Eastcott v The Seedling Factory Pty Ltd - [2009] WADC 44

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: EASTCOTT & ANOR -v- THE SEEDLING FACTORY PTY LTD [2009] WADC 44

CORAM: STAVRIANOU DCJ

HEARD: 11-12 SEPTEMBER 2008, 13 NOVEMBER 2008, 10 MARCH 2009 & 23 MARCH 2009

DELIVERED : 26 MARCH 2009

FILE NO/S: CIV 1206 of 2006

BETWEEN: OWEN EASTCOTT
THE ESTATE OF THE LATE R H EASTCOTT
Plaintiffs
AND
THE SEEDLING FACTORY PTY LTD (ACN 099 694 658)
Defendant

Catchwords:

Sale of goods - Implied condition of fitness - Merchantable quality - Sale of Goods Act s 14(ii)

Evidence - Generally - The rule in Jones v Dunkel

Legislation:

Sale of Goods Act 1893

Result:

Judgment for the plaintiffs

Representation:

Counsel:

Plaintiffs: Mr J C Curthoys
Defendant: Mr A P Hershowitz

Solicitors:

Plaintiffs: Slee Anderson & Pidgeon
Defendant: Paiker & Overmeire

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

Australian Knitting Mills Limited v Grant (1933) 50 CLR 387
Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) [2008] WASC 239
Cammell Laird & Co Ltd v Manganese Bronze and Brass Co Ltd [1934] AC 402
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
George Wills & Co Ltd v Davids Pty Ltd (1956‑1957) 98 CLR 77
Jones v Dunkel (1959) 101 CLR 298
Robinson v Harman (1848) 1 Exch 850 at 855; 154 ER 363

STAVRIANOU DCJ:

Introduction

The plaintiffs carry on a farming and civil contracting business under the name of Wagerup Contracting ("Wagerup Contracting") in Yarloop.
In July 2004 Wagerup Contracting purchased watermelon seedlings ("the seedlings") from The Seedling Factory Pty Ltd ("The Seedling Factory").
The seedlings were planted but many died.
Wagerup Contracting claims that the seedlings were not of merchantable quality and that The Seedling Factory is liable for the damage and loss it suffered.
The claim is for the difference between what would have been obtained had the seedlings been of merchantable quality and that which it obtained because of the reduced yield. There is also a claim for consequential loss being the cost of additional labour and chemicals.
The Seedling Factory denies that the seedlings were not of merchantable quality and counterclaims the unpaid price of $16,450.73.

The Issues

The primary factual dispute is as to the quality of the seedlings.
Wagerup Contracting claims that The Seedling Factory is liable for its loss and damage caused by the failure of the seedlings because in breach of s 14(ii) of the Sale of Goods Act 1893 ("the Act"):
(a)the stems of the seedlings were when delivered very thin and the plants that had leaves were small, yellowish and misshapen;
(b)the seedlings did not mature into watermelon plants that produced watermelons;
(c)a significant number of the seedlings wilted and died;
(d)further planting of approximately 25,000 Watermelon Voyager 128 seeds and remaining seedlings was necessary;
(e)the mature plants which grew from the surviving seedlings and seeds were of poor quality, in that they were undersized, lacked flavour, and were of poor marketable quality; and
(f)the surviving mature plants had smaller leaves which:
(i)caused a lack of sufficient ground cover leading to a weed problem;
(ii)did not prevent the fruit from becoming sunburnt.
The Seedling Factory alleges that the seedlings were of merchantable quality when delivered and were healthy in all respects. It further alleges that:
(a)many of the seedlings were unplanted for long periods of time and were kept in watery and moist conditions rendering the seedlings susceptible to disease and poor growth;
(b)the property of Wagerup Contracting was subject to very high winds during October 2004 causing the Watermelon Voyager seedlings to be buried by sand with the result that some would have wilted and died;
(c)the seedlings were over-watered;
(d)many seedlings were planted too deep in the soil; and
(e)the seedlings were treated with inappropriate chemicals.
The Seedling Factory also alleges that Wagerup Contracting elected to plant the seedlings during a high risk period and not the optimum period, thereby exposing the seedlings to adverse conditions which resulted in certain of the seedlings being of poor merchantable quality. The case of The Seedling Factory is that watermelon seedlings are warm season crops and should be planted during the summer months and not in spring as Wagerup Contracting had done.
The Seedling Factory puts in issue that Wagerup Contracting has suffered loss and damage and the quantum thereof.

Overview

The primary business of Wagerup Contracting is that of growing fruit and vegetables.
This case concerns the sale of seeded (Voyager) and unseeded (Dragonheart) watermelon seedlings. The two varieties are grown together to enable the Voyagers to pollinate the Dragonhearts. Each variety produces fruit.
In 2003 Wagerup Contracting planted approximately 3.4 hectares of watermelon seedlings at its farm in Yarloop ("the farm") and harvested and sold 89,471 kilograms of fruit at market.
In 2004 Wagerup Contracting decided to again plant, harvest and sell watermelons and for this purpose agreed to purchase seedlings from The Seedling Factory. For the 2004/2005 season approximately 6 hectares of the farm were planted with watermelon seedlings. In that season 59,159 kilograms of watermelons were harvested and sold, a reduction of 30,322 kilograms from the previous season.
Owen Reginald Eastcott ("Mr Eastcott") acted throughout on behalf of Wagerup Contracting. He was raised on a farm and attended agricultural college. He has been involved in farming all of his life. Mr Eastcott gave evidence at trial in a straightforward manner. He was prepared to make concessions in the course of cross-examination as to factors which might affect seedlings. He said he was a beginner in growing watermelons. He was in my view attempting to recall events as best he could.
Trevor Excell ("Mr Excell") is now employed by the Water Corporation but in 2004 he managed the farm. He had some farming experience but had not previously been involved in growing watermelons. He would on occasion consult Scott Mason ("Mr Mason") who has tertiary qualifications in agriculture. Mr Mason would attend the farm once a week and provide advice on a range of issues including the use of fertiliser and irrigation. Mr Mason has considerable expertise and experience in growing seedlings. He was an impressive witness.
Bernardus Johannes Funnekotter ("Mr Funnekotter") is the general manager of The Seedling Factory. He is primarily responsible for the conduct of its business. He has an agricultural economics tertiary qualification and has extensive experience in growing seedlings.
Barry Winterbourne ("Mr Winterbourne") is the primary shareholder of The Seedling Factory.
Mark Fouweather ("Mr Fouweather") is the production and dispatch manager of The Seedling Factory.
It is not in issue that The Seedling Factory entered into an agreement for the supply of 22,500 Voyager and 22,500 Dragonheart seedlings to Wagerup Contracting.
On 2 August 2004 The Seedling Factory issued a written confirmation of a telephone order placed by Wagerup Contracting which showed a price payable of $16,588.00. Of that sum Wagerup Contracting accepts that it owes $840.00 for pumpkin seedlings but disputes the balance relating to the supply of the watermelon seedlings.
The first delivery ("the first batch") was made on 21 September 2004 and comprised 15,000 Dragonheart seedlings and 15,000 Voyager seedlings contained in 251 trays. The second delivery ("the second batch") was made on 28 September 2004 and comprised trays of 7,250 Dragonheart seedlings and 7,250 Voyager seedlings.
The seedlings were delivered to the farm by Vincent D'Ercole ("Mr D'Ercole"), a sub-contractor engaged by The Seedling Factory. On each occasion following delivery Mr D'Ercole obtained a signed delivery receipt. The first delivery receipt was signed by Mr Eastcott. The second receipt was signed by Mr Ben Hart.
Each receipt was in the following terms:
"As an authorised representative for Wagerup Contracting, I hereby confirm that I have received all of the above products in good condition".
Soon after delivery Wagerup Contracting commenced planting of the seedlings.
Following the delivery of the first batch Mr Eastcott telephoned Mr Mason.
Mr Mason attended the farm within a week of Mr Eastcott's call and recommended the use of two chemicals, Hi-Start and Rovral Aquaflo. Wagerup Contracting had some Hi‑Start from the previous season but did purchase additional product at a cost of $1,843.60 and which was applied by Wagerup Contracting to the seedlings.
Mr Eastcott's evidence was that he telephoned The Seedling Factory after the seedlings were delivered and spoke to Mr Funnekotter. He gave evidence that he told him the plants were not of the quality he wished for and they were sickly.
Mr Funnekotter's evidence was that there was only one telephone call between himself and Mr Eastcott and this was made on 6 October 2004. Mr Eastcott's memory was reasonably clear as to the telephone call and I prefer his evidence. Mr Funnekotter's evidence was generally unconvincing. The impression I formed was that he was careful when giving evidence to ensure that what he said did not adversely affect the case of The Seedling Factory.
Following delivery of the second batch of seedlings Mr Eastcott again telephoned Mr Funnekotter and complained of the poor quality. Mr Funnekotter's response was to say he would get back to Mr Eastcott.
Following a complaint as to the quality of the seedlings by Mr Eastcott to Mr Funnekotter a meeting was held on 7 October 2004 at the farm. Mr Funnekotter and Mr Winterbourne attended as did Mr Eastcott and Mr Excell.
Mr Funnekotter and Mr Winterbourne inspected the seedlings during the course of the meeting. Mr Funnekotter agreed to supply seeds and chemicals to Wagerup Contracting at no cost and these were collected by Mr Excell. The seedlings were treated the next day with the chemicals supplied.
The planting of the seedlings was completed by about 8 October 2004. However, by about that date a large number of the Voyager seedlings had died and approximately 20 per cent of the Dragonhearts had died.
The seeds supplied by The Seedling Factory were planted by Wagerup Contracting. Wagerup Contracting was required to remove dead and dying plants and weed the farm.
The Seedling Factory has not been paid for the seedlings supplied.

Delivery of the seedlings

Mr Fouweather's evidence was that he was involved in the examination of seedlings prior to their dispatch. He said he could recall the deliveries made to Wagerup Contracting in 2004. This was because 90 per cent of deliveries were made to the northern suburbs and special arrangements were required for these particular deliveries. He gave evidence that he checked the seedlings.
Mr Fouweather gave evidence that the seedlings were loaded the night before delivery. He said that there were six to eight deliveries each day. He gave evidence that The Seedling Factory had 240 racks of seedlings and there were 96 trays per rack. The truck was loaded by forklift. Once the seedlings were on the truck it would have been difficult to examine them.
The distinct impression I formed of Mr Fouweather's evidence was that he was relying upon his practice rather than having a memory of events.
Mr D'Ercole delivered each batch to Wagerup Contracting. He has been a driver for The Seedling Factory for 23 years. He was remunerated on a per trip basis and accepted that he would unload a delivery as quickly as possible.
It was Mr D'Ercole's evidence that he loaded the truck for each batch himself. It was his evidence that he remembered the deliveries to Wagerup Contracting as there were two deliveries. In re-examination he referred to driving through pine trees as being one of the reasons why he could recall the deliveries. He had a poor recollection of events. The events in question had occurred at least four years before he gave evidence. In that period he had continued working as a courier making many deliveries. Mr D'Ercole's memory of events was generally poor.
I do not accept Mr D'Ercole's evidence concerning why he recalled the particular deliveries. On his evidence this was a routine delivery with nothing unusual about the goods delivered. In all the circumstances, I do not consider his evidence to be reliable.
Mr Fouweather's evidence was that he helped to load the seedlings. Each of Mr D'Ercole and Mr Fouweather claimed to have a specific recollection of the seedlings. The inconsistency between their evidence as to the loading of the seedlings causes me to doubt the reliability of what each said.
When the first batch was delivered Mr Eastcott signed a delivery docket. Mr Eastcott did not have his glasses when he signed. He helped to unload the first delivery. Mr Eastcott's evidence which I accept was that when Mr D'Ercole arrived to deliver the first batch he was in a hurry to leave. The seedlings were unloaded and Mr D'Ercole asked Mr Eastcott to sign the document as a delivery docket. Mr Eastcott did not realise that it referred to the quality of the seedlings. There were 30,000 seedlings delivered in 251 trays.
Mr Ben Hart who signed the delivery docket for the second batch was not called as a witness by either party. He was an employee of Wagerup Contracting at the time but had only just started that year. Counsel for The Seedling Factory made a submission in reliance upon Jones v Dunkel (1959) 101 CLR 298 that I should infer that Mr Hart's evidence would not have assisted Wagerup Contracting's case. There were a number of employees involved in unloading. There is no evidence Mr Hart had any specific authority. It was Mr Excell's evidence that he was there when the second batch was unloaded. As I have said, he was the manager of the farm.
Jones v Dunkel (supra) was comprehensively analysed by Owen J in Bell Group Ltd (in liq) v Westpac Banking Corp (No 9) [2008] WASC 239 at [1001]-[1022]. I would with respect adopt the principles outlined. As his Honour made clear in his reasons the principle in Jones v Dunkel (supra) is grounded in commonsense and must be applied in the circumstances of the case.
I am satisfied there was a reasonable explanation for the failure to call Mr Hart. The delivery dockets were discovered by The Seedling Factory only shortly before trial. There was very little evidence in relation to Mr Hart's involvement in the delivery of the seedlings. There was no evidence that he had any specific authority to sign the delivery docket. Mr D'Ercole gave no detailed evidence about the circumstances of the signing of the docket by Mr Hart. There was no evidence that Mr Hart had inspected the seedlings. There was other detailed evidence adduced as to the condition of the seedlings at the time. In the circumstances I would not draw the inference suggested.
When Mr Eastcott signed the document he had not had an opportunity to inspect the seedlings. There were 251 trays delivered in a short space of time. The document was in the circumstances no more than an acknowledgement of receipt of seedlings.
I am satisfied that the receipts signed by Mr Eastcott and Mr Hart were in the nature of acknowledgment of receipt of the seedlings rather than an acceptance of their merchantable quality.
The seedlings were on the evidence of Mr Eastcott and Mr Excell loaded from the delivery truck onto a flat top 8 ton truck and a harvester. They were then backed into the shed for protection. I accept this evidence in preference to that of Mr D'Ercole who said the seedlings were loaded onto the floor of the shed. I have already referred to the reliability of his evidence. It is improbable in the circumstances that the seeds would have been stored on the floor of the shed. They were to be planted and it was more convenient for them to be placed on the truck and the harvester in preparation for use. The shed faces east and any rain would come from the west. I accept the seedlings were well protected in the shed.

The condition of the seedlings

Mr Eastcott's evidence which I accept was that on 21 September 2004 he noticed the condition of the seedlings during the course of unloading them. They were sickly looking and he described them as looking like they needed a drink or that they lacked fertiliser. They were yellowish in colour and a lot of them were in the two-leaf stage. He noticed this after Mr D'Ercole had left.
Mr Eastcott explained the significance of the two‑leaf stage as being that the seedlings had not formed the next leaf which was the stage at which the seedlings should be when they arrived.
Mr Eastcott received recommendations from Mr Mason concerning treatment of the first batch and applied additives to the watering system to enhance growth.
Mr Eastcott saw the second batch of seedlings in the afternoon of the day they were delivered. He accepted that he was not there when they arrived. The seedlings he saw were virtually similar to the first batch. They looked like they were deprived of water and fertilizer. They were yellow, stunted and sickly in appearance.
Mr Excell gave evidence that he helped to unload the seedlings. He said that a lot of the seedlings were yellow and were tall and skinny. Some were very small with two leaves on them. A lot of the seedlings were not ready to be planted. Each batch was in the same condition. Mr Excell's evidence was given in an extremely direct and straightforward manner. I have no hesitation in accepting him as an honest and reliable witness.
Mr Mason's evidence was that when he first saw the seedlings about a week after delivery their condition was substandard. The substandard seedlings were so widespread that it was going to affect the planting. However, he had not been present when the seedlings were delivered. As I have said, he was an impressive witness and I found his evidence to be reliable.
Mr Mason was cross-examined concerning problems which The Seedling Factory had experienced at about the time the deliveries occurred. It was his evidence that sometimes there were problems which arise at a nursery. He was asked about this matter in re‑examination and he said:
"CURTHOYS, MR: You made a reference in one of your answers to plants being in the cell. What do you mean by plants being in the cell? ‑ The trays from the nursery, I call them cells, a lot of people call them cells.
…
Was it the majority had been planted out, or a minority had been planted out? ‑ We drenched and we rowed, we got rid of the worst plants, the worst trays of plants, and then the best of the bunch were planted.
Now, if there's a problem with plants when they are in the cell, a week after – say at most a week after they had been delivered, what does that indicate to you about the source of it, or the reason why the plants aren't thriving properly? – Well, the person who took delivery, if those roots were in the cells, were brown and the plants had ill thrift, then of course it came from an external source, it came with the plants."
Mr Fouweather's evidence was that he had inspected the seedlings on the night before each delivery. When he checked the seedlings there were no obvious defects. They were on his evidence standard watermelon plants.
Mr D'Ercole's evidence was that when he loaded the seedlings he did not see anything unusual in their appearance. At the time of delivery no one had complained to him about the condition of the seedlings and on each occasion he had obtained a signed docket. He did not give any evidence as to the condition of the seedlings when they were delivered.
I have already referred to the reliability of the evidence of each of Mr Fouweather and Mr D'Ercole.
I accept and prefer the evidence of Mr Eastcott and Mr Excell as to the condition of the first and second batch when delivered. Their evidence was consistent throughout. Soon after delivery complaints were being made about the quality of the seedlings by Mr Eastcott.

Planting of the seedlings

The planting of each batch of seedlings began on the day after delivery.
The planting of the first batch was completed by about the end of September 2004. The second batch which had been delivered on 28 September 2004 was planted by 8 October 2004.
Mr Eastcott's evidence was that following delivery of the first batch and the completion of the planting on 30 September 2004 a lot of the Voyager seedlings had died. He said that as the seedlings were planted he could see that the root structure was insufficient to support the plant. The potting mix would not hold together and the root system would collapse. He described the second batch as being virtually the same quality as the first batch and not thrifty.
Mr Excell gave evidence as to having made similar observations to those of Mr Eastcott in relation to the first batch. He gave evidence that his involvement in the planting was "not much".
Mr Excell's evidence as to seedlings included the following:
"And you were involved in the planting of the seeds – I was involved a little bit, not much. Mostly I helped the – because, you know, because I had a quad motorbike. So I tried to set it up that – if someone could sit on the back, you drive along and drop them in. That worked and it didn't work, so we mainly had to go back to planting by hand, you know what I mean.
From when the first batch of seedlings was planted, can you tell us whether they thrived in the ground, or how they ---? – No, they were yellow and started perishing. We started taking – the ones out of the shed, which we – the good – the best of the bad batch at the shed – and started re‑planting them.
All right? – And as fast you plant, you were losing plants everywhere else.
Right? – So we got to the end of that thing where we – we had plants in the shed when Ben and Barry come down. We had plants in the shed which were about this high, which I think might have even been from the first batch. I had watered them ‑‑‑
STAVRIANOU DCJ: You indicated they were quite small. Was that right? – Very small and very – they just didn't grow, you know. But we planted what we could – and the ones that when Barry and Ben come down, we had some in the shed and – and landed up throwing them out, because it wasn't worth the effort and the money to plant them. Because we – as you were planting them, we were just losing so many. They were juts turning yellow and turning their heels up."
Mr Excell saw the planting of the first batch and gave evidence that the seedlings were not the best plants. They were not standing up and as a result had to be planted a bit deeper.
Mr Excell was asked about the seedlings in the shed in cross‑examination and said:
"You said there were still a lot in the shed on the floor? – There was a lot in the shed and they wouldn't grow any better so I wasn't wasting my time planting them. I ended up throwing them out. They had been there for a fair while getting treated and that, watered, putting the stuff on that Scottie told me to put on. They did not grow. I ended up throwing them out. I wasn't wasting my time by planting them and then having them die."
Following the planting of the seedlings a significant number of the Voyagers died. Some of the Dragonhearts also died but not in as significant numbers as the Voyagers. Ultimately 80 per cent of the Voyager seedlings died. This impacted upon the fruit which could be obtained from the entire crop. This was because the Voyagers are used to pollinate the Dragonheart seedlings. Without being pollinated no fruit is obtained.

The meeting of 7 October 2004

Mr Funnekotter did not have a clear recollection of telephone conversations with Mr Eastcott after delivery. However, he was quite definite that there were no complaints from Mr Eastcott before 6 October 2004. I do not accept that evidence and prefer the evidence of Mr Eastcott. There were problems with the seedlings. They were not doing well and there is evidence in the form of telephone records which support Mr Eastcott's evidence that he did telephone The Seedling Factory and complained about the seedlings.
On 6 October 2004 Mr Eastcott telephoned Mr Funnekotter. He told him that the seedlings were of poor quality and there was a problem. A meeting was arranged at the farm for 7 October 2004.
Mr Funnekotter and Mr Winterbourne attended the farm on 7 October 2004 and met with Mr Eastcott and Mr Excell. The meeting lasted for about 1½ hours. An inspection occurred of the seedlings which had been planted and the seedlings on the floor of the shed. It was Mr Eastcott's evidence that there were 2,000 seedlings which had not been planted. These were in the shed and were yellow, sickly, stunted and did not appear thrifty. Mr Eastcott explained that these were the rejects and that was why they were on the floor of the shed.
Following the inspection of the seedlings there was a discussion during which Mr Winterbourne recommended the use of Previcure, a chemical, to treat the seedlings. This was after Mr Funnekotter had spoken to Mr Mason by telephone and discussed possible treatment.
It was Mr Funnekotter's evidence that there was a problem with the seedlings and that the plants were stressed. At the meeting Mr Funnekotter and Mr Winterbourne agreed to supply seeds as a replacement for the seedlings and agreed to pay for the Previcure and the chemicals which had been earlier recommended by Mr Mason.
Mr Excell collected the Previcure and seeds from The Seedling Factory. He injected the Previcure into the irrigation system as treatment for the seedlings in accordance with the recommendation of Mr Funnekotter. It was Mr Excell's evidence which I accept that the Previcure did not make a difference to the seedlings.
Mr Eastcott's evidence was that at the inspection of 7 October 2004 most of the Dragonhearts were alive but they were not healthy. Dragonheart seedlings continued to die after the meeting. Mr Excell said in his evidence that the Dragonhearts were not too bad and at least they grew.

Merchantable quality

Wagerup Contracting claims against The Seedling Factory in contract and relies upon a breach of s 14(ii) of the Act.
Section 14, so far as material, is in the following terms:
"(ii)Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality:
Provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed."
It was accepted that the seedlings were goods bought by description, that The Seedling Factory was a seller which deals in goods of that description and that there was an implied condition in the agreement that the seedlings should be of merchantable quality. At trial the defence was amended to abandon reliance upon the proviso to s 14(ii) of the Act.
The Act does not contain a definition of merchantable quality. Whether the seedlings were of merchantable quality is a question of fact. The time at which merchantable quality is to be determined is the time of delivery of the goods.
In Australian Knitting Mills Limited v Grant (1933) 50 CLR 387 at 418, Dixon J said:
"The condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms."
In the Privy Council Lord Wright observed in Cammell Laird & Co Ltd v Manganese Bronze and Brass Co Ltd [1934] AC 402 at p 430:
"What [the section] now means by 'merchantable quality' is that the goods in the form in which they were tendered were of no use for any purpose for which such goods would normally be used and hence were not saleable under that description.''
Similarly in the Privy Council appeal in Grant (supra) Lord Wright said at pp 60‑61 that:
"... whatever else merchantable may mean it does mean that the article sold, if only meant for one particular use in ordinary course, is fit for that use; merchantable does not mean that the thing is saleable in the market simply because it looks all right; it is not merchantable in that event if it has defects unfitting it for its only proper use but not apparent on ordinary examination ... ."
In George Wills & Co Ltd v Davids Pty Ltd (1956‑1957) 98 CLR 77, in a joint judgment Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ approved the following description of merchantable quality:
"The expression 'merchantable quality', in relation to goods the subject of a contract of sale, must, obviously, constitute a reference to their condition or quality. Consequently, goods are said to be of merchantable quality 'if they are of such a quality and in such a condition that a reasonable man, acting reasonably, would, after a full examination, accept them under the circumstances of the case in performance of his offer to buy them, whether he buys them for his own use or to sell again'. ('Benjamin on Sale', 8^th ed (1950), p 645, and cases there cited).''
Wagerup Contracting commenced action on 22 June 2006. The writ of summons was indorsed with a statement of claim which claimed damages for breach of an implied condition as to merchantable quality. Wagerup Contracting pleaded that the seedlings delivered were infected with a fungus. It was alleged that because of the fungus the seedlings had wilted and died. This action was first listed to proceed to trial in November 2007. Shortly before trial Wagerup Contracting amended its claim to abandon reliance upon the allegation of an infection caused by fungus and pleaded that the seedlings were not of merchantable quality at the time of delivery. Mr Eastcott was cross‑examined in detail over the amendment and the contents of letters of demand and correspondence. Wagerup Contracting has consistently alleged that the seedlings were not of merchantable quality.
Mr Eastcott was also cross-examined concerning his telephone records and his evidence as to calls made to Mr Mason and Mr Funnekotter. There is evidence of calls made to The Seedling Factory from Mr Eastcott's phone on 24 September 2004 and 27 September 2004 and to Mr Funnekotter's mobile telephone on 29 September 2004. The cross-examination did not affect the credibility or reliability of his evidence. He was being asked about dates he made telephone calls. I am satisfied that he did telephone Mr Mason and Mr Funnekotter in the period between the delivery of the first and second batches.
I have carefully considered Mr Eastcott's evidence. I am satisfied that his evidence was truthful and reliable.
The Seedling Factory did not adduce evidence as to the quality of the seedlings at the time of delivery. Mr Fouweather inspected them during the evening prior to each delivery and Mr D'Ercole did not give evidence as to the condition.
It was the evidence of Mr Mason and Mr Fouweather that seedlings can deteriorate rapidly. I accept that to be the case. The evidence of Mr Fouweather can be understood on that basis. He examined the seedlings on his evidence the night before delivery but did not inspect them prior to delivery. I am, as I have said, not prepared to rely upon the evidence of Mr D'Ercole. He, like Mr Fouweather, had inspected the seedlings on the night before delivery.
When the seedlings arrived at the farm they were in the condition as described by Mr Eastcott. I accept the evidence of Mr Eastcott and Mr Excell as to the condition of the seedlings upon delivery.
The seedlings delivered were not fit for their purpose of production of watermelons. They had no other purpose. The seedlings had yellow leaves and were sickly when delivered. Many of the seedlings died soon after being planted. They would not have been purchased by Wagerup Contracting if their quality had been known. The seedlings were not of a quality which would produce an optimum yield.
The seedlings were showing signs of failure on delivery and many died shortly thereafter.
I do not consider that a prospective purchaser would buy the seedlings in their condition at delivery if the buyer was aware of their condition.
I am satisfied that the seedlings were not of merchantable quality in any of the approaches referred to above at the time of delivery and The Seedling Factory was in breach of the condition implied by s 14(ii) of the Act.

Care of the seedlings

The Seedling Factory contended that a number of matters would have caused the seedlings (which it alleged were of merchantable quality when delivered) to wilt and die.
The 2004/2005 season was only the second season that Wagerup Contracting had grown watermelons. Whilst Mr Eastcott and Mr Excell were inexperienced in growing watermelons this was a commercial operation and the intention was to harvest the crop and sell at a profit. Trials were conducted before the planting of watermelons began and a feasibility study was conducted. A watermelon planting machine was purchased.
The planted area was protected from high winds by a pine forest and other trees.
The evidence of Mr Eastcott which I accept was that the soil where the seedlings were planted was sandy and well drained.
David Charles Fyfe ("Mr Fyfe") gave evidence on behalf of The Seedling Factory. He has a tertiary qualification in horticultural technology. He grows fruit and vegetables, principally watermelons in Broome since 1991.
It was Mr Fyfe's evidence that while there were quite substantial differences in growing watermelons in Broome and in the South-West, the basic principles were the same. He has not grown watermelons in the South‑West.
Mr Fyfe gave evidence that growing watermelons in wet and cool conditions was difficult because the plants struggle to pick up nutrients and are more susceptible to disease. He was taken to the weather station records for Harvey and gave evidence that without knowledge of the microclimate on the property he could not exactly say what the effect of the conditions would be on growing. He gave evidence of a general nature that if it is cool, wet and windy the plants would be exposed to stress.
Mr Fyfe also explained that overwatering can cause problems in two ways. Waterlogging of the plants can be caused and can also cause the leaching of nutrients away from roots.
It was Mr Fyfe's view that to achieve a yield of nearly 60 tonnes per hectare was ambitious. It was his view that to plant 6 hectares of seedlings would take 72 hours at a cost of approximately $1,400.00.
Mr Fyfe had no experience of growing watermelons in the South‑West and had never been to the farm. I am not prepared to accept his evidence in which he expressed specific opinions concerning the growing of watermelons in the South-West. It was his evidence that there were many things that could cause problems with the seedlings. He had not seen the seedlings.
I accept as Mr Eastcott, Mr Mason and Mr Fyfe said that inadequate nutrition, disease, poor irrigation practices and weather stress could contribute to problems with watermelon seedlings.
Desmond Joseph May ("Mr May") is a sales representative with T Systems Australia, an irrigation supply company and he has worked for that firm for five years. Prior to that he has been engaged in a number of different occupations. Between 1985 and 1997 he was the manager of Carnarvon Growers Association which operates as a non-profit rural merchandise company.
Mr May designed an irrigation system for use by Wagerup Contracting at the farm. He gave evidence that a design requires consideration of factors including the source of water, topography, the nature of the crop and weather conditions. It was his evidence that Mr Excell followed the design he produced to the letter and it was installed perfectly.
It was Mr May's evidence that he went to the farm to examine the operation of the irrigation system. He was unable to identify the precise date but knew it was in September 2004. Mr May saw seedlings on the back of a truck or flat top trailer and gave evidence their condition was terrible. They were skinny, small, yellowish in colour and were not vigorous, strong looking plants at all.
Mr May found the water pressures, filtration system and valves to be properly operating. I am satisfied that the seedlings were properly watered before and after planting by Wagerup Contracting. There was a proper irrigation system in place and Mr Excell followed the expert recommendations made by Mr Mason. There is no evidence that the seedlings were over‑watered.
There was no evidence which I accept that the seedlings were planted too deep or that inappropriate chemicals were applied. Wagerup Contracting had substantial amounts of spray left from the 2003/2004 season which it used.
There was evidence that on 5 October 2004 the wind speed in Harvey was 41 kph. There was no evidence as to the wind conditions between the date of delivery and 4 October 2004.
I am satisfied that the seedlings were not subjected to high winds from the date of delivery. They were, as I have said, protected by trees. Mr Funnekotter gave evidence that on 7 October when he attended the property he saw many of the planted seedlings were covered in sand which had been blown around the seedlings. I accept and prefer the evidence of Mr Excell that there was not a lot of sand on the leaves.
Mr Funnekotter gave evidence that he saw seedlings on the floor of the shed and sitting in puddles of water. Mr Excell accepted that seedlings had been placed on the floor of the shed on green plastic but were not sitting in puddles of water. They had on his evidence just been watered. I do not accept that Mr Excell would have left the seedlings sitting in puddles of water and prefer his evidence.
I am satisfied that the farm was well established and managed. Wagerup Contracting had been in business since 1998. Professional advice was available and utilised.
Mr Eastcott's evidence was that during planting at the end of each day the seedlings were placed in the shed overnight for protection. I accept his evidence in this regard.
I am satisfied that there was nothing in the way Wagerup Contracting stored, planted, cultivated and harvested the seedlings which would have led to their deterioration and death.
It was also contended by The Seedling Factory that the seedlings had been planted during a high risk period and not the optimum period. The farm is approximately 30 kilometres from Harvey. Meteorological evidence establishes that during October 2004 Harvey had a mean maximum temperature of 20.6 degrees. I accept based upon the evidence of Mr Fyfe and Mr Mason that the optimum temperature for propagation of seedlings is between 30 and 35 degrees. Whilst the evidence suggests that it is preferable for the seedlings to be planted in warmer conditions, I am satisfied that the seedlings were not of merchantable quality when delivered.
I am satisfied that weather conditions do affect the growth of seedlings. However as the evidence of Mr Steven Caratti ("Mr Caratti") establishes, it was the case that in an area in relatively close proximity to the farm watermelons were successfully grown.
I am not satisfied that the meteorological evidence adduced establishes that the conditions on the farm were so adverse as to lead to the scale of seedling failure experienced by Wagerup Contracting.
Planting of the first batch began on the day after delivery. The seedlings were properly stored whilst planting proceeded. Planting of each batch was completed by 8 October 2004.
It was the evidence of Mr Mason which I accept that the planting of the seedlings did not result in them being of poor merchantable quality. The case of The Seedling Factory was that planting in spring was a high risk period. Mr Mason's evidence which I accept was that the sandy soil conditions at the farm meant the seedlings could be effectively planted at the time that they were planted.

I am not satisfied that the seedlings failed because of factors which arose following delivery. There is no evidence that the seedlings were stored for an excessive length of time before being planted or that they were improperly stored. The seedlings were stored on the truck and harvester. Whilst the storage shed was open to the east, the undisputed evidence is that rain comes from the west. I am satisfied that they were not over-watered, planted too deeply, had incorrect chemicals applied or that they were exposed to high winds.

Assessment of damages

The compensation principle in contract provides that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed: Robinson v Harman (1848) 1 Exch 850 at 855; 154 ER 363 per Parke B.
In Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 Mason CJ and Dawson J said at 80:
"The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff's expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation."
Wagerup Contracting has formulated its claim for damages as follows:
(a)Loss of yield – This was a claim for loss of sales due to reduced yield of fruit obtained from the seedlings. Calculations were provided which referred to loss of sales of between $86,672.00 and $126,712.00.
(b)Additional labour - $37,600.25.
(c)Chemicals - $1,843.60.
Mr Eastcott's evidence was that in October 2003 3.4 hectares of the farm were planted with watermelons. The planting in 2004 was about a month earlier. The bulk of the 2003/2004 crop was harvested in mid January 2004 through to February 2004 for a yield of 89,471 kilograms which was sold at market for $26,644.16. This on Mr Eastcott's evidence represented an average of 30 cents per kilogram.
It was Mr Eastcott's evidence that in the 2003/2004 season only half the crop had been harvested. This was because the price had dipped to such an extent that it was not economically viable to take the fruit to market.
The yield of fruit from seeds supplied following the meeting of 7 October 2004 was minimal and not of good quality. The plants were not thrifty and did not produce optimum yield.
In 2004/2005 Wagerup Contracting was able to sell 59,159 kilograms of watermelons at market for $18,016.00.
Wagerup Contracting's claim for loss of yield was put on two bases. First, by comparison with the yield which had been obtained in the 2003/2004 season (52.8 tonnes per hectare). Second, by comparison with the yield obtained by Mr Caratti (70 tonnes per hectare).
Wagerup Contracting's pleaded case included the allegation that the seedlings would have been sent to market during December 2004 to January 2005. The trial was conducted on the basis that the seedlings were being planted for harvesting and sale during the 2004/2005 season. The pleading alleges that the seedlings would have matured about 15 December 2004 to the end of December 2004. The expectation of Wagerup Contracting was that the watermelons would be sold during the 2004/2005 season and would have been at market in January 2005.
Cooler conditions delay growth of the seedlings. The period of time from ground to harvest can range between 10 to 15 weeks. This was Mr Fyfe's evidence. I am satisfied that if the seedlings had been of merchantable quality the fruit produced would have been ready for sale in January 2005.
The microclimate for a particular location is of significance. Mr Fyfe would not express an opinion without knowing the microclimate for the particular location. I accept that evidence. It is clear that conditions at a particular location may vary for a number of reasons.
Mr Caratti's evidence which I accept was that seedlings can be planted in September for the market in January.
The claim was particularised in written closing submissions in the following way:
Yield
Area
Area planted 6 hectares
Planting dates
The seedlings were planted between 22 September 2004 and about 8 October 2004 (over about 2 weeks).
The seedlings would have matured in January 2005 based on Mr Caratti's planting.
Yield per hectare
Mr Caratti's actual yield was 70 tonnes per hectare.
Alternatively,
In the first growing season (2003-2004) the plaintiffs planted 3.4 hectares of watermelons comprising of 8,400 Dragonheart 128 plants and 6,000 Voyager 128 plants for a total harvested yield of 89,471 kilos for approximately $26,644.16.
i.e. 3.4 hectares produced 90 tonnes harvested – 26.4 tonnes per hectare.
The plaintiffs only harvested half the 2003-2004 crop because of low prices for that season.
Therefore, the inferred tonnage 52.8 tonnes per hectare.
52.8 tonnes x 6 hectares = 316.80 tonnes/316,800 kgs.
Wagerup January Price
Seedless: Average prices for seedless Dragonheart watermelons over the period 3 January 2005 to 28 January 2005 were about 55 c/kilo. It was Mr Caratti's evidence that he obtained a price of between 42 cents and 55 cents per kilo.
Seeded: Average prices for seeded Voyager watermelons over the period of 3 January 2005 to 28 January 2005 were about 37 c/kilo. Mr Caratti's evidence was that he obtained between 24 cents and 30 cents per kilo.
Yield at 70 tonnes/hectare x 6 hectares (½ Dragonheart ½ Voyager)
Seeded Dragonheart
Average 55c/kilo x 210,000 kgs    $115,000
42c/kilo x 210,000 kgs  $88,200                $88,200
Seeded Voyager
Average 37c/kilo x 210,000 kgs    $77,700
30c/kilo x 210,000 kgs  $63,000
24c/kilo x 210,000 kgs  $50,400
Total Income         $192,700              $151,200              $138,600
Less Actual Income -$18,016
Loss on Sales         $174,684              $133,184              $120,584
Yield at 52.8 tonnes/hectare x 6 hectares (½ Dragonheart ½ Voyager)
Seedless Dragonheart
Average 55c/kilo x 158,400 kgs    $87,120
42c/kilo x 158,400 kgs  $66,528                $66,528
Seeded Voyager
Average 37c/kilo x 158,400 kgs    $58,608
30c/kilo x 158,400 kgs  $47,520
24c/kilo x 158,400 kgs  $38,160
Total Income         $145,782              $114,048              $104,688
Less Actual Income -$18.016
Loss of Sales         $127,712              $96,032                $86,672
Mr Caratti has a property approximately 20 kilometres from the farm. He is familiar with the soil type on the farm which he gave evidence was similar to that on his property. He had only been to the farm on one occasion.
It was Mr Caratti's evidence that in about the third week of September 2004 he began planting watermelon seedlings and planted 3 hectares. The fruit was harvested in January 2005 and he achieved a nett return from Dragonheart watermelon seedlings of between 42 cents to 55 cents per kilo and for Voyager watermelon seedlings between 24 cents to 30 cents per kilo. Calculations of loss based upon his nett returns are contained in the particulars above.
Mr Funnekotter's evidence as to yield was that yields of 40 to 45 tonnes per hectare were the industry average.
The evidence of Mr Caratti was that his property attained a yield of 70 tonnes per hectare. I am not satisfied given the evidence that it is appropriate to assume that the farm would have achieved a yield of 70 tonnes per hectare. Given the circumstances detailed above for the yield achieved on the farm in the previous year I am not prepared to utilise the yield of 70 tonnes per hectare. Further, as is clear from Mr Fyfe's evidence the particular location is important. Mr Caratti's evidence does not satisfy me that his property and the farm and the conditions on each were so similar that I can conclude that a yield of the same order as Mr Caratti obtained would have been obtained by Wagerup Contracting. I consider it more appropriate to consider the evidence as to yield from the farm in the 2003/2004 season. That evidence in my view is more reliable.
Mr Excell considered 80 per cent of the crop had been harvested in 2003/2004. It was the evidence of Mr Eastcott that only 50 per cent of the crop had been harvested in 2003/2004. On that basis the evidence establishes a yield of approximately 33 tonnes per hectare (26.5 tonnes in 2003/2004 plus 25 per cent) for the 2004/2005 season. That figure is arrived at on the basis that the yield of 26.4 tonnes obtained in the previous season is increased by 25 per cent to reflect the yield if all the fruit from the farm had been harvested. The effect of the evidence of Mr Excell and Mr Eastcott is that projected yield for the 2004/2005 season would have ranged between 33 tonnes per hectare (based on Mr Excell's evidence) and 52.8 tonnes per hectare (based on Mr Eastcott's evidence).
Mr Funnekotter's evidence was that average yield was between 40 to 45 tonnes per hectare. I consider it reasonable in all the circumstances to adopt the midpoint of Mr Funnekotter's estimate of yield. I therefore conclude an estimated projected yield of 42.5 tonnes per hectare is reasonable.
I consider it reasonable to adopt Mr Caratti's minimum nett sale figures. He was selling in the relevant market. In the previous season Wagerup Contracting had obtained approximately 30 cents per kilogram. On that basis the nett loss in sales would be $69,764.00 (42.5/52.8 x $86,672.00).
The evidence establishes that after planting many of the seedlings died. The seeds supplied by The Seedling Factory were then planted. This required employees of Wagerup Contracting to perform additional work in removing the dead seedlings and planting the seeds supplied. The employees were also required to perform additional weeding because the watermelon plants were not of a sufficient size to shade out the soil and therefore to minimise the germination of weeds.
It was Mr Eastcott's evidence that there were a number of employees of Wagerup Contracting involved in working on the watermelon crop in the 2004/2005 season. The claim originally pleaded was for $48,850.25. This comprised re‑planting seedlings, re‑planting seeds, spraying weds, manual removal of weeds and placing hay over the fruit to prevent sunburn.
By reference to a payroll activity summary Mr Eastcott gave evidence that the additional labour cost was $37,600.25. He made estimates of how much of the gross wages of each employee should be allocated to additional work. The claim as finally particularised was for $36,942.25.
Mr Eastcott gave evidence that he had asked Mr Excell about the apportionment and the time spent on additional work. Mr Excell initially said that he had not been involved. However when pressed he said he may have been. I accept the evidence of Mr Eastcott that he did speak to Mr Excel about the matter. Mr Excell's memory on this issue was not clear.
There was no evidence as to how long each of the tasks identified took to complete.
The wages for at least one of the employees had not been apportioned. In the original claim there was a claim for wages for Mr Eastcott of $11,250.00. Cross‑examination established that there was no basis for the claim and it was abandoned. Mr Eastcott gave evidence that there was no extra cost incurred in relation to Mr Excell. Mr Excell was unsure as to the basis of his remuneration. I am not satisfied as to the claim for wages for Mr Excell.
The claim for the removal of weeds was particularised as being 78.5 per cent of the claim for additional labour. There was no evidence of how long the weeding work took.
The evidence of Mr Mason and Mr Excell was that there would always be weed removal when growing watermelons. It was Mr Fyfe's evidence that the reasonable cost to re‑plant 6 hectares would be $1,440.00. Whilst the evidence establishes a need for additional weed removal because of the condition of the seedlings the evidence of Mr Eastcott comprises estimates only. I have, as I have said, accepted Mr Eastcott as an honest witness. The extent of spraying and weeding required in any particular crop would vary. As I have said, Mr Eastcott's evidence comprised estimates. Doing the best I can I consider a reasonable sum for additional labour costs in all the circumstances would be $15,000.00. In arriving at that sum I have first reduced the claim by $11,250.00 to reflect Mr Excell's wages.
Chemicals were recommended by Mr Mason for use on the seedlings shortly following delivery. The chemicals were required because of the quality of seedlings supplied. I would allow the sum claimed of $1,843.60.

Counterclaim

There was no issue as to the quantum of the counterclaim of $16,450.73.

Conclusion

During closing submissions amendments to the pleadings were foreshadowed. In the circumstances I will hear the parties as to any amendments, the orders required to dispose of the action and costs.