Marble & Cement Work Co Pty Ltd v Parchem Construction Products Pty Ltd (No 2)
[2010] SADC 29
•12 February 2010
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
MARBLE & CEMENT WORK CO PTY LTD v PARCHEM CONSTRUCTION PRODUCTS PTY LTD (No 2)
[2010] SADC 29
Reasons for Supplementary Decisions of His Honour Judge Barrett
12 February 2010
TRADE AND COMMERCE - TRADE AND COMMERCE GENERALLY - STATUTES RELATING TO MISLEADING OR DECEPTIVE CONDUCT IN TRADE - SOUTH AUSTRALIA
Plaintiff sought a quote from defendant for the bulk supply of drums of defendant's product. Later it ordered the bulk supply. When providing its quote, defendant did not disclose that it might not be able to supply the whole anticipated order. It did so when the bulk order was placed - whether defendant engaged in misleading or deceptive conduct by what it said or failed to say, i) when it provided the quote, ii) when the bulk order was placed and iii) at subsequent times.
Held: No misleading or deceptive conduct.
Trade Practices Act 1974 s 52, s 51A; Fair Trading Act 1987 s 56; Evidence Act 1929 s 45A(2), referred to.
AON Risk Services Australia Ltd v ANU (2009) 239 CLR 175; Campomar v Nike International (2000) 202 CLR 45; Taco Co of Australia v Taco Bell Pty Ltd (1982) 42 ALR 177; Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714; Jones v Dunkel (1959) 101 CLR 298, considered.
MARBLE & CEMENT WORK CO PTY LTD v PARCHEM CONSTRUCTION PRODUCTS PTY LTD (No 2)
[2010] SADC 29
I am directed by the Full Court to make determinations in relation to several questions remitted for my consideration. The questions arise out of a judgment I delivered on 22 January 2009. There were three issues in the trial. The first was a claim in contract. The third was a claim in tort. The questions relate to the second issue which was cast as follows:
The plaintiff alleges that the defendant misrepresented to it that the defendant would supply all of the chemical needed to complete the job. Was there a misrepresentation by the defendant? If there was a misrepresentation, did the plaintiff rely upon it?
The questions direct me to determine whether, during three nominated time spans, the defendant, by its communications and dealings with the plaintiff in respect to the supply or potential supply of preco Hi V in relation to the production of 4,500 square metres of precast panels with an exposed aggregate finish, engage in conduct which was misleading or deceptive within the meaning of s 52 of the Trade Practices Act 1974 and s 56 of the Fair Trading Act 1987 and, if so, in what respect?
The three time spans are:
1. 31 July to 8 October 2000 (Question 1);
2. 9 October to 30 November 2000 (Question 5);
3. 1 December 2000 to 3 January 2001 (Question 9).
In respect of each of those questions there are further questions asking whether:
1.If there was misleading or deceptive conduct, was the plaintiff thereby induced to act in a different manner from that which it would otherwise have done? (Questions 2, 6 and 10.)
2.If the plaintiff was so induced, did it suffer loss? (Questions 3, 7 and 11.)
3.What is the quantum of the loss suffered? (Questions 4, 8 and 12.)
The first Question – preliminary objections
The answer to the first question depends, in part, upon my deciding whether particular documents contained in Exhibit P1 were admitted into evidence at the trial. The plaintiff says they were. The defendant says they were not.
The documents bear directly on a topic that has now assumed somewhat more prominence than it did in the trial. The defendant asserts that the topic is entirely new and I should not entertain it when answering the questions posed by the Full Court. The plaintiff says it was identified at the trial and on the Appeal.
The topic relates to the ability or inability of the defendant to secure supplies of sodium gluconate, said to be an essential raw material in the manufacture of all the relevant preco Hi-V products which are the subject of the dispute. The plaintiff asserts as a fact that the product was no longer available from at least February 2000. It asserts that the defendant knew that fact in February 2000. The plaintiff says that the defendant’s knowledge renders, or tends to render, its subsequent conduct towards the plaintiff misleading and deceptive.
Admission of Documents Exhibit P1, pages 1, 2 and 176
I turn first to the admission of the documents now relied upon by the plaintiff to establish its contention that from early in 2000 the defendant knew it could not produce any more preco product and consequently it knew it could not meet the plaintiff’s requirements. (I understand that each of the documents was before the Full Court on the Appeal.)
Discussion about the status of the plaintiff’s tender book of documents took place in the Opening by Mr Ross-Smith for the plaintiff. As Mr Blue QC put it at the further hearing, the status of the documents evolved. At trial Mr Ross-Smith suggested first that the tender book be marked for identification. Mr Hoile for the defendant submitted that the volume should become an exhibit but he expressed reservations about some documents. He suggested that if those documents were eventually excluded from evidence I would be able to ignore them (T5). I admitted the tender book as Exhibit P1 (T6). It was not marked only for identification.
Moments later, still in the opening by Mr Ross-Smith, the matter was further discussed. Mr Ross-Smith sought to tender the first document from the volume (T7). He suggested that the documents be tendered by page number. He suggested that in due course the parties might marshall what documents had been tendered and what had not. Mr Hoile suggested there might be an easier way. He thought that the reservations he had were relatively few and that, unless he registered an objection, it could be assumed that he had no objection to the tender of a document. He said he would articulate the matters to which he had objection. Otherwise it could be accepted that the documents were admitted. I indicated I might do that (T7). There was no further discussion about the admission of the tender book documents.
Mr Hoile submits that there are three documents, now part of Exhibit P1, which were not properly admitted into evidence. The documents are set out in his outline as follows:
127.1A fax dated 8 February 2000 on the subject of “Preco Hi-V Yellow” which states that “We have had no success so far in finding an alternative source of sodium gluconate that contains no large gritty particles – do you know of any sodium gluconate suppliers in NZ”.
127.2An email dated 13 February 2000 from a Mr Bill McKee to a Mr Peter Battista on the subject of “Preco Hi-V Yellow” which states that “PS – I was talking with same and he suggested there would be a multitude of sodium gluconate suppliers. If this is the case, we can see if we can source a less grainy material.”
127.3A fax dated 13 June 2001 from Bill McKee to Alistair Allan on the subject of “Renderoc FC & Preco Hi-V Yellow formulations” which states that “We found that sourcing sodium gluconate for the Preco Hi-V is a nightmare, and is one of the reasons we have elected to exit the Hi-V range.”
Mr Hoile submits that those documents did not become exhibits. Although he did not say so at the trial, they were three of the documents about which he had reservations and to whose admission he proposed to take objection. He did not take objection because the documents were not referred to during the evidence. His submission is that if a witness had sought to refer to the documents he would have raised his objection. No witness did refer to them. In those circumstances Mr Hoile submits they were not admissible or admitted. The purport of pages 1 and 2 in Exhibit P1 was referred to by Mr Ross-Smith in his address in the following passage (T592-3). In this part of his address he was referring to Mr Gebethner’s knowledge in July 2000:
Mr Ross-Smith: … That’s the occasion where David Gebethner was obliged, if he was going to meet his company’s duty to Marble & Cement, to go off and check that Parbury had the capacity to fill that order if it was either green or brown or a yellow order for 45 drums with what Parbury had in stock, or could promptly manufacture and the circumstance of that inquiry being made is document no.1 of 8 February and document No.2 of 13 February 2000 and that is apparently there was an issue about one of the ingredients in the Parbury product for yellow – and we don’t know any more than that – and that is that there was a graininess in the sodium gluconate, which is either known to Gebethner, or your Honour is entitled to assume it was, because he’s not here to say it was, and that enlivens the obligation of Parbury to speak up. And that duty arises because there are things that Parbury knows that are important to Marble & Cement and Marble & Cement had no prospect of knowing.
His Honour: Look, I don’t know that I have understood what p.1 means; you might have to spell it out for me.
Mr Ross-Smith: I do: that is, there is some problem with one of the ingredients used to manufacture Preco High-V Green and that is a grittiness, the effect of which was that Parbury was looking for alternatives.
His Honour: Where do you get the green from?
Mr Ross-Smith: Yellow, if I didn’t say yellow, I meant to, this is about Preco High V Yellow, and that’s all we know, we don’t know if this carries across to green, we just don’t know. It’s the same for the next one, the next one is about yellow, we don’t know what that means for green or brown and it’s again about sodium gluconate suppliers and it is again about graininess.
His Honour: I don’t think that takes you very far.
Mr Ross-Smith: It doesn’t.
His Honour: I’m not sure that it takes you anywhere.
Mr Ross-Smith: It only takes me a little distance and that is that the fact of that circumstance concerning yellow makes the point for me that it’s not that there’s an inquiry that Parbury needed to make about manufacturing, because we know from the stock levels that there probably wasn’t enough in Australia, if only one colour was chosen, so there certainly wasn’t enough in Australia if only one colour was chosen and there seems to have been a problem about manufacturing, and when your Honour puts that together with the context of the duty to disclose, then there couldn’t be any doubt that Parbury had to speak up and one of the things it needed to do to put itself in a position where it could lively speak up, was to establish that it could manufacture what else was needed beyond current stock levels.
Mr Hoile did not object to that submission including counsel’s reference to pages 1 and 2 of Exhibit P1.
Mr Hoile submitted that Mr Ross-Smith effectively conceded the documents were not in evidence. At T890 Mr Ross-Smith said this during his address:
Mr Ross-Smith: No, there’s not. If I have your Honour notice the reason given at p.101 for what’s occurred. P.101 starts about Parbury’s pride and then says: “this is largely due to the situation of raw material quality and the closure of our raw materials supplies business”.
If Mr Gebethner had been in the witness box I could have asked him what that was about, in the context of what’s on p.1 of P1. P.1 of P1 is an internal communication of 8 February 2000, it concludes this way: “We’ve had no success so far … suppliers in New Zealand”.
I am not sure that that is so. It may even be to the opposite effect from that contended for by Mr Hoile. Mr Blue QC submitted that in that passage Mr Ross-Smith was in fact assuming that the documents were in evidence and was merely submitting that he would have been able to cross-examine Mr Gebethner on those documents had he been called as a witness. I think that is possibly the more likely reading of Mr Ross-Smith’s submission.
I think in the circumstances it must be taken that the documents at pages 1, 2 and 176 became part of Exhibit P1. The whole volume was admitted into evidence.
Mr Hoile further submits that I should exclude the documents on the discretionary basis that the prejudicial effect of the evidence outweighs the probative value. Section 45A(2) of the Evidence Act reads:
(2) A document shall not be admitted in evidence under this section if the court is of the opinion—
(a)…
(b)that the evidentiary weight of the document is slight and is outweighed by the prejudice that might result to any of the parties from the admission of the document in evidence; or
(c)…
I reject that submission. In my view there is no prejudicial value above that which is probative. While I accept that there was a genuine misunderstanding between counsel about the admission of the documents I think they were admitted into evidence and I decline now to exclude them.
The “Sodium Gluconate” Issue
I turn now to a consideration of the topic of defendant’s knowledge of supply problems. I conclude that there is no reason to decline to hear the argument put by the plaintiff that the defendant had knowledge about problems with the supply of the raw material. As the transcript of Mr Ross-Smith’s address on the topic illustrates at pages 892-3 (above), the topic was not given great prominence at trial but it was a small part of the plaintiff’s argument at trial and I should have regard to it when answering the questions posed by the Full Court. I do not think that the case of AON Risk Services Australia Ltd v ANU (2009) 239 CLR 175 requires me to do otherwise. That case, as Mr Hoile acknowledges in his outline,[1] concerned a late amendment application.
[1] see [10].
I turn to the questions posed.
Question 1
Did the defendant, by its communications and dealings with the plaintiff between 31 July and 8 October 2000 in respect of the supply or potential supply of Preco Hi-V in relation to the production of 4500 square metres of pre-cast panels with an exposed aggregate finish, engage in conduct which was misleading or deceptive within the meaning of section 52 of the Trade Practices Act 1974 and section 56 of the Fair Trading Act 1987 and if so in what respect?
In [89] of my judgment I referred to, but did not make a finding on, the topic raised in this question. I said:
Assuming for the moment (although I do not find) that the communications from the defendant to the plaintiff before 9 October did amount to a misrepresentation that the defendant was able to fully supply the plaintiff with its needs for retardant, the plaintiff’s reliance on that misrepresentation stops on 9 October.
I went on to conclude that the plaintiff was not induced by any misrepresentation to take the path it did after 9 October. To answer this question first I must have regard to any communication between the plaintiff and the defendant between 31 July and 8 October whether written or spoken. I must have regard to any other conduct on the part of the defendant including silence. I must have regard to any evidence that casts light on the knowledge of the defendant about any possible inability to produce more of the preco retarder.
The first communication between the parties was on 31 July 2000. I refer to my references in the judgment to the evidence, beginning just before 31 July:
20 July 2000
[33]Mr Miller, the plaintiff’s quantity surveyor, submitted the tender for the job to the builders. The tender was for $1,880,760 (Exhibit P1 page 27). At this stage no panel had been produced for approval by the client. That did not happen until 29 September.
31 July 2000
[34]There were several communications on this day.
Mr Miller contacted the defendant by telephone enquiring about the supply and cost of retardant. It is not clear to whom he spoke. It was not the state manager Mr Gebethner.
Mr Miller’s evidence of that phone call was as follows:
“… Well, the enquiry was obviously – We had won the job at this stage and it was a fairly large job and I wanted to get hold of a costing, the best price I could for that size of job and also to get a hold of, in particular, the first drum so that we could get the sample process going. So that was the lines of the phone call and I just rang him to explain this is the situation, we have this large job. I had two or three queries myself which was what coverage per … litre do we get in square metres and whether we need the primer; whether we needed one or two coats and I also asked him to send me data sheets that I could have on hand in case the architect or builder wanted to look at what was involved with the product.” (T475)
Although Mr Miller said in his evidence that his enquiry was made after the plaintiff had “won the job” (T475) I do not think that can be accurate, at least as far as formal acceptance of the tender was concerned. The tender was not accepted until 5 August 2000.
There was some discussion during the phone call about what colour retardant might be best for the job, and brown was settled on as possibly being the most appropriate.
Mr Miller sent the defendant a fax which, materially, read as follows:
“Could you please fax me any data sheets – work method details etc on preco-hi-V (brown) retarder, plus a cost to use for approx. 4,500 square metres of panel. 5 square metres per square litre = 900 litres? primer?? possibly double if we need (2) coats.” (Exhibit P1 page 28)
Mr Miller received a fax from Mr David Gebethner, the state manager of the defendant. In effect the fax provided a quote for the supply of preco-brown retardant. The quote was prefaced by this passage:
“Prices for the product are as follows, please note they are special project prices given the volume required.”
The quote for the brown retardant was $222.32 per 20 litre drum. The quote attached some data sheets as requested (Exhibit P1 pages 29-31).
The plaintiff’s submission is that:
By its conduct on 31 July Parchem clearly conveyed to MCW that it was in a position to supply the requisite quantity of preco (in which colour the client selected) to MCW for the job.[2]
[2] Plaintiff's Outline [34].
The plaintiff submits that the defendant’s conduct is misleading or deceptive in that it was in no position to supply the requisite quantity of preco and it knew that to be so by 31 July. By its active representations in Mr Gebethner’s fax, by its silence as to the position on that day and from its continued silence until 9 October the defendant engaged in false or misleading conduct within the meaning of s 52 of the Trade Practices Act and s 56 of the Fair Trading Act.
The acts done, or not done, have to be seen “against the background of all surrounding circumstances”.[3]
[3] Campomar v Nike International (2000) 202 CLR 45 at[100] citing Taco Co of Australia v Taco Bell Pty Ltd (1982) 42 ALR 177.
While impugned conduct might generally consist of representations, express or by silence, it does not always take that form. The alleged conduct itself must be examined to determine whether it is misleading or deceptive. The intention of the wrongdoer is generally not relevant.[4]
[4] Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd (1998) 155 ALR 714 at 721.
The plaintiff bears the onus of proving the impugned conduct, except where the defendant makes representation about a future event. In that case the defendant bears the onus of establishing that it had reasonable grounds for making the representation (s 51A of the Trade Practices Act).
I will not set out exhaustively the background to the alleged conduct on 31 July and following which the plaintiff says is relevant. The most significant parts of that background are that the plaintiff intended from the outset to tender for the job anticipating it would use the defendant’s preco product. It was regarded as the best in the business. While the plaintiff’s tender was not accepted until 5 August 2000, it was confident its tender would be accepted, hence Mr Miller’s comment to the defendant on 31 July that they “had won the job”. From the exchanges between Mr Miller and the defendant on 31 July, the defendant appears to have appreciated that the plaintiff would need at least 900 litres or 45 drums for one coat of retarder. If it applied two coats it would need twice that. There is no suggestion two coats were ever applied to the panels erected at the site.
On 31 July the defendant certainly gave no indication of any difficulty in meeting the plaintiff’s prospective needs. It gave no such indication until 9 October.
Between 31 July and 9 October the plaintiff took delivery of 20 litres of each of the brown, green and yellow retardant for the purpose of preparing samples for approval by the architect. On 29 September the architect gave approval for a prototype panel using the green retardant. The events between 31 July and 9 October are set out in [35] to [44] inclusive of the judgment. I will not recapitulate them.
The plaintiff says that this conduct by the defendant has to be seen in the light of the “true position with preco as at 31 July 2000”.[5]
[5] Plaintiff’s Outline [14].
The position as at 31 July has to be understood by reference not only to correspondence before that date but also after. The plaintiff invites me to look at the defendant’s conduct in two ways. It claims that in both ways the defendant engaged in misleading or deceptive conduct. First it submits that the defendant represented on 31 July that it had at that time sufficient stock of retarder to meet the plaintiff’s needs. In fact it did not have sufficient retarder in stock. The evidence would suggest that it had not manufactured any retarder since April 2000 (Exhibit P1 pages 1 and 97A). Having manufactured 420 litres of green in April it had about half of what the plaintiff required. The plaintiff bears the onus of proving that the conduct is a misrepresentation about an existing fact.
The second way in which the plaintiff alleges misleading and deceptive conduct is that the defendant might be representing that it could meet all of the plaintiff’s requirements by making more product in the future. Section 51A of the Trade Practices Act places the burden on the defendant to prove that it has reasonable grounds to believe it would be able to manufacture more product.
There are three steps in answer to question 1. The first is to determine whether the defendant made a misrepresentation, or engaged in misleading or deceptive conduct, by suggesting on 31 July that it had sufficient preco from whatever source to supply the plaintiff with all their prospective needs? In my view the defendant did not make a misrepresentation of that sort. On 31 July it was giving the plaintiff a quote for the unit price of preco if the plaintiff should place an order. No order for bulk preco was placed until 9 October. Between 31 July and 9 October the plaintiff purchased three drums of preco of different colours to obtain, if it could, the architects approval. Those drums were billed at full price, not for the unit cost if a bulk order was placed. In providing the quote the defendant was not representing anything about its ability to fulfil the bulk order. It was providing a quote for the unit price if an order was to be placed. I find neither by action nor inaction did the defendant engage in conduct between 31 July and 8 October that was misleading or deceptive.
If I am wrong in that finding and the defendant did, by providing the quote, make a misrepresentation on 31 July, then there must be an examination of what exactly was the representation.
The second step is based upon the assumption that on 31 July the defendant represented that it then had in stock sufficient preco to meet the plaintiff’s needs. That is the plaintiff’s submission at [42] of its Outline. If that is the specific representation it made then the representation was not true. On 31 July the defendant did not have in stock 45 drums of any single colour of preco. Page 97A of Exhibit P1 shows that as at 31 July it had in stock 30 drums of brown, 19 drums of green and 20 drums of yellow. However I find that the defendant made no such representation. It certainly made no express representation that it had 45 drums of any single colour in stock. I see no way in which such a representation could be implied by its conduct whether by what it said or by what it did not say. In my view it would be fanciful to imply that a supplier providing a quote represents that it then has in stock the customer’s full prospective order.
The third step is to consider whether, if the defendant did make a representation that it could supply the proposed bulk order, was it a misrepresentation about a future event or at least a mixture of representation about present and future events. That would arise if the defendant made a representation that it could supply the bulk order partly from its current stock and partly from product to be manufactured in the future. The plaintiff submits, as an alternative to the above, that that is what the defendant represented and that it is false.[6] The plaintiff submits that the defendant had no reasonable grounds for believing that it could make sufficient preco product to satisfy the plaintiff’s needs. Even by 31 July the defendant knew it was not going to be able to make any more preco because it had lost its source of an essential raw ingredient in February 2000.
[6] Plaintiff’s Outline [43].
To determine what the defendant knew on 13 July 2000 it is convenient to work backwards from 13 June 2001, almost a year after the alleged misrepresentation. In a fax from Mr McKee to Fosroc New Zealand on 13 June 2001 it is made clear that by then the defendant has discontinued making the Hi-V preco. Despite the heading referring only to Hi-V yellow I conclude that the defendant is here indicating that it has discontinued manufacturing all three colours of the product.
Mr Blue QC places great emphasis on the first part of the following sentence:
We found sourcing sodium gluconate for the preco Hi-V as a nightmare, and is one of the reasons we have elected to exit the Hi-V range.
He argues that “nightmare”, when taken in the context of what was said in February, October and December of 2000 and January of 2001, should mean that the defendant simply could not obtain an essential raw ingredient. While I accept that by June 2001 the defendant had been unable to obtain supplies of sodium gluconate (and I accept that is the raw material being referred to) I do not think that was necessarily so from February 2000. I think the plaintiff’s submission in that regard is a flawed exercise in ex post facto reasoning. I do not accept that the word “nightmare” means that at all times before June 2001 the defendant knew that it was unable to source sodium gluconate. In other words I would not conclude that “nightmare” in this context meant anything other than difficulty.
That view can be tested by examining the earlier correspondence.
Mr Gebethner’s letter to Mr Andolfatto on 4 January 2001 is perhaps the clearest indication of the state of affairs regarding the defendant’s capacity to meet the plaintiff’s requirements. Four propositions arise from that letter.
1. The defendant can no longer manufacture green preco.
2. All preco products have been withdrawn from the market by the defendant.
3. At a slightly earlier time (see below) the defendant had in stock sodium gluconate which was found by the QA Department to be of insufficient quality.
4. The defendant, or the plaintiff, might be able to source preco from another supplier/manufacturer.
I would infer from propositions 1 and 2 above that the defendant had been unable to source any more sodium gluconate. The letter does not make clear when the defendant came to that realisation but by 4 January 2001, it could not obtain any more.
Page 97A of Exhibit P1 shows that the stocks of preco rose to a maximum for the year 2000 in April and May, when there were 60 drums in store, to a low of six in December. The biggest drop in supplies occurs in October/November. That coincides with the plaintiff buying all of the defendant’s stocks of green. The plaintiff submits that I should infer from the figures in the Schedule shown on that page that the defendant manufactured no preco after April 2000. I would not readily draw that inference. The figures represent the monthly stocks and it is possible that within a month there has been manufacture of the product and sale of that same product. I would not be willing to draw that inference even in the absence of evidence from the defendant.[7]
[7] Jones v Dunkel (1959) 101 CLR 298.
Mr Gebethner’s earlier letter to Mr Andolfatto of 1 December 2000 (page 84) tells him the defendant has the capacity to supply “2 x 200 litre units of preco Hi-V green”. I take that to mean that the defendant has sufficient sodium gluconate to make the preco. I would also infer that sodium gluconate was the material that turned out to be of insufficient quality to make the product. I draw the inference that between 1 December and 4 January the defendant discovered the inadequacy of the material. The letter of 1 December leads me to find that on that day the defendant believed it would be able to meet the plaintiff’s requirements. By then the defendant had sold the plaintiff half of its requirement and the prospective manufacture of a further 400 litres would be roughly sufficient to meet the other half. I see no reason not to conclude that the defendant’s belief in its capacity to meet the plaintiff’s requirements was genuine and I further find that it was a reasonable expectation. I would infer from that letter that the defendant did not know and could not know that the sodium gluconate was not going to be of sufficient quality until it tested it or checked it in some way. It is true that there is no other evidence that bears on the reasonableness of the defendant’s belief that it would be able to manufacture a further 400 litres of preco, but I would not infer that the defendant held an unreasonable belief. As already discussed the defendant bears the onus of demonstrating the reasonableness of its belief. That test is an objective one. It is not sufficient that the defendant had a genuine belief. It must be demonstrated that the belief was reasonable in all the circumstances.
The statement of the belief must be taken in the context of the earlier letter from Mr Gebethner to Mr Andolfatto on 9 October (Exhibit P1 page 72). In that letter Mr Gebethner raised for the first time with the plaintiff difficulties it faced with meeting his order. The first time that a bulk order had been made by the plaintiff was on 9 October. In the letter of 9 October Mr Gebethner apologised to the plaintiff for inconvenience and said that it did not then see how it could produce any further preco “until we can source a new supplier for the raw material”. Mr Blue QC submitted the word “until” in that sentence was itself a misrepresentation suggesting that there might be a time in the future when raw material might be found. Yet the defendant knew that none could be found. I do not read the word in that way. The ordinary use of the word could suggest either that there was an expectation that at a time in the future some more raw product might be available but it also could mean “unless”. In other words unless it is able to get further raw material it will not be able to produce anymore preco. What that letter does suggest however is that Mr Gebethner was unaware that the defendant had some further raw material sufficient to make 400 further litres of preco. He must have discovered the existence of that material between 9 October and 1 December. In those circumstances I think the evidence is sufficient to demonstrate that on 1 December 2000 the defendant did have a reasonable expectation that it would be able to produced further preco.
I make only brief reference now to the letter of 9 October 2000. As soon as Mr Andolfatto placed his order, Mr Gebethner notified him that there might be difficulties in supplying the entire order. He also said that the raw component had been withdrawn from the market. I see no reason to conclude that Mr Gebethner knew that much earlier than 9 October. It may be that he did not literally discover it that day. He does not say when he discovered that fact. I will come in a moment to refer to pages 1 and 2 of Exhibit P1 but I think it is unlikely that Mr Gebethner knew that he might be unable to meet the plaintiff’s requirements when he provided the quote on 31 July. There seems to be no rational reason why he would not tell Mr Andolfatto of his difficulties on 31 July. On the contrary there is every reason why he would. There would be no point in him seeking, by his quote, to attract a large scale order from the plaintiff knowing that he was unable to fulfil it. Subject to reviewing pages 1 and 2 of Exhibit P1 I conclude that on 9 October the defendant was frank with the plaintiff in raising doubt about its ability to provide the bulk order and it said that it could not supply it unless and until it found a new source of sodium gluconate.
The plaintiff submits that the defendant knew in February that it was not going to be able to supply the bulk order. It knew that it had lost its source of sodium gluconate. The plaintiff relies on all of the correspondence, in particular the reference by the defendant to it being a nightmare to obtain the product.
I turn to pages 1 and 2 of Exhibit P1. Page 1 is a fax from Mr Bill McKee to Fosroc New Zealand dated 8 February 2000. The lower part of page 2 is an email from Mr McKee to Mr Peter Battista dated 13 February 2000. (The upper part of that email is dated 9 August 2006 indicating it is merely an email sending the lower part for information at a much later time.) The subject in each of the documents is “Preco Hi-V yellow”. I have already found that the sodium gluconate referred to in the correspondence is the same as the raw product or the essential ingredient referred to in other correspondence. The material was used in the production of the whole preco range. However these two pieces of correspondence introduce a different topic which was not canvassed during the trial. On 8 February Mr McKee said inter alia:
We have no success so far in finding an alternative source of sodium gluconate that contains no large gritty particles – do you know of any sodium gluconate suppliers in New Zealand? (emphasis added.)
Five days later on 13 February Mr McKee says:
PS – I was talking with Sam, and he suggested there would be a multitude of sodium gluconate suppliers. If this is the case can we see if we can source a less grainy material. (emphasis added.)
The plaintiff submitted that, those two pieces of correspondence together with all other correspondence suggest that what is really meant by the fax of 8 February is that the defendant has lost its source of sodium gluconate, the essential raw material in the manufacture of its preco product. I do not read the correspondence that way. On 8 February there is a qualification to the statement that the defendant has had no success in finding an alternative source of sodium gluconate. That qualification appears in the second part of the sentence – “… that contains no gritty particles”. That topic was simply not explored by either party during the trial. There is no evidence suggesting what it means. On 13 February Mr McKee is saying that his information is that there would be a multitude of sodium gluconate suppliers and he asks whether they could source sodium gluconate that is less grainy. Even reading this correspondence together with the other correspondence I do not conclude that the defendant had lost its suppliers of sodium gluconate in February 2000. I conclude it was looking for sodium gluconate with a particular characteristic and that it believed it had “a multitude of … suppliers” from which to inquire. There is no evidence suggesting that that belief changed until 9 October. It may be that, as the plaintiff investigated the matter between October and December 2000, it had lost its supplier but there is no evidence from which I would infer that the defendant knew that before 8 October.
Accordingly I answer the first question in the negative. I arrive at that answer as a result of the following findings of fact:
1. Between 31 July and 8 October 2000 the defendant made no representation that it would be able to supply the plaintiff’s prospective bulk order for preco. Its quote dated 31 July and the brochure which was sent with the quote to the plaintiff did not represent that the defendant was in a position to fulfil an order if it was made.
2. In the alternative, if the defendant did make a representation that it could supply a bulk order from the plaintiff, it did not represent that it could do so from existing stock of preco.
3. If the defendant did make a representation on 31 July that it could supply the bulk order, it did so on the basis that it could meet the order from a combination of existing stock and product that could be manufactured in the future.
4. Insofar as the defendant made a representation about future conduct, it did not make a misrepresentation. There were objectively reasonable grounds for expecting that it could meet the prospective bulk order from the combination of existing stock and stock which could be manufactured in the future.
5. Before 8 October 2000 the defendant did not know it had lost access to sodium gluconate.
The answer to Question 1 is “No”.
Question 2
If the answer to (1) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, was the plaintiff induced by the misleading and deceptive conduct to act either prior to or subsequently to 9 October 2000 in a manner differently to the manner in which it would have acted if the defendant had not engaged in the misleading or deceptive conduct, and if so in what manner?
I have answered “no” to the first question but, if I have understood the second question correctly, it asks me to assume the answer is “yes”. Accordingly I approach this question on the basis that between 31 July and 8 October 2000 the defendant engaged in misleading or deceptive conduct in that it misrepresented to the plaintiff that it could supply all of its requirements of preco. It represented that it could do so, knowing that it could not.
Between 31 July and 8 October the plaintiff set about producing first small concrete panels, then a prototype panel for approval by the architect. The green sample panel and the green prototype panel were approved on 27 and 29 September respectively.[8] The question requires me to determine whether the plaintiff was induced by the defendant’s conduct to act differently either prior to or after 9 October.
[8] Judgment [43] and [44].
The builder’s timetable required the plaintiff to deliver the first panels to the building site in early December. Panels take about a month to manufacture. To comply with the building timetable the plaintiff had to start manufacturing panels at the beginning of November. The plaintiff was told on 9 October that there was a question about the defendant’s ability to supply the entire order. Mr Andolfatto told Mr Gebethner on 9 October that the defendant was searching for raw materials so more preco could be produced.[9] In his fax to the plaintiff he said that the major raw material component had been withdrawn from the market.[10] There may be no inconsistency between the spoken words (which I accept were made) and the fax. The defendant may have hoped to find more sodium gluconate despite its having been withdrawn from the market. As events turned out the defendant actually found it had some raw material, although it turned out to be of insufficient quality.
[9] Judgment [46].
[10] Judgment [48].
The plaintiff submits that once the architect had approved the green prototype using the facedown method with the preco retardant, the plaintiff was locked into that process. There was clear reliance of the defendant’s misrepresentation.
I accept that submission insofar as it applies to the plaintiff’s reliance up to 9 October. If, contrary to my finding, the defendant misrepresented by its quote and brochure on 31 July that it could supply the plaintiff’s prospective needs for preco then the plaintiff relied upon that misrepresentation to seek the architect’s approval. I accept the plaintiff’s submission that it is unlikely that the plaintiff would wish to produce panels made by a mixture of the faceup method (no preco required) and the facedown. I accept that if it knew that it could not get enough preco to do the whole job it would probably have sought approval for faceup panels.
The position is different after 9 October. On that day the plaintiff was told that there were questions about the supply of preco. The defendant was not representing on that day that it could supply the plaintiff’s needs. I will need to revisit this topic in answering later questions but my finding for the purpose of answering this question is that the plaintiff did not place reliance on the misrepresentation of 31 July after 9 October. It did place reliance before that. It was induced by the misrepresentation to take a particular course, namely seeking the architect’s approval for the facedown green panels.
The answer to Question 2 is “Yes, but only up to 9 October”.
Question 3
If the answer to (2) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, did the said action by the plaintiff (sic) cause loss to the plaintiff, and if so what type of loss?
Assuming that the plaintiff was induced by the defendant’s conduct to go down the path of getting approval for the preco green finish between 31 July and 9 October, did it suffer loss?
I find that the plaintiff did suffer loss. To attempt to identify the loss I make certain findings of fact which are, in part, predictions of what might have happened. I think there is evidence to support the predictions.
If the plaintiff had been told on 31 July that the defendant definitely could not meet the plaintiff’s prospective requirements for preco then I think it is likely that the plaintiff would have sought the architect’s approval to proceed by the faceup method. It is just possible that the plaintiff might have chosen to mix the finishes. It might possibly have chosen to manufacture as many panels as it could with the preco in stock and then make the rest by the faceup method. There was after all a unit cost saving in the facedown method but that saving would be offset in part at least by having to make two sorts of moulds. The evidence shows that the architect preferred the facedown method. He approved it. He did not approve the later use of the face up panels but the client overrode him and accepted them. On balance however I think the plaintiff would probably have sought to proceed with the faceup panels from the outset and he would have attempted to persuade the client, if not the architect, that the finish thus achieved was acceptable.
Assuming the misrepresentation on 31 July was but a break in the chain of causation on 9 October, the plaintiff would have lost the cost of manufacturing the small preco test panels and the prototype panels. On the scenario I have postulated, upon being told on 9 October that the defendant could not supply any further preco, the plaintiff had about a month to get approval and gear up for using the faceup method. On the evidence at trial there is no reason to think it would be unable to do that.
The answer to Question 3, on the assumption I have been asked to make, is “Yes”. The type of loss was the cost to manufacture small preco test panels and prototype panels.
Question 4
If the answer to (3) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, what was the quantum of the loss suffered by the plaintiff?
On the assumption I have been asked to make I fix the loss suffered by the plaintiff as follows:
1)
Test panels
(2 x $150)
(Plaintiff’s Outline [116] and [118])$300
(possibly reduced by compromise at trial – Plaintiff’s Outline [119A])
2)
Prototype panels
(say 3 x $586)
(Plaintiff’s Outline [116] and [118])$1,758
(possibly reduced by compromise at trial – Plaintiff’s Outline [119A])
3)
Wasted mould
(Prototype mould was small, for under windows, (T469)
(Plaintiff’s Outline [120])$1,540
(possibly reduced by compromise at trial – Plaintiff’s Outline [126A])
Question 5
Did the defendant, by its communications and dealings with the plaintiff between 9 October and 30 November 2000 in respect of the supply or potential supply of preco Hi-V in relation to the production of 4,500 square metres of precast panels with an exposed aggregate finish, engage in conduct which was misleading or deceptive within the meaning of s 52 of the Trade Practices Act 1974 and s 56 of the Fair Trading Act 1987 and if so in what respect?
I have already canvassed some of the evidence which bears on this question when discussing Question 1. I have found that until some time between 1 December 2000 and 4 January 2001 there were reasonable grounds for the defendant believing it had access to sufficient sodium gluconate to make 400 litres of preco, or approximately half of the plaintiff’s requirements. On about 9 October it sold the plaintiff all its remaining stock of preco green which proved sufficient to make about half of the panels for the job.
The plaintiff submits that it was mislead or deceived by the hope that the defendant held out that it might be able to locate some more raw material. That hope was a false hope. The true position was the defendant had no expectation of finding any raw material and no prospect of producing any more preco.
The plaintiff argues that the defendant should have said more. What it failed to say is set out in [152] and [153] of the plaintiff’s Outline. They read:
152. The letter did not state or suggest that:
152.1the raw material was uniquely made by the former supplier (on the contrary);
152.2Parchem had lost the supply of the raw material in or before February;
152.3from not later than February, Preco had been searching for an alternative supplier: Fax P1/1, P1/84, 1/1P97A, P1/100;
152.4the search for sodium gluconate had been a nightmare and unsuccessful: memo 13.601 P1/176;
152.5it was likely to be impossible to source a new supplier.
153.In contrast to the letter of 4 January (see below), it did not say that Preco was to be discontinued, nor did it suggest that MCW consider alternatives.
The plaintiff submits that the defendant made misrepresentations which caused the plaintiff to believe it would be able to obtain more preco.
The plaintiff submits in [154] and [155] of its Outline that the defendant should have said as follows:
154.On the face of the letter, it was a matter of timing until Parchem sourced another supplier. Parchem did not know MCW’s timetable for requiring the product, and in particular did not know that the last panels were not scheduled to be delivered until May. The letter clearly implied that in time Parchem would manufacture more Preco.
155.The letter represented to MCW that:
155.1there was no reason to doubt that Parchem would locate an alternative supplier and would manufacture more Preco;
155.2it was only a matter of time until this occurred;
155.3that Parchem would supply to MCW more Preco;
155.4that Parchem would supply enough Preco to allow MCW to finish its job.
By a combination of what it did not say and what it did say the defendant engaged in misleading or deceptive conduct which induced the plaintiff to continue down the facedown path.
I do not accept that submission. I deal individually with the proposition set out in the above paragraphs of the Outline. For convenience I will refer to the propositions using the plaintiff’s paragraph numbers.
152.1It is not in fact clear that the raw material was uniquely made by the former supplier. Page 2 of Exhibit P1 suggests that there were “a multitude of sodium gluconate suppliers”. Further, it is not clear where the sodium gluconate found by the defendant between December 2000 and January 2001 came from.
152.2I have already found that the defendant had not lost its supply of raw material in February.
152.3It is true that from February the defendant was looking for another or other supplier(s).
152.4In June 2001 the defendant did describe its sourcing of raw material as a “nightmare” but, as I have already found, it does not follow that the search had been unsuccessful, at least before January 2001.
152.5It is not clear until January 2001 that the search was likely to be impossible.
153.The evidence suggests it was not clear until January 2001 that preco was to be discontinued.
In the light of these findings there was in my view no need for the defendant to state or suggest the propositions contended for by the plaintiff.
I turn to the statements that the plaintiff alleges that the defendant did make.
154.I have already found that the word “until” could reasonably be read to mean “unless or until”.
155.1I do not accept that the defendant made this representation. On the contrary, on 9 October it very definitely gave the plaintiff reason to doubt that the defendant would be able to manufacture more preco.
155.2See 154 above.
155.3See 155.1 above.
155.4See 155.1 above.
In those circumstances I find that between 9 October and 30 November 2000 the defendant did not engage in misleading or deceptive conduct. The answer to question 5 is “No”.
Question 6
If the answer to (5) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, was the plaintiff induced by the misleading and deceptive conduct to act after 9 October 2000 in a manner differently to the manner in which it would have acted if the defendant had not engage in misleading or deceptive conduct, and if so in what manner?
I am asked to assume that between 9 October and 30 November the defendant engaged in misleading or deceptive conduct in accordance with the contention of the plaintiff. That contention is that by what the defendant said and did and did not say, it falsely induced the plaintiff into proceeding down the facedown path. On this argument the plaintiff proceeded down that path because it was falsely lead to believe that there was some hope of the defendant being able to produce some more preco. The plaintiff’s contention is that to avoid misrepresentation the defendant should have said the things set out in [152] and [153] of its Outline and it should have refrained from saying things set out in [154] and [155]. However I should still answer this question in light of the fact that the defendant did speak and did write to the plaintiff as it did on 8 October. On any view, the defendant’s fax on that day sounded a warning about future supplies:
The major raw material component for the preco Hi-V (green) has been withdrawn from the market.
This places questions on our ability to supply the entire order of your organisation.
… As you can see the situation has been taken out of our hands until we can source a new supplier…
Even the phone call sounds a warning. Mr Andolfatto reported Mr Gebethner as saying:
…They may not be able to produce all of this, but they are searching for materials.
Mr Andolfatto gave evidence of telephone calls he had with Mr Gebethner after 9 October and each time he said Mr Gebethner was “fairly negative” about getting more raw material although he was still trying to locate some.[11]
[11] T177-179.
The plaintiff submits that if it had been told the true position on 9 October the plaintiff “would have gone straight to the faceup method and obtained approval from the architect within a month and suffered no consequential loss”.[12]
[12] Plaintiff’s Reply [129].
The plaintiff submits that it was effectively prevented from adducing “state of mind evidence of reliance” by an objection by the defendant to a question at T164 line 34 and adverse ruling at T164 line 32 and T175 line 23. I think that what happened is slightly different. The question objected to was directed to whether Mr Andolfatto understood that there was a doubt about whether there would be sufficient preco. The question was:
(T164)
QAt the end of your conversation with David Gebethner on 9 October, did you understand that there was a doubt about whether there would be sufficient preco green supplied for you to be able to carry on …
Mr Hoile objects.
The question was not about reliance. Mr Andolfatto was never asked what he would have done if he had been unequivocally told on 9 October that the defendant could not sell them anymore preco.
In [89] of my judgment I found there was no reliance on any misrepresentation that had been made before 9 October. I did not expressly find that none had been made before 9 October, but I now have. I have also expressly found that none was made on 9 October.
Question 6 really poses the dilemma faced by the plaintiff on 9 October. Holding out some hope for more preco despite the warnings from the defendant he proceeded down the facedown path. He might still have done so if, in addition to the warnings he did receive, he had been told the things the plaintiff contends he should have been told (the “more pessimistic outlook”). He might still have taken the risk even though the warnings were heightened by the more pessimistic outlook. By 9 October he had approval for preco, it was the less costly option, it was the less labour intensive and the defendant had stock sufficient to cover half his requirements. Would the extra information have stopped him from going down that path? When he was told unequivocally on 3 January 2001 that there was not going to be anymore preco he had no choice. He had to proceed by the faceup method but only after he exhausted all of the preco stock. On 9 October he had a choice even with the more pessimistic outlook.
On balance I think that while the plaintiff held out any hope of obtaining sufficient supplies of preco he would have proceeded down that path. In that sense I find that he was not induced by the misleading or deceptive conduct I have been asked to assume. I find that even with the more pessimistic outlook there were still reasonable grounds for thinking that the defendant might be able to make some more.
The answer to Question 6 is “No”.
Question 7
If the answer to (6) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, did any of the said actions by the plaintiff cause loss to the plaintiff, and if so what type of Loss?
I must assume that the plaintiff was induced by the defendant’s misleading or deceptive conduct between 9 October and 30 November. It was induced to proceed using the facedown method. If the plaintiff had not been so induced it would have proceeded using the faceup method. The plaintiff’s contention is that the defendant should have told the plaintiff the more pessimistic outlook on 9 October. That outlook did not change between 9 October and 30 November. I therefore assume that on 9 October the plaintiff would have proceeded immediately using the faceup method. In all likelihood I think it would have been ready to have made faceup panels at the beginning of November and it would have delivered the first of them to the site on time at the beginning of December.
Notwithstanding the losses I have identified in answer to Questions 3 and 4, the plaintiff would have saved the cost of all the facedown work done after 9 October and he would have saved such consequential loss as might have occurred. The heads of loss can be divided into two main categories – the facedown costs and the consequential loss.
I find that if the plaintiff knew that no more preco was available on 9 October it would have gone straight to the faceup method. It would not have experimented with the other retarder products as the defendant has submitted.[13]
[13] Plaintiff’s Outline [69].
In those circumstances I find the plaintiff would have suffered the losses it alleges in its Outline by way of facedown costs. They are:
Wasted test panels and prototypes – paragraphs 116-119A
Wasted moulds – paragraphs 120-126A
Wasted panels – paragraphs 127-128A
Cost of rectification paragraphs 129-132A.
There is one adjustment the defendant urges even if the above findings are made against it. The defendant submits that the faceup method was dearer and so if 40 per cent of the job was completed using the facedown method there is a saving for the plaintiff which should be deducted. The saving is approximately $10,000.[14] The plaintiff says that sum should not be deducted from the loss suffered by the plaintiff because the plaintiff lost costs in management time dealing with the changeover. While that might be true there is no evidence from which I would be able to quantify this loss. I do not know, for example, whether management were being paid by an hourly rate or whether they simply had to absorb extra work into their existing salaries. It is possible, however, to quantify the cost savings using the facedown method and I would therefore discount the plaintiff’s losses by $10,000.
[14] Defendant’s Outline [87].
There is then the question of consequential loss. The defendant submits that there was no consequential loss. The plaintiff finished the job on time and was paid in full for it. The evidence from Mr Andolfatto was that another large job, the construction of a car park at the Royal Adelaide Hospital, was awarded to the defendant’s in July 2000[15] and they were able to get on with that job as soon as the Regency Park job was finished. The two jobs overlapped.[16] The workers were kept busy in the first job and they continued to the second job (T303).
[15] T305.
[16] T303.
The plaintiff says that the continuity of work on the big jobs overlooks a diminution in the small jobs and that that diminution has caused a considerable loss of profit as reported by the accountant, Mr Ellery. Mr Ellery has calculated the loss of gross profit as $177,000. The plaintiff describes in its outline how Mr Ellery arrived at that figure:
133.MCW was very quiet in February/March due to the misleading conduct, leading to reduced invoicing a month later in March/April 2001: see paragraphs 107 to 113.
134.On average, MCW invoiced 17% of its total annual revenue in March/April: Ellery [8.6‑8.11].
135.During 2000/2001, MCW invoiced only 8.6% of its total annual revenue in March/April: Ellery [8.6‑8.11].
136.During 2000/2001, MCW’s actual revenue was $3,010,382. An additional 8.4% of the total revenue of $3,300,000 which ought to have been invoiced in 2001 would have been approximately $300,000: Ellery [8.6‑8.11].
137.MCW made a gross profit of about
65%59% on its sales: Ellery [8.6‑8.11], Ellery XXN 699/6-700/13, RXN 704/11-32 (Ellery in his report said 56% (sic) but accepted in oral evidence a reduction of 6% (giving 59%)).138Accordingly, MCW lost $177,000 [altered from $195,000] gross profit due to the misleading conduct.
The loss is thus calculated by identifying the loss of revenue in March and April of 2001. That is said to be caused by the defendant’s conduct. The loss appears to be of two sorts – lost production because the plaintiff was not able to tender for small jobs (Andolfatto T238) and loss of production consisting of some 6 weeks (see Andolfatto T237 - “Traumatic… probably 90% down”).
The plaintiff was unable to supply to Mr Ellery any documents to account for tendering patterns (Ellery T676).
The revenue for March/April is calculated as a percentage of the annual revenue.[17] That percentage is then compared, unfavourably, with the corresponding percentage revenue for the “average”.[18]
[17] Plaintiff’s Outline [135].
[18] Plaintiff’s Outline [134].
Mr Ellery relied, for his calculations, on information from Mr Andolfatto. That information was that, “from December 2000 Marble reduced its tendering for other jobs due to its uncertainty about the timing of the Regency Park work” ([8.4.9] Ellery report, Exhibit P3).
There was a time lag between quoting and commencing work for the smaller jobs of the order of three months ([8.4.4]). Mr Ellery recited the following two pieces of information ([8.4.10]).
In March and April 2001 there was very little work as a combination of not having tendered for work from December 2000 and not being able to complete work for the Regency Park contract ([8.4.11]).
Sales after May 2001 reverted to a level reasonably consistent with previous years.
In [8.7] Mr Ellery noted that “sales to other customers for March and April
2001 were less than would otherwise be expected”. He referred to Appendix 7 of his report which I reproduce:
MARBLE & CEMENT WORK CO PTY LTD APPENDIX 7
ANALYSIS OF SALES NOVEMBER 2000 TO AUGUST 2001
Total Regency
TAFEOther Nov 457830 91170 366660 Dec 387172 156502 230670 Jan 167884 115728 52156 Feb 384159 303998 80161 Mar 84827 42290 42537 Apr 173700 133671 40029 May 315033 97740 217293 Jun 125347 61956 63391 Jul 381212 0 381212 Aug 339858 41010 298848
The Appendix bears out what Mr Ellery says. On the other hand the low sales for Regency TAFE Work and Other work has to be compared with a very high sales figure for TAFE work in February. The only traumatic drop identified by Mr Andolfatto is between the extreme high in February and the extreme low in March. The average for those two months is comparable to the other months in the job. The figures do not really support Mr Andolfatto’s contention that the yard was idle for 6 weeks.
In Appendix 4 of his report Mr Ellery sets out the Summary of Profit and Loss Statements for the years 1996 to 2002. I reproduce only the Sales and Operating Profit before tax figures of that Appendix.
MARBLE & CEMENT WORK CO PTY LTD APPENDIX 4
SUMMARY OF PROFIT & LOSS STATEMENTS
1996
1997
1998
1999
2000
2001
2002
SALES
2,624,239
2,350,673
2,726,338
2,457,574
2,877,942
3,010,383
4,318,684
It shows a steady increase in annual sales from 1999 to 2002. The operating profit before tax figures show no pattern that is helpful.
In the circumstances I am not satisfied that the plaintiff suffered the loss it claims. I am unable to identify any consequential loss it has suffered.
The answer to Question 7 is “Yes”. It is the loss identified in [98] above.
Question 8
If the answer to (7) is yes, or otherwise assuming that the answer is yet in accordance with the contention of the plaintiff, what was the quantum of the loss suffered by the plaintiff.
The loss I am able to identify is contained in the summary of quantum loss at [138B]. I reproduce that summary but I omit the consequential loss and I deduct $10,000 for the allowance of cheaper facedown method panels.
Waste of Sample Prototypes
3,560
Waste of Moulds
8,036
Waste of Panels
4,849
Rectification
26,833
Deduct
- 10,000
Total
$33,278
Those figures are not cumulative upon the figures at [71] above. They include them. The earlier figures would have to be deducted to arrive at the loss suffered if the conduct operated from 9 October.
Question 9
Did the defendant, by its communications and dealings with the plaintiff between 1 December 2000 and 3 January 2001 in respect of the supply or potential supply of Preco Hi-V in relation to the production of 4,500 square metres of precast panels with an exposed aggregate finish, engage in conduct which was misleading or deceptive within the meaning of s 52 of the Trade Practices Act 1974 and s 56 of the Fair Trading Act 1987 and if so in what respect?
For the reasons already given I find that the defendant did not engage in misleading or deceptive conduct between 1 December 2000 and 3 January 2001.
The defendant had found that it had what it believed would be sufficient raw product to make 400 litres of preco. There is no reason to conclude that the defendant knew in early December that the material would be unsatisfactory. I find that it discovered that fact between 1 December and 3 January.
The answer to Question 9 is “No”.
Question 10
If the answer to (9) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, was the plaintiff induced by the misleading or deceptive conduct to act after 1 December 2000 in a manner differently to the manner in which it would have acted if the defendant had not engaged in the misleading or deceptive conduct, and if so in what manner?
If I assume that the defendant’s representation about the newly found raw product was misleading or deceptive it is not easy to find, with any degree of certainty, what the plaintiff might have done. If it had changed to the faceup method on 9 October it is conceivable it might have changed back to the facedown method. The facedown method was cheaper and gave a better finish. The plaintiff already had access to enough preco to do half the job and here was the possibility of buying enough to do the other half. However if he had started producing faceup panels at the beginning of November I think it would have hesitated before changing back to the facedown method. I think the plaintiff would be more likely to pause over Christmas to see if the 400 litres could in fact be produced. I think it unlikely that it would change back. As it was the plaintiff was already delivering panels made by the facedown method and there would be no reason to change that practice. That delayed the changeover to the faceup method by a month. If what the defendant said on 1 December was misleading or deceptive conduct I do not see that the plaintiff was induced by that conduct to change its position.
The answer to Question 10 is “No”.
Question 11
If the answer to (10) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, did any of the said actions by the plaintiff cause loss to the plaintiff, and if so what type of loss?
If the plaintiff was induced to change its position and it had been so induced on 9 October, then its loss would be cumulative upon the earlier losses. If it was induced for the first time then, theoretically at least, its loss would be the consequential loss. I have however found that there was no consequential loss.
The answer to Question 11 is “No”.
Question 12
If the answer to (11) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, what was the quantum of the loss suffered by the plaintiff?
The answer to this question is the same as that to the preceding question, “No”.
Schedule of Questions and Answers
Question 1 [21]
Did the defendant, by its communications and dealings with the plaintiff between 31 July and 8 October 2000 in respect of the supply or potential supply of Preco Hi-V in relation to the production of 4500 square metres of pre-cast panels with an exposed aggregate finish, engage in conduct which was misleading or deceptive within the meaning of section 52 of the Trade Practices Act 1974 and section 56 of the Fair Trading Act 1987 and if so in what respect?
The answer to Question 1 is “No”.[55]
Question 2 [56]
If the answer to (1) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, was the plaintiff induced by the misleading and deceptive conduct to act either prior to or subsequently to 9 October 2000 in a manner differently to the manner in which it would have acted if the defendant had not engaged in the misleading or deceptive conduct, and if so in what manner?
The answer to Question 2 is “Yes, but only up to 9 October”.[63]
Question 3 [64]
If the answer to (2) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, did the said action by the plaintiff (sic) cause loss to the plaintiff, and if so what type of loss?
The answer to Question 3, on the assumption I have been asked to make, is “Yes”. The type of loss was the cost to manufacture small preco test panels and prototype panels. [69]
Question 4 [70]
If the answer to (3) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, what was the quantum of the loss suffered by the plaintiff?
On the assumption I have been asked to make I fix the loss suffered by the plaintiff as follows: [71]
1)
Test panels
(2 x $150)
(Plaintiff’s Outline [116] and [118])$300
(possibly reduced by compromise at trial – Plaintiff’s Outline [119A])
2)
Prototype panels
(say 3 x $586)
(Plaintiff’s Outline [116] and [118])$1,758
(possibly reduced by compromise at trial – Plaintiff’s Outline [119A])
3)
Wasted mould
(Prototype mould was small, for under windows, (T469)
(Plaintiff’s Outline [120])$1,540
(possibly reduced by compromise at trial – Plaintiff’s Outline [126A])
Question 5 [72]
Did the defendant, by its communications and dealings with the plaintiff between 9 October and 30 November 2000 in respect of the supply or potential supply of preco Hi-V in relation to the production of 4,500 square metres of precast panels with an exposed aggregate finish, engage in conduct which was misleading or deceptive within the meaning of s 52 of the Trade Practices Act 1974 and s 56 of the Fair Trading Act 1987 and if so in what respect?
The answer to question 5 is “No”. [82]
Question 6 [83]
If the answer to (5) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, was the plaintiff induced by the misleading and deceptive conduct to act after 9 October 2000 in a manner differently to the manner in which it would have acted if the defendant had not engage in misleading or deceptive conduct, and if so in what manner?
The answer to Question 6 is “No”. [93]
Question 7 [94]
If the answer to (6) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, did any of the said actions by the plaintiff cause loss to the plaintiff, and if so what type of Loss?
The answer to Question 7 is “Yes”. It is the loss identified in [98] above. [112]
Question 8 [113]
If the answer to (7) is yes, or otherwise assuming that the answer is yet in accordance with the contention of the plaintiff, what was the quantum of the loss suffered by the plaintiff. [114]
Waste of Sample Prototypes
3,560
Waste of Moulds
8,036
Waste of Panels
4,849
Rectification
26,833
Deduct
- 10,000
Total
$33,278
Those figures are not cumulative upon the figures at [71] above. They include them. The earlier figures would have to be deducted to arrive at the loss suffered if the conduct operated from 9 October. [115]
Question 9 [116]
Did the defendant, by its communications and dealings with the plaintiff between 1 December 2000 and 3 January 2001 in respect of the supply or potential supply of Preco Hi-V in relation to the production of 4,500 square metres of precast panels with an exposed aggregate finish, engage in conduct which was misleading or deceptive within the meaning of s 52 of the Trade Practices Act 1974 and s 56 of the Fair Trading Act 1987 and if so in what respect?
The answer to Question 9 is “No”. [119]
Question 10 [120]
If the answer to (9) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, was the plaintiff induced by the misleading or deceptive conduct to act after 1 December 2000 in a manner differently to the manner in which it would have acted if the defendant had not engaged in the misleading or deceptive conduct, and if so in what manner?
The answer to Question 10 is “No”. [122]
Question 11 [123]
If the answer to (10) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, did any of the said actions by the plaintiff cause loss to the plaintiff, and if so what type of loss?
The answer to Question 11 is “No”. [125]
Question 12 [126]
If the answer to (11) is yes, or otherwise assuming that the answer is yes in accordance with the contention of the plaintiff, what was the quantum of the loss suffered by the plaintiff?
The answer to this question is the same as that to the preceding question, “No”. [127]
0
7
1