Langmaid v Dobsons Vegetable Machinery Pty Ltd (No 2)
[2014] TASSC 55
•17 October 2014
[2014] TASSC 55
COURT: SUPREME COURT OF TASMANIA
CITATION:Langmaid v Dobsons Vegetable Machinery Pty Ltd (No 2) [2014] TASSC 55
PARTIES: LANGMAID, Andrew Kevin
LANGMAID, Kevin George t/as Cherry Hill Coolstores (ABN 87 065 420 794)
LATROBE COOL STORES PTY LTD
v
DOBSONS VEGETABLE MACHINERY PTY LTD t/as Dobmac Agricultural Machinery
FILE NO: 495/2009
DELIVERED ON: 17 October 2014
DELIVERED AT: Hobart
HEARING DATE: 19 August and 9 October 2014
JUDGMENT OF: Tennent J
CATCHWORDS:
Damages – Measure and remoteness of damages in actions for breach of contract – General – Significant damage to potato grading line in fire – Grading line rectified – Grading line as rectified not as accurate as line pre-fire - Assessment of damages – Reasonableness of plaintiffs' claim for costs of replacing equipment as valued where actual replacement costs known.
Robinson v Harmon (1848) 1 Ex 850; Bellgrove v Eldridge (1954) 90 CLR 613; Gagner Pty Ltd trading as Indochine Café v Canturi Corporation Pty Ltd [2009] NSWCA 413; Central Coast Leagues Club Ltd v Gosford City Council, Supreme Court of New South Wales, 9 June 1998, unreported; Hyder Consulting (Aust) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313; Marlow v Walsh (2008) 18 Tas R 153, referred to.
Damages – Measure and remoteness of damages in actions for breach of contract – General - Significant damage to potato grading line in fire – Grading line rectified – Was grading line a fixture?
Agripower Barraba Pty Limited v Blomfield [2013] NSWSC 1598; Australian Provincial Assurance v Coroneo (1938) 38 SR (NSW) 700, referred to.
Aust Dig Damages [12]
Procedure – Judgments and orders – Interest on judgments – Time from which interest runs.
Potts v Frost (No 2) [2012] TASSC 32; The Board of Management of the Agricultural Bank v Brown [1958] Tas SR 22; Craine v Colonial Mutual Fire Insurance Co Ltd [1923] VLR 623, referred to.
Supreme Court Civil Procedure Act1932 (Tas), ss 164 and 165.
Supreme Court Rules 2000 (Tas), r 887A.
Aust Dig Procedure [498]
REPRESENTATION:
Counsel:
First Plaintiff: T Cox
Second Plaintiff: T Cox
Defendant: T Pilkington
Solicitors:
First Plaintiff: Wallace Wilkinson & Webster
Second Plaintiff: Wallace Wilkinson & Webster
Defendant: Page Seager
Judgment Number: [2014] TASSC 55
Number of paragraphs: 58
Serial No 55/2014
File No 495/2009
ANDREW KEVIN LANGMAID and KEVIN GEORGE LANGMAID t/as CHERRY HILL COOLSTORES (ABN 87 065 420 794), LATROBE COOL STORES PTY LTD v DOBSONS VEGETABLE MACHINERY PTY LTD t/as DOBMAC AGRICULTURAL MACHINERY (No 2)
REASONS FOR JUDGMENT TENNENT J
17 October 2014
Late in 2012, I conducted a trial in this action. On 31 May 2013, I published reasons by which I determined the plaintiffs' claim should fail. A successful appeal followed those reasons, which resulted in a determination that judgment should be entered for the plaintiffs for damages to be assessed.
On the appeal, Blow CJ determined that the plaintiffs were not entitled to recover damages for breach of statutory duty or for negligence, and that only nominal damages could be recovered for breach of contract. Porter and Pearce JJ, however, reached a different conclusion. They determined that the defendant did breach its statutory duty, its duty of care and the implied terms of the contract by failing to comply with cls 2.4, 2.7, 2.8 and 2.12 of AS 1674. They were satisfied to the requisite degree that the cause of the fire was the hot work done by Rodney Maine.
It is now necessary to assess the quantum of the damages to which the plaintiffs are entitled. Almost all items of damages claimed have been agreed by the parties. Further, counsel have indicated that it is unnecessary for the purpose of my assessment to draw any distinction between the plaintiffs. For the purpose of these reasons, I will simply refer to the plaintiffs and the defendant, and will not distinguish between the plaintiffs unless it is necessary.
By reference to the item numbers in annexure B to the certificate of readiness dated 17 August 2012, the parties agreed items of damages as follows:
Items 1–108
$90,267.19
Items 126–150
$1,253,808.14
Items 155–174
$220,000.00
Items 153 and 175
$3,783.72
Items 176–204
$267,972.82
Item 154
$11,323.10
Item 205
$26,702.00
$1,873,857.30
As to items 151 and 152 appearing in annexure C to the same certificate of readiness, they are not now claimed by the plaintiffs as separate items.
That leaves for consideration the following matters.
· The claim in respect of items 109–125 also shown in annexure C.
· A claim in respect of loss of use of funds by reference to par 19 of the amended statement of claim (which depends on the outcome of the determination as to items 109–125).
· Interest pursuant to the Supreme Court Rules 2000, r 887A.
Factual background to the claims
The issue raised by items 109–125 is the cost of fixing the grading line. Prior to the fire, the plaintiffs had a fully functioning grading line. That grading line included what was described as an E-sizer. That was a grading machine operated by computer. It was very accurate and had enabled the plaintiffs to develop certain markets for small potatoes. The plaintiffs had initially sourced that E-sizer through the defendant. However, the plaintiffs had found that the accuracy of the E-sizer was being adversely affected by the volume of potatoes being put through it. Further, its parts were expensive and difficult to replace.
The plaintiffs had discussions with the defendant about replacing the E-sizer, and Andrew Langmaid and Phillip Dobson also had discussions about other options for the grading line. Ultimately the plaintiffs commissioned the defendant to upgrade the grading line, and, for the purpose of that upgrading, supply for installation new and additional equipment. It was intended that the E-sizer would remain, and that additional equipment, in the form of a mechanical sizer (the super soft sizer), would be put into the grading line ahead of the E-sizer for the purpose of reducing the volume of potatoes going through the E-sizer and thus improving its level of accuracy. The fire occurred during this process. The grading line, which included the existing E-sizer and the new equipment, being installed as supplied by the defendant, was either destroyed or badly damaged.
Initially after the fire, the defendant manufactured a temporary grading line for the plaintiffs so that their business could continue to function. That led to discussions about permanent work. At that point the parties became aware that the E-sizer which had existed was no longer manufactured. However, the defendant was able to source a second-hand expanding roller sizer. That was refurbished and installed, along with a super soft sizer (as originally planned).
Andrew Langmaid told the Court that the line, as it existed at the time of trial, that is with the mechanical sizer ahead of the expanding roller sizer, was doing essentially the same thing as was planned before the fire but it was not as accurate with its grading. It can be inferred from Mr Langmaid's evidence that no replacement E-sizer was in fact obtained and that therefore, as at the time of trial, over six years had passed since the replacement grading line went in. Mr Langmaid told the Court that, when particular accuracy was required, extra labour needed to be hired to sort manually. There was also evidence that use of extra labour made the access to the markets which required extra accuracy not cost effective. There was no evidence as to the cost of any extra labour, how often, if at all, it was required, or the impact on the plaintiffs' business arising from any deficiencies in the grading line as it stood at trial. There was no evidence about the financial consequences, if any, of any loss of access to markets as a consequence of deficiencies in grading accuracy.
Positions of parties as to items 109–125
By reference to the certificate of readiness, the plaintiffs' claim in respect of items 109-125 totalled $605,500. By reference to the evidence at trial, the amount claimed for the items was $685,000. Neither figure represented what was actually spent by the plaintiffs to replace the grading line. That amount, $454,187.90 including GST, was not in dispute. It was the subject of various invoices tendered by consent on the trial.
The figure of $685,000 was derived from an undated letter from Philip Dobson from the defendant company to Crawford International Loss Adjustors. That contained a list of equipment lost or damaged in the fire and an estimate of the cost of replacement of those items. That letter (exhibit P3 on the trial) provided as follows:
"Attn Peter Alford
Peter
Please find the following machinery estimations of the Cherry Hill grading Line and associated equipment. The values shown are what I consider to be a realistic replacement cost of the equipment at today's rates to manufacture or source. The prices do not reflect the actual purchase price that the equipment was purchased for over the last few years. I am comfortable that the pricing would be within 10%. Given more time I can prepare an accurate quotation on all items apart from the e sizer which is no longer produced. I based the price of this unit on the last sales price of these machines before they were discontinued. A machine to replace the e sizer could be more expensive than the price indicated but I would need time to do further research. All prices are plus GST
Cherry Hill Grading line Fire Damage Values (approx)
•
Dobmac Auto Bin Tipper (partial damage)
$10,000
•
3 Tonne Intake Hopper
$17,000
•
Elevator
$12,000
•
Super soft Dirt remover
$7,500
•
Pintle Brush Unit
$7,500
•
Roller Inspection Table
$9,500
•
Super Soft Sizer Table (New) inc take off Belts
$46,000
•
Feed Belt to e Sizer
$7,500
•
e Sizer singulator
$25,000
•
edp E sizer (no longer available last machine price)
$400,000
•
Short divider collection conveyor (New)
$8,500
•
Long divider delivery conveyor (New)
$17,500
•
Roller inspection table
$9,500
•
Single Bin filler
$11,500
•
Dual Bin Filler
$30,000
•
2 x Mini Hopper conveyors
$8,000
•
Seed treating elevator conveyor
$14,500
•
2 x Chemical applicator units
$3,000
•
Walkways
$13,000
•
Electrical controls on Grader
$20,000
•
3m long portable conveyor
$7,500
$685,000 AUD plus GST
If you require any further information please contact me, I will be on mobile phone on Friday [mobile phone number]
Regards
Philip"
The defendant contends the plaintiffs are only entitled to recover $350,410. As to how the figure of $350,410 proposed by the defendant was calculated, details were contained in counsel's written closing address at pars 21–30. They were as follows:
"… The Defendant's position is that the loss amounts to $350,410.00 made up as follows:
a) Invoice 56282 (Stage 1) $50,110.00
b) Invoice 56677 (Stage 2) $171,879.00
c) Invoice 57193 (Stage 3) $180,000.00
Less 'supersoft sizer' $63,579.00-
SUBTOTAL $338,410.00
22The First Plaintiff is also entitled to the costs of acquiring the second hand expanding roller sizer from Wayne Marshall for $12,000.00.
23 Together these sums total $350,410.00.
24The work refurbishing the line following the fire is reflected in the repair report dated 26 September 2006.
25 That document shows that Invoice 57193 includes:
a) super soft sizer $39,484.00 (Job Number 11640)
b) short divider conveyor $6,845.00 (Job Number 11642)
c) long divider conveyor $17,250.00 (Job Number 11641)
TOTAL $63,579.00
26On the day of the fire the Defendant owned the super soft sizer, the short divider conveyor and the long divider conveyor. (shown in P2 E12 as divider conv (1) and divider conv (2)). This property was destroyed in the fire.
27Had the fire not occurred the First Plaintiff would have been liable to pay for these items.
28After the fire the First Plaintiff contracted with the Defendant to rebuild the line including a super soft sizer, a short divider conveyor and a long divider conveyor. Accordingly they are required to pay for those items and the claim for the grading line on our case should be reduced by $63,579.00.
29Had the contract been performed and the fire not occurred the First Plaintiff would have been required to pay for these items. They are still required to pay for them as they were not the First Plaintiffs property at the time of the fire and the loss at the time of the fire was not the First Plaintiffs loss but was the Defendants loss.
30In relation to the First Plaintiffs case on quantum, those items are shown in P3 and total $72,000.00. Our submission is that that figure should be deducted from the First Plaintiffs claim bringing the total to $613,000.00." [Footnotes excluded.]
Contentions of the parties
The grading line – fixture or chattels
The plaintiffs contend that the grading line was a fixture, as opposed to a collection of chattels, and that, as a consequence, the correct measure of damages should be that relating to the loss of real property. Counsel's written submissions contained references to some authorities as to the issue of what would and what would not amount to a fixture. Counsel for the defendant did not directly address the issue at all.
The grading line was in fact a combination of a number of pieces of equipment which could be purchased separately and replaced separately. Counsel for the plaintiffs submitted that the grading line as a whole was intended to be permanent, there was no plan to replace it and it was fixed to the floor. The evidence he referred to, to support those submissions, was not quite as precise and unequivocal. In the course of his examination-in-chief, Andrew Langmaid was asked about the process which resulted in the new equipment and who was to do the installation work. He described what had to be done to enable the new equipment to be installed. At 55 of the transcript, he was asked "Was the installation of the equipment in the grading line intended to be permanent?" He replied, "Yes". That evidence was not, in my view, to the effect that the grading line was permanent, as in a fixture. It was contrasting what was proposed with the temporary arrangements put in place after the fire.
At 65 of the transcript, there was another reference in the evidence of Mr Langmaid to the issue of permanency. Mr Langmaid was talking about immediately after the fire. He said that with Mr Dobson's help they had a temporary line underway and he then said, "and then we were looking further into the future about replacement line – permanently replacing it with a permanent line. Yes."
Reference was made in written submissions to some evidence of Michael Cooper to the effect that the grading line was fixed to the floor. An examination of the transcript at the place indicated revealed no such evidence. There was reference to evidence to the same effect having been given by Mr Philip Dobson. It was clear from his evidence that he was not able to say that the grading line in its entirety was bolted to the floor. He believed some parts, like the E-sizer, were bolted, but other parts of the line were modules which may or may not have been bolted.
The references to the evidence about these issues were clearly directed to establishing a basis for a submission that the grading line as a whole was a fixture. The newest of the authorities to which counsel referred to support his contention that the grading line was a fixture was 1938, with the oldest being 1872. While I have no doubt the authorities generally remain good law, the issue was canvassed in depth and more recently in the Supreme Court of New South Wales in Agripower Barraba Pty Limited v Blomfield [2013] NSWSC 1598. Black J, commencing at [29], canvassed numerous cases which included one of the authorities to which counsel referred, namely Australian Provincial Assurance v Coroneo (1938) 38 SR (NSW) 700. What was described as the prima facie view in that case was that an object merely standing by its own weight on land would not ordinarily be a fixture, but, if it were fixed to any extent, it would be. What is to be gleaned from the authorities canvassed by Black J is that the question of whether or not an item is a fixture will depend on the degree to which it is annexed to the land, and the object and purpose of that annexation. The intention of the person annexing the items may also be relevant.
The plaintiffs, together, owned, not only the business being operated from the premises where the fire occurred, but also all the equipment and the real property on which it stood. They had established the business, they had purchased the equipment and they had arranged for it to be installed. There is little doubt, even from the limited evidence, that the grading line, which certainly in part was dyna-bolted to the concrete floor, was intended to be a permanent installation even if from time to time component parts might need to be, and were, upgraded. I am satisfied in the circumstances the grading line was a fixture.
How should damages be calculated?
Counsel for the plaintiffs submitted that damages for breach of contract should be awarded to a plaintiff such as to put the plaintiff as nearly as possible in the position they would have been if the contract had been performed: Robinson v Harmon (1848) 1 Ex 850 at 855. Counsel for the defendant did not join issue with that principle, but referred to a qualification to that general rule arising from the decision of Dixon CJ, Webb and Taylor JJ in Bellgrove v Eldridge (1954) 90 CLR 613. That case involved initially a claim by a builder against a home owner for a balance payment for a home he had built. The homeowner counterclaimed asserting that, by reason of a number of breaches of contract, the house was worthless, and she claimed damages. The builder's claim was dismissed. On the counterclaim, the trial judge found the breaches of contract proved and determined, on the facts of that case, that the homeowner was entitled to have the existing building demolished and a new home built in accordance with the contract and the specifications. The builder appealed unsuccessfully.
In that case, the homeowner had retained the home, and, at the time of trial, no rectification work had been undertaken. As their Honours pointed out, the homeowner was entitled to have a home built on her land which accorded with the contract she and the builder had and the specifications for that home. She was not obliged to accept a home not built in accordance with the contract and specifications, and which was seriously inadequate. Her loss could not be calculated by simply looking at the difference between the value of a home built to specification and the value of what she actually got. At 618-619, their Honours said:
"But the work necessary to remedy defects in a building and so produce conformity with the plans and specifications may, and frequently will, require the removal or demolition of some part of the structure. And it is obvious that the necessary remedial work may call for the removal or demolition of a more or less substantial part of the building. Indeed — and such was held to be the position in the present case—there may well be cases where the only practicable method of producing conformity with plans and specifications is by demolishing the whole of the building and erecting another in its place. In none of these cases is anything more done than that work which is required to achieve conformity and the cost of the work, whether it be necessary to replace only a small part, or a substantial part, or, indeed, the whole of the building is, subject to the qualification which we have already mentioned and to which we shall refer, together with any appropriate consequential damages, the extent of the building owner's loss.
The qualification, however, to which this rule is subject is that, not only must the work undertaken be necessary to produce conformity, but that also, it must be a reasonable course to adopt. No one would doubt that where pursuant to a building contract calling for the erection of a house with cement rendered external walls of second-hand bricks, the builder has constructed the walls of new bricks of first quality the owner would not be entitled to the cost of demolishing the walls and re-erecting them in second-hand bricks. In such circumstances the work of demolition and re-erection would be quite unreasonable or it would, to use a term current in the United States, constitute 'economic waste'. (See Restatement of the Law of Contracts, (1932) par. 346). We prefer, however, to think that the building owner's right to undertake remedial works at the expense of a builder is not subject to any limit other than is to be found in the expressions 'necessary' and 'reasonable', for the expression 'economic waste' appears to us to go too far and would deny to a building owner the right to demolish a structure which, though satisfactory as a structure of a particular type, is quite different in character from that called for by the contract."
Counsel for the defendant referred also to a decision of the New South Wales Court of Appeal in Gagner Pty Ltd trading as Indochine Café v Canturi Corporation Pty Ltd [2009] NSWCA 413. The case involved a dispute about the appropriate measure of damages arising from the tort of negligence. A jewellery store owner's premises were damaged as a result of a flood from a café upstairs. The premises were not completely damaged. However, the owner of the jewellery store carried out a full refit of the premises, and as a consequence closed his shop for longer while work was being done, rather than just making good that part of the premises actually damaged. The judgment of the court was written by Campbell JA, with whom MacFarlan JA and Sackville AJA agreed.
While the court in that case accepted that Bellgrove v Eldridge was a case dealing with the assessment of damages for breach of contract, and that there was a clear difference between the principles upon which damages for breach of contract and damages for tort are assessed, nevertheless they found that the case provided some useful assistance. Campbell JA canvassed a number of authorities which dealt with damages for breach of contract.
Two of the cases referred to by Campbell JA were Central Coast Leagues Club Ltd v Gosford City Council, Supreme Court of New South Wales, 9 June 1998, unreported, and Hyder Consulting (Aust) Pty Ltd v Wilh Wilhelmsen Agency Pty Ltd [2001] NSWCA 313. I mention these because quite a lengthy passage from the judgment of Giles CJ (as he then was) in the former case was quoted in the written submissions of counsel for the defendant. The same passage was quoted at [63] of Gagner. It had been relied on by counsel for the café owner. However Campbell JA then said at [65]:
"However, though the passage I have quoted from Central Coast Leagues Club at 216-217 on its face appears to provide some support for Mr Parker's present contention, that passage cannot now be relied upon, as it has later been qualified by its author and the course of subsequent appellate decision, as will appear below."
Giles JA (as he became) was a member of the court of appeal in Hyder. That case involved an architect having been found liable for a breach of contract. The breach involved the architect failing to pass on to an engineer a client's instructions about the need to accommodate an increased load in some pavement. The pavement was built, it could not carry the intended load and it failed. The owner did not replace all the failed pavement. Instead, he undertook a re-development which saw part only of the failed pavement replaced with a new building on the other part of it. The trial judge allowed for damages by reference to the cost of replacing the entire failed pavement even though it had not occurred.
The court of appeal reduced the damages and allowed them by reference to the actual costs of rectification. Meagher JA said at [19] as to the decision to do this:
"19 What is surprising is that his Honour stated 'in the absence of any alternative method of calculating rectification costs or any expert evidence on the point' he would accept the figure of $566,560. It seems almost too simplistic to point out the actual cost was an impeccable alternative method of calculating cost. The owner's counsel suggested that the $566,560 figure was mandated by the High Court's decision in Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 at 617-8. In my view, this is simply not so. The ratio of that case is that where the price of rectification is ascertained, that price cannot be discounted because of the fact that the plaintiff will not, or might not, spend all the money on the rectification in question."
Giles JA then said at [96]–[100]:
"96 In my opinion his Honour was in error. Neither Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613 nor the other cases cited supported damages based on the theoretical cost of reconstruction of the pavement when the actual cost of reconstruction of the pavement was known, and the actual cost was powerful evidence of an alternative method of calculating rectification costs.
97 In Bellgrove v Eldridge the owner sued the builder for breach of contract in constructing a building with defective foundations. It was held that the measure of damages was not the diminution in the value of the building by reason of the defective foundations, but the cost of reasonable and necessary work to rectify the foundations plus consequential losses, and that in the particular case demolition and rebuilding was reasonable and necessary to provide a building in conformity with the contract. Theoretical cost versus actual cost was not in question.
98 The Court did say (at 620) -
'It was suggested during the course of argument that if the respondent retains her present judgment and it is satisfied, she may or may not demolish the existing house and re-erect another. If she does not, it is said, she will still have a house together with the cost of erecting another one. To our mind this circumstance is quite immaterial and is but one variation of a feature which so often presents itself in the assessment of damages in cases where they must be assessed once and for all.'
99 This does not mean that a theoretical reasonable cost is to be preferred over the actual cost where the actual cost is known and can be taken as the reasonable cost. If the rectification work has not been carried out, then a theoretical reasonable cost must be found and, because damages must be assessed once and for all, must be awarded even though the rectification work might not be carried out. (I have held that, if it is found that the rectification work will never be carried out, no damages should be awarded: see Central Coast Leagues Club Limited v Gosford City Council, 9 June 1998, unreported). But if the rectification work has been carried out and the actual cost is known, that provides sound evidence of the reasonable cost and should ordinarily provide the basis for damages.
100 In neither Director of War Services Homes v Harris (1968) QdR 512 nor De Cesare v Deluxe Motors Pty Limited (1996) 13 BCL 136 was the actual cost of the rectification work known. The buildings had been sold, and while in De Cesare v Deluxe Motors Pty Limited some money had been spent on rectification work there had not been proper rectification. It was held in both cases that the reasonable cost of rectification could still be the measure of the former building owners' losses."
Campbell JA returned to the relevance of Bellgrove v Eldridge to cases of damages for tort at [89] in Gagner. He said there were repeated examples of courts obtaining guidance from it in assessing damages for tortious damage to property. He described it as a reflection of the very close similarity between the way principles operated in the areas of breach of contract and tortious liability. In both situations he said "it must be reasonable to take remedial action before the costs of that remedial action is allowable as damages".
Is the plaintiffs' claim for recovery of the replacement costs as valued reasonable in the circumstances of this case?
Outcome
There is no dispute that the grading line as it is, and the grading line as it would have been had the contract between the parties been completed, or indeed as the grading line would have been had there been no breach of duty as found, is not the same. The plaintiffs would have retained their E-sizer, whereas in its place they now have a mechanical expander roller sizer. There may be little doubt that, had a replacement for the E-sizer destroyed in the fire been able to be sourced, it would have been. Had it been, no doubt this argument would not have occurred. However, those E-sizers were no longer being manufactured. The plaintiffs, instead, created a different type of grading line and, for the past eight years, I infer, have operated that grading line without an E-sizer.
It is, in my view, a simplistic approach to say that the plaintiffs are now entitled (or at least were in 2012 when the trial in this matter took place) to be placed in the position in which they would have been had the contract been completed satisfactorily, and that therefore they are entitled to the costs of replicating that situation: Robinson v Harman, Bellgrove v Eldridge. This is not a Bellgrove v Eldridge situation where there is no material to indicate an actual cost of rectification, and what the plaintiffs now have is a defective and unusable fixture.
The measure of the plaintiffs' damages should be reasonable in all the circumstances of this particular case. In my view, therefore, the starting point should be the actual costs of rectification.
The actual cost of rectification claimed by the plaintiffs was $454,187.90 by reference to invoices and a repair report which were exhibits P2–E10 and 11. Those invoices contained a GST component. Counsel for the plaintiffs accepted in the course of submissions that the claim for the GST component would not be pursued. The total of the invoices, exclusive of GST, was $401,989. In addition to that figure, the plaintiffs claimed an agreed figure of $12,000 for the second hand-roller. The total actual replacement cost was therefore accepted by the plaintiffs to be $413,989.
Counsel for the defendant, however, does not accept that even that sum is the correct measure of damages for the plaintiffs. He submitted that invoice numbered 57193 included allowances relating to the costs of a super soft sizer, a short divider conveyor and a long divider conveyor. In fact, it was invoice number 56677. He submitted that, as at the date of the fire, a super soft sizer, a short divider conveyor and a long divider conveyor had been supplied by the defendant to the plaintiffs and were part of the installation destroyed in the fire. At that point, those items had not been paid for and, in fact, remained the property of the defendant. The plaintiffs would have ultimately been required to pay for them had the fire not occurred. As a consequence of the fire, the plaintiffs, not owning or having paid for the items, suffered no loss in respect of them. The items referred to in invoice number 56677 (first three items) were in effect replacements for the unpaid for items. The plaintiffs would have had to pay for those in any event, and they should not be able to claim that cost from the defendant as part of any damages.
As a consequence of this argument, counsel for the defendant submitted that the invoice total of $401,989 should be reduced by the cost of those three items as shown in invoice number 56677. That is, the total should be reduced by $63,579, leaving a net figure of $338,410; add to that the extra $12,000 and there is a total of $350,410.
In my view, the approach taken by the defendant is reasonable and logical, as it reflects the actual loss of the plaintiffs.
Counsel for the plaintiffs submitted that, if the Court were to determine that the actual replacements costs were the measure of the plaintiffs' damages, there should be a further allowance for two factors. The first was an amount to take into account the extra cost of manual labour expended by the plaintiffs to improve the accuracy of the grading line above that now produced as a result of the inferior line in place post-fire. The second was an allowance for the loss of market presence occasioned by the fact that, notwithstanding extra costs of manual labour to sustain accuracy in normal markets, continued access to markets requiring superior accuracy above and beyond that required for normal markets was not possible because it was not cost effective.
The difficulty with each of these claims was simply the lack of evidence which might support them. While counsel for the plaintiffs conceded there was a paucity of evidence as to these matters, he submitted that the Court, on the evidence which was available, could still make an allowance using a broad brush approach. He submitted that, in determining what that allowance should be, the Court could have regard to the fact that the plaintiffs' operation was a significant commercial operation and to the fact that the cost of replacing the E-sizer was valued in itself at $400,000.
The reference to the "broad brush" approach I infer came from remarks of Cosgrove J in Martin v Howard [1983] Tas R 188. The court was there dealing with an assessment of damages for personal injuries. The plaintiff had almost no pre-accident employment history and what his future held was largely a matter of speculation. The trial judge had assessed economic loss by reference to some income the plaintiff had been earning for a short period prior to the accident. Cosgrove J said at 212:
"I find the conclusion inescapable that the method of calculation adopted by his Honour had no basis in fact, and was unsuited to the resolution of the problem before him. This was an occasion for arriving at a round sum which gave to an experienced man of the law the most satisfaction and appearance of justice. If that process is criticised as 'intuitive', so be it. At the trial level there is often no available alternative."
On the previous page, his Honour had used the phrase "broad brush treatment" when describing the approach he advocated.
Porter J referred to these remarks in Marlow v Walsh (2008) 18 Tas R 153, an appeal, in part, against a judge's assessment of damages where not dissimilar problems had been faced in precisely estimating damages for loss of earning capacity for a motor vehicle accident victim. His Honour said at [164]–[168]:
"164 The assessment of damages for loss of earning capacity was described by Cosgrove J in Dodge v Matchan 19/1988 as a task which '... is never simple and often involves the making and balancing of a number of forecasts of a speculative nature, the accuracy of which is at best doubtful. Sometimes it involves the making of several forecasts about the same thing followed by an endeavour to select a mean or a probability among them.'
165 In this case, in making an estimate of what income the appellant would have generated, it was a matter of speculation as to when, if ever, the appellant would seek to establish himself in a business, or take up some other form of paid employment, and what the likely returns of those endeavours would be. As to what income he might now generate, matters of speculation would be whether the appellant's depression improved for whatever reason and what consequences that might have on his employment situation.
166 In the cross-appeal, the respondent argues that there should have been no award under this head, primarily on the basis that there was no evidence upon which any finding could have been made that there was any reduction in such earning capacity productive of loss. The respondent says that the figure of $75 per week discounted at 15 per cent for contingencies gave to the appellant, on the trial judge's assessment, the whole of the value of what he was likely to earn, and that this was in conflict with the findings of fact actually made as to what the future held.
167 The respondent pointed to Dr Rose's opinion of August 2001 to the effect that the appellant was fit 'for at least part time work [there being] no real restrictions on his inability to work ...'. The actual level of established disability and the failure of the appellant to seek any remunerated work since the accident, were highlighted.
168 It might be said that the circumstances of this case called for a broad 'intuitive' approach to the assessment of the type suggested by Cosgrove J in Martin v Howard [1983] Tas SR 188 at 212, rather than one based on particular weekly figures for both past and future components of the loss. However, the process of valuing pre-accident earning capacity and the injury caused diminution of that capacity generally requires some empirical basis, at least as far as the evidence permits."
Counsel for the plaintiffs submitted that, despite the lack of detailed evidence, the Court must still accept there was a loss arising from the factors identified and that some allowance should be made on a broad brush or intuitive basis for those factors. Counsel for the defendant, on the other hand, submitted that there was simply no evidence upon which the Court could make any sort of allowance for these factors
The evidence relevant to these factors seems to be as follows. At 61 of the transcript, Mr Langmaid said in relation to the grading line at the time of trial by comparison to what it was:
"It essentially does the same things as the old line but it's not as accurate. The current line, the more tonnes you put over it the less accurate it becomes. The current line has got a pre-sizer in it and then he goes on to a roller – another sizer which effectively is the same configuration and if you like is what we was attempting to achieve with the E-sizer. You have a pre-sizer in front of the E-sizer and now we've got a pre-sizer in front of an expanding roller sizer."
He was then asked whether the expanding roller sizer achieved the same level of accuracy as the E-sizer and he said no. By way of explanation of the difference he said:
"A difficult question to answer because it does vary – varies depending on the potatoes that you're putting over it. The E-sizer would do a plus or minus 1 to 2 grams depending on what the shape of the potatoes are that we are sizing, the expanding roller sizer might be plus or minus 50 grams depending on the shape of the potatoes. So on some potatoes it was reasonably accurate on other potatoes they are not very accurate."
He then said that, when they needed to get very accurate with the current line, they employed labour to adjust the sizes, that is, to take some potatoes off one conveyor and put them on another.
At 72 of the transcript, the following exchange occurred between Mr Langmaid and his counsel:
"Mr Langmaid, you were talking earlier about the accuracy of the E-sizer, what was the importance of obtaining that accuracy for your business?.....Our business was developing markets whereby the customers needed or required extreme accuracy in small pre packs for overseas markets. We would typically get orders of, say, 2 kilo packs with potatoes up to 180 grams. When they gave an order like that they meant they did not want potatoes over 180 grams so it was very important to get as close to that mark as we could without going over it.
Are you still able to participate in those markets?.....No, our current sizer isn't accurate enough to get to those markets and still be cost effective because of the additional labour required.
So in order to actually achieve that accuracy you need to put - ?.....Yeah, those markets are fairly tight as far as margins go.
Yes?.....Money margins. We wouldn't get to those tight markets with the current machinery cost effectively."
Philip Dobson also gave some evidence about the accuracy of the machinery.
None of this evidence was challenged. I am satisfied having regard to this evidence that:
· the grading line generally post fire was not as accurate as that pre-fire;
· when they needed to get very accurate, extra labour was required to take some potatoes off one conveyor and put them on another;
· the current sizer is not accurate enough to enable the plaintiffs to get into small potato specialised markets and still be cost effective with the extra labour costs involved.
As a consequence of the above, I am satisfied that the plaintiffs have suffered loss arising from
· extra labour costs incurred since the fire to enable accuracy to a level which existed pre-fire; and
· an inability to access specialist markets for small potatoes.
There was no evidence which would however enable me to, in dollar terms, quantify those losses. Should the consequence of that be no allowance at all, or should there be some allowance on an intuitive or broad brush basis? Were there to be no allowance at all, the situation would be that there is an acknowledged loss with no amount of damages by reference to it. That is not reasonable on any basis. As counsel for the plaintiffs submitted, the plaintiffs' operation was a large commercial operation and to actually replace the E-sizer would have cost in the region of $400,000. Those factors should be recognised in assessing some sort of allowance. However, what also needs to be recognised is that there was no evidence to suggest any major downturn in profits of the plaintiffs such that they felt the need to somehow rectify, on any permanent basis, the accuracy problem. I have determined in the circumstances to make an allowance of $50,000 for these factors.
I therefore assess the damages to which the plaintiffs are entitled by reference to items 109-125 at $400,410.
Loss of use of funds issue
There was no dispute that, if I were to award to the plaintiffs a figure in excess of the actual replacement costs figure, then they would be entitled to an allowance for the loss of use of that extra amount. I have awarded an extra amount of $50,000. The parties agreed an appropriate interest rate at 7% and counsel for the plaintiffs included in his written submissions a formula by which this claim could be assessed. I have, using that formula and a period of eight years and seven months, assessed the loss of use claim at $41,022.86.
Interest
The Supreme Court Civil Procedure Act 1932 ("the Act"), s 164, relevantly provides that "All judgments and orders of the Court or any judge .., whereby any sum of money, ... shall be recovered by or shall be payable to any person shall have the same effect, and may be enforced by the same writs and process, as a judgment in an action at Common Law had, and could be enforced by, immediately before the commencement of this Act ...". Section 165 provides:
"Every such judgment and order as is mentioned in section 164(1) shall carry interest at the rate of 5 per centum per annum, or such other rate as may be prescribed by the Rules of Court, from the time of the trial or inquiry, or, if there has been no trial or inquiry, from the time of signing or entering up judgment; and the amount of such interest shall be stated in the body of, and may be levied under, a writ of execution on such judgment."
The Supreme Court Rules 2000 ("the Rules"), r 887A, provides:
"(1) Unless the Court at the time of giving judgment otherwise orders, a judgment or order under section 164(1) of the Act carries interest from the time of the trial or inquiry or, if there has not been a trial or inquiry, from the time of signing or entering up judgment at —
(a) ...; or
(b) the prescribed rate of interest."
In the present case, the trial concluded on 6 September 2012, and judgment was delivered on 31 May 2013. That judgment did not provide for the payment of any sum of money. It was appealed, and, on 4 July 2014, the Full Court allowed that appeal and ordered there be judgment for the plaintiffs in an amount to be assessed. That assessment is the subject of these reasons. Counsel for the plaintiffs submitted that the plaintiffs should be entitled to interest from the date the hearing in the trial in 2012 concluded, that is, 6 September 2012. No authority was provided for that proposition, and both the Act and the Rules are silent as to what the meaning of the phrase "the time of trial" is. Counsel for the defendant made no submissions.
What therefore does the phrase "the time of trial mean"? Porter J in Potts v Frost (No 2) [2012] TASSC 32 at [21] said in relation to the issue:
"The 'time of the trial' referred to in s165 means the date when judgment is delivered: The Board of Management of the Agricultural Bank v Brown [1958] Tas SR 22. That date, as I have noted, is 5 October 2011."
In the Agricultural Bank case, Gibson J was dealing with a situation where he conducted a trial and gave judgment for the defendants on 21 June 1956. The plaintiffs appealed to the High Court. That court allowed the appeal, dismissed a cross-appeal, and ordered that judgment be entered for the plaintiffs for a particular sum. The plaintiffs moved for judgment in this Court. The report in that case records the following at 23:
"GIBSON J, following Craine v Colonial Mutual Fire Insurance Co Ltd [[1923] VLR 623], held that the resulting judgment should be entered as a judgment of the Supreme Court, and continued:
Consequently interest should be payable on the sum awarded at five per cent from the time of the trial until payment, in accordance with s 165 of the Supreme Court Civil Procedure Act, 1932. The action was concluded before me when I gave the judgment appealed from on 21 June 1956. Interest will run, therefore, from and excluding that date."
The matter of Craine involved a situation where a judgment was entered for a defendant in the Supreme Court of Victoria. On appeal to the High Court, that judgment was set aside, and it was ordered that judgment be entered for the plaintiffs. A subsequent appeal to the Privy Council failed. No judgment in terms of the order made in the High Court was ever actually entered in the Supreme Court. However, the order of the High Court was filed in the Supreme Court. The Supreme Court directed that interest be paid from the date of the High Court order, and that was not overturned. Schutt J dealt with the application which raised a dispute as to the date from which interest should be paid. In the course of his reasons, his Honour said at 629:
"It is, of course, still a question whether the date of the judgment, where there has been an appeal, is the date of the judgment originally entered in the Court appealed from or the date of the judgment of the appellate Court directing a different judgment to be entered in lieu thereof. In Keogh v Dalgety and Co Ltd, Hodges, J, decided that the former view was correct, but Borthwick v The Elderslie Steamship Co Ltd (No 2) [[1905] 2 KB 516] is a decision in favour of the latter view, subject, however, to any special order antedating the judgment. In the present case, however, the point is of no importance, as the plaintiff claims interest only from the date of the High Court judgment.
…
I think interest was properly claimed under sec 181 of the Supreme Court Act at the rate of 8 per cent, and, further, that it was properly claimed as from the date of the order of the High Court. It may be that it was claimable as from the date of the original Supreme Court judgment, or it may be that it was claimable even from the time of the original trial of the action, having regard to the difference in the language of sec 181 of our Act and that of sec 17 of the English Statute 1 & 2 Vict, c 110, which does not refer to the time of trial."
In the present case, counsel for the plaintiffs is seeking interest from the conclusion of the trial in September 2012. As far as the plaintiffs are concerned, if Gibson J's decision in the Agricultural Bank case is adopted, which appears to have been the approach of Porter J in Potts v Frost, the best the plaintiffs could hope to achieve is interest from the date of my decision on 31 May 2013. Further, it would seem to me that the courts in Craine and Agricultural Bank approached the issue of interest differently. In Craine, the court did not determine the question of when interest should begin to accrue, but ruled on whether the plaintiff was entitled to enforce a judgment and seek interest from the date of the decision in the appeal. In the Agricultural Bank case, interest was ordered from the date of the judgment at first instance, notwithstanding that judgment was overturned on appeal.
The Act and the Rules refer to the time of trial. The trial in this matter was finalised by a decision on 31 May 2013, even though that decision did not entitle the plaintiffs to recover any sum upon which interest could be said to accrue. It may be argued that, had the decision in the first instance been that which ultimately occurred on appeal, the plaintiffs would have been entitled to claim interest from the date of the judgment at first instance. That may be the logic behind the manner in which the Court dealt with the issue in the Agricultural Bank case and in Potts v Frost when combined with a literal reading of s 165 and r 887A. I propose in those circumstances to adopt that approach. The plaintiffs will be entitled to interest on the damages assessed from 1 June 2013 until the judgment in respect of those damages is satisfied at the prescribed rate from time to time applying in this Court.
Outcome
As a consequence of my findings, the plaintiffs are entitled to damages in the sum of $2,315,290.16 calculated as follows:
As agreed in respect of items
$1,873,857.30
In respect of items 109-125
$400,410.00
In respect of the loss of use of funds claim
$41,022.86
$2,315,290.16
The plaintiffs are further entitled to interest on the above sum from 1 June 2013 to the date of payment of the sum assessed at the prescribed rate as applies from time to time.
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