant nothing to you, and as a result of that, the suggestion is that the reason you asked for these documents is a nonsense, isn't it.
ANo, that's not correct. I was trying to prove that Mr Draper was saying he had some back-up for it, and he produced that document quite willingly with the other document at the front. Document 7.
HIS HONOUR
QYou referred to an industry standard.
ASorry, when I say that, I was aware that other compression plants were using compression rams in the 200 to 250 range. I wanted to check when he said they were 200, they actually - that we were getting something similar to what other people were using. We found out later on from the expert's opinions they were not 200 tonnes. We did not know that at the time.
QWhich were the other plants using 200/250.
AGolden Plains Fodder were apparently using a similar size ram, and also there is a company called York, which I don't believe is operating any more, but that was using a 200 tonne ram from what I knew back then. So the figure 200 did not mean much to me, but it meant that we were getting - we were getting 50 or a hundred. It was similar to what other people were successfully using.
....
QYou see, your evidence about Mr Tumes telling that other presses were 200 to 250 ram -
ANo, 200 to 250 metric tonne.
QTonnes, and that that was the reason that you requested this document from Mr Draper is simply wrong, isn't it.
ANo, it's not wrong. It is not wrong at all.
QThere's no so-called industry standard whereby those compressors are between 200 and 250 tonne, is there.
AThere may not be a written industry standard, but if you knock on some hay processors' a couple of doors down, they will tell you they have 200 rams.
HIS HONOUR
QPara.1 in the particulars, for example, the press situated at York Hay, Wallaroo, which has a main cylinder force of 110 tonnes.
AYes.
QThat statement contradicts what you said earlier.
AYes. Well, look, he is obviously an expert; I'm not. I had heard from someone else they had a 200 tonne ram. Whether they do or not, I don't know. That was the information I was given through John a long time ago. I have never been there. I haven't seen their plant. I don't know.”
I think it is unlikely that Mr Davis had been told that the press at Yorke Hay Wallaroo was a 200 tonne press, because on the evidence of Mr Ridge, that would not have been correct. The defendants had no reason to require a 200 tonne press simply for the sake of having a 200 tonne press.
The actual performance of the plaintiff’s press was of more importance than a statistic. I have already found that there was no material misrepresentation as to the performance of the press. If anything, the defendants were more likely to be influenced by the fact that the press was similar to Yorke Hay Wallaroo than by a figure, which by itself meant nothing.
I find that Mr Draper did not on 18 October 2000, 20 October 2000 or in January 2001 represent that the rams had a compression force of 200 tonnes. In making that finding I reject the evidence of Mr Davis.
It was not until February 2001 that the hay compression plant assumed any importance in the negotiations. I have found that the sheet containing the specifications (Exhibit D13-8) was not given to Mr Davis in January 2001, as initially claimed by him, but was provided shortly prior to 17 May 2001, by which time the defendants had already decided to proceed with the lease. The evidence of Mr Davis, which is set out above, does not establish that the plaintiff handed Exhibit D13-8 to him in January 2001. The minutes of the defendants’ meetings, which refer to the receipt of the specifications of the plant, do not indicate that the defendants relied upon the specifications provided by Mr Draper, nor do they indicate any requirement for a 200 tonne press. Mr Davis simply passed the sheets to Mr Emmett who gave no evidence on the topic.
I find that by handing Mr Davis Exhibit D13-8 shortly prior to 17 May 2001 the plaintiff did represent that the rams had a compression force of 200 tonnes, but that the evidence does not establish that the defendants signed the lease in reliance of any representation that the rams had a compression force of 200 tonnes.
Representations in Mid to Late January 2001 as to Share Portfolio and Profitability (Paragraph 2.2(a) and (b) of the Defence)
I find that in January 2001 Mr Draper did give the defendant a list of shares which shows that he and his wife were relatively wealthy persons. However, the evidence does not establish that Mr Draper represented that his business had been so profitable that he was able to recover establishment costs of $1.5 million from the profits of the hay plant over three years. The alleged representation does not identify what business Mr Draper referred to. His business at Mount Monster extended far beyond the cubing plant and the hay compression plant.
At most, the alleged representation might have caused the defendants to believe that the plaintiff had a profitable business. There is no evidence that representation were untrue. There is no evidence of Mr Draper’s income during the relevant years. By itself the alleged representation leads nowhere.
Representation that the Plant Compressed Oaten Hay as well as Lucerne Hay (Paragraph 2.1(viii) of the Defence)
Mr Tumes gave evidence that Mr Draper told both him and Mr Davis that the plant could not compress lucerne hay, but it was Mr Davis who disagreed. I accept that evidence of Mr Tumes. Also Mr Davis’s email of 9 August 2001, to which I have already referred, reveals Mr Davis’s awareness of the problems associated with compressing lucerne hay before the defendants accepted the plant in September 2001.
I find that Mr Draper never made the alleged representation as to the ability of the plant to compress lucerne hay and also find that there was no reliance upon such a representation by the defendants.
Representations as to Samples and Price of Lucerne (Paragraph 2.2(c) of the Defence)
Paragraph 2.2(c) combines two representations alleged to have been made at the meeting in January 2001. First, it is alleged that at the meeting Mr Draper provided samples of cubes which he represented to be of the quality that he made and exported. Secondly, it is alleged that he represented that he was achieving more than double the FOB price of lucerne delivered into Adelaide with hay of the sample given to the defendants at the meeting. The defendants complain that samples provided by Mr Draper were rejected by the industry because they were brown hay and not green hay.
Mr Draper denies that at the meeting in January 2001 he was asked by Mr Davis to provide him with samples of the cubes that he had exported. He said that if he had provided a cube it would have been three or four years old. He said there were old cubes laying around and he could have picked one up and said “this is the cube, this is the size cube that comes out of the compressor”. He said there were cubes lying around the shed, but you could not take them as the class of cube that the machine would produce. In cross-examination it was put to Mr Draper that a request for the cubes was made in January and cubes were sent to Mr Davis in the post. Mr Draper said that he sent cubes to Mr Davis in the post after the demonstration of the plant. The demonstration took place in about August, after the lease had been signed.
In his evidence Mr Davis said that the sample cubes were mailed to him in about February or March 2001. He said he had spoken to Mr Draper on the phone and requested that he send some samples of the cubes that he had been exporting. That evidence differs from the allegation in paragraph 2.2(c) of the defence that the samples were provided at a meeting in mid to late January 2001.
On my findings, in January 2001, the defendants had not yet turned their attention to the hay processing plant.
Mr Davis said that he rang Mr Draper a few days later to thank him and to confirm with him that they were the quality and colour that he had been exporting to his clients overseas and Mr Draper said they were the product he had been sending. Some of the samples were forwarded to an agent in New South Wales. Mr Davis said that after the defendants had signed the lease the agent contacted him as a result of which he began to doubt Mr Draper’s assertion about the cubes.

How another party, which was interested in leasing the plant itself, could be transformed into a customer of the defendants which might produce an almost immediate cash flow was never made clear. Mr Emmett gave evidence that there was never any guarantee of business from the Western Australian business.
Mr Draper denied that he ever agreed to provide the contact details of the Western Australian business. However, the reference to the Western Australian processing group in the letter of 30 April 2001 and Mr Draper’s acceptance of the “conditions” set out in that letter make it clear that Mr Draper’s denial was wrong. Mr Draper’s denial demonstrates a stubborn refusal on his part to acknowledge the obvious.
It is important to consider paragraph 2.5 of the defence where it is alleged that the Western Australian business wished to lease the hay exporting business and other land, and that the Western Australian business could not satisfy its existing orders from its Western Australian plant. Those representations do not create any reasonable expectation of work for the defendants. However, I think that the letter of 30 April 2001 establishes that the defendants did want to know the identity of the Western Australian business and the evidence establishes that the plaintiff said he would disclose the identity. The question is where does this evidence lead.
The alleged “representation” was a representation as to a future matter. It was not the sort of representation that could be classified as true or false at the time when it was made. The representation was promissory in nature and is only enforceable if it assumed contractual significance. I find that the matters alleged in paragraphs 2.5 and 3 of the defence do not establish a claim based on misrepresentation.
The pleading in paragraph 4 (“pursuant to the representation made in paragraph 2.4 hereof, the plaintiff refused to give the defendants details of the Western Australian business...”) confuses different concepts. A representation per se does not give rise to a breach of contract. The representation alleged in paragraph 2.4 is only of consequence if it has contractual significance.
The pleading in paragraph 5B of the defence (“... it was an oral condition of the said Lease, evidenced in writing in the said letter of 30 April 2001 (sic), that, on paying the first rental instalment at the signing thereof, the Plaintiff would provide the Defendants with the contact details...”) cannot, on its face, be correct. I find that the promise to provide the details of the Western Australian business was not a condition of the lease. The lease must be interpreted by reference to its terms. There is no reference to the Western Australian business in the lease.
However, I do not think that the discussions between the parties with respect to the Western Australian business should be disregarded. The effect of the discussions was that the defendants said they would sign the lease and pay the first rental instalment if, amongst other things, the plaintiff provided the name of the Western Australian business.
The defendants’ case is that the representation induced them to sign the lease, but the evidence is that the defendants had already decided to enter into the lease when they heard about the Western Australian business. I find that the defendants regarded the Western Australian business as an added benefit, but not an inducement to sign the lease.
Although it has not been pleaded as such I think that the evidence establishes that the representation by Mr Draper that he would provide details of the Western Australian business became a term of the collateral contract between the parties. Alternatively, I find that clause 2(d) of the lease required the plaintiff to disclose details of the Western Australian business.
The defendants paid the rent and signed the lease. Mr Draper never provided details of the Western Australian business. The evidence of Mr Draper was that the Western Australian business never rang him back and he was never in a position to pass on the details because he never knew them himself. Whether that is correct or not does not matter. Mr Draper did not do what he had promised to do. What then was the consequence of Mr Draper’s failure to provide the contact details of the Western Australian business? The defendants were deprived of the opportunity to contact and negotiate with the Western Australian business.
Mr Draper told the defendants that the Western Australian business would lease the plant themselves for the purpose of processing hay which it intended to grow on 600 acres of Mr Draper’s land. There is no evidence that the Western Australian business was aware of the existence of the defendants or that they had contemplated engaging the defendants as a contractor. It is not known whether the Western Australian business would have grown hay on the 600 acres if they were not able to operate the compression plant themselves. Nor is it known whether they would have transported hay from Western Australia to Keith to be processed by the defendants. The fact that the Western Australian business never leased the 600 acres of land themselves means that the defendants never have had any prospect of work compressing hay grown by the Western Australian business on Mr Draper’s land. Accordingly, it was only if the Western Australian business wanted to transport hay from Western Australia to Keith that the defendants would have had the prospect of a contract. There is no evidence as to whether that would have happened. There is no evidence as to whether the transport costs would have made it economically viable for hay to be transported from Western Australia to South Australia for compressing.
The evidence is so confused that I cannot make any finding as to the work that may have eventuated from the Western Australian business. Was it an opportunity to process hay which the Western Australian business proposed to grow itself on land leased from Mr Draper at Keith, was it an opportunity to compress hay sourced from South Australia, was it an opportunity to compress excess hay which the Western Australian business could not manage in Western Australia or was it something else? There was no discussion about the likely arrangement between the defendants and the Western Australian business and there is no reason to believe that the Western Australian business was aware of the possibility that the defendants might become the lessee of the hay compression plant. I am unable to make any finding as to the nature of the Western Australian prospect.
The only thing that is clear is that Mr Draper did not provide the contact details of the Western Australian business. I have found that he had contracted to do that. Mr Draper is in breach of the contract. In addition to the collateral contract there is the general obligation in clause 2(d) of the lease to refer clients to the defendants.
I specifically reject the evidence of Mr Davis that the prospect of work from the Western Australian source was important. It would have been naïve and unreasonable for the defendants to place any reliance upon a vague prospect of unidentified work from an undisclosed source in deciding to lease the plant.
I find that Mr Draper’s breach of the collateral agreement by failing to disclose the identity of the Western Australian business does not give rise to a right to terminate the collateral contract or a right of rescission of the lease. If I am wrong and the defendants did have a right to terminate the collateral contract or a right to rescind the lease for nondisclosure of the identity of the Western Australian business, the defendants waived such rights by remaining in possession and enjoying the benefit of the lease from 10 June 2001 when the lease was signed until October 2002 when they vacated the premises.
I find that Mr Draper’s failure to provide the details of the Western Australian business gives rise to nominal damages for loss of a chance. On analysis of the evidence it seems unlikely that any business would have eventuated from the Western Australian source.
Remaining Claims of the Defendants
As a consequence of the preceding findings, I reject the claim in paragraph 5D that the plaintiff failed to observe conditions or was in fundamental breach of the lease. I reject the defendants’ claim that they were not obliged to perform any of the covenants on their part in the lease. I reject the claim in paragraph 5F of the defence that the defendants were lawfully entitled to terminate the lease and that by their conduct in abandoning the property in about October 2002 did lawfully terminate the lease. I reject the assertion in paragraph 6 of the defence that as a result of misrepresentations the defendants were entitled to rescind the lease and by their conduct did rescind the lease ab initio so that they became entitled to repayment of rent.
I have found that the evidence does not establish the alleged representations as to the capacity of the plant, and that with inconsequential exceptions the alleged representations as to the capacity of the plant were not false. I have also found that the evidence does not establish that the defendants relied upon the alleged representations as to the capacity of the plant when they entered into the lease.
So far as the alleged representations as to the condition of the plant are concerned, I have found the representations as to future matters are not actionable per se, but that there was a collateral agreement whereby Mr Draper agreed to commission the plant if the defendants signed the lease and paid money. I have found that Mr Draper did commission the plant, but that in the ways which I have mentioned, the commissioning of the plant was defective and Mr Draper was in breach of the collateral agreement. The breaches of the collateral agreement do not lead to an entitlement to rescind the lease, but damages for breach of the collateral agreement.
Having regard to my finding that the plaintiff is liable to pay damages for breach of the collateral agreement, the claim based on the Fair Trading Act 1987 is otiose. To the extent that the claim based on the Fair Trading Act 1987 goes further than the entitlement to damages for breach of the collateral agreement, I dismiss the Fair Trading Act claim in paragraph 6A of the defence.
The defendants have not made out any basis for rescission of the lease. I find that they were in breach of the lease. Their act of refusing to pay rent and vacating the property was a repudiation of the lease, which the plaintiff accepted.
Affirmation
The defendants processed lucerne cubes in January and February 2002. They processed bales of lucerne hay in February 2002. By the end of February 2002 the defendants had been in possession of the plant for over eight months and I find that if there were any problems with the plant they should have been aware of them by then. There is evidence that at the time the defendants sought to vacate the Keith premises they had put in place plans to establish their own hay processing plant at Callington. It was more advantageous economically for the defendants to own and operate their own plant rather than pay rent to the plaintiff. The defendants had been in possession of the Keith premises for over sixteen months. If they ever had an entitlement to rescind the lease, which is contrary to my findings, the defendants affirmed the lease by remaining in possession and using the plant from the end of February 2002 up until October 2002. On their case, the defendants were aware of facts which would have justified rescission no later than when they processed lucerne hay in about February 2002.
Counterclaim for Damages
The defendants claim expenses in connection with remedying plant and equipment totalling $4,740. The claim is particularised in Exhibit D35. Some of the payments were made by Fodderco, which is a different entity from the defendants, but I overlook that technicality. Mr Davis gave evidence in support of the expenses.
The first item chronologically was a payment on 14 September 2001 of $363.00 to Modern Weighbridge. A second payment of $654.50 was made to Modern Weighbridge on 14 October 2002. On the basis of the evidence of Mr Davis that the second payment was connected with the initial problem, I find that both amounts, that is a total of $1,017.50, relate to the commissioning of the weighbridge, which was an obligation of Mr Draper pursuant to the collateral agreement.
The defendants claim six payments said to have been made to “Sellars”. They are $1.87, $42.17, $81.60, $140.53, $17.60 and $84.70. The payments were made on various dates between March and October 2002. Mr Davis said that the payments may be for chain links and bolts, but the evidence does not establish what the payments relate to. In particular, his evidence did not establish that the payments were made as a consequence of the failure of Mr Draper to commission the plant. All of the payments to “Sellars” were well after the defendants took possession of the plant. I disallow the claim.
The defendants made a payment of $71.61 on 18 September 2002 to Vermeeren Brothers, an engineering firm at Keith. Mr Davis could not recall what the expense related to. He said “I don’t recall exactly, but there’s a fair chance it was for some cross members, some metal cross members to go onto the hay creep that leads into the tub grinder”. The evidence does not establish that the payment was required as a consequence of Mr Draper’s failure to commission the plant. Mr Davis said other payments to Vermeeren Brothers were for repair parts to the plant and that a large payment of $2,579.10 on 21 April 2002 was to fix the hay creep that leads into the tub grinder. The first payment to Vermeeren was $291.50 on 10 December 2001. The evidence does not establish that any payment to Vermeeren was required to commission the plant.
A payment to Mr Harvey in January 2002 related to a repair job on a rubber conveyor belt. Mr Davis said that a payment to Wise Machinery on 15 February 2002 related to baler parts. He said they had “several problems with the baler, with broken parts, worn out parts, and wearing”. All of those expenses related to running repairs rather than Mr Draper’s obligation to commission the plant for use. The payments were made after the defendants had been operating the plant for some time. I disallow the claims.
Mr Davis said that he, his father and a neighbouring farmer carried out the labour necessary to effect repairs. There was no evidence as to how many hours were spent.
Mr Davis complained of lost production as a consequence of a problem with the clutch on the cubing machine. When he complained, Mr Draper told Mr Davis that he did not know what he was doing. Mr Davis fixed the problem himself after consulting the manual. The evidence does not establish any basis for holding Mr Draper responsible for that problem.
Mr Davis also complained to Mr Draper about a problem with the hay creep. Again, Mr Draper blamed Mr Davis and called him “an incompetent operator”.
The defendants’ case barely touched upon the economic consequences of the deficiencies in Mr Draper’s commissioning of the plant. The defendants’ case was directed at obtaining an order for rescission of the lease rather than damages. I have found that in some respects the plaintiff was in breach of a contractual obligation to commission the plant. The plaintiff is liable for the damages which flow from those breaches. The evidence does not permit an accurate assessment of the defendants’ damages. I must do the best I can. In considering damages I take into account the fact that the annual rent of the premises can be broken down to a figure of about $410 per day. That is what it cost the defendants to have the use of the plant. Because the plant was not in full time production a lost day did not necessarily result in lost production or lost sales, but the defendants were required to spend time remedying the problems. Between themselves the defendants had agreed on an hourly rate of $20 to $25 for their labour.
Doing the best that I can with the limited evidence that is available I make the following allowances in respect of the deficiencies in the plaintiff’s commissioning of the plant.

·     Weighbridge - payments to Modern Weighbridge $1,017.50

·     Electric motor that drove quarry belt from baler 62.00

·     Cost of welder to fix metal strips to conveyor into compression chamber - estimate
200.00

·     Lump sum for general damages in respect of deficiencies in commissioning, weighbridge, hay creep, hydraulic pump, solenoids on cubing plant, polarity of teaser, switches on main compression ram and hose on compression ram, for inconvenience, lost production, lost time, unavailability of gantry and increased transport costs, two trips to Adelaide and loss of opportunity to pursue Western Australian business
15,000.00

  TOTAL

$16,279.50

The Lease - the Plaintiff’s Claim

The parties accept that the lease was a binding agreement. The defendants paid the rent for the first year only and were in default. The plaintiff rejected their request for an extension of time.
On 16 October 2002, Mr Emmett wrote to the plaintiff and requested that the plaintiff agree to a mutual termination of the lease as from 25 October 2002. The plaintiff did not agree to the request. The defendants now allege that they were entitled to rescind the lease and that they rescinded the lease ab initio by their conduct in abandoning the property in about October 2002.
On 12 November 2002, the defendants’ solicitors wrote to the plaintiff’s solicitors referring to the alleged misrepresentations which are the subject of the counterclaim. They advised that their clients had ceased operating the business and offered to meet to resolve outstanding issues.
On 3 December 2002, the plaintiff’s solicitors responded in writing:
“Your clients do not dispute that they are in default of the lease and we assume that your clients accept that our client is entitled to re-enter the premises. Please confirm that:
·your clients surrender possession of the property to our client; and
·your clients will execute a surrender of lease;
on the basis that all of the parties reserve their rights in relation to the lease and the matters raised in your letter of 12 November 2002.”
I should not speculate as to what the rights of the respective parties may have been if there had been a surrender of the lease by express agreement. The plaintiff’s solicitors responded to the allegations that had been made by the defendants. The letter indicates that the plaintiff had not re-entered the property at that time.
On 5 March 2003, the defendants’ solicitors replied to the letter of 3 December 2002 asserting that their clients’ failure to pay rent was justified bearing in mind the misrepresentations. They confirmed that the defendants had yielded up possession of the site. There was no surrender by agreement as had been proposed by the plaintiff’s solicitors. In that letter, the defendants did not assert that they had rescinded the lease, or had a right to rescind. The assertion that the lease had been rescinded came later.
On the findings, which I have made, the defendants were not entitled to rescind and they were required to pay the rent under the lease. I find that the refusal to pay rent was a breach of the terms of the lease and the vacation of the premises amounted to a repudiation of the lease by the defendants. I find that the plaintiff was entitled to relief under clause 3(a) of the lease and accept the defendants’ repudiation and terminate the lease, which he did by re-entering possession.. On termination of the lease by the plaintiff the defendants’ obligation to pay rent came to an end. The plaintiff is entitled to the unpaid rent as at the date of the repudiation by the defendants together with damages for the loss of the lease. Shevill v Builders Licensing Board[9]; Wood Factory Pty Ltd v Kricitos[10]; Progressive Mailing House Pty Ltd v Tabali[11].
[9] (1982) 149 CLR 620
[10] (1985) 2 NSWLR 105
[11] (1995) 57 ALR 609

The damages are to be assessed in accordance with the ordinary principles of contract. In Progressive Mailing House Deane J said at paragraph 55 that a landlord is entitled to terminate the lease and in accordance with ordinary contractual principles sue the tenant for damages for loss of the benefit of the tenants covenant to pay future rent and outgoings. The landlord has a duty to mitigate damages, but in this case the defendants do not allege a failure to mitigate. Carter & Harland, “Contract Law in Australia”, 4^th edition, say at para 2135 that there is no positive duty to take steps to minimise loss, but there is a duty not to act unreasonably. If the duty to mitigate is not discharged the breach is reflected in a reduction of the plaintiff’s award. Whether the plaintiff has acted reasonably or unreasonably must depend on the circumstances of the case. The defendants bear the onus of establishing a failure to mitigate. The defendants do not argue that the plaintiff should be criticised for his failure to re-let. The equipment was unique and was located in a relatively isolated area. It had been unused for several years before the defendants entered into the lease and would only have been of interest to a person who wished to conduct a very specialised business.
Mr Draper was asked during examination-in-chief what use had the compression plant and mill been put to since mid-March 2003. He said: “It’s in limbo at the moment. We’re using it as a machinery shed”. Presumably the hay compression plant and cube mill have remained unused.
The plaintiff’s initial calculation of loss ignored the fact that the plaintiff had occupied and used the shed himself. The defendants’ case did not address the question of the plaintiff’s damages. I therefore invited counsel to make further submissions on this topic.
As I have mentioned, the plaintiff is entitled to damages for loss of the lease. What is the effect of the plaintiff’s own use of the shed upon his entitlement to damages? If the plaintiff had decided to occupy the premises himself and resurrect his hay processing business that may have been a complete answer to his claim for damages, but what is the consequence of the plaintiff taking possession and putting the premises to some lesser use?
I accept the statement in Carter & Harland above that a plaintiff has a duty not to act unreasonably. Given the unusual nature of the premises, and the fact that the defendants have not raised the failure to mitigate, I do not think the plaintiff’s damages should be reduced because of his failure to find another lessee. However, I am troubled by the fact that the plaintiff has had the use of the premises himself, albeit something less than the full use of the premises. The plaintiff’s own use of the premises must have the practical effect of reducing the amount of his loss, but there is no evidence of the rental value of the shed alone without the use of the cube mill and the compression plant.
I find that the value of the plaintiff’s use of the premises as a machinery shed is a matter which should be taken into account. See British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Company of London Ltd[12] where Viscount Haldane LC said at page 689:
“The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second, which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps. In the words of James L.J. in Dunkirk Colliery Co. v. Lever (1878) 9 Ch. D. 20, at p. 25, ‘The person who has broken the contract is not to be exposed to additional cost by reason of the plaintiffs not doing what they ought to have done as reasonable men, and the plaintiffs not being under any obligation to do anything otherwise than in the ordinary course of business.’
As James L.J. indicates, this second principle does not impose on the plaintiff an obligation to take any step which a reasonable and prudent man would not ordinarily take in the course of his business. But when in the course of his business he has taken action arising out of the transaction, which action has diminished his loss, the effect in actual diminution of the loss he has suffered may be taken into account even though there was no duty on him to act.”
See also Nadreph Ltd v Willmett & Co[13].
[12] [1912] AC 678
[13] [1978] 1 All.ER 746
The onus of proving the extent of his loss or damages rests with the plaintiff. Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd[14]. If the plaintiff’s loss is something less than the full value of the lease, because the plaintiff has limited use of the property himself, the onus of proving the quantum of the loss must rest with the plaintiff. The practical consequence of the plaintiff’s use of the shed is that the plaintiff‘s loss, being the difference between the full loss of the lease and Mr Draper’s actual loss has not been quantified, because there is no evidence of the value of the plaintiff’s use of the shed.
[14] (1938) 61 CLR 286
Difficulty in assessing damages should not be a bar to recovery. Fink v Fink[15]. Carter & Harland say at para 2117:
“Where damages are difficult to assess because the plaintiff has produced evidence which, while establishing some loss or damage, does not permit the court to make as reliable assessment as should have been possible, he cannot complain if the court’s award is not as high as it would have been had reliable information been produced. Aerial Advertising Co v Batchelors Peas Ltd (Manchester) (1938) 2 All ER 788.”
[15] (1946) 74 CLR 127 at 143
After taking all these considerations into account, and without attempting to be precise, the best I can do is to assume that the use of the shed alone is equal to one-fifth of the combined use of the shed, the cubing machine and the hay compression plant. An alternative would be to regard the plaintiff’s own use of the machinery shed as either full compensation for his loss, or as a waiver of his entitlement to damages, but I do not think that would be realistic or achieve justice between the parties. Another alternative would be to ignore the plaintiff’s use of the shed as inconsequential, but that would be unfair to the defendants. In ascribing one figure of one-fifth of the rental for the entire property to the plaintiff’s use as a storage shed, I have arrived at an apportionment which is likely to be more favourable to the defendants than the plaintiff. Accordingly, I have decided that the damages for loss of the lease should be reduced to four-fifths of the rental that would have been payable.
I accept the plaintiff’s calculation of the claim. The defendants did not dispute the calculation. The damages are calculated by reference to the rent that would have been payable. The lease provided that the rental was to increase by 5% in each of the second and subsequent years.
I assess the plaintiff’s claim as follows:

2002 - rental instalments due 10/05/02 and 01/09/02
$157,500.00

2003 - damages 4/5 of 165,375.00 132,300.00

2004 - damages 4/5 of 173,643.00 138,914.00

2005 - 1^st instalment due 10/05/05 - damages 4/5 of
91,162.97

72,930.00

Present value of instalment due on 01/09/05 - damages 4/5 of
89,797.60

71,838.00

TOTAL

$573,482.00

The plaintiff claims interest. Clause 3(c) provides that interest is payable at 12% per annum. I find that the plaintiff is entitled to interest on the unpaid rent due in May and September 2002 at 12% per annum. I allow $55,949.00 calculated to 29 June 2005.
I allow interest on the damages in respect of the loss of the lease at the rate of 6% per annum. I allow $24,051.00 calculated to 29 June 2005 as follows:

Date interest and obligation commenced

Amount due

No of days outstanding

Interest

17/05/03 $82,687.50 772 $10,493.38

07/09/03 $82,687.50 659 $8,957.43

17/05/04 $86,821.87 407 $5,808.74

07/09/04 $86,821.87 294 $4,195.99

17/05/05 $91,162.97 41 $614.41

TOTAL

$30,069.95

I have reduced the amount of $30,069.95 by one-fifth to $24,051.00 to take into account the plaintiff’s own use.
Orders
On the plaintiff’s claim there will be judgment for the plaintiff in the sum of $573,482.00.
I fix interest on the plaintiff’s claim to 29 June 2005 at $80,000.00.
On the defendants’ counterclaim, there will be judgment for the defendants in the sum of $16,279.50.
I will hear counsel as to interest on the defendants’ counterclaim costs and any other ancillary matters.

· Weighbridge - payments to Modern Weighbridge	$1,017.50
· Electric motor that drove quarry belt from baler	62.00
· Cost of welder to fix metal strips to conveyor into compression chamber - estimate	200.00
· Lump sum for general damages in respect of deficiencies in commissioning, weighbridge, hay creep, hydraulic pump, solenoids on cubing plant, polarity of teaser, switches on main compression ram and hose on compression ram, for inconvenience, lost production, lost time, unavailability of gantry and increased transport costs, two trips to Adelaide and loss of opportunity to pursue Western Australian business	15,000.00
TOTAL	$16,279.50

2002 - rental instalments due 10/05/02 and 01/09/02	$157,500.00
2003 - damages 4/5 of	165,375.00	132,300.00
2004 - damages 4/5 of	173,643.00	138,914.00
2005 - 1^st instalment due 10/05/05 - damages 4/5 of	91,162.97	72,930.00
Present value of instalment due on 01/09/05 - damages 4/5 of	89,797.60	71,838.00
TOTAL	$573,482.00

Date interest and obligation commenced	Amount due	No of days outstanding	Interest
17/05/03	$82,687.50	772	$10,493.38
07/09/03	$82,687.50	659	$8,957.43
17/05/04	$86,821.87	407	$5,808.74
07/09/04	$86,821.87	294	$4,195.99
17/05/05	$91,162.97	41	$614.41
TOTAL	$30,069.95