Junair Spraybooths ANZ Pty Ltd v Rydalmere Prestige Smash Repairs Pty Ltd

[2019] NSWDC 367

District Court

New South Wales

Medium Neutral Citation:

Junair Spraybooths ANZ Pty Ltd v Rydalmere Prestige Smash Repairs Pty Ltd [2019] NSWDC 367

Hearing dates:

9 -12, 15, 22 July 2019

Date of orders:

30 July 2019

Decision date:

30 July 2019

Jurisdiction:

Civil

Before:

Abadee DCJ

Decision:

See paragraph 316

Catchwords:

CONTRACT – contract for supply of spray booths (and associated equipment) – whether compliance with implied condition of merchantable quality – whether breach of implied condition causally linked to imperfections in paintwork on defendant’s customers’ motor vehicles.

 

DAMAGES – whether exclusion clause incorporated to limit recoverability of damages – whether claim for loss of profits established – reliance damages – replacement value – operation of set-off under s 54 of Sale of Goods Act 1923 (NSW).

TRADE PRACTICES – alternative action for contravention of prohibition against misleading or deceptive conduct – whether exclusion clause (assuming it is incorporated) may limit recoverability of damages under s 236 of Australian Consumer Law – whether loss of expected profit claim available under s 236 of Australian Consumer Law.

Legislation Cited:

Acts Interpretation Act 1901 (Cth)
Civil Liability Act 2002 (NSW)
Competition and Consumer Act 2010 (Cth)
Evidence Act 1995 (NSW)
Sale of Goods Act 1923 (NSW)
Trade Practices Act 1974 (Cth)

Cases Cited:

Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Payments Corp (1985) 1 NSWLR 1
ASIC v Hellicar (2012) 247 CLR 345
Aussie Traveller Pty Ltd v Marklea Pty Ltd [1996] 1 Qd R 1
Beaton v Moore Acceptance Corp Pty Ltd (1959) 104 CLR 107
Bellgrove v Eldridge (1954) 90 CLR 613
Blatch v Archer (1774) 98 ER 969
Bonnington Castings Ltd v Wardlaw (1956) AC 613
Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd [2018] VSC 246
Byers v Dorotea Pty Ltd (1986) 69 ALR 715
Castel Electronics Pty Ltd v Toshiba Singapore Pty Ltd [2011] FCAFC 55
Commonwealth of Australia v Amann Aviation Ltd (1991) 174 CLR 64
Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd (2008) 19 VR 358
Firstmac Fiduciary Services Pty Ltd v HSBC Bank of Australia [2012] NSWSC 1122
Hadley v Baxendale (1854) 156 ER 145
Havyn v Webster [2005] NSWCA 182
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83
Ho v Powell [2001] NSWCA 168
Howe v Teefy (1927) SR (NSW) 301
Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency [2001] NSWCA 313
IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470
Lane Cove Council v Michael Davies Associates Pty Ltd [2012] NSWSC 727
LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494
Masters v Cameron (1954) 91 CLR 353
Mondel v Steel (1841) 151 ER 1288
National Australia Bank Ltd v Dionys as Trustee for the Angel Family Trust [2016] NSWCA 242
Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197
Omega Air Inc v CAE Australia Pty Ltd [2015] NSWSC 802
Owners Corporation SP 62930 v Kell & Rigby Pty Ltd [2009] NSWSC 1342
Purkess v Crittenden (1965) 114 CLR 164
Siegwerk Australia Pty Ltd (in liq) v Nuplex Industries (Aust) Pty Ltd [2016] FCA 158
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272
TC Industrial Plant Pty Ltd v Robert’s Queensland Pty Ltd (1963) 37 ALJR 289
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603
Zanner v Zanner (2010) 79 NSWLR 702

Texts Cited:

Sutton, Sales and Consumer Law (4th ed), LBC 1995
Cheshire and Fifoot Law of Contract
Cross on Evidence (7th ed)

Category:

Principal judgment

Parties:

Junair Spraybooths ANZ Pty Ltd (Plaintiff)
Rydalmere Prestige Smash Repairs Pty Ltd (Defendant/ Cross-Claimant)

Representation:

Counsel:
Mr A Byrne (Plaintiff)
Mr D Knackstredt (Defendant/ Cross-Claimant)

  Solicitors:
Mills Oakley (Plaintiff)
Somerville Legal (Defendant/ Cross-Claimant)

File Number(s):

2018/90606

Publication restriction:

Nil

Judgment

NATURE OF THE CASE

1. The plaintiff (“Junair”) is in the business of manufacturing and supplying spray booths and associated workshop equipment. It is a subsidiary of the foreign company, Junair Spraybooths Ltd, which is based in Lancashire in the United Kingdom. Junair was registered as an Australian company in 2011. It commenced manufacturing and supplying in Australia in 2016.

2. There are, as Mr Peter Belding, the sole director of Junair, explained in the first of his two affidavits, different kinds of spray booths and products associated with them. They include automotive spray booths. In the relevant context, spray booths serve the purpose of facilitating the (re)application of paint to motor vehicles after they have been involved in accidents. The automotive market is but one of the markets to which Junair’s products are promoted.

3. Junair’s clientele includes, but is by no means limited to, smash repairers, such as the defendant (“RPSR”). RPSR has run the business of a prestige motor vehicle smash repairer since 2003. It was and is a family business: Mr Redwan Dandan is the sole director; and is the father of Khaled (general manager), Walid (‘Wally’) (foreman painter), Ahmed (head painter) and Mohammed Dandan (foreman panel beater). RPSR operates its business in Rydalmere: in 2015, it had changed its business address from Mary Parade Rydalmere to Bridge Street, Rydalmere, which was the relevant site for the purposes of this proceeding.

4. In October 2015, on terms which to some extent are disputed, Junair and RPSR entered into a contract for the supply of two spray booths and a paint room to be installed at RPSR’s business premises in Rydalmere. This installation took place between December 2015 and late January 2016. Between February and June 2016, RPSR expressed concerns about the operation of the spray booth and, during this period, Junair made numerous visits to the premises, working on the booths and providing information and assistance intended to address those concerns.

5. The price for Junair’s goods was $264,000 (incl GST). It was payable in three instalments: by the terms of the contract, the first (for $66,000) was paid upon placement of the order; the second (also $66,000) upon delivery of the goods. Both these instalments were paid. The third instalment, representing the balance of $132,000, was thereafter to be paid in equal monthly instalments of $16,500 from the date of delivery.

6. Owing to what RPSR contends were defects with the operation of the spray booths, RPSR has refused to pay the balance of the purchase price of $132,000. To understand why that is so requires some understanding as to the practical operation of a spray booth to a damaged car. In this regard, RPSR explained that when it spray paints damaged motor vehicles in spray booths, its work depends, for its efficacy, upon three requirements. The spray booth: (i) must remain free from dust; (ii) must be able to efficiently extract contaminants (such as overspray in the air); and (iii) must be able to ‘bake’ cars for such duration and temperature as to enable the paint to dry quickly and thereby preclude contaminants entering into the paint work. In short, the spray booth needs to be effectively sealed and the extraction process must efficiently remove contaminants from the air. The failure to secure such an environment can result in contaminants being introduced into the paint.

7. RPSR says that since their installation in February 2016, the two spray booths have never fulfilled these requirements and that this has had the consequence that RPSR has not been able to conduct its business operations for its customers as efficiently as it had intended. It says, specifically, that it has needed to deploy greater labour resources to cover for the deficiency in the goods supplied to it.

8. By this proceeding, Junair sues to recover the balance of its purchase price of $132,000. By its Defence, RPSR says that it is justified in withholding payment of the final instalment on the purchase prices because Junair breached certain statutory implied warranties, under the Sale of Goods Act 1923 (NSW) (‘the Act’); as well what it contends was an implied condition that the goods would fully comply with the Australian and New Zealand Standard for pre-spray booth manufacture and installation (AS 4114.1 4114.2). In an associated cross claim, RPSR sues for damages, representing loss of profits and added labour costs. In its cross-claim, and in addition to its reliance upon the same matters which it says establishes defective goods, RPSR also asserts that certain misleading representations were made, which it says were relied upon in inducing entry into the contractual arrangements, contrary to s 18 of the Australian Consumer Law. A further count is pleaded in negligence.

9. In its Defence to RPSR’s cross-claim, Junair denies any breach of the implied warranty of merchantable quality. On liability issues, it denies any lack of compliance with relevant Australian Standards. On the matter of causation, (amongst other things) it says that RPSR has not used, or operated, the machinery within the spray booths (which, it adds, was of a very different order to the spray booth RPSR had previously used for virtually 30 years) as it should have. It disputes the basis for any damages claimed and the assumptions and facts underlying those damages calculations. It disputes that any allegedly misleading representations had any causal effect on RPSR’s alleged loss and damage. It also seeks to rely upon contractual limitations upon the recovery of damages for the contract claim. It denies any negligence.

10. Put broadly, in this proceeding, it is common ground that RPSR experienced on-going problems with the operation of the spray booths throughout 2016. It is also common ground that early on, after installation, a problem with the sealing of doors to the spray booths was identified. But save for that particular matter (which Junair says it has repeatedly offered to rectify – indeed, it has actually gone further and delivered replacement doors that RPSR have never allowed Junair to install) Junair generally says that the problems of which RPSR complain were not of such kind that could not have been avoided by RPRS had it used the system properly; by reference to appropriate manuals or dossiers. Junair says, in effect, that it was not its responsibility to operate the system in accordance with those manuals. Even so, it says that, through Mr Perna’s active involvement and assistance to RPSR, throughout 2016 and through correspondence, it went to significant lengths to help RPSR identify the source of the problems, and, to a substantial degree, was stymied by RPRS’s own conduct.

11. The parties identified the following issues as arising for the Court’s determination:

1. Did Junair’s ‘goods’ comply with Australian standards or, more generally, comply with its implied warranties?

2. Did Junair engage in any misleading or deceptive conduct causative of loss or damage to RPSR?

3. Did Junair breach any duty of care in a way that caused loss or damage to RPSR?

4. Was any loss or damage to RPSR caused by any breach of implied condition in the contract, contravention of s 18 of the Australian Consumer Law, and/or negligence?

5. Are RPSR’s claims for damages in general law, or in statute, limited by clauses within Junair’s standard terms and conditions?

6. Are RPSR’s claims for damages, in general law, or in statute, made out?

LIABILITY ISSUES

Factual Background

12. I will commence this section by reference to background facts, detailing the relations between the parties in the lead up to the entry into the contract, and the installation of the spray booths. Thereafter, I will go on to consider the evidence of the more contentious issues of the identification and articulation of complaints about the operation of the spray booths as revealed in the affidavit and testimonial evidence of the witnesses. I will address in a separate section the contemporaneous correspondence.

Pre-contractual negotiations and discussions

13. In September 2015, Mr Darrel Maloney, a Junair sales agent, informed Mr Belding of a potential sale of the spray booths and associated workshop equipment to RPSR. Mr Khaled Dandan had initially made an online enquiry of Junair for a meeting.

14. On or about 29 September 2015, Khaled Dandan, his father (Redwan), and Wally say they met with Mr Belding (and Mr Maloney). Mr Belding says that the meeting occurred very in early October 2015. In his affidavit, Khaled Dandan recalls indicating that RPSR was operating a prestige smash repair shop and wanted ‘top of the line’ spray booths. He indicated that it wanted to spend less time in the booth with the baking cycle. According to Mr Dandan’s affidavit, Mr Belding described Junair’s series 5 spray booths as being a top-of-the-line booth and indicated that, instead of a car being baked for 40 minutes, the baking cycle could be reduced to 20 minutes if RPSR paid extra for QADs, in both booths. This served to blow out the hot air and made the cars dry quicker. Mr Dandan recalls Mr Belding describing Junair variously as having “one of the best systems in Australia” and being “of the highest quality and class leading” and “fully compliant with all Australian standards.”

15. Wally Dandan’s affidavit gave an account of the meeting on or about 29 September 2015 (or very early October 2015) substantially to the same effect. He added that the response to some of the ‘representations’ attributed to Mr Belding, concerning the benefits obtained from special QADs, in terms of reducing the time needed to bake cars, he said to Mr Belding, that was a lot faster than RPSR’s current booth (which currently) bakes cars in 40 minutes at 60°. To this, Wally deposed in his affidavit, Mr Belding said “well, our booth will do it in 20 minutes but you can adjust the temperature and therefore, the timing to what you want.”

Entry into contract

16. On 1 October 2015, Khaled Dandan received the Junair proposal and quotation. He said he read each page and understood the importance of the document. He said that he had a telephone conversation with Mr Belding the same day in which they discussed, or negotiated, the purchase price. He recalls Mr Belding agreeing to discount the price and indicating that if RPSR wanted to proceed with the arrangements, it would need to pay the sum of $66,000 as confirmation of the order. Mr Dandan indicated that he would pay that amount “today” and wanted to proceed with the arrangement.

17. On 2 October 2015 (apparently the meeting which RPSR submits occurred on 29 September) Mr Belding (who at all material times, was based in Brisbane) met with Mr Redwan Dandan and Khaled Dandan at RPSR’s Rydalmere site. At this meeting he explained the functionality of the spray booth technology. He subsequently measured the dimensions of the site so as to facilitate Junair’s supply of options for RPSR. It is common ground that at this meeting, Redwan and Khaled Dandan agreed to order, and Junair agreed to supply and install, two Junair 5 Series Spray Booths, a Paint Mixing Room [1] , and associated equipment. He said, in reply to Khaled Dandan’s account of what was said at this meeting, that he only indicated that the 5 Series Spray Booth “can reduce the baking cycle in as little as 20 minutes”.

    1. There was a minor dispute about the function of a paint mixing room. Junair characterised it as a room for storing equipment. RPSR said that it was also the place where paints were mixed.

18. On 1 or 2 October, a tax invoice was sent from Junair to Rydalmere which identified the calculations for price and its payment. They were set out as follows:

1. total price is $264,000 (incl GST) (this price incorporating freight, installation and commissioning allowance);

2. payment is to be made on the following terms:

1. 25% plus GST, due upon placement of the order – $66,000

2. 25% plus GST, due upon delivery of the equipment - $66,000

3. Balance plus GST, $132,000 is to be paid as per the following terms:

1. A minimum monthly payment - $16,500 (incl GST);

2. Due on the monthly anniversary date of the equipment delivery of $15,000 plus GST; and

3. Failure to pay the monthly payment on the due date may incur a late payment fee of 5%.

19. By 2 October 2015, Junair had received $66,000 from RPSR. In his evidence, Khaled Dandan said that he was the one who took the decision to proceed with the purchase, albeit that he did so after consulting others. He said in his evidence in chief that this was after receiving two other quotes. He said that what was material to him was that Mr Belding had represented that the spray booths RPSR was proposing to purchase were ‘top of the class’ and other representations contained (in paragraph 11) of his affidavit (including, but not limited, to the representation that they were fully compliant with Australian Standards).

20. The same day, Khaled Dandan recalled in his affidavit, Mr Belding (or Mr Maloney) indicated that the installation of the two new spray booths could occur over the Christmas holiday in time for RPSR to resume trading in the New Year.

21. On 12 October 2015, a drawing of Option 1B, indicating mezzanine details, was sent to Mr Khaled Dandan.

22. On 15 October 2015, Junair issued RPSR a ‘Proposal and Quotation’. On the same date, it also issued a ‘Confirmation of Order’ letter to RPSR.

Installing the spray booths

23. In late 2015 or early 2016 the spray booths were installed at RPSR’s Rydalmere site. They were installed by Mr Damian Perna, an electrician, who was engaged by Junair for the task. Mr Perna trades under the incorporated entity ‘JDP Services’. Mr Perna indicated that this entity is part of the larger Junair group. Mr Perna said in his affidavit that the process for installation at the Rydalmere site differed from the ‘usual’ process: whereas, typically, each parts of a spray booth were assembled offsite and thereafter delivered and installed, in this case, the parts were assembled at the Rydalmere site. Mr Perna was assisted in the installation process by 2 other employees of JDP. He was not used to assembling the component parts in this way. Indeed, he has not done this since. When asked in cross-examination as to why he was tasked with this aspect of the process in this instance, he said he did not know. At any rate, he was instructed to complete the assembling part by Ms Kelly Johnson. At a point during the process, Mr Perna left the task, to be alongside his pregnant wife. Thereafter Ms Johnson herself continued with the assembling part of the process. Under cross-examination, Mr Bending accepted that Ms Johnson’s responsibilities, in her employment agreement, were not listed as extending to project managing; although he maintained that this was part of her role. He appeared to accept that the written description of her jobs would reasonably lead others to characterise her employment as that of a desk job.

24. In his affidavit, Khaled Dandan recalled that in December 2015 the process of installation was managed by Kelly Johnson. According to his recollection, Mr Dandan heard Ms Johnson raising many questions during the process of installation.

25. Mr George Syder is the territory manager of PPG Australia Pty Ltd, which develops and delivers paints, coatings and materials to its customers. As a territory manager, his role consists of providing, amongst other things, technical assistance, including advice to clients on how best to use PPG paints and, in the case of spray painting booths, how best to set up a spray booth to get the best results from PPG paints. PPG had supplied paints to RPSR for many years prior to the events of this proceeding. In early 2016, Mr Syder recalls witnessing the installation of the two new Junair booths. In his affidavit he recalled offering, at this time, an unspecified Junair representative (but one who he identified as having an English accent, presumably Mr Belding), information about the best temperatures to set the baking cycle so as to get the optimum performance from PPG paint. The response was that this was unnecessary as Junair knew the correct temperature to set the baking cycle, for optimum performance, for every paint.

23. By 20 January 2016, RPSR paid its second instalment of the purchase price ($66,000).

24. On 21 January 2016, RPSR received a copy of Junair’s ‘Dossier’ for the spray booths.

The emergence of problems with the spray booths: January – June 2016

28. On 23 January 2016, Mr Belding attended the Rydalmere premises and was told by Mr Redwan Dandan that the spray booth door frames were not of good quality. Mr Belding noticed an issue with the welding of the mitre joints of the spray booth door frames. He also noticed minor ‘caulking’ still required on the spray booths. (Mr Belding later explained in his evidence that he equated the term ‘caulking’ with ‘sealing’ and used the terms synonymously).

29. Mr Belding accepted in cross-examination that he was aware of a number of complaints of RPSR to the goods: these concerned the circumstances that the doors were not fitted properly, and a problem with sealing (or ‘caulking’) with the booth panels. He was aware of the complaint of the baking cycle as well as overspray. As to the latter complaint, he did not see that there was a real problem: he did not think that it was possible for overspray to be visible to the naked eye. But, in this respect, he accepted he was guessing.

30. Mr Sean Finn is a former employee of RPSR (having ceased employment in July 2018). He is a spray painter by trade. In his affidavit, he deposed that from an early point after installation he could see that the spray booths were not properly sealed: there were visible gaps left when the doors were closed; the panels of the booths were not aligned (leaving visible gaps) and there were gaps and cracking in the ceiling of the booths. Mr Finn described the process he undertook when spraying in the spray booth. This involved applying a base coat of paint which, when dry, would be wiped down with a rag. He then put a coat of “clear on” on; which effectively sealed the paint and provided a hard cover. After letting the coat of “clear on” dry 5 to 10 minutes, he put on a second coat of “clear on”. He observed that unfiltered air would carry dust which would land on the paintwork. He said the only thing that could be done would be to buff out the imperfections or start again. This, he said, caused pressure in the workplace and a drop in productivity. When cross-examined, he noted that buffing was not something that could be done by RPSR’s apprentices, given the nature of the vehicles received from the firm’s customers.

31. Mr Finn identified, as one of the issues, that the burners in the spray booths would not turn on; which meant that cars were not baking. He noted (he said, in about February 2016) a problem with the doors to the booths not having been installed correctly. On one (rainy) day, he witnessed water leaking through the roof of the spray booths and into the light in the mixing room. He also saw overspray being sucked out of the spray booth and into the mixing room. He testified that after having operated the QADs (which he understood was the name given for air instruments which pushed the air out), panels dried faster, however he also saw a solvent boil in the “clear on”. That had significance since if a solvent put into paint has not evaporated before the “clear on” goes hard, it is trapped inside the paints and can cause pin marks all over the paintwork and would mean that the job needed to be re-done.

32. When he was cross-examined, Mr Finn accepted that he had not looked at any of the Junair Operations Manual, or dossier, or manual for spray booths.

33. In late January 2016, Junair agreed to replace the spray booth doors and ordered replacement doors. These were delivered to the Rydalmere site in February 2016. Mr Belding recalls trying to call Mr Khaled Dandan, but could only leave a voice mail message. The gist of the message was that Junair was prepared to suspend monthly payments for the final instalment of the purchasing price until the spray doors were both replaced and installed.

34. Mr Khaled Dandan deposed in his affidavit to a range of problems with the spray booths from very soon after the installation process had been completed in the middle of February. In his affidavit, he identified the defects as follows:

1. the joints of the booths were not aligned, leaving visible gaps;

2. the doors of the booths were not properly sealed, leaving visible gaps;

3. there were gaps and cracking in the ceiling of the booths;

4. the panels did not have sealant put between them;

5. there were numerous tubes of sealer sitting idly by the booths, which were not used during construction;

6. the doors of the booths did not close flush against the booths, leaving a gap and the hinges bent when the doors opened;

7. the baking cycle took 40 minutes;

8. at the conclusion of each baking cycle, the new paintwork had numerous foreign contaminants. This meant that additional time was spent buffing out the numerous imperfections in the paintwork;

9. the circulation in the booth was not removing the paint overspray from the booth. The overspray was staying in the booth;

10. the panels to the spray booths were damaged;

11. the panels to the booth were not perpendicular to the ground;

12. there was exposed wiring on the mezzanine level;

13. there were bolts coming loose from the ceiling;

14. water leaked from the ducts into the booths when it rained;

15. the filters in the roof were dropping fibres;

16. the motor was making a ticking noise;

17. there were metal shards in the lights that were rusting;

18. there were dents in the paint room.

35. During cross-examination, Khaled Dandan said that from February to June 2016, he was asked by each of Wally and Ahmed Dandan, and Sean Finn, for his assistance and guidance. For that purpose, Khaled said that he recalled using the Junair Operations Manual and ‘going through it’ with them.

36. He accepted that problems with the booths ‘escalated’ in the sense that he, and his staff, could not work out what was wrong with them. Mr Dandan deposed, in his first affidavit, that RPSR had made numerous requests for Junair to attend the premises and rectify the problems that it was experiencing with the spray booths. He recalled, specifically, attending 4 to 5 meetings with Mr Belding at the Rydalmere site between February and the end of June 2016. The thrust of his evidence was partly that throughout this period, promises were made by Mr Belding that he would have Mr Perna come out to visit the sites and fix the issues but wanted to be paid the balance of its purchase price first; and partly, that the problems were attributable to the way in which its technicians were performing the work or the quality of the paint.

37. Wally Dandan deposed in his first affidavit to the problems he identified. They may be summarised as follows:

1. an absence of silicon in the walls of the booths (this, he said, he identified in February 2016);

2. a large gap in the roof where no silicon had been applied. Dust and other particles were observed coming into the spray booth, through the roof;

3. insulation had not been installed in the roof;

4. an air flow issue: paint spray was left floating in the air and not sucked towards the bottom of the booth;

5. the gas burners responsible for heating spray booth repeatedly turning off;

6. the desired temperature for the baking cycle not being reached;

7. (on at least one occasion) the motor in the spray booth stopped working;

8. the doors to the spray booth were not sealing;

9. the lighting, on the sides of the spray booth, not being sufficient;

10. the filters to the booths blocking to quickly;

11. exposed wiring on the roof of the spray booth and loose roof bolts holding the filter on the roof;

12. (on at least one occasion) water leaking into the spray booth.

Mr Perna’s evidence

38. In his affidavit, Mr Perna deposed that he received a significant number of calls from Wally Dandan in the period from January to June 2016, regarding ‘issues’ about the goods. Mr Perna attended the Rydalmere site approximately 6 times in this period to try to address the complaints. He said that he provided training to a RPSR employee (who he did not identify by name); which comprised a review of the spray booth manual and training in how to operate the spray booths. He also said that he attended the site in this period to pressure wash the spray booths. He said he did this over the course of a weekend (two 14 hour days). Notwithstanding his efforts, he recalled that paint remnants remained on the grates and floor baffles after the pressure washing. From his experience in the spray booth industry, he found the inability to remove all paint remnants unusual. But despite these matters, he deposed that during his visits to the site, he often observed the spray booths being used for motor vehicles at the site.

39. Under cross-examination, Mr Perna indicated that:

1. It was unusual for filters in the roof to be replaced, as they were in this case, so soon after installation;

2. The need to replace the doors to the booths came about (and was justified) because of ‘twisting’ and ‘dropping’ in them. He could not discount the possibility that they were not sealing correctly, either;

3. He accepted that if his intensive ‘pressure wash’ which he applied in an attempt to deal with the concern about dust, could not remove the paint, it was unlikely that the residue of the paint could be completely dislodged during the regular car-spraying of its own accord.

4. The number of his trips to the Rydalmere site, in the 6 – 9 month period, was unusual, in the context of when the booths were installed;

5. He was himself unable to diagnose the cause, or causes, of the problems complained about by RPSR

6. He accepted the possibility that the spray booths continued not to function (effectively, that is, in the way they were intended to operate);

40. On or about 16 May 2016, the replacement spray booth doors were delivered to the Rydalmere site. Mr Belding deposed in his affidavit that from 23 May 2016, through to 9 December 2016, he made persistent attempts to arrange for the installation of the spray booth doors. Throughout this period, he says, he met with the response (from either Redwan, Khaled or Walid Dandan) that it was too inconvenient for RPSR’s business for Junair to come and install the new spray booth doors.

41. On one of the occasions that he visited the Rydalmere site, in June 2016, Mr Perna recalled changing the brand of roof filter used within the spray booth cabins. He said that, acting in accordance with Walid Dandan’s instructions, the filters were swapped from ‘Filter Air’ brand to the ‘Viledon’ brand. He noticed that the exhaust filter that had been used had more than what he regarded as the recommended 120 hours.

16 June 2016 meeting

42. On 16 June 2016, Mr Belding met with Mr Dandan at the Rydalmere site. There were a range of competing versions of what was said during this important meeting so I will set out each version.

43. Mr Belding said in his main affidavit that he inspected a white BMW being spray painted by the spray booths. He noticed that the white BMW had clear evidence of very dark blue fibres in the wet paint firm.

44. On this occasion, Mr Dandan said to Mr Belding words to the effect:

“We are getting hundreds of contaminants in the paint work at the conclusion of each baking cycle. We have got two full-time detailers buffing out the imperfections. We need this rectified as soon as possible as is severely inhibiting our production”

45. Mr Belding accepted that these words were used but disputed their correctness. In his first affidavit (paragraph 20) he explained that in his experience, if there were hundreds of contaminants in paintwork at the conclusion of each baking cycle it was attributable, or a direct result, of a range of causes, being: (i) dirt on the vehicle; (ii) dirt on the clothing of the painter; (iii) dirt on the internal booth services; (iv) dirty air lines (as a result of poor maintenance of the operator); and (v) blocked exhaust filters (also as a result of poor maintenance of the operator).

46. Under cross-examination, it was put to him that he did not include, as a potential cause, the failure of the spray booth equipment. To this, Mr Belding acknowledged that this was a theoretical possibility but, in his experience it did not “typically” occur. Mr Belding was further challenged on the fifth of the above causes he had identified. It was put to him that if dust had entered from the outside, this would cause the exhaust filters to become dirty. He acknowledged that this was a possibility but said it would depend on the size of the contaminants. He was challenged about the extent of his experience allowing him to express the opinions he provided (at paragraph 20 of his affidavit) and accepted that he was speculating.

47. Mr Belding was also challenged on his affidavit evidence about a cause of contamination being imperfection in the paint itself. He confirmed that he had been informed that PPG, a paint supplier, had been at the site in June 2016 and found no problem. Ultimately, it was put to Mr Belding that he did not know what was wrong with the paintwork and he still did not know. He accepted that his view was that Junair should be paid for its goods regardless of whether RPSR’s complaints had been satisfied.

48. Khaled Dandan’s recollections of what was said at the meeting on 16 June, which he deposed to in his first affidavit, were that Wally had explained to Mr Belding that there were numerous issues (of the kind identified in paragraph 34 above).

49. In his affidavit, Wally Dandan not only explained in considerable detail the specific problems that he identified; but also pinpointed different conversations at different times, with Mr Belding in respect to those issues, in so far as he referred to any conversation with Mr Belding in June 2016, the subject matter of his affidavit was concerned only with the doors. He deposed to having informed Mr Belding that the doors to the spray booth were not sealing; that when they were open they came down on one side and when closed, they were not sealed. The pop rivets and the 8 mm screws had come off. He deposed to Mr Belding saying that he would organise for new doors to be delivered and installed.

50. Under cross-examination, Wally Dandan acknowledged that during 2016, there were discussions with Mr Belding about Junair coming out to assist. He recalled someone coming out on behalf of Junair (the name not being identified), but was unable to do the work: hinges to a door, and a tool for the door handle were forgotten. He confirmed that the replacement doors continue to be left on RPSR’s premises, un-installed.

Mr Syder’s visit: June 2016

51. In about the middle of June 2016, Mr Syder (of PPG) was asked (by Wally Dandan) to attend the Rydalmere site. In his affidavit he recalled conducting a visual inspection of all parts that had been painted the previous day. He observed that there was a loss of gloss on most parts painted in both booths. There was also ‘solvent popping’. Mr Syder deposed in his affidavit that adjustments were made to the spray booths so as to reduce the baking temperature and shorten the time that spray booths were set to bake. Having conducted this testing, Mr Syder concluded that the issues relating to loss of gloss and solvent popping had been resolved. At the same time he observed other “numerous” imperfections in the finished paintwork. The thrust of his evidence was that he conducted testing to ensure that the paint itself was not the cause. He also observed a range of other processes undertaken by RPSR in the use of PPG paint and the spray painting of cars and panels generally. These were processes which, speaking generally, were intended to ensure that all impediments and dust were thoroughly clean. Mr Syder clarified in cross-examination that when he spoke of things occurring ‘daily’, that was not to be taken in the literal sense that he was on the site every day - his evidence was that he visited the site a couple times each month - but the things that he saw each time he attended.

52. Under cross-examination, Mr Syder accepted that if spray booths used painted the wrong temperature this could produce imperfections. He accepted that users of spray booths should look at the manufacturer’s instructions.

53. Mr Belding was challenged on his evidence of his observation about dirt and filth in the spray booth in mid-June 2016. He was referred to Mr Perna’s evidence about using a pressure-wash between January and June 2016. He maintained the correctness of his observation.

54. In his first affidavit, Khaled Dandan deposed that on 28 June 2016, he had a telephone conversation with Mr Perna in which Mr Dandan pointed out that gas burners had broken down and that the booth was not heating properly. A short time later, Mr Perna indicated that he tried to call a can combustion engineer who was not available. He suggested to Mr Dandan that he called Mr Belding.

55. Khaled Dandan also deposed to witnessing water dripping into the spray booth on or about a July 2016. When he reported this to Mr Belding, Mr Dandan recalls the latter suggesting he get a quote from a plumber to fix it. He emailed that quote to Mr Belding (and, thereafter, to Mr Belding’s son) in August but says he received no reply.

56. Further, in his first affidavit, Wally Dandan exhibited a large number of ‘pictures’ intended to corroborate RPSR’s serial complaints.

57. In September 2016, and for a period of virtually two weeks, Mr Damian Perna, of JDP Services, attended the Rydalmere site to attend to alleged repairs and rectification works on the spray booths. Mr Perna reported to Mr Belding what he did.

58. In his affidavit, Mr Perna described the rectification works that he undertook. They consisted of: (a) dismantling and replacing the roof of the spray booth; (b) adequately sealing and riveting the replacement roof; (c) pressure washing the spray booth; and (d) installing the replacement spray booth doors. Mr Perna deposed that the only issue he encountered during these works involved the replacement of the spray booth doors. When he unpacked the doors from its packaging, he noticed that there were nut inserts missing for where the handle would attach to the door. Because of this, he was unable to attach the doors.

59. Under cross-examination, Wally Dandan confirmed Mr Perna’s presence at this time. He gave some vague evidence that he was ‘happy’ with what Mr Perna did, but recalled that problems re-emerged only two days later.

60. Mr Perna says that between December 2016 and March 2017, he attempted to contact Wally Dandan on several occasions to organise the installation of the replacement doors. Text messages from Mr Perna confirmed this. Mr Belding recalled in his affidavit that Mr Perna had told him this and, further, Mr Perna had indicated his attempts to contact Walid Dandan to fix both the spray booth doors and his offer to replace them on the weekend or in the evenings so as not to disrupt RSPR’s business. Mr Perna was not cross-examined on these aspects of his evidence.

Correspondence about the defendant’s complaints from June 2016

61. In addition to the testimonial evidence, there was put before the Court extensive email correspondence, principally between Khaled Dandan and Mr Belding in June and July 2016 in which the former articulated, and the latter responded to, the defendant’s complaints. Some reference was made in this correspondence to Wally Dandan, and the latter was cross-examined on some features of that correspondence. Generally however, and for ease of reference, in this section of these reasons, where I refer to Mr Dandan, unless indicated otherwise, the reference is made to Khaled Dandan.

62. On 7 June 2016, Mr Belding complained of threatening and aggressive conduct by persons associated with RPSR towards Junair personnel. Leaving that aside, however, Mr Belding made it clear that he wanted to be guaranteed that Junair would be paid in full all of the amounts they were owing before it carried out any work on the spray booths. He asserted that Junair had already made a number of attempts to work on the spray booths and to replace the vehicle doors, but this had not been convenient for RPSR. Specifically, he said that Junair had offered to work into the evening to minimise disruption to RPSR’ production. Materially, however, he said (apparently based upon Mr Damien Perna’s advice) that Junair personnel could be on RPSR’ site in Rydalmere on 25 and 26 June to undertake the following scope of works:

• replace front booth doors;

• reseal rear door jamb in the corners;

• small areas of the booth to re-caulk and reseal;

• sealing underside of supply plenum

63. Very shortly thereafter, Mr Dandan’s email response (of the same day, at 4:09pm) denied that any threats have been made, stated that RPSR had been under pressure to get business through since Junair’s booths were not what had been described and sold to RPSR. He asserted that RPSR would not pay the full amount and would only pay what was agreed once the booths were “running right”. Amongst other things, he rejected the proposition suggested by Mr Belding that there may be oil contamination in the compressed air lines as a possible cause of the problem – that issue had been ‘fixed’. He also confirmed that it was fine for Junair personnel to be on site on 25 and 26 June to undertake the works.

64. On 8 June 2016 (10:29am), Mr Belding’s next email to Mr Dandan reiterated that Junair would replace all of the vehicle doors (whilst asserting that only two needed replacement). He also responded to some of Mr Dandan’s specific issues raised about the QADs system installed in the booths, the ceiling filters and water leaks.

65. Wally Dandan was cross-examined in relation to Mr Belding’s reference, in his email, to a complaint about the effectiveness of the QADs. He said that attempts had been made to use this system, but they were ineffective: it sometimes resulted in ‘solvent popping’ in the paintwork.

66. On the same day (1:36pm) Mr Dandan attached a very large number of images of the spray booths installation to illustrate all the gaps and cracking sealer, which, he said, was making the booth not operate properly and is leaking on the inside, which was not safe. He also asserted that the lights were not of factory standards nor sealed right: they did not have a Loctite on them. He indicated that he was getting technicians to test the booths and to paint test (them).

67. Not long after on the same day (3:00pm), Mr Belding commented on the photos and, with the exception of the photos on the front door and the QADs blower towers, opined that the balance of the photos showed evidence of gaps in the caulking. He admitted that the ‘caulking’ (a term which he regarded as synonymous with ‘sealing’) was not the standard that it needed to be and indicated that re-caulking the joints were part of the work that Junair planned to carry out on 25 and 26 June. Notwithstanding this submission, he went on to say that he did not regard the small gaps in the caulking as causing defects/dirt/contamination in the paint job.

68. Also on the same day (3:22pm), Mr Dandan sent another email to Mr Belding indicating that he had his paint supplier with him to check that his technicians were doing everything correct. He said that there was still dust dropping into the paintwork. He referred to a need to seal the roof work and fix the lights issue and motor noise created from the leaking roof. He indicated, very clearly, that if the problems were not resolved, RPSR would not be making any further payments to Junair until it was 100% satisfied.

69. On 14 June 2016, Mr Belding sent the next email (11:59am) in the relevant sequence to Mr Dandan. The message foreshadowed that two of its installers would arrive on site to carry out specific works: replacing frontal booths; reseal rear door jamb in the corners; small areas of the booth to ‘re-caulk’ and reseal; sealing the underside of the supply plenum; exhaust duct joint sealing. The message foreshadowed that when Junair’s personnel replaced the front vehicle doors, they would ensure that they were adjusted so as to minimise any air leaks. It was put to Mr Belding that if there were air leaks, then air might introduce contaminants which could get into the paintwork on motor vehicles. Mr Belding said that this was very unlikely but possible. He did not necessarily accept that the air would contain contaminants. In response to this, Mr Belding was referred to a Junair document (apparently a presentational -type document sometimes given to its customers) which, under the heading of ‘principles of operator awareness’, contained a pictorial representation of spray booths surrounded by a shaded sphere (outside the spray booths) carrying the words ‘Heavy contamination’. Having been supplied with this reference, Mr Belding maintained his view that if they were able to get into the spray booth it was unlikely, although it was possible, for contaminants to be deposited onto wet paint on a vehicle. This, he explained, was due to the workings of the exhaust system: the more likely tendency was for air contaminants to settle quickly on the floor. Having said that, Mr Belding accepted that if dust had entered into the spray booth through the ceiling, it could settle on a wet painting surface.

70. Khaled Dandan said in cross-examination that his father, the owner of the business, was responsible for deciding that the works Mr Belding proposed would be done.

71. On 17 June 2016, Wally Dandan rang Mr Belding to inform him that Junair should not undertake certain works on the spray booths, including installing replacement doors. In Mr Belding’s first affidavit, Mr Belding recalled Wally Dandan had said to him “I do not want Junair to attend the Rydalmere premises to rectify any of the defects, or replace the spray booth doors, or attend to the minor caulking. We will see Junair in Court.”

72. Under cross-examination, Wally Dandan was referred to this email. He said he could not remember having a conversation to the effect described by Mr Belding.

73. Shortly thereafter, Mr Belding sent an email to Mr Dandan (2:32pm) threatening to cancel the scheduled trip to come to the Rydalmere site the next day (with 3 booth technicians). He also took the opportunity to comment on his site meeting the day before. He commented on his observation of the contamination seen on the white BMW vehicle he inspected. Effectively he discounted the prospect that the ceiling filters in the spray booths were a source. In the same email, Mr Belding also referred to having sent a text message (it was unclear whether this was to Wally or Khaled, although the context suggests it was more likely the former) offering to send to Filtrair (in Holland) some spray out panels so that they could identify, in their laboratory, the type of fibre or other contaminant found in some of the paint work. In this email, he indicated that this offer still stood.

74. On 21 June 2016 (3:14pm), Mr Dandan sent an email to Mr Belding. This email attached an extensive number (approximately 100) of photographs purporting to show all that was wrong about the spray booths. Mr Dandan’s message catalogued a range of complaints before adding that they were only a few of the issues that have been raised. In answer to Mr Belding’s suggested cause (caulking/sealing issues), Mr Dandan said that no amount of caulking would fix the poor workmanship with the joints that were shown in the pictures. He said that with the amount of unfiltered air getting into the booths, this was causing dust to be sucked into the booths and contaminating everything. He added that RPSR was spending an extraordinary amount of time running back panels and buffing and in some cases repainting panel entirely for. This was costing the company money for work that it should not have to do if the booths were incorrect working order. He added that if the booths stopped operating, RPSR would sue Junair for loss of income and wages. He demanded that the booths be stripped down and re-installed to the quality that June had promised and that this reinstallation for the booths should occur one at a time. He threatened litigation.

75. Mr Dandan indicated in cross-examination that although he drafted the content of this email, the decision to send it, and the decision to engage lawyers at about this point for RPSR was that of his father, Redwan Dandan.

76. Later that day, Mr Tim Cox, a lawyer from Mills Oakley, sent an email after business hours (9:45pm) to Mr Dandan directing that any further correspondence should be sent to his firm and not to Junair (the message being copied to Mr Belding).

77. On 22 June 2016 (at 9:00am), Mr Dandan duly sent his response to Mr Cox; albeit that he copied it to Mr Belding (and the email address of Junair’s parent company, in the United Kingdom). The effect of this message was to caution Junair from commencing litigation.

78. Later that day (at 10:05pm), Mr Grahame Kitchin, sales and marketing director of the parent company (Junair Spraybooths Ltd), sent an email to Mr Dandan in response to the email earlier that day. In it, he indicated that he had spoken to Mr Belding. Amongst other things, Mr Kitchin acknowledged that it was “unlikely though possible” that the booths had elements of contamination being transferred to RPSR’s paint jobs. But he struck a more conciliatory tone than Mr Belding’s previously indicated recourse to the involvement of lawyers. This was demonstrated when he said that it was important to “trace this and help resolve it we need to work together”. This involved, as the first two steps, allowing Junair to revisit to fit new doors and to reseal the booth panels.

79. It was put to Mr Belding that it was a result of his conversation with Mr Kitchin that caused him to change his mind, between going down what might be described as the legal (or litigious) option and trying to bring about a commercial resolution. I thought that Mr Belding’s evidence was quite equivocal (to say the least) about this: he said that he was always interested in trying to fix issues but could not recall anything specifically that Mr Kitchin had said.

80. Under cross-examination, Wally Dandan recalls speaking with Mr Kitchin; although he said that Mr Perna did most of the talking.

81. On 24 June 2016 (at 8:12am), Mr Belding sent an email to Mr Dandan asking him when RPSR would like Junair to work on the booths and foreshadowing a need to discuss and document the specific works that needed to be completed as well as Junair’s outstanding payment. Mr Belding also offered RPSR the opportunity to inspect this particular booth at another site; in Tasmania. When asked about this in cross-examination, Mr Dandan understood that this was not the Australian spray booth. In re-examination, he said he thought it was English.

82. Between 24 and 30 June 2016, Junair arranged for 10 of its employees to attend RPSR’s site.

83. Nevertheless, on 30 June 2016, Mr Dandan sent a further email to Mr Belding (12:37pm) recording that RSPR had found a few over issues with the booths.

84. On 14 July 2016, Mr Dandan sent an email (11:06am), apparently [2] to Mr Belding, but also Mr Damian Perna and Mr Kitchin, in which he complained that RPSR’s employees had been buffing cars for hours and threatening that if the booths were not stripped down and reassembled properly, RPSR would commence court proceedings. To this, Mr Perna promptly offered to visit the RPSR site so that he could see firsthand the issues, from the following Wednesday (20 July). Mr Dandan embraced that offer, and sent several photographic images to Mr Perna shortly thereafter.

    2. It was not clear on the face of the email in evidence.

85. On 16 July 2016, Mr Dandan sent a further email message to Mr Perna (copied to Mr Belding and Mr Darrel Maloney, another Junair employee), complaining about the spray booth temperature not working during cycle spray time.

86. On 11 August 2016, Mr Dandan forwarded, by email, to Mr Belding, the quote that he had received for roof repairs. It was put to Mr Belding that Junair had in fact been notified of a problem with the roof from early June 2016 but no work had been done since August. Mr Belding agreed with this. When he was asked whether Junair had in fact paid for the roof repairs, Mr Belding said that he was not aware of the work that had been done.

87. On 9 December 2016, Mr Belding sent an email to Mr Khaled Dandan, referring to the former’s conversation with Mr Perna. On the basis of information that the latter provided to him, Mr Belding indicated his understanding that all the booth upgrade work had been completed to Wally’s ‘satisfaction’, apart from replacing the vehicle doors. The email referred to Mr Perna’s informing him that he had been trying to set up a convenient time with Wally to replace the vehicle doors on the two spray booths and had offered to replace them over the weekend or over two evenings so that there was no disruption to production. He added that both Mr Perna and he would like to get the job done ASAP so Junair could be paid in full for the outstanding invoice.

88. Khaled Dandan disputed Mr Belding’s understanding of Wally being ‘satisfied’ as reflecting his actual position at this time.

89. On 20 December 2016, Damian Perna sent a text message to Wally Dandan, seeking an indication from the latter as to when he could access the spray booths to “complete the work”. Khaled Dandan was not aware of this. Wally Dandan recalled Mr Perna coming to the booths and indeed, recalled him working most of the weekend, whilst he, Wally, sporadically, was on hand to assist with inquiries.

90. On 30 March 2017, Ms Tracey Burton, an account manager of Junair, emailed to RPSR an outstanding invoice for the sum of $132,000. Mr Belding acknowledged that this invoice was sent to RPSR with the awareness that RSPR was still complaining about problems. In response to the suggestion that this reflected his position that no rectification work on the defects would occur until Junair had been paid, Mr Belding accepted that this was partly right. He thought that most of the problems were of RPSR’s making (such as lack of maintenance).

91. On 6 April 2017, Ms Burton sent a further request for the tax invoice to be paid.

92. On 18 April 2017, Mr Dandan responded to Ms Burton’s email of 30 March 2017 (copied to Mr Belding and Mr Cox), by clearly indicating that RPSR would not release any further funds until all the issues with the booths had been rectified to its satisfaction, all the booths had been removed and its money refunded. At the same time, he gave an update of the continuing problems being experienced by RPSR (dust getting into the booth, air coming through the doors, rubbers perishing on the booths, airflow in the booths not remaining constant and creating baking problems).

93. No response to this had been received for a few days so on 21 April 2017 (at 1:30pm), Mr Dandan sent a follow up email to Ms Burton, seeking an indication as to what Junair’s intentions were to rectify the problems with the booths.

94. There was no response to this message before 6 November 2017 when a letter of demand was sent by Mills Oakley to Mr Dandan. Mr Belding accepted that in the period from April 2017 to November 2017, Junair did not do any work: specifically, it did not cause doors to be installed and it did not attend to any other works of a rectification nature.

95. RPSR refused to pay the $132,000 demanded. On 21 March 2018, Junair commenced this proceeding to recover this amount from RSPR.

Expert evidence

Procedural matters relating to expert evidence

96. RPSR relied upon expert opinion evidence of Mr Todhunter. Mr Todhunter prepared a report dated 29 November 2018. He prepared a supplementary written report dated 28 May 2019. Junair relied upon expert opinion evidence of Mr Carl Strautins. Although he had prepared a report dated 28 November 2018, Junair only relied upon his second report of 29 March 2019.

97. There were some procedurally curious matters concerning the reception of the expert evidence.

98. One issue, affecting Mr Strautins’ March 2019 report, was Mr Ahmed Dandan’s evidence (in his affidavit sworn 10 May 2019) about what he observed during Mr Strautins’ inspection undertaken on 14 February 2019. The evidence particularly concerned what happened when Mr Strautins was shown the temperature testing. Mr Dandan gave some evidence to the effect that RSPR continued to experience the same problem with the temperature testing after Mr Strautins had left the premises. I did not find this evidence useful. Mr Strautins was not there as part of maintenance of the system, but to assist him to prepare expert evidence.

99. Another issue was that prior to the trial, these experts had not participated in any conclave which, for a case with these issues, was not particularly satisfactory. During the trial itself, a somewhat frantic attempt was made for these experts to confer, which they did; although they did so in circumstances where Mr Todhunter was unwell. The circumstances, including the proposed draft final report, were set out in Mr Todhunter’s affidavit dated 12 July 2019.

100. These were that Mr Todhunter had prepared a version of a draft report on 11 July 2019 (the day before he and Mr Strautins gave evidence) (being Annexure ‘B’ to his last affidavit), but that version of the report was incomplete: apart from anything Mr Strautins might wish to add, Mr Todhunter himself wanted to refer to his main report before finalising this version. Ultimately, although the draft report was the product of discussion between the experts for an hour and a half, it did not (as Mr Todhunter anticipated) extend beyond this time and it is not apparent that Mr Strautins had considered the content of the version of the ‘draft’ report that was Annexure ‘B’ to the draft report.

101. After having had the opportunity to review his report, and consider the issues further, Mr Todhunter thereafter prepared a final version of a proposed draft report (Annexure ‘C’ to his affidavit). The only deletion to the earlier version (Annexure ‘B’) was to the first dot point of the topic ‘Airflow’. The deleted words were: ‘which may be attributable to design, maintenance or a combination of both’. The earlier sentence in which those words appeared (in Annexure ‘B’) was, I thought, incomplete. The deletion of these particular words (in Annexure ‘C’) did not change that particular result: the sentence still appeared incomplete to my mind.

102. At the time Mr Todhunter’s affidavit of 12 July 2019 was read (the penultimate day of the trial), I was informed from the Bar Table that Mr Strautins had not seen Annexure ‘C’. Nevertheless, no objection was taken to its tender. When the matter returned on the final day of the evidence (15 July), Mr Todhunter indicated to the Court that, from his perspective, he was satisfied with the completeness of this ‘joint report’. By then, no indication was given that Mr Strautins had not had the opportunity to consider, or respond to it; or otherwise wanted to supplement it. Accordingly, I will henceforth treat Annexure C to Mr Todhunter’s affidavit of 12 July 2019 as representing a true and accurate record of what it purports to say.

103. Ultimately, both Mr Todhunter and Mr Strautins gave evidence concurrently.

Mr Todhunter’s written opinion evidence

104. In his first report dated 29 November 2018 Mr Todhunter described himself as a materials and durability scientist of over 30 years’ experience. His qualifications included an Honours degree in Materials Science and a Master’s Degree in Science. He is a chartered chemist member of the Royal Australian Chemical Institute. Since 2000 he had been a Senior Consultant with the Automotive Coating Consultants, giving expert opinion on the refinish of vehicles.

105. Mr Todhunter elaborated upon his expertise when he gave evidence, with reference to matters that had been touched upon in his curriculum vitae. He described his occupation as being material scientist and university lecturer When, in his curriculum vitae, he had referred to technical investigations, he explained that he looked at the quality of paint, but also defects in panels to the spray booth and temperature controls, in helping him to opine on the probabilities of the cause of a defect. He said that he had experience in spray booths: he had looked at the quality of paint on a vehicle that had been inside a spray booth. He had looked at between 50 to 100 spray booths at premises. He had conducted 3 – 8 inspections per month.

104. Mr Todhunter accepted that, through the course of his investigations of spray booths for the purposes of his reports in this proceeding, he had not investigated the “componentry” or the engineering of a spray booth. When looking at the quality of the paint system, he did not look at the mechanical operation of the spray equipment.

105. In view of the joint expert report that was prepared (with the focus of questioning at trial being centred upon it), setting out specific issues, I propose to summarise Mr Todhunter’s opinion in his earlier single report as follows:

1. the paint mix room and spray paint booths did not comply with Standards AS/NZ 4114.1: 2003 and AS/NZS 4114.2: 2003;

2. the current condition of the spray booths impacted on the potential quality of vehicles refinished, by introducing defects into the paint coating;

3. there were serious structural issues with the spray booth doors, safety concerns with luminaires and with the airflow in the spray booth. These and other areas were not compliant with AS/NZS 4114.

4. In their current condition the spray booths were not suitable for resale, due to the defects;

5. rectification of the spray booths would require extensive work to the air extraction system, so as to give airflow compliant with the standard and replacing all luminaires to comply with the standard.

6. The estimated cost of a large, high-quality spray booth, with a high-quality filtration system and electrical systems would be approximately $160,000 for each ray booth and $25,000 for the paint mix room.

7. Civil and structural works would be approximately $80,000. Demolition and disposal of existing equipment would be estimated at $15,000 and total replacement and removal was considered to be approximately $440,000.

Mr Strautins’ written opinion evidence

108. Junair did not rely upon Mr Strautins’ first report dated 28 November 2018. It only relied upon his report of 29 March 2019, which was prepared in response to Mr Todhunter’s first report. Mr Strautins inspected RPSR’s premised on 14 February 2019. Following the same course as per Mr Todhunter, I now briefly summarise Mr Strautins’ opinion in that report. His conclusions were as follows:

1. he could not opine on the causes of any problem with airflow, though he observed that the filters to the floor were relatively contaminated and may significantly reduce airflow;

2. the pre and post purge systems were working properly at the time of his inspection;

3. there was an absence of markings to warn those using and maintaining the operation of the booths;

4. there was an apparent fault with the burner observed during his inspection;

5. he did not see any significant gaps between the door seals which were likely to affect airflow;

6. the height of the doorway did not meet the prescriptive requirements of the National Construction Codes (although the applicability of those codes was questionable on the question whether there was a safe means of escape from the mixing room in emergency situations). There was an absence of escape signs; although these could easily be rectified;

7. the lighting system would not make any meaningful difference to the airflow;

8. he was unable to describe a particular cause to the alleged defect of low airflow.

9. There was no verification tests to establish compliance with AS 4114.1 and 4114.2; nor other test reports or certificates to show compliance with those standards;

10. on the other hand there is no supporting documentation to indicate that maintenance schedules have been followed in accordance with those respective standards;

11. even if there was a requirement for the pit under the spray booth to be greater than 300 mm (rather than, here, only 140mm) there was no evidence that a depth greater than 300 mm would make any meaningful difference to the performance of the spray booth;

12. he was unable to comment upon the effect of alleged inadequate sealing;

13. such evidence as was provided to Mr Strautins from Mr Damian Perna, which evidence was not signed or dated, did not meet the competency standards set out in AS 4114.2, or the relevant parts of AS/NZS 4761.

109. Mr Strautins was also asked about his expertise in evidence. Mr Strautins described himself as an occupational hygienist and material scientist. He explained that this involved epidemiology, toxicology and control of hazardous substances. To the extent that he had any experience with spray booths (and he said that he had inspected about half a dozen of them), it appeared that it related to how their operation might affect the safety of workers. He accepted that he had not considered the causes of defects to the paintwork in cars that had been put through the spray booths.

110. After video clips were shown, during the course of the concurrent evidence, Mr Strautins indicated that he had only done a ‘walk in’ inspection. He said he looked at the temperature of the control screen and observed the burners. He said he looked at the filters on the floor, the signage and the height of the doors. He could not identify any testing he had performed, beyond the visual observations he said he had performed. I asked him whether he had experience in applying the Australian Standard, which was referred to in Mr Todhunter’s report. As I understood his answer, he indicated that he did so, but only to the extent of ascertaining whether it was safe for workers to enter into a booth.

The joint expert report

111. I have noted the limitations in which this draft report were prepared above: especially the circumstance that Mr Strautins had not read, or expressly stated his agreement with its contents. I also note that in circumstances where the concurrent evidence spanned over two hearing days (separated by a weekend), Mr Strautins had fair opportunity to consider the correctness of the final version of the draft report (Annexure ‘C’ to Mr Todhunter’s report) and to indicate whether he disagreed with what Mr Todhunter had represented were matters of agreement. With these matters in mind, I will now summarize its (brief) content.

112. In their joint report the experts gave evidence in respect to 5 topics: temperature, lighting, airflow, doors and sealants.

113. As to the first topic, the experts were expressed to have agreed that there appeared to be a fault in the operation of the bake cycle which explained the difficulties in achieving the required temperature; however, both considered that the issue needed to be considered by an expert in electrical and machine safety in order to identify the underlying cause or causes.

114. As to the second topic, the experts noted that, in relation to lighting, the dossier had not been verified as to the spray booth’s safety in a potentially hazardous or explosive environment. But they were expressed to have agreed that the lighting fixtures inside the booth were of a permanent type seal not intended to be broken for maintenance of the luminaires and that there may be issues accessing the light fixtures from outside the booth.

115. As to the third topic, the experts were expressed to have agreed that the airflow did not meet the requirements of AS/NZS 4114. Mr Todhunter added that he attributed this circumstance to a fault in the operation of the spray booth.

116. As to the fourth topic, it was noted that the doors were not aligned to the spray booth frame.

117. As to the fifth and final topic, it was noted that the sealants used to join walls and other structural components of the spray booth had visible ‘dirt marks’ at joined surfaces.

The concurrent evidence

118. To the extent that Mr Strautins gave evidence, it was confined to evidence of his expertise. All of the substantive questioning thereafter as to the content of the draft expert report was directed to Mr Todhunter.

119. In relation to the topic of temperature, Mr Todhunter said in evidence that there was a deficiency in the control system for burners controlling the temperature of the booth for the burners. This meant that the burner was unable to attain the temperature required to evaporate solvents to cure the paint systems. He did not regard the problem as being attributable to the way the system was used, but the combustion system that was used.

120. Mr Todhunter was asked to consider the relevant Australian Standard (section B.3.1) which posited that careless maintenance might lead to a reduction in clearance. He accepted that there could be a connection between poor maintenance and electrical faults; although he said he saw no evidence of careless maintenance.

121. The Court was presented with a video clip of the operation of burners. The clip revealed that despite the screen being pressed to set a temperature (in the lower right hand corner), even after a period of minutes, the actual temperature inside the booth (revealed on the top right hand corner of the screen) had not increased. This, Mr Todhunter signified, that information had not been processed in the temperature control part of the system.

122. Mr Todhunter was referred to screen shots of the temperature control screen. Specifically, he was referred to the left hand side of the screen and what was suggested were (numerical) ‘values’. Mr Todhunter said he had not observed them during this inspection. Mr Todhunter was also referred to the relevant part of the Operations Manual (in relation to the appropriate spray booths). He said he did not refer to this during his inspection as he had been instructed to conduct only physical observations. Consistently with this evidence, he was unaware whether the QADs system had been turned on at the time and did not see how the system had been set up for his observation. Further, he was not aware whether the controls indicated in the electrical diagrams (forming part of the Operations Manual) were operating. Whether they were or not was a matter that fell outside of his expertise. In re-examination, Mr Todhunter indicated his view that he did not need to consider these diagrams to form a view whether the deficiencies in operation of the spray booth had observed were likely to be attributable to use or were a design or manufacturing concern.

123. Other photographs (Ex K) were shown to Mr Todhunter, apparently taken during Mr Todhunter’s testing and Mr Todhunter was asked about the significance of a tripod appearing, discolouration on a wall, and a hose on the ground. It was not clear to me what the purpose was for this questioning, or what Mr Todhunter could say, in any probative sense, as to these matters, given his expertise.

124. Mr Todhunter was also separately shown screen shots (Ex L) of activity taking place outside the spray booth and asked about whether they may have depicted wet substances on the floor; and a worker who was not wearing protective equipment. Again, it was not clear to me to what purpose this evidence was directed.

125. On the topic of lighting, Mr Todhunter elaborated that the issue arose because of the absence of 600mm clearance above the external point at which luminaires can be accessed. Without that access the lights outside the spray booth could not be accessed; and access could only be obtained from within. Mr Todhunter was asked whether the problem could be fixed by adjusting the mezzanine. Mr Todhunter said he thought that this would be very difficult, because of the permanent structure of the mezzanine. After being referred to part of the Operations Manual (at section 1.1), Mr Todhunter maintained that a technician would be impeded in his access to the lights.

126. On the topic of sealants, Mr Todhunter understood the term to mean the ability to stop an air flow or liquid entering into the spray booth. He said that he had observed ‘dust like’ discolouration between the panels and the fittings. That, he thought, was consistent with internal air pressure causing external air to be sucked in through the small crevices. Dirt collected on the edges of panels. He considered it probable that (dust) particulates were entering into the spray booth from the upper ceiling areas. If dust had been sucked through (either through the doors or elsewhere), Mr Todhunter said he thought that particles, or debris from the paintwork would settle on the painted surface of cars.

127. Mr Todhunter was questioned as to his expertise in opining upon ‘air pressure differentials’. I understood him to say that he had had experience in that he had been exposed to differentials between the exterior and interior. He said that the colour of the discolouration was a dark blackish-brown.

128. He was also shown photographs of discolouration depicted during one of the video clips put before the Court. He discounted the possibility that it was paint.

129. The Court was shown a video clip of a ‘smoke gun’ being fired into a spray booth. It depicted smoke gravitating to the left side of the booth. Mr Todhunter opined that he would not have expected, as appeared, the smoke particles to agglomerate on the upper left hand side, but rather, said he would have expected them to be drawn downward. He also found that there was an inconsistency in the flow pattern: he received by metre per seconds variations from zero up to probably over 40. The impact of this, he surmised, indicated that airborne particulates containing solvent might lose some solvency. This, in turn, meant that the ability of the airborne particles to mix in with the paint film would be diminished and the end result would be a dry film appearance once they reached the surface. That is to say, it might cause imperfections on the paintwork.

130. Mr Todhunter was challenged as to his experience with ‘smoke gun’ tests. He had not undertaken such a test himself before, although he had seen them performed in relation to other projects. He was not present when this test occurred; nor knew who completed it. He was unaware whether they were referred to in any Australian Standard. When asked what type of smoke it was, Mr Todhunter described it as a small particulate material that was dispensed. He thought that the smoke was likely to be cold. That, he later indicated in re-examination, was his surmise from past experience. He was shown some photo clips of the smoke gun test and the appearance of some feature of what had occurred during the test; including the presence of a trestle table and shelfs at the back of the booth and possible rags; apparently for the purpose of suggesting the possibility of impurities within the spray booth at the time of testing. This elicited responses which did not strike me as consequential.

131. On the subject of doors, Mr Todhunter noted that they did not seal efficiently. He explained that the doors had problems with how they opened; they were slightly cleaved on angles and structural issues. When asked whether, if they were replaced, that might cure the sealing issues observed elsewhere, Mr Todhunter did not consider that they would. The sealing around the doors was a contributing factor.

132. On the topic of airflow, Mr Todhunter noted that, in his view, the problem with the air flow rate was a consequence of the manufacture of the spray booth, including the design and equipment. Mr Todhunter said he would like to know why the mechanics did not produce air flow consistent with the Australian Standard. He did not consider that there was a maintenance issue affecting it.

133. Mr Todhunter explained that he had performed tests of the air flow with the assistance of others. He was trying to operate the booths as if they were used by all the spray painters. He had performed such tests before, but accepted that this was not specifically in accordance with an Australian Standard for this particular type of spray booth. He confirmed his view that there was turbulence in the air flow on one side of the booth. He accepted that he did not form a view as to the strength of the air flow. This did not, however, cause him to reconsider this opinion.

134. Mr Todhunter was asked, more generally, about the extent of testing he had conducted of the filters. In performing these tests, he said he was assisted. He was there the whole time. He said he had tested the exit filters, which he considered looked cleaned, but not the input-flow filters (although he observed that the input flow filters were supplying sufficient airflow). He said he physically picked up the filters and picked up debris from the spray. He did not observe any damp mat outside the spray booth.

CONSIDERATION

Credit

Mr Belding

135. I was not altogether impressed with Mr Belding when he gave evidence. He did not start on a promising footing when, following changes to his affidavits in his examination in chief, he was, once cross-examination began, forced to accept that he did not read his affidavit evidence carefully, or carefully enough to pick up a basic point of when he first met Mr Redwan Dandan and otherwise confusing him with Ahmed Dandan. Thereafter, during his cross examination, I formed the view that his answers were sometimes tentative, if not non-responsive. This suggested to me that he was very conscious of the implications of his evidence for Junair’s case. This was exemplified when he was challenged as to why the plaintiff did not organise for the promised installation of doors. Mr Belding’s evidence that Junair did not wish to cause disruption was implausible in the context. He was sometimes reluctant to offer sensible concessions, such as when he was asked whether air could contain contaminants; and when he alternated his position, around 21-22 June 2016, between veering to resolution of the disputes through lawyers’ correspondence and renewing offers to fix the problems identified on the defendant’s behalf. Sometimes, Mr Belding accepted that evidence that he gave was ‘guessed’ at or that he was ‘speculating’. He was doing so when asked material questions. At one point, also, when confronted with photographic images of the problems experienced by the defendant, Mr Belding gratuitously commented that they were attributable to poorly maintained booths.

Mr Perna

136. Mr Perna was a good and reliable witness, who tried his best to answer each question that was presented and did so without regard to the implications of his evidence.

Mr Syder

137. Mr Syder impressed as a good witness. He presented as knowledgeable and as a witness who did his best to answer the questions raised of him and to otherwise assist the Court.

Mr Finn

138. Counsel for Junair sought to make something of the apparent circumstance that the presentation of Mr Finn’s affidavit was irregular: at least in the version of his affidavit that was before me the paragraph numbering was askew and it is possible that the page in which he signed his name may have been detached from the body of the affidavit. Even if this was so, I do not draw any adverse inference, affecting Mr Finn’s credit, from these matters. To the contrary, he seemed to me to present his evidence in a straightforward fashion.

Walid (‘Wally’) Dandan

139. Wally Dandan is hard of hearing. He acknowledged that he has a poor memory for dates and times. He did not like corresponding by email and was uncomfortable with communications technology (save as for text messaging). I thought he generally tried to give his evidence honestly and was reliable. Nevertheless there was at least one instance, when referred to emails purportedly (by Mr Belding) referring to him as being privy to telephone conversations where Wally was rather too dismissive of the possibility of having been involved. Given he was one of the more important witnesses for RPSR, I would have expected that he would be more open to the possibility that he was involved in such communications. I also thought that, beyond his difficulties recalling dates and times, he also had general difficulties recalling events with any precision.

140. I am cautious about accepting his evidence where it is not corroborated or supported by the objective probabilities.

Khaled Dandan

141. Khaled Dandan was the manager of RPSR at the material times. It was, initially, surprising to me that he was unable to give meaningful answers to questions concerning the ordinary management of the business of RPSR. But it emerged throughout the course of his evidence that: (a) although a manager, in form; much of what he actually did amounted to execution of important decisions that were made by Redwan Dandan, the owner of the business; (b) the extent of his express managerial responsibilities were limited. This, I consider, provided an explanation for the limited nature of much of his evidence. Generally, I regarded him as doing his best to provide honest evidence; however, similar to Walid Dandan, I did not regard his recollections as being all that precise.

248. Ms Viner’s email required information (the selection between Option 1 & Option 3) to be supplied by the end of next week. As is self-evident, there was no reference to standard terms and conditions in the email itself.

249. The second of the documents, the tax invoice of 1 October 2015, identified, under the heading ‘Description’ that the invoice related to a quotation ‘DM-1015-RPSR-Q3-Option 1.1- Serial JA1003.’ There was no reference to any other document on the face of this invoice.

250. Reading the first and second documents together, it appears that the written part of the contract was to include a quotation; and, in the case of the email, there was reference to, or indeed, express definition of a ‘final’ quotation. But in each of the initial and final quotations and proposals, the covering letters that referred to the standard terms and conditions did so only in a context of the price being subject to standard terms and conditions.

251. I accept that in commercial contracts it is common for the parties to record the bare essentials in one or more documents and for either or both of those documents to incorporate the standard terms of one of the parties. That may occur even where the standard terms have not been provided to or obtained by the other party. But in my view, neither of the first or second of the pleaded documents pleaded by Junair as comprising the written part of the contract achieve this effect, and especially not in relation to clauses 6.3 - 6.4.

252. The third of the pleaded documents identified as constituting the written part of the contract, the Confirmation of Order document, ran to 15 pages. It included a complete version of Junair’s standard terms and conditions. It appeared, on its face, to be hand delivered.

253. In National Australia Bank Ltd v Dionys as Trustee for the Angel Family Trust [2016] NSWCA 242, the Court of Appeal (Sackville AJA, with whom Macfarlan JA and White J agreed) determined (at [56]-[57] that the burden of proof that a ‘limiting term’ formed part of a contract rested upon the party seeking to rely upon the limitation.

254. Junair’s confirmation of order dated 15 October 2015 did refer to the standard terms and conditions in their entirety. But, by the time the document had been received by RPSR, according to Junair’s pleaded case, Junair and RPSR were already bound. Once parties are bound, it is not open to a party to add further terms to a contract: Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 228; followed in Dionys at [86].

255. Counsel for Junair sought to distinguish this case from Dionys. Dionys was a case, he submitted where a term could be ‘carved out’ from the general principle of incorporation where the clause is ‘unusual’. He submitted that a provision limiting liability for damages for supply of a defective good could not be regarded as ‘unusual’. As I read the judgment, I do not regard the observations of the Court of Appeal in the narrow sense submitted by Counsel for Junair in this regard. I regard the Court of Appeal as speaking generally about ‘limiting’ terms that significantly curtail a party’s rights in general law (Dionys at [87]). Nevertheless, I consider that there was some significance given in Dionys as to the identity or nature of the entity against whom the limitation clause was said to operate. There was, in Dionys, an imbalance of bargaining power, and commercial sophistication as between the parties. In this case, also, there was a family business whose managers did not exhibit much sophistication in dealing with a local subsidiary of a very substantial offshore company. I do not consider RPSR should be taken to have understood that a limitation of liability clause was anything other than ‘unusual’. It was therefore necessary for Junair to bring its existence home to RPSR.

256. In the alternative, Counsel for Junair argued that in this context, this is a Masters v Cameron case, where the parties have agreed to the essential terms of their bargain, but in various ways or for various reasons, wish to restate or add additional terms.

257. In my view, however, this analysis does not improve Junair’s position. I do not consider that I can lightly impute to RPRS an intention that at the time of contractual formation it would later be bound by a new document that sets out onerous or burdensome limitations upon its rights of recovery of damages for breach of an implied condition of a contract, for which it had no prior notice.

258. It is insufficient, in view, to seek to establish that Junair might have contemplated the possibility that other terms might later be added – at least for ‘unusual clauses’ which significantly curtail Junair’s liability for damages to RPSR (Dionys at [87]-[88]). In this regard, I agree with the submission of Counsel for Junair that to the extent that some cross-examination of RPSR’s witness(es) was centred upon understanding the effect of the contract, none of it centred upon understanding the effect of the limitation clauses. The witnesses were simply provided with a 15 page confirmation order on or about 15 October which referred to and stated the standard terms and conditions. No specific reference was made to cl 6.

259. I note, also that Junair did not rely upon a course of dealing to establish that the limitation clause was brought to the attention of RPSR. Nor did it ensure that RPSR signed a document representing its agreement to be bound by a clause which is inherently onerous or burdensome.

260. Clause 6 of the standard terms and conditions was not incorporated into the agreement between Junair and RPSR.

Is the claim for lost profits made out?

262. I am not persuaded that this claim is made out. It rests entirely upon acceptance of the assumption (which Mr Mullins was instructed to make) that had the two spray booths been operational, RPSR would have doubled its revenue.

263. It was not entirely clear whether the source for this assumption was Mr Wally’s exercise of logic, or a representation made by Mr Belding on behalf of Junair, or perhaps both. I will return to the latter possibility when considering the statutory action. But whichever was the source, it leads to the same question: whether the performance of the contract (the supply of the operational spray booths free of defects), and/or promise, was likely to have doubled revenue.

264. In my opinion, whatever force the assumption may have in logic, it is flawed. It conflates a potential capacity to generate a possible result (it could, rather than would, bake in half the time) with the probability that the result will be obtained. I agree with the submission for Junair that it would be necessary, to establish proof, for RPSR to identify that it had the market demand for RPSR’ services. As Counsel for Junair submitted, this prospect of a surge in demand was not apparent in RPSR financial statements in the recently concluded financial years prior to the purchase of the spray booths.

265. I also accept that allied to that is proof that RPSR had the wherewithal to exploit such demand. To this end, as Junair had established, it appeared to me that it was an unsophisticated business operation, in which ultimate responsibility rested in the family’s “patriarch,” Mr Redwan Dandan (who did not give evidence and whose absence was not explained): Khaled, the company’s manager, was unaware of accounting systems, and it appeared that there were certain questions about the veracity of salary payments to family members. Khaled and some of his brothers appeared unaware of, or perhaps not willing to elaborate upon, promotional and marketing activities undertaken by the family.

‘Reliance’ damages

266. In the alternative to its claim for loss of profits, RPSR claims that it suffered loss in the form of ‘time taken away from its business’ to discuss problems with the spray booths. This claim is vague and was not quantified. I make no allowance for this.

Costs incurred in mitigating loss

267. A different claim was for costs incurred which would not have been incurred but for the defective performance of the spray the booths. These were said to be costs incurred in a reasonable attempt to mitigate the loss flowing from a breach of promise [20] .

     20. Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd (1998) 192 CLR 603 per Hayne J at 654 [134].

268. Junair did not submit that it was unreasonable for RPSR to employ additional labour, or take out a lease of additional premises, in order to alleviate or mitigate the effects of spray booths that were defective in causing imperfections to RPSR’s customers’ motor vehicles.

269. This claim was the subject of expert evidence from Mr Mullins. Mr Mullins assumed that RPSR:

1. paid additional rent of $1,000 per week in order to operate the business to the capacity level that had been hoped for or expected; and

2. paid for (in cash) three additional spray painters $1,000 a week to buff out imperfections. Mr Mullins identified these three other employees as Mr Ahmed Dandan, Mr Phil Hancock and Mr Ahmad Makari.

Costs of additional labour

270. Mr Mullins annexed (Ex 1) to his report an employee register indicating, relevantly, that:

• Ahmed Dandan (spray painter) was to receive a weekly sum of $1,280

• Phil Hancock (labourer/spray painter) was to receive a weekly sum of $1,000

• Ahmad Makari (spray painter/detailer) was to receive a weekly sum of $1,000

271. If one adds up the amounts in the employee register, for all of RPSR’ employees, there is the sum of $12,770. I note that no challenge was made to the authenticity of this document, though there is no indication on the face of the document as to who prepared it, or when it was prepared.

272. Also annexed to his report were bank statements from a bank account in RPSR’s name for a limited period (August to October 2018). However, the bank accounts are so heavily redacted that it is not possible to identify the payee for each of the payments that are apparent. But I infer that Mr Mullins considered the total sums paid, as they appear in the bank statements, in the order of $15,000 to $18,000 each week, and cross-checked them against the payments said to be attributable to each individual employee (pars 3.17-3.18 of the report).

273. Junair challenged Mr Mullins’ assumption in this regard. Counsel for Junair cited evidence from Mr Finn (the former RPSR employee) who gave evidence the effect that Wally did most of (at least a majority of) the buffing. Counsel also referred me to PAYG payment summaries (Ex C) for RPSR employees during the relevant period [21] which, simply on the basis of arithmetic, established that (i) of the three additional employees referred to Mr Mullins for his instructions, only Ahmed Dandan was the subject of a PAYG payment summary; and (ii) in any event, no one else, other than the owner (Redwan Dandan) or manager (Khaled), received gross salary exceeding $1,000 per week.

     21. These employees had been identified by Khaled Dandan in paragraph 68 his affidavit of 28 November 2018

274. Counsel for RPSR referred to Wally Dandan’s cross-examination, where Mr Dandan resisted what was put to him and maintained that he did the buffing with the assistance of two others. Counsel also referred to Khaled Dandan’s affidavit evidence of three additional spray painters working full time on buffing out imperfections, that these employees were paid $1,000 each (in cash, presented in a brown envelope). Counsel said that Khaled was not cross-examined on the evidence.

275. RPSR has not persuaded me of the accuracy of Mr Mullins’ assumption that three additional labourers have been paid $1,000 per week to buff out the imperfections. No PAYG summaries were produced in relation to Mr Hancock or Mr Makari and Mr Mullins appears to have relied upon bare assertions on behalf of RPSR that were not corroborated in independent documentation. On the evidence before me, I am only prepared to accept that Wally Dandan has received the assistance of Ahmed Dandan and that the latter has been paid $800 per week.

Costs of additional premises

276. Mr Mullins was not challenged on the correctness of the assumption (T 322.42 – 322.49), concerning the payment of the additional rent.

277. RPSR has persuaded me that it has paid $1,000 a week for the rent of the additional premises in Rydalmere to meet its capacity.

278. In the short, RPSR has made out this head of damage; however the quantum for this head needs to be reconsidered in the light of the above findings.

279. In my view, since the issue is only one of arithmetic, Mr Mullins should have the opportunity to revise his calculations, on the basis of these findings, on this topic: principally, that only one additional employee was used, who was paid $800 per week.

Claim for rectification or replacement costs

280. The third suggested head of damage is the cost of replacing the equipment; there being no meaningful evidence of rectification expenses.

281. In his report of 29 November 2018, Mr Todhunter expressed an opinion that in their current condition the two spray booths were not suitable for resale due to the defects identified in the report. Counsel for Junair submitted that this opinion is insupportable. Further, Mr Todhunter opined that because of the nature of the rectification works, which in his view would require extensive work to the air extraction system and limited access to the externally accessible luminaires, rectification would not be practicable since would not be cost effective. In this last respect, concerning the luminaires, Mr Todhunter was cross-examined and it was suggested that repair of the lights would only involve creating access so as to comply with the 600 mm access space. To this Mr Todhunter noted that it would be very difficult to adjust or remove the mezzanine. Mr Todhunter thought that a technician would not be able to externally access the luminaires.

282. Because of his view as to the lack of cost effectiveness in attempting a rectification of the spray booths, Mr Todhunter recommended that the spray booths be replaced. His evidence was that, based upon his knowledge of the industry a large, high-quality spray booth, with a high quality filtration system, would be valued in the order $160,000 for each spray booth and $25,000 for the paint mix room. He said that he thought that civil and structural works would be approximately $80,000 and the cost of demolishing and disposing of the existing equipment would be about $15,000. In summary, he estimated that the total removal and replacement costs would be approximately $440,000.

283. Junair criticised this evidence. Junair’s Counsel said that Mr Todhunter was not qualified to express this opinion (and particularly his opinion about replacement value).

284. In my opinion, I accept that it is impracticable to rectify the problems of the spray booths in an attempt to restore them to the condition that they would be in as if they complied not only with the implied condition as to merchantability or quality but also in accordance with the Australian standards. In addition to the points raised by Mr Todhunter, which I accept, it seemed to me that in circumstances where neither of the experts, or anybody else, could identify an underlying cause or causes of the defects [22] , it would potentially be necessary for a range of other persons of expertise (such as electricians or mechanical engineers) to investigate the problems further. On the evidence before me it is speculative to think that the underlying cause or causes for the defects that have bedevilled the effective and proper functioning these spray booths will be diagnosed. Perhaps the clearest indication of the point is that Junair did not itself propose any method for rectification.

     22. I reiterate that one of Junair’s submissions was the effect that some of the defects may have been explicable for reasons beyond its control.

285. On the matter of replacement value, as is pointed out by counsel for RPSR, Junair faces a number of difficulties in sustaining its criticisms of Mr Todhunter’s opinions in this regard:

1. having received the opinions, in Mr Todhunter’s report dated 29 November 2018, it did not seek to put on any independent opinion in response;

2. by its acknowledgement as a potential head of damage in its Counsel’s submissions, Junair has been plainly aware (at least since 29 November 2018) that a conventional method for assessing RPSR’s loss in this proceeding is calculation of the replacement value of the equipment;

3. Junair’s lay witnesses did not put on evidence about the current replacement value for these particular spray booths when it was clearly in a position to do so.

4. No suggestion, much less evidence, has been made that the original quotation for this equipment in early October 2015 remains current nearly 4 years later.

5. Junair did not invoke coercive process to identify the underlying assumptions or reasoning supporting Mr Todhunter’s opinions;

6. Junair did not object to the admissibility of the opinions in respect to replacement value; and

7. Mr Todhunter was not cross-examined on his opinions in respect to replacement value (including, but not limited to Mr Todhunter’s reference to his ‘knowledge of the industry’, as a basis for opining on the value of a spray booth with associated equipment).

286. I am satisfied that Mr Todhunter has some level of expertise to opine on the value of spray booths and associated equipment. His main experience with spray booths is assessing the quality of the outcome for paintwork arising from the operation of spray booths. It is not inherently implausible that where, as here, the paintwork has caused problems for motor vehicles, he would be exposed to opinions as to the replacement value for spray booths and the level of associated expenses associated with the substitution of a new product. Further, in several instances when he gave his evidence, he volunteered his view that he may not be qualified to express an opinion on a particular issue. I consider that if he subjectively considered himself unqualified to express any view on this particular subject, he would have done so. There is nothing to suggest to me that his views as to replacement costs are so extravagant as to compel their rejection. In this regard, the original quote of 1 October 2015 (leaving out the discount) indicates the cost of the goods and installation was $280,000. Mr Todhunter’s opinion attributed the price for the goods (spray booths and paint mix room) alone as $355,000. The figure of $440,000 was not just the purchase price for the new spray booths and associated equipment. It appeared to me plainly obvious that the replacement of one defective good for a substituted good will involve the other expenses (such as demolition & civil or structural works) which Mr Todhunter took into account. No submission was made that such expenses would not ordinarily follow from the decision to substitute new spray booths. Further, in circumstances where Junair plainly had the opportunity, but did not avail itself of the opportunity, to respond to Mr Todhunter’s opinions, I accept them.

287. In cases where orders for damages are made for the replacement value of goods, it is important to be astute to the prospect that a claimant does not achieve a net gain. In this case, RPSR has had some use of the spray booths, though it is not possible to gauge how much of that has been effective in terms of the paintwork. But although a Court might countenance a discount, there would need to be evidence of such gain: Hyder Consulting (Australia) Pty Ltd v Wilh Wilhelmsen Agency [2001] NSWCA 313 at [55], [107].

288. I repeat a principle I referred to earlier that where there may be difficulties in assessment of damages, they may be resolved against the party which should have put on evidence. In my view, on the evidence before me, there was no reason why Junair should not have responded to Mr Todhunter’s evidence in this regard.

289. Subject to what I now say about set-off, RPSR is entitled to compensation for the sum of $440,000 to reflect the replacement value for the defective spray booths and associated equipment.

Set-off

290. Counsel for Junair submitted that if the court was inclined to award damages to represent replacement value of the equipment then RPSR should be required to account for its failure to pay the balance of the purchase price to Junair, in the sum of $132,000.

291. I accept that submission as I consider that it amounts to an accurate description of the effect of s 54(1) of the Act [23] . By this provision, RPSR is entitled to rely upon the breach of the implied condition to extinguish its liability to pay the purchase price and thereafter seek the balance (after the set-off) as damages for breach of the implied condition in s 19.

     23. Which also reflects the position at common law: Mondel v Steel (1841) 151 ER 1288 at 1293-1294

292. That means that after the unpaid component of the purchase price is taken into account, the amount for damages, for the head of damage concerning replacement value, would be $308,000.

RPSR’s claim for damages in statute

293. By its cross-claim, RPSR draws no distinction in the damages recoverable under s 236 (or in negligence) and those recoverable for breach of contract. I do not consider that the assumption that the damages that are recoverable is the same for all actions is right. To the contrary, the learned authors of Cheshire and Fifoot Law of Contract posit that because of contractual limitations, a claimant might do better under the remedies for statutory contravention than under the law of contract [24] .

     24. 11th Australian edition, at [11.133], pp 704-705, citing Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd (2008) 19 VR 358 as one such instance.

294. Be that as it may, there are some issues which should be considered in relation to these other actions, in case I am wrong on certain findings I have made. There are two issues which concern the claim under statute.

Exclusion clauses – the claim under the statute

295. Since I have found that cl 6 of the terms and conditions, being a limitation of liability clause, was not incorporated in the contract (and/or that it was not a provision sufficiently drawn to RPSR’s attention), the large question as to whether a contract breaker may utilise an exclusion clause to limit the damages recoverable against it for contravention of s 18 of the Australian Consumer Law does not strictly arise. However, lest I am wrong, I now consider that difficult question. Counsel for both parties accepted that the question is unsettled in the authorities.

296. In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83, Lockhart J said that it would be contrary to public policy for a contract to deny a statutory remedy for offending conduct under the (then) Trade Practices Act 1974 (Cth) [25] .

     25. See also Byers v Dorotea Pty Ltd (1986) 69 ALR 715 and IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470

297. In Owners Corporation SP 62930 v Kell & Rigby Pty Ltd [2009] NSWSC 1342, McDougall J, determined that upon the proper construction of a clause that limited liability for damages, and another clause that impose a time-limit for making a claim, both clauses were effective to defeat a claim for damages for misleading or deceptive conduct.

298. In Lane Cove Council v Michael Davies Associates Pty Ltd [2012] NSWSC 727 and again in Firstmac Fiduciary Services Pty Ltd v HSBC Bank of Australia [2012] NSWSC 1122, Sackar J determined that a time bar could be shorter than the limitation period specified in the statute to preclude a claim for damages for misleading conduct. Sackar J drew a distinction between a contractual term supporting to bar a statutory remedy altogether and one that purported to impose a monetary temporal limit on the extent of the remedy (Firstmac at [38]).

299. In Omega Air Inc v CAE Australia Pty Ltd [2015] NSWSC 802 at [31], Ball J, in the context of an interlocutory decision, doubted that the statutory time bar could be contracted out of and observed that if limitations of that kind were permitted, it would not be easy to see how the line could be drawn between those limitations were acceptable and those which were not.

300. In Cheshire & Fifoot Law of Contract, the learned authors evinced [26] surprise at the line of authority developing from the decisions of McDougall J and Sackar J.

     26. 11th Australian ed [11.133], p 706

301. In Brighton Australia Pty Ltd v Multiplex Constructions Pty Ltd [2018] VSC 246, Riordan J considered the recent decisions of McDougall J and Sackar J, as well as the decision of Ball J. His Honour (at [133]) interpreted Sackar J’s decision in Firstmac as establishing the entitlement of parties to fix a shorter limitation period unless the contractual provision in question was contrary to public policy; and also identified a time bar as a procedural provision (which was susceptible to waiver). His Honour determined that temporal restrictions on a claimant’s right to claim damages within the period prescribed by s 236(2) of the Australian Consumer Law were not contrary to public policy.

302. In Kell & Rigby, McDougall J also construed (at [26]) the provision there in question as being intended to specify, “so far as the law allows”, the monetary and temporal limits of liability. I agree with the submission of Counsel for RPSR that in that decision, the issue was one of construction of clauses; centred upon the parties’ expectation. The larger question for me does not depend upon the parties’ intention: it is whether public policy enshrined in legislation enacted to enhance consumer protection might trump the operation of contract intended to limit the recoverability of damages.

303. In my view, if it was necessary to decide, the observations of McDougall J and Sackar J, which were primarily directed to time bar provisions (arguably, procedural in nature) should not, with respect, be taken to support the view that a contractual limitation on the monetary amount that can be recoverable can (irrespective of whether it would be contrary to public policy) exclude or limit the monetary amount recoverable in an action for damages for contravention of s 18 of the Australian Consumer Law. That is not, in terms, what either McDougall J or Sackar J, in their decisions said. Such view would appear to be antithetical to the object (s 2) of the Competition and Consumer Act 2010 (Cth) (in which s 236, and the other provisions of the Australian Consumer Law combine to comprise a Schedule) of enhancing the welfare of Australians through the provision for consumer protection. Section 236 needs to be construed with this object in mind [27] . As with Ball J, I find it difficult to draw the line between a contractual provision which could limit and that which would exclude altogether a remedy for a substantive right conferred by statute.

     27. Acts Interpretation Act 1901 (Cth), s 15AA.

304. If it was necessary to decide, I would have held that cl 6 of Junair’s terms and conditions would not limit recoverability of damages for contravention under the Australian Consumer Law.

Are ‘expectation damages’ recoverable under s 236 for contravention of the Australian Consumer Law?

305. I have already rejected a claim of lost profit in the contract action based upon an expectation as to the doubling of revenue. If I am wrong in such finding as a matter of contract law, it is pertinent to address the position whether such a claim could have been run in the action for damages under section 236 in the event (which I have found) that the contractual provision does not oust the full recoverability of damages under s 236.

306. RPSR says that long standing jurisprudence supports the proposition that for a claim for damages for contravention of the statutory prohibition, the remedy is not fixed by principles developed in general law. It cites the Full Federal Court’s decision in Castel Electronics Pty Ltd v Toshiba Singapore Pty Ltd [2011] FCAFC 55 at [53] as an illustration of where the basis of expectation of damages could be deployed in an action for damages for the statutory prohibition.

307. Counsel for Junair referred to the decision of Havyn v Webster [2005] NSWCA 182 (at [117] (g)) as indicating the narrow range of circumstances in which lost profits might be recoverable under s 236. He said that the task for measuring damages for breach of the statutory provision was to consider the counter-factual: how much worse off the representee would have been but for the representation.

308. In terms of the applicable test, I agree with Counsel for Junair. A difficulty, with respect, with the Full Federal Court’s decision is identifying whether the passage at [53] relied upon by Counsel for RPSR was referable to damages recoverable in contract, or damages recoverable in the statutory action. At any rate, the passage does not, in my view, sustain the proposition for which Counsel for RPSR contends. A person does not suffer loss, for the purposes of the statutory precursor to the current s 236, so the plurality held in Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, simply because a hoped for advantage, or expectation, does not materialise. The conventional principle is that, for the purpose of 236, the award is not intended as damages for loss of an expected performance. But where, as Santow J held in Havyn, a person is worse off because he or she has refrained from entering into a different and more profitable contract than the one that was entered into, loss of profit may be recoverable: but this is a case where the ‘reliance’ loss basis may practically equate to ‘expectation loss’.

309. I have already found that no expectation loss is recoverable in contract, and that there is no pleading that the damages for contravention of s 18 are any different to the damages recoverable in contract. But in deference to the submissions of the parties, it is appropriate for me to make some brief observations on the merits of a claim of lost opportunity to make a profit on the evidence before me.

310. RPSR’s cross-claim does not expressly plead a loss of opportunity to enter into a more profitable contract with some other entity. I agree with Counsel for Junair that in order to sustain an action for damages akin to a claim for loss of expected profit (flowing from the impugned representation actually coming to pass), it would have been necessary for RPSR to identify another contract with a different manufacturer or supplier who could have generated two spray booths whose features (including not limited to the facility for baking) would have doubled revenue. In my opinion, it has not sought to do so.

311. Counsel for RPSR, in his reply, said that RPSR lost the opportunity of contracting with another manufacturer and supplier of spray booths that did not have the problems that it experienced with Junair. But in my view, the implicit premise must be that there was another contact available to be entered into with another spray booth with the same, or essentially, the same features of the spray booths supplied or manufactured by Junair. This was not established in evidence. Counsel for RPSR further submitted that the problems experienced meant that many hours were consumed by the spray repairers buffing out the imperfections. Be that so, but that does not in my view establish loss caused by a misleading representation: it establishes a claim for “reliance” loss.

312. If it was necessary to find, I would not find that a claim for loss of profits (or loss of opportunity to make profits) is made out under s 236 of the Australian Consumer Law.

Action for damages in negligence

313. I have noted that no distinct claim for damage or loss resultant from the tort is made in the action for negligence other than that which appears in the claim for contract.

314. Recoverability of damages for the tort is distinct from the recoverability of damages for contravention of the statute. There is no particular reason of public policy why an exclusion clause could not apply to exclude or limit liability for damages in negligence. But in circumstances where, as here, I have found that the limitation term was not incorporated, Junair’s position, in relation to its liability for damages in tort, is no better than it is under the contract.

315. In my view, had I found that negligence was established, the same result applies in relation to the award for damages in tort as it would have in relation to the statutory claim for damages, and that is no different to what would have been recoverable in contract.

SUMMARY & ORDERS

316. For the above reasons, I find that:

1. RPSR has established that the implied condition as to merchantable quality in its contract with Junair was breached;

2. the breach of contract caused imperfections in the paintwork on RPSR’s clients’ vehicles; which, in turn, caused RPSR to take steps (taking out additional premises and adding some labour) and thereby incur costs to rectify its’ clients problems. Such costs would not have been incurred but for Junair’s breach of contract;

3. the limitation clause in Junair’s standard terms and conditions was not incorporated in the contract; but, in any event, RPSR has not established a claim for loss of profits (or loss of opportunity to obtain profits).

4. the action for misleading or deceptive conduct fails for want of proof that the pleaded representations were relied upon to RPSR’s detriment;

5. the action in negligence also fails;

6. RPSR is entitled, by the operation of the statutory set-off in s 54 of the Sale of Goods Act, to extinguish its liability to pay the balance of Junair’s purchase price ($132,000) and is otherwise entitled to damages, reflecting the replacement value of the good (with associated expenses, such as demolition) for loss caused from the breach of contract. This reflects a net outcome of $308,000.

7. To this amount, RPSR is additionally entitled to recover the additional costs incurred in mitigation, that is, in its attempt to rectify or limit the imperfections caused by the defective goods (for a sum that remains to be finally determined in the light of these reasons.

8. Even if liability for the statutory action and/or the action in negligence was established, it would not change the damages recoverable from that which is recoverable in the action in contract.

317. I direct the defendant/cross-claimant to prepare short minutes to reflect the reasons in this judgement, within 7 days. Included within the short minutes should be orders for damages that reflect revised calculations of its claim for labour costs incurred (as indicated in these reasons) as well as provision for interest and costs. Junair should respond with its proposed orders within a further 5 days.

318. If the short minutes are agreed, they may be sent to my Associate within 14 days and orders will be made in Chambers.

319. Should there be disagreement as to the orders, then within a further week, the parties are to serve short written submissions as to the orders and send them (by email) to my Associate. Such submissions may attach supporting documentation, but the body of the submissions is not to exceed 3 pages

320. Unless indicated to the contrary, orders will be made on the papers. Should that position change, the parties will be notified.

**********

Endnotes

Decision last updated: 30 July 2019