Mulligan v Benton

[1999] NSWCA 339

CITATION:	Mulligan v Benton [1999] NSWCA 339
FILE NUMBER(S):	CA 40091/98
HEARING DATE(S):	26/02/99
JUDGMENT DATE:	24 September 1999
PARTIES :	James Bruce Mulligan Estate of the Late Valmai Mulligan Ian Benton
JUDGMENT OF:	Beazley JA at 1; Stein JA at 42; Sheppard AJA at 44

LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S) :	1286/94
LOWER COURT JUDICIAL OFFICER:	Downes DCJ

COUNSEL:	Appellant: M Cashion SC/ C Robinson Respondent: V Gray
SOLICITORS:	Appellant: Turner Freeman Respondent: Watkins Tapsell
CATCHWORDS:	Breach of contract; terms of contract; claim and cross-claim; Referee report; District Court Rules Part 28; Supreme Court Rules Part 72; damages; standing
ACTS CITED:	District Court Rules Part 28B, r2; r4; r7; r10; r12 Supreme Court Rules Pt 72, r 13 Suitors Fund Act 1951 (NSW)
CASES CITED:	Nine Network Pty Ltd v Kennedy Miller Television Pty Ltd (unreported, New South Wales Court of Appeal, 8 June 1994) Super Pty Ltd v SJP Formwork (1992) 29 NSWLR 549 Homebush Abbatoir Corp v Bermria Pty Ltd (1991) 22 NSWLR 605 Cape v Maidment (1991) 98 ACTR 1 Nicholls v Stamer [1980] VR 479 Jordon v McKenzie (1987) 26 CPC (2d) 193
DECISION:	Appeal Dismissed; Cross-Appeal Dismissed

THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40091/98
DC 1286/94

BEAZLEY JA
STEIN JA
SHEPPARD AJA

Friday, 24 September 1999


JAMES BRUCE MULLIGAN & ESTATE OF LATE VALMAI MULLIGAN v IAN BENTON & ANOR





By contract made on 11 October 1992 the appellants agreed to sell and the respondents to buy certain plant and equipment of a conveyorised processing line for $140,000. The purchase price was payable by instalments. The respondents made the fist two payments and refused to make any further payments. The appellants treated this as a repudiation of the contract and commenced proceedings to recover the amount due. The respondents cross-claimed on the basis that the line was not properly commissioned in accordance with the terms of the contract and sought damages for the loss they suffered as a result.

During the course of proceedings, evidence was called that the assembly and installation of the plant and equipment was not carried out in a proper and workmanlike manner. His Honour considered that evidence was unclear as to what parts of the installation were unsatisfactory and what costs would rectify the unsatisfactory work. Accordingly, he appointed a referee under Part 28 of the District Court Rules .

The trial judge held that the appellants were not in breach of contract and ordered the respondents to pay the balance of the purchase price. However, his Honour also found for the respondents on the cross-claim on the basis that, although the plant was fully operational on the Monday after it was installed, it was not installed in a proper and workmanlike manner.

On appeal, the appellant alleged:

(i) that the finding on the claim and cross-claim were inconsistent and could not stand together. Having succeeded on the claim, the cross-claim should have been dismissed;

(ii) his Honour erred in the manner in which he dealt with the referee’s report;

(iii) his Honour erred in not finding that the respondents had no standing to bring the cross-claim;

The respondents contended that:

Notwithstanding the error in his reasoning process, the money verdict arrived at by his Honour was correct.

HELD

(1) His Honour’s approach to the claim and cross-claim was erroneous. His Honour should have determined the terms of the contract or contracts and then determined whether there had been any breach of any terms.

(2) It appears that what his Honour intended by his judgment was that, although there was a breach of the term of the contract to properly install the equipment and the respondent was thereby entitled to damages for the cost of rectification, the breach was not such as to disentitle the appellants to the purchase price. Accordingly, the appellants claim that the judgment was internally inconsistent was not made out.

(3) The appellants have not demonstrated an appealable error in the manner in which his Honour dealt with the referee’s report.

(4) The respondents had standing to bring the cross-claim.

ORDERS

(1) Appeal and cross-appeal dismissed.

(2) The appellants to pay the respondents costs of the appeal, the cross-appeal and in the court below.

(3) The appellants to have a certificate under the Suitors’ Fund Act 1951 (NSW) if so qualified.

*************************************

THE SUPREME COURT

OF NEW SOUTH WALES

COURT OF APPEAL

CA 40091/98
DC 1286/94

BEAZLEY JA
STEIN JA
SHEPPARD AJA

Friday, 24 September 1999


JAMES BRUCE MULLIGAN & ESTATE OF LATE VALMAI MULLIGAN v IAN BENTON & ANOR

JUDGMENT

1    BEAZLEY JA: By statement of claim filed in the District Court, the appellants claimed the balance of the purchase price alleged to be owing pursuant to a contract of sale of certain plant and equipment associated with a powder coating process. The respondents cross claimed, alleging that in breach of the contract, the appellants had failed to properly commission the plant and make it fully operational. The trial judge held that the appellants were not in breach of contract and ordered that the respondents pay the balance of the purchase price. However, his Honour also found for the respondents on the cross-claim on the basis that although the plant was fully operational on the Monday after it was installed, it was not installed in a proper and workmanlike manner.

2    Both parties appeal from this decision. The appellants challenged his Honour’s decision on three bases. First, the appellants contended that the finding on the claim and the cross claim were inconsistent and could not stand together. The appellants submitted that having succeeded on the claim, the cross-claim should have been dismissed. Secondly, it was alleged that his Honour erred in the manner in which he dealt with the referee’s report. Thirdly, the appellants claimed his Honour erred in not finding that the respondents had no standing to bring the cross claim. The respondents contend that, notwithstanding error in his reasoning process, the money verdict arrived at by his Honour was correct.
Background
3    By a contract made on 11 October 1992, the appellants agreed to sell and the respondents to buy certain plant and equipment associated with a powder coating process for $140,000. The parties pleaded the contract in somewhat different terms. I will deal with this more fully below. The purchase price was payable by instalments. The respondents made the first two payments but on 15 April 1993, refused to make further payments The appellants treated this as a repudiation of the contract and commenced proceedings to recover the amount due under the contract. The respondents cross-claimed on the basis that the line was not properly commissioned in accordance with the terms of the contract and sought damages for the loss they had suffered as a result of the appellants’ failure to properly commission the plant and equipment.

4    The appellants pleaded that the agreement was wholly written and was contained in the contract of 11 October 1992 which provided:

1. The Owner [the appellants] hereby sells the plant and equipment to the purchaser [the respondent] for the sum of One Hundred and Forty Thousand Dollars ($140,000) (‘the Purchase Price’). The Purchase Price shall be payable as follows:-
(a)
{1} On the 23rd Day of October 1992 a deposit to the value of Fifty Thousand Dollars ($50,000) becomes due and payable.
{2} Upon satisfactory proof to the Purchaser of equipment being commissioned and fully operational as a conveyorised processing line, the balance of the purchasers finance of Thirty thousand dollars ($30,000) becomes due and payable

(b) The balance of sixty thousand dollars (“Principal”) shall be payable to the Owner over a period of six years and not exceeding six years in instalments of Ten Thousand Dollars ($10,000) per year due and payable on the 23rd of October. In addition to the annual payments of the principal amount, an amount of interest shall be payable every six months at a rate of ten percent per annum calculated on the minimum monthly principal balance of the preceding six monthly period. PROVIDED THAT the Purchaser shall be entitled to pay the whole of the principal sum outstanding at any time together with interest up to and including the month of discharge without penalty.

…
4. It is agreed that the purchaser will be liable for the costs of commissioning the plant and equipment to a maximum amount of Eight Thousand Dollars ($8,000.00).”

5    The respondents alleged that the terms of the contract were (a) that the first appellant would sell and deliver to the respondents certain plant and equipment which, together, constituted a conveyorised powder coating process line and (b) the first appellant would commission the plant and equipment as a fully operational powder coating process line in a proper and workmanlike manner. The terms were alleged to be either entirely written in accordance with the contract of 11 October 1992, or partly written, partly oral and partly implied.

6    The oral term alleged was that the appellants agreed to “commission the goods as a fully operational conveyorised powder coating process line”. The following evidence of the first appellant would support such a term:

“Q. Had you discussed the commissioning of the plant yourself with Mr Benton at any time prior to that?
A. Yes we had discussed commissioning of [the] plant.
…
A. Yes, well, I was to get the conveyor running and the machinery working and Mr Benton was going to look after connecting the gas to the oven. That wasn’t part of the commissioning.”

7    The respondents also rely upon an admission by the first appellant during the course of his cross-examination that:

“Q. Mr Mulligan, I think you told us that you recognised as part of the contract with Mr and Mrs Benton that it was your responsibility to commission these goods as a fully operational powder coating process line?
A. Correct.”

8    The implied term alleged was “that the process of commissioning the plant and equipment required that the work be done in a proper and workmanlike manner, [that is] to [a] standard acceptable in the industry”.

9 During the course of the proceedings, evidence was called that the assembly and installation of the plant and equipment was not carried out in a proper and workmanlike manner. His Honour considered that the evidence was unclear as to what parts of the installation were unsatisfactory and what the costs would be to rectify the unsatisfactory work. Accordingly, he appointed a referee under Part 28 of the District Court Rules. The order made appointing the referee was made in the following terms:

Pursuant to Part 28B Rule 2 there are referred to Arnold M Abicht of 16 Macintyre Crescent, Sylvania Waters, NSW 2224, for enquiry and report the matters in the Schedule hereto.
…
Liberty is granted to the Referee or any party to seek directions with respect to any matter arising in the proceedings under reference upon application made on 24 hours notice or such less notice as the Court deems fit.
…
SCHEDULE
The following questions arising in the proceedings, namely:
Bearing in mind that the parts were 2nd hand in October 1992
1. What was the cause of the work that was done and the parts that were supplied in each of the Defendant’s invoices (including the charges claimed by the Defendant for labour)?
2. Was the charge in each of the invoices (including the charges claimed by the Defendant for labour) reasonable at the relevant time, e.g. was it excessive and, if so, to what extent was it excessive or could the problem have been remedied in a more economical way?
3. If the charges were not reasonable, then what was a reasonable charge?
4. What is the cause of the work referred to as “Work to be done” in the Amended Scott Schedule and “Commissioning work yet to be completed” in the Reference Schedule for Labour Materials and Further Commissioning Costs for Items in the Scott Schedule” (the Reference Schedule”)?
5. Is the charge applicable to the work referred to as “Work yet to be done” as set out in the Reference Schedule, the reports of Dr Lohning and Mr D Evans, reasonable for the work concerned? If it is excessive, to what extent is such charge excessive or can the problems be remedied in a more economical way?
6. If the estimate of charges for commissioning work yet to be done is not reasonable, then what is a reasonable charge for this work?”

10    The appellants sought to raise two points of principle in relation to the references. First, senior counsel for the appellants submitted that it is desirable when referring a matter out that the Court identify for the referee the question or questions in the proceedings upon which the referee is required to report so as to give the referee a clear understanding of the task to be undertaken. Secondly, he submitted that when the referee reported to the court, it was mandatory for the trial judge to determine whether the referee had addressed the correct questions in the report.

11    It was submitted that, in this case, the trial judge failed to identify the questions upon which the referee was to report, as was desirable in accordance with the first submission. This meant that when the referee reported, it was necessary for the trial judge to determine precisely the contractual obligations imposed by the contract and to deal with the report on the basis that each finding by the referee had to be assessed against the contractual obligation of the appellants.

12    In order to determine whether his Honour did fall into error as alleged, it is necessary to ascertain whether the trial judge did make any or any sufficient findings in relation to the terms of the contract and any breach thereof. This question in effect requires a consideration of the first issue on the appeal, namely whether the trial judge’s finding that the respondents were entitled to succeed on the cross-claim was inconsistent with his finding on the appellants’ claim that they had not breached the contract.

13    The trial judge made the following findings as to the terms of the contract:

(i) that there was an agreement in accordance with the terms of clauses 1 and 2 of the written agreement;

(ii) that there was an agreement between the parties independently of the written agreement for the appellants to commission (install) the plant and equipment, including the conveyor system, the component parts of which were upon the premises;

(iii) that cl 4 in the written contract was referable to the independent agreement.

14    His Honour observed that at the time the agreement was entered into, the powder coating process operated by the appellants “was a manual one whereby metal components were passed manually from a cleaning process to a drying process to a powder coating process and finally to a baking oven.” His Honour also noted that the sale “included a second hand conveyor system” so that the components would not have to be manhandled.

15    His Honour found that the following payments were made:

(i) $50,000 on 23 October 1992 (thus complying with cl 1(a)(i) of the written agreement).

(ii) $10,000 on 20 November 1992 and $20,000 on 11 December 1992.

16    The parties were at issue as to whether the payments made in November and December in accordance with cl 1(a)(ii) of the contract. The respondents alleged the $30,000 was paid before the equipment was commissioned because the first appellant said the appellants needed to satisfy a $10,000 debt and $20,000 to pay out their lessor. The first appellant denied these allegations. His Honour made no finding as to these matters. However, from the findings he did make, namely that the commissioning work was not done till January 1993, the $30,000 could not have been paid in accordance with cl 1(a)(ii). Put another way, the payment of the $30,000 did not constitute an admission by the respondents that they were satisfied that “the equipment [was] commissioned and fully operational as a conveyorised processing line”.

17    His Honour then found that:

“What the parties intended was that Mr Mulligan would assemble and install the plant and equipment that was sold so that the conveyor system would be fully operational and this is what the contract said.”

18    It is not clear what his Honour meant by this statement. The parties intentions do not represent the terms of the contract. Notwithstanding his Honour’s departure from the language of contract, I think it is likely he meant that this is what was required by the contract. If that is correct, the statement is unexceptional.

19    His Honour next added, “necessary adjustments would have to be made thereafter in order to process different types of materials”. No further reference is made to this in the judgment and no such term appears in the written agreement. Nor did the respondents allege there was an oral or implied term to that effect. The comment is probably no more than that - a comment made by his Honour as to the actual operation of the system.

20    Next his Honour referred to the fact “the conveyor” was not operating at the time it was installed but that the first respondent rectified it over the weekend and that it was fully operational the following Monday. He concluded:

“Consequently, the plaintiffs didn’t breach the agreement and they are entitled to the balance of their purchase price, that is to say $60,000 plus interest.”

21    Both parties focus on this finding to advance their respective cases. The appellants contend that having made that finding, they had succeeded on their claim, and it followed, must succeed on the cross claim.

22    The respondents allege the trial judge was confused at this point but that confusion did not vitiate the final result. The confusion appears to have come from his Honour focussing, at this point in his judgment when he was dealing with the appellant’s claim, on the question whether the conveyor was working on the Monday after it was installed -which as a matter of fact it was - with the real question at issue - whether the appellants had properly commissioned the plant and equipment sold. That plant and equipment was far more extensive than the conveyor or the conveyor system. It also included the pre-treatment cleaning tank, the drying oven, the powder application unit and the bake oven. The individual component parts when commissioned constituted a “powder coating line” or, to use the words in clause 1(a) (1) of the contract a ”conveyorised processing line” which was required to be commissioned and fully operational

23    Having found that the appellants had not breached the contract, his Honour then dealt with the cross-claim quite separately and found that the commissioning or installation was “not carried out in a proper and workmanlike manner”. His Honour gave as an example that the “track guide wheels did not match up”. The respondents submitted that this finding was tantamount to a finding that there was an implied term of the contract that the installation work would be carried out in a proper and workmanlike manner.

24    His Honour’s approach to the claim and cross claim was clearly quite erroneous. There was but one contract between the parties or possibly two on his Honour’s finding of a separate contract in relation to the commissioning of the plant. Neither counsel made any reference to or point about the finding of two contracts rather than one. His Honour should have determined the terms of the contract (or contracts) and then determined whether there had been a breach of any term or terms of the contract. If he found breach, he should then have determined whether this breach or breaches caused any loss. However, what his Honour appears to have done is as described by Sheppard AJA during the course of the hearing of the appeal:

“I think [the trial judge] was concerned to ensure that he could give the $60,000 [being the unpaid portion of the contract price] and so he said that in the context of the situation [the appellants] could have the $60,000 but what he wanted to achieve was a situation in which he gave them [that]….but also there was this question of whether the machinery had been properly installed”

25    I agree with Sheppard AJA’s observations. I think that sense is properly made of his Honour’s judgment by construing it that way. In other words, I believe that his Honour considered that if it was established that the plant had not been installed in a proper and workmanlike manner, the appellants breached the contract and the respondents were entitled to damages for the cost of rectification. However, the breach was not of such a nature as to disentitle the appellants to the purchase price. If this construction of his Honour’s judgment is correct, as I think it is, the appellant’s claim that it is internally inconsistent is not made out.

26    It is necessary at this point to return to the questions referred to the referee. Before doing so it is appropriate to consider the power of the court to appoint a referee and the function of the court when the referee provides the report.

27 Part 28B provides for the reference of any question of law or fact to a referee: r 2; for the manner in which proceedings may be conducted by and before a referee: rr 4 and 7; for the making of a report: r 10; and for proceedings on the report: r 12. As the appellants challenge the trial judge’s adoption of the report it is necessary to refer to the judge’s function under rule 12.

28    Rule 12 provides:

“(1) Where a report is made, the Court may, of its own motion, after notice to the parties, or on application by any party, on a matter of fact or law or both -
(a) adopt, vary or reject the report in whole or in part;
(b) require an explanation by way of report from the referee;
(c) on any ground, remit for further consideration by the referee the whole or any part of the matter referred for a further report;
(d) decide any matter on the evidence taken before the referee, with or without additional evidence;
and shall give such judgment or make such order as the Court thinks fit
(2) Evidence additional to the evidence taken before the referee may not be adduced before the Court except with the leave of the Court.”

29    In Nine Network Pty Ltd v Kennedy Miller Television Pty Ltd (unreported, New South Wales Court of Appeal, 8 June 1994) Gleeson CJ said (at 9-10) of the equivalent rule in the Supreme Court Rules, that the Court is required:

“to consider and determine afresh any material question of law arising out of the referee’s report which either party desired to agitate. Subject to that obligation, [the Court has] a discretion as to the extent to which [it will] re-consider, and determine … matters upon which a referee had reached a conclusion and reported.”

30    Earlier in Super Pty Ltd v SJP Framework (Aust) Pty Ltd (1992) 29 NSWLR 549, Gleeson CJ had considered the provisions of Pt 72 of the Supreme Court Rules in detail, including its history. He said, at 563-564:

“What is involved in an application under Pt 72, r 13 is not an appeal, whether by way of a hearing de novo or a more limited re-hearing. This is consistent with the right of the referee to conduct the reference as the referee thinks fit and unconstrained by the rules of evidence. Rather, the judge, in reviewing the report and deciding whether to adopt, vary or reject it, has a judicial discretion to exercise in a manner that is consistent both with the object and purpose of the rules and with the wider setting in which they take place.
That wider setting is a system for the administration of justice according to law. In so far as the subject matter of dissatisfaction with a referee’s report is a question of law, or the application of legal standards to established facts, then a proper exercise of discretion would require a judge to consider and determine that matter afresh. That was decided by this Court in Homebush Abattoir Corporation v Bermria Pty Ltd (1991) 22 NSWLR 605: see also, Cape v Maidment (1991) 98 ACTR 1 at 4. That conclusion is entirely consistent with the history of the rules and the reasoning of the High Court in Buckley which, although the case related to different provisions is also instructive as to the present provisions.
Subject to what has just been said, it is undesirable to attempt closely to confine the manner in which the discretion is to be exercised: cf Nicholls v Stamer [1980] VR 479 at 495 per Brooking J. The nature of the complaints made about the report, the type of litigation involved and the length and complexity of the proceedings before the referee, may all be relevant considerations. The purpose of Pt 72 is to provide, where the interests of justice so dictate, a form of partial resolution of disputes alternative to orthodox litigation, and it would frustrate that purpose to allow the reference to be treated as some kind of warm-up for the real contest. On the other hand, if the referee’s report reveals some error of principle, some absence or excess of jurisdiction, or some patent misapprehension of the evidence, that would ordinarily be a reason for rejecting it: cf Jordon v McKenzie (1987) 26 CPC (2d) 193. So also would perversity or manifest unreasonableness in fact finding.”

31    Gleeson CJ also expressly endorsed the statement of Giles CJ Comm Div, who had heard the matter at first instance that:

“As a broad proposition, depending upon the circumstances of each case, the court will not reconsider disputed questions of fact where there is factual material sufficient to entitle the referee to reach the conclusions he [or she] did, particularly where the disputed questions are in a technical area where the referee enjoys an appropriate expertise.”

32    I have already set out the questions referred to the referee. Those questions have to be understood against the background that the parties had prepared a Scott Schedule in which the alleged defects in the system were specified and the claimed costs of rectification were set out. It is also apparent from the questions asked that the claimed costs were supported by invoices. The first question makes it clear, in my opinion, that the referee was to report as to the cause of the work specified in the Scott Schedule, having regard to the fact the “parts were second hand”. The referee was also to report on the reasonableness of the expenses claimed.

33    When the trial judge came to exercise the functions imposed by Rule 12, in the absence of any real assistance from the parties, he reviewed each item in the report. His Honour recorded in his judgment that neither counsel addressed him on any particular item in the report, except of course, the respondents who addressed him on item 5.4. That item related to the dry-off oven. It is clear from his judgement that he distinguished between upgraded work or improvements which the respondents had carried out or wanted to be carried out, for which the appellants were not responsible, and work which was necessary because the plant had not been installed in a proper and workmanlike manner - being a term of the contract on the construction I have put on his Honour’s judgment. In my opinion, his Honour performed the function which the appellants allege was incumbent upon him to perform under Part 12.

34    An appeal lies to the Court of Appeal in respect of a judge exercising a power of review under r 12. That appeal is not an appeal by way of rehearing. The nature of the appeal was stated by Gleeson CJ in Nine Network at 11 in the following terms:

“It is not for this Court to review the referee’s report … In the exercise of the power of review given by the rules, the judge at first instance may fall into appealable error. If that can be demonstrated to the Court of Appeal, then ordinarily the judgment at first instance will be set aside and consequential relief granted. However, what the Court of Appeal is concerned with is error on the part of the judge. If the judge’s decision to adopt (or vary or reject) the referee’s report in whole or in part cannot be shown to be based upon a material error on the part of the judge, then there will be no ground for attacking the judgment based on that decision. If, on the other hand, that decision can be shown to be based upon a material error on the part of the judge then a different result will follow. If the point at issue is one of law, it may not be difficult to demonstrate such error. If the judge can be shown to have made an error in the approach taken to the exercise of the discretion conferred by the rules (as was contended unsuccessfully in Super Pty Ltd v SJP Formwork [(1992) 29 NSWLR 549]) then that also may constitute a ground for setting aside the judgment. It may even, in a given case, be possible to demonstrate that the judge’s decision to adopt, or vary or reject, the report was based upon an appealable error of fact made by the judge. An example might be a case where the judge embarked upon a consideration of new evidence, or a fresh consideration of evidence that was before the referee, and could be shown to have reached a wrong conclusion. The important point is that it is the judge at first instance who reviews what the referee did; the Court of Appeal, within the limits of the ordinary rules governing appeals, reviews what the judge did.

… However, if the judge, in the proper exercise of the discretion given by the rules, declines to consider afresh questions of fact that have been decided by the referee, then it is not open to the party aggrieved to invite this Court to re-visit those questions on the basis that, by virtue of the adoption of the referee’s report, the judge’s decision is vitiated by any errors in it.”

35    It follows from the approach which I have taken that the appellants have not demonstrated appealable error in the manner in which his Honour dealt with the matter.

36    The question which does arise is whether this Court should approach the matter as I have done by construing his Honour’s judgment or whether the matter should be remitted to the District Court for a new trial. Both parties wish to avoid the latter course if at all possible.

37    I have already stated that on its face his Honour’s judgment does not properly deal with the contract. However, it is clear that he found that there was a contract under which the appellants were entitled to $140,000 for the sale of the plant and equipment; that the conveyor was working the Monday after it was installed; but that in breach of contract, the conveyorised processing line was not installed in a proper and workmanlike manner. In these circumstances where it is possible, without any real contrivance, to work out what his Honour intended to find by his judgment, as a matter of conventional contract law, and where the order made properly reflects what he intended, it is permissible for this Court to make findings on the appeal.

38    That leaves only one issue for consideration, namely whether the respondents had standing to bring the cross claim. The point raised is short. The appellants case was that although the contract for sale was with the respondents, the books of account of Dolphin Coatings Pty Limited, a company in which the respondents acquired shares in December 1992, revealed that the plant and equipment was shown as an asset of that company. The respondents submitted however that that entry was an error and had been corrected in Dolphin’s books of account in 1994. There was evidence to support the respondents explanation and no error has been shown in the trial judge’s acceptance of that evidence.

39    The respondents/cross appellants have been successful in establishing that, contrary to the trial judge’s reasoning, there was a breach of contract. However, I have decided that that breach did not disentitle them to claim the balance of the purchase price. Accordingly, the verdict on the claim should stand. Because I consider that there was a breach of contract entitling the respondents/cross-appellants to damages, the verdict on the cross-claim should likewise stand. As the verdicts are not to be disturbed, the formal orders which should be made are that the appeal and cross appeal be dismissed.

40    I consider however, that the order for costs should not “follow the event” but rather reflect my reasons. The effect of my reasons is that the respondents/cross appellants were successful both in defending the issues raised by the appellants on the appeal and were also successful in establishing that there was in fact a breach of contract, which was the essential issue raised on the cross-appeal, so as to meet the appellants’ argument that the trial judge’s verdicts were inconsistent. Accordingly, I propose that the costs of the appeal and cross appeal should be borne by the appellants.

Orders

41    Accordingly, I propose the following orders:

(i) Appeal and cross-appeal dismissed;
(ii) The appellants to pay the respondents’ costs of the appeal and the cross-appeal.
(iii) The appellants are to have a certificate under the Suitors’ Fund Act 1951 (NSW) in relation to the costs of the cross-appeal, if so qualified.

42    STEIN JA: I have had the benefit of reading the draft judgment of Beazley JA. I agree with it and with the orders which she proposes. A fair reading of his Honour’s judgment as a whole readily reveals what he thought about the evidence and the competing cases, and the result which he was seeking to achieve. Beazley JA makes this clear in paragraph 25 of her judgment.

43    Thus understood, and not withstanding that the judge did not properly deal with the contract, the inconsistency falls away. In the circumstances of this case, bearing in mind the nature of some of the technical evidence and the amounts of money involved, a new trial would be a travesty.

44    SHEPPARD AJA: In this matter I have had the advantage of reading the judgment to be delivered by Beazley JA. I agree in her Honour's reasons and conclusions and with the orders she proposes.

45    I agree with Beazley JA in her conclusion that there was only one contract and that its essential terms were those provided for in clauses 1, 2 and 4 set out in para. 4 of her judgment. The purchasers, ie the respondents, took delivery of the plant and equipment comprising the powder coating process. The purchasers paid the deposit of $50,000 and the further sum of $30,000 provided for in cl.1(a)(2). When the plant was installed there was an initial problem with the conveyor which, as counsel for the purchasers emphasised, was but one part of the plant and equipment which was the subject of the contract. The problem was overcome by the purchasers and the equipment was apparently assumed by both the vendors, ie the appellants, and the purchasers to be working satisfactorily. So the sum of $30,000 was also paid.
46    But, on the findings made by the referee and adopted by the learned primary judge, the plant, contrary to the parties' assumption when the purchasers took delivery, was not, within the language of cl.1(a)(2) "fully operational". It had not in fact been commissioned and was not fully operational as a conveyorised processing line. That was because of the multiplicity of defects which it had. But, by the time these were discovered, the purchasers had taken delivery and had paid not only the deposit but also the sum of $30,000 due on satisfactory proof to the purchasers that the plant was commissioned and was fully operational. This constituted an acceptance of the subject matter of the contract and carried with it the purchasers' obligation to pay the balance of the purchase price amounting to $60,000.
47    But that did not mean that the purchasers were left without remedy when it became apparent that the plant and equipment they had bought were defective. Their payment of $30,000 upon taking delivery ought not be regarded as an admission that everything was in working order. The fact that they paid the sum did not mean that they gave up their rights to sue for damages in the event that the plant should prove defective. What the acceptance by the purchasers of the plant and equipment did do, however, was to put an end to any prospect they might have had of treating the failure of the vendors to comply with their obligation under the contract as a condition and rescinding the contract for breach of that condition. They were relegated to the rights they had to treat the vendors' breach of obligation as a breach of warranty and sue for damages. That may not have been precisely the way the primary judge approached the matter, but it seems to me to have been the way he thought about it. In my opinion such an approach discloses no error.
48    In these circumstances the correct result was as his Honour found, namely a verdict for the vendors, the appellants, for the balance of the purchase price and a verdict for the purchasers, the respondents, for the damages to which they were entitled in consequence of the various defects in the subject matter of the contract.
49    The other matter which was the subject of submissions was the adoption by the primary judge of the referee's report. I do not wish to add anything to what Beazley JA has said about that matter.
50    Accordingly both the appeal and cross-appeal should be dismissed. In ordinary circumstances that would require orders that the appellants pay the respondents' costs of the appeal and the respondents pay the appellants' costs of the cross-appeal. But, at the time the hearing of the appeal commenced, no cross-appeal had been filed. Instead the respondents relied on a notice of contention. If matters had been left where they were when the hearing of the appeal began, the appellants would have succeeded. The particular circumstances of the case thus require the Court to depart from the usual practice. Notwithstanding the respondents' success, the appropriate order for costs is that the appellants pay the respondents' costs of the appeal and cross-appeal.

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