Gough and Gilmour v Peter Campbell - [2009] NSWSC 1310

No judgment structure available for this case.

CITATION: Gough & Gilmour v Peter Campbell [2009] NSWSC 1310

HEARING DATE(S): 21/09/09-27/09/09

JUDGMENT DATE :
10 December 2009

JUDGMENT OF: James J

CASES CITED: Campbell v Backoffice Investments Pty Ltd (2009) 83 ALJR 903
Drinkwater v Caddyrack Pty Ltd (Young J 25 September 1997)
Gough & Gilmour Holdings Pty Ltd (No 2) v Peter Campbell Earthmoving Pty Ltd [2007] NSWSC 172
Gough & Gilmour Holdings Pty Ltd v Peter Campbell Earthmoving Pty Ltd [2009] NSWCA 37
Gough v Gilmour [2005] NSWSC 1155
Kilpatrick Green Pty Ltd v Leading Synthetics Pty Ltd (Gillard J Supreme Court of Victoria 5 June 1998)
Kingston v Preston (1773) 2 Doug 689, 99 E.R.437
Mackay v Dick (1881) 6 App Cas 251
S.M.K. Cabinets v Hili Modern Electrics Pty Limited (1984) VR 391
TC (by his tutor Sabatino) v New South Wales [2001] NSWCA 380

TEXTS CITED: Carter Contract Law in Australia

PARTIES: Gough & Gilmour Holdings Pty Ltd - Plaintiff
Peter Campbell Earthmoving Pty Ltd - Defendant

FILE NUMBER(S): SC 20491/00

COUNSEL: F Corsaro SC / D F Villa - Plaintiff
N Cotman SC / I Griscti - Defendant

SOLICITORS: Minter Ellison - Plaintiff
Coleman & Greig - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

JAMES J

THURSDAY 10 DECEMBER 2009

20491/00 GOUGH & GILMOUR HOLDINGS PTY LTD v PETER CAMPBELL EARTHMOVING PTY LTD
JUDGMENT

1 HIS HONOUR: In these proceedings brought by Gough & Gilmour Holdings Pty Ltd (“G & G”) against Peter Campbell Earthmoving Pty Ltd (“PCE”) I have already delivered two judgments, a judgment described as a preliminary judgment dated 18 November 2005 ([2005] NSWSC 1155) and a judgment dated 9 March 2007 ([2007] NSWSC 172). Orders to give effect to my two earlier judgments were formally made on 27 June 2007. The present judgment is to be read with my earlier judgments and I will not repeat in this judgment all of the matters set out in my earlier judgments and, in particular, all of the factual matters.

2 Summonses by G & G for leave to appeal and by PCE for leave to cross-appeal and then an appeal by G & G and a cross-appeal by PCE were brought. The appeals were heard on 16 February 2009 and the members of the Court of Appeal delivered their reserved judgments on 11 March 2009 ([2009] NSWCA 37). The principal judgment was given by Sackville AJA, with whom the other members of the Court agreed. The Court of Appeal allowed in part both the appeal and the cross-appeal. However, only certain procedural orders were made at that stage, including an order that the parties file written submissions as to the orders which should be made.

3 On 3 June 2009 the Court of Appeal made formal orders. In orders 1, 2 and 3 the Court of Appeal allowed the appeal in part, allowed the cross-appeal in part and set aside a judgment I had entered in favour of PCE. Order 4 made by the Court of Appeal, which gives rise to the present part of the proceedings before me, provided:

“4. The matter be referred back to the primary judge for determination of:

(a) whether there has been breach of the “minimum hours warranty” in each of the FOCUS contracts sued on in the cross-claim as found in paras 73 and 76 of the judgment of the Court delivered on 11 March 2009;

(b) if there has been a breach, for assessment of damages in respect of such breach;

(c) paragraph 15(b) of the respondent’s amended defence to cross claim dated 6 November 2006”

4 Order 6 provided:

“The costs of the further hearing and the earlier proceedings before the primary judge be reserved for his Honour’s determination at the conclusion of the proceedings before him.”

5 The hearing for the purpose of determining the three matters referred to me by order 4 made by the Court of Appeal commenced on Monday 21 September 2009 and continued all of that week. The matters in pars (a) and (b) of order 4, that is the “breach” and “damages” issues, which are clearly closely related, were dealt with together and separately from the matter in par (c) of order 4, the “defences” issue.

6 On 25 September 2009, when it had become apparent that the hearing could not be concluded that day and would have to be stood over, I directed that the parties lodge a statement of issues relating to the breach and damages issues, if possible a joint statement but otherwise a separate statement by each party. In accordance with this direction each party lodged a separate statement of issues.

7 The hearing of the three matters concluded on 27 October, when I reserved my decision.

8 As happened at the hearing before me, it is convenient in this judgment to deal with the breach and damages issues together, and separately from the defences issue.

4 (a) Whether there has been breach of the “minimum hours warranty” in each of the FOCUS contracts sued on in the cross-claim as found in pars 73 and 76 of the judgment of the Court (of Appeal) delivered on 11 March 2009.

(b) If there has been a breach, for assessment of damages in respect of such breach

9 It was common ground between the parties that in the present judgment I should determine the issues stated by the parties in their statements of issues and should not endeavour to make any actual assessment of damages in dollar figures.

10 Before directly considering each party’s statement of issues, I propose to deal generally with the subjects of breach and damages.

11 Many parts of Sackville AJA’s judgment have some relevance to the matters of breach and damages. However, while I have had regard to all of his Honour’s judgment, I propose to quote only certain parts of it, being pars 73 and 76, which are referred to in order 4 (a) made by the Court of Appeal and pars 78 to 83 which appear in his Honour’s judgment under the heading “Consequential issues”.

“[73] I therefore conclude that the P49 Contract, on its proper construction, included a Minimum Available Hours Warranty. The parties intended that the minimum number of available hours for the purposes of the Warranty was to be calculated according to the formula derived from the material set out on p 7. They also intended that the Minimum Available Hours Warranty would apply for the duration of the P49 Contract: that is, until the 12,000 “Contract Engine Hours” had expired.

……….

……….

[78] The conclusions I have reached give rise to some consequential issues, principally how the questions of breach of the Minimum Available Hours Warranty and the assessment of damages are to be approached. Unfortunately, the parties provided little assistance on these issues, largely because their submissions concentrated on other matters. Having regard to the prolonged history of the proceedings, however, it is desirable that the remaining issues, so far as possible, should be resolved without further delay and expense to the parties.

[79] The better view is that both breach and assessment of damages should be determined by reference to each period of one year for which the FOCUS Contracts have run. Thus in the first year of the P49 Contract (commencing in August 1997), G&G warranted that the scraper would be available for 2976 hours. Whether this minimum was attained would be assessed by reference to machine availability per 10 hour day (assuming 312 working days for the year). Therefore the maximum number of hours that the machine could be unavailable in any given day by reason of down time is 10.

[80] For the purposes of determining whether G&G breached its Minimum Available Hours Warranty, the number of unavailable hours is to be calculated by ascertaining whether the machine was unavailable for operations on a particular working day by reason of down time. This calculation does not depend on proof that PCE actually intended to operate the machine on the particular day.

PCE’s damages must, however, be limited to those hours that PCE would have operated the machine but for its unavailability due to down time.

[82] A further consequential issue concerns the application of the Minimum Available Hours Warranty to an incomplete year of a FOCUS Contract, bearing in mind that G&G terminated the FOCUS Contracts in October 1998. In the case of the P49 Contract, only two months or so of the second year had elapsed at the time the contract was terminated. The P50 Contract was terminated before the expiration of the first year.

12 A large number of submissions, written and oral, were made by counsel on the subjects of breach and damages. I will refer to many of these submissions in dealing with particular issues.

13 I have formed a number of conclusions on the subjects of breach and damages. Most of these conclusions are in accordance with what I described as “tentative ideas” I had at the beginning of the hearing on 27 October.

14 (1) Although I am dealing together with the issues of breach and damages, as being closely related, it is, nevertheless, important to keep the two issues distinct and not to elide the distinction. The two issues are distinguished in order 4 made by the Court of Appeal, the breach issue in par (a) and the damages issue in par (b). The two issues are also distinguished in Sackville AJA’s judgment, for example the breach issue is dealt with in par 80 and the damages issue is dealt with in par 81.

15 There is also a practical utility in keeping the two issues distinct. In some of the written and oral submissions which were made to me the two issues were conflated, leading, so it seems to me, to some confusion. It is clear from Sackville AJA’s judgment that there could be breaches of the minimum available hours warranty, which do not sound in damages.

16 (2) In my opinion, the warranty in each FOCUS contract was a minimum available hours warranty, that is a warranty that the machine would be available for at least a minimum number of hours in a year or a part of a year; and not, or only secondarily, a warranty that the number of hours the machine was unavailable in a year or a part of a year would not exceed a certain number of hours.

17 Such a view of the warranty would be consistent with parts of the FOCUS contracts referred to in Sackville AJA’s judgment, including the entry for “annual available hours” in the “summary of proposed contract” in the spreadsheets attached to each FOCUS contract.

18 Such a view would also be consistent with pars 73 and 76 and many other parts of Sackville AJA’s judgment. For example, in par 68 of his judgment his Honour said in part:-

“…it is not difficult to conclude that G&G warranted that, perhaps subject to PCE’s compliance with its responsibilities, scraper P49 would be available for each year the contract remained in force for a minimum of 3120 hours, less the down time allowed for that year in the “Cumulative” box…”

19 In par 79 of Sackville AJA’s judgment, which is, of course, the paragraph immediately preceding par 80, his Honour said in part:-

“Thus in the first year of the P49 Contract (commencing in August 1997), G&G warranted that the scraper would be available for 2976 hours.”

20 If this is the correct view of the warranty, it is puzzling that in par 80 of his judgment, which is obviously to be regarded as an important paragraph, Sackville AJA said that for the purpose of determining whether G & G had breached its “minimum available hours warranty”, what should be calculated was the number of unavailable hours, and not the number of available hours.

21 Neither counsel was able to offer any assistance on why this part of par 80 of Sackville AJA’s judgment was expressed in the way in which it is. I note that it is apparent from par 78 of his Honour’s judgment that the part of his Honour’s judgment under the heading “Consequential issues” including par 80, was written by his Honour independently, or largely independently, of any submissions which had been received from counsel.

22 Although the view I have adopted might be the subject of criticism as not being a faithful application of the literal meaning of part of what Sackville AJA said in par 80 of his judgment, I remain of the view that the ultimate question in determining whether G & G breached what his Honour himself described in par 80 as the “minimum available hours warranty” is whether the number of hours for which the machine was in fact available was less than the number of hours the machine was warranted to be available and ascertaining the number of hours the machine was unavailable is of significance only as a means of determining that ultimate question.

23 I note that in par 81 of his judgment Sackville AJA used the concept of “available hours” and not that of “unavailable hours”. His Honour said that, if breach was established, damages should be assessed by calculating the difference between the minimum number of hours the machine was warranted to be available and the number of hours the machine was actually available.

24 (3) The warranty was a warranty as to “availability”.

25 I referred to the concept of “availability” in my first judgment of 18 November 2005. In par 76 and 77 of the judgment I referred to submissions which had been made by counsel for PCE about the meaning of “availability”.

26 In par 76 I said that counsel for PCE had referred to the definition of “available” in the Oxford English Dictionary as “being capable of being used…capable of producing a desired result”.

27 In par 77 of my judgment I recorded a submission by counsel for PCE that “availability” referred to a relationship between the operating hours for a machine which were wanted and the operating hours that could be had, after deducting down time for repairs to the machine pursuant to the contract.

28 In par 89 of my judgment I said that “I generally accept the submissions made by counsel for PCE about the word “availability””.

29 In the present part of the proceedings counsel for PCE submitted that what I had said in my earlier judgment about “availability” had not been affected by anything said in Sackville AJA’s judgment in the Court of Appeal and I should apply what I had said in my earlier judgment, particularly my apparent acceptance that “availability” refer to a relationship between operating hours which were wanted for a machine and the operating hours which were actually obtained.

30 I note that in par 89 of my earlier judgment I qualified my acceptance of counsel’s submissions by using the word “generally”.

31 I remain of the opinion that I should accept the definition of “availability” referred to in par 76 of my earlier judgment, provided that the word “mechanically” is added; that is a machine is “available”, if it is “mechanically capable of being used”.

32 However, having had the opportunity for further reflection, I am not now of the opinion that “availability” refers to a relationship between operating hours wanted and operating hours obtained.

33 (4) As I have already indicated, the ultimate question in the determination of whether, in relation to a particular machine, there was a breach of the minimum available hours warranty, is whether the number of hours for which the machine was in fact available in a year (or part of the year) reached the number of hours the machine was warranted to be available.

34 The approach which was generally advocated by counsel for PCE was as follows. The number of operating hours wanted by PCE for the machine (“the hours wanted”) should be calculated. In calculating the number of hours wanted, periods of wet weather (wet weather such that the machine could not be operated) and periods of idle time (when there was no work for the machine) should not be included. The hours for which the machine was available should be limited to the hours the machine was actually working (“the worked hours”). These hours would not, of course, include periods of wet weather or periods of idle time.

35 Whether there had been a breach of the minimum available hours warranty would then be ascertained by comparing the number of available hours (that is the number of worked hours) with the number of warranted hours or, if the number of wanted hours was less than the number of warranted hours, by comparing the number of available hours (worked hours) with the number of wanted hours.

36 In support of this approach counsel for PCE referred to Sackville AJA’s use in par 79, 80 and 81 of his judgment of the expressions “working day” or “working days”; the description of “availability” recorded in par 77 of my earlier judgment; and the practical difficulty of determining whether, during a period of wet weather or idle time when the machine was not in fact being worked, the machine was nevertheless available in the sense of being capable of being used.

37 I do not consider that the hours a machine was available should be limited to the hours that the machine was being worked. If a machine was being worked, then it was, necessarily, available. However, a machine could be available in the sense of being mechanically capable of being used, even though it was not being worked. A machine could be available, in the sense of being mechanically capable of being used, during periods of wet weather and periods of idle time.

38 As to the arguments in support of PCE’s approach which I have noted, it is clear from the last sentence in par 80 of Sackville AJA’s judgment that, whatever the significance of the expression “working day(s)” as used by his Honour, his Honour considered that a day could be a “working day” for a machine, even though it was a day on which it was not operated or intended to be operated. I have earlier in this judgment held that I do not now accept the description of “availability” in par 77 of my earlier judgment. I do not consider that I should be deterred from interpreting “availability” as I consider it should be interpreted, by any practical difficulties that might exist in determining whether a machine which was not being worked on a particular day was nevertheless capable of being used on that day.

39 In my opinion, the correct approach to determining what I have described as the ultimate question is to calculate the number of hours a machine was in fact available, in the sense of being mechanically capable of being used, by adding together the number of hours the machine was available on particular days during the year, up to a maximum of 10 hours per day, and then comparing the aggregate number with the number of hours warranted. However, I acknowledge that this broad statement of a correct approach leaves a number of questions outstanding.

40 (5) As I already noted, in pars 79, 80 and 81 of Sackville AJA’s judgment, his Honour used the expression “working days” or “working day”. In par 79 his Honour said that whether the minimum number of available hours was attained would be determined “by reference to machine availability per 10 hour day (assuming 312 working days for a year)”. The expression “working days” or “working day” then recurs in pars 80 and 81 of the judgment.

41 “The industry norm” from which Sackville AJA held that the number of hours in the available hours warranty was derived, was based on a working day of 10 hours, 6 days per week, 52 weeks per year (see par 62 of Sackville AJA’s judgment).

42 It was submitted by counsel for PCE that the expression “working day” as used by Sackville AJA meant, not a calendar day of 24 hours but a shift of 12 hours. On this interpretation, there could be two “working days” in a calendar day of 24 hours. It was submitted that this interpretation was supported by evidence of the context in which the expression “working day” was used, including evidence that PCE had enough operators for two shifts of 12 hours to be worked each calendar day using the same machine and evidence that G & G had agreed to provide service for repairs and breakdowns on a 24 hour per day basis.

43 I do not consider that this submission should be accepted. The ordinary natural meaning of the word “day” is a calendar day of 24 hours and I do not consider that there is any sufficient reason or combination of reasons for departing from this meaning of the word “day” and holding that the word “day” should be interpreted as meaning “shift”.

44 It was submitted by counsel for PCE that it was only the available hours on 312 days in a year which could be taken into account in determining whether there had been a performance or a breach of the available hours warranty. The other 53 days in the year would not be the subject of any warranty by G & G and the hours that the machine was available on those days could not be brought into account in determining whether there had been a performance or a breach of the minimum available hours warranty.

45 It was further submitted that the in a carefully written judgment Sackville AJA had chosen to use the expression “working day(s)” and significance should be given to the expression his Honour had chosen; that his Honour had, in accordance with the formula for deriving the industry norm, limited the number of hours per day which could be brought into account as available hours to 10 and, likewise, the number of days in a year on which hours could be brought into account as available hours should be limited to 312; and that to permit G & G to bring into account hours that the machine was available on all of the 365 days in a calendar year would confer an unfair advantage on G & G.

46 It is, in my opinion, clear that Sackville AJA was well aware that the assumptions used in the derivation of the industry norm, that a machine would be operated 10 hours a day, 6 days a week, 52 weeks a year would not necessarily be reflected and, indeed, almost certainly would not be reflected, in the extent to which PCE wanted to operate a machine or did actually operate a machine.

47 In par 56 of his Honour’s judgment his Honour noted that I, as the trial judge had taken into account, inter alia, that “the calculations (in the FOCUS contracts of percentage availability) were based on assumptions which were highly unlikely to reflect the actual operation of the machine”. In par 71 of Sackville AJA’s judgment his Honour held that none of the matters I had identified which were referred to in par 56 of his Honour’s judgment, presented an obstacle to construing a FOCUS contract as imposing a minimum available hours warranty on G & G. However, as I read his Honour’s judgment, his Honour did not hold that the matters I had identified were factually wrong; merely that those matters did not prevent the construction of a FOCUS contract which his Honour favoured.

48 In par 67 of his judgment Sackville AJA said that “the parties must be taken to have appreciated…that the actual number of hours PCE wished to operate the machine would vary, perhaps considerably, from year to year”.

49 In par 69 of his judgment his Honour observed that the construction of a FOCUS contract which he had adopted would have the consequence that the number of down hours for each year a contract was in force would be calculated “on the basis of assumptions as to the use of the machine that, from a chronological point of view, may be unrealistic”.

50 In par 70 of his judgment his Honour said:

“No doubt both parties realised that PCE might wish to use the machine more frequently than the norm.”

51 I note that there are differences in pars 79 to 81 of his Honour’s judgment between his Honour’s references to hours in a day and his Honour’s references to days in a year. His Honour explicitly states that a maximum of only 10 hours in a day can be either unavailable (par 79) or available (par 81). However, the only reference to 312 days in a year (in par 79) is in brackets and is introduced by the word “assuming”, which suggests that his Honour was not stipulating that the number of days on which hours of availability could be taken into account is limited to 312.

52 It would not appear to me that his Honour intended the expression “working day(s)” to have the degree of significance suggested by counsel for PCE. It would appear from par 80 of his Honour’s judgment that a day could be a “working day” for a particular machine, even though on that day the machine was unavailable and even though PCE did not intend to operate the machine on that day.

53 If it were the position that it was only the available hours on 312 days of a calendar year which could be counted, problems would arise of how those 312 days should be selected. The FOCUS contracts do not contain any suggestion as to how the 312 days would be selected.

54 It might be possible to adopt the criterion of counting the available hours on only the first 6 days of a week and not any available hours on the seventh day of a week but this seems to me to be quite arbitrary.

55 If it was within the power of either of the parties to nominate which days should be the days on which available hours could be counted, then the determination of whether there was a breach of the warranty could depend on capricious decisions by a party as to which days were selected.

56 The conclusion I have reached is that the number of available hours on all of the days in a calendar year can be counted in determining whether there was a performance or a breach of the minimum available hours warranty.

57 (6) There could be periods when there is some difficulty in determining whether as a matter of fact a machine was available or unavailable.

58 The onus of proving that a machine was unavailable would rest on PCE as the party asserting a breach of the warranty of availability.

59 I have already expressed the view that a machine could be “available”, even though it was not being operated (worked). An important question is whether a machine should be regarded as available or unavailable during a period of wet weather when the machine, even if available, could not have been operated. The resolution of this question in relation to a particular period of wet weather could depend on evidence specific to that period of wet weather. However, in the absence of evidence specific to a particular period, I consider that the following guidelines should be adopted.

(1) If a machine was available at the beginning of the period of wet weather and was available immediately after the end of the period of wet weather, then, subject to any specific evidence, the machine should be regarded as being available during the whole of the period of wet weather. This guideline would not be affected, merely by the circumstance that a machine became unavailable, that is broke down, soon after the end of the period of wet weather. The period during which the machine was unavailable after the actual break down would be taken into account as a period during which the machine was unavailable.

(2) If a machine was available at the beginning of the period of wet weather, then it seems to me unlikely, as a matter of fact, that it would be unavailable immediately after the end of the period of wet weather.

(3) If a machine was unavailable at the beginning of the period of wet weather and was unavailable immediately after the end of the period of wet weather, then it should be regarded as unavailable during the whole of the period of wet weather.

60 In the light of the conclusions I have so far stated, I turn to the statement of issues by the parties.

Statement of issues by G & G

(1) Is the “Minimum Hours Warranty” found by the Court of Appeal satisfied if each FOCUS machine is mechanically available to be operated for at least the total of warranted hours in each year, with the hours for which the machine is mechanically available to be operated to be assessed by reference to the number of hours in each working day that the machine is actually mechanically available to be operated, limited to a maximum of 10 hours per calendar day?

61 I answer this question “Yes”, with the qualification that the word “working” in the expression “each working day” could be omitted. Reference can be made to the number of hours in each day in the year (or part of the year) that a machine was mechanically available to be operated.

(2) In determining whether the “Minimum Hours Warranty” is satisfied, is a day (or part of a day) on which the machine is not required to work or does not work due to wet weather, but is not under repair, to be treated as a day (or part of a day) for which the machine is mechanically available?

62 I answer this question “Yes”, if the expression “is not under repair” is understood as meaning “is mechanically available”. Whether a machine is mechanically available on a day is independent of whether on that day it is required to work or whether on that day it could not have been operated because of wet weather.

If “yes” to 2:

(a) if a machine is mechanically available before a period of wet weather, is it to be considered mechanically available or unavailable during the period of wet weather;

(b) if a machine is mechanically unavailable before a period of wet weather, is the machine to be considered mechanically available or unavailable during the period of wet weather, and, if unavailable, is it to be considered unavailable for:

the whole of the period of wet weather, or

for such length of time as was in fact required to repair the machine.

63 (a) I have answered this question earlier in this judgment.

64 (1) If a machine is mechanically available immediately before a period of wet weather and is mechanically available immediately after the period of wet weather ends, then, subject to any further specific evidence, the machine should be regarded as having been mechanically available during the period of the wet weather.

65 If a machine is mechanically available before a period of wet weather but is mechanically unavailable immediately after the period of wet weather ends, then I do not consider that it is possible to lay down any general guideline.

66 (b) If a machine is mechanically unavailable immediately before a period of wet weather and is mechanically unavailable immediately after the period of wet weather ends, then, subject to any further specific evidence, the machine should be regarded as mechanically unavailable during the whole of the period of wet weather. If a machine is mechanically unavailable immediately before a period of wet weather and is mechanically available immediately after the end of the period of wet weather, because of repairs done during the period of wet weather, then it should be regarded as mechanically unavailable until the repairs are completed and as mechanically available from that time onwards.

(4) If “no” to 2, how is a day (or part of a day) on which the machine is not required to work or does not work due to wet weather to be treated for the purpose of determining whether or not there has been a breach of the Minimum Hours Warranty?

67 Does not arise.

(5) Who bears the onus of proof of whether or not the machine is mechanically available or unavailable?

68 PCE bears the onus of proof as the party asserting breach of warranty.

(6) Assuming in respect of any particular machine it is determined that there has been a breach of the Minimum Hours Warranty, are damages to be assessed by taking the lower of the Warranted Hours and the PCE Wanted Hours, and deducting from that lower number the number of hours for which the machine was mechanically available (calculated in accordance with paragraphs 1 to 4 above)?

69 I answer this question “Yes”.

If “no” to 6, how are damages to be assessed?

70 Does not arise.

(8) In either case, is PCE entitled to recover damages for days (or parts of a day) on which a machine was not mechanically available but on which days (or parts of day) PCE could not have worked due to wet weather.

71 I answer this question “No”.

(9) Is the court bound by the determination of the Court of Appeal at [27] that the Minimum Hours Warranty in respect of the P22 and P27 is to be assessed by reference to annual available hours of 3,120 or is the court entitled to determine the Minimum Hours Warranty in respect of those two machines by reference to annual available hours of 8,000?

72 The question refers to par 27 of the judgment of Sackville AJA. In pars 25 and 27 of his judgment Sackville AJA said:-

“ [25] Each of the machines was allocated a separate number. For example, the two scrapers were allocated the numbers P48 and P49, respectively. All four August FOCUS Contracts were in similar form. Both at trial and on the appeal, the FOCUS Contract for scraper P49 (“P49 Contract”) was taken to be representative of the three contracts in issue (there was no dispute as to the contract concerning the excavator). Whatever conclusions are reached in relation to the construction of the P49 Contract, subject to one possible qualification referred to in para 27 below, will apply to the other August FOCUS Contracts.

[27] The qualification referred to in para 25 above, is that the Court was informed, for the first time, in PCE’s reply to G&G’s supplementary written submissions, made by leave after the hearing, that the figure specified for “Annual available hours” in the FOCUS Contracts relating to the bulldozers was different from the figure for “Annual available hours” in the FOCUS Contracts relating to the scrapers. However, the FOCUS Contracts relating to the bulldozers were not included in the appeal books and were not referred to in argument in the appeal. This judgment proceeds on the basis expressly accepted by the parties at trial and on appeal, namely that the P49 Contract is representative of the August FOCUS Contracts and the P50 Contract is representative of the November FOCUS Contracts.”

73 The number of “annual available hours” in the spreadsheets in the FOCUS contracts for the bulldozers, machines P22 and P27, was 8,000 and not 3,120, which was the number of “annual available hours” in the spreadsheets in the contracts for the other machines, which were scrapers.

74 It was submitted by counsel for PCE that the true number of annual available hours stated in the contracts for P22 and P27, and not 3,120 hours, should be adopted for the purposes of the minimum available hours warranty. It was submitted by counsel for G & G that I was bound by the judgment of Sackville AJA to find that the minimum available hours warranty for machines P22 and P27 was to be assessed by reference to annual available hours of 3,120 and that the figure of 3,120 had had a special significance in the judgment of Sackville AJA. The amount of money involved in the determination of this issue is in fact quite small.

75 It seems to me that I am bound by the judgment of Sackville AJA to find that the number of annual available hours for the machines P22 and P27 is to be regarded as 3,120. In par 25 of his judgment Sackville AJA said that there was a possible qualification to the proposition that whatever conclusions were reached in relation to the construction of the P49 contract would apply to the other August 1997 contracts. In par 27 of his judgment his Honour identified the possible qualification, namely that the figure for annual available hours in the contracts for P22 and P27 was different from the figure for annual available hours in the contracts for the other machines. However, as I read the rest of par 27 of his Honour’s judgment, his Honour, having been put on notice of the possible qualification, proceeded to reject it and to state that his judgment proceeded on the basis, which he said had been accepted by the parties at trial and on appeal, that the P49 contract was representative of all the August 1997 contracts and the P50 contract was representative of all the November 1997 contracts.

76 I also accept a submission made by counsel for G & G that the figure of 3,120 for annual available hours was not merely the number of annual available hours stated in the contracts for the machines other than the bulldozers but, as expressing what Sackville AJA found was the industry norm, was fundamental to his Honour’s reasoning.

PCE’s statement of issues

(1) When referring to “machine availability”, does the Court of Appeal’s decision in any way alter what is meant by the term “availability” and how that term was interpreted and applied in the first instance judgments?

77 I answer this question “No”. I refer to what I have said earlier in this judgment about the meaning of “availability”.

(2) If 1 is answered “yes”, how is the term to be interpreted and how does this impact on the determination of whether a machine is available and/or unavailable?

78 Does not arise.

(3) Does the reference to working “working days” in the Court of Appeal judgment include shifts worked or able to be worked at night (i.e. does it refer to working “periods”)?

79 I answer this question “No”. The expression “working day” refers to a calendar day of 24 hours and not to shifts.

(4) Does a “working day” denote days on which it is intended to work the machines (i.e. not moving days or rain days)?

80 I answer this question “No”. A day can be a working day for a machine even though it is not intended to work the machine on that day.

(5) Does “working day” denote 6 days in 7, or multiples thereof?

81 I answer this question “No”.

(6) As to the machines P22 and P27, are the relevant minimum hours for the purpose of the warranty (for the first year of the contract) the hours specified in the schedule (8000 hours less repair time, e.g. 206 hours re P22) or 2976 hours?

82 See my answer to issue (9) in G & G’s statement of issues.

(7) Is the G & G warranty such that PCE is entitled to seek to work the scrapers (the “3120 hours machine”):

on 312 “working days” in each year (or 312 working periods);

for up to 10 hours in each period (the warranted times);

less 144 hours of down time; (in total the warranty hours/days)

so that, 144 hours plus 53 days of 10 hours, or 530 hours per year are not warranted as available in a 10 hour 365 day year.

83 It is not the case that 53 days of 10 hours or 530 hours per year are not warranted.

(8) Is PCE entitled under the warranty to nominate which are the 312 warranted periods of 10 hours by calling for the machines to work or having work to do?

84 I answer this question “No”.

(9) Is whether a machine is capable of working on some or all of the 53 “days” in a year, being those for which G & G does not warrant availability under the term described by the Court of Appeal, (or other non-warranted time) relevant or irrelevant to performance of the warranty?

85 This question does not arise.

(10) If relevant, how is it relevant to performance of the warranty?

86 This question does not arise.

(11) Is a machine to be considered available merely because it is not required for use?

87 I answer this question “No”.

(12) Is a machine to be considered “available” notwithstanding it is manifestly incapable of use by reason of, for example, being acknowledged as under repair?

88 I answer this question “No”.

(13) Is a machine to be considered unavailable, though not demonstrated as inoperative on each day of wet weather occurring during or immediately after it became inoperative by reason of a breakdown, in the absence of evidence that it was operable?

89 I do not find this question easy to understand. I have endeavoured to deal with the subject of wet weather earlier in this judgment.

(14) Is the occurrence of wet weather at all relevant to issues of breach of warranty, or is it only relevant to issues of whether damage is suffered by reason of unavailability?

90 It is mainly relevant to issues of whether damage is suffered.

(15) Is it appropriate to calculate damages in respect of a machine and a year to:

calculate warranted time for the machine by reference to the contract schedules;

ii. calculate the time for which PCE would have required the machine to work, but for rain and other causes, up to 10 hours per day (wanted time);

if larger, deduct from wanted time, the period by which wanted time exceeds warranted time (so that wanted cannot exceed warranted) (net warranted time).

iv. deduct from that wanted time or net wanted time the time actually worked to derive lost wanted time; and

multiply the lost wanted time by the earnings rate?

91 Step (iv) (and, consequently, step (v)) is not appropriate.

(16) Is it significant that the lost wanted time with the excess over warranted time added back, closely compares to the calculated downtime for repairs (capped at 10 hours per day) calculated by PCE?

92 It does not appear to me to be essential that I should attempt to answer this question and I do not propose to do so.

(17) As to the machine P51, is it correct to treat the machine as “available” in the post rollover period between 15 March 1998 and 12 May 1998, during which time the machine was being “rebuilt”? If not, how is the time to be treated.

93 I answer this question “No”.

(18) Are the Court of Appeal’s references to a “working day” and a “10 hour day” references to 10 hours within a 24 hour day or 10 hours within a particular day or night shift.

94 10 hours within a 24 hour day.

The Defences issue

95 The Court of Appeal made the following order:-

96 It is convenient to set out in full pars 91-99 of the judgment of Sackville AJA, which appeared in his Honour’s judgment under the heading “Defences not addressed”.

“

[93] G&G argues that the primary Judge did not address the defences pleaded in para 14 of the Defence, either in the preliminary judgment or the second judgment. Since there was substantial evidence relating to a number of the pleaded matters, G&G contends that the proceedings should be remitted to the primary Judge for further findings to be made in relation to the defences pleaded by it.

[94] PCE, in a lengthy reply to G&G’s supplementary submissions, concedes that the defences relied on by G&G were appropriately pleaded and were the subject of costs evidence and submissions at the preliminary hearing. PCE also acknowledges that his Honour, in the preliminary judgment, made findings that G&G had established a factual basis for certain of the matters pleaded. However, according to Mr Cotman SC who appeared with Mr Gristci for PCE, the findings were made in the context of addressing G&G’s contention that any pre-contractual representations made by it to PCE were, to PCE’s knowledge, founded on certain assumptions made by G&G as to PCE’s responsibilities.

[96] The primary Judge can readily be excused for not addressing the so-called causation issue. The ways in which the parties presented their cases were confusing and the formulation of a multitude of preliminary issues did not help to simplify the matters in dispute. G&G’s submissions at the second hearing, like PCE’s submissions relating to the terms of the warranties, did not develop the “causation” argument in a clear or coherent fashion.

[97] Nevertheless, the fact is that G&G pleaded that its apparent breach of any warranty that might be found in the FOCUS Contracts was due to PCE’s failure to comply with its dependent contractual obligations. G&G’s pleaded defences were supported by evidence given at the preliminary hearing. His Honour made certain findings on the basis of that evidence, albeit in the context of other questions requiring resolution. G&G’s submissions at the second hearing relied, albeit briefly, on the pleaded matters as defences to PCE’s contractual claims.

[98] G&G can be criticised for not developing the arguments before the primary Judge and its failure to do so may be relevant to the question of costs, both on the appeal and at trial. But it cannot be said that G&G abandoned or ignored altogether its pleaded defences. G&G is entitled to have those defences determined and, to that end, to have the necessary factual findings made by the primary Judge.

97 In pars 44 to 59 of my judgment of 18 November 2005 I summarised parts of the pleadings on the cross-claim under the heading “The pleadings”. It was not suggested by either counsel at the latest hearing that any amendments to the pleadings made after I delivered my judgment of 18 November 2005 made any material difference to the pleadings.

98 I will not in this judgment repeat the parts of my judgment of 18 November 2005 in which I set out in full or summarised some of the paragraphs in the cross-claim by PCE and the defence to cross-claim by G & G. I will, however, make some comments about the structure of the pleadings.

99 In pars 9 and 10 of the cross-claim PCE alleged that G & G had made certain representations, including in par 10 representations as to machine availability rates expressed in percentages. In par 14 of the cross-claim PCE alleged that each of the matters which had been alleged in pars 9 or 10 to have been representations were also terms of the FOCUS contracts as warranties by G & G. In par 17 of the cross-claim it was alleged that, in breach of contract and contrary to representations made, G & G had failed to provide the machine availability rates represented. In par 18 of the cross-claim it was alleged that there had been contraventions or breaches of the other representations and warranties alleged in pars 9 and 10 (and 14 of the cross-claim).

100 In par 5 of the defence to cross-claim G & G, in answer to par 9 of the cross-claim, admitted that it had made statements to a similar effect to some of the representations alleged but said in sub-par (c) that the statements, to the knowledge of PCE, were based on 13 assumptions, which were listed (i) to (xiii).

101 In par 6 of the defence to cross-claim G & G, in answer to par 10 of the cross-claim, admitted that it had made statements to a similar effect to some of the representations alleged but said in sub-par (c) that the statements, to the knowledge of PCE, were based on the assumptions referred to in par 5(c) of the defence to cross-claim.

102 In par 14 of the defence to cross-claim G & G said inter alia that, based on the assumptions referred to in par 5(c) of the defence to cross-claim, G & G had made statements to the effect that the machines would have the availability rates alleged in par 17 of the cross-claim. In sub-par (e) of par 14 of the defence to cross-claim G & G said that to the extent that the machines had failed to achieve the availability rates alleged in par 17 of the cross-claim, that failure had been due to factors that, to the knowledge of PCE, had not been taken into account in calculating those machine availability rates. Sixteen factors were then listed, which were numbered (i) to (xvi).

103 The first 12 factors listed in par 14(e) corresponded to the first 12 assumptions in par 5(c), in that the assumptions alleged in par 5(c) were assumptions by G & G about what conduct would be engaged in by PCE and the factors in par 14(e) were alleged conduct engaged in by PCE which was contrary to the corresponding assumption.

104 Paragraph 15 of the defence to cross-claim was in the following terms:-

105 Sackville AJA’s judgment refers to par 14 of the defence to cross-claim, whereas the actual order made by the Court of Appeal refers to par 15(b) of the defence to cross-claim. As I have noted, par 14 of the defence to cross-claim was directed to par 17 of the cross-claim, which alleged breaches and contraventions of warranties and representations as to machine availability rates, whereas par 15 of the defence to cross-claim was directed to par 18 of the cross-claim, which alleged breaches and contraventions of other warranties and representations alleged in the cross-claim. However, at the hearing before me it was accepted that par 15(b) of the defence to cross-claim should be treated as a defence to allegations that G & G had breached the minimum available hours warranty.

106 Although the formulation of a number of issues for preliminary determination in my first judgment had not had entirely successful results, it was agreed by the parties at a late stage of the last hearing that the parties should endeavour to define the issues for determination by me in relation to G & G’s defences.

107 After I had reserved, an agreed statement of issues was forwarded to me, which was in the following terms:-

“Issues for determination in relation to Gough and Gilmour’s defence

1. Whether the determination of G&G's Further Amended Defence to the Cross-Claim ("the Defence") should proceed solely upon the basis of the submissions made during the original hearings in 2005 and 2007, or whether the Court is entitled to have regard to the further written and oral submissions made in August and September 2009.

Subject to the extent to which the arguments are permitted:

5. If there were obligations of the kind described in 4, were they (all, or any of them) breached?

8. To the extent that performance of the minimum available hours warranty is capable of being excused in part only:

108 I will deal in turn with each of the issues.

Whether the determination of G&G's Further Amended Defence to the Cross-Claim ("the Defence")

should proceed solely upon the basis of the submissions made during the original hearings in 2005 and 2007,or whether the Court is entitled to have regard to the further written and oral submissions made in August and September 2009.

109 I was informed at a late stage on the last day of the hearing before me (transcript 27 October 2009 p 322) by counsel for G & G that counsel for PCE wanted to raise an issue that the defences issue should be determined solely on the basis of the submissions which had been made in the original hearings before me. I observed that I had received a lot of further submissions. Neither counsel suggested on 27 October that any previous submission had been made that the defences issues should be determined solely on the basis of the submissions made at the original hearing.

110 I note that on 30 June 2009, soon after the Court of Appeal made its orders of 3 June 2009, I made orders by consent about the further conduct of the proceedings, including orders that G & G file and serve written submissions relating to the defences issue and that PCE file and serve written submissions in reply to G & G’s written submissions. Pursuant to these orders written submissions were filed and served by G & G and PCE (even if somewhat belatedly).

111 On the second day of the hearing before me (22 September 2009) counsel for G & G commenced making oral submissions before me on the defences issue, without any complaint by counsel for PCE. Submissions by both counsel on the defences issue were made on parts of the third and fourth days of the hearing. On the fifth day of the hearing (25 September 2009) counsel for G & G again addressed me on the defences issue (transcript pp 262-287), again without any complaint by counsel for PCE.

112 In these circumstances it would be strange if I were now required to disregard the written and oral submissions I received before and during the latest hearing.

113 Although Sackville AJA did say in his judgment that, in his view, the evidence already adduced was sufficient to enable the defences issue to be determined, his Honour would not appear to have said anything by way of prohibiting me from receiving further submissions. Indeed, there would appear to me to be indications in his Honour’s judgment that further submissions would be appropriate. The part of his Honour’s judgment which I have already quoted is headed “Defences not addressed”. In par 92 of the judgment his Honour said that the evidence now relied on in relation to the defences issue had been relied on at the trial principally for other purposes. In par 93 of the judgment his Honour noted submissions by counsel for G & G, which his Honour clearly accepted, that I as the primary judge had not addressed the defences pleaded in par 14 of the defence to cross-claim and that the proceedings should be remitted to me so that I could make further findings about the defences issue. In par 94 of the judgment his Honour, in referring to submissions by counsel for PCE, noted an acknowledgement by counsel for PCE that G & G had established a factual basis for “certain” of the matters pleaded but also a submission that such findings as I had made had been made in a different context.

114 In par 96 of Sackville AJA’s judgment his Honour said that I could be excused for not having addressed the “causation” issue. His Honour added that G & G’s submissions at the second hearing before me had not developed the “causation” argument in a clear or coherent fashion.

115 If the defences were not addressed by me in my earlier judgment, if such findings as I made in my earlier judgment related to some only of the matters pleaded in par 14(e) of the defence to cross-claim and were made in a different context, if the submissions previously made by G & G were deficient and if I am to make further findings, then it would seem to me appropriate for me to receive further submissions.

116 I answer issue 1 by saying that the Court is entitled to have regard to the further written and oral submissions made in August and September 2009 (and on 27 October 2009).

Having regard to the content of paragraph 15(b) of G&G's defence to cross claim, is G&G permitted to contend that any or all of the matters alleged in paragraph 14(e) of the defence are:

the subject of express or implied terms of the FOCUS Contracts.

Incidents of the implied obligation to cooperate in the performance of the FOCUS contracts by G&G.

Obligations interdependent with G&G's obligation under the minimum available hours warranty;

matters that prevented G&G from performing its obligation under the minimum available hours warranty.

117 I have already set out the terms of par 15(b) of the defence to cross-claim but it is convenient to repeat them.

118 I have already noted that, although par 15(b) was pleaded in answer to par 18 of the cross-claim, it is to be treated as a defence to the claim by PCE based on the minimum available hours warranty. Having regard to the way in which the case progressed, any breaches by G & G of other warranties in the FOCUS contracts and any failures by G & G to “make out” representations made by it can be disregarded.

119 I have already pointed out that the matters alleged in par 14(e) of the defence to cross-claim consist of alleged conduct, by act or omission, on the part of PCE; whereas the matters alleged in par 5(c) of the defence to cross-claim were alleged assumptions by G & G about conduct which would be engaged in by PCE, which G & G alleged formed the basis of statements made by G & G.

120 To allege, as par 15(b) of the defence is to be taken to have alleged, that any breaches of the availability warranty were the result of the 14(e) matters is equivalent to alleging that the breaches of the warranty were caused by the 14(e) matters and to alleging that the 14(e) matters prevented G & G from performing the warranty. I am, accordingly, of the opinion that contention d in issue 2, that the matters alleged in par 14(e) of the defence to cross-claim prevented G & G from performing its obligation under the minimum available hours warranty, falls within what is pleaded in par 15(b) of the defence and is a contention G & G should be permitted to make.

121 It is more questionable whether contentions a, b and c fall within par 15(b) of the defence.

122 It appears to me that there are indications in the judgment of Sackville AJA that I should adopt a liberal approach in interpreting par 15(b) of the defence to cross-claim.

123 The Court of Appeal itself adopted a liberal approach in interpreting PCE’s cross-claim, in holding that the cross-claim “encompassed, even if only in very general terms” (par 88 of Sackville AJA’s judgment) the warranty as to minimum available hours which the Court of Appeal found had been given.

124 In pars 95 and 96 of his judgment Sackville AJA referred to the defences G & G wished to raise as the “causation” point or issue or argument (placing the word “causation” in quotation marks) or the “so-called causation issue”, thereby suggesting, to my mind, that his Honour was using the word “causation” as a convenient label, rather than as a precise, exhaustive description of the defences G & G should be permitted to have determined.

125 In par 95 of Sackville AJA’s judgment his Honour quoted part of G & G’s submissions at the second hearing before me, in which it had been submitted that the assumptions (in par 5(c) of the defence to cross-claim), on the basis on which G & G said it had made its representations, were dependent obligations on the part of PCE and that, to the extent that the assumptions had not been fulfilled, PCE had failed to cooperate in the performance of the FOCUS contracts or had prevented G & G from performing the FOCUS contracts.

126 In par 97 of his judgment Sackville AJA said that G & G had pleaded that its apparent breach of warranty was due to PCE’s failure to comply with its dependent contractual obligations.

127 Sackville AJA referred several times to G & G’s defences, using the plural “defences”, indicating that the defences G & G should be permitted to have determined were not limited to a single defence but extended to all of the defences referred to in this part of his Honour’s judgment.

128 I have concluded that par 15(b) of the defence to cross-claim is a sufficient pleading to permit G & G to make all of the contentions in a, b, c and d of issue 2. However, later in this judgment I will give further consideration to the question of whether the terms of par 15(b), even liberally interpreted, and the terms of Sackville AJA’s judgment place some limits on the contentions G & G can make.

If any or all of the above matters are not open to be argued on the pleading:

Is it open to G&G to maintain the arguments having regard to the manner in which the case was conducted at the original hearings in 2005 and 2007, including the submissions made (or not made) at that hearing,

Should G&G be permitted, in all the circumstances, to amend its defence to permit such arguments.

129 Having regard to how I have answered issue 2, this issue does not arise.

130 No submissions were made to me at the latest hearing about the manner in which the case had been conducted before me at the hearings in 2005 and 2007.

131 If I am wrong in answering issue 2 in the way in which I have, I consider that G & G should be given leave to amend so as to permit it to make all of the contentions in issue 2. In accordance with par 102 of Sackville AJA’s judgment, no further evidence was adduced at the latest hearing. All of the contentions in issue 2 were the subject of submissions at the hearing before me and counsel for PCE had a full opportunity to respond to counsel for G & G’s submissions.

Whether PCE had obligations in relation to the matters pleaded in paragraph 14(e) of the Defence, as contended for in paragraphs 8 to 15 of G&G's Outline of Submissions dated 14 August 2009, either as:

express terms of the FOCUS Contracts;

implied terms of the FOCUS Contracts;

incidents of any implied obligation to co-operate in the performance of the FOCUS contracts by G&G.

132 Earlier in this judgment I referred to the correspondence between sub-pars (i) to (xii) of par 14(e) of the defence to cross-claim and sub-pars (i) to (xii) of par 5(c) of the defence. Sub-pars (i) to (xii) of par 14(e) alleged kinds of conduct, by act or omission on the part of PCE. Sub-pars (i) to (xii) of par 5(c) alleged assumptions by G & G about what conduct would be engaged in by PCE as forming the basis for statements which had been made by G & G. The terms of the assumptions in par 5(c) could, as a matter of language, readily be converted into the terms of contractual promises by PCE which would be breached by conduct of the kind alleged in the corresponding par 14(e) matters. For example, the assumption in par 5(c)(ii) was that “the machines would not be operated in remote and isolated areas” and the corresponding matter in par 14(e)(ii) was “that the machines were operated in remote and isolated areas”.

133 Accordingly, the question in issue 4, so far as sub-pars (i) to (xii) of par 14(e) are concerned, could be expressed as follows:- were there obligations of PCE, whether as express terms of the contracts or as implied terms or as incidents of an implied obligation to cooperate, which were in the same terms as, or substantially similar terms to, the assumptions alleged in par 5(c) and which would have been breached by the conduct alleged in par 14(e).

134 At pars 135 to 153 of my first judgment I made findings about whether the alleged assumptions in sub-pars (i) to (xii) of par 5(c) of the defence to cross-claim were assumptions made by G & G, to the knowledge of PCE. The question whether an alleged assumption about the conduct which would be engaged in by PCE was an assumption made by G & G, to the knowledge of PCE, is not necessarily the same question as whether the subject matter of the alleged assumption was a contractual promise by PCE that it would engage in such conduct. A matter could be an assumption made by G & G, to the knowledge of PCE, about conduct which would be engaged in by PCE, without the matter being a contractual promise by PCE. Nevertheless, the two questions are related and my findings in my first judgment about whether G & G, to the knowledge of PCE, made the various alleged assumptions in sub-pars (i) to (xii) of par 5(c) are clearly the findings made by me which Sackville AJA referred in his judgment (see pars 94 and 97).

135 I will now consider in turn the various matters in par 14(e), adopting, as the parties did, some grouping of the matters.

(i) the machines were operated in areas other than in and around Wee Waa, Narrabri, Burren Junction, Walgett and Gunnedah

136 For the same reasons as I found in my first judgment (pars 136 to 143) that the corresponding alleged assumptions were not assumptions made by G & G, to the knowledge of PCE, I do not find that there were obligations of the FOCUS contracts which would be breached by these matters.

137 I found that the corresponding alleged assumption was an assumption made by G & G, to the knowledge of PCE (first judgment par 144). I find that there was an express term of both the August 1997 and the November 1997 FOCUS contracts, which would be breached by conduct on the part of PCE of the kind alleged in (iii). See p 5 of the August 1997 contracts (fifth bullet point) and Schedule 3 item 2 of the November 1997 contracts.

138 I found that the corresponding alleged assumption was an assumption made by G & G, to the knowledge of PCE (first judgment par 145). I find that there was an express term of both the August 1997 and the November 1997 FOCUS contracts, which would be breached by such conduct by PCE. See p 5 of the August 1997 contracts (fourth last bullet point) and Schedule 3 item 3 of the November 1997 contracts.

139 I found that the corresponding alleged assumption was an assumption made by G & G, to the knowledge of PCE (first judgment par 146). I find that there was an express term of both the August 1997 and the November 1997 FOCUS contracts, which would be breached by such conduct by PCE. See p 5 of the August 1997 contracts (third last bullet point) and Schedule 3 item 10 of the November 1997 contracts.

140 I found that the corresponding alleged assumption was an assumption made by G & G, to the knowledge of PCE (first judgment par 147). I consider that I should find that, if the machines were to be serviced and maintained by G & G at a fixed rate of charging, a term should be implied in all of the contracts or at least it was an incident of an implied obligation to cooperate in the performance of the contracts, that the machines should not be operated beyond their operational limits.

141 I found that the corresponding alleged assumption was an assumption made by G & G, to the knowledge of PCE (first judgment par 148). I find that there was a term on the part of PCE in the August 1997 contracts that the bowls of these two coal bowl scrapers would be modified so as to reduce their capacity to approximately that of the bowl of a standard scraper.

142 I found that the corresponding alleged assumption was an assumption made by G & G, to the knowledge of PCE (first judgment par 149). I find that they were terms of the August 1997 and November 1997 contracts, which would be breached by conduct on the part of PCE rendering the machines inaccessible to G & G servicemen. However, I do not consider that such terms extended to requiring PCE to construct access roads to sites for the use of the G & G servicemen.

&

143 I found that the corresponding alleged assumption was an assumption made by G & G, to the knowledge of PCE (first judgment par 150). I find that there were terms of both the August 1997 and the November 1997 contracts, either as implied terms or as incidents of an implied obligation to cooperate in the performance of the contracts, which would be breached by such conduct by PCE.

144 I did not find that the corresponding alleged assumption was an assumption made by G & G, to the knowledge of PCE (first judgment par 151). For similar reasons I do not find that there was a term of the August 1997 or the November 1997 contracts which would be breached by such conduct by PCE.

145 I did not find that the corresponding alleged assumption was an assumption made by G & G, to the knowledge of PCE (first judgment par 152). I do not find that there was a term of the August 1997 or the November 1997 contracts which would be breached by such conduct by PCE.

146 I referred to the corresponding alleged assumption in par 153 of my first judgment.

147 The terms of this matter are very similar to the terms of the sixth bullet point on p 5 of the August 1997 contracts, describing matters for which PCE would be responsible. Item 7 in Schedule 3 of the November 1997 contracts stating a responsibility of the customer (PCE) was in somewhat similar terms.

148 The effect of these express provisions in the contracts is that PCE, and not G & G, was to be responsible for repairing damage due to these factors. Apart from operator abuse, the factors listed were not conduct, or intentional conduct, on the part of PCE and were matters the happening of which would be beyond the control of PCE.

149 I do not find that there was a term of either the August 1997 or the November 1997 contracts such that the occurrence of events within sub-par (xii), apart from operator abuse, could be a breach of an obligation by PCE. As far as operator abuse is concerned, insofar as it involved operating a machine beyond its operational limits, it would fall within matter (vi).

150 There was no corresponding alleged assumption in par 5(c) of the defence to cross-claim.

151 There were no express terms in any of the contracts in respect of which conduct of this kind would be a breach. I do not consider that I should find that there was any implied term in any of the contracts which would be breached by such conduct.

(xiv) the machines were operated by inexperienced and/or incompetent
operators

(xv) the machines were operated on sites overseen by inexperienced and/or incompetent site supervisors

152 There were no corresponding alleged assumptions in par 5(c) of the defence to cross-claim. There were no express terms in the contracts which would be breached by conduct of this kind by PCE. However, I consider that I should find that it was an implied term of each contract or an incident of an implied obligation to cooperate in the performance of the contract that operators engaged by PCE would be reasonably competent and that site supervisors would be reasonably competent and that maintenance and repairs for which PCE was responsible would be carried out by reasonably competent persons.

153 I have found that there were obligations on the part of PCE, either as express terms of the FOCUS contracts or as implied terms of the FOCUS contracts or as incidents of an implied obligation to cooperate in the performance of the FOCUS contracts, in relation to the matters pleaded in sub-pars (iii), (iv), (v), (vi), (vii), (viii), (ix), (xiv), (xv) and (xvi) of par 14(e) of the defence to cross-claim.

209 Mr Campbell in oral evidence agreed that he and G & G had talked about trying to make the machines more accessible in wet weather, for example, by taking the machines from the job site to a service road, but denied he had agreed to construct suitable access roads to get to work sites.

210 I accept the evidence of G & G witnesses about the difficulty of accessing sites in wet weather. However, as I stated earlier in this judgment, while I consider that there was a term of the contracts which would have been breached by conduct on the part of PCE rendering the machines inaccessible to G & G servicemen, I do not consider that the term extended to imposing a positive requirement on PCE to construct access roads for the use of G & G’s servicemen during periods of wet weather.

211 I do not find that there were breaches of any obligation relating to the matter in sub-par (viii).

212 No submissions were made about this matter and I do not find that there was any breach of an obligation of PCE.

(xiv) the machines were operated by inexperienced and/or incompetent
operators

(xv) the machines were operated on sites overseen by inexperienced and/or incompetent site supervisors

213 These matters can conveniently be dealt with together.

214 Some evidence was given by Mr Keogh about observing 17 and 18 year olds youths driving the machines. However, I do not find that it has been established that the there were breaches of an obligation relating to matter (xiv). Insofar as there was operator abuse of the machines, I have already dealt with it in considering matter (vi).

215 No submissions were made about matters (xv) and (xvi) and I do not find that there was any breach of an obligation relating to either of these matters.

Submissions by G & G

216 In written and oral submissions it was submitted by counsel for G & G that such contractual obligations on the part of PCE as I found, and also found to have been breached, were obligations interdependent with G & G’s obligation under the minimum available hours warranty; that performance by G & G of its warranty was conditional upon PCE performing such obligations; and that breaches of such obligations by PCE prevented G & G from performing its warranty.

217 It was also submitted that such obligations were incidents of a term implied generally in contracts, that each party to the contract will do all such things as are necessary to be done on his part to enable the contract to be performed – Mackay v Dick (1881) 6 App Cas 251 especially at 263 per Lord Blackburn.

218 Counsel for G & G stated explicitly in oral submissions that G & G was not seeking damages for any such breaches of contract by PCE.

219 It was submitted that, if any of its principal submissions was accepted, the relief which should be granted to G & G for the breaches by PCE would be that G & G would be excused from performing its minimum available hours warranty, and that G & G would be entirely excused from performing its warranty and not merely for any limited period or in any limited way.

220 Counsel for G & G informed the court that G & G did not intend to seek to prove, and the state of the evidence would not permit it to prove, that the unavailability of a machine on any particular day had been caused by a particular breach of its obligations by PCE. Counsel said:-

“We are not intending to tell your Honour, here is evidence of Mr So and So, who says that on that particular day a machine was bogged and to prove that on that particular day we couldn’t comply. The evidence does not descend to that particularity and we acknowledge that.”

221 Later in his oral submissions counsel for G & G said:-

“We have steadfastly maintained that you couldn't hope to run the prevention argument or to run the dependent contractual obligations argument, by demonstrating that on a particular day a breach of the dependent contractual obligation had a specific effect on the claimed lack of availability”.

222 Counsel said that there were two reasons why a particular unavailability of a machine could not be connected with a particular breach by PCE. One reason was that the effects or consequences of breaches, for example of the obligation to provide or allow oil samples to be taken regularly from a machine, would not necessarily, and very likely would not, manifest themselves on the day the breach occurred.

223 The other reason, as put by counsel, would appear to be that it should be regarded as sufficient for G & G to establish “significant material breaches of the various terms that we put are dependent contractual obligations, which your Honour can comfortably find were likely to have had a material effect in preventing the final number” (that is, achieving the total number of available hours warranted).

224 Later still in the hearing counsel for G & G submitted:-

“If I can satisfy your Honour that there is a complex interaction of events which your Honour is satisfied must have impacted on our ability to perform, and the breach is such as to make it impossible or impracticable for us to prove cause and effect on a day-by-day basis, we can't do it because of the nature of the breaches, that is not our fault. So your Honour would have to find that the prevention principle, whether there is a complex interaction that makes it impossible to prove the overall hindrance or delay, has the effect of disentitling the innocent party from being relieved of its obligation in toto, and we say that's a very harsh view of the prevention argument. And we say that the proper approach should be: if in truth the disentangling can't occur because of the nature of the breaches to which we have been subjected, either it is all relief or, if there is going to be some disentangling, it should be on the guilty party to disentangle and show what the effect of its breach was in connection with the prevention or hindrance. So what I need to show on that, in my respectful submission, is sufficient to show material contribution to a failure to be able to meet the warranty.”

225 With regard to the submission that G & G was prevented from performing its warranty by breaches by PCE of its obligations, counsel for G & G referred to Carter Contract Law in Australia at pars (29-070) and (29-080) and to S.M.K. Cabinets v Hili Modern Electrics Pty Limited (1984) VR 391 (Supreme Court of Victoria Full Court); Drinkwater v Caddyrack Pty Ltd (Young J 25 September 1997); Kilpatrick Green Pty Ltd v Leading Synthetics Pty Ltd (Gillard J Supreme Court of Victoria 5 June 1998) and TC (by his tutor Sabatino) v New South Wales [2001] NSWCA 380.

226 Counsel for G & G placed particular reliance on the decision of the Full Court of the Supreme Court of Victoria in S.M.K.

227 In S.M.K. the Full Court of the Supreme Court of Victoria held that under a construction contract the proprietor could not recover liquidated damages under a clause in the contract providing for the payment of liquidated damages if the contractor did not complete the work by a particular date, if the proprietor had himself prevented completion by the due date by ordering extras or variations, even where the contractor might, in any event, have been prevented by his own delays from completing by the due date.

228 Counsel for G & G pointed out that in S.M.K. it was not suggested that the court should assess the number of days by which completion had been delayed by the conduct of the proprietor and then to add that number of days to the originally fixed date for completion so as to arrive at a new date for completion, to which the liquidated damages clause in the contract would apply.

229 It was submitted by counsel for G & G that the judgment in S.M.K. could be applied in the present case so as to produce the result that, on proof of some breaches by PCE of its obligations, the warranty by G & G of a specific number of hours of availability would fall and be replaced, not by a new warranty with an adjusted specific number of hours of availability, but by a warranty merely providing for a reasonable number of hours of availability.

230 The decision in S.M.K. was referred to by Young J (as his Honour then was) in Drinkwater, in the course of a wide ranging discussion by his Honour of the legal maxim that a person cannot rely on his own wrong. In Drinkwater it had been submitted that parties to a contract could not take advantage of a situation that had been brought about by their own wrong, in order to justify a termination of the contract.

231 In Drinkwater Young J summarised the decision in S.M.K. by saying that there is either a presumption of law or an implied term that, if conduct of a proprietor, whether innocent or otherwise, has substantially delayed completion, the proprietor will not be able to recover liquidated damages from the builder under a liquidated damages clause, notwithstanding that the builder may in fact have disabled himself by his own delays from completing by the due date.

232 In Drinkwater Young J explicitly held that the instant case was not a case of interdependent conditions.

233 As to whether the warranty by G & G was interdependent with the obligations of PCE, it was submitted by counsel for G & G that there is a presumption against independency, that is a presumption in favour of interdependency of contractual obligations. The decision of Lord Mansfield in Kingston v Preston (1773) 2 Doug 689, 99 E.R.437 was referred to.

234 It was submitted by counsel for G & G that the warranty as to availability was a major obligation undertaken by G & G under the FOCUS contracts and should be construed as being interdependent with at least the major obligations of PCE under the FOCUS contracts.

235 Counsel for G & G referred to a part of my first judgment in which I said at par 97 that:-

“A reasonable person in the position of PCE or an intelligent bystander would not consider that G & G was intending to give a contractual promise, which would be absolute and unconditional, that PCE in operating a machine in what were likely to be a variety of conditions would achieve a rate of availability calculated to two decimal places.”

236 It was conceded that, as appears on the face of this comment, it was made by me, not with respect to a warranty in the terms ultimately found by the Court of Appeal, but with respect to the warranty pleaded in par 17 of the cross-claim, that the machines would provide the percentage availability (calculated to two decimal places) set out in the table appended to par 17. Nevertheless, it was submitted that my comment was still valid, that a reasonable person would not consider that G & G was intending by its warranty to make a promise which would be absolute and unconditional.

237 It was submitted that it would defy common sense for the warranty by G & G to be held to be absolute and unconditional. Counsel offered extreme examples in which, it was submitted, the warranty could not apply, such as PCE taking the machines overseas (for example to Alaska) or operators abusing the machines every day in a year of 365 days.

238 As to the implied duty to cooperate in the performance of a contract, it was submitted by counsel for G & G that such a term is implied in all contracts; that, even if there had been no express terms in the FOCUS contracts requiring PCE to do anything, all or most of the matters in par 14(e) of the defence to cross-claim would have been breaches of the implied duty to cooperate.

239 It was accepted by counsel for G & G that, as was stated by Gummow, Hayne, Heydon and Kiefel JJ in Campbell v Backoffice Investments Pty Ltd (2009) 83 ALJR 903 at [168], “care must be exercised in identifying both the content and operation of an implied obligation to co-operate lest it be at odds with the terms upon which the parties have expressly agreed.”

240 It was submitted generally by counsel for G & G that the express terms of neither the August 1997 contracts nor the November 1997 contracts prevented the implication in the contracts of a term to cooperate in the performance of the contracts having the incidents contended for or a finding that the warranty by G & G was interdependent with the obligations of PCE.

241 In particular, it was submitted that where an express term of a FOCUS contract provided that there would be some consequence of a breach of a contractual obligation by PCE, other than that G & G would be excused from its warranty as to availability, that would not prevent the obligation being held to be interdependent with the warranty by G & G.

Submissions by PCE

242 Counsel for PCE submitted that close attention should be paid to the express terms of the FOCUS contracts, in determining whether any term should be implied or whether any incident of an implied term to cooperate should be implied or whether the warranty by G & G should be regarded as interdependent with any obligation of PCE.

243 It was submitted that the true nature of the terms of the FOCUS contracts which counsel for G & G submitted were interdependent terms, was shown by the way in which G & G had dealt with some of them in its original statement of claim, by making them the basis for claims, which were later abandoned, for sums of money or for damages.

244 It was submitted that, in whatever way G & G formulated its claim to be excused from performing the warranty, the onus of proof was on G & G, there was no reversal of the onus of proof at any stage and there was no onus, legal or evidentiary, on PCE to “disentangle” the consequences of any breaches of its obligations from the consequences of any other factors.

245 Counsel for PCE contended that, in whatever way G & G formulated its claim to be excused from its warranty, it was necessary for G & G to prove causation, that is to prove that breaches by PCE had caused the non-performance of its warranty by G & G.

246 Counsel for PCE examined the documents showing the availability of each of the machines and suggested that, in the case of each machine, much of the total time for which the machine was unavailable was to be found in a small number of large blocks of time. It was contended that, at least with respect to these large blocks of time, it should have been possible for G & G to establish, if it was the fact, that these periods of unavailability had been caused by breaches by PCE of its obligations. It was further contended that such evidence as there actually was tended to refute that these periods of unavailability had been caused by breaches by PCE.

247 A submission particularly pressed by counsel for PCE was that there was powerful evidence from witnesses within G & G itself, that the unavailability of the machines had been caused otherwise than by breaches by PCE of its obligations. Counsel for PCE concluded his written submissions by saying:-

“Overwhelmingly, the evidence demonstrates that the difficulties G & G experienced in performing the FOCUS contracts was due to factors other than the relatively trifling matters set out in paragraph 14(e). The problem of not knowing the machines’ maintenance history prior to them being put onto FOCUS, the inability to predict how the machines would perform, the need to perform major component removal and replacement in the field on a “random” basis and the subsequent withdrawal and rebuilding of a number of the machines were overwhelmingly the major problems. This is admitted by G & G’s key witnesses. It is recorded in the contemporaneous documents.”

248 Counsel for PCE referred to a part of my first judgment in which I dealt with the issue identified as issue 5 in that judgment (pars 165-186 of my judgment). In some of that part of my judgment I was concerned with whether G & G had reasonable grounds for making certain representations as to future matters. I examined parts of Mr Shearman’s report of 21 July 1998 (pars 175-176 of my judgment), Mr Shearman’s oral evidence (pars 178-179 of my judgment) and Mr Hutson’s oral evidence (par 180 of my judgment) and I concluded that G & G had not discharged the onus of proving that it had reasonable grounds for making those representations as to future matters (pars 184 and 185 of my judgment).

Decision

(c) did breach of the obligations prevent, or hinder, G & G from performing the minimum available hours warranty, wholly or in part, and if in part, to what extent?

249 It is convenient to consider firstly part (c) of issue 6 and, in particular, whether the breaches by PCE of its obligations which I have found prevented G & G from performing its warranty.

250 I accept that there is a principle, whether it is regarded as a rule of law or as a term implied in a contract, that one party to a contract should not by his acts or omissions prevent the other party from performing an obligation under the contract and if the first party does so, he cannot enforce the obligation of the other party. The acts or omissions preventing performance need not necessarily be breaches of the contract. See the discussion by Brooking J in S.M.K. at pp 395-396.

251 I take into account the cases which were cited by counsel for G & G as applications of the prevention principle. However, it seems to me that, apart from recognising the principle, all of them were so different in their facts from those of the present case as to afford little guidance in the determination of the present issue.

252 Counsel for G & G accepted that the onus of proof was on G & G to prove that it had been prevented by PCE’s breaches from performing its warranty. However, as I noted earlier, counsel for G & G submitted that it would be sufficient, in order to discharge the onus, for G & G to prove breaches by PCE sufficient to have been likely to have affected, “impacted upon”, G & G’s ability to perform its warranty and, even if I considered that G & G’s inability to perform its warranty was caused, not only by PCE’s breaches, but by other factors as well, there would be an onus on PCE to “disentangle”, if it could, the effects of the other factors from the effects of PCE’s breaches. As I also noted earlier, counsel for G & G made a submission that, on proof of some breaches by PCE of its obligations, the warranty by G & G of a specific number of hours of availability would fall and be replaced by a warranty providing for merely a reasonable number of hours of availability.

253 I do not consider that I should accept any of the suggested modifications of the requirement that G & G prove that it was prevented by PCE’s breaches from performing its warranty. In my opinion, it is not sufficient for G & G to prove merely that there were some breaches by PCE of its obligations. It is necessary for G & G to prove that it was prevented by PCE’s breaches from performing its warranty.

254 Notwithstanding the submissions of counsel for G & G, I consider that the judgment of Brooking J in S.M.K. provides little, if any, support for any of the suggested modifications. In S.M.K. the arbitrator had made an unequivocal finding that the conduct of the proprietor had prevented the contractor from completing by the due date. It is true that the arbitrator had also made a finding that the contractor would not, in any event, have been able to complete by the due date. However, the latter finding did not detract from the former finding; the conduct of the proprietor had been a sufficient cause of the contractor being unable to complete by the due date. There is no suggestion in Brooking J’s judgment that there should have been an attempt to disentangle the effects of the proprietor’s conduct and the effects of the contractor’s own conduct on the contractor’s inability to complete by the due date.

255 I accept the submission by counsel for PCE that for each of the machines much of the time for which the machine was unavailable consisted of a small number of large blocks of time.

256 Machine P22 was unavailable between 26 August 1997 and 19 October 1997.

257 Machine P27 was unavailable, while it was being repaired, between 26 February 1998 and 3 April 1998.

258 Machine P48 was unavailable between 5 October 1997 and 9 October 1997, between 4 November 1997 and 2 December 1997 and between 25 February 1998 and 26 March 1998, while it was being rebuilt.

259 Machine P49 was unavailable between 16 August 1997 and 22 August 1997, for 10 days in October 1997, for 10 days in November 1997, between 19 February 1998 and 2 March 1998, between 19 March 1998 and 22 March 1998 and then between 31 March 1998 and 26 May 1998, while it was being rebuilt.

260 Machine P50 was unavailable between 29 January 1998 and 31 January 1998, between 3 March 1998 and 12 March 1998, and between 1 April 1998 and 3 April 1998.

261 The machine P51 broke down immediately on being delivered to PCE. It was unavailable between 26 November 1997 and 7 December 1997, between 18 January 1998 and 23 January 1998, between 21 February 1998 and 8 March 1998 and between 15 March 1998 and 12 May 1998.

262 I accept the submission by counsel for PCE that, at least with respect to some of the large blocks of time, for example during the rebuilding of a number of the machines by G & G, it should have been possible for G & G to establish, if it was the fact, that these periods of unavailability had been caused by breaches by PCE of its obligations.

263 I also accept the submission by counsel for PCE that the evidence by Mr Shearman and Mr Hutson which was referred to in the conclusion of counsel’s written submissions and some of which I summarised in my earlier judgment strongly suggests that G & G was prevented from performing its warranty of availability, not by breaches by PCE of its obligations, but by the factors identified by Mr Shearman and Mr Hutson, including, especially, that G & G did not have sufficient information about the previous history of the machines, all of which were second hand, and did not know the age and condition of the components of the machines, with the consequence that there was a high incidence of unanticipated component failure, and, because components were failing unexpectedly, replacement parts were not on hand so as to enable prompt repairs to be effected.

264 I conclude that I am not satisfied that G & G has discharged the onus of establishing that breaches of its obligations by PCE prevented G & G from performing its warranty.

265 I do not propose to attempt to answer question 6(c) any further.

266 No submissions were made at the hearing that breaches of its obligations by PCE which merely “hindered”, as distinct from preventing, G & G from performing its warranty would be relevant. I was not referred to any authority about conduct by a party to a contract which merely hinders, but does not prevent, another party to the contract from performing an obligation under the contract.

267 The case which was put by G & G at the hearing was that, as a result of breaches of contract by PCE, G & G was excused or relieved entirely, and not merely in part, from performing its warranty. As I have already noted, counsel for G & G informed the Court several times that the state of the evidence would not permit G & G to establish that the unavailability of a machine on a particular day had been caused by a particular breach of its obligations by PCE. If this is the state of the evidence, it is difficult to see how a breach by PCE of an obligation could be found to have prevented G & G from performing some part of its obligation under the warranty, let alone identifying the part and the extent of the part.

(a) were the obligations interdependent with G & G’s obligation under the minimum available hours warranty in respect of the relevant machine(s), and if so does the breach by PCE excuse performance of that warranty by G & G, wholly or in part and if in part, to what extent ;

(b) was performance of the minimum available hours warranty conditional upon PCE’s performance of its obligations under the FOCUS contracts, and if so does the breach by PCE excuse performance of that warranty by G & G, wholly or in part and if in part, to what extent

268 These two parts of issue 6 can be conveniently be dealt with together. To ask whether the obligations of PCE were interdependent with the obligation of G & G under the warranty is, in substance, the same as asking whether performance by G & G of its obligation under the warranty was conditional upon performance by PCE of its obligations.

269 I did not receive much assistance from counsel as to any law applicable to these parts of issue 6. All that I was referred to was a single page from a text, asserting that there is a modern presumption against the promises in a bilateral contract being construed as independent of each other.

270 It is clear that a promise by one party to a contract can be interdependent with, and not independent of, a promise by the other party.

271 A classic example of one kind of interdependency is a contract for the sale of land, where the promise by the vendor to convey or transfer the land is interdependent with the promise of the purchaser to pay (the balance) of the purchase price. Neither party can require the other party to perform, without himself performing or averring that he is ready, willing and able immediately to perform his own promise.

272 Features of this kind of interdependency are that the receiving of the benefit of the other party’s performance of his promise is the benefit each party bargained for in entering into the contract. In order to perform his promise, each party is to perform a single act on one occasion and it can readily be ascertained whether the promise has been performed. Performance by one party is not conditional on performance by the other, in the sense that the promise by one party cannot be performed unless there is a performance by the other party of his promise.

273 In the present case, on the other hand, it was contended by counsel for G & G that performance by G & G of its warranty was interdependent with or conditional upon performance by PCE of its obligations, for example to conduct regular fluid checks, to clean the machines before servicing and not to subject the machines to abuse by operators, in the sense that the warranty by G & G was incapable of being performed by G & G unless PCE performed its obligations.

274 Counsel for G & G referred to the evidence by Mr Hutson about the need for PCE to perform daily and weekly checks and particularly oil sampling, to enable the principles underlying the FOCUS contracts to be realised.

275 Reference has already been made to par 97 of my first judgment where I said that a reasonable person in the position of PCE or an intelligent bystander would not consider that G & G was intending (by its warranty) to give a contractual promise which would be absolute and unconditional. What I said in par 97 related to a somewhat different warranty from that found by the Court of Appeal, namely a warranty that PCE in operating the machines in what were likely to be a variety of conditions would achieve a rate of availability calculated to two decimal places.

276 Notwithstanding that what I said in par 97 of my first judgment related to a somewhat different warranty, I remain of the opinion that the warranty as to availability by G & G cannot be interpreted as being absolute and unconditional. I accept that in the extreme cases postulated by counsel for G & G of PCE taking the machines overseas or PCE’s operators operating the machines beyond their operational limits every day in a year, the warranty as to availability could not be enforced by PCE. Such extreme cases would fall within the prevention principle. G & G would have been prevented by the conduct of PCE from performing its warranty as to availability.

277 I have found that there were breaches of the obligations of PCE to conduct daily and weekly fluid checks, to clean the machines prior to scheduled servicing and repairs and not to operate the machines beyond their operational limits. However, in the case of each obligation, I find that, while there were breaches on some occasions, on other occasions the obligations were being performed. There should, at least in principle, be some remedy for G & G for these breaches of contract by PCE, for example, claims for damages of the kind made by G & G in its statement of claim but later abandoned. However, the remedy which was sought by G & G at the hearing was that it be relieved entirely from its warranty as to availability.

278 In determining issue 2, I held that par 15(b) of the defence to cross-claim was a sufficient pleading to enable G & G to make all of the contentions a, b, c and d in issue 2. However, I added that later in the judgment I would have to give further consideration to the question of whether the terms of par 15(b) of the defence to cross-claim and the terms of Sackville AJA’s judgment nevertheless placed some limits on the contentions, that is the defences, G & G could make.

279 The terms of par 15(b) of the defence to cross-claim, so far as is presently relevant, provided that, to the extent that there were any breaches of the warranty by G & G, then the breaches were the result of matters referred to in par 14(e) of the defence to cross-claim; that is that matters referred to in par 14(e) (conduct by PCE) caused the breaches by G & G.

280 With reference to pars 95 to 97 of Sackville AJA’s judgment, I found that his Honour used the word “causation” as a convenient label, rather than a precise, exhaustive description of the defences G & G should be permitted to have determined. I am, nevertheless, of the opinion that the word “causation”, which was repeatedly used by his Honour in these paragraphs of his judgment, cannot be disregarded. I note, particularly, that in par 97 of his Honour’s judgment, where his Honour was stating his own views and not merely summarising or quoting submissions which had been made by counsel (as he had in par 95 of his judgment), his Honour said that what G & G had pleaded was that any breach of its warranty “was due to PCE’s failure to comply with its dependent contractual obligations”.

281 The consistent use by his Honour of the word “causation” and the terms of par 97 of his Honour’s judgment suggest to me that his Honour considered that it was an essential part of all the defences by G & G which had not been addressed, that there should have been a causal relationship between the breaches by PCE and non-performance by G & G of its warranty.

282 I consider that I should accept counsel for PCE’s submission that, in whatever way G & G formulated a defence to be excused or relieved from performance of its warranty, in order for the defence to be permitted by the terms of par 15(b) of the defence to cross-claim and by the terms of Sackville AJA’s judgment and the Court of Appeal’s order, it would be necessary for G & G to prove causation, that is to prove that the breaches by PCE of its obligations caused the non-performance of its warranty by G & G.

283 In my opinion, in relation to parts (a) and (b) of issue 6 it is necessary for G & G, on whom the onus would rest, to establish that performance of its obligation under the availability warranty was dependent, or conditional, upon performance by PCE of its obligations, in the sense that substantial breaches by PCE of its obligations were the cause of G & G not performing its warranty.

284 It is clear that breaches by PCE of its obligations and particularly its obligation to conduct daily and weekly fluid checks on the machines could have militated against G & G being able to perform its warranty. However, having regard to the evidence of G & G’s own witnesses Mr Hutson and Mr Shearman, the general nature of which was summarised in counsel for PCE’s written submissions and in pars 173 to 180 of my first judgment, I am not satisfied that such breaches of its obligations by PCE as were established were the cause of G & G not performing its warranty.

285 Although it is not necessary for my decision, I will, because it was the subject of some submissions at the hearing, make some examination of the express terms of the contracts.

286 The express terms of the November 1997 contracts were more extensive than those of the August 1997 contracts. In neither of the two kinds of contract was there any express provision that the performance by G & G of the warranty as to availability was conditional upon performance by PCE of its obligations.

287 In the August 1997 contracts it was provided that the fixed cost agreement had been calculated on a certain basis. I infer that, if there was any departure from this basis, G & G might no longer be bound to charge no more than the fixed operating cost fixed by the contract.

288 Clause 3 of the November 1997 contracts provided that PCE must undertake the responsibilities of the customer in order that G & G could offer the fixed hourly rate of maintenance. Clause 4 of the 4-page document within the November 1997 contracts required the machines to be operated according to the operating conditions set out in Schedule 6 which, it was agreed by the parties, should have read Schedule 4. Clause 4 then went on to provide that because the maintenance of a machine had been pre-costed, any changes in the operating conditions would have to be agreed by G & G and might result in a variation in the maintenance charges or, in certain circumstances, termination of the agreement by G & G.

289 Schedule 4 provided in par 2 that specified load ratings as per Caterpillar specifications would have to be adhered to and a failure to do so might lead to a variation in the terms of the agreement or changes (semble charges) relating to failures for usage outside of the specified guidelines being to PCE’s account.

290 Clause 5 of the 4-page document provided that for costs to be guaranteed by G & G PCE would have to adhere strictly to the terms of the agreement.

291 Clause 10 of the 4-page document provided that, if an event happened within Part (a) of the clause, G & G could terminate the agreement. Event (2) within Part (a) was that PCE failed to perform a material obligation under the agreement and the failure was not remedied to the satisfaction of G & G within 7 days of G & G notifying PCE in writing of the failure.

292 In the case of the November 1997 contracts what was expressly linked to the performance of its obligations by PCE was the obligation by G & G to service and maintain the machines at no more than fixed hourly costs, and not the obligation of G & G under the availability warranty. There were provisions of the November 1997 contracts to the effect that G & G might have certain remedies for contraventions by PCE, including varying the rate of charges, charging for work beyond the fixed hourly rate and terminating the contract. These features of the November 1997 tend against a conclusion that G & G should be relieved entirely of its warranty by reason of some breaches by PCE of its obligations.

293 I answer each of parts (a) and (b) of issue 6 by saying that breaches by PCE did not wholly excuse performance of the warranty by G & G. For reasons similar to the reasons I gave in considering part (c) of issue 6, I do not answer the remaining parts of issues 6 (a) and (b).

Independently of whether PCE had contractual obligations in relation to the matters pleaded in paragraph 14(e) of the defence

(a) were those matters (or any of them) such as to in fact prevent G & G from complying with its obligation under the minimum available hours warranty ;

if so, does that excuse G & G from performing its obligations under the minimum available hours warranty, wholly or in part and if in part to what extent

294 I determine this issue:-

(a) No.

(b) Does not arise.

To the extent that performance of the minimum available hours warranty is capable of being excused in part only

(a) who bears the onus of proof as to what part is excused as to the machine(s) or time unavailable ;

does the evidence establish that one or more breaches by PCE resulted in any particular period of downtime in respect of any one machine

295 (a) G & G

296 (b) Counsel for G & G said that the evidence did not permit any finding that particular breaches by PCE resulted in particular periods of down time and no attempt was made in submissions to establish that any particular breach by PCE resulted in any particular period of down time. In these circumstances, I do not propose to attempt to answer (b).

**********

Actions

Download as PDF Download as Word Document

Citations

Gough and Gilmour v Peter Campbell [2009] NSWSC 1310

Most Recent Citation

"Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU) v George Weston Foods Limited T/A Tip Top Bakeries [2013] FWC 1240

Cases Citing This Decision

1

"Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union" known as the Australian Manufacturing Workers' Union (AMWU) v George Weston Foods Limited T/A Tip Top Bakeries [2013] FWC 1240

Cases Cited

6

Statutory Material Cited

0

Gough & Gilmour [2005] NSWSC 1155

Gough & Gilmour Holdings Pty Limited (No 2) v Peter Campbell Earthmoving Pty Limited [2007] NSWSC 172

Gough & Gilmour Holdings Pty Ltd v Peter Campbell Earthmoving Pty Ltd [2009] NSWCA 37

CITATION:	Gough & Gilmour v Peter Campbell [2009] NSWSC 1310
HEARING DATE(S):	21/09/09-27/09/09
JUDGMENT DATE :	10 December 2009
JUDGMENT OF:	James J
CASES CITED:	Campbell v Backoffice Investments Pty Ltd (2009) 83 ALJR 903 Drinkwater v Caddyrack Pty Ltd (Young J 25 September 1997) Gough & Gilmour Holdings Pty Ltd (No 2) v Peter Campbell Earthmoving Pty Ltd [2007] NSWSC 172 Gough & Gilmour Holdings Pty Ltd v Peter Campbell Earthmoving Pty Ltd [2009] NSWCA 37 Gough v Gilmour [2005] NSWSC 1155 Kilpatrick Green Pty Ltd v Leading Synthetics Pty Ltd (Gillard J Supreme Court of Victoria 5 June 1998) Kingston v Preston (1773) 2 Doug 689, 99 E.R.437 Mackay v Dick (1881) 6 App Cas 251 S.M.K. Cabinets v Hili Modern Electrics Pty Limited (1984) VR 391 TC (by his tutor Sabatino) v New South Wales [2001] NSWCA 380
TEXTS CITED:	Carter Contract Law in Australia
PARTIES:	Gough & Gilmour Holdings Pty Ltd - Plaintiff Peter Campbell Earthmoving Pty Ltd - Defendant
FILE NUMBER(S):	SC 20491/00
COUNSEL:	F Corsaro SC / D F Villa - Plaintiff N Cotman SC / I Griscti - Defendant
SOLICITORS:	Minter Ellison - Plaintiff Coleman & Greig - Defendant