Fox v Garnelle Industries P/L
[2007] SADC 83
•14 August 2007
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
FOX & ORS v GARNELLE INDUSTRIES P/L
[2007] SADC 83
Judgment of His Honour Judge David Smith
14 August 2007
CONTRACTS
Contract for manufacture and supply of agricultural machine - plaintiff claiming damages for breach of implied terms of fitness and quality under s14(a) and (b) of Sale of Goods Act 1985 (SA) and claiming in the alternative for damages for common law negligence – defendant denied liability and pleaded Statute of Limitations defence - discussion of whether proceedings in both causes of action were commenced within time – discussion of when causes of action in contract and tort accrue and time begins to run pursuant to s35 and s36 of Limitation of Actions Act 1936 (SA) - calculation of the date by which the action should have been instituted by reference to s27 of the Acts Interpretation Act 1915 (SA) - discussion of measure of damages in contract and whether costs of mitigation recoverable as loss and damage.
Held: (1) actions in both contract and common law negligence were within time; (2) defendant breached implied terms of fitness for purpose and merchantable quality; (3) costs of mitigation recoverable as loss and damage in action for breach of contract; (4) unnecessary to determine liability in common law negligence; (5) plaintiffs entitled to judgment against the defendant in the sum of $113,247.88 plus interest at $47,847.23, a total judgment of $161,095.11.
Sale of Goods Act 1895 s14(a) & (b); Limitation of Actions Act 1936 (SA) s35(a) & (c), s36(1); Acts Interpretation Act 1915 (SA) s27(1) & (2); District Court Act 1991 s39, referred to.
Sykes v Midland Bank (1971) 1 RB 113; Hall v Foong (1995) 65 SASR 281; Hawkins v Clayton (1998) 164 CLR 535; Pirelli General Cable Works Ltd v Oscar Faber & Partners (1983) 2 AC 1; Footner v BHAS (1983) 33 SASR 58; Wardley v WA (1992) 175 CLR 514; Swan Pools Ltd v Baker (1980) 25 SASR 103; Gates v CML (1985-86) 160 CLR 1; Hadley v Baxendale (1854) 150 ER 145; Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322, considered.
FOX & ORS v GARNELLE INDUSTRIES P/L
[2007] SADC 83Introduction
The plaintiffs, at the time material to this action, operated a farm known as Waterloo Downs which is situated near Keith in the south-east of South Australia. The defendant was a manufacturer of farm machinery and carried on that business in Pittsworth near Toowoomba in Queensland.
In this action the plaintiffs claim damages from the defendant for breach of a contract entered into between them on the 2nd March 1998, whereby for a consideration of $56,500, the defendant agreed to manufacture and supply to the plaintiffs a seeding machine called “A Garnelle Tow Between Air Seeder Model TB3 7500” (the Air Seeder). Pursuant to this contract the defendant delivered the Air Seeder to the plaintiffs on the 24th April 1998. The plaintiffs used it to sow their various crops in the 1998, 1999 and 2000 seasons. They allege that there were a multitude of problems with the operation of the Air Seeder which caused:
·loss of crop production;
·increases in the costs of crop production; and
·expenditure on parts and labour.
The plaintiffs claim damages in the sum of $113,247.88, plus interest.
The plaintiffs did not plant crops after the year 2000 season. They sold the farm property in 2001. The Air Seeder was sold two years later for $32,700.
The Pleadings - the claims – the issues
The plaintiffs’ claims damages of breach of contract and alternatively damages for common law negligence.
The defendant corporation admits the contract and the manufacture and supply by it of the Air Seeder. It also admits that the contract was subject to implied conditions of fitness for purpose and merchantable quality. However, it denies that it breached the contract and that it was negligent.
Finally, the defendant pleads that the claims against it are statute barred.
In the course of the trial the defendant agreed that the proper plaintiffs were before the Court and that it was not necessary for the plaintiffs to prove the existence of the Trust, the authority of the trustees and that the Trust was the operator of Waterloo Downs at the material time (229, 230, 249, 250). This matter was not addressed in the pleadings.
Witnesses - Credibility – Reliability
There were only four witnesses in this trial.
The first named plaintiff, John Ronald Fox, gave all the narrative evidence on behalf of the plaintiffs. There were two expert witnesses called in the plaintiffs’ case. Richard Leigh Sulman, an engineer with expertise in Air Seeding machines, gave evidence as to the alleged manufacturing defects in the Air Seeder, and Matthew Harvey McCallum, an agricultural scientist, gave evidence as to the alleged resultant losses of agricultural production and associated losses.
The only witness for the defendant company was its sole director Mr Gary Briskey. I granted him leave to represent the defendant company in the action. He gave not only narrative evidence but also expert engineering evidence, given his practical engineering knowledge and in particular his experience of machines such as the Air Seeder.
There was also voluminous documentary evidence adduced.
I accept unreservedly the credibility and reliability of the first plaintiff Mr John Fox. He was an articulate witness and convinced me that he was an intelligent, skilful and meticulous farmer. He had what he called “experience based skills” in mechanics. He had undertaken TAFE courses in maintenance work and he serviced and maintained all his own farm machinery. It became obvious from all the evidence that he had a working knowledge and understanding of engineering and design concepts pertinent to the workings of the Air Seeder.
I also accept without reservation the evidence of the two experts. Mr Sulman withstood the challenges to his evidence and there was no serious challenge to the evidence of Dr McCallum as to loss of crop production and the associated or consequential losses relating to weed and erosion control.
I prefer the evidence of Mr Fox to that of Mr Briskey, but indicate that there was very little material conflict between them. I consider that Mr Briskey was by and large a truthful witness who had no answer to the case against him and struggled vainly to defend himself and his company.
I regard Mr Briskey, at all times, to have been acting as the servant and agent of the defendant company and within the scope of his employment and his authority. So what was said and done by him bound the defendant company.
Evidence – Findings
I now turn to the evidence. The following constitutes my findings.
Some history
The Fox family had owned Waterloo Downs since 1956 (101).
In 1980 John Ronald Fox and his wife Jenny Esther Fox, in their capacity as trustees of the Fox Family Trust No. 5, purchased the property from Mr Fox’s siblings. It was then predominantly a grazing property (101).
In 1989, following the collapse of the wool price, the plaintiffs decided to change the mix of the farming operation by increasing the area of cropping. By 1993 they were cropping about 1500 acres and were using a Steiger tractor, a Napier Air Seeder and a Napier cultivator bar (102). In about 1997 Mr Fox decided to upgrade the Air Seeder in order to improve the efficiency of the seeding operation (114-115).
The engineer Mr Sulman in his evidence described an “Air Seeder” in the following terms:
... an air seeder essentially ... is a distribution device as opposed to gravity feed seed to ground. The principle of an air seeder is to group seed in boxes and then with compressed air push that seed out to a bar and spread it evenly across that bar ...
(26)
In his report of the 10th January 2005 there was the following more expansive definition:
“Typically an air seeder consists of a fan, an air flow divider, bulk seed and fertiliser hoppers with units to meter product into the air stream, hose to convey the material, dividers to uniformly split the product flow into the required number of outlets and boots to place the seed and fertiliser into the soil profile” (Fielke, J.M and M.G Slattery (2002). Pneumatic Conveying Principles Applied to an Airseeder. Australian Conference on Engineering in Agriculture 2002.
(See Exhibit P2 at 439)
Mr Fox after some investigation had a particular type of Air Seeder in mind, namely “a dual shoot, triple bin, tow in-between, Air Seeder”. A “dual shoot” machine has two sets of primary hoses which convey products such as seed and fertilizer from the three hoppers to the secondary hoses which in turn convey it to the outlets on the cultivator bar (see graphic illustration at 187 of Exhibit P2). “Tow in between” simply denotes that the Air Seeder is to operate between the tractor and the cultivator bar rather than be towed behind the bar as is apparently more commonly the case with Canadian Air Seeders.
A Canadian company named Morris Industries was a pre-eminent manufacturer of air seeders and had dealerships in Australia. Mr Fox became seriously interested in a Morris manufactured machine. The particular machine sought by him was available from Morris Industries but it had to be shipped from Canada. There was some doubt about whether it would arrive in time for the 1998 planting season. So in February 1998 Mr Fox approached the defendant company and in particular Mr Briskey with whom he had some earlier dealings (116).
The defendant company throughout the negotiations which thereafter took place held itself out to be a competent manufacturer of such machines and Mr Briskey, on behalf of the company, represented that the Air Seeder manufactured by his company compared favourably with the Morris Industries machine (484, see also Exhibit p1 at 5).
Contract March 1998 - Manufacture and Delivery of Air Seeder April 1998
Between February and March of 1998 there was repeated contact between Mr John Fox and Mr Gary Briskey by telephone and email (116-118). The essential specifications for the Air Seeder were settled upon. In particular, the defendant knew of or was apprised of all necessary detail including the intended use of the Seeder and the specifications of both the tractor to be used to tow it and the cultivator bar which was to follow behind it (116-137). The Air Seeder was to be “based upon a Morris machine ...” (124).
In particular there were a number of discussions between Mr Briskey and Mr Fox about the suitability of the fan proposed by Mr Briskey. The fan is a crucial part of the mechanism of the Air Seeder. It provides the air pressure or air velocity which forces the seed and fertilizer through a system of hoses and ultimately into the ground through outlets located on the cultivator bar. Mr Fox learned that the defendant company was intending to install a REM fan (123, 124). Mr Fox was aware, as was Mr Briskey, that the Morris Industries Air Seeder used a Crary fan. Mr Fox indicated to Mr Briskey that he preferred the “proven technology of the Morris Machine ...” (124). In response, according to Mr Fox, Mr Briskey explained that the company could not procure a Crary fan and said that the REM fan had similar performance characteristics (125). Mr Fox said he accepted Mr Briskey’s assurance (125). I accept what Mr Fox said about this topic.
By letter dated the 25th February 1998 the defendant quoted $56,500 for the manufacture and supply of the Air Seeder (137, see also Exhibit P1 p15). The price included “travel to SA and set up” (120; see also Exhibit P1 at 3). The offer required the payment of a 20% deposit before despatch. The plaintiff accepted the offer and paid the deposit into the defendant’s bank account on the 4th March 1998 (141, 142, see also Exhibit P1 at 21), and so the contract was concluded.
It was an implied condition of this contract that the defendant would make and deliver to the plaintiffs an Air Seeder which was fit for the purpose of sowing crops and distributing fertilizer as specified and which was also of merchantable quality (see ss 14(a) and (b) of the Sale of Goods Act 1895 (SA)).
Following the concluding of the agreement, the construction of the Air Seeder proceeded. There were ongoing discussions between Mr Fox and Mr Briskey in the course of construction relating to such matters as the positioning of the axle (145, 146), and the power of the tractor (143). On the 22nd April 1998 the balance of the purchase price was paid (146, see also Exhibit P1 at 26).
On or about 24th April 1998 the defendant company completed the manufacture of the Air Seeder. It was transported from Pittsworth in Queensland to Bordertown in South Australia by road transport. The plaintiffs took delivery of it in Bordertown on the 24th April 1998 (147, see also Exhibit P1 at 29).
Problems began on the day of delivery. In the course of the journey from Bordertown to Waterloo Downs the primary hoses became detached and were seen to be dragging on the roadway.
In the ensuing three years a multitude of problems beset the operation of the seeder. Most were addressed and rectified by the plaintiffs, sometimes with and sometimes without, the help of the defendant. This involved expenditure of time and/or money. There was however one problem, which defied diagnosis for the three sowing seasons in 1998, 1999 and 2000, namely, the recurring seed blockages in the secondary lines. Such blockages resulted in rows not being seeded. These blockages thereby caused reduced crop yield and consequential weed and soil erosion problems.
I turn to my findings as to what occurred in the ensuing three years.
After delivery – first sowing season 1998
Primary hose connections
As indicated on the 24th April 1998 in the course of transporting the Air Seeder from Bordertown to Waterloo Downs one of the primary hoses became detached from its mounting at the diverter and was seen to be dragging on the roadway underneath the Air Seeder (147; see also Exhibit P1 at 29). This problem continued into 1998 and involved more than this particular connection. The primary hoses repeatedly came away from not only the diverters but also the manifold, at the rear of the Seeder, notwithstanding them being strongly clamped (159-163). The defendant company through Mr Briskey disclaimed responsibility for this saying that the fittings were standard (163). This is not a sufficient answer. Nor do I agree with the suggestion in Mr Briskey’s evidence that Mr Fox was the author of his own misfortune by causing the defendant company, in the course of manufacture, to reposition the axle towards the rear of the seeder thereby increasing the turning moment of the seeder (459, 460). Indeed Mr Fox said, and I accept it, that disconnections occurred even when there was no turning (160). I accept also that when Mr Fox requested the relocation of the axle, Mr Briskey’s response was merely that it was a departure from the Morris design. In particular he did not warn Mr Fox of the prospect of ongoing disconnections (146). Mr Briskey’s evidence to the contrary was inconclusive and unreliable (458-460).
Mr Fox partially attended to this problem by having the sleeves of the manifold onto which the hoses clamped redesigned to achieve a more secure fit. To do this, he engaged the services of “Carline Mufflers” (163; see also Exhibit P1 at 70). This rectification work was done in about June/July of 1998 (163). This measure addressed the problem of the hoses pulling away from the manifold but it did not fully address the problem of the disconnections from the diverters.
Calibration Chart
The calibration chart enables the farmer to set the rate at which the fertilizer and/or seed is released from the bins into the lines and thereby into the soil profile (153). The calibration chart which was in the operator’s manual which came with the machine was of no use to the plaintiffs because it pertained to a 30 foot cultivator bar with 52 rows of 7 inch spacings (148, 154; see also Exhibit P1 at 32). Well known to the defendant, the plaintiffs’ cultivator bar was 44 foot in width with 10 inch spacing (118). Over a period of time more calibration charts were provided, in particular in June 1998 and then September 1998 (153, 154, 199, 200).
Commissioning in early May 1998
Mr Briskey and an employee arrived at the Waterloo Downs property in early May 1998 in order to commission the Air Seeder as required by the contract (154). The object of the commissioning was to fit the Air Seeder to the plaintiffs’ tractor and cultivator bar and ensure its operation. Over a period of two days Mr Briskey and his employee with the assistance of Mr Fox fitted and connected:
·the monitoring system;
·the hydraulic system;
·the primary and secondary hoses; and
·the distribution heads.
(155).
However, Mr Briskey did not finish the commissioning and left the rest of the necessary work to Mr Fox. According to Mr Fox, he explained that he had other commitments and was exhausted (154-157). Mr Briskey denied that he would have claimed to be exhausted (500). It does not much matter. Mr Briskey accepted that he left the job incomplete. He said “... sadly we didn’t get an opportunity to run the machine in the paddock ...” (471). In any event, Mr Fox and his employee armed with instructions from Mr Briskey, finished as best they could. Mr Fox said in evidence that he did not have much choice in the matter (154). There was considerable work involved in the completion of the commissioning and included in the plaintiffs’ claims is the expense of the labour involved in that work (261-265; see also Exhibit P2 at 197-203). By not completing the commissioning and running the seeder Mr Briskey lost the chance of detecting, for instance, the reasons for the recurring blockages. It was perhaps a slim prospect and would have needed him to test with wheat or barley seed but still the chance was lost.
Modification of distribution heads
In April/May of 1998, before seeding commenced, Mr Fox discovered that the caps over the inspection holes in the 10 distribution heads did not properly seal the cavity. These heads fit onto the primary hoses and effectively channel or divide the material (ie seed etc) into the secondary hoses (see Exhibit P1 at 33; see also report of Mr Sulman dated 10.01.05 at 471 of Exhibit P2). Mr Fox redesigned and fitted new cover plates to reduce turbulence and ensure the smooth flow of material from the primary hoses into the secondary hoses (256). This measure had the later approval of the engineer Mr Sulman (57; 58; see also his report (supra) at paras 97-99). Telfer Engineering assisted Mr Fox with this modification.
Seeding starts in about June 1998 – alarm going off – metering device discovered to be operating in reverse
Seeding started in June 1998. On or about the 12th June 1998 a problem with the monitoring system arose (164). In the Air Seeder there is a shaft which operates the “metering system” which measures out the seed and/or fertilizer. If the shaft is not turning and consequentially the seed not feeding out of the bins into the system, then an alarm will sound in the cabin of the tractor to alert the driver (164, 165). In about June 1998, in the course of seeding, the alarm was sounding and incorrectly suggesting that the shaft was not turning (164, 165). It took some time to discover the malfunction. Eventually this problem was addressed. A company named Farmscan reconfigured the whole system (164). It does not appear from the evidence that the plaintiff bore the expense of Farmscan’s rectification work.
The alarm malfunction slowed up the sowing of the canola. The driver was constantly stopping and checking whether the canola was being planted. When canola seed could not be found the driver would turn back and re-sow the missing area (179). Some 15 hectares was re-sown.
At about this time, namely in June 1998, Mr Fox was expressing concerns to Mr Briskey about strange noises emanating from the metering devices under the bins (167). Some investigation by Mr Briskey obviously occurred. He discovered that the metering rollers, (see Exhibit P3), which controlled the flow of seed from the bin into the lines were rotating in the wrong direction. He frankly admitted that to Mr Fox on the 16th June 1998 (167; see also Exhibit P1 at 73). What had occurred was that the defendant company had installed the metering devices in strict accordance with the design of the Morris Industries machine which was “a tow behind” not a “tow in between” Air Seeder (167). So the metering rollers were rotating in reverse and so had the effect of grinding the seed (52).
The defendant company provided Mr Fox with advice and plans for reversing the drive of the metering rollers (168, 169). The plaintiff engaged Telfer Engineering to modify the sprocket drive so that the metering rollers rotated in the correct direction (169-172). The plaintiffs’ paid for this repair (see Exhibit P1 at 83). It took a day to a day and a half to complete the rectification work (168, 170).
By the time of the discovery of this defect the plaintiffs had completed the planting of Canola and had sown 40 of the 98 hectares of Lupin (174). Mr Fox was of the view that though the Canola crop in the end was excellent, it could have been better. He noted unevenness in the crop and the obvious signs of what he called “surging” (ie patches of intense growth and then patches of sparse growth) (181). Nonetheless, the expert Dr McCallum concluded that there was no yield loss of Canola “... due to the compensatory nature of this broadleaf crop” (see Exhibit P2 report of Dr McCallum dated May 2005 at 517).
In respect of the Lupin there was a loss of yield in respect of the 40 hectares sown when the seeder was not operating correctly, that is when the metering roller was operating in reverse (175). Mr Fox’s records indicated that the said 40 hectares was in the result less productive by 0.5 of a tonne per hectare compared with the 58 hectares sown when the machine was operating correctly. I accept Mr Fox’s contention that there was a 20 tonne loss of Lupin production (176).
As at June 1998, there had been no blockage problems. However, as Mr Fox pointed out Canola is a very fine seed (172). I infer also that Lupin is a smaller seed than wheat and barley.
Blockages – wheat and barley
The plaintiffs then proceeded to plant wheat and barley and noticed that the secondary hoses were blocking. There were missed strips obvious when the crop emerged (182). Although the secondary hoses are to some degree transparent the build-up of seed was obvious only upon reasonably close inspection. The driver needed to stop and walk back to check it (193, 194).
Mr Fox communicated his concerns about the blockages to Mr Briskey (189). On the 7th and 8th August 1998 Mr Briskey called in at Waterloo Downs. Mr Fox said that at that visit he drew Mr Briskey’s attention to the fact that there were blockages in the course of sowing the wheat and barley (191). He added that the wheat crop had begun to emerge and there was “the odd missed row ...” (193). Though the fan was discussed on this occasion, the cause of the blockages was not identified (192). Indeed the cause was not positively identified until the engineer Mr Sulman arrived at his opinion in May 2005 (192).
So in the end Mr Fox and his employees made a habit of stopping the tractor regularly in the course of the seeding operation and checking (194).
At about this time also Mr Fox arranged for Telfer Engineering to make a small modification to the auger mechanism which I accept was not performing adequately (196).
October 1998 – some redesign work on diverters
After the seeding Mr Fox set about reconfiguring the diverters. The original design of the diverters was such that when the secondary hoses were clamped onto the diverters it caused the diverter opening to close down and that in turn caused leakage of seed and fertilizer. With the help of Mr Briskey’s employees Mr Fox set about rectifying that problem by amongst other things relocating the diverters (200-203).
Crop and associated losses – 1998
The above problems particularly the recurring blockages not only delayed the seeding operation in 1998 but also reduced crop yields and caused weed and erosion problems. I will deal with this aspect later.
Second Sowing Season – 1999
Disconnection problem of Primary Hoses continues
As the 1999 seeding season approached, the primary hoses were still disconnecting from the diverter valves. In about April 1999 Mr Fox, in consultation with the defendant company, fitted a dual manifold to the rear of the Seeder and also procured and fitted more flexible hoses to go through the manifolds (203-207; see also Exhibit P1 at 97, 98). The new, more flexible hose, was purchased by the plaintiff’s and transported to them from John Pumpa Motors in June 1999 and new foam was obtained and fitted between the manifolds (257; see also Exhibit P2 at 194, 195).
Diverter Modification
The diverter valves which effectively channelled the material into the various primary lines were not adequately sealed at the joints so that material was “blasting through the joints”. Mr Fox welded plastic across the joints after having obtained advice from Mr Taylor of Morris Industries as to the type of plastic to employ (204, 257; see also Exhibit P1 at 105).
Blockage problem continues
On the 26th June 1999 the plaintiffs commenced seeding (209). When sowing the wheat and barley there were recurring blockages. Mr Fox in his evidence described what happened and what was done about it in the following terms:
A.We were getting, with wheat and barley, in the direction of travel, on average approximately nine – and this is just from observations afterwards when the crop was up and growing – we were getting about nine outlets blocking between every stop on a corner to unblock the secondary hoses.
Q.What physically did you do to deal with that problem when it occurred.
A.As described earlier we pulled each one of those secondary hoses out of the seed boots and flung the product that was blocking those secondary hoses around the paddock and then replaced them back in the boot.
Q.Did that cause you any time and frustration.
A.Yes, it did.
Q.Just describe that to us.
A.It was a case where, on every corner in about 120 acre paddock we were stopping every corner which is about, in round figures, every ten minutes, and spending 10 to 15 minutes on unblocking those hoses and checking to make sure others weren’t blocked.
Q.Did that increase the amount of time you took to do the job.
A.Yes, it did.
Q.Was it you working on the machine, or did you have your men working on the machine as well.
A.It was a case where, in most instances it was, in ’99 it was either my son or another operator that I employed.
Q.But is it the case that by 1999 you had got into this rhythm of unblocking the hoses on every corner.
A.That’s correct.
(210)
In August 1999 after seeding Mr Fox sought advice about the blockages from Mr Taylor of Morris Industries (209). Mr Fox himself conducted tests of air pressure on the primary hoses and provided the test results to Mr Taylor (215, 216). There was much speculation about the likely cause of the blockages but still the true cause was not identified and the problem persisted (216).
Photographs of the crops showed the missing rows (216-220; see also Exhibit P1 at 160-170).
Drive shaft damage June 1999
In June 1999 the seeding operation was interrupted by the need to repair damage to the main drive shaft in the seeder. The main shaft, which is driven by the hydraulics of the tractor, drives the three metering systems under each of the three bins. In particular, it turns the rollers which control the feeding of the seed and/or fertilizer into the lines (53). Its proper functioning is fundamental to the operation of the Seeder. On the 29th June 1999 the shaft was, in the words of the engineer Mr Sulman, “fatally damaged”, when it became dislocated and came into contact with nearby boltheads (see Exhibit P2 at 445). As the engineer Mr Sulman explained, good design required a shoulder or indentation in the shaft to locate it adequately in position and so avoid the axial movement which was the cause of the damage. The plaintiffs repaired the shaft and not only expended time doing so but purchased parts to do so such as bearings and housing from Sellers Farm Supplies (212, 257, 258; see also Exhibit P1 at 153). There was apparently a further failure of this shaft in the year 2000 but there was little evidence from Mr Fox about this. He confirmed that he told the engineer Mr Sulman about it (see Exhibit P2 at 445 para 46).
Crops and Associates Losses – 1999
In 1999 like 1998 there were reductions in crop yields and consequential weed and erosion problems which needed addressing.
Third and Last Sowing Season – 2000
In the year 2000 autumn was wet and the plaintiffs’ crops were consequently sown late. Despite Mr Fox’s best efforts the blockages in the secondary lines with cereal seed (ie wheat and barley) persisted (216, 217). In the result there was a patchy emergence of the crops and missed strips were evident. Again, photographs taken by Mr Fox in the year 2000 showed the blank rows (217, 271; see also Exhibit P1 at 160-170; see also report of Dr McCallum dated May 2005 at 518 of Exhibit P2).
Experimentation to alleviate blockages
In about May of 2000 in conjunction with the defendant company the plaintiffs experimented with the secondary hoses in an effort to rectify the blockage problems. New hoses and fittings were purchased in the course of this exercise and as a consequence there were a number of costs including cartage fees incurred by the plaintiffs (253, 254, 259; see also Exhibit P2 at 195, 196). These experiments did not resolve the blockage problem which persisted in the sowing season.
Embrittlement of the Secondary Hoses
Mr Fox said that the secondary hoses started cracking and crazing within months of purchasing the machine (213). He resisted the suggestion that this was “fair wear and tear” and made the point that the hoses on his previous air seeder lasted many years (213, 214). He suggested that the hoses were of poor quality. In any event he took up an offer by the defendant company to supply some replacement hoses free of charge (213). This occurred in about June of 2000 (see Exhibit P1 at 156). There were other purchases of hose by the plaintiff and, as I will particularise later under the heading of quantum, the claim for the costs of these purchases has been discounted by 50% by the plaintiffs in acknowledgement of the fact that old hoses have been replaced with new (258; see also Exhibit P2 at 195, 196).
Electrical defects
In the year 2000 in the course of operating the Air Seeder at night the electrical wiring on the tractor and the Air Seeder “shorted out” and almost caused a fire (214). Mr Fox’s evidence was that this was caused by the lack of adequate sheathing and protection of the electrical cables together with a lack of any fusing. Fiegert Mobile Electrics of Bordertown repaired and restored the wiring (214, 260; see also Exhibit P1 at 158; see also Exhibit P2 at 196).
Further investigations of blockages
In August of 2000 Mr Fox conducted air pressure tests on the primary hoses at their junction with the distribution heads (215). The results show that there were variations in the pressure readings from hose to hose. This was discussed with the Morris Industries representative Mr Taylor whom I have previously mentioned (216). As before the cause of the blockages nonetheless remained unidentified.
Loss of crop yields and other associates losses – 2000
Again, in this year crop yields were reduced and the associated weed and erosion problems persisted as in the case of the previous two seasons.
End of crop farming - 2001
Early in the year 2001 in consultation with another Morris dealer in Loxton named Rex Payne, Mr Fox conducted yet more tests in an effort to solve the problem of the blockages. In particular he tested a device known as the plenum (223-225). The plenum is a box shaped device which divides the air from the fan into the primary hoses. One side is attached to the fan and the other side has a cluster of outlets which are coupled to the primary hoses. Air is driven into the plenum by the fan and is channelled by it into the various primary hoses which are coupled to it. The plenum is shown in the photographs at pages 174, 177 and 181 of Exhibit P1. The investigations of Mr Fox went so far as to obtain from Mr Payne a plenum from a Morris Industries Air Seeder and by testing compare it with the plenum taken from his Garnelle Air Seeder (224). The test results demonstrated that there was no difference in the performance of the two plenums. Of course the original REM fan was used for the testing. This attempt to ascertain the source of the problem also came to nothing.
It was later in 2001 that the plaintiffs sold Waterloo Downs. So no crops were sown in the 2001 season. Mr Fox explained that he quit farming Waterloo Downs because of health problems and difficulties obtaining labour in the area (225, 226). The Air Seeder did not sell at the clearing sale in October 2001 probably because Mr Fox effectively disclaimed responsibility for its performance (226). It was sold some two years later to a farmer named Glacken from a property near Maitland on the Yorke Peninsula for $32,700 (227). It was examined for the purposes of this case by the engineer Mr Richard Sulman on the 13th April 2004. Mr Fox said, and I accept it to be so, that when inspected and tested by Mr Sulman on the 13th April 2004, the Air Seeder was in all material respects in the same condition as when he had it (268).
Expert evidence on adequacy of Air Seeder – Mr Richard Sulman
Mr Sulman’s expertise was not challenged and so requires no special mention. However, I note that his credentials included wide ranging work for Flexi Coil, which is a Canadian company based in Saskatchewan which manufactures air seeders including three bin seeders. In his work for that company he was involved in “... trouble shooting mechanical, electrical, hydraulic and air system failures in all tillage and air seeding products ...” (Exhibit P2 at 467).
As indicated, Mr Sulman inspected and conducted tests on the subject air seeder on the 13th April 2004. His evidence embraced his two reports dated respectively the 10th January 2005 and the 13th May 2005 and identified a range of manufacturing defects and other shortcomings in the performance of the contract by the defendant (25-100; see also Exhibit P2 at 439-513).
First, putting aside the issue of blockages, Mr Sulman’s evidence confirmed that the problems encountered by the plaintiff in the three years of seeding operations, such as:
·the recurring problem of the primary hoses disconnecting;
·the catastrophic failure of the drive-shaft;
·the fitting of a metering device which was inappropriate for a tow in between operation and therefore was operating backwards;
·the malfunctioning of the alarm system; and
·the shorting out of the electrical system,
were a result of inadequate and substandard design and manufacture. So too, from his experience in and familiarity with the industry he said that:
·the failure of the defendant company to complete the commissioning of the air seeder; and
·the failure of the defendant company to supply with the air seeder the relevant operation manual and calibration and metering charts,
fell short of the common place and expected requirements of a manufacturer and supplier of a complex piece of machinery such as an air seeder.
I agree with the above conclusions.
The second aspect of Mr Sulman’s evidence concerned his investigation of air flow and in particular the problem of the recurring blockages. These investigations revealed two linked problems.
First, Mr Sulman tested the volumetric output of the plenum. There are six outlets on the top of this box-like device and six on the bottom. Mr Sulman’s tests found that the bottom outlets demonstrated a high comparative volumetric output. He said that for the most efficient use of air-pressure, the bottom set of primary hoses should collect and convey the heavier products which are carried in the rear bins. This view was confirmed by the pipe layout on the Morris seeder (see diagram Figure 8, Exhibit P2 at 452). However, notwithstanding that, the defendant company was purporting to follow the Morris design; the defendant company’s pipe layout was the opposite (39, 40).
According to Mr Sulman this problem could have been identified and rectified if tests were conducted. In particular, he said as follows:
Essentially this error, or this – essentially it is an error because it’s not producing the most efficient flow of air for the system to provide enough flow for the product. This error should be picked up at the manufacturing stage in the validation of the design through testing.
(40)
He concluded in the following terms:
In my opinion, the assembly of the plenum and primary hoses led to inadequacies in the performance of the seeder contributing to the Plaintiffs suffering down time from blocked hoses and reduced crop establishment.
The risk of the seeder failing was more than might otherwise been expected if the seeder had been supplied with hoses correctly fitted between the plenum and product bins.
(See report of Mr Sulman dated 10.01.2005 at 461 of Exhibit P2)
I conclude from this evidence that the simple switching over of the hoses or perhaps changing in which bins the heavier seed was placed might have addressed or improved the problem of blockages. In any event, this was not done; nor could the prospects of it being successful be tested.
Mr Sulman then turned to the question of the adequacy of the REM fan. He compared the REM fan with the Crary fan by reference to performance data provided by the two manufacturers. He concluded that, under system pressure which was “an acceptable example of back pressure created by the air system under normal operating conditions”, the REM fan performed at one-third the capacity of the Crary fan (41-46; see also report of Mr Sulman dated 13.05.05 at 513 of Exhibit P2).
Mr Sulman’s overall conclusion as to his investigations of air flow and blockages was that the hose blockages would have been “significantly reduced or eliminated if the Crary fan had been fitted along with the correct fitment of the primary hoses to the plenum ...” (see para 12 of report of Mr Sulman dated 13.05.05 at 513 of Exhibit P2).
Mr Briskey in his evidence said that Morris Industries had supplied the fan and that all seeders built by him including three bin seeders (488), had REM fans installed in them and experienced no problems (463). He made the point correctly that Mr Sulman did not proffer a view of what was required by way of fan capacity to serve the three bin air seeder (464). Indeed Mr Sulman declined to proffer such a view because he was not able to test the air seeder in operation between the tractor and the cultivator bar. However, he made the point that the Crary fan was an integral part of the successful Morris design and to depart from it required “validation” (69). I agree.
I accept the evidence of Mr Sulman and in doing so I have not overlooked the points made by Mr Briskey and also his “report” (see Exhibit D1).
I interpolate here what is virtually an aside. Mr Briskey said in his evidence about the use of the REM fan that “... on advice I was given by Mr Taylor of Morris Industries was that the fan was an equivalent and that Morris themselves in Canada were testing both the Crary and the REM fan and the REM was their second choice ...” (485). In his earlier cross-examination of Mr Fox he effectively put that position and he put it again in his final submission. So there is a clear hint in all this that his position was that if the fan was inadequate for its purpose then it was the fault of Morris Industries or their Australian agents for representing to him that it could do the job on the Air Seeder. When this position was being put in cross-examination of Mr Fox, I interrupted the evidence to canvass with Mr Briskey, bearing in mind that he was a lay advocate, the prospect of the defendant company instituting third party proceedings and seeking an adjournment to do so (231-247). In the end Mr Briskey declined to take up that invitation on behalf of the defendant corporation. In particular he made the point that the company had no money to do so (245). Before leaving this topic I should also point out that counsel for the plaintiffs indicated that on the 31st August 2004 the plaintiffs’ lawyers forwarded to the defendant company’s lawyers a preliminary version of Mr Sulman’s expert report and invited them to give consideration to contacting the manufacturer of the REM fan (245).
Conclusion on liability
I find in all the circumstances that the recurring problem of blockages was caused by one or other or both the inadequately powered REM fan and the incorrect configuration or connection of primary hoses to the plenum. These were design and manufacturing defects for which the defendant is contractually responsible.
I conclude that the Air Seeder’s recurring blockages in the secondary hoses together with the multitude of other defects which impaired the operation of the air seeder in the course of 1998, 1999 and 2000, rendered the air seeder unfit for its purpose and of unmerchantable quality.
Considered separately, many of the problems encountered by the plaintiffs and chronicled by me, apart from the manufacturing defects which caused the blockages, would not of themselves constitute a breach of the said conditions but the accumulation of them together with the defects which caused the blockages does so. By themselves the defects which caused the blockages would render the Air Seeder unfit for its purpose and unmerchantable.
I find therefore that the defendant company was in breach of the conditions of quality and fitness implied into the contract.
Subject to a consideration of the Statute of Limitations defence, the plaintiffs are entitled to judgment for the assessed amount of the loss and damage which has resulted from the breach.
Before turning to the assessment of the loss and damage, I deal with the Statute of Limitations defence.
Statute of Limitations Defence
In its defence the defendant company pleaded as follows:
20.Further, and in answer to the entire Statement of Claim, that the Plaintiff’s claim is statute barred pursuant to the Limitation of Actions Act 1936 (SA) since the proceedings were not commenced within 3 years after the cause of action accrued.
21.Further, and in the alternative to paragraph 20 hereof, and in answer to the entire Statement of Claim, that the Plaintiff’s claim is statute barred pursuant to the Limitation of Actions Act 1936 (SA) since the proceedings were not commenced within 6 years after the cause of action accrued.
There were no particulars of these pleas and nor was there any reply.
Actions in both contract and common law negligence not being actions “... in which the damages claimed consist of or include damages in respect of personal injuries to any person ...” must be “... commenced within six years next after the cause of action accrued and not after ...” (see s35(a) and (c) and s36(1) of Limitation of Actions Act 1936 (SA)).
It is trite law that a cause of action for breach of contract accrues upon the happening of the breach. It may be that little or no damage flows from the breach in which case a judgment for nominal damages will result (see Sykes v Midland Bank[1]; Hall v Foong[2]). On the other hand, the tort of negligence is not actionable per se and so a cause of action in negligence only accrues when damage is suffered (see Hawkins v Clayton[3]; Pirelli General Cable Works Ltd v Oscar Faber & Partners[4]; Footner v BHAS[5]; Wardley v WA[6]).
[1] (1971) 1 RB 113
[2] (1995) 65 SASR 281 per Debelle J at 301
[3] (1998) 164 CLR 535 per Gaudron J at 599
[4] (1983) 2 AC 1
[5] (1983) 33 SASR 58
[6] (1992) 175 CLR 514
The contract here was for, inter alia, the supply of an air seeder. The implied terms of that contract were that the Air Seeder was to be fit for its purpose and of merchantable quality. It was delivered to the plaintiffs at Bordertown on the 24th April 1998 and though most of the problems were then not apparent, the seeder was defective in those respects particularised by me above. So the defendant company was at that date in breach of the contract. It failed to supply an Air Seeder which was both fit for its purpose and of merchantable quality. Therefore the action in contract “accrued” on the 24th April 1998.
In calculating the date by which the action should have been instituted, regard is to be had to subsections (1) and (2) of s27 of the Acts Interpretation Act 1915 (SA) which provide:
(1) The time prescribed or allowed by any Act for any proceeding, or for the doing of any thing, or for suffering any thing, will be taken not to include the day of the act or event from or after which the time is to be calculated, but to include the day on which the proceeding is to be taken or the thing is to be done or suffered.
(2) If the time so prescribed or allowed falls or expires on a Saturday or Sunday, or on any public holiday, the time will be extended so as to fall or expire on the day next following the Saturday, Sunday or public holiday that is not itself a Saturday, Sunday or public holiday.
So in this case “... six years next after” the 24th April 1998 is the 24th April 2004. However, that day is a Saturday. So too, Monday the 26th April 2004 was the “Anzac Day” public holiday. Accordingly, the plaintiffs had until and including Tuesday the 27th April 2004 to commence the action.
The action was instituted on the 23rd April 2004 and so the action in contract is within time.
Therefore there is no need to consider the arguments of the plaintiffs to the effect that time should only run after the elapsing of a reasonable time to remedy the defects after their discovery (see Swan Pools Ltd v Baker[7]).
[7] (1980) 25 SASR 103
So far as the alternative negligence action is concerned, as indicated, that cause of action does not accrue until damage is suffered. On any view of the facts, that was subsequent to the delivery date of the 24th April 1998. So there are no statute of limitations problems for the alternative common law negligence action.
I turn to the topic of quantifying the loss and damage which I accept resulted from the breaches of contract referred to above.
Loss and Damage
The damages sought in this action fall, as previously indicated, into the following categories:
·first, there are the losses resulting from the reduced crop production;
·secondly, there are the additional costs which the plaintiffs incurred in dealing with the heightened weed infestation particularly ryegrass and soil erosion bought about by unseeded rows in the crops; and
·thirdly, there is the expenditure of time and money by the plaintiffs in dealing with the various problems as they arose.
In case it not be clear I find on all the evidence that as a result of the breaches of contract found to have occurred, the plaintiffs incurred losses in all these areas. What remains is to quantify these losses.
As to the measure of damages it is trite law that in contract a plaintiff is entitled to be placed in the position, so far as money can do it, he or she would have been in had the contract been performed (see Gates v CML[8]; see also Hadley v Baxendale[9]). In my view, the claimed crop production losses and the additional costs of weed and erosion control fall squarely into the above statement of principle.
[8] (1985-86) 160 CLR 1 per Mason, Wilson and Dawson JJ at 11, 12
[9] (1854) 150 ER 145 at 151 per Alderson B
The third category is more comfortably categorised as losses and expenses incurred in mitigating the consequences of the defendant’s breach. In Simonius Vischer & Co v Holt & Thompson[10] Samuels JA with whom Moffitt P and Reynolds JA agreed, said at 356 as to this category of loss:
I think that the principle is that stated in McGregor on Damages,13th ed., p. 167, par. 237, namely that recovery is allowed “for losses and expenses reasonably incurred in mitigation even although the resulting damage is in the event greater than it would have been had the mitigating steps not been taken”. That statement (from the 12th ed. of Mayne & McGregor on Damages, par. 161) was quoted with approval by Edmund Davies J. in Lloyds and Scottish Finance Ltd. v. Modern Cars & Caravans (Kingston) Ltd where his Lordship said: “… it is well established that a plaintiff may recover expenses incurred in an effort to mitigate the damage resulting from a defendant's wrongdoing.” The learned authors of Halsbury's Laws of England, 4th ed., vol. 12, p. 477, par. 1193 state the law in the same terms as McGregor. Direct authority is scanty, perhaps because the principle admits of no argument to the contrary, it being a direct corollary of the undoubted policy by which the law “seeks to encourage the avoidance of loss … by denying to the wronged party a recovery for such losses as he could reasonably have avoided, …”: McCormick’s Handbook on the Law of Damages, p. 127.
(footnotes omitted)
[10] [1979] 2 NSWLR 322
With those principles in mind I turn to my findings as to the quantum of loss and damage.
Crop Losses
The methodology used by the agricultural scientist Dr McCallum to assess crop yield loss was a water use efficiency calculation based on what was called the French and Schultz (1984) model. Pursuant to that method the loss of yield is calculated by ascertaining the yield in kilograms per hectare per millimetre of rainfall achieved in previous seasons for certain crops and then, by reference to no other constraint but rainfall, estimate what ought to have been the yield of a particular crop in the years under examination. The estimate of potential crop yield is also cross checked against what neighbouring farmers achieved. This methodology according to Dr McCallum has industry acceptance (see report of Dr McCallum dated May 2005 at 516 of Exhibit P2).
There was no serious issue taken with either the methodology employed by Dr McCallum nor the correctness of the assumptions and documents upon which his opinion proceeded (433-446; see also 270-288 and Exhibits P4 and P5)
I note in making the above point that though not legally skilled Mr Briskey, in the trial, demonstrated a considerably depth of knowledge of cereal farming and was clearly alert to the significance of leaving such matters free from challenge.
So employing the French and Schultz method, Dr McCallum assessed the crop production loss for the three years, and also he quantified the increased chemical spraying and clay spreading costs which followed in the wake of the cropping difficulties (see report of Dr McCallum dated May 2005 in Exhibit P2 at 514-544; see also 423-448).
In respect of 1998 season Dr McCallum said in relation to:
·wheat the plaintiffs achieved only 64% of their potential yield;
·barley which is more vigorous than wheat and so more able to compete with the ryegrass there was no significant yield loss;
·canola there was no yield loss due to “... the compensatory nature of this broad leaf crop ...” apart from the cost of resowing 15 hectares; and
·lupin there was a loss of 0.5 tonnes per hectare on 40 hectares as particularised by Mr Fox (176).
In respect of the 1999 season Dr McCallum said:
From our estimate using the crop water-use efficiency method, there appeared to be no yield loss in wheat or barley crops in 1999. For wheat, this is likely to be due to the impact of crop rotation. All wheat crops in 1999 followed canola crops of 1998. Ryegrass control in canola crops in 1998 was reasonably effective due to high trifluralin rates (2L/ha). As in 1998, no yield loss in barley was likely to be due to the competitive ability of the crop.
(See report of Dr McCallum dated May 2005 at 517 of Exhibit P2)
Finally, for the 2000 season Dr McCallum said in relation to:
·wheat the plaintiffs achieved only 70% of their potential crop yield; and
·barley the achievement was 75%.
Dr McCallum then made the calculations employing the French and Schultz model. He then proceeded to address the extra herbicide costs and the extra cost of clay spreading and levelling to address the wind erosion on the sandy rises where there were missed areas in the barley crops.
His overall conclusion was as follows:
Crop production $60,594.37
Resowing canola $1,305.00
Increased chemical costs $7,970.22
Increased spraying costs $5,158.02
Increased clay spreading costs $11,977.81Total $87,005.42
(See report (supra) at 524 of Exhibit P2)
The final heading of loss relates to the costs of mitigation and in particular the cost of labour and the cost of materials incurred by the plaintiff in addressing the accumulating problems with the Air Seeder.
Mr Fox’s narrative evidence explained the basis of these claims and at the conclusion of his evidence in chief he referred to records compiled by himself and his son as to these costs (254-268; see also Exhibit P2 at 194-250).
I accept this evidence and accept that the quantum of this heading of loss is as follows:
Cost of materials $3,101.94
Cost of labour $24,727.50Total $27,829.44
It emerged from the evidence of Mr Fox that the plaintiffs retained 11.9 tonnes of the 1998 wheat crop for use as seed in the 1999 season (254; see also Exhibit P6). Dr McCallum was not informed (430). Accordingly, a downward adjustment of his figures for reduction of wheat receipts is necessary. Accordingly, I set out hereunder a final quantification of the loss and damage incurred by the plaintiffs which incorporates that adjustment.
Loss of crop production
Loss of wheat in 1998 $17,683.54 less additional
11.9 tonnes (retained for 1999 seed) at $133.36 $16,096.56
Loss of 20 tonnes of lupins in 1998 $3,468.00
Resowing of canola in 1998 $1,305.00
Loss of wheat in 2000 $20,791.47
Loss of barley in 2000 $18,651.36Increased cost of weed and erosion control
Increased herbicide chemicals 1999-2000
to control ryegrass $7,970.22
Contract spraying costs ($1183 in 1998 and $1729.22
in 2000) and increased spraying costs by
Mr John Fox $2245.10) $5,158.02
Increased clay spreading costs $11,977.81Expenditure on parts and labour
Parts $3,101.94
Labour $24,727.50TOTAL $113,247.88
Therefore I assess the loss and damage to the plaintiffs which resulted from the breach of contract by the defendant company at the sum of $113,247.88.
Interest
The plaintiffs abandoned their pleaded claim for compound interest (105).
Nonetheless they are entitled to ordinary “pre-judgment” interest to be included in the amount of the judgment sum (see s39 District Court Act 1991). Interest should be calculated from the time when the costs were incurred and/or the losses sustained. The quantum documents, namely the payment advices from such organisations as the AWB for the sale of grain, indicate that payments are made within a month or so of delivery. All the losses therefore were fully crystallised by about the beginning of 2001. I propose to allow interest therefore for 6.5 years being the period from about the beginning of the year 2001 to the date of this judgment. The appropriate rate of interest is 6.5% being the approximate average of the commercial rates of interest prevailing since early 2001. Such rates, at least to April 2004, are conveniently set out in the Third Schedule to the old Supreme Court Rules. Accordingly, the calculation (ie $113,247.88 x 6.5% x 6.5 years) results in an allowance for interest of $47,847.23.
Judgment and Final Order
It is unnecessary to deal with the alternative claim for damages in common law negligence. The contractual duties which have been breached are the same duties of care owed by the defendant corporation to the plaintiffs pursuant to the law of negligence. So too though the measure of damages and tort in contract is in theory different, the claimed losses would satisfy both causes of action. Therefore, the plaintiffs having succeeded in contract would for the same reasons succeed in the alternative claim in negligence and the quantum of the loss will be the same in respect of both causes of action.
Accordingly, I enter judgment for the plaintiff against the defendant corporation in the sum of $113,247.88 plus interest in the sum of $47,847.23 a total judgment of $161,095.11.
I will hear the parties as to costs.
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