Nea Pty Ltd v Magenta Mining Pty Ltd

[2005] WASC 106

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   NEA PTY LTD -v- MAGENTA MINING PTY LTD [2005] WASC 106

CORAM:   EM HEENAN J

HEARD:   16-20 SEPTEMBER 2002, 3-5 MARCH & 17-21 MAY 2004

DELIVERED          :   1 JUNE 2005

FILE NO/S:   CIV 2348 of 1996

Consolidated with CIV 1821 of 1998 by order dated
23 September 1999

BETWEEN:   NEA PTY LTD (ACN 009 248 006)

Plaintiff

AND

MAGENTA MINING PTY LTD (ACN 054 284 936)
Defendant

(BY ORIGINAL ACTION)

MAGENTA MINING PTY LTD (ACN 054 284 936)
Plaintiff by Counterclaim

AND

NEA PTY LTD (ACN 009 248 006)
First Defendant by Counterclaim

GEOFFREY FRANS GROENENBERG
Second Defendant by Counterclaim

(BY COUNTERCLAIM)
 

Catchwords:

Contract for hire of mining machinery - Termination - Action for recovery of unpaid instalments of hire and incidental services - Interest - Total failure of consideration - Set off

Counterclaim -  Damages for misleading and deceptive conduct - Implied warranty of fitness - Consumer - Exclusion of warranty of fitness - Quantum of damages - Fundamental breach - Effect of exclusion clause in event of misleading or deceptive conduct - Liability of alleged accessory - Reliance damages - Claim for losses of profits to be made by mining venture for which hired machinery employed - Interest

Legislation:

Trade Practices Act 1974 (Cth), s 4B, s 52, s 68, s 71, s 75B

Result:

Plaintiff's claim dismissed after set off
Damages of $259,570.37 plus interest awarded to defendant against plaintiff on counterclaim
Counterclaim against second defendant dismissed

Category:    B

Representation:

Original Action

Counsel:

Plaintiff:        Mr C P Shanahan

Defendant:        Mr R W Bower

Solicitors:

Plaintiff:        Tottle Partners

Defendant:        Corser & Corser

Counterclaim

Counsel:

Plaintiff by Counterclaim              :        Mr R W Bower

First Defendant by Counterclaim    :        Mr C P Shanahan

Second Defendant by Counterclaim :        Mr C P Shanahan

Solicitors:

Plaintiff by Counterclaim              :        Corser & Corser

First Defendant by Counterclaim    :        Tottle Partners

Second Defendant by Counterclaim :        Tottle Partners

Case(s) referred to in judgment(s):

100F Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470

Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; 206 ALR 387

Atkinson v Hastings Deering (Queensland) Pty Ltd (1985) 6 FCR 331; 8 FCR 481

Australian Competition and Consumer Commission v Dell Computer Pty Ltd (2003) ATPR 41‑910

Australian Competition and Consumer Commission v Michigan Group Pty Ltd [2002] FCA 1439

Baltic Shipping Company v Dillon (1993) 176 CLR 344

Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR 41‑043

BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20

Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653

Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 212 ALR 357

Castlemaine Tooheys Ltd v Williams and Hodgson Transport Pty Ltd (1986) 162 CLR 395

China Ocean Shipping Co Ltd v Pearse Chellaram & Co Ltd (1990) 28 NSWLR 354

Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367

Cullinane v British "Rema" Manufacturing Co Ltd [1954] 1 QB 292

Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353

Demogue Pty Ltd v Ramensky (1992) 39 FCR 31

Derbyshire Building Co Pty Ltd v Becker (1962) 107 CLR 633

Dorotea Pty Ltd v Christos Doufas Nominees Pty Ltd [1986] 2 Qd R 91

Eastern Extension Australasia and China Telegraph Co Ltd v Federal Commissioner Taxation (1923) 33 CLR 426

Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1943] AC 32

Frank Davies Pty Ltd v Container Haulage Group Pty Ltd (No 1) (1989) 98 FLR 289

Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1

Gregory & Bradshaw v MAB Pty Ltd (1989) 1 WAR 1

Grundy v Lewis (1995) 133 ALR 400

Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd (1968) 121 CLR 584

I & L Securities v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109

Insurance Commission of Western Australia v Container Handlers Pty Ltd [2004] HCA 24; 206 ALR 335

IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470

Jillawarra Grazing Co v John Shearer Ltd (1984) ATPR 40‑441

Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281

Lagden v O'Connor [2003] UKHL 64; [2004] 1 All ER 277

Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 107 ALR 291

Masters v Cameron (1954) 91 CLR 353

McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457

McRae v Commonwealth Disposals Commission (1951) 84 CLR 377

Mendelssohn v Normand Ltd [1970] 1 QB 177

Minchillo v Ford Motor Co of Australia Ltd [1995] 2 VR 594

Mouritz v Ramona Hegedus [1999] WASCA 1061

Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388

National Carriers Ltd v Panalpina (Northern) Ltd [1981] AC 675

Nissho Iwai Australia Ltd v Malaysian International Shipping Corporation Berhad (1989) 167 CLR 219

Oceanic Sun Lines Special Shipping Co Inc v Fay (1988) 165 CLR 197; 79 ALR 9

O'Dea v Allstates Leasing System (WA) Pty Ltd (1983) 152 CLR 359

Oraka Pty Ltd v Leda Holdings Ltd (1997) ATPR 41‑558

Owners of Liesboch Dredger v Owners of Steamship Edison [1933] AC 49

Pearson & Bridge Pty Ltd v Australian National Industries Ltd, unreported; CA of NSW; No 16 of 1985; 29 September 1986

Petera Pty Ltd v EAJ Pty Ltd (1984) 7 FCR 375

Photo Productions Ltd v Securicor Transport Ltd [1980] AC 827

Re Continental C & G Rubber Co Pty Ltd (1919) 27 CLR 194

Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd (1968) 120 CLR 516

Rich v CGU Insurance Ltd [2005] HCA 16; (2005) 79 ALJR 856

Robert A Monroe & Co Ltd v Meyer [1930] 2 KB 312

Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332

T C Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd (1963) 180 CLR 130; 37 ALJR 289

The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 79 ALJR 129

Wallis, Son and Wells v Pratt and Haynes [1911] AC 394

Wardley Australia Ltd v Western Australia (1992) 175 CLR 514

Yorke v Lucas (1985) 158 CLR 661

Case(s) also cited:

Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54

Arturi v Zupps Motors Pty Ltd (1980) 33 ALR 243

Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441

ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460; (1990) 97 ALR 513

Ballas v Theophilos (No 2) (1957) 98 CLR 193

Banco de Portugal v Waterlow and Sons Ltd [1932] All ER 181

Bethune v Oconn Pty Ltd [2002] FCA 1485

Byrne & Frew v Australian Airlines Ltd (1995) 131 ALR 422

Challenge Bank Ltd v VL Cooper & Associates Pty Ltd [1995] 1 VR 220

Chaplin v Hicks [1911] 2 KB 786

Chappel v Hart (1998) 195 CLR 232; 156 ALR 517; 72 ALJR 1344

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337

Commonwealth Homes and Investment Co Ltd v Smith (1937) 59 CLR 443

Delta Corp Ltd v Davies [2002] WASCA 125

Derbyshire Building Co Pty Ltd v Becker [1962] ALR 796

Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) ATPR 41-686

Entores Ltd v Miles Far East Corp [1955] 2 QB 327

Fink v Fink (1946) 74 CLR 127

Ghirardi v Allregal Corp Pty Ltd [2001] WASCA 366

Goldberg v Shell Oil Co of Australia Ltd (1990) 95 ALR 711

Gull v Saunders & Stuart (1913) 17 CLR 82

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 1 All ER 474

Kargotich v Mustica [1973] WAR 167

Kewside Pty Ltd v Warman International (1990) ATPR 46-059

Lavrick v Lease Auto Pty Ltd (2002) 192 ALR 290

Magenta Nominees Pty Ltd v Webb [2000] WASCA 40

Marinovski v Zutti Pty Ltd [1984] 2 NSWLR 571

Metal Fabrications (Vic) Pty Ltd v Kelcey [1986] VR 507

Munchies Management Pty Ltd v Belperio (1988) 58 FCR 274

Neilson v Hempston Holdings Pty Ltd (1986) 65 ALR 302

Newmarket Corporation Pty Ltd v Kee-vee Properties Pty Ltd [2003] WASC 157

Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221

Piper Ellis Pty Ltd v Farmland Pty Ltd [2000] QSC 157; [2000] ACL Rep 110

Private Parking Services (Vic) Pty Ltd v Huggard (1996) Aust Tort Rep 81-397

Roxburgh v Rothmans of Pall Mall Aust Ltd (2001) 208 CLR 516

Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 597

Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322

Suisse Atlantique Societe d'Armement Maritime SA v Rotterdamsche Kolen Centrale NV [1966] 2 All ER 61

Sotiros Shipping Inc v Sameiet Solholt (The Solholt) (1983) 1 Lloyd's Rep 605

Thomas National Transport (Melbourne) Pty Ltd v May & Baker Pty Ltd (1966) 115 CLR 353

Tonitto v Bassal (1992) 28 NSWLR 564

Truth About Motorways Pty Ltd v Macquarie Infrastructure Investments Ltd [1998] FCA 525

W & S Pollock & Co v Macrae [1922] SC (HL) 192

Western Australia v Bond Corporation Holdings Ltd (1991) ATPR 41-081

Whitehouse Hotels Pty Ltd v Lido Savoy Ltd (1975) 49 ALJR 93

Wynn v New South Wales Insurance Ministerial Corporation (1995) 184 CLR 485; 133 ALR 154; 70 ALJR 147

Yoeman Credit Ltd v Apps [1961] 2 All ER 281

Introduction
Progress of litigation
Magenta - Mourillion Mining - Joint Venture
The Hawkins Find gold operation
The Bond Work Index of the ore
The hardness of the ore
The Hazemag - AP4B Impactor
The condition of Hazemag AP4B Impactor - Serial No 106420
Change in configuration of plant
Implied terms - s 71 of TPA
Total failure of consideration
The written terms of the contract for the supply and hire of the crushing circuit
Discussions between the parties - oral terms and representations
Visits by Halbert and Bandy to the hire plant yard at Welshpool
Visits by Nea's representatives to Hawkins Find
Attempt to rectify the problems experienced at Hawkins Find
Combined effect of claim and counterclaim
Events at Hawkins Find after 23 October 1995
The significance of cl 8 - excluding conditions or warranties of fitness for purpose
Misleading and deceptive conduct - exclusion clauses

Misleading and deceptive conduct - the discussions of 25 July 1995
Claim against Mr G F Groenenberg by virtue of s 75B of the Trade Practices Act
Financial resources of Magenta

Counterclaim for Damages
Damages for supplying equipment unfit for purpose

Profitability of Hawkins Find operation

Conclusion

EM HEENAN J:

Introduction

1. This case concerns a contract for the hire of crushing and ancillary equipment by the plaintiff to the defendant, Magenta Mining Pty Ltd ("Magenta"), for use at a small‑scale gold recovery operation being undertaken at the Hawkins Find mining lease near Kunanaling and Ora Banda in the Coolgardie mineral field.  The plaintiff's claim is for $28,040.06 for the balance of hire and set‑up charges for the supply and hire of this processing plant, or alternatively, for damages in that amount, together with interest on the amount claimed from 1 December 1995 until judgment.

2. Magenta denies any liability to pay any moneys claimed by Nea Pty Ltd ("Nea") and brings its own counterclaim seeking damages of $1,954,510.37 plus interest on that sum from 26 July 1995, for losses which it alleges were caused by the plaintiff through breaches of express or implied terms in the contract for the supply of a crushing plant which was part of the equipment hired. Further and alternatively, Magenta counterclaims for losses caused by alleged misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("TPA") arising from express or implied representations said to have been made by Nea in the negotiations leading to the agreement for the hire.  Magenta has added a second defendant to its counterclaim, Mr G F Groenenberg, a director of Nea and its manager, with whom the directors of Magenta dealt when enquiring about and negotiating for the hire of the crusher and associated plant.

3. The antecedent negotiations took place and the agreement for the hire of the crushing and associated plant was reached in July 1995.  A period of about seven weeks was needed for Nea to modify and rehabilitate the crusher and to procure and adapt some of the associated treatment plant.  All the plant was transported from Perth to Hawkins Find by heavy haulage vehicles and was delivered at Hawkins Find for commissioning on 18 September 1995.

4. There were some initial problems experienced in commissioning the plant but it was made operational after seven days.  However, from then on it worked only for a few short periods and by mid‑October 1995, after a series of breakdowns, investigations revealed that the crushing components were badly worn and that it was not able to process the ore in the volume or at the rate expected.  A major re‑configuration of the crushing circuit was then needed, probably involving the acquisition of a completely different crusher with a larger capacity.  Magenta was not able to afford new or different plant and Nea re‑took possession of the crusher and associated plant on 23 October 1995.

5. The plaintiff has formally conceded that the crusher was not capable of crushing the ore to be processed at Hawkins Find in the manner required.  With the failure of the crushing plant to perform this task and its inability to purchase or hire any replacement, the defendant's gold extraction operation effectively collapsed.  As a consequence, the defendant has advanced its counterclaim seeking damages for all the costs and expenses associated with the abandonment of its venture at Hawkins Find together with a large claim for the loss of the profits which, it asserts, it would have made had it been able to process the ore as proposed over an extended programme.

6. In addition to its counterclaim the defendant seeks, on one alternative, to set off so much of the counterclaim against any liability which it may be found to owe to the plaintiff under the hire agreement, notwithstanding that it denies the existence of any such liability on the basis of a total failure of consideration.

7. The vital component in the crushing and processing plant hired by the plaintiff to Magenta which proved to be unsuitable for the task, was a Hazemag‑AP4B Impactor, Serial No 106420 of German design and manufacture.  This was an item of old second‑hand equipment which the plaintiff had available for hire and which, in circumstances the details of which are in dispute, was chosen for supply to and use at the Hawkins Find operation.  The defendant makes a series of criticisms about the condition and refurbishment of the Hazemag Impactor.  A major problem which, as is now clear, caused its failure at the Hawkins Find operation was its inability to crush hard and abrasive ore which had been stockpiled at that site.  It could not crush this ore in any significant volume without extreme and rapid wear of its working parts and it had frequent major breakdowns.  Not only were the breakdowns frequent, but the extent of the repairs and re‑placement of parts needed to deal with them meant that the machine was simply not suitable for the task.  In the short periods during which the machine was operating it was found that only an unacceptable proportion of the ore crushed was crushed to the degree of fineness required.  The oversize crushings had to be recycled, and the volume of this recycled material was so great that it substantially reduced the throughput of the ore feed and, in addition, caused other blockages and wear within the crusher.

8. The parties are at issue over the events which took place in the initial discussions and negotiations leading to the contract for the hire and supply of this equipment.  Magenta alleges that a series of oral enquiries and discussions occurred by which their directors, Mr Byron Halbert and Mr John Bandy, made it known to the plaintiff's manager, Mr Geoffrey Groenenberg, that they were looking to Nea for advice and recommendations about the selection of plant which would be suitable to perform the crushing operation of ore which they described, telling him that the ore had a Bond Work Index of about 18 kwh/tonne (an index of hardness).  They say that they received assurances from Mr Groenenberg, amounting both to representations about the suitability of the Hazemag crusher for this task and warranties as to its merchantability and fitness for the purpose, upon which they relied for entering into the contract of hire.

9. Nea and Mr Groenenberg deny that any details suggesting that the ore to be processed was hard were given by either Halbert or Bandy, deny that there was any reference to a Bond Work Index of 18 kwh/tonne or at all, and maintain that Mr Groenenberg explained that the particular Hazemag crusher would only be suitable for crushing soft rock.  The plaintiff and Mr Groenenberg deny that any express or implied representations, undertakings, conditions or warranties were made or given about the suitability of the Hazemag crusher for this particular task, or its merchantability or fitness in any respect.  They assert that the contract of hire included express written terms that:

   "Our Hire Agreement in addition to the above conditions will apply to all hire of equipment along with special terms and conditions that may be subject of negotiation from time to time."

   and:

   "The hirer agrees:

   ...

   8.That no warranty or condition expressed or implied is given by the owner as to the condition of the Plant or as to the suitability or fitness of the Plant for any purpose."

10. These written terms which exist in the plaintiff's hire documents, are said by Nea to form terms of the contract of hire agreed upon.  Magenta, on the other hand, denies this and asserts that the agreement for the hire of all the plant, including the Hazemag Impactor, was concluded by oral discussions between the representatives of the parties and was complete before the standard forms, containing these terms, were later sent to its directors by the plaintiff.

11. Magenta further contends that implied undertakings as to quality and fitness of the plant arose because of the operation of s 71 of the Trade Practices Act 1974 (Cth) so that even if, contrary to its case, the express exclusion of conditions or warranties of fitness, propounded by cl 8, did constitute any part of the contract the effect of that clause is expressly excluded by virtue of the operation of s 68 of the Trade Practices Act. To this contention the plaintiff responds that Magenta was not a "consumer" within the meaning of that term in s 71 of the Trade Practices Act - see s 4B of that Act.

12. A significant further part of the plaintiff's case is that, quite apart from its denial that there were any express or implied representations made as to the suitability or fitness of the Hazemag crusher and other plant to perform the task contemplated by Magenta before or at the time of the contract of hire, that (implied terms under s 71 of the TPA aside) no such representations could be found to have been made when the significance of the written terms of the hire contract, cl 8 in particular, are taken into account. The submission in this regard is that the existence of the express term excluding any such conditions or warranties made it clear to the hirer that no assurances of any kind were being given and, accordingly, nothing that may have been said or implied about the plant during the course of negotiations could have any effect as an inducement to enter the contract or otherwise.

13. Magenta's main defence to the plaintiff's action for hire charges or damages is its claim of a total failure of consideration.  The basis for this arises from its allegations about the unsuitability of the plant for the operations at Hawkins Find.  So the major issues in the case are those arising from the counterclaim.  In addition to the issues already described, the plaintiff submits that, if contrary to its primary position, it is at all liable to the defendant on the counterclaim then the damages sought have been claimed by reference to a wrong measure.  The plaintiff submits that this is because the most that the defendant could obtain would be the additional costs, if any, of hiring other plant to perform the crushing operation intended together with the loss of profits or expenses associated with a delay in the operations for no longer than a reasonable period needed to obtain and install substitute plant.

1. The plaintiff's submission is that the defendant's counterclaim for all expenses associated with the closing down of the operation and, further, for the loss of profits which Magenta asserts it would have made had the venture been completed successfully, is quite beyond the scope of damages which may be recovered under s 82 of the Trade Practices Act.  Further, at the factual level Nea maintains that the evidence does not support a conclusion that the venture would have operated profitably as claimed and that losses and damages claimed as part of shutting down the operations were not caused by the plaintiff.

2. The defendant's counterclaim is also made against Mr Geoffrey Groenenberg on the basis that he was a person knowingly involved in the contravention of s 52 of the Trade Practices Act and, therefore, is concurrently liable with the plaintiff as a result of the operation of s 75B(1)(c) of the Trade Practices Act.  Apart from defending the counterclaim on all the issues already described, Mr Groenenberg also maintains that he was no more than the agent or representative of the plaintiff, acting entirely within the scope of that role and as such is not personally liable.

3. In order to identify the basis for these conflicting contentions and before attempting to resolve them it is necessary to describe the events leading to this dispute, and the nature of the disputes, in some detail.

Progress of litigation

1. This case has, unfortunately, had a very protracted and interrupted history.  The plaintiff's claim (CIV 2348 of 1996) was commenced in 1996, being an action for the recovery of unpaid hire charges or damages as already described.  Later, the defendant instituted another action CIV 1821 of 1998 seeking damages for alleged breach of the contract for the hire and supply of the machinery, including claims for damages for misleading and deceptive conduct.  The two actions were consolidated in this Court by order of 23 September 1999 and from then on had a lengthy history of interlocutory applications involving amendments to the pleadings and disputes over discovery.  The consolidated actions came on for trial for five days in September 2002 and at the commencement of the trial the defendant sought leave to make a series of amendments to its defence and counterclaim, and also to add a claim for damages for alleged negligent misrepresentation.  I granted leave to the defendant to make a series of relatively minor amendments in relation to the causes of action which had already been joined in the proceedings but refused leave to introduce a claim for alleged negligent misrepresentation at that late stage.  The plaintiff was granted leave to file an amended reply and defence to counterclaim and that was done.

2. It soon became evident that the listing of five days hearing for the duration of the trial was a substantial underestimate and that significant additional time would be needed.  Unfortunately, due to listing commitments it was not possible to continue with the trial after the first five days of hearing.  However, there had been a series of protests made during the course of those five days of hearing on behalf of the plaintiff about alleged inadequate discovery by the defendant, particularly in relation to its financial records, banking records, financial statements and tax returns for the financial years ending 30 June 1994 and following.

3. After the plaintiff's case had initially closed and Mr Halbert had begun giving evidence for the defendant, he produced and made reference to his diary for the 1995 year which contained many manuscript references to events which had occurred, together with notes of meetings and other discussions relating to the project at Hawkins Find.  This diary had not previously been discovered nor had counsel for the plaintiff had any opportunity to scrutinise it for the purposes of cross‑examination or taking instructions.  Consequently, at the end of the first five days of the trial, when Mr Halbert was still giving evidence, it was necessary to adjourn the trial sine die to obtain another listing and to order that the diary be made available for inspection and that a further affidavit or affidavits of discovery should be served by the defendant referring to the diary and to other material documents which, by then, it seemed probable had at least at some time in the past been in the possession of the defendant.  At that stage it was estimated that a further three days would be needed to complete the trial.

4. The trial resumed on 3 March 2004 and ran for a further three days without concluding.  In the long interval before this resumption additional discovery had been given by the defendant.  Also the defendant's accountant had prepared detailed financial statements for Magenta for each of the financial years ending 30 June 1994 to 30 June 2000 and these, and some other material documents, had been disclosed to and inspected by the plaintiff.  In the light of these developments counsel for the plaintiff sought and was granted leave to re‑open the plaintiff's case to adduce further evidence dealing with matters which the plaintiff had not been able to address before.  Although leave was granted in this respect, further evidence for the plaintiff was not called until after Mr Halbert had completed giving evidence for the defendant.

5. In the course of his cross‑examination it emerged that many other documents relating to the defendant's financial position and, in particular, in relation to cash deposits which it had with the Commonwealth Bank at the time the Hawkins Find project was being proposed and set up were missing.  There had been no mention of these in the discovery or supplementary discovery which had been given by the defendant but, in evidence, Mr Halbert explained how these records had been held by his colleague Mr Bandy and had been destroyed in a fire which had burned down his office premises.  The absence of these records inevitably meant that the process of cross‑examination was more protracted and more far‑ranging than might otherwise have been the case.

6. Even then, however, the additional three days proved insufficient and another five days of hearing became necessary and were supplemented with written submissions.  The absence of many of the contemporary financial records of the defendant has made the task of dealing with the defendant's counterclaim for damages, and in particular the plaintiff's scrutiny of this, difficult and gives rise to a need for special care and some reserve in the examination of those claims.

Magenta - Mourillion Mining - Joint Venture

1. In 1984 the mining lease over the land at Hawkins Find was held by Westcoast Holdings Ltd.  It carried out gold extraction processes for some time but these ceased when the company experienced severe financial problems.  Some time later the mining lease was acquired by Mr Robert Hoppman and, possibly, by his sister the two of whom conducted business under the name Mourillion Mining.  Mr Hoppman had access to many of the geological and mining records of Hawkins Find which had been prepared or obtained by Westcoast Holdings Ltd, including the reports (Exhibits 15(1) and 15(2)).  His brother was also associated, in some way, with the gold miner Croesus Mining NL and, through him, Mr Hoppman had access to geological and metallurgical sampling facilities.

2. In the early months of 1995 Messrs Halbert and Bandy of Magenta were looking for a small gold extraction project to operate as they had been involved in minor ways in projects at Lindsay's Reward near Gindalbie, north‑east of Kanowna, in trucking operations for Mr Hoppman and at Yarri near Edjudina, east of Menzies.  They had also been involved in a small gold operation near Paraburdoo in the Pilbara region.  Magenta was looking for another small project to operate itself and Mr Hoppman offered Messrs Halbert and Bandy an opportunity to participate in an operation at Hawkins Find for gold recovery by heap leach extraction from an existing ore stockpile.  Mr Halbert and Mr Bandy sought advice from a consultant, Mr David Hurley, and he advised them about the prospect of joining in a joint venture at Hawkins Find.

3. Messrs Halbert and Bandy, on behalf of Magenta, decided to go ahead and entered into an informal oral joint venture agreement with Mr Hoppman on behalf of Mourillion Mining.  This joint venture agreement was not documented at the time but later, according to Mr Bandy, a letter was written containing its broad terms.  This was never produced but a written memorandum containing the main terms of the agreement was later sent by fax from Mr Hoppman to Mr Bandy on 2 July 1996.  This is Exhibit 31 and, I accept, sets out the principal terms of the joint venture arrangement between Mourillion Mining and Magenta.

4. Exhibit 31 states that the purpose of the joint venture is to process:  existing heaped material; existing ore at (?); and existing and further ore from the pit, situated at Hawkins Find Ora Banda.  The process method was to be by heap leach and gravity circuit.  The two joint venturers were Mourillion Mining and Magenta Mining.  The obligations of the two parties were as follows:

   "Magenta to supply:

   •crushing plant ex Perth and KJA;

   •earthmoving machinery and operators;

   •fuel;

   •liners - dam and leach pad;

   •mobilisation of all equipment;

   •earthworks and mining;

   •site facilities - office, ablution;

   •all labour to above;

   •commissioning of crushing plant, including all electrical;

   Mourillion Mining to supply:

   •water piping and pumps;

   •Knelson Concentrator;

   •Mines Department letter of intent;

   •Bond to Mines Department;

   •all reagents;

   •carbon tanks, sprinklers etc;

   •a kit for site facilities;

   •steel tanks;

   •grizzly"

   This memorandum went on to provide that all capital expenditure items were to be submitted to the joint venturers by invoice and to be repaid pro‑rata prior to distribution of profits from sale of gold.  All rates for day labour and machinery were to be agreed prior to commencement.  All profits from the sale of gold produced were to be distributed after mining costs had been met.

5. The plan was for Magenta and Mourillion Mining, respectively, to provide the plant and services listed and for all capital and operational expenditure, once agreed by the joint venture, to be paid from the proceeds of the sale of gold recovered.  The remaining proceeds from gold sales were to be divided equally between the two joint venturers.

6. The reference to gravity circuit as one of the methods of gold extraction is a reference to the Knelson Concentrator which is a commercialised centrifuge process which separates particles of free gold from fines passed through the centrifuge.

7. There was no period fixed for the duration of the joint venture but its terms contemplated that it would involve more than merely treating the stockpile of about 178,000 tonnes of partly crushed ore on the surface.  As described by Mr Bandy, and by Mr Halbert, the intention was to process the surface stockpile by the crushing circuit which they would initially establish in order to obtain a quick cash flow from the sale of gold recovered.  They anticipated that a positive cash flow from gold sales would be achieved within the first few weeks of operations.  Depending upon progress, Messrs Bandy and Halbert had in mind that after three months or more of successful operations Magenta may be in a position to purchase the crushing plant.  It was for that reason that they raised with Mr G Groenenberg the possibility of a hire/buy arrangement for the crushing circuit and also why they enquired from him about the cost of purchasing the equipment initially taken on hire.  They expected that it would take 12 months or more to crush and treat the stockpile at Hawkins Find by the heap leach process and by the associated process of gold concentration.

8. After that, depending upon performance, the directors of Magenta and Mr Hoppman had in mind that it may be possible to treat the larger run of mine (ROM) ore which was on the floor of the open pit at Hawkins Find and then, still later, perhaps to begin ore extraction operations from the pit to provide further feed for the process.  In July 1995 the treatment of ROM ore from the floor of the pit and further ore extraction operations at Hawkins Find were distant prospects dependent upon progress achieved and cash flow from the heap leaching of the stockpile.  But they provided further potential for continuing operations at Hawkins Find beyond the initial 12 months.  Messrs Bandy and Halbert contemplated that there may have been a profitable operation from this process of development lasting two or three years.

9. A feature of this joint venture arrangement which is of particular significance for Magenta's present counterclaim is that the defendant did not acquire, nor did it have any entitlement to acquire, any interest in the mining lease over the land at Hawkins Find.  This remained the property of Mourillion Mining and it was Mr Hoppman's to dispose of, as he eventually did, to Mr Photios or to any other prospective partner.  Magenta and Mourillion Mining treated the arrangement as one which was to exist and endure only so long as successful gold extraction operations could be achieved from the ore treatment process.  The venture was to continue unless and until the arrangement was terminated on reasonable notice by one or other of the joint venturers deciding to withdraw.  Consequently, Magenta not only had no proprietary interest in the mining lease but, its continuation in the project was dependent upon profitable gold extraction operations becoming established and continuing together with maintenance of the good working relationship between it and Mr Hoppman.

10. As the parties have worked together at the Lindsay's Reward project in the past there is no reason to conclude that there was anything but a good stable working relationship between the two joint venturers or that it would not have continued for as long as profitable gold recovery operations could be maintained at Hawkins Find.  In the absence of other major problems involving plant breakdown, accidents or severe deterioration in the gold price, I consider that it is probable that, if the gold recovery rates were satisfactory, the joint venture would have continued at least until the processing of the stockpile had been completed, that is, for about 12 months or so.

11. Despite their interest in mining operations and their involvement in gold mining projects at Lindsay's Reward, Gindalbie, Yarri and Paraburdoo neither Mr Halbert nor Mr Bandy had been involved directly in any ore crushing or gold recovery operations before the one at Hawkins Find.  Their interest and association with gold mining had developed from, in Mr Halbert's case a farming background and familiarity with heavy plant and machinery, and in Mr Bandy's case, machinery management and transport which led them both into trucking operations involving the transport of ores on contract from various mining operations to treatment plants.  It was such an ore transport operation in which they were involved with Mr Hoppman at Lindsay's Reward.

12. In 1994 Magenta had had an involvement in an open cut operation at Kunnanalling.  Mr Bandy described this as a drill and blast operation followed by heap leaching but involving no crushing.  I accept that neither Mr Halbert nor Mr Bandy had any significant knowledge or experience in crushing operations, or, in particular, with jaw, cone or impact crushers before they approached Nea to enquire about a crushing plant for Hawkins Find.

The Hawkins Find gold operation

1. The Mining Lease M16/231 known as "Hawkins Find" lies about 50 kms north‑west of Kalgoorlie.  It is more to the north of Coolgardie and slightly south of Ora Banda.  It is just 1½ kms west of the Grants Patch mining area and near the Dark Horse and Renown Gold Mines.  Access to the area is from the north by the Broad Arrow/Ora Banda Road.  The mine occurs in a very hard, dense quartz/feldspar granite porphyry instrusive in an ultramafic.  In a report prepared in January 1996, a consultant described the mine and its geology as follows (Exhibit 51):

   "Mining at Hawkins Find prior to May '86 excavated an open pit to minus 16m in oxidised mineralised porphyry injected into a shear system within a series of ultramafics, and an incompletely measured amount of sulphide material has been taken to the minus 24m or minus 26m level.  The pit was designed and pre‑stripped to minus 50m.  Mineralisation is low grade Au associated with a sulphide wall rock alteration adjacent to quartz veins within the host porphyry, and the work index of the ore is 17‑18 kWh/t.  The material on offer at Hawkins Find includes a quantity of uncrushed broken stock of low grade porphyry both in and out of the open pit, which has been sampled and roughly mapped.  Heap leach pads of sulphide material crushed to minus 40mm are also laid out near the top of the pit.  Total remaining reserves have been crudely estimated from sparse previous drilling to be approximately 323,000t @ 1.37g/t."

2. In a later report prepared for the defendant in March 2001 (Exhibit 43), the operation and production history of the mine is set out.  This reported the production of gold by prospectors in the area since 1897 but the recorded output from Hawkins Find before 1971 was only very small - 3.730kgs (120oz) from 638 tonnes of ore.  Between 1971 and 1987 gold production was higher with 130,735 tonnes of ore yielding an average recovery of 1.16g of gold per tonne.  This was recovered by heap leaching with sodium cyanide but that process stopped in March 1988.  The author of this report added:

   "During the period when this heap leach pad was in operation (1971‑87) gold recovery suffered due to lack of proper grinding to produce optimum ore particle size for heap leaching and poor maintenance of the piles and cyanide feed solution distribution and pregnant liquor collection and carbon stripping."

3. In 1995 there were no mining operations underway or contemplated at Hawkins Find, that is, in the sense of ore recovery by open pit or underground operation.  There was, however, a sizeable stockpile of mined ore on the surface which had been partially crushed to approximately 40mm dimensions or less.  There was additional ore crushed to approximately 200mm to 150mm.  The estimates made by Magenta, and Mr Hoppman who was associated with Magenta, were that there was approximately 178,000 tones of broken ore in this stockpile and the limited sampling which had been conducted suggested that the average grade was about 1.3g/t of Au.  Their proposal was to heap leach this stockpile of ore, first by crushing it to finer dimensions (8mm or less) and then piling those fines in heap leach pads and treating them with a sodium cyanide solution.

4. These pads or ponds would be large flat shallow excavations in the surface lined with a strong impermeable plastic or polythene liner upon which would be piled the heap of crushed ore to be leached.  The leaching solution, of cyanide and other chemicals, would be sprayed or poured onto the crushed aggregate and left for some days.  The effect of the leaching solution on the small crushed items of aggregate would be to dissolve into solution most of the gold contained in the ore.  The smaller the particles and, therefore, the greater the surface area of their content exposed to leaching, the greater would be the recovery of the gold contained in the aggregate by this process.  Not all the gold would be recovered but a sufficiently high proportion to make the process economic was expected.  Clearly, the smaller the particles the greater the recovery of the gold content by the leaching.  8mm in dimension or less was considered to give the best return consistent with the extra costs and efforts of crushing larger ore into smaller fines.

1. After the pile of fines had been left leaching in the cyanide solution for some days, the leaching liquor, which by then had collected in the bottom of the pans and was retained by the plastic sheeting, would be drawn off and itself subject to further treatment which would result in the precipitation and recovery of the gold from the auric solutions which had been formed by the process.

2. As a gold recovery process, this was relatively simple and could be operated by a few men comparatively easily and with little in the way of major sophisticated equipment.  What was needed was some mobile machinery to move the larger ore from the stockpile to a crusher and a crusher or a series of crushers which would smash the stockpile ore down to a size suitable to be laid out in the leaching pans.  As well as a crusher, a screening plant or plants were needed to sift the product from the crusher so as to separate the particles which were at, or below, the maximum size acceptable for the leaching pans.  Inevitably, some proportion of the crushed product would be too large and that would be separated by the screening process and re‑circulated for further crushing until it reached a size which would pass the screens.  The newly screened ore would then be laid out in the various leach pads and the leaching process would be begun, continued and then be followed by the gold recovery process already described.

3. Prior to the introduction of the leaching solution onto the fines laid out in the heaps or pans the process was a dry process, that is, the crushed ore remained as aggregate ore in the form of dry fines all less than 8mm and some of which might, indeed, be very fine.  It was not mixed with water or other liquids to form a slurry, such as occurs in some other different gold recovery processes.  However, the crushing and screening process would also produce a small amount of very fine and almost powdery material which, it was later realised, could be readily diverted to a wet process and the resulting slurry passed through a gravity or centrifugal process for recovery of free gold by separation.  The rest of the slurry could then be reticulated to the heap leach pads to go through the cyanide process mixed with the (until then) dry fines.  As will emerge later, it was found convenient at Hawkins Find to add a separate wet stream to deal with some of the crushed product in this latter fashion.  Obviously, however, this second wet or slurry process also depended on feed coming from the crushing process but of much finer dimensions.

4. With the ore in the stockpile being of up to 200mm in any one dimension what was needed was a crushing plant and screening system which would reduce that ore to less than 8mm in any one dimension and with the facility to separate out and recycle ore which was not reduced to that dimension by the first or any subsequent pass through the crusher.  Machinery to move the ore, conveyors to move it to and from the crusher, screening plants and other conveyors were needed.  A crusher was vital to this process and its capacity to crush the ore to the requisite dimensions, on a first or later pass, and to continue operating for long periods with a sufficient throughput was essential.  Quite simply, if the ore could not be crushed to the requisite dimensions or smaller there would be no aggregate to be laid out in the heap leach pans, nor any fines to go through the wet process and, therefore, no gold recovered.

The Bond Work Index of the ore

1. Ores vary in their hardness or abrasiveness and, consequently, require widely varying degrees of force to be crushed or fragmented.  Limestone, shale, clay, bauxite and calcite are all relatively soft ores in comparison with basalt, gneiss, stone and granite/porphyry.  A measure of the comparative hardness of such ores with reference to the energy per unit of time, indicates the ore to be treated has been devised and is known as the "Bond Work Index" or the "Bond Impact Crushing Work Index".  This index expressed as a measure of work, that is units of energy per unit of time, is expressed as indicating the amount of work required to crush a tonne of the particular ore and hence is expressed as a figure of x Kwh/tonne for the ore being treated.

2. The expert evidence in this case indicated that the Bond Work Index, while useful, was of limited value in providing necessary information about the requirements for crushing the particular ore because, in addition to the Bond Work Index, a measure of the abrasiveness of the particular ore would also be needed in order to reach conclusions about the suitability of any particular machinery to crush that ore.  Some ores can have a Bond Work Index which is not at the highest levels but, because the ore is particularly abrasive will nevertheless result in great wear and tear on crushing apparatus.  The stockpiled ore at Hawkins Find comprising of granite porphyry with large elements of quartz (silica) was particularly abrasive because of its silica content.

3. The significance of a Bond Work Index for any particular ore and the additional importance of the abrasive characteristics of the ore for decisions to be made about the method and layout of a crushing circuit were not well understood by the representatives of the plaintiff or of the defendant who were involved in this case.  The historical records and earlier appraisal reports of the Hawkins Find ore described it as being particularly hard with a Bond Work Index of 17‑18 kwh/tonne but apart from saying that they had read and repeated that statistic in their discussions about the selection of machinery for the crushing circuit at Hawkins Find, neither Mr Halbert nor Mr Bandy had any real appreciation of what that meant or of its significance for the suitability of any crushing apparatus.  Mr Groenenberg's appreciation was no better but he has always maintained that no‑one on behalf of Magenta ever informed him that the Hawkins Find ore had a Bond Work Index of 17 or 18 or any other figure.  His evidence was that he explained to the directors of Magenta in his discussions with him that the Hazemag Impactor would be suitable only for soft rock and that upon being told that the feed which was intended for this crushing plant was soft rock, did not pursue or develop the matter further.

The hardness of the ore

1. Before they visited Mr G Groenenberg at the plaintiff's premises on 25 July 1995 Messrs Halbert and Bandy had received and read extracts from a report entitled "A Valuation of Ore Reserves Hawkins Find", which had been commissioned by West Coast Holdings Ltd in February 1984.  The entire report had been obtained by Mr Hoppman of Mourillion Mining who had introduced them to the Hawkins Find joint venture.  He had made copies of the summary and recommendations of the two volumes of that report and had given them to the directors of Magenta to examine.  I am satisfied that Messrs Halbert and Bandy had these pages with them when they first visited Mr G Groenenberg.

2. These summaries described the geology and mineralisation at the Hawkins Find lease and gave estimates of gold reserves and extraction rates as well as detailed mineralogical data.  With respect to the hardness of the ore the reports included the following passages (Exhibit 15(1) and 15(2)):

   "The major difficulty with the ore is its hardness, being assigned a Bond Work Index of about 17 kWh/t.  Crushing and grinding requirements will present a significant cost."

   And, as part of subpar 5.6 which described a test undertaken by Mr L I Smith on a sample of Hawkins Find ore taken from the stockpile and crushed at Grant's Patch some time before February 1984:

   "The ore is hard with a Bond Work Index of 17 kWh/t, requiring two stages of closed circuit crushing to produce a suitable ball or rod mill feed (minus 9.5mm).

   ...  The ore proved to be extremely hard, yielding only 38 per cent passing the 6.25mm diameter trommel screen after a pass through the Hazemag crusher."

   (It is to be noted that the Hazemag crusher referred to in this passage for the testing of the ore at the Grant's Patch mill before 1984 was not the Hazemag Impactor which is the subject of the present action.)

3. Following his visit to the site on 9 October 1995 the engineer, Mr T Kendall, wrote a report to Mr Halbert about problems which he observed with the Hazemag Impactor at Hawkins Find.  The contents of this report (Exhibit 36) were largely accepted by Mr G Groenenberg in cross‑examination.  Within the report, after describing severe wear on its parts, Mr Kendall observed:

   "The ore is hard and abrasive and the crusher needs to be set up with this in mind."

4. The defendant adduced evidence from Mr Trevor Bilney, a qualified and experienced metallurgist, who, at the date of trial was employed as a senior process metallurgist for Western Mining Resources Ltd at Mt Keith.  He had been a metallurgist on the staff at Amdel in Adelaide from December 1994 to February 1999 and was subsequently manager of the laboratory at the Mineral Research Centre at the University of Queensland.  Mr Bilney was a very well qualified and experienced metallurgist and I accept his evidence entirely.

5. In November 1998, while at Amdel, Mr Bilney had been engaged to prepare a report on the impact crushing work index of ore from Hawkins Find.  Samples had been sent to him in Adelaide from Ammtec in Perth which had been engaged to advise Magenta on this subject.  The tests which he undertook were to determine the energy required to break the sample rocks.  The sample size rocks which he received were, generally, from less than 45 mm to greater than 38 mm in dimension, that is, slightly smaller than the generality of the ore in the stockpile at Hawkins Find.  Consequently, his results, cannot be regarded as determinative of the hardness of the rock in the stockpile but Mr Bilney said, and I accept, that they were indicative of that hardness.  In cross‑examination Mr Bilney accepted that the probabilities were that had he tested samples from the stockpile of less than 76 mm to more than 51 mm, that is a typical size from the stockpile, the Bond Work Index would have been higher and possibly as high as 15, although that was only an estimate.  His report (Exhibit 24) included:

   "  Work Index‑kWh/tonne

   Average  12.8

   Maximum  35.6

   Minimum  6.8

   Standard deviation  6.5"

6. The detailed results for each sample processed are to be found in the report, together with a table showing the average crushing work indices for various forms of ore.  Mr Bilney described the results as indicating a wide range of hardness.  He contrasted the hardness of rock with its abrasiveness and emphasised that the Bond Work Index test did not measure abrasiveness although, it could also be regarded as being indicative of that characteristic.  The Ammtec Ltd report to Mr Halbert incorporating Mr Bilney's work at Adelaide and submitted to Mr Halbert is Exhibit 25.

7. In March 2001 Mr Alan W Popp, an experienced consultant geologist, prepared a report on the Hawkins Find mine site for Mr Halbert although he never visited the site.  At that time Mr Popp was operating as a consultant to the mining industry through a company which he had set up, Barrington Resources Pty Ltd.  His report is Exhibit 43 and his extensive curriculum vitae is Exhibit 42.  Mr Popp did not give evidence at the trial but had given evidence de bene esse before a Registrar of this Court on 6 September 2002 and, by consent and without objection, the transcript of that examination was tendered as Exhibit 41.  There are several references to the hardness of the ore at Hawkins Find in Mr Popp's report, as follows:

   ‑ in par 3 ‑

   "The mine occurs in a very hard, dense quartz/feldspar granite porphyry intrusive in an ultramafic host rock."

   ‑ in par 6 ‑

   "The porphyry gold deposits which occur in the quartz/feldspar granite in the mineralised shear zones along the Binduli anticline are noted for their hardness and density.  The oxide and sulphide mineralisation occurs in the hydro thermal quartz veins and the shear zones are generally enclosed in softer ultramafic wall rocks.  This is both an advantage and a disadvantage as this softer wall rock generally exhibits low to medium Bond impact crushing Work Index test results in the range of 7 to 12 while the mineralisation vein quartz has a much higher Work Index ranging from 13 to as much as 35 and averages about 17 ‑ 20.  Results of the Bond Index work test done by Ammtec and Amdel are reported in the 12 November 1998 report.  The Bond Work Index is used to determine primary and secondary crusher requirements.  Test work carried out on an adjacent porphyry gold deposit just south of Hawkins Find indicates that a four stage crushing and grinding circuit is required to produce a product that can be readily leached using cyanide."

8. Mr Popp confirmed this in his evidence before the Registrar (Exhibit 41 p 30) and in the course of cross‑examination went on to accept that, with an average work index of 12.8 and a standard deviation of 6.5 that the upper limit that the samples of rock extracted and tested would be the sum of those figures or approximately 19.3 (Exhibit 41 p 32 – 33).

9. This was the extent of the scientific evidence about the hardness or abrasiveness of the ore at Hawkins Find but there was other, observational, evidence on the topic of a qualitative rather than a quantitative nature.  Mr Trevor Thomas, a fitter from Nea who had been sent to Hawkins Find on 27 September 1995 to install a new hydraulic pump was having a work‑break at the campsite and noticed that the roadways and pathways which had been laid comprised of crushed metal causing him to remark to one of the Magenta personnel that he hoped that they (Magenta) were not crushing this rock because it was too hard.  He says there was an equivocal response made to that observation.  Messrs Halbert and Bandy later denied this but gave evidence that the roads and the pathways which had been laid out comprised material from a stockpile of waste rock which was not ore that had been separated and used for incidental purposes and I have no reason to doubt that explanation.

10. Similarly, Mr Joshua Groenenberg, the son of Mr Geoffrey Groenenberg who had been sent to the site with the plant to commission it and was at Hawkins Find for six or seven days between 18 and 26 September 1995 described how, after the impactor had been set up, he and Bandy and Halbert put a small load of ore through the crusher.  At the time he took a sample of the ore, placed it on a tow bar hitch and struck it with a 32 ounce ballpane hammer but it did not break causing him to remark that it was pretty hard rock.  He was unable to identify who else was there at the time but said that this unidentified person remarked that they thought they may have the wrong crusher for this rock.  I am not able to make a finding that this was said, or was not said by either Mr Halbert or Mr Bandy.  Even if it was said, however, by then the supply and equipment hire contract had been agreed upon and the plant installed and any such observation, even if made, cannot affect the outcome of any issue in this case.

11. Mr Brent Cooper, director of Hydra Plant Equipment Pty Ltd in 1995 which then shared premises with Nea, gave evidence about a conversation which he had with Mr G Groenenberg in July 1995 about the proposal to hire the Hazemag Impactor to Magenta.  In the course of giving his evidence he described how impact crushers are very susceptible to wear and that he had a bad experience with such a crusher used out of Karratha and resulting in very high wear.  He described using impact crushers successfully in the 1980s on gold bearing laterites at Marvel Loch.

12. The defendant called Mr Michael Photios a prospector/gold producer who has made a business of processing old tailings and stock piles in the eastern goldfields for about 25 years.  After the departure of Magenta from Hawkins Find, Mr Photios entered into a joint venture arrangement with Mr Hoppman to process the existing heap leach piles at that site and to divide the proceeds of the gold recovered in equal shares.  After about 12 months, Mr Photios and a colleague, Mr Max Brown purchased the lease from Mr Hoppman and worked it for three years or so.  In addition to processing the stockpiled ore they extracted about 1800 tons of ore from the pit.  They sent about 400 tons of that ore for crushing to the Coolgardie custom mill but, so Mr Photios related, it broke the crusher.  The crusher at Coolgardie which broke after processing about 400 tons of ore from the Hawkins Find pit was an impact crusher.  No dimensions were given of the ore recovered from the pit.  After that the ore recovered was crushed by Barminco at a Greenfields smelting plant at Coolgardie. 

13. Taken in conjunction with the evidence about the quartz content in the granite porphyry ore at Hawkins Find I consider that the evidence establishes that the stockpile of the ore to be processed was both hard and abrasive but had a varying range of hardness as described by Mr Bilney.  His conclusion that the mean bond impact index for the ore which he sampled was 12.5 with the standard deviation of 6.5 is consistent with the reports in Exhibit 15 (the West Coast Holdings Evaluation Report) that the ore had a Bond Work Index of about 17 kWh/t and with the evidence of Messrs Bandy of Halbert that they told Mr Groenenberg at their first meeting that the ore had a Bond Work Index of 18.

14. While this certainly indicates that the rock was hard, an impression any person would readily gain merely from inspection of the samples (Exhibit 23), it does not suggest that they were exceptionally hard.  There is also evidence which I accept that impact crushers had been used for this or comparable ore at Grants Patch and Coolgardie, although with breakdowns at the latter site.  There is the evidence of Mr Cooper that impact crushers had been used in the goldfields in the 1980's although, again, that problems were experienced with them.  It follows that, with suitable warnings and with the anticipation of higher rates of wear, it would be reasonable to expect that an impact crusher properly configured in good working order could crush gold bearing ore but with high rates of wear.

The Hazemag - AP4B Impactor

1. The Hazemag‑AP4B Impactor was a vital component in the plant hired by the plaintiff to the defendant.  It is illustrated in the photographs (Exhibit 13.1) and in further photographs and diagrams contained in the appendices in the report prepared for Magenta by Sinclair Knight Merz Pty Ltd (Exhibit 38).  Essentially, the impactor comprises a large steel box‑like structure with an entry port into which the material to be crushed can be fed by a conveyor or other apparatus.  Inside the large steel structure is a high‑powered electrically driven motor which drives a large cylindrical shaped rotor.  This rotor has a series of strengthened metal arms, extending radially for the full length of the rotating cylinder, which are shaped to allow the ore feed to be drawn in and forced through the space within which the rotor and its radially extended arms are rotating.  The ends of these radial arms of the rotating cylinder are designed to take removeable components known as "blow bars" which are of specially hardened steel.  The edges of these "blow bars", as the apparatus rotates, trap the ore feed caught in the rotating cylinder between them and interior fixed metal plates on the walls of the cylinder, thus applying the crushing force to the ore which can only fragment under this rapidly repeated series of batterings.  The small margin of space between the rotating "blow bars" on the radial arms of the rotor and the crushing walls of the cylinder in which it is operating are set at predetermined distances so as to ensure that the size of ore taken into the rotor is reduced to at least that dimension before it can escape from the crushing process.

2. Clearly, very great forces are applied to the fragments of ore inside the crusher by this smashing, compressive and grinding process which is taking place in a series of rapid sequences.  The force applied to the ore results in similar forces on the "blow bars" and other crushing areas of the rotor and, more particularly, on the crushing or wear plates within the impactor against which the ore is opposed by this process.  Inevitably this causes wear, particularly to the "blow bars" and to the wear plates on the inside of the crusher but, also, to most of the other components of the crusher.  It is for this reason that the "blow bars" are designed to be removeable so that, as their crushing edges are worn away by this constant abrasion and compression, they can be reversed to employ their opposing sides before being discarded and replaced by new "blow bars".  Similarly, the wear plates inside the crusher have to be replaced from time to time and the settings constantly checked and revised to ensure that the pre‑set distances are reset from time to time to maintain the desired size of the crushed product.

1. Not all the crushed ore which emerges from the impactor from this process is of a dimension sufficiently small for the heap leaching process.  It is not practical to set the clearances in the crushing rotor to exactly 8mm because that would result in the bulk of the product being much smaller and would require much greater energy (and therefore more power) for the crusher and a greatly increased rate of wear on all the components.  As one piece of ore is smashed in the crushing process it will produce fragments of varying size many, but not all, smaller than 8mm.  The output of the crusher is then passed over an 8mm screen so that all fragments of that size and smaller fall through and are taken by a conveyor to the next stage in the process.  Fragments of ore which do not pass the 8mm screen are diverted onto another conveyor and are recycled for re‑introduction to the crusher before reaching the same screen on a second or subsequent pass.

2. By this means the ore which is fed into the crusher comprises a quantity or ore from the original stockpile, that is ore of 200mm to 40mm dimensions or thereabouts, plus recycled ore which has been through the crusher at least once but is not yet small enough to pass the 8mm screen.  The more ore that is recycled in this way for a second or subsequent passing through the crusher, the less capacity there is for the impactor to accommodate the larger ore direct from the stockpile.  This is another way of saying that the higher the proportion of first crushings which do not pass the 8mm screen, the lower the output of the crusher for the production of aggregate of acceptable size.

3. The crusher in the circuit was expected to operate continuously, except for maintenance periods when it would have to be stopped, blow bars reversed or replaced and internal wear plates inspected, replaced and clearance settings re‑adjusted.  Otherwise it was expected to operate on a 10 hour per day basis and to crush to the acceptable limits 50 tonnes or more of ore per hour.

4. Once the product of the crusher had passed the first 8mm screen it would be taken by conveyor to a second screen which separated out all particles of less than 3mm in dimension.  The aggregate which did not pass this second screen, that is ore greater than 3mm and less than 8mm in dimension would then be removed and stockpiled for eventual placement in a heap leach pile.  The particles of 3mm or less would be diverted into the wet process to be mixed with the slurry and to be fed into the gravity/centrifuge gold recovery process.  So it was that two streams of material came from the crushing circuit:  the first to be placed in the heap leach process and the second to be treated through the wet process for gold recovery, before also being sent to the leaching pads.

5. Before feeding any ore into the crusher it was necessary to take precautions to prevent any iron, steel or other ferrous materials being fed into the machine.  There is always a risk that fragments of iron or steel, bolts, screws, broken pieces of machinery, wire or metallic bands from containers may get caught up in the ore.  Any such items had the potential to cause considerable damage and wear to the crusher if introduced to it among the ore feed.  For that reason all ore fed into the crusher passed along a conveyor over which a powerful electro magnet was hung and kept charged during the operations.  This magnetic field attracted and removed items of iron and steel and other ferro‑magnetic materials that might inadvertently have found their way into the feed.

6. There are other quite different crushing or impacting systems for use in treating gold‑bearing ores, depending upon the size, quantity and type of ore involved.   Where it is necessary to crush ROM ore of large dimensions and introduce that into varying treatment plants it is often the case that a series of crushing operations takes place and that different types of crushers are used in sequence.  Hence, there may be a primary, secondary or tertiary crusher in which, at the primary stage, the ROM ore is reduced to a certain size, perhaps about 200mm, as must have occurred before the accumulation of this stockpile of ore at Hawkins Find.  Next, there may be a secondary crusher which reduces it from the intermediate size to a smaller size which will depend upon the requirements of the processing operation and the economics of the particular operation.  There may be a third crusher which pulverises the ore to produce a far finer product and this may occur by dry crushing or by wet crushing in a ball mill or other process.  So there are various kinds of crushers at various stages of the process, including jaw crushers, bell crushers and various different kinds of impact crushers.

7. Whether it is possible, practicable and economic to reduce the ore which is to be treated to the desired size by a single crusher will be a matter for judgment based on a variety of factors, not the least of which are the capital cost of acquiring and operating the crusher, the type and size of the ore and its quantity, all of which will affect the economics of the operation.  For a small treatment plant, with a relatively limited quantity of ore to be treated, as was the case for this project at Hawkins Find, it would not have been economical to acquire or utilise a large capacity jaw or bell crusher or a series of crushers for the low grade gold‑bearing ore to be treated.  The choice of a crusher, or a series of crushers, which would perform the task required at Hawkins Find on the ore from the stockpile was, therefore, plainly a matter for careful selection and judgment.

The condition of Hazemag AP4B Impactor - Serial No 106420

1. As the more detailed examination of the evidence undertaken later will reveal, there is no doubt that the Hazemag Impactor did not perform satisfactorily at Hawkins Find.  It never worked continuously for 10 hours.  In the first fortnight it worked for a total of only about 17 hours.  It broke down repeatedly.  Its components, particularly the blow bars and the wear plates showed very severe wear and deterioration after only relatively small amounts of ore were processed.  The clearances became misaligned, including clearances at the side of the rotor.  These problems were confirmed on repeated inspections and led to recommendations that the existing rotor should be replaced by a "K" rotor but that, in reality, the better solution would be to obtain a completely new crusher of different design.

2. In short, it was soon realised that the Hazemag Impactor as supplied could not perform the task expected of it and, short of replacing it entirely, any efforts to deal with the problem would at best be palliative.

3. Several factors are suggested as having contributed to the problems with the machine.  Those advanced are the hardness of the ore in the stockpile; lack of proper configuration of the Hazemag Impactor; the use of substitute wear plates and materials in the blow bars and wear plates other than those specified by the manufacturer; and lack of capacity to deal with the through‑put in circumstances where a larger than expected proportion of the treated ore was recycled for a further pass or passes.  In my view, the probabilities are that these are all manifestations of the problems which the machine, as configured, experienced in dealing with the ore at Hawkins Find.

4. This impact crusher which was supplied on hire by the plaintiff to Magenta was about 25 to 30 years old at the date of hire.  It had been in Nea's Welshpool yard since sometime in 1993 when it had been taken by Mr G Groenenberg in part payment of liability owed to his company by a contractor Simpto.  The machine had never been used by Simpto but had been acquired by AIS Kwinana.  There were some remnants of soft limestone ore within the working parts of the machine indicating that it had been used in the past for the preparation of soft road bases.

5. Once the agreement to supply and hire the impactor and the other crushing plant to Magenta had been reached, Nea undertook the work of refurbishing and equipping the impactor to put it into a condition suitable for the operation which had been described by Messrs Halbert and Bandy.  Extensive electrical rewiring was required and a report and quotation from Australian Electrical Services Pty Ltd to the plaintiff was provided for this work on 2 August 1995 (Exhibit 5).  The quotation was for $25,895 and included installation of an auto transformer starter and other extensive electrical apparatus.

6. In addition, Mr G Groenenberg arranged for the impactor to be inspected by Hydraplant Equipment Pty Ltd and a report following his inspection on 2 August 1995 was prepared by Mr C Muscat (Exhibit 6).  This sets out an extensive list of work to be done but, significantly, it included the replacement of missing internal wear plates in the base section; the replacement of a wear plate at the rear end above the double doors in the top section; the installation and supply of wear plates and surround steel work at the right hand side door in the top section; together with surround steel work and wear plates for the left hand side door of the top section.  The rotor bearing needed to be cleaned and reassembled and its tolerances checked.  There was extensive other work recommended by Hydraplant Equipment Pty Ltd but the replacement and installation of wear plates is notable in view of the problems which subsequently developed with wear of these and other internal parts.

7. When Mr Muscat gave evidence, which included a brief account of his 20 years experience as a fitter and turner, with a labour hire company, the State Electricity Commission of Victoria, as a marine engineer, experience with WMC, as a plant process operator and with CSBP as a senior maintenance supervisor which included experience with all forms of crushers, he identified a photograph of this Hazemag impact crusher and described it as a very old machine.  He confirmed that all the work listed in his inspection report Exhibit 6 was in fact performed and that, indeed, additional work was done.  He explained that, as the machine was dismantled for the refurbishment it became evident that it needed much more work than had been listed in the inspection report and that was authorised.  In particular, a lot of casing needed replacing or replating.

8. In Mr Muscat's view the bearings on the rotor were marginal but they were not replaced.  The wear plates that were missing or which were no longer suitable were replaced with Bisalloy.  He was unable to say whether or not the replacements were to manufacturers' specifications.  In his view the rotor was excessively worn.  Mr Muscat said, that if it had been his own decision, he would not have attempted to refurbish this machine because it was too badly worn, indeed that it was beyond repair.  However he maintained that the standard of workmanship in the refurbishment was good and that the machine was functional when it left his workshop.   Mr Muscat's evidence has confirmed the assumptions of the engineer, Mr Kendall (Exhibit 37) that the wear plates supplied by Nea were of Bisalloy 360 or similar material.  Mr Kendall, a highly qualified and experienced consulting engineer (curriculum vitae Exhibit 35), considered that Bisalloy would be suitable in mildly abrasive applications only, whereas appropriately chosen manganese would be needed for more abrasive duties.

9. It was the opinion of Mr Kendall that the reliability of the impactor was unacceptable by normal industry standards and that its maintainability was fairly poor.  Although he commented adversely on the choice of the Bisalloy replacement of wear plates he emphasised that the choice of wear material was not the key issue but, rather, the essence of his comment was that the totality of the presentation of the wear liners showed an ignorance of the manufacturer's requirements (Exhibit 37).  Mr Kendall's criticisms of the machine follow from his inspection of it at the site on 9 October 1995 after it had only done a limited amount of crushing since commissioning.  Mr Kendall put that as five and a half hours work but that is an underestimate.  It is more probable that the machine had been crushing ore for an aggregate period of 12 to 24 hours, but no more, at the time of his inspection.  In the course of giving evidence Mr Kendall estimated that the impactor may have crushed somewhere between 400 to 500 tons of ore from the stockpile by the time of his inspection.

10. Mr Kendall was familiar with gold ore crushing processes in the Ora Banda area having designed and built the mill at Grants Patch used by West Coast Holdings Ltd.  That had ceased operations in the early 1990s when it had been moved to Lake Grace and it was no longer available in 1995.

11. From his history of the recorded performance of the impactor at Hawkins Find, which Mr Groenenberg has accepted, Mr Kendall was of the view that the plant had not been adequately prepared or commissioned (Exhibit 36) and that this machine could not do the job (t/s 1034 and t/s 1041) and that a replacement machine was needed.  Mr Kendall thought that an impactor would have been fine and that it was not essential to use a cone crusher or a jaw crusher instead (t/s 1041).

12. The history of the operation of the Hazemag Impactor at Hawkins Find which was prepared by Mr Kendall is an attachment to Exhibit 36 and is also included in the two subsequent reports prepared by Mr Kendall while at Sinclair Knight Merz Pty Ltd (Exhibits 38 and 39).  This lists a total period of crushing of 14 and a half hours from Friday 22 September to Friday 6 October 1995 although, as indicated, I accept the possibility that the total period may have been slightly, but not much, longer.  The summary is:

"Friday 22/9/95	Joshua Groenenberg dry commissioned the plant and crushed 'two tonne' of stone.  After about one hour, the hydraulic motor on the screen failed and Groenenberg left for Perth to attend his father's 50th birthday
Sunday 24/9/95	Joshua Groenenberg arrived back at site and fitted a new hydraulic motor onto the screen.  The plant crushed for one hour.
Monday 25/9/95	The plant crushed for one hour.  Byron Herbert signed for commissioning complete – Dated 29/9/95.  [Should be 26/9/95 – see Exhibit 8]  Joshua Groenenberg left site
Tuesday 26/9/95	The plant was started, but the pump driving screen would not work.
Wednesday 27/9/95	Hire plant dispatched new hydraulic pump.  Geoff Groenenberg and a hydraulic fitter 'Trevor' [Thomas] fitted the new hydraulic pump.  In the event new hoses and fittings were required.  The plant crushed for four hours.  Geoff Groenenberg and Trevor left site.
Thursday 28/9/95	Impact plates were adjusted to reduce the recirculating load.  The plant crushed for 1½ hours and then the impact plates were readjusted to reduce the recirculating load.
Friday 29/9/95	Maintenance work was carried out to turn the blow bars around.  The blow bar retainers were badly worn and required replacement.  The retainers were badly worn and one had 175mm centres instead of the normal 165mm centres.
Saturday 30/9/95 to Monday 2/10/95	No work was done because engineering firms were closed for the long weekend.
Thursday 3/10/95	The new blow bars were fitted.  A fax was received from Hire Plant advising 'Charlie Muscat' was coming up to site and suggested the plant not be started until [he] arrived.
Wednesday 4/10/95	Charlie [Muscat] arrived and checked that the settings were OK.  The plant crushed for three hours.
Thursday 5/10/95	The plant crushed for two hours.  The blow bars were worn and the impact plates were adjusted.  Charlie, at this stage, was working on the wet plant and he inspected the crusher.  He said that the wear was uneven and stone was falling preferentially to the near side of the impact crusher from the screen.  Charlie welded a deflector plate into the crusher feed, but said that the result was unsatisfactory.
Friday 6/10/95	The plant crushed for one hour.  The doors were opened and the bars were removed.  Charlie have a hand but left at 2.00 pm saying that it was all 'too hard'.
No work has occurred since."

1. A copy of Mr Kendall's report of 10 October 1995 (Exhibit 36) was sent by Magenta to Nea by fax that day under cover of a letter from Mr Bandy complaining about the performance of the machine and advising that Magenta's representative, Mr David Hurley, would call on Mr Groenenberg to discuss the problem.  A meeting between Mr Hurley and Mr Groenenberg did take place on 16 October 1995 when the two men discussed Mr Kendall's report and a proposal, never agreed or implemented, to install a new K rotor as a substitute for the S rotor on the machine and to make other alterations.

2. This was in response to the report of Mr Kendall (Exhibit 36), which had also said:

   "The capability of the plant is determined by the hardness and abrasiveness of the ore, as well as by your requirement for a size reduction from 80 per cent passing about 40 mm, to 80 per cent passing 8 mm.  This is a reduction ratio of about five which is high, but not impossible.  Ideally to achieve this objective the machine should be fitted with a 'grind path'.  The hardness of the ore in this case should not be a problem, although harder ores do reduce throughput.  The abrasiveness appears to be a problem and the Abrasion Index should be determined to confirm that the ore has highly abrasive properties.  The ore is described as a granite porphyry with a stockwork of quartz veins and multiple stringers.  This description indicates a high silica content which in turn indicates a high Abrasion Index.

   The capability is also affected by the state of the machine which is not good.  The wear plates are not of original manufacturer's specification and many of these are quite severely worn.  The rotor also appears to be worn badly and the gap between the rotor and the side plates is excessive.  The rotor is an S‑type rotor, which is not suited to the hard abrasive rock application.  A K‑type rotor is required.

   In summary:-

   •The crusher itself should have a K‑type rotor and the speed needs to be set to the application.

   •The crusher is not set up to make the regular maintenance and replacement wear parts easy to achieve.  In abrasive, hard rock this is not a must.

   •The crusher almost certainly will require a grind path to achieve the required reduction ratio without excessive down time to adjust the impact plates.

   •The ore is hard and abrasive and the crusher needs to be set up with this in mind.

   •The plant as currently configured is totally unsuitable to the application and must be appropriately modified before it will be suited.

   •The plant, according to the sequence of events in Attachment 1, has never been properly commissioned according to industry standard expectations, not withstanding any signature to the contrary.

   A new K‑type rotor and a grind path can be obtained from O'Connor Resource Engineering ... who are the Hazemag agents, or from CBR Crushing Equipment ... ."

3. In the subsequent and more detailed reports which he prepared and revised (Exhibits 38 and 39), Mr Kendall summarised the position by saying that the crusher was not fit for the purpose for the application at Hawkins Find, it was unsuitable for the application which required to achieve a high reduction ration (5:1) of crushing a hard abrasive ore.  The plant achieved only 18 per cent "availability" whereas industry expectations would be for an availability of 75 per cent or better.

4. The detailed reasons for those conclusions are to be found in revision 1 of Mr Kendall's expert report and I accept them.  It is not necessary to elaborate upon them, however, because the plaintiff's position, since the commencement of the trial has always been that it "concedes from the outset of these proceedings and always has that the impact crusher could not crush the ore which the defendant sought to crush.  That's not in issue." - per counsel for the plaintiff in opening at t/s 98.

1. Samples assayed for Mr Halbert by ALS Chemex in April 2000 (Exhibit 49) were of samples taken from various sides of the stockpiles, or possibly of the pit, and were generally much less than 1.00 g/t but with a few exceptions going as high as 4.21 g/t.  These could not support any conclusion that the average grade was 1.6 g/t as postulated by Mr Popp.  It must be added, however, that Mr Popp interpreted this data as justifying an average grade for all the reserve ore of 1.37 g/t.

2. The operating history of the Hawkins Find site since 1897 is summarised in Mr Popp's report (Exhibit 43) at page 5 and 6 and in par 1.2 of the Westcoast Holdings Ltd evaluation report (Exhibit 15(1)).  This latter document reported that only sporadic work in the area was done between 1913 and the mid‑1970's, that mining between 1975 and 1980 gave only a small yield of 6802 tonnes with an average bullion yield of 3 g/t.  But since then 289 tonnes was treated at the Coolgardie State Battery for a return of 2.3 g/t.  An investigation conducted by the company Swiss Aluminium Mining Australia Pty Ltd in 1994 using surface mapping and diamond drilling, estimated grates of 1.34 g/t.  Further diamond drilling investigations on the lease were conducted in 1982 on behalf of BHP Minerals Ltd leading to an estimated grade of 1.5 g/t within the porphyry leading to the option to BHP being allowed to lapse.  West Coast Holdings Ltd exercised an option to take up the lease in 1983, but there is no evidence in any successful operation of the area by that company.  Mr Photios, who took over the lease from Mourillion Mining, did not provide any details which would allow an optimistic valuation to be reached, nor did his limited evidence in any way corroborate or confirm the estimates made by Mr Popp.

3. When one adds to this history the fact that neither Mr Halbert nor Mr Bandy had ever been involved in a crushing or gold recovery operation themselves, and the fact that there is no objective evidence of the rate of gold recovery from the cyanide process which they intended to employ, it is very difficult to conclude that any particular rate of gold recoveries would have been achieved or that the operation would have been profitable.  There was a history of lower than expected rates of recovery from cyanide leaching on this lease in the past due to a variety of problems.  Mr Popp has made a series of estimates about the profit which could have been derived from the Hawkins Find operation but, as indicated, they assume far more extensive operations than just treating the fine ore stockpile.  They also assume grades and rates of recovery which have not been demonstrated.

4. Its past history, and its evaluation and rejection by major mining companies, leaves very little scope for a finding that a gold production operation at Hawkins Find would have been profitable.  I accept that small‑scale, low cost gold recovery operations such as contemplated by Magenta and Mourillion Mining can, by selective treatment of old areas, make profits but there is very little to support such a conclusion in the present case.  There are many hazards in gold mining operations, not least of which are the breakdown of machinery, unexpected repair and treatment costs and other vicissitudes.  To assume a high overall degree of gold mineralisation, on the basis of comparatively few assay results, and high recovery rates for a company's first excursion into gold mining is very hopeful.  The very limited evidence about gold recovery operations at Hawkins Find after February 1996 does not provide any basis for concluding that the expectations of Mr Popp, or of Magenta would have been fulfilled.  I am simply not persuaded that this would have been a profitable gold recovery/mining operation.  At best, it seems to me that it would have been marginal and even then prone to higher than expected treatment costs because of the abrasiveness of the ore.

5. I am certainly not satisfied that, had the Hazemag Impactor been able to crush the stockpile ore, the Hawkins Find operation would then have developed and expanded to treat other stockpiles of uncrushed ore on the surface, on the floor of the pit, and then would have extended further to excavation from the pit walls and floor.  Even if it had, such a venture was not proposed or contemplated as a task for the equipment which was taken on hire from Nea and I do not see any basis upon which the failure of the impactor can be regarded as causing a loss of an ability to treat profitably more ore than was contained in the identified stockpile.

6. The nature of the joint venture agreement which Magenta had with Mourillion Mining permitted the crushing proposal to continue for as long as was mutually advantageous, but equally permitted the venture to be abandoned at any stage.  Mr Hoppman's subsequent attempts to treat the stockpiles by heap leaching in conjunction with Mr Photios do not appear to have been very successful and were not continued for long.  I do not consider that there is any basis upon which I could conclude, as a matter of probability, that even if the Hazemag Impactor had operated successfully the venture would have continued beyond the treatment of the stockpile, if it lasted that long.

7. For these reasons, therefore, I am not satisfied that Magenta has shown that it has lost profits from the operation at Hawkins Find or that it has been deprived of an opportunity which had any realistic chance of making an overall profit in the medium or long term.  I conclude that Magenta has failed to make out a case that it has lost the opportunity to make any profit from continued operations at Hawkins Find or that it has lost the opportunity of engaging in a chance which might lead to the realisation of a profit over the projected duration of the 12 months or so expected to process the stockpile.  Accordingly, the counterclaim for loss of profits must be rejected.

8. In view of Magenta's failure to prove that any loss of profits was caused by the plaintiff's misleading and deceptive conduct arising from the supply of this crushing circuit equipment on hire, I consider that Magenta must be confined to "wasted expenditure" damages as recognised in The Commonwealth v Amann Aviation Pty Ltd (supra). These are a species of damages recoverable by reason of a contravention of s 52 of the TPA - Sellars v Adelaide Petroleum NL (supra).

9. Had it not been for the misleading and deceptive conduct which led Magenta to enter into this agreement to take the crushing circuit on hire from Nea, Magenta would either have not proceeded with the venture or would have sought and obtained on hire other alternative equipment of such a nature and cost which would have provided a basis for believing that the gold extraction process would have been profitable.  As I have already concluded that Magenta has failed to prove that the operation would have been profitable if this Hazemag Impactor had been reasonably fit for crushing the stockpiled ore, it seems unlikely that another crushing circuit, including a more powerful crusher or series of crushers, would have been profitable either, or that Magenta would have been prepared to proceed with significantly higher operating expenses.  This conclusion provides another reason for selecting the approach of identifying wasted expenditure as the proper measure of damages.

10. Nea has certainly not made out a case that any wasted expenditure should be reduced by losses which could be shown to have been probable.  Even if Nea could establish that the performance of the venture would probably have involved losses of a quantifiable amount that would not provide a reason for reducing claims for wasted expenditure arising from the early abandonment of the venture, such as occurred in November 1995.

11. In this case I accept that, where Magenta has been unable to prove that its overall operations at Hawkins Find would have been profitable, there is nevertheless and onus upon Nea to show that the revenue derived from the operation would have been insufficient to cover the establishment expenses - The Commonwealth v Amann Aviation (supra) per Mason CJ and Dawson J at 86 ‑ 87.  In the absence of such proof, I must proceed on the footing that the setting up expenses would have been recovered by Magenta or, alternatively, would never have been incurred.  Either way the amounts paid or payable in respect of the hire of the crushing circuit will be part of the wasted expenses and recoverable as damages.  This comprises:

    (a)the deposit paid on 31 July 1995                   $15,625.00

    (b)the amount claimed for the balance               $28,040.06

    of hire charges by Nea in its action

    (c)any interest allowed on the

    plaintiff's claim  $43,665.06 + interest

12. On this basis, therefore, I conclude that Magenta is entitled to succeed on this aspect of its counterclaim and may set portion of that component of damages off against the plaintiff's claim.  This will entirely eliminate the plaintiff's claim for unpaid hire and associated expenses.

13. At this point it is necessary to return to the plaintiff's claim for interest at bank rates on the outstanding hire from time to time.  No evidence of the relevant interest rates having been proved or agreed, I raised earlier in these reasons the prospect of inviting the parties to make further submissions about this claim for interest or giving leave to allow the plaintiff to re‑open to prove the relevant rates.  However, if that were to be done and a component for interest was to be added to the plaintiff's claim, a corresponding addition would result in the counterclaim with each of these adjustments cancelling the other out.  Therefore, to avoid circuity of action, I consider that the best course to follow is to let matters stand without including any interest on the plaintiff's claim and without making any corresponding addition to the counterclaim:  see Eastern Extension Australasia and China Telegraph Co Ltd v Federal Commissioner Taxation (1923) 33 CLR 426 at 438, 441 and 447; Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd (1968) 121 CLR 584 per Windyer J at 614 and Rich v CGU Insurance Ltd [2005] HCA 16; (2005) 79 ALJR 856 at [20]. The net result will not differ whichever alternative is chosen.

14. The remaining items of damage claimed for wasted expenditure by Magenta relate to expenditure for services and equipment in setting up and operating the camp at Hawkins Find with ancillary earthmoving equipment from late July 1995 until it was closed down.  The list of items below was verified by the evidence of Mr Halbert who said that he had taken the details from the records of Magenta and other records of his own, but many of these could not be produced because they had been lost or destroyed.  Consequently, the extent to which they could be challenged by cross‑examination or otherwise was very limited, but in the end it was accepted that expenditure or liabilities of the amounts claimed had in fact been made or incurred by Magenta in relation to the Hawkins Find operations.  Nea, through its counsel accepted that the amounts which Mr Halbert said were paid had been paid and that, accordingly, the question which arose was what connection the various items of expenditure had with the Hawkins Find operation (see t/s 409 ‑ 410).  Even so, there were some items which, for additional reasons, were challenged and which I shall address separately.

15. Those items of expenditure or liability which were established as resulting from the collapse of the Hawkins Find venture are:

    1.Penn's Crane Hire  $1,815.00

    2.Rainfill Waterlanks Water tanks  $515.00

    3.Site Masters  $9,938.65

    4.Kenlow Dam liners  $6,580.00

    5.JR Engineering  $1,362.02

    6.Power West Hire of 650 KVA

    generator and pumps  $6,120.00

    7.West Brothers  $2,497.77

    8.Glenn Haulage  $1,060.00

    9.True Blue Hire  $309.58

    10.Goldfields Electrical  $13,223.60

    11.Brambles Manford  $1,987.71

    12.Hampton Transport  $2,897.00

    13.Power West  $6,506.68

    14.M Electrical  $413.25

    15.Kalgoorlie Auto Electrical  $1,945.58

    16.Motive Travel  $1,300.00

    17.Miller Hince Fuel  $21,177.29

    18.G V Luke Refrigeration  $497.11

    19.Hannan Food Mart  $1,261.00

    20.Pump Care  $157.75

    21.CIG  $3,583.40

    22.Elders  $453.00

    23.Handy Hire Ute  $370.16

    24.Truck Power  $92.50

    25.Universal Tyres  $420.00

    26.Coyles  $90.80

    27.Challenge Batteries  $130.00

    28.Kalgoorlie Secretarial  $52.50

    29.Boral Engineering  $6,250.00

    30.Caltex Fuel  $4,247.50

    31.Shell Fuel  $779.10

    32.BP Fuel  $854.22

    33.Jaylon Dam Lines  $7,000.00

    34.Onga Water Pump  $420.00

    35.David Hurley Consultancy Fees (unpaid)      $2,500.00

    36.Monodelphus - new wear plates

    and blow bars  $2,292.50

    37.F J Sweetmans bolts for Impactor  $758.00

    38.Report by Kendall Engineers  $961.70

    39.Accommodation:

    Hospitality Inn                 $402.00

    Ora Banda Inn              $5,863.00

    $6,265.00

    40.Wages to K Witta  $12,000.00

    TOTAL  $129,945.37

16. The claim for Boral Engineering (29) was for the hire of the wet plant which was introduced after the repossession of the plant hired by Nea on 23 October 1995.  I am satisfied that it forms part of the wasted expenditure on the basis that it was acquired in order to attempt to preserve the viability of the operation at Hawkins Find after the repossession, although, in the end, unsuccessfully.

17. The following items were also claimed by Magenta as components of damages in its counterclaim but, as a result of cross‑examination of Mr Halbert, give rise to additional issues.  They are:

    1.Komatsu 470 Front End Loader

    25 weeks hire at $2,500  $62,500

    2.TCM 850 Front End Loader

    15 weeks hire at $1,500  $22,500

    3.Tandem Tipper Truck

    25 weeks at $500  $12,500

    4.Magenta plant and equipment

    25 weeks at $500  $12,500

    5.Excavator 974

    1 week hire at $4,000  $4,000

    6.Wages payable to Byron Halbert  $25,000

    7.Wages payable to John Bandy  $25,000

    TOTAL  $164,000

18. The Komatsu 470 Front End Loader (1) and the TCM 850 Front End Loader (2) were items of equipment which had been taken by Magenta on hire purchase from the finance company AGC.  The Tandem Tipper Truck (3) and the Magenta plant and equipment (4) were items of equipment or machinery owned by Magenta which were employed in connection with the Hawkins Find operation and were charged in effect for their value, during the period employed on this project.

19. The claims of wages of $25,000 each for Messrs Halbert and Bandy are for payments in lieu of wages because neither man was paid wages for any of the time working on the site.

20. The TCM Front End Loader was eventually returned to Perth and sold and the amount of $1500 per week was an allocation by Magenta to this venture as a charge.  The same applies to the tipper truck and to the excavator (5) and the front end loader (see t/s 437 ‑ 439).  There was more than a little uncertainty at the trial about the basis of Magenta's counterclaim for these items especially, as at that stage, Magenta was simultaneously pursuing a claim for loss of profits which, upon a correct formulation, could only relate to anticipated profits after normal operating expenses, such as the costs of this other machinery, had been met.

21. In the light of my conclusion to reject Magenta's claim for loss of profits, the consideration of these aspects of the counterclaim becomes simpler because it is only necessary to ascertain whether or not there was expenditure of the amounts claimed incurred but wasted.  Had the joint venture with Mourillion proceeded successfully with a positive net cash flow then, under the terms of the joint venture agreement, the operating costs of each joint venturer would have been reimbursed in amounts which were approved by the joint venturers, before a surplus from the sale of gold was divided between the two venturers.  By this means each co‑venturer would be reimbursed for the value of its contributions by the provision of machinery or otherwise to the operation.  The reimbursement would either come in the form of repayment for agreed levels of expenditure, or if the expenditure was higher than the rates agreed and therefore had to be borne by the co‑venturer which had incurred it, the reimbursement would come from its share of the surplus.  Whichever way the treatment of expenses within the joint venture is viewed, it follows that, on the assumption that the revenues were sufficient to cover set up and establishment expenses, those expenses would be reimbursed.

22. There was no direct evidence that the nominated charges for the weekly hire of the Komatsu 470 Front End Loader, the TCM 850 Front End Loader, the Tandem Tipper Truck or other plant and equipment, including the 974 Excavator were agreed or approved by Mourillion Mining.  However, there was no suggestion or submission made by the plaintiff that these were other than reasonable commercial rates of hire for equipment of that nature used for these purposes and, therefore, on the basis of Mr Halbert's uncontradicted evidence that these rates represented the value of the contribution made by Magenta for the provision of this equipment, I consider that I should accept them.

23. The claims for wages for Mr Halbert and Mr Bandy, however, are of a different nature.  No wages were actually paid and there was no evidence that either Mr Bandy or Mr Halbert was treated as an employee by having tax deducted or charged for his wages or in any other manner.  There is no doubt that they were working directors of the company, but there is no evidence to show that any form of remuneration would have been paid to them under the terms of the joint venture.  It was not suggested that there was any remuneration payable to Mr Hoppman of Mourillion Mining under that agreement.  I consider that the preferable view is that, in the absence of clear evidence establishing that the Magenta directors were to be paid wages as part of the operating expenses of the joint venture, I should regard Messrs Bandy and Halbert as deriving their advantage from the share of the surplus which it was expected that Magenta would receive and which, in turn, would be distributed to them as shareholders.  For that reason I do not accept the components in the counterclaim totalling $50,000 for wages due to Mr Halbert or to Mr Bandy.

24. The result is that the total of the counterclaim, including the $43,665.06 paid or payable to Nea, comes to $287,610.43.  This sum is made up by:

    a.Moneys paid or payable

    by Magenta to Nea  $ 43,665.06

    b.Wasted expenditure

    (as set out in par [349] above)            $129,945.37

    c.Further wasted expenditure

    (as set out in par [351] above)

    $164,000

    less wages disallowed    $ 50,000      $114,000.00

    $287,610.43

25. I am satisfied that Magenta is entitled to judgment on its counterclaim in this sum.  After setting off the balance of the plaintiff's claim of $28,040.06 this reduces the amount due to Magenta to:

    $287,610.43

    —  $ 28,040.06

    Sub total            $259,570.37

26. In addition, Magenta claims interest on its counterclaim at the rate of 14 per cent per annum as from 26 July 1995 until judgment.  There was no basis submitted for the selection of the 14 per cent rate claimed and the only interest rate approximating that is the 13 per cent per annum charged on Magenta's overdraft at the Commonwealth Bank from January 1996 onwards, as shown in Exhibits 29 and 30.  There was nothing to establish how long it took to have that overdraft liquidated or what was the aggregate of interest paid to the bank.  In any event such amount was not put forward as an item of special damages.

27. In the circumstances, I consider that Magenta should be entitled to a discretionary award of damages under s 32 of the Supreme Court Act upon the net balance of the counterclaim after the plaintiff's claim has been set off.

1. Magenta claims interest from 25 July 1995 notwithstanding that this various expenditure was accrued progressively from then until late 1995.  A large component of the expenditure would, no doubt, have been incurred before crushing operations at Hawkins Find were first attempted on 26 October 1995, but the major costs for the hire and use of machinery ran from then on and accumulated to the aggregate of the amount assessed as damages on this counterclaim.  It is necessary to take into account the time effect of how this expenditure was progressively incurred, and I consider that the best way of doing this is to allow interest on the total amount from 18 September 1995, which is the date when the plaintiff's equipment was delivered to the Hawkins Find site and from when Magenta required all its ancillary equipment in operational order.

2. The rate of interest should be the rate or rates applicable at all material times until judgment which have been gazetted as rates for interest on judgment under s 142 of the Supreme Court Ac (1935) and now under s 8 of the Civil Judgments Enforcement Act (2004) which vary over this period from 8.5 per cent per annum to 6 per cent.  I direct the solicitors for the defendant to prepare a minute showing the calculation of interest claimed in accordance with this calculation and endeavour to reach agreement as to the aggregate amount of interest with the solicitors for the plaintiff, in which event the additional amount of interest can be added to the counterclaim.  In the event that agreement cannot be reached on the aggregate amount of interest payable, I will hear further submissions from the parties.

Conclusion

1. In summary, the conclusions reached in these reasons are that the plaintiff has established that, as a result of the invoices delivered to Magenta in January 1996, the defendant is indebted to it for a balance of hire charges and installation costs totalling $28,040.06.  There may, in addition to this sum, be a component of interest on that balance payable but, for the reasons given, it is presently not possible nor is it eventually necessary to compute this.  The plaintiff's claim in this regard, however, is satisfied and discharged by the set off of an equivalent amount of the defendant's counterclaim.  Magenta succeeds on its counterclaim and I have assessed that at a total sum of $287,610.43 (before set off) which, after the set off, reduces to $259,570.37.

2. Magenta is entitled to judgment for that sum of $259,570.37, together with interest from 18 September 1995 at the rates applicable from time to time prescribed for judgments under s 142 of the Supreme Court Act (1935) and since 1 May 2005 at the rates prescribed under s 8 of the Civil Judgments Act 2004.

3. Magenta's concurrent counterclaim against Mr G F Groenenberg under s 75B(1) of the TPA is dismissed.

4. The defendant is to bring in a minute of an agreed amount of interest calculated in accordance with these reasons or, failing agreement, I will hear further submissions from the parties as to the amount of interest.

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION: NEA PTY LTD -v- MAGENTA MINING PTY LTD [2005] WASC 106 (S)

CORAM:   EM HEENAN J

HEARD:   16-20 SEPTEMBER 2002, 3-5 MARCH, 17-21 MAY 2004 & 16 JUNE 2005

DELIVERED          :   1 JUNE 2005

SUPPLEMENTARY

DECISION              :16 JUNE 2005

FILE NO/S:   CIV 2348 of 1996

Consolidated with CIV 1821 of 1998 by order dated 23 September 1999

BETWEEN:   NEA PTY LTD (ACN 009 248 006)

Plaintiff

AND

MAGENTA MINING PTY LTD (ACN 054 284 936)
Defendant

(BY ORIGINAL ACTION)

MAGENTA MINING PTY LTD (ACN 054 284 936)
Plaintiff

AND

NEA PTY LTD (ACN 009 248 006)
First Defendant

GEOFFREY FRANS GROENENBERG
Second Defendant

(BY COUNTERCLAIM)
 

Catchwords:

Costs - Special orders - Security for costs - Payment out - Costs of separate actions before consolidation

Legislation:

Nil

Result:

Special orders
Plaintiff pay defendant's costs of counterclaim
Counterclaiming defendant pay second defendant's costs of counterclaim

Category:    B

Representation:

Original Action

Counsel:

Plaintiff:     Mr C P Shanahan SC

Defendant:     Mr S V Forbes

Solicitors:

Plaintiff:     Tottle Partners

Defendant:     Corser & Corser

Counterclaim

Counsel:

Plaintiff:     Mr S V Forbes

First Defendant             :     Mr C P Shanahan SC

Second Defendant         :     Mr C P Shanahan SC

Solicitors:

Plaintiff:     Corser & Corser

First Defendant             :     Tottle Partners

Second Defendant         :     Tottle Partners

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Nil

1. EM HEENAN J:  In this litigation I published reasons for judgment and entered judgment for the counterclaiming defendant, Magenta, on 1 June 2005.  Questions of costs and the calculation interest on the damages were stood over for later consideration.  Written submissions have been received and I have heard counsel and these points today.

2. The first matter which needs to be addressed is the interest component of the successful defendant's counterclaim.  The parties are agreed that calculation of interest in conformity with the conclusions which I reached in the reasons for decision produces a figure of $161,388.21 which should be added to the damages awarded of $259,570.37, resulting in an award of damages to the defendant Magenta on the counterclaim of $420,958.58.  I direct that judgment for that aggregate amount be entered in substitution for the earlier reference to $259,570.37 plus interest.  That one finite sum will be the quantum of the judgment on the counterclaim.

3. In relation to the costs of the litigation, it is necessary first to take into account that originally two actions were commenced, one by Nea against Magenta for what I will call the unpaid hire charges and incidental expenses.  That was defended, so I am told, without a specific set‑off defence being pleaded at the early stage.  Later Magenta commenced another action against both Nea and Mr Groenenberg for damages.  That ultimately became the counterclaim in these proceedings.  The two actions were consolidated on 23 September 1999 but it is necessary to deal with the costs of the two actions separately up to the point of consolidation.

4. Because Nea was successful in demonstrating its claim to unpaid hire charges in the proceedings but did not recover any judgment because of the set‑off arising from the counterclaim, I consider that Nea is entitled to its costs of the original action for the recovery of unpaid hire charges and incidental expense up to the date of consolidation or until the first time that a defence of set‑off in that particular action was pleaded.  Accordingly, I order that Magenta pay Nea's costs of those proceedings to be taxed up to the point of consolidation or, as I have said, the first occasion when the defence of set‑off in that action was pleaded, whichever is earlier.

5. In relation to the second action commenced by Magenta against Nea and Mr Groenenberg, Magenta has succeeded against Nea but not against Mr Groenenberg.  In that action Magenta should have the costs against Nea to be taxed up to the point of consolidation.  However, Mr Groenenberg should have his costs of that action against Magenta up to the point of consolidation, such costs to be those costs which in the opinion of the taxing officer were reasonably incurred by Mr Groenenberg in the defence of the action beyond costs incurred by Nea in doing so.

6. That brings me to the position where both actions were consolidated and proceeded in parallel from 23 September 1999 onwards. The difficulty here is to deal with two problems which emerged and significantly affected the trial. In general terms they are that discovery by Magenta was very significantly inadequate. At the trial this inadequacy became patent and necessitated an adjournment and supplementary discovery, on a significant scale, which itself gave rise to additional interlocutory applications arising from disputes in that process. The second major difficulty is that, in the defence of the plaintiff's action and in its own counterclaim, Magenta raised issues: concerning the alleged existence of implied terms by virtue of s 71 of the Trade Practices Act; the inability of Nea to rely on express exclusionary terms in the contract of hire because of the alleged magnitude of the breach of contract or the implied warranty said to have occurred; and, perhaps, most of all, because of the magnitude of Magenta's counterclaim arising from its component for alleged loss of profits which ultimately failed.

7. In relation to the questions of discovery, I consider that special orders as to costs are warranted.  While Magenta should be entitled to the costs of giving discovery and allowing inspection of the documents it initially discovered in the action, it should not be entitled to additional costs for supplementary discovery, for supplementary inspection, or for the costs of dealing with Nea's interlocutory applications for additional or supplementary discovery.  Similarly, I consider that the adjournment which resulted following 20 September 2002 was largely caused by problems with the inadequacy of Magenta's discovery and, accordingly, Magenta should pay the costs thrown away by reason of that adjournment.

8. To allow these conclusions to be implemented in a practical way upon the taxation of costs, I will, therefore, direct that Magenta shall not be entitled to any costs associated with giving discovery or allowing inspection after its initial discovery and provision of inspection in the action, and that Magenta must pay Nea's costs associated with seeking and obtaining supplementary discovery and inspection.

9. There is another pre‑trail issue which requires special attention and that is the costs of the de bene esse hearing to take the evidence of the witness Mr Popp whose deposition was tendered without objection at the trial without him being called.  Mr Popp's evidence related largely, if not entirely, to the possible yield of gold from the Hawkins Find operation conducted as Magenta had hoped to conduct it with a view to quantifying the net profits for the Mourillion joint venture through which Magenta could have expected revenue through the operation of the venture.

10. I concluded, for reasons set out in my decision, that that claim for loss of profits failed.  Consequently, I consider that Magenta should not be entitled to recover any of the costs of the de bene esse hearing to take the evidence of Mr Popp, and that rather Nea should be awarded the costs of that application and its conduct.

11. I have also been informed that during the course of the litigation Magenta was ordered to pay, and did pay, money into court for security for Nea's costs and additional security for Mr Groenenberg's costs.  In relation to the moneys paid into court for the security of Nea's costs, I direct that that money shall now forthwith be paid out of court to Magenta's solicitors whose receipt shall be a sufficient discharge for payment.  In relation to the money paid into court for Mr Groenenberg's costs, I direct that that money shall remain in court until the completion of the taxation of Mr Groenenberg's costs and then, after the time fixed for filing objections to the taxing officer's certificate or dealing with any appeal that may be instituted from the decision on taxation, so much of the money in court as would be necessary to satisfy Mr Groenenberg's costs shall be paid out of court to the solicitors for Mr Groenenberg whose receipt shall be sufficient discharge for payment.  Any surplus moneys after payment to Mr Groenenberg shall be paid out to the solicitors for Magenta, whose receipt again will be sufficient discharge for that payment.  In the event that the money paid into court is insufficient to satisfy Mr Groenenberg's costs, there will be liberty to enforce the amount allowed on taxation after credit has been given for the payment out of court.  In each case, where I have referred to payments out of court, this is to include interest, if any, which may have accrued on the moneys while under the control of the court or any other authority.

12. Coming now to the question of the costs of the consolidated actions and the trial, I make the following orders subject to the directions which I have already given:  first, that Nea shall pay to Magenta the costs of the consolidated actions from the point of consolidation onwards, such costs to be taxed.  However, in relation to the costs of the trial, Magenta shall be limited to recovering costs for eight days of trial including the first, rather than the 13 days occupied, because of the issues upon which Magenta failed in the proceedings.

13. In relation to allowances to be made for various items on applicable scales of costs, I direct that the taxing officer shall be at liberty to allow what he or she may regard as reasonable costs having regard to the work necessarily done and its responsibility, notwithstanding that that allowance may exceed the maximum prescribed by any item in any applicable scale of costs for the following subheadings:

    (a)provision of particulars;

    (b)giving discovery;

    (c)getting up a case for trial;

    (d)counsel fees, and

    (e)the transcript.

14. Magenta's costs on taxation are also to include as a disbursement the costs for the reasonable travel and accommodation expenses of the witness, Mr Bilney, for attending to give evidence at trial, in addition to any qualification fees or other expenses associated with him providing his reports.

15. That deals with all the costs of the consolidated proceedings with the exception of those of Mr Groenenberg who was successful in having the counterclaim against him dismissed entirely.  I have already directed that he should recover his costs of that action up to the point of consolidation.  I now order that he should be entitled to recover his costs of the consolidated proceedings to be taxed from that point onwards but that those costs should be limited to the additional components, if any, incurred in the defence of his claim going beyond the defence which was necessary to be made by Nea itself.

16. I anticipate that there may be some difficulties in making that separation and, accordingly, I reserve liberty to apply on summons on notice for further directions in that respect should that be necessary.  Otherwise all reserved costs in the consolidated actions shall be paid by Nea to Magenta except for costs reserved in connection with supplementary discovery, the adjournment of the trial and the de bene esse hearing, in which case those costs, if any, that have been reserved are to be paid by Magenta to Nea.