George Street Steel Pty Ltd (ACN 008 179 708) v Wilson Pastoral International Pty Ltd (ACN 167 284 399) - [2019] SADC 11

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
GEORGE STREET STEEL PTY LTD (ACN 008 179 708) v WILSON PASTORAL INTERNATIONAL PTY LTD (ACN 167 284 399) & ORS
[2019] SADC 11
Judgment of Her Honour Judge McIntyre
8 February 2019
CONTRACTS - BUILDING, ENGINEERING AND RELATED CONTRACTS - REMUNERATION - RECOVERY ON QUANTUM MERUIT
INDUSTRIAL LAW - SOUTH AUSTRALIA - REGULATION OF PARTICULAR MATTERS UNDER PARTICULAR STATUTES - WORKMEN'S LIENS
PROFESSIONS AND TRADES - ENGINEERS - NEGLIGENCE
The plaintiff, George Street Steel Pty. Ltd. (ACN 008 179 708) (“GSS”), is an engineering firm based in Port Pirie trading under the name SJ Cheeseman. Brian and Jillian Wilson, the third and fourth defendants, are directors and shareholders of the first defendant Wilson Pastoral International Pty Ltd. (ACN 167 284 399) (“WPI”) and the second defendant Wilson Pastoral Australia Pty Ltd. (ACN 008 030 297) (“WPA”).
In about 2013 the Wilsons began investigating the possibility of expanding the family farming business to make and sell pellets for livestock feed incorporating native saltbush. The introduction of saltbush was an innovative concept which the Wilsons subsequently patented. The Wilsons incorporated WPI in January 2014 for the purpose of pursuing the pelleting business. WPI purchased a secondhand pellet plant and boiler in mid-2014. It was their intention to construct this plant upon land owned by WPA.
GSS was engaged in about April/May 2015 to provide services and materials in relation to the set up and commissioning of the pellet plant and boiler. The precise nature and extent of the agreement reached between the parties is contentious. Towards the end of November 2015 the parties fell into dispute and the Wilsons asked GSS to leave the property and cease all works.
GSS seeks damages for breach of contract and initiated these proceedings seeking payment of invoices in the sum of $359,574.09 plus interest or, in the alternative, restitution based on a quantum meruit for the reasonable value of the services provided to the defendants. GSS registered a workers’ lien for that amount on property owned by WPA. In addition GSS, in separate proceedings which have been joined to the within proceedings, claims against WPI for the sum of $45,000 plus interest under two loan agreements occurring in about September 2015.
The defendants counterclaim for damages for breach of contract and common law duty in respect of a loss of profits and the cost of remedying deficiencies in the boiler and pellet plant. The defendants further claim a set-off of any amount owing by WPI to the plaintiff under the loan agreements.
Held:
1. The plaintiff has failed to establish its breach of contract claim or a claim in quantum meruit.
2. WPI is bound by the agreements to defer payment of
i. invoice SINV045472 for $76,092.75 and
ii. invoice SINV045589 for $39,708.93.
3. WPI is entitled to a credit of $10,000.00 under the agreement to defer payment of SINV045472 for the payment made to the plaintiff on or about 30 December 2015.
4. The plaintiff is entitled to recover $45,000 for the loans from WPI.
5. WPI has failed to establish its counterclaim for breach of contract.
6. WPI is entitled to damages of $30,000 from the plaintiff for breach of its common law duty of care.
7. The workers’ lien registered by the plaintiff on land owned by WPA is invalid.
8. WPI is entitled to set off the $45,000 it owes to the plaintiff under the loan agreements against its entitlement to damages in the sum of $30,000 under the counterclaim.
Work Health & Safety Act 2012 SA s 21(2); Worker's Liens Act 1893 SA s 2, s 5, referred to.
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; GMA Garnet Pty Ltd & Another v Barton International Inc (2010) 183 FCR 269; Gilberto v Kenny (1983) 57 ALJR 283; Abram v AV Jennings Ltd (2002) 84 SASR 363; Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221; Equuscorp Pty Ltd v Haxton (2012) 246 CLR 498; Voli v Inglewood Shire Council (1963) 110 CLR 74; Astley v Austrust Ltd (1999) 197 CLR 1; Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642; MWH Australia Pty Ltd v Wynton Stone Australia Pty Ltd (In Liquidation) (2010) 31 VR 575; Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; De Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10; Australia & New Zealand Banking Group Ltd v Westpac Banking Corporation (1988) 164 CLR 662, considered.

GEORGE STREET STEEL PTY LTD (ACN 008 179 708) v WILSON PASTORAL INTERNATIONAL PTY LTD (ACN 167 284 399) & ORS
[2019] SADC 11
Contents
Introduction
Issue to be resolved
Summary of findings:
The Trial
The Evidence
De bene esse rulings
The Pellet Plant Project
The Contract or Contracts
The Plaintiff’s Breach of Contract Claim
Counterclaim
Lien
Loan Agreements
Key Interactions
The First Contact
22 May 2015 – The First Boiler Inspection
1 June 2015 - Meeting
1 June 2015 – The Gantt Chart
3 June 2015 - Meeting
11 June 2015 - Second Boiler Inspection
16 June 2015 - Meeting
17 June 2015 – The First Bank Meeting
22 June 2015 - Meeting
21 or 22 August 2015 - Jaeschke Site visit
22 August 2015 – Second Bank Meeting
3 September 2015– First Inventure Meeting
Late September 2015 – Landline Filming
26 November 2015– Second Inventure Meeting
30 November 2015– Termination of Agreement
Other Interactions
Invoices
Delivery of invoices
Deferral of invoices
The Contractual Situation
One contract or two?
Who were the parties?
Time frame
What was agreed about costs?
Interim Billing/Indivisible Contract
Scope of Work or Retainer
The Boiler
Pellet Plant

Summary of Findings on Contractual Issues
Delivery of invoices and deferral agreements
Consideration
Independent debt obligation
Exclusion clause unenforceable
Estoppel as to Price
Is the plaintiff entitled to be paid for the work performed?
What work was done
The value of the work
What benefit has WPI accepted?
Counterclaim
Exclusion clause
The Boiler
Unauthorised works
Unnecessary equipment
Damaged equipment
Fumigation expenses
Loss of raw materials
Other issues
Summary of findings on Counterclaim
Lien
Loans
Amount outstanding
Set-off
Introduction

George Street Steel Pty. Ltd. (ACN 008 179 708) (“GSS”) is an engineering firm based in Port Pirie trading under the name SJ Cheeseman.
Brian Wilson and his wife Jillian Wilson, the third and fourth defendants, are directors and shareholders of the first defendant Wilson Pastoral International Pty Ltd. (ACN 167 284 399) (“WPI”) and the second defendant Wilson Pastoral Australia Pty Ltd. (ACN 008 030 297) (“WPA”). The Wilsons also operate a partnership, the Wilson Partnership; they are joined as individuals and as partners of the Wilson Partnership.
The Wilsons are a farming family. In about 2013 the Wilsons began investigating the possibility of expanding the family farming business to make and sell pellets for livestock feed incorporating native saltbush. The introduction of saltbush was an innovative concept which the Wilsons subsequently patented. The Wilsons incorporated WPI in January 2014 for the purpose of pursuing the pelleting business. WPI purchased a secondhand pellet plant and boiler in mid-2014. It was their intention to construct this plant upon land owned by WPA at Clements Gap in South Australia.
GSS was engaged after late April 2015 to provide services and materials in relation to the set up and commissioning of the pellet plant and boiler. The precise nature and extent of the agreement reached between the parties is contentious. Towards the end of November 2015 the parties fell into dispute and the Wilsons asked GSS to leave the property and cease all works.
GSS seeks damages for breach of contract, specifically for breach of an agreement by which the plaintiff claims to have provided services for the design, development and construction of the pellet plant and ancillary equipment. GSS initiated these proceedings seeking payment of invoices in the sum of $359,574.09 plus interest or, in the alternative, restitution based on a quantum meruit for the reasonable value of the services provided to the defendants. GSS registered a workers’ lien for that amount on property owned by WPA. In addition, GSS in separate proceedings which have been joined to the within proceedings, claims against WPI for the sum of $45,000 plus interest under two loan agreements occurring in about September 2015.
The defendants, Mr and Mrs Wilson, WPI and WPA counterclaim for damages for breach of contract and common law duty in respect of a loss of profits, the cost of remedying deficiencies in the boiler and pellet plant, increased labour costs and damage to grain silos. The defendants further claim a set-off of any amount owing by WPI to the plaintiff under the loan agreements.
Issues to be resolved
There are a large number of issues to be resolved in these proceedings. They can be summarized as follows:
1.   What were the terms of the plaintiff’s retainer as to scope of works, price and time frame?
2.   Who were the contracting parties?
3.   What, if anything, is GSS entitled to be paid for work performed for the defendants?
4.   Did GSS render invoices during the course of the retainer and, if so, was there an agreement for deferred payment of invoices?
5.   What entitlement do the defendants have under the counterclaim?
6.   What is GSS’ entitlement under the loan agreements?
7.   Is the lien valid?
Summary of findings:
For the reasons that follow I find that:
·The plaintiff has not established its breach of contract claim or its claim in quantum meruit.
·That WPI is bound by the agreements to defer payment of
invoice SINV045472 for $76,092.75 and
invoice SINV045589 for $39,708.93.
·WPI is entitled to a credit of $10,000.00 under the agreement to defer payment of SINV045472 for the payment made to the plaintiff on or about 30 December 2015.
·That the plaintiff is entitled to recover $45,000.00 for the loans from WPI.
·That WPI has failed to establish its counterclaim for breach of contract.
·That WPI is entitled to damages from the plaintiff of $30,000.00 inclusive of interest for breach of its common law duty of care.
·That the workers’ lien registered by the plaintiff on land owned by WPA is invalid.
·That WPI is entitled to set off the $45,000 it owes to the plaintiff under the loan agreements against its entitlement to damages in the sum of $30,000 under the counterclaim.
The Trial
This trial commenced on 13 March 2018. It was originally listed for eight days. The trial ultimately took 29 days and concluded with submissions on 29 October 2018. This is a significant underestimation of trial length. Besides the obvious impact on the parties involved in this litigation, such underestimates cause difficulties with court listings, are an inefficient use of limited court resources, and cause inconvenience for other litigants.
Part of the reason for this overrun was a failure by the parties to reach any agreement as to the conduct of the trial or issues in dispute. The tender books were a prime example of this lack of cooperation. Eleven lever arch folders were produced together with other bound volumes of material. There appears to have been no effort made to limit the volume of material by agreement. Much of what was contained in the eleven folders was not ultimately tendered. Much of what was tendered was a matter of form rather than substance. The manner in which material was ordered and indexed in these folders was unhelpful to prompt identification of relevant documents and played its part in slowing down the trial.
In my view, it is incumbent upon parties to litigation, and their representatives, to endeavour to identify precisely the issues in dispute and to provide the evidence, both oral and documentary, related to those issues in as concise and logical a form as possible. Regrettably this did not occur in this litigation.
The Evidence
The plaintiff’s witnesses comprised a number of employees and former employees of GSS: Alexander Jenner-O’Shea, an engineer; James Ritchie, a fitter and turner; Ross Caven, a fitter and turner; Anthony Albanese, a boilermaker; Stephen Richter, the managing director of GSS; and Joanne Court, a certified practicing accountant. The plaintiff also called Marijan Mikulic, an engineer who prepared a report for the plaintiff and attended a conclave with the three experts engaged by the defendants. Finally, the plaintiff tendered a statement of Elizabeth Ockleshaw, a handwriting expert, by consent.[1]
[1] Exhibit P66.
The defendants Brian and Jillian Wilson, both gave evidence as did their son, Matthew (Matt) Wilson. The defendants called Craig Jaeschke, the previous owner of the pellet plant; Ian Tucker, who was engaged by the defendants to apply for a Commonwealth grant; and Craig Eckert, the defendants’ banker. In addition, the defendants called three expert witnesses: John Bryant and Paul van de Loo, both engineers, and Ty Masters, a boilermaker who is licensed to commission boilers. Remarkably, in view of the nature and extent of the counterclaim, there was no expert accounting evidence.
In addition to the oral evidence and the numerous exhibits tendered, a view was conducted at the defendants’ Clements Gap property. This was very helpful in understanding the evidence that followed.
Mr Jenner-O’Shea impressed me as a very careful witness whose evidence I accept in general terms. He is no longer employed by the plaintiff and works overseas. Of the project workers, Mr Caven and Mr Ritchie were not very good with dates but did appear to have a good recall of various events. Both made appropriate concessions. Mr Ritchie was not on site for a substantial part of the project due to injury. Mr Albanese struck me as a very defensive witness with a limited memory for various events. He did however complete his time sheets in a more detailed fashion than the others which assisted his evidence.
Mr Stephen Richter was not an impressive witness. He was vague on a surprising number of issues. Given he is the managing director of the plaintiff and the self-described project manager of this project he appeared casual, even cavalier, in his approach to the commercial arrangements. His evidence was often difficult to follow. Ms Court was also rather vague. This is perhaps because she is no longer employed by the plaintiff; however, her evidence was unhelpful in circumstances where one would have thought that at least some of the accounting and invoicing issues would have been readily explained.
All the expert witnesses were clear and helpful. Mr Masters and Mr Van de Loo were particularly impressive.
Of the defendant’s witnesses Mr Jaeschke was experienced and knowledgeable about the pelletising process with a good recall of the events in which he was involved. Mr Tucker was a reasonable witness although some aspects of his evidence were confusing as will be seen in the discussion of that evidence. Mr Eckert was an impressive witness who appeared to have a clear recall of events.
The Wilsons struck me as a very pleasant family involved in their family life and farming business. They appear however to be somewhat naive about commercial arrangements. Whilst the Wilsons were undoubtedly enthusiastic about the saltbush project it is clear that they were busy with other farming matters. It seems likely that they took their eyes off the ball leaving the plaintiff to conduct the project with little oversight or guidance. It is further clear that, as a family, they have discussed these matters on a number of occasions and it appears likely that these discussions have, consciously or unconsciously, impacted upon their evidence.
Mr Brian Wilson is plainly an intelligent man. His evidence appeared considered and cogent. Mrs Wilson was very nervous and, perhaps in consequence, quite dogmatic and unwilling to make concessions. Some aspects of her evidence were particularly troubling as will be seen. Mr Matt Wilson was openly hostile towards Mr Richter and somewhat defensive when challenged about aspects of his evidence. He nonetheless impressed as an intelligent witness who gave clear evidence.
Despite the extraordinary quantity of paperwork involved in this litigation, a key difficulty is that there is no documentation of agreements reached between the parties. Whilst it is uncontroversial that the defendants engaged the plaintiff to undertake some work, none of the parties behaved in a businesslike manner at the time arrangements were made between them. This situation continued until the arrangements were terminated. The approach taken by both sides of the equation could best be described as casual. There is now considerable dispute as to what was agreed; in particular as to the scope of the work and the basis upon which it was to be costed and paid for. In many respects, the version of events given by Mr Richter on the one hand and the Wilsons on the other cannot stand together. Making all due allowances for differing perspectives and the vagaries of memory some of their evidence is so contradictory that it cannot be explained as a mistaken appreciation of events. Someone must be attempting to mislead the court. Such an assessment cannot be performed on demeanour alone. Where possible I have had reference to documents and independent evidence. In some circumstances, I am left in the position that I simply do not know where the truth lies.
De bene esse rulings
Two exhibits were received de bene esse; exhibit D96 a diary note of Mr Brian Wilson and exhibit P112 Mr Van de Loo second report dated 27 October 2017. Both were objected to on the basis of relevance. Having considered the submissions; I uphold the objection in both cases. I will not receive those exhibits.
The Pellet Plant Project
Mr Brian Wilson saw the potential to harvest the saltbush which grows naturally on the Wilson farming land and to use it in pellet form with other ingredients as a new type of livestock feed pellet. Pelletising ingredients such as barley and hay is commonplace. The introduction of the ingredient saltbush is not. Native saltbush grows throughout Australia. There are many different types of saltbush. Stock feed on saltbush. It is a source of protein. Sheep fed on saltbush have a market advantage.
Initial tests, with Wilson stock eating pellets formed in a makeshift way in the Wilson’s kitchen, proved successful. Building on this, the Wilsons obtained a State Government grant for $200,000.00 which enabled them to purchase a second-hand boiler and pellet plant machine from Hill River Hay in about mid-June 2014. The purchase price was $115,500.00. These items were then about 10 years old and had not been in use for some 12 months although Hill River Hay indicated that they were operable.
The Wilsons constructed a large shed for the pellet plant and a smaller shed adjacent to the pellet plant shed for the boiler room. They arranged for the supply of power, water and natural gas to those sheds. It was necessary for the Wilsons to reassemble the pellet plant machine, arrange for the commissioning of the boiler and to construct a steam line from the boiler to the pellet plant. This, in broad terms, is the work that GSS was engaged to undertake.
The items of equipment in the pellet plant fall into four categories. The first category comprises the pre-pelletiser items which chop or mill the ingredients to a sufficiently fine size to enter the pelletiser. The second category comprises the boiler and associated steam piping which provides moisture to the milled ingredients in the pelletiser. The third is the pelletiser itself and the fourth relates to the cooling and finishing of the pellets after they leave the pelletiser.

The pelletiser’s job is to combine milled down ingredients, such as hay, saltbush, barley and legumes. The pre-milled dry ingredients are fed into an overhead storage bin, the pre-pelletiser, to be moistened using steam generated by the boiler. That mixture is then fed into the fast rotating barrel of the pelletiser. The barrel has a circular grate with holes cut into it at one end (a die ring). As the barrel spins, the centrifugal force pushes the mixture outward through the holes of the die ring. A knife housed on the outside of the die ring cuts the pellets to a pre-determined length. The pellets are then conveyed into a bin and are cooled.
The pre-pelletiser setup, as it was at Hill River Hay, comprised the following items of equipment:
·The hay teaser; a large conveyer belt onto which bales of hay are placed in order to be fed into the chopper.
·The chopper; a number of rotating blades inside a housing which roughly chops up the hay into 5 to 10cm pieces.
·The hammermill; a machine that strikes the mixed ingredients with a number of rotating hammers powered by an electric motor to further mill down or crush the mixture. When the mixture is of a sufficiently small size it falls through a grate at the bottom of the mill known as the hammermill screen. From there the mixture is transported into the pre-pelletiser bin mounted above the pelletiser.
After the pellets are made in the pelletiser they are transported to the cooler and from there they are transported to a silo or other storage receptacle. The transport of ingredients and pellets throughout the plant is done automatically through augers.
GSS’s involvement was originally in relation to the boiler; the Wilsons having started to assemble the pellet plant themselves. There is some contention about whether it was agreed that GSS would perform all works necessary to commission the boiler or just manufacture a steam line from the boiler to the pellet plant. In any event, GSS was first contacted by the defendants about undertaking works on site in late April 2015. GSS commenced work in early May 2015. At some point GSS was also engaged to do work in relation to the pellet plant. GSS continued on site until on or about 30 November 2015.
The Contract or Contracts
The plaintiff contends that there was one contract between the parties that was subsequently varied. The defendants say that there were two contracts described in their pleadings as the boiler contract and the pellet plant contract.
The plaintiff says that the agreement is partly oral, partly written and partly implied. It is said that in or about May or June 2015 Mrs Wilson, either on her own behalf and/or on behalf of the Wilson partnership and/or WPI and/or WPA entered into an agreement under which George Street Steel would provide services for the design, development and construction of a pellet plant and ancillary equipment. The agreement comprised a number of emails passing between Mr Richter and Mrs Wilson and conversations between Mr Richter and Mr and Mrs Wilson.[2]
[2] Second Statement of Claim [8].
GSS contends that the initial agreement was subsequently varied, at a meeting on 16 June 2015 for which minutes were prepared, to divide the services into three stages.[3]
[3] Second Statement of Claim [8A].
GSS says that there was a third variation in early September 2015 until 27 November 2015 to expand the services such that the plaintiff’s employees were required to prioritise the making of pellets over the works constituting the second stage of the services. It is said that this variation occurred by way of oral directions given by or on behalf of the defendants to the plaintiff’s employees on site.[4]
[4] Second Statement of Claim [8B].
The plaintiff contends that, at all times, the services were provided on a time cost basis of $100 per hour for labour and materials to be supplied at cost plus a mark-up of 15%. Invoices were to be rendered on an interim basis to be paid within 30 days, or alternatively, within a reasonable period of time.[5]
[5] Second Statement of Claim [9]-[12].
The plaintiff says that subsequently there were two agreements for deferred payment of invoices. These agreements occurred on or about 12 August 2015 and on or about 21 September 2015. These agreements for deferred payments were either standalone agreements or alternatively formed part of the terms of the agreement.[6]
[6] Second Statement of Claim [15]-[23].
The defendants contend that on or about 29 April 2015 GSS and WPI entered into the “Boiler Contract”. The terms were entirely oral and agreed in conversations between Mr Richter of GSS and Mrs Wilson of WPI. The express terms of that contract were that GSS would provide services to assemble the boiler; that after assembly the boiler would be operable and be able to supply sufficient hot water to enable the pellet plant machine to operate; that the price would be $23,000 inclusive of GST; that the boiler would meet SafeWorkSA safety standards, pass an inspection and be certified safe and that the work would be complete by 13 May 2015. It is further said that there was an implied term of the boiler contract that the plaintiff would provide the work with the skill and care of a reasonably competent and diligent professional engineer and boilermaker. The Wilsons contend that on or about 16 June 2015, as the result of a tax invoice issued in respect of the boiler contract, the parties agreed to an increase in the capped price to $48,777.32.[7]
[7] Statement of Counterclaim [7]-[9].
The defendants further contend that, in about early June 2015 GSS and WPI entered into a second contract, the “Pellet Plant Contract”. The express terms of the pellet plant contract were that GSS would assemble and commission the pellet plant machine including minor ancillary works such as the construction of a stone trap and drying container; that after assembly, the pellet plant machine would be operable and achieve a minimum output of 100 tonnes of pellets per week, based on a 20 tonne per 8 hour day production capability, over 5 days; that the price was capped at $23,000 inclusive of GST inclusive of all labour and materials and that the works would be completed in 4 to 6 weeks; that is by mid-July 2015. The capped figure was subsequently varied by oral agreement to $76,092.75 on or about 24 August 2015. This contract was oral and agreed in conversations between the Wilsons and Mr Richter. The defendants deny that there was a variation of the agreement to divide the services into three stages. The defendants say that the scope of work has remained the same throughout the pellet plant contract and that those works were discussed on 1 June 2015 and documented in a Gantt chart prepared by Mr Richter the same day. [8]
[8] Defence to second statement of claim [8]-[12]; Statement of Counterclaim [13].
The Plaintiff’s Breach of Contract Claim
The plaintiff says that the defendants are in breach of the contract because the defendants have failed to make payment of the sum of $359,574.09 for the provision of materials and services under ten tax invoices itemised in paragraph 25 of the Statement of Claim. At the outset of the trial the plaintiff reduced its claim by $52,830.36 by withdrawing invoice number SINV045849 dated 6 November 2015. The amounts charged in that invoice were duplicated in a further invoice issued in January 2016. Further, the plaintiff claims outstanding interest under the terms of deferred payment agreements set out in paragraph 26 of the plaintiff’s statement of claim. No issue is taken with the defendants’ termination of the agreement.
The defendants say that, apart from the invoice received on or about 16 June 2015, which they say was for the boiler contract, they did not receive any invoices from the plaintiff, nor did they expect to receive such invoices. Their expectation was that they would be billed at the conclusion of the pellet plant works. The defendants deny entering into agreements to defer payment of invoices. They do not admit any obligation to pay the sum of $359,574.09 or the lesser amount now claimed of $306,743.73.
Counterclaim
The Wilsons contend that the services provided by GSS in respect to the boiler were not competently or diligently performed and caused the boiler to be unsafe. Further the works were not completed by 13 May 2015.
The Wilsons say that it was an implied term of the Pellet Plant Contract that GSS would perform the work with the skill and care of a reasonably competent and diligent professional engineer, boilermaker, machinist, fabricator and welder. They contend that it was an implied term that, after completion of the works, the Pellet Plant would be in safe condition and enable WPI to comply with its duty under s.21 (2) of the Work Health & Safety Act 2012 (SA). It is further said that GSS owed WPI a common law duty of care to perform the work and provide its services with the skill and care of a reasonably competent and diligent professional engineer, boilermaker, machinist, fabricator and welder.
The Wilsons contend that the pellet plant works were not competently or diligently undertaken. Further, the works were not completed by mid-July 2015 and the works resulted in a pellet plant which was inoperable, alternatively barely operable; it did not produce the minimum 100 tonnes of saltbush pellets per week. The situation was compounded by the alleged shortcomings in the work performed by GSS in relation to the boiler.
By reason of the breaches alleged in respect of each contract and/or the breach of common law duty, WPI claims to have suffered loss and damage. This was particularised in paragraph 23 of the Statement of Claim. Ultimately, WPI did not pursue all of the aspects particularised. The remaining aspects of the counter-claim that are pressed are:
·Loss of profits from the sale of saltbush pellets which should have been produced and would have been sold if the pellet plant had been operable.
·The cost of remedying the deficiencies with the boiler and pellet plant.
·Expenditures which, but for the alleged breaches, WPI would not have incurred.
·Loss by reason of GSS damaging equipment.
The defendants say in their written submissions that it is uncontroversial that work on the pellet plant was not complete as at 30 November 2015 when the Pellet Plant Contract was terminated by the defendants. The basis of termination is pleaded by the defendants to be the fundamental non-performance by the plaintiff of the pellet plant contract and repudiatory breach. After 30 November 2015, the boiler equipment was inspected by Mr Masters and it failed commissioning.
The defendants say that a profit margin of $100.00 per tonne should be used to assess damages for loss of profits. The basis for this is the evidence of the Wilsons and the sales in the current period. It is said that the lost profit claim, taking into account contingencies, is $500,000.00 for the period 1 October 2015 to 19 October 2016. The direct loss claim is particularised as follows:

·      Failed commissioning of equipment in Boiler room and steam line and rectification costs of same
$ 6,025.00

·      Unauthorised works by plaintiff
$ 13,283.92

·      Unnecessary equipment acquisition costs.
$ 63,659.00

·      Damaged equipment
$ 16,300.00

·      Cleaning Rainwater tanks of effluent $   1,000.00

·      Fumigation of raw ingredients
$   2,664.50

·      Loss of raw materials $ 16,620.00
TOTAL:              $119,552.42

The plaintiff denies that there were two separate contracts and says that if the Court accepts the plaintiff’s position as to the terms of the retainer then there is no breach of that retainer. If the Court accepts the defendants’ position as to the contractual terms between the parties the plaintiff says that it substantially performed the contract; that the defendants have not established that the machinery purchased was capable of producing 3 tonnes per hour with saltbush and that there was no failure to complete the project within a particular time frame.
The plaintiff contends that the defendants have not established any breach and accordingly there can be no loss of profits. In the alternative, the plaintiff contends that if there was a breach the defendants have not established a loss of profits claim as there is insufficient evidence before the Court to establish what the profit may have been. The plaintiff further disputes the various aspects of the direct loss claim.
Lien
On 11 March 2016 GSS registered a worker’s lien under s 5 of the Worker’s Liens Act, 1893 (“the WLA”) upon land owned by the second defendant, WPA (“the land”). The lien claims the sum of $359,574.09 for the provision of services and materials under the contract.
The defendants say that the lien is invalid because there are no moneys owing to the plaintiff and because the plaintiff did not do any work or use any materials on the land to which s 5 of the WLA applies. Further it is said that the pellet plant machinery was not, and is not, a fixture on the land and that WPI, the contracting party under the pellet plant contract, is not the owner of the land.
Loan Agreements
It is common ground that Stephen Richter agreed to lend the Wilsons $50,000. This sum was paid in three tranches; $5,000 on 1 September 2015, $20,000 on 2 September 2015 and $25,000 on 7 September 2015. The loan was unsecured. It is less clear who the parties were; what the terms were, what the amount outstanding is and whether any outstanding amount is to be offset and by whom.
GSS issued proceedings against WPI in the Adelaide Magistrates’ Court in action number AMCCI-16-911. Those proceedings were transferred to this court to be heard with the substantive proceedings. In its particulars of claim, dated 16 March 2016, GSS pleads two loan agreements and a total loan of $45,000. The first loan agreement is said to be between GSS and the first defendant, WPI, for the sum of $20,000. The terms were said to be oral and subsequently set out in a letter from the plaintiff to Mrs Wilson dated 2 September 2015.[9] The second loan agreement is said to be between the same parties for the sum of $25,000. The terms are again said to be oral and subsequently set out in a letter from the plaintiff to Mrs Wilson dated 7 September 2015[10]. In both letters, the borrower is stated to be WPA rather than WPI. Both agreements are said to require repayment in full in three months with interest accruing at 9.45% per annum calculated daily. The particulars of claim allege that there has been no repayment of the principal and no payment of interest.
[9] Exhibit P2, pp 425-426.
[10] Exhibit P2, pp 429-430.
In the defence filed by WPI in the Magistrates’ Court on 11 April 2016, WPI admits that it borrowed the sum of $50,000 from GSS despite the pleadings claiming only $45,000. It is further said that the agreements were oral in conversations between Mr & Mrs Wilson on behalf of WPI and Stephen Richter on behalf of GSS on or about 31 August 2015; that there was no interest payable and that there was no requirement to repay the loan or loans within three months.
WPI contends that it made two loan repayments; the first of $5,000 on 17 December 2015 and the second of $10,000 on 30 December 2015 and that, therefore, the outstanding balance of the loan is $35,000. WPI claims a set-off of the outstanding balance of the loan against the liability of the plaintiff to WPI in the within District Court proceedings.
The disparity in the loan amount may have its answer in the documents provided by the plaintiff in support of this claim.[11] These suggest that there was a loan from Mr Richter personally to WPA for $5,000 on similar terms to the first and second loan agreements particularised in the statement of claim. Mr Richter gave evidence that he could not recall if these documents were ever provided to Mr or Mrs Wilson. They are not signed. In view of this, the plaintiff conceded that the terms of the agreement or agreements were oral. GSS now says that a total sum of $50,000 was advanced to WPI and was repayable on demand. GSS further concedes that a repayment of $5,000 was made in late December 2015 and that, accordingly, the amount outstanding is $45,000. GSS accepts that a further payment of $10,000 was received from the Wilsons but it is said that the plaintiff was entitled to, and did, apply this to the outstanding invoices.
[11] Exhibit P2, pp 419-420.
GSS contends that the loans are a separate and discrete matter and do not arise from the contractual relationship between the parties as to the pellet plant. Accordingly, GSS maintains that the defendants are not entitled to set off any liability for the loans as against any liability that GSS might have to the defendants under the counterclaim.
On the basis of WPI’s admissions and the concessions of GSS I therefore find that, notwithstanding suggestions to the contrary in the pleadings and the documents, there was an oral loan agreement between GSS and WPI; that the total amount of the loan was $50,000 and that at least $5,000 of that loan has been repaid. The plaintiff appears to have abandoned the claim for interest and to have conceded that payment was to be made on demand. In the absence of any evidence of an earlier demand, I find that the first demand was the filing of the claim in the Adelaide Magistrates’ Court on 16 March 2016.
The only remaining loan issues are whether the payment of $10,000 made on 30 December 2015 ought to have been applied to the loan thus reducing the amount outstanding to $35,000 and whether there is an entitlement to a set-off in respect of the outstanding loan amount.
Key Interactions
The First Contact
The first contact between the plaintiff and the defendants occurred in April 2015. By this point the Wilsons had purchased the pellet plant and boiler from Hill River Hay. They had commenced placing the various parts of the pellet plant machine in the shed that had been built for that purpose. The boiler was in a separate shed adjacent to the pellet plant shed. Mrs Wilson sent an email[12] to Mr Richter on 28 April 2015. That email included a number of emails concerning the boiler and reads as follows:
Hello Stephen
We have met a long time ago through our children. Elise was at St Marks with Harriet and Matt with Annie. I hope they are all going well.
Our family is starting a new Saltbush Livestock Pelleting Plant at 206 Wilson Road, Clements Gap. We are working with Anthony Buller from RCR Energy Services who is certifying our boiler.
I will forward all emails to date so you are up to date with what needs to be done.
Please ring me if you have any questions or need directions to our place. We will all be home tomorrow to help in any way.
[12] Exhibit D16.
It is uncontentious that a meeting occurred at the Wilsons’ property the day after this email on 29 April 2015. There is dispute as to who was present at that meeting and what was discussed in relation to the scope of work on the boiler. It is however common ground that there was no discussion about GSS undertaking work on the pellet plant at that meeting.
Mrs Wilson says that she met with Mr Richter and Mr Jenner-O’Shea. Mr Jenner-O’Shea said that he was present at the meeting with another person from GSS. He said he could not recall who that was. He thought that it wasn’t Mr Stephen Richter but he cannot be certain. Mr Richter said that he asked Mr Jenner-O’Shea to go and have a look once he received the email and to take it from there. He does not think that he attended this meeting.
Mr Jenner-O’Shea said that he spoke to Mrs Wilson about what was needed. She asked if GSS would be able to plumb a steam line from the boiler to the pelletiser. He advised that they could do that work. Mr Jenner-O’Shea’s evidence was that there was no discussion as to pricing at that time. Mr Jenner-O’Shea discussed the state of the steam equipment that was located outside the shed with Mrs Wilson. Some of it was unsuitable for reuse. He told her that he would research replacements for these and that he needed to get a better understanding of what was required in order to do the plumbing. He left the meeting understanding that he was to attend to this and that he was to return to undertake a site survey and scope.

Mr Jenner-O’Shea subsequently obtained information about the parts required, pricing and a drawing of the steam line from a company called Spirax Sarco.[13] He prepared what he described as a “general arrangement plan” which sets out the arrangement of the boiler and the pellet plant.[14] He conveyed this information to Stephen and Hugh Richter. He was aware that a quotation was prepared but did not recall if he ever saw that document. It is clear from his evidence that Mr Jenner-O’Shea had no involvement in the contractual arrangements for this work.
[13] Exhibit P10.
[14] Exhibit P9.
In cross-examination Mr Jenner-O’Shea was shown an email from Mr Hugh Richter to Mrs Wilson dated 7 May 2015.[15] That email says:
Spoken to Dad and Alex and we will be pushing to have our part of the steam project finished by Wednesday 13 May.
We use Dave Parker from Aztec analysis to pressure test most of our jackets he can come down from Port Augusta if you would still like to go ahead with commissioning the boiler next week.
[15] Exhibit D17.
It is not clear whether this email is referring to the boiler or the steam line or both. Mr Jenner-O’Shea could not recall the context of this email. He believes that GSS was installing the steam line after 13 May. He did not give evidence about any other entity working on the boiler or steam line.
I note that at this stage there was a further email exchange between Mrs Wilson and Mr Hugh Richter on the same date, 7 May 2015.[16] This was not put to either Mrs Wilson or Mr Jenner-O’Shea. Hugh Richter was not called. The emails were tendered by consent at the conclusion of the case. I will deal with these emails in the context of Mrs Wilson’s evidence.
[16] Exhibit P113.
Mr Stephen Richter said that as far as he can recall he did not attend the first meeting with Mrs Wilson but rather that he passed Mrs Wilson’s email and enclosures on to Mr Jenner-O’Shea asking him to go and have a look to see what was involved. He thought his son Hugh Richter went to that meeting. His son was employed by the plaintiff as an estimator. Mr Hugh Richter was not called to give evidence; there was no explanation for this.
Mr Richter was asked whether he gave an indicative price of $23,000 to Mrs Wilson at the first meeting. He said that he had no recollection of that because he did not recall going to the meeting. He also said that it would in any event have been difficult to do so because he did not have the prices for the components.
Mr Richter says that his involvement in the project started when he approved the quote. He said that to put the quote together they had to source some difficult or rare items which took some time.[17] Mr Richter identified a letter dated 20 May 2015[18] as the quote. This letter was sent under cover of an email entitled “To date costs”. The heading of the letter refers to both the steam line and “pellet plant progress”. The letter includes a list of components for the boiler from Spirax Sarco invoiced at $14,301.98 which Mr Richter says will be $16,447.27 “with our mark-up”. It is then said that the feed water tank and blowdown vessel require modification and that:
It will take about 5 days with 2 men to install the fittings and pipework from the boiler to the pellet machine and from the feed water tank to the boiler.
Trade Labour Cost approximately $10,000.
We will supply a detailed account each week.
We plan to complete this component of the work by the 11^th June when the Boiler Inspectors are due on site.
[17] TX 745.
[18] Exhibit P29.
The quotation is expressed to exclude GST and electrical work. It is said that payment is to be “30 days from the date of delivery”. Mr Richter said that that meant from the date of the invoice.
Also included as an attachment to the letter was a document described as “... the work diary to date and the current cost and material details”. The work diary indicated a number of tasks related to the boiler and to the pellet plant. The total amount for labour and materials on this document was $6,833.72; the labour component was $6,600 and the materials $233.72. Mr Richter gave evidence that this amount was not included in his quotation; in other words, that the quotation was for future work.
In cross examination Mr Richter appeared to concede that there was a capped price for the steam line work when he said:[19]
[19] TX 854-855.
A.It was a fixed price contract to do the steam line, the rest was an hourly rate with an open-end scope.
Q.So you agree with me there were two contracts.
A.One flowed from one to the other.
Q.Well, you've just described one as a fixed price contract and the other as a non-fixed price contract.
A.That's correct.
Q.This were two contracts, weren't there.
A.No, one can be a variation of the other. Doesn't have to be two contracts.
Q.So there's a variation of the first contracts now, was there.
A.May not be.
Q.Was there or wasn't there.
A.You're asking the question.
Q.I'm asking for an answer. Was there a variation or wasn't there.
A.In the quotation that I gave the Wilsons I said we would do the steam line in five days at $100 an hour which was $10,000. I used the same formula for the rest of the project.
Q.Well you just referred to and gave evidence that was a capped priced contract.
A.It is.
Q.And yet the work on the pellet plant according to your case wasn't.
A.No.
Q.You've not pleaded the variation, have you.
A.No, it's a continuation, it's an hourly rate.
Q.A continuation, it's an hourly rate.
A.Not unusual.
Q.Your evidence is that it was the same contract, a continuation of the contract but the continuation had different terms. Do I have that right.
A.That's correct.
Mrs Wilson says that Mr Richter attended the meeting on 29 April 2015. Mrs Wilson had a list from RCR of all the requirements for the boiler work which she had sent to Mr Richter with her email. She ran through everything that was on that list with Mr Richter and said that works had to be done on the boiler, the steam line, that there had to be lagging and correct fittings. She told him that the Wilsons needed the boiler and the steam-line to be commissioned to an appropriate standard. Mr Richter told her that they could do those works, that they were qualified and that the work “would be easy”. Mr Richter told her that it would cost approximately $23,000 and that the time to complete the work would be 4 to 6 weeks. Her understanding was that Mr Richter would go away and send a quote. At that stage, she had not instructed Mr Richter to perform any works. Mr Jenner-O’Shea did not say much at all.
Mrs Wilson said that after the meeting with Mr Richter, on 12 May 2015, she included a figure of $30,000 for GSS in the budget spreadsheet that she maintained to keep track of finances. Her practice was to round figures up in the budget to be conservative. She recalled receiving the email from Mr Richter on 20 May 2015. She replied on 22 May 2015 asking GSS to “go ahead with the work required”.[20]
[20] Exhibit P30.
Mrs Wilson was cross-examined about her understanding of the documents she received on 20 May 2015.[21] She said that she read the letter and understood that the labour cost would be approximately $10,000 and materials of $16,447.27. Mrs Wilson agreed that the charge out rate for the boiler work was $100 per hour because that is what they were told by Stephen Richter. She said that she understood from Mr Richter that they were specialised workers and she assumed that was “an expert’s rate for the boiler only”[22]. It was put to her that the work diary indicated that this rate applied to all of the work including in respect of the pellet plant. Mrs Wilson did not accept that there was an agreement between her and Stephen Richter prior to 1 June that GSS staff were authorised to work in respect of the pellet plant. She further did not accept that there was only one agreement that workers would be charged at $100 per hour in respect of the boiler, the steam line and the pellet plant.
[21] TX 1957-1963.
[22] TX 1968.
Mrs Wilson agreed that she was aware that what she described as “minor works” were carried out on the pellet plant by GSS employees prior to the letter of 20 May 2015. This was, she said, at the request of James Wilson, her husband’s cousin, who was at the time assembling the pellet plant machinery. The tenor of her evidence was that this occurred without her authority or that of her husband. Mrs Wilson did not have any understanding as to what, if anything, GSS was to be paid in relation to that work[23]. James Wilson was not called to give evidence; there was no explanation for this.
[23] TX 1957-1962.
There was, as I have said, an exchange of emails between Mrs Wilson and Mr Hugh Richter on 7 May 2015.[24] Mrs Wilson included the same emails from RCR that were included in her email to Mr Stephen Richter dated 28 April 2015 saying:
Hello Hugh
Please find below the steps that will need to take to have everything operational.
Can you please advise if your person from Port Augusta can do any of the jobs listed below? I am not sure if I am doubling up on people.
Can I go ahead with the commissioning that they are travelling on site for if I have the certificate of compliances from the plumber (already done) and the electrician (still to do)? Are these the people that you require for your final inspection or can we get the man from Port Augusta?
I am a little confused if the pelleting plant also has to be operational too or certain parts thereof.
If you could please ring me to discuss.
[24] Exhibit P113.
It is very unfortunate, to say the least, that Mrs Wilson was not asked about these emails. The reply from Hugh Richter to this email is not clear and it is also not clear whether there was a telephone discussion in accordance with Mrs Wilson’s suggestion. With no explanation, the emails are most unhelpful. They suggest that, contrary to Mrs Wilson’s evidence, not all of the matters in the RCR emails were discussed at the initial meeting but that they were the subject of on-going discussion with the plaintiff. It seems possible that there was an initial discussion of limited work by the plaintiff, perhaps the steam line, but that Mrs Wilson sought, by this email, to expand those works. It is not clear whether any of this information was communicated to Mr Stephen Richter or whether it was included in the quote. He was not asked about this.
Also part of this exhibit is an email from Mrs Wilson to Luke O’Dea, the electrician, dated 26 May 2015 which reads as follows:
Hello Luke
I wanted to give you an update. I am trying to make sure that everyone is in the know with the progress so far. I hope you can all work together as this is completely out of my comfort zone – sorry.
We have had Ty Masters from Adelaide Inspection Services come to inspect the boiler. His mobile contact details are: (number provided). If you want to speak to him regarding what is required regarding the boiler being commissioned, please give him a call.
Ty has been in contact with RCR who commission the boiler and Cheesmans (Stephen Richter) who are working on having the pellet machine and steamer ready. Stephen’s number is (Provided)
The new date where we hope to have the pelleting plant complete is the 11^th and 12^th June. Cheesmans believe that they will have the steamer and everything ready to go by this date. Ty and RCR will continue to work on the boiler until it is commissioned and safe.
Can you please advise if you can have the electrical ready by this date and if this suits you?
Can you please email me the Certificate of Compliance.
Thanks for everything.
This email is also contrary to the evidence that Mrs Wilson gave. It appears from this email that, as at 26 May 2015, RCR and Ty Masters were working on the boiler and that GSS were working on the steam line and, possibly, the pellet plant. Again, it is most unfortunate that this material was not put to Mrs Wilson. Likewise, Mr Masters was not asked about this. It also appears that, contrary to his evidence, Mr Stephen Richter may have had some involvement in the works, whatever they may have been, at this point. The email was not put to him for comment.
Mr Brian Wilson was not at the April meeting as he was at the Wilson’s Whyalla property for shearing. His wife informed him, in a telephone call, of her meeting with Mr Richter including that Mr Richter gave a quote for around $23,000 to get the boiler to the stage it could be commissioned.[25] He did not meet Mr Richter until 1 June 2015. He was not asked about the documents sent under cover of the email dated 20 May 2015. Mr Wilson was aware that his cousin, James Wilson, had spoken to some of the GSS workers about an issue he was having with the exit auger from the hammermill but he was not aware of any other contact with GSS about the pellet plant.
[25] TX 1297.
22 May 2015 – The First Boiler Inspection
Ty Masters gave evidence. He is a boilermaker and certified boiler inspector. Mr Masters says that there are typically two types of inspection prior to certification of a pressure vessel in this case the boiler; a dry inspection of the internals of the pressure vessel and a wet inspection of the pressure vessel which includes a steam pressure test. He attended at the Wilsons property on 22 May 2015 for the first, or dry, inspection. He was not asked who organised this nor who was present.
Mr Masters saw a very basic layout of a boiler assembly plant; everything was in its general set-up location. He was on site approximately 1 hour. He was unable to do a dry inspection of the boiler as it was full of water. He was given to understand that it had been full of water since the date of purchase. He was concerned because this can accelerate corrosion and cause holes in the boiler. They drained the water out whilst he was there; unfortunately, it is not clear who “they” were. There was some evidence of corrosion. Mr Masters suggested giving the internal boiler a flush out or clean out to remove any of the active corrosion cells to see what was underlying. He recommended replacing the blowdown vessel. The blowdown vessel is not a pressure vessel but the pressure vessel drains into it. It is not clear who received these recommendations.
Mr Jenner-O’Shea gave evidence that GSS took the blowdown vessel to their workshop in Port Pirie where they grit blasted it for inspection. This showed a large hole and as a result he recommended that the Wilsons purchase a new blowdown vessel. The timing of this is far from clear although the work diary that accompanied the quote of 20 May 2015 suggests that a worker called Dennis Rogers “picked up blowdown tank” on 18 May 2015; the location of the tank and the reason for picking it up is not clear. If the inspection at Port Pirie post-dated Mr Masters’ visit it is not clear why it was necessary given Mr Master’s advice. Mr Jenner-O’Shea said that he located a blowdown vessel at Forbes Hunt in Adelaide for around $4000 - $5000 which he recommended Mrs Wilson purchase direct to avoid the GSS mark up. He said that he thought that, ultimately, GSS purchased this.
Mrs Wilson said that GSS told her that there was a hole in the blowdown vessel and that it needed to be replaced. She did not think that this was recommended by Mr Masters.[26]
[26] TX 1956.
Mr Richter said that GSS purchased a new blowdown vessel after a failed inspection by Ty Masters. Mr Masters said they would need to purchase a new vessel so GSS purchased it and installed it. I have been unable to find an invoice related to that in the materials however it is true to say that the accounts are not itemised and the information supplied to supplement them is not particularly helpful. In any event, GSS workers were involved in the installation of the blowdown vessel. James Ritchie and Ross Caven described cleaning, stripping and assessing parts of the boiler in addition to working on the steam line.[27] Ross Caven also gave evidence of assisting in a range of work associated with the blowdown vessel.[28] The timing of this work is not clear because their time sheets[29] do not specify what activities they undertook on site but it seems likely that it was after the inspection by Mr Masters
[27] Ritchie TX 436-438; Caven TX 498.
[28] TX 547-552.
[29] Exhibit P2.
1 June 2015 - Meeting
Mr Richter and Mr and Mrs Wilson met at the Wilson property on 1 June 2015. This is the meeting at which the Wilsons contend that the second contract or pellet plant contract was agreed. Whilst this does not sit well with GSS’s pleadings, Mr Richter agreed in his evidence that there were discussions about the terms upon which the plaintiff would undertake work on the pellet plant on that date.
Mr Richter’s evidence was that this was the first time he can recall being on site. This was the first time that he met Mr Wilson. He could not be sure if this was the first time he met Mrs Wilson. Mr Richter said that he went out to discuss the project with Mr Wilson because he was concerned that there was a lot of other work going on that was not related to the boiler. He became aware of this through one of his fitters, Mr Ritchie. Mr Richter told Mr Wilson that he was not in a position to provide a quote for the pellet plant work but he told Mr Wilson that he would charge $100 per hour per man. Mr Richter said that he could not recall exactly what Mr Wilson said in response but Mr Richter left the meeting with the understanding that they were going ahead. They also discussed the layout that Mr Wilson required in terms of the pelletising process. There was no discussion of a budget or timeline. GSS was to use materials about the farm and those purchased with the pelletiser. Mr Richter’s observation was that, whilst these items were not new, they were in useable condition.
After the meeting Mr Richter produced what he referred to as a Gantt chart comprising a list of the jobs that had to be done, when and by whom. His intention was to expand that list as he went along. The Gantt chart included work on the boiler as well as the pellet plant. Mr Richter sent the Gantt chart to Mrs Wilson that evening via email.[30] He received a response from Mrs Wilson indicating that they were happy with the construction plan and indicating “an intention to carry on”.[31]
[30] Exhibit P31 and D21.
[31] Exhibit P32 and TX 755.
In cross-examination Mr Richter agreed with the suggestion that he asked Mr Wilson whether he wanted any assistance in putting the pellet plant together.[32] Mr Richter was aware from time sheets of his workers and discussions with them that they were undertaking some work on the pellet plant prior to 1 June 2015. He would not agree to a characterisation of those works as fairly minimal; rather he said they were “substantial in that they changed the aspect of the pieces of machinery”.[33] He had not spoken to any of the Wilsons about works at the pellet plant prior to 1 June 2015; at best, what was happening were some informal work arrangements which he had not approved.
[32] TX 862.
[33] TX 862.
Mr Richter denied that there was any discussion about the cost of the pellet plant project. He had no idea what it would cost at that stage:[34]
[34] TX 867.
Q.So, on your version of events, it was a straight $100 an hour per worker.
A.Yes.
Q.So, on your version of events, the Wilsons agreed to an uncapped non-time-limited financial expenditure in this contract, did they.
A.At that time, because we didn't know what we were doing.
Q.I suggest to you that that doesn't really accord with financial common-sense for them to have done that; do you -
A.No, it doesn't.
Q.I suggest to you that you did talk about a figure.
A.No, we didn't. How was I to know the figure?
Q.You're used to estimating jobs, aren't you.
A.Yes, and every job is different.
Q.And you saw this job on the day.
A.Yes, I did.
Q.I also suggest that Mr Wilson asked how long the job would take to complete.
A.Again, I had no idea.
Q.He asked though, didn't he.
A.He may have. I don't remember.
Q.I suggest you answered that question by saying 'Four to six weeks'; do you agree.
A.It could have been in that range, yes, if I -
Q.So you agree that you might have given that answer.
A.May have given that answer. Can't remember actually.

Mr Richter was again asked about this topic in the context of an email that he drafted in late November 2015 but did not send. In that email he referred to “the original verbal quote”. He then gave evidence as follows:[35]
[35] TX 952-953.
Q.So there was an original verbal quote for the pellet plant, wasn't there.
A.That's right.
Q.That was on 1 June, wasn't it.
A.Thereabouts, yes. Yes, 1 June.
Q.So you did discuss pricing for the pellet plant on 1 June, didn't you.
A.I didn't know the quantum of what I was doing. I knew that it had to be put together and in my discussions with Brian Wilson I said six weeks, so it was easy to work out what it would cost.
Q.And you spoke about money on 1 June, I suggest.
A.Only the hourly rate. I can't quote instantly on a project no matter the size of it. I have to sit down and calculate material costs, what we're doing, how much. I didn't have a scope, I had to create that myself.
Q.You had to scope the same day on 1 June, didn't you.
A.I wrote it myself, yes.
Q.This proposed email is referring to the original verbal quote, and I'm putting to you you can't read that any other way but saying you gave a dollar figure to the Wilsons.
A.I didn't give a dollar figure. I gave an indicative, so many days at so many hours.
Q.How many days did you quote.
A.I said about six weeks.
Q.How many hours did you quote.
A.That would have been two blokes by eight hours a day, five days a week.
Q.You told Mr Brian on 1 June.
A.Roughly, yes.
Q.With the intention of giving him some estimate of the dollar figure for the job.
A.I didn't have enough information to give a dollar figure.
Q.With the intention of giving him a rough estimate about the cost of the job.
A.That was my intent but it soon changed when we started building it, it was all over the place.
Q.Are you agreeing with me that you gave some kind of verbal quote on 1 June -
A.An hourly rate.
Q.And one also based on time.
A.Rough time.
Two workers at $100 per hour for 8 hours per day, 5 days per week for 6 weeks is $48,000.
Mr Richter said that he was aware that the Wilsons wanted the plant up and running as soon as possible. He agreed that there was a discussion about the predicted output of the machine and that discussion included that it had consistently achieved 3 tonnes per hour at the previous owner’s site. It was then put to Mr Richter as follows: [36]
[36] TX 868.
Q.I suggest that you told them that you'd be able to assemble the machine to achieve that same output on that day.
A.I'm not sure that I said that because there was another ingredient.
Q.Am I right in saying you can't be sure either way whether you said it.
A.I can't confirm on the output because there was another ingredient involved.
Q.So, coming back to my question, do you deny that you said it -
A.I've no idea.
Q.- you accept you said it, or you're not sure.
A.Not sure.
Mr Richter agreed that there was no discussion about invoicing or progress payments. He denied that his intention was to bill at the end of the project rather he said it was GSS’s normal practice to bill monthly but he agreed that he did not discuss that normal practice with the Wilsons. Mr Richter did not take any notes of the discussion nor did he document the agreement reached that day or at any point in time. The project was intended to be a very small project in the order of $50,000 to $75,000.[37]
[37] TX 869-870.
Mr Richter agreed that the tasks on the Gantt chart could be characterised as assembly of the plant and that there was no task dealing with experimentation or making pellets. All that was discussed with the Wilsons on 1 June 2015 was the assembly of the pellet plant and nothing else.
Mr Wilson said that he first met Mr Richter on 1 June 2015. On that day he, his wife and son Matt were looking at the boiler and the steam work with Mr Richter. Mr Richter said that it looked as though they could do with a hand with the assembly of the pellet plant. Mr Wilson responded by asking whether GSS did that sort of work. Mr Richter told him about the type of work that GSS did including a lot of industrial work at the smelters but also working on agricultural equipment. Mr Richter said, “this will be easy, we can do that”. Mr Wilson said these were his exact words. It was a phrase that Mr Richter would say quite often.[38]
[38] TX 1299-1300.
Mr Wilson asked Mr Richter how much he thought it would cost. Mr Richter said he wasn’t sure, he would have to work it out. Mr Wilson asked him whether it would be something like the boiler. Mr Richter said it wouldn’t be that much. Mr Wilson had in mind a price of $23,000. Mr Richter said that the work would take no more than 4 – 6 weeks. Mr Wilson informed Mr Richter that he had already been in contact with Flinders Hydraulics and O’Dea Electrical to do the hydraulic work and the electrical work. Mr Richter said that he would arrange a meeting with the various contractors.
They had a long conversation about what was required to assemble the pellet plant. Mr Wilson said he had some concerns about the fact there was not a stone trap and also about drying the saltbush, particularly in winter. They discussed a drying container. Mr Wilson thought that a shipping container would be a good solution. They also discussed a mixer that the Wilsons had already purchased. Mr Richter suggested placing that in the pre-pellet line rather than using the hay teaser because this would enable more accurate weighing of inputs. Mr Wilson said that he accepted that advice notwithstanding his original intention to use the hay teaser as it was at Hill River Hay. He said that they had extended the shed specifically to include the hay teaser and that the mixer had been purchased for use outside the pre-pellet line.
Mr Richter denies that the removal of the hay teaser and the inclusion of the mixer was his suggestion. I prefer the evidence of Brian and Matt Wilson on that topic. Matt Wilson never agreed with his father accepting Stephen Richter’s advice on that topic. He continued to advocate for the inclusion of the hay teaser; it was an on-going source of friction between him and his father. I accept that the Wilsons had extended the shed to accommodate the hay teaser and had purchased the mixer for other purposes. The minutes of the meeting of 16 June 2015 set out that rationale that Brian Wilson says Stephen Richter advanced to him on 1 June 2015 in support of his recommendation namely that it would assist with accurate measurement for quality accreditation purposes.
Mr Wilson said they gave the plaintiff a scope of works in that they spoke in depth about what needed to be done at the plant. He did not accept the proposition put to him in cross-examination that the project was a collaborative process. He denied that Mr Richter had told him that his men were going to be $100 per hour. Mr Wilson maintained that on the very first day they met they talked about how long to finish the plant and what it would cost.
Mrs Wilson gave evidence similar to that of her husband, as did their son Matt Wilson, both as to time to complete the project and the cost. Mrs Wilson said that when the meeting concluded Mr Richter was to go away and send back particulars on everything they had talked about. He was going to email them. They did not instruct him to undertake any work in that meeting. Both Wilsons said that cost and time frame were very important to them because of their financial circumstances; they were adamant that they were not in a position to agree to an open-ended contract for an hourly rate and with no end date agreed for completion.
1 June 2015 – The Gantt Chart
Mr Richter sent the Gantt chart[39] with an email[40] to the Wilsons describing it as “my initial plan for the construction of the Pellet Plant”. In summary, this work identified was:
[39] Exhibit D21.
[40] Exhibit P31.
·Installing the mixer on site;
·Fabricating, modifying and/or bolting down a number of conveyors or augers;
·Designing and fabricating a stone removal device;
·Designing and fabricating a mixer storage (the silo after the mixer) and pellet storage and limited work on the existing hammermill storage;
·Bolting down the hammermill, pelletiser, pellet cooler and other associated equipment;
·Installing the steam line and the works in the boiler room;
·Installation of duct work;
·Other minor works.
Mrs Wilson replied the following morning[41] saying that she had forwarded the Gantt chart to Matt and Brian and that they were “very happy with it”.
[41] Exhibit P32.
It is unfortunate to say the least the Mr Richter did not document any aspect of the discussion that took place that day including what he says was discussed about the basis upon which GSS would charge for its work.
3 June 2015 - Meeting
There was a meeting at the Wilson’s site office on 3 June 2015. It appears that this was called at the instigation of Mr Richter. Present at that meeting were Mr and Mrs Wilson, their son Matt Wilson, Mr O’Dea from O’Dea Electrical, Mr Freer from Flinders Hydraulics and Mr Richter. Mr Richter said that he wanted to make sure that everyone was on the same page and not working on top of each other. The purpose of the meeting was to ensure that all the different contractors understood what they were doing. There was an agenda provided and used to a degree but not strictly followed. Mr Richter said that there were no discussions about the time for completion or the project budget at the meeting.
Mr Wilson agreed that the agenda[42] accurately recorded the purpose of the meeting. Mr Richter discussed a time for completion of 4 to 6 weeks. Mr O’Dea expressed concern about whether he could complete the electrical work in that time frame but indicated that he would do his best. Mr Richter announced himself as the project manager. The topic of the price of the works was not discussed but Mr Richter asked Mr O’Dea and Flinders Hydraulics to give a quotation for their work. Mrs Wilson gave similar evidence to that of her husband.
[42] Exhibit P41.
Following the meeting, on 5 June 2015, Mr Richter sent an email to both Flinders Hydraulics and Mr O’Dea seeking an indication of the likely cost of their materials and labour to complete the project to “help Brian with his Cash Flow”.[43]
[43] Exhibit D56.
In an email dated 10 June 2015[44] Mr Richter informed GSS’s insurance brokers that GSS had been appointed project managers to “oversee the construction of their new Pellet Line”. The email indicated that GSS was also supplying construction material and trade labour and that Mr Richter’s expectation was that it “may take 3 months before the work is complete”. In cross-examination Mr Richter agreed that, at the time, he thought the project would be completed in less than 3 months but that he wished to be conservative in the information provided to his broker. He also agreed that the description of his being a project manager was correct in the sense that he was managing the project in a detailed way.[45]
[44] Exhibit D57.
[45] TX 879.
11 June 2015 - Second Boiler Inspection
Mr Masters again attended the site on 11 June 2015 to do a dry inspection of the boiler after the problems experienced at the first visit. He wanted to see the boiler after it had been cleaned so that he could assess what level of corrosion, if any, was inside the vessel. The boiler was in a far better condition than he had feared and he was satisfied that the boiler was appropriate to be used. There were however issues aligning other attachments to the boiler. Mr Masters explained those issues as follows:[46]
Q.You were asked about your site visit on 11 June 2015.
A.Yes.
Q.And your observations of that day. You gave an answer that there were issues with other attachments, what were the issues with the other attachments.
A.A mixture of positioning, so it could be the location of the attachments, whether it's the feed water copper piping which was - off the top of my head, I think and it probably shows in a photo six inches or 150 ml off the ground so which caused an issue with tripping hazard as opposed to a safety side of the boiler operation, more of an OHS side, slips and trips. The blowdown line from the boiler was installed into the wrong location. There was no outlet for the boiler, for the overflow from the flash vessel as well at all. The areas were blanked which are the attachments. The relief valve for the boiler itself was still requiring overhaul but it was still in place as per age unknown and condition unknown. I think what it was - the main steam line which to the best of my recollection was at that time as well was in place though it had been - I raised concerns about the heated - to change its shape, it had been heated rather than having a fabricated bend or direction change. It showed evidence of hot spotting where the piping had been heated by oxyacetylene or something else to change its direction. The piping that was in place, the flanges, had nylon nuts, like fixings for them which aren't allowed in steam plant due to temperatures that it runs at, so that becomes an issue as well and that's what I can think of off the top of my head from a couple of years ago.
[46] TX 2195-2196.
Mr Masters said that he communicated the information that the boiler was not correctly plumbed to Matt Wilson.[47]
[47] TX 2193-2194.
Matt Wilson said that he was present at the site when Mr Masters attended on 11 June 2015. It was his understanding that Mr Masters had been requested to commission the “supposedly completed steam boiler including the steam line which has been plumbed to the conditioner of the pellet press”.[48] He observed Mr Masters’ arrival and the fact that the boiler work was incomplete. He said Mr Masters made the comment ‘Why are we even here?’.
[48] TX 2078.
Mr Masters’ next site inspection was not until 21 January 2016. He went intending to undertake a steam inspection and final inspection. Once he arrived he cancelled the boiler inspection company who were coming to do the steam test because the plumbing was incorrectly configured. It was unchanged from the 11 June visit. From the best of his recollection the main steam piping was installed and the condensate lines installed. The feed water tank was connected and there was power to the boiler. Nothing was insulated. Matt Wilson suggested that this was the occasion that Mr Masters first told him about the problems with the plumbing of the boiler.[49]
[49] TX 2078.
Mr Jenner-O’Shea agreed that the boiler failed the inspection on 11 June 2015 and that a number of deficiencies were identified in the equipment and some of the plumbing work.
Mr Caven said that he was neither a boilermaker nor a plumber. He put a pipe into the blowdown vessel half way up; he accepted that this was incorrect because he attached it to the outlet valve rather than the inlet valve. The consequence of that error was that there was no way for water to come out of the blowdown vessel other than at the top of the pipe which led to the roof. Mr Caven agreed that this would cause water to go onto the top of the boiler shed.[50] He also installed some pipe work coming off the boiler which was bent to make it fit. Mr Caven now understands that this is not best practice because it weakens the structural integrity of the pipe.[51] He also placed the condensate release in what he conceded was an unsafe location. He also agreed that he inappropriately used a number of plastic components in the plumbing. None of the piping in either the boiler shed or main shed was lagged or insulated.[52] Mr Caven said that he had never plumbed a boiler before and that he was not experienced enough to do that work. He accepted that the boiler and the plumbing work was sub-standard.[53]
[50] TX 547-549.
[51] TX 551.
[52] TX 551-552.
[53] TX 553.
16 June 2015 - Meeting
Mr Wilson said that Mr Richter and Mr Jenner-O’Shea came to his house on the evening of 16 June 2015. His wife and his nephew Andrew were present. Matt Wilson and his wife came later. Mr Wilson says that they discussed the Gantt chart, the progress of the assembly of the plant and the boiler and that they obtained some information for the bank meeting that he and his wife were to have the following day.
Mr Wilson rejected the suggestion that he gave Mr Richter the authority to trial the drying of saltbush with, for example, a rotary kiln. He said that was completely Mr Richter’s idea. It is however hard to avoid the conclusion that Mr Wilson at least acquiesced to the trial given that subsequently he is seen in a Landline video inspecting the kiln and discussing trials of methods of drying saltbush.
Mr Wilson said that as Mr Richter was leaving he said, “I have the account here for the boiler”. Mr Wilson looked at the account and showed it to his wife. They told Mr Richter that it was a lot more than they were expecting. Mr Richter said that it was a lot bigger job than he expected. Mr Wilson said that he did not say much other than that he would have to discuss it with the bank the following day.
Mrs Wilson said she was not present for a lot of the meeting as she was coming and going. She was unable to say whether the minutes of the meeting were accurate or not.[54] Mrs Wilson said that Mr Jenner-O’Shea brought a spread sheet along to talk about. Mr Richter was reading from the spread sheet and saying how wonderful the business was going to be and how much money the Wilsons were going to make. The price or charge for the plaintiff’s work was not discussed except when Mr Richter produced the invoice for the boiler and steam works. She and her husband were not happy about it because the written quote was for $26,000 and this invoice was for $48,777. Mr Richter said that there had to be a lot of work done and that this included the blowdown vessel. Mrs Wilson said they accepted the invoice because they believed there must have been more work as Mr Richter said and at the time they trusted him. Mrs Wilson said she did not read the invoice because they were told it was the boiler and steam line invoice. They were told by Mr Richter that this was the entire bill. She just looked at the cost at the bottom.
[54] Exhibit P11 is accurate.
Matt Wilson said that he dropped in towards the end of the evening. The meeting had finished and everyone was “just exchanging niceties”.[55] Stephen Richter spoke to him about being able to produce 8 tonnes per hour; Matt Wilson viewed that as unrealistic. He denied that the reference in the minutes to pelletising grain at 8 tonnes per hour came from him or anyone in his family and denied this was their aim saying:
[55] TX 2099.
A.Our ultimate aim was to have a commercially operating pellet plant. Eight tonne an hour with grain doesn’t come into it.
Q. Why not?
A.We are pelletising a full feed mix ration so that it can be fed to sheep. Eight tonne an hour with grain doesn’t come into it.
Q. Well mightn’t you want to put saltbush in it as well?
A.That’s not what we are talking about. We’re talking about eight tonne an hour of grain. We are talking a mixed ration. Eight tonne an hour with mixed ration is not obtainable. [56]
[56] TX 2100.
Matt Wilson said that the terms “stages” or “phases” were used by Mr Richter and Mr Jenner-O’Shea but had no relevance for him in terms of assembling the pellet plant to a commercially operating standard.[57] He was cross-examined at some length about this and in particular his use of that terminology in subsequent emails. He said that he was simply adopting the terminology used by the professionals that they had employed in order to look as if he knew what he was talking about. He maintained that there was only ever one construction effort and that the pellet plant would be operating commercially after that.[58]
[57] TX 2012.
[58] TX 2105-2108.

Matt Wilson’s evidence was that he did not ever ask the plaintiff to assist in making pellets.[155]
[155] TX 2071.
WPI contends that in total it is a fair estimate that 30 maybe 40 hours was taken to produce the 54 tonnes of pellets it says were produced with the assistance of the plaintiff’s workers. However, WPI also counterclaims in respect of loss of raw materials. That claim is quantified in the sum of $16,620 exclusive of GST. Mr Wilson gave evidence to the effect that not all of the pellets made by the plaintiff were useable. Many batches were burnt and those burnt pellets contaminated otherwise useable pellets in the storage bins to which the burnt pellets were added.[156] There appears little doubt on the evidence that GSS workers did burn pellets. For the reasons that follow I consider that WPI has made out a claim in negligence but I am not however satisfied that all of the burnt pellets are the result of that negligence; it seems more likely than not that some were just the results of attempting to commission the machine. Accordingly, quantification of that counterclaim is problematic.
[156] TX 2084.
The plaintiff on the other hand says that between the date the pellet plant was operable, which was no later than 28 September 2015, to the date the plaintiff left the site, the end of November 2015, almost all of the time was spent making pellets for the Wilsons and/or third parties. It is said that this is apparent from the time sheets prepared by Tony Albanese[157] and Brian Wilson’s diary.[158] It is further said that the time period contended for by the defendants ignores the problems with the pellet plant, the setup time, the preparation time and the amount of time it took to dry the saltbush.
[157] Exhibit P27.
[158] Exhibit P88.
I have carefully considered the submissions by both parties and the evidence. It is clear that the defendants did give some directions to the plaintiff’s workers to produce pellets for third parties. This was work of value to the defendants as the third parties paid for those pellets. I have limited information about the amounts charged, and the profit made, on those pellets.
I am less certain that directions were given to make pellets for the defendants. The plaintiff were still endeavouring to achieve the objectives set by the defendants as to the output for the pellet plant. This plainly involved making pellets. I accept Mr Wilson’s evidence that pellets made on these occasions would be used for trials and feeding the Wilsons’ stock. Having said that there was plainly a value to the defendants in having those pellets to feed their stock. Again, I have limited information as to what that value might be.
The evidence is moreover equivocal as to the occasions upon which the defendants instructed the plaintiff’s workers to assist with making pellets for third parties. The time sheets prepared by Mr Albanese do not distinguish between making pellets for third parties and pellets for other purposes. He agreed that 50 tonnes would be very close to the tonnage of pellets made for third parties and agreed that the total production, burnt or unburnt, did not exceed 130 tonnes. Mr Wilson’s diary likewise does not assist with this. Accordingly, whilst I find that the defendants did direct the plaintiff to make pellets for third parties on and after 28 September 2015 I do not accept that this was the only task upon which the plaintiff’s workers were engaged, nor do I accept that it was a major part of their duties. Work was still proceeding in relation to the pellet plant itself.
The value of the work
The plaintiff’s claim for restitution relates only to the pellet plant work after 30 August 2015. Accordingly, issues relating to the boiler are irrelevant for present purposes.
The defendants submit that the court should find that the state and condition of the pellet plant and the boiler as at 30 November 2015 was as set out in the conclave position paper dated 2 March 2018, the reports of Mr Van de Loo dated 17 April 2016, Mr Bryant dated 3 June 2016 and Mr Masters dated 21 June 2016.
All of the experts endorsed the conclave position paper although I note that Mr Masters was only qualified to comment upon the boiler issues. Mr Mikulic, the plaintiff’s expert, made his endorsement subject to minor qualifications concerning the scope of his enquiries. The defendants contend that the conclave position paper demonstrates that the value of the work performed by the plaintiff was zero.
The plaintiff on the other hand says that the defendants misconstrue the conclave position paper as it is no more than a summary. It is said that the conclave report makes broad summary statements without detail and that it is the detail in the individual reports that is necessary in order for the court to make findings of fact as to what work, if any, was not to the requisite standard.[159]
[159] Plaintiff’s responding submissions [176].
The plaintiff also contends that the experts in the conclave report assume that what was sought by the defendants was “a fully functional commercial plant” and that what the defendants expected was substantially less than a fully functional commercial plant; that this was a pilot plant involving trial and error. I have already found that this was not a pilot plant in the sense contended by the plaintiff. Rather the defendants gave a brief to the plaintiff as to the output that they sought. There was not, as the experts point out in their reports and the conclave report, a well-developed process to achieve this. The process was described as an evolutionary approach rather than a cohesive design philosophy. The plaintiff says that it did not have the opportunity to develop its own design philosophy. Rather it is said, the plaintiff was directed as to how the defendants intended to construct the plant; the defendants were not seeking detailed process designs and drawings. I have rejected this. As I have said above the plaintiff was engaged for its expertise and assumed the role of a project manager. If the plaintiff thought that detailed designs and drawings were necessary it ought to have informed the defendants of this. At the least it ought to have informed the defendants that it did not believe that it was possible to achieve the results that the defendants sought with the existing equipment.
The experts also identified that there was fundamental difficulty with a combination of batch and continuous flow processes due to the inclusion of the mixer at the expense of the hay teaser and the output of the hammer mill.
The plaintiff says that the inclusion of the mixer was not the plaintiff’s decision but that it did the best it could to improve the capacity of the plant whilst including the mixer in the process. I have found that the use of the mixer in the production line was a suggestion of Mr Richter. It was however agreed to by Brian Wilson. Matt Wilson was pressing for the inclusion of the hay teaser but his father continued to accept Mr Richter’s advice notwithstanding his son’s objections. It was plainly a major bottleneck in the process and meant that the plant as configured could never achieve continuous flow nor could it be anything but a manual process. This suggestion ought to have been abandoned when that became apparent. Mr Richter’s advice was flawed and he ought to have realised this and discussed it with the defendants.
There appears to be little dispute that the hammermill output was insufficient to achieve continuous flow. The defendants blame this upon works undertaken by the plaintiff inter alia by installing a new screen and a replacement die ring. The defendants say that these works were undertaken without approval. The plaintiff on the other hand says that this was a second-hand piece of equipment that they were obliged to use and that they undertook the work with a view to improving the performance of the hammer mill. The plaintiff further points out that the defendants have two hammermills in the current plant.
The expert evidence on this topic is of limited assistance. Mr Van de Loo says that the capacity of the hammer mill needed to be increased. He was critical of the change in the screen as was Mr Bryant. Mr Van de Loo said that the holes were smaller and sparsely spaced resulting in a low total area for material to pass.[160] Mr Bryant said that the original screen had 10mm holes and was replaced with a screen with 7mm holes which reduced its output. Mr Van de Loo also identified other factors affecting output as the speed of rotation and the amount of power provided. He was not however able to express a view as to whether the motor and gear ratio between that motor and the hammers was suitable; he suggested addressing these if rectification of the screen did not resolve the issue.
[160] Exhibit P14, p 19.
There was recognition of the importance of matching the speed of the hammer mill with other items of equipment so that the pelletiser could be run “at full speed” at the meeting on 16 June 2015. Despite this, the plaintiff did not recommend either rectifying the screen or addressing the motor and gear ratios nor did it suggest the purchase of a new hammer mill. The defendants were relying on the plaintiff’s expertise. If the hammer mill required further work or a new hammer mill was required, then this is an issue that ought to have been apparent to competent engineers at an early stage and the various options ought to have been put to the defendants.
It is moreover extraordinary that Mr Richter did not discuss the rapidly escalating costs with the Wilsons. He admits giving an estimate in the order of $48,000 on 1 June 2015. He was aware of their financial difficulties. He had loaned them money. On his version, he had agreed to defer payment of invoices to assist with their cash flow. A failure to discuss an increase in the estimated costs of the magnitude applicable here is simply inexplicable.
Mr Richter agreed with the factual observations in the expert reports[161] with two minor exceptions being the issue of earth leakage on the electricity supply to the first auger from the mixer and cabling associated with that topic. Mr Richter further agreed that there were fundamental problems with the plant throughout and that as at 30 November 2015 the plant fell a long way short of an acceptable commercial standard because it had low productivity. The plant did not achieve consistent production over a number of days at a time, that it did not allow sufficient through-put to allow the pelletiser to function at a continuous rate, the hammermill was not working fast enough, that there were difficulties with the pre-pellet bin and blockages and that to improve the plant significantly would require extensive re-work and replacement of some equipment. Whilst Mr Richter did not accept that these matters were the plaintiff’s fault I consider that, had he been properly managing the project, these issues would have been the subject of discussion with the defendants at an early stage rather than the plaintiff persisting with this unsatisfactory situation. There is no evidence that Mr Richter sought to discuss these issues with the defendants in any structured manner after the meeting on 22 June 2015.
[161] TX 978.
Matt Wilson gave evidence that following the departure of GSS it was necessary to strip the plant back to “its bare bones” and that they began working on it as if it was 1 June 2015 in order to get it working as closely as possible to the way it was at Hill River Hay. This included incorporating the hay teaser and removing the mixer.[162] The import of his evidence, and that of his father Brian, was that the work undertaken by GSS was of no value.
[162] TX 2082.
What benefit has WPI accepted?
There are significant difficulties in establishing what work the plaintiff’s workers performed because of the deficiencies in the plaintiff’s accounting systems, the lack of detail in the time sheets and the invoices and the limited evidence of what was done and when. Further, it is plain that a lot of the work undertaken by the plaintiff’s workers was, at the least, misguided in the sense that there was no, or no adequate, project management by the plaintiff. I find therefore that there was limited benefit to WPI in the performance of those works. I further find that GSS has established that WPI accepted some benefit in respect of pellet making and for the shipping container (which is included in invoice SINV045847) which remains on site.
Would WPI be unjustly enriched if it was not required to pay a reasonable sum for those benefits? I note that unjust enrichment is not a “definitive legal principle” with the High Court observing in Australia & New Zealand Banking Group Ltd. v Westpac Banking Corporation that:
…contemporary legal principles of restitution or unjust enrichment can be equated with seminal equitable notions of good conscience.[163]
[163] (1988) 164 CLR 662 at 673.
WPI still retains the benefit of the shipping container. A third-party invoice associated with the GSS invoice indicates that the shipping container cost $3,795.00 delivered to site. The time sheets associated with the GSS invoice are entirely unhelpful as to what, if any work, was associated with the container and the workers concerned did not give evidence. WPI also had a counterclaim in relation to defective works on the shipping container which was not pressed.
WPI was able to supply pellets to third parties and to use some for its own purposes. I have limited information to assess the fair and reasonable compensation for that benefit; the time taken, the number of pellets produced and any profit made by or value to WPI are obscure. However, on the other side of the coin is WPI’s counterclaim in respect of loss of raw materials.
The work performed by GSS in respect of the pellet plant machinery was, as I have found, of limited benefit to WPI. WPI also had to undertake works to rectify the plant and equipment after the departure of GSS. WPI has paid an invoice for part of that work and is obliged to pay further amounts under the terms of the deferred payments agreements. Leaving aside the question of interest, that is a total of $164,579.00. The context for this is Mr Richter’s quote for the boiler work and his original estimate of the cost of the pellet plant work together with the original purchase price of the pellet plant and boiler from Hill River Hay.
In all of the circumstances, the plaintiff has not satisfied me that WPI would be unjustly enriched if it retained the limited benefits that I have identified without further payment. It is moreover virtually impossible to ascertain what a reasonable payment would be for those benefits. In the circumstances, I dismiss the plaintiff’s claim in quantum meruit.
Counterclaim
WPI claims that the pellet plant contract was terminated on 30 November 2015 for fundamental non-performance and repudiatory breach by the plaintiff of the pellet plant contract. I have found that there was no separate pellet plant contract and I have further found that there was no agreed time frame. WPI has not satisfied me that the contract was terminated for fundamental breach. Rather it appears more likely than not that the contract was brought to an end by mutual agreement.
This finding disposes of WPI’s claim for loss of profits. That claim is a claim for loss of profits for the period during which WPI says it was prevented from trading by reason of the plaintiff’s breach of contract. Even if that were not the case it is my view that the claim for loss of profits would fail. WPI did not lead any admissible evidence on the question of the market, price and expenses of its business. It did not particularise its case. WPI pleaded that it was going to particularise the claim by reference to an expert report. That expert report was never obtained. To allow such a claim would be unfair to the plaintiff in all the circumstances. In any event the question of whether WPI has suffered a loss of profits is a matter for expert accounting opinion based upon issues such as costs of production and potential market. There was no attempt by WPI to quantify the alleged loss of profits claim in the normal way and I would have rejected that claim in any event.
This leaves what has been described as the direct loss claim. Again, in view of my finding as to the basis for termination of the contract this cannot proceed by way of damages for breach of contract. WPI has however also advanced a tort case against the plaintiff for failure to use reasonable skill and care in its works. WPI must establish that GSS owed it a duty of care; that GSS was in breach of this duty of care; that GSS’s breach of duty was the cause of WPI’s loss and that the damage suffered by WPI was not too remote.
It is well established that professionals owe a duty of care to their clients. Professionals are not required to have an extraordinary degree of skill or the highest professional attainments but must use the competence and skill that is usual among their peers and must use due care. Liability can arise from either a breach of contract or in tort; those duties can be concurrent.[164]
[164] Voli v Inglewood Shire Council (1963) 110 CLR 74 at 84; Astley v Austrust Ltd (1999) 197 CLR 1.
The plaintiff was engaged by WPI because of its expertise in engineering, boiler making, machining, fabrication and welding. I have also found that Mr Richter assumed the role of project manager and that WPI relied on him as such.
I find that GSS did owe WPI a common law duty of care to perform the work and to provide its services with the skill and care of a reasonably competent and diligent professional engineer, boilermaker, machinist, fabricator, welder and project manager.
It is necessary to consider the complaints that WPI makes in relation to the various aspects of the work performed by GSS in order to ascertain whether there has been any breach of that duty of care.
Exclusion clause
There is a complication with WPI’s counterclaim in relation to the exclusion clause in the deferral agreements. The claim in respect of the Boiler is not affected by the deferral agreements; the work complained of occurred prior to the agreements and was the subject of the invoice dated 16 June 2015 which was paid.
Exclusion clauses may limit or exempt liability for negligence.[165] A properly worded exclusion clause need not expressly mention liability and negligence in order to exclude such liability.[166] Such clauses are to be construed strictly and any ambiguity resolved against the person seeking to rely on it.[167] The clause drafted by GSS seeking to exclude liability in this case is set out above. In my view, it is not effective to exclude liability in negligence.
[165] Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642.
[166] MWH Australia Pty Ltd v Wynton Stone Australia Pty Ltd (In Liquidation) (2010) 31 VR 575 at [87-88].
[167] Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500.
The Boiler
I accept the evidence of Mr Masters relating to the deficiencies in the boiler. That evidence is supported by his report, the conclave report, the defendants’ evidence and the evidence of the GSS workers who performed much of those works. These works were as I have said neither novel nor experimental. They should have been relatively straight forward. The deficiencies were:
·The boiler was not affixed to the floor;
·Bent pipe work;
·Steam pipes were not lagged;
·Steam condensate pipes were fabricated from general galvanised water pipe as opposed to galvanised steel water pipe. Whilst accepting this is not a mandatory requirement it was not in accordance with industry practice and I therefore find that galvanised steel pipes ought to have been used;
·The main steam condensate trap outlet was vented to the atmosphere at a height of approximately 4 metres. That constituted a safety hazard;
·The blowdown vessel required re-plumbing;
·The use of plastic components was inappropriate and required replacement;
·The header tank to the boiler required re-plumbing;
·A tank overflow required installation;
·Chemical dosing and a water softener were required, as was an inline strainer up-steam of the feed water pump.

The plaintiff says that some of these items relate to updating and upgrading equipment and that this work was required in any event due in part to the age and second-hand nature of the equipment purchased by the defendants. It is said that the experts did not identify a deficiency in the plaintiff’s work but rather a deficiency in the equipment purchased by the defendants. I accept that some of the items referred to do not appear to be related to deficient work by GSS; items such as the requirement for chemical dosing and a water softener. Other items such as the incorrect plumbing of the blowdown vessel and header tank, the use of plastic components and the failure to lag pipes are in my view plainly a breach of GSS’s duty to WPI. The work fell far short of the standard required of a reasonably skilled boilermaker.
WPI claims for expenses incurred in relation to the failed commissioning of the equipment in the boiler room and steam line being the professional fees of Mr Masters attending site on 11 June 2015 and 21 January 2016 for the purpose of inspecting and commissioning the equipment. I have referred to the evidence of these two inspections above. In my view part at least of Mr Masters’ charges to WPI totalling $3,800 exclusive of GST would not have been incurred but for the breach of duty by the plaintiff. The loss is causally connected to the plaintiff’s breach.
WPI further claims for the acquisition of items from Aqualutions that were required to be fitted to the equipment in order for commissioning to occur. This includes the purchase and installation of a water softener, dosing pump and water treatment chemicals. This totalled $1,950 exclusive of GST. I reject that claim. These items were required to be purchased in any event and do not arise from any breach of duty by the plaintiffs.
There is limited evidence about the cost to rectify the other items listed above apart from an invoice from RCR Energy[168] and some limited evidence from Mr Matt Wilson on this topic.[169] This evidence is not entirely satisfactory in that it does not explain what works were performed. I accept however that there was some rectification work required and I will assess this on a broad axe basis.
[168] Exhibit P104.
[169] TX 2079-2081.
I assess the claim in respect of the boiler overall as $5,000.00.
Unauthorised works
WPI claims expenses incurred in relation to unauthorised works arranged by the plaintiff in the sum of $13,283.92 exclusive of GST.[170] These relate to fees charged by O’Dea Electrical. It is said that Mr Wilson gave evidence to the effect that the works in the invoice charged to the defendants were organised by the plaintiff and were not authorised under either the pellet plant contract or the boiler contract or otherwise by the defendants. It is said that the charges were not to the account of the defendants and should not have been incurred.
[170] Exhibit D80.
The plaintiff asserts that the works were authorised. It is said that the works were notified by email from Mr Richter to the Wilsons on 2 September 2015 and that no issue was raised in response. Further, it is said the Wilsons could not under cross-examination adequately explain what the works were, why they were not authorised and what use WPI has made of those works.[171]
[171] TX 1461-1463.
In my view, WPI has failed to establish that the work was not authorised. Further it appears likely that WPI has had the benefit of at least some of the work undertaken by O’Dea, for example, the portion of the invoice relating to lighting. This claim must fail.
Unnecessary equipment
WPI claims for expenses incurred in relation to unnecessary equipment acquisition costs in the sum of $63,659 exclusive of GST.[172]
[172] Exhibits D79, D81 & D107.
The red mixer was purchased for the sum of $30,000 prior to the plaintiff’s involvement. I have found that the defendants intended to use the red mixer outside the pellet plant line. I have further found that they used it in place of the hay teaser at Mr Richter’s suggestion. This was ineffective. Mr Wilson gave evidence that the red mixer had not been sold. WPI asserts, in its submissions, that the mixer cannot now be used after it was abandoned. It is not clear why that is. I accept that there would have been some additional wear and tear on the mixer by reason of its use in the pellet plant. I will assess the loss arising from that on a broad axe basis.
WPI further claims $24,000 in respect of tractor hire. It is said that it was required to hire an additional tractor in place of the blue ford tractor which was being used to power the red mixer. Mr Wilson gave evidence that it was necessary to hire another tractor for the purposes of pre-existing farming operation. Mr Matt Wilson said that the blue ford tractor was not able to be detached until after the plaintiff’s engineer inspected the pellet plant in late June 2016. The additional tractor would not have been required had the plaintiff not installed the red mixer in the production line or alternatively installed an electric motor to power the red mixer.
Mr Richter says that the mixer was trialled with an electric motor provided by the plaintiff but that the motor was of insufficient power to drive the mixer. It is said that Mr Wilson declined to purchase a more powerful electric motor to drive the mixer and instructed the plaintiff to utilise the blue tractor and its power take-off. Mr Caven gave evidence that Mr Wilson requested an electric motor but that when they tried this it did not work and they suggested a bigger motor. Whilst Mr Caven’s evidence is somewhat unclear it does not support Mr Richter’s evidence that Mr Wilson directed the use of the power take-off; rather, it suggested that Mr Wilson wished a motor to be installed.[173] Mr Wilson said that he approved the use of the mixer on the basis that it would be operated by an electric motor. He denied that he instructed the plaintiff to use the tractor. Mr Wilson said that the use of the blue tractor’s power take-off to power the mixer caused a serious problem with the motor of the tractor and he indicated that it required a rebuild. It is not clear how much this would cost. Mr Wilson said that he incurred a cost of in excess of $10,000 to rebuild the motor on a larger tractor. This can only be a very rough guide to the cost of any repairs required to the blue tractor. Mr Wilson was cross-examined about the use of the blue tractor on the mixer. He said it became inoperable because of long term use which he described as approximately 2000 hours of unnecessary use. He said that had an electric mixer been fitted as requested that would not have occurred.
[173] TX 556.
Having carefully considered Mr Wilson’s evidence[174] I am not satisfied that he gave instructions as contended by the plaintiff. On the other hand, it is clear that he acquiesced in the use of the blue tractor to power the mixer. Had Mr Wilson’s preference been acted upon it would have been necessary to have purchased an electric motor. I have no means of knowing what the cost of that would have been. I infer however that it would have been less than the combined amount of the tractor hire and the repairs to the tractor. Again, it will be necessary to take a broad axe assessment to this loss.
[174] TX 1678-1682.
The next item relates to the purchase price of a 10-inch auger for the sum of $8,909.09.[175] Matt Wilson gave evidence, which I accept, that the auger was purchased in order to operate the pellet plant in a rudimentary way after the plaintiff left site. Due to the inability of the pellet plant to operate with continuous flow, hammer milled ingredients were stock piled and then augured using the 10-inch auger from a storage truck into the pre-pellet bin.[176] This was the only manner in which pellets could be made with the infeed system constructed by GSS. Mr Brian Wilson gave evidence which I accept to the effect that the defendants did not have a need for a 10-inch auger at the time it was purchased and that it was specifically purchased for the purpose described by his son.[177]
[175] Exhibit D107.
[176] TX 2093.
[177] TX 1743-1744.
Doing the best that I can in the circumstances, I assess the unnecessary equipment claim overall at $15,000.
Damaged equipment
WPI seeks damages in relation to expense incurred for damaged equipment. The first aspect of this claim relates to damage to the engine of the blue ford tractor as described above. WPI further claims in respect of damage to the blue elevator.[178] Mr Wilson said that the blue elevator was damaged as a result of the modification to and negligent use of the elevator. He described it as “completely ruined”. There was no evidence to the contrary. The purchase price of the elevator was $1,200.
[178] Exhibit D82.
Matt Wilson gave evidence, which I accept, to the effect that the plaintiff modified and damaged two silos in a way that necessitated repairs. He personally repaired one of the silos but the other was uneconomical to repair. The cost of replacing that silo was $4,100.[179] Plainly there was some time expended by Mr Wilson on the repairs. It is not clear what that time was.
[179] Exhibit D105 and TX 2082.
WPI further claims the sum of $1,000 to clean water tanks it says were contaminated with effluent discharged by the blowdown vessel. I have been unable to locate any evidence on that topic. I dismiss that aspect of the claim.
I note that there was evidence about modifications and damage to the pelletiser that does not appear to have been claimed or quantified. I will not take that into account.
Taking a broad axe to the claim for damaged equipment I assess this at $10,000.00.
Fumigation expenses
Matt Wilson gave evidence that the barley silo required fumigation as a result of the inability to make pellets and accordingly had to be stored for a longer period than was anticipated. Unless the barley were fumigated it would be eaten by weevils and the treatment was required to kill any existing weevils and reduce the risk of reinfestation. I reject this claim on the basis that it relates to the assertion by the defendants that the plaintiff ought to have completed the project within a specified time frame and no later than October 2015. That has not been established on the evidence.
Loss of raw materials
I have already referred to this aspect of the counterclaim as part of the plaintiff’s claim in quantum meruit. In view of the manner in which I dealt with the quantum meruit claim I do not consider that WPI is entitled to anything for this head of loss.
Other issues
WPI has not quantified any claim in respect of the work that Matt Wilson said was required to rectify the pellet plant and boiler beyond what is set out above. It seems clear on the evidence that there would have been such expenditure. I will however disregard that expenditure in the light of my findings on the quantum meruit claim.
Summary of findings on Counterclaim
In summary I find that:
·The contract was not terminated for fundamental breach and that WPI’s claim for loss of profits is not therefore made out.
·GSS owed WPI a common law duty of care in the provision of its services.
·The exclusion clauses in the deferral agreements dated 12 August 2015 and 21 September 2015 are not effective to exclude liability in negligence.
·GSS breached its common law duty of care to WPI in the respects indicated above.
Given the issues referred to above it is necessary to assess damages for the breach of common law duty on a broad axe basis. I assess the damages for that breach in the sum of $30,000.00 inclusive of interest.
Lien
On 11 March 2016 GSS registered a worker’s lien under section 5 of the Worker’s Liens Act, 1893 (“the WLA”) upon the land which is owned by the second defendant, WPA (“the land”). The lien claims the sum of $359,574.09 for the provision of services and materials under the contract.
Section 5 of the WLA provides that:
A contractor or sub-contractor shall have a lien for the contract price, so far as accrued due, on the estate or interest in land of any owner or occupier in each of the following cases:
(a) Where the work is done, with the assent, express or implied, of the owner or occupier to the land or to any fixture thereon:
(b) Where the materials are, with the assent, express or implied, of the owner or occupier, used or intended to be used in or about work done, or intended to be done, to the land or to any fixture thereon.
The plaintiff complied with the time frames set out in the WLA. The plaintiff wrote to the defendants on 18 February 2016 demanding that the tax invoices be paid. The lien was registered within 28 days after 18 February 2016. The within proceedings, seeking to enforce the lien, were filed within 14 days of the registration of the lien. The issue is whether there was a “contract” price. The relevant terms are defined in section 2 of the WLA as follows:
contract means any agreement, whether written, oral, or implied, to do work or to procure work to be done, or to furnish materials in connection with work, or to pay for work, or for materials furnished or to be furnished in connection with work;
contract price means the money payable to any contractor or sub-contractor for any work, or materials furnished or to be furnished in connection with work, under any contract, and whether such price has been fixed by express agreement or not.
I have found that the plaintiff has failed to establish the contract price of $359,574.09 for which the lien was registered nor has it established the agreement that formed the basis of that contract price. For that reason, the lien cannot be maintained over WPA’s land. I need not therefore consider the other issues raised by the parties. The lien is invalid.
Loans
Amount outstanding
The total amount of the loan was $50,000. A $5,000 loan repayment was made on 17 December 2015. The question is whether a payment of $10,000 made by WPI to the plaintiff on 30 December 2015 was in repayment of the loan or in payment of the plaintiff’s invoices for work on the pellet plant machine.
Ms Court emailed Mr and Mrs Wilson on 4 January 2016 asking whether that payment was to be allocated to the loan or to a particular invoice.[180] The defendants did not respond to that email. It is said that Mrs Wilson telephoned Ms Court in December 2015, the day the $5,000 repayment was made and that during that telephone call Mrs Wilson told Ms Court that a further $10,000 payment for the loan would be made by the end of December 2015.
[180] Exhibit P67.
The defendants say that this telephone call comprised an appropriation direction and that the plaintiff was required to apply the $10,000 payment to the loan. This telephone call was not put to Ms Court in cross-examination. I do not know what she would have said had this question been put to her. However, if that call had been made, it is unclear why Ms Court made the email request for instructions. Further Mrs Wilson gave no reason for failing to respond to Ms Court’s email.[181] I am not satisfied that Mrs Wilson did give an appropriation direction to the plaintiff as contended. In all of the circumstances I find that it was not inappropriate for the plaintiff to have applied the $10,000 payment towards the outstanding invoices. The total amount outstanding on the loans is therefore $45,000.
[181] TX 1068.
Set-off
The defendants claim an equitable set-off against the counter-claim. It is said that the moneys were loaned by the plaintiff to WPI in order to finish the pellet plant. The counter-claim made by WPI is for damages flowing from the plaintiff’s failure to complete the pellet plant to the required standard. Whilst the counter-claim does not arise out of the loan contracts, it is my view that the claims are sufficiently connected and accordingly I find that there is an equitable set-off.[182]
[182] De Galambos & Son Pty Ltd v McIntyre (1974) 5 ACTR 10.

· Failed commissioning of equipment in Boiler room and steam line and rectification costs of same	$ 6,025.00
· Unauthorised works by plaintiff	$ 13,283.92
· Unnecessary equipment acquisition costs.	$ 63,659.00
· Damaged equipment	$ 16,300.00
· Cleaning Rainwater tanks of effluent	$ 1,000.00
· Fumigation of raw ingredients	$ 2,664.50
· Loss of raw materials	$ 16,620.00