Safrate Society Limited & Anor v Graziano & Ors No. DCCIV-94-454, DCCIV-94-455 Judgment No. D3680

SAFRATE SOCIETY LIMITED v GRAZIANO & ORS T/as HARD PRODUCE SERVICES and
SAFRATE INTERNATIONAL PTY LTD v GRAZIANO & ORS T/as HARD PRODUCE SERVICES

Civil

Judge Worthington

These two actions were heard together. The first, No. 454 of 1994, is a claim by Safrate Society Limited (Safrate Society) for $2,592, being fees payable for cold storage of the defendants’ onions in September 1993. The second, No. 455 of 1994, is a claim by Safrate International Pty Ltd (Safrate International) for $7,159.71, being fees for cold storage of the defendants’ onions in July and August 1993. In both actions the defendants are Antonio Graziano, Filomena Rosaria Graziano and Bruno Graziano, trading as Hard Produce Services (HPS). In each action, the defendants deny liability and counterclaim damages for loss caused by damage to their onions while they were in storage with the plaintiffs. The plaintiffs began both actions in the Magistrates’ Court but they were removed to this court because of the extent of the counterclaim.

INDEX

OUTLINE

ARRANGING FOR THE ONIONS TO BE STORED

STORAGE UNTIL LATE JULY

DEFROST CYCLE MALFUNCTION

ADJUSTING THE THERMOSTAT FROM 4oC to 0oC

AUGUST/SEPTEMBER

OTHER MATTERS CONCERNING MR CECCHI

SAFRATE SOCIETY LIMITED/SAFRATE INTERNATIONAL PTY LTD

THE CAUSE
9.1 Refrigeration
9.2 Horticulture

LIABILITY

QUANTUM
         11.1           General
         11.2           Loss on Sales of Salvaged Onions
         11.3           Loss on Dumped Onions
         11.4           Cost of Storage
  11.4.1        25 May - 19 July
  11.4.2        20 July - 31 July
  11.4.3        1 August - 31 October
  11.4.4        Overall: 25 May - 31 October
         11.5           Loss on Processing
         11.6           Loss of Business
         11.7           Summary

OUTLINE

Antonio Graziano was the only defendant to give evidence. He is in charge of HPS. There is no need to distinguish between the various defendants and when I refer to Mr Graziano, I mean the defendant, Antonio Graziano.

Mr Graziano is now about 41. He left Mannum High School in Year 10 and began to work on the family farm at Bow Hill, where his father is still a market gardener. The family business is known as St. George Produce, dealing mainly in onions and potatoes. He has been involved with vegetables ever since then and especially with onions, either as a grower or as a produce merchant. About 11 years ago, he and his wife, Filomena, and brother, Bruno, set up HPS at Pooraka near the markets. Because he was familiar with onions and potatoes, in about 1986 they started a business of storing, transporting, processing and packing that produce. The business has since branched out to handle other vegetables such as apricots, apples and tomatoes.

There is a matter which I should mention early. Each plaintiff is a corporation and both are shown on the originating summonses as having the address of Warehouse Lane, Adelaide Produce Market, Diagonal Road, Pooraka, SA 5095. The defendants say that for the purposes of this action, the contract was with Safrate Society or alternatively with Safrate International as agent for Safrate Society but this is denied by the plaintiffs. The thrust of the plaintiffs’ pleadings is that the defendants’ dealings with each of them was separate and there was no question of agency. For reasons I will set out in due course, that plea by the plaintiffs must fail. Thus, for convenience and except where there is some reason to differentiate between them, I shall refer to the plaintiffs indiscriminately as Safrate.

Safrate Society is a cooperative representing produce growers. Its premises are located at the Pooraka Markets and its purpose is to provide a service for growers in cold storage, freight and general assistance with Australian and overseas markets. Safrate International has premises at Export Park, near the international air terminal at West Beach. Although the evidence about it is imprecise, it appears that the business at Export Park, a large cold storage facility, was not running successfully and at some stage prior to events the subject of this trial, Safrate Society took it over. It operates as Safrate International and is a wholly owned subsidiary of Safrate Society.

In 1993, Mr John Cecchi was employed by Safrate Society as General Manager. His duties included managing the affairs of both Safrate Society and Safrate International. The Pooraka premises consist of a warehouse with one major cool room divided into two and a two-storey office block. The Export Park premises consist of a cold store with four major cool rooms, two other cool rooms and a two-storey office block.

In outline, the circumstances giving rise to the actions were these. Over the period late May - late June 1993, Mr Graziano progressively put about 265 tonnes of onions, in mixed bags and bins, into storage with Safrate in cool room no. 3 at Export Park. From time to time, he also removed onions. In late July 1993, it became apparent that a large quantity of them had become mouldy and were deteriorating. The bulk of them had to be destroyed.

In short, the defendants say that this happened because until late July, the onions were stored at 4oC instead of 0oC and because of a defect in the refrigeration unit that caused it to ice up and become so inefficient that the onions were ruined by high humidity. They allege that the plaintiffs are at fault because the employees of Safrate International did not properly monitor the operation of the cool room.

The plaintiffs agree that the onions were stored at 4oC until late July but say that this was at the defendants’ request and that as soon as 0oC was requested, the storage temperature was changed. They admit that there was a fault in the refrigeration defrost system in the latter part of July but say that this had no adverse effect on the onions. The plaintiffs say that the onions deteriorated because they were of poor quality.

The plaintiffs claim monies owing; namely storage fees at Export Park in July and August and at Pooraka where some of the onions were taken in September. The defendants counter claim damages for the loss of their onions. Their actions are framed in negligence and breach of contract, the plaintiffs being bailees for reward. It was sensibly agreed between Mr Apps, for the plaintiffs, and Mr Lovell, for the defendants, that Mr Lovell should be dux litis.

ARRANGING FOR THE ONIONS TO BE STORED

Onions come in four sizes and starting with the smallest, they are pickler, jarrer, medium and large. So far as is relevant here, there are two grades. A second grade onion is one that has a cosmetic blemish such as broken or missing skin, marks, an odd shape, etc. A first grade onion is one that has a better appearance and is suitable for retail display and sale. A first grade onion would bring a better price than a second grade one. However, the use of the term "second grade" does not necessarily mean that the onion is of a lesser quality. It can still be a sound onion although it does not look as good as a first grade one. Thus, while not appealing to the retail market and able to command as good a price as first grade, second grade onions are used extensively in the processing part of the trade (chopped, sliced etc.) and are used by restaurants, canned food manufacturers, and makers of chutney, pickles, relish, etc. Mr Graziano dealt principally in second grade onions and was geared to supplying that market.

Onions are commonly stored and transported in bags or bins. A bag contains about 19kgs and if there is a large number of bags to be moved, they are put on a pallet which usually holds 64 bags. Bins are made of wooden slats which allows air to circulate and hold about 575kgs.

HPS bought onions from a number of suppliers, some of whom they used regularly. As relevant here, the suppliers were Condo & Son Pty Ltd (Condo), St George Produce (St George), Carretti Bros. Pty Ltd (Carretti), Long Island Gardens (Long Island), R.M. Hall & Son (Hall) and Dicerbo Nominees Pty Ltd (Dicerbo). The onions that Mr Graziano stored with Safrate were purchased from these suppliers between 11 May and 26 June 1993 and put into storage with Safrate on various dates between 25 May and 30 June 1993. I shall return to more detail about supply and storage in due course.

HPS has a large shed on its property with a cool room that can hold a maximum of about 100 bins of onions. Mr Graziano said that it was his practice to buy onions when they were plentiful at harvest time, store them (some in his cool room) and market them gradually over a number of months prior to the next harvest being available. I accept that Mr Graziano had on many occasions prior to 1993, stored onions for periods up to about 6 months in his cool room at HPS. I accept also that when storing onions for periods like that, he would do so at OoC.

It is clear from the evidence given by Mr Graziano, Mr Brian Clarke, Chairman of Directors of Safrate and himself a grower, and from wall charts published by the NSW Department of Agriculture and the Sydney Market Authority about vegetable storage temperatures, that 0oC is commonly accepted as appropriate for long term storage of onions. A Department of Agriculture chart was displayed at each of Safrate’s premises and a Sydney Market Authority’s chart was on display at Export Park. Expert evidence from two witnesses qualified in agricultural science, Dr D. E. Bottrill and Mr B. L. Tugwell, shows that it is widely recommended and commonly accepted that the best temperature for long term storage of a wide range of horticulture, including onions, is 0oC.

There was a shortage of onions in 1993. As mentioned, Mr Graziano had often put onions into cold storage so that he could market some of them during the months of short supply, viz September, October and November. But he said in evidence that because he expected the market to be even tighter in late 1993 with better prices, he wanted to put as many onions into cold storage as he could afford, to take advantage of that opportunity. The HPS cool room was not big enough for this. He sought more space at a number of other places without success and eventually, he rang the Safrate Society office at Pooraka. When he told the woman who answered the telephone that he wanted to store produce, she told him to speak to Mr Cecchi and gave him Mr Cecchi’s mobile telephone number. Although the date of this call is not known, it was probably in early May.

Both Mr Graziano and Mr Cecchi gave evidence. Although there were some areas of common ground, their evidence was in direct conflict on a number of important issues. In due course I shall refer in more detail to some of those areas but it is appropriate at this stage to state briefly my opinion about the relative value of their evidence.

Mr Graziano struck me as being bitter about what happened to his onions and the way he perceives that Safrate has handled his loss. To some extent this has coloured his memory of events. Not unexpectedly, things that were of little significance at the time have become more important because of what occurred. As often happens in cases like this, witnesses are required to think back over events that were not particularly important at the time, to try to remember what occurred before there was any reason to be worried. That often leads to some reconstruction and in my opinion, there were times when Mr Graziano did that in giving evidence. For instance, he was emphatic about the number of times he spoke to Mr Cecchi by telephone before delivering onions to Safrate, although he was not sure what each conversation was about. There was no particular reason for him to think about that until much later; after things had gone wrong. The probabilities are that his evidence is a mixture of memory and reconstruction and the reconstruction is likely to be coloured by what happened. Similarly, there were times, especially in cross-examination, when I thought he gilded the lily in defending his own actions. I therefore have reservations about accepting everything Mr Graziano said in some areas but nevertheless, I formed the opinion that he was generally honest and overall, he did his best to give a truthful account of relevant events.

On the other hand, I formed a poor opinion of Mr Cecchi. I found him to be a most unsatisfactory witness. I shall come to some of his evidence later but in short, there were times when he was glib and careless in his answers. He was evasive and sometimes he was untruthful. Overall, I cannot treat his evidence as reliable on contentious matters. On important issues, where he and Mr Graziano were in conflict, I have generally preferred the evidence of Mr Graziano.

Mr Graziano had not spoken to Mr Cecchi before this call. He had had some dealings with a man named Rainer in the transport section of Safrate at Pooraka but he knew no more about the business than that and did not know there were cool rooms at Export Park. In the course of the phone call, Mr Graziano indicated that he was thinking of storing about 500 bins. Mr Cecchi said that they could accommodate this without any problem and there was a quick discussion about prices. Mr Cecchi’s memory is that the request was to store about 200 mixed pallets and bins. The precise figure discussed is not important. It was to be a fairly large consignment.

Both Mr Graziano and Mr Cecchi said that during the telephone call, there was discussion about how long the onions would be stored and at what temperature. However, their evidence about what was said is in conflict. Mr Graziano maintained that during that conversation and at all relevant times, he requested a temperature of 0oC and mentioned that he wanted to store the onions over a period of some months. Mr Cecchi said that during that conversation and at all relevant times, Mr Graziano asked for the onions to be stored at 4oC for a short period of time - "a few weeks". Mr Cecchi said in evidence that he understood that to mean 6-8 weeks. In fact, until late July when steps were taken to change it, the onions were stored at about 4oC.

I prefer the evidence of Mr Graziano on this matter. This was an area in which I found Mr Cecchi’s evidence to be most unconvincing but in any event, I think it inherently unlikely that Mr Graziano would have requested his onions to be stored either at 4oC or for only a few weeks. Everything points to Mr Graziano’s being justified in his expectation in April/May that onions would be in short supply in the latter part of 1993 and that he could get a much better than usual price if he stored them until then. Evidence was given by Mr Ross Webb, a director of Spring Gully Pickles, who has bought onions from produce merchants, including HPS, for many years. His evidence makes it clear that this was a most unusual year. He said that from September on, the onion market is usually expensive but in 1993 it was extremely so. He said that his onion requirement in November each year would usually cost around $12,000-$14,000 but in November 1993, there was short supply and it cost about $126,000. He gave these figures from memory and did not strike me as having checked them recently. Although I cannot put weight on the figures themselves, I accept his evidence as confirming that onions were in short supply in late 1993 and that prices were considerably higher than normal. Mr Graziano’s anticipation of higher prices for onions in late 1993 was reasonable and there was a cogent reason in early May for his wanting to put them down for some months and not for a short period i.e., he could expect a better than usual margin on sales later in the year.

In previous years, Mr Graziano had stored onions in his own cool room at 0oC for periods of some months. Although he sent the bulk of the onions to Safrate in 1993, he retained some in his own cool room at HPS and I accept that these were stored at 0oC. There is some evidence that a temperature of 4oC is appropriate for short term storage but not for the longer storage Mr Graziano had in mind. There is no reason why, in the circumstances I have found, he would want to store some of the onions at 0oC in his own cool room for a long period but the bulk at 4oC for a shorter period. That would be bizarre. I do not accept that Mr Graziano ever told Mr Cecchi that he wanted his onions stored at 4oC or that he wanted to store them only for a short period - i.e., something in the order of a few weeks. I find that Mr Graziano told Mr Cecchi that he wanted the onions stored at 0oC and I find that Mr Cecchi was aware of that requirement before any onions were delivered to Safrate.

Within a day or two after this telephone conversation, Mr Graziano went to Safrate International and inspected the premises. He was most impressed. There is a dispute between Mr Graziano and Mr Cecchi as to whether their next contact was face to face at Safrate International or by telephone. It is unnecessary to resolve that conflict. The short answer is that within a very short time, agreement was reached that HPS would use the facilities at Export Park.

I find that the substance of the agreement was that from time to time, HPS would deliver onions for storage in cool room no. 3 and that overall, the onions would be stored for some months, although Mr Graziano would remove some as and when needed. In other words, it was not part of the agreement that once onions went into the cool room they would all stay there for a long period; some would and others would be taken out earlier. In addition, as I have found, Mr Cecchi knew that the onions were to be stored at 0oC. Various methods of charging were discussed but I am satisfied that the agreed storage fees were to be $3 per item (ie. per pallet or per bin) per week.

STORAGE UNTIL LATE JULY

HPS either delivered, or had delivered, onions to Safrate at Export Park on 25 May, 2 June, 4 June, 7 June, 9 June, 15 June, 16 June, 23 June, 24 June, 25 June, 26 June and 30 June 1993. Most of the onions came from the suppliers to HPS at Pooraka and were then taken to Safrate by HPS. However, a small quantity went directly from suppliers to Safrate. Although the precise figure has not been established, it was probably only a couple of loads that were transported from a supplier directly to Safrate without first going to HPS.

Mr Graziano kept back some of the onions in the HPS cool room and did not send them to Safrate. The bulk of those that went to Safrate via HPS were stored in the HPS shed for a short time (mainly a matter of days) but some, among the early deliveries to Safrate, had been in the HPS cool room before they were taken to Export Park. Mr Graziano was unsure how many of these there were but he thought it would have been 1-2 truckloads. That would be somewhere in the range of about 15-30 tonnes.

Onions were removed by HPS on 25 June, 2 July, 15 July and 19 July. On 25 June, HPS removed four bins of jarrers and 32 bags (half pallet) of small brown onions. On 2 July, one pallet of jarrers, four bins of medium white onions and the other half pallet of small brown onions were removed. On 15 July, HPS removed three pallets of jarrers and one pallet of small brown onions. Overall, these removals total about 12 tonnes. Most were second grade onions but some were first grade. There was nothing wrong with any of them.

Another 12 pallets of small brown onions were removed on 19 July. The parties tried to work out how many onions were in storage after this removal and various estimates were made. The best evidence is the defendants’ records which show that a total weight of just over 265 tonnes (337 bins and 59 pallets) was put into Safrate. Those removed on 25 June, 2 July and 15 July amount to about 12 tonnes, leaving a balance of 253-254 tonnes. The 12 pallets removed on 19 July would reduce this by about 14.5 tonnes, leaving a balance (to the nearest round figure) of about 239 tonnes of mixed white and brown onions of various sizes, probably all second grade.

Mr Graziano intended to process the onions removed on 19 July for Spring Gully Pickles. He saw them shortly after they arrived at HPS and I accept that there were fine white hairs on the bottom of some of the onions. This indicated to him that they had become active and were beginning to develop fine roots. He was concerned about it. However he said, he did not think there was anything wrong with the onions apart from that and the next day, he processed them by putting them through a machine that peels the skin and chops off the top and the bottom - referred to as topping and tailing. During that process, he noticed signs that they were starting to sprout internally.

The exact day the onions went to Spring Gully Pickles is not certain. Relying on memory, Mr Graziano said he thought it was 21 July but he also said that the delivery was on a Friday. July 21 was a Wednesday and Friday was 23 July. Mr Webb was not specific about the date. There is an invoice (No. 3643) for a delivery of onions from HPS to Spring Gully Pickles dated 23 July 1993 with a later notation that this was a "Problem load" and that there was to be a credit for part of it, namely 4 tonnes. That note is consistent with the evidence of both Mr Graziano and Mr Webb that the latter rang shortly after delivery to complain about defects in the onions. When this invoice was shown to Mr Graziano in court, he said he remembered that those onions, as well as some which had been retrieved from Safrate on 15 July, were delivered to Spring Gully Pickles on 23 July. Mr Graziano said that Mr Webb rang to complain on the following Monday or Tuesday. If so, that would be 26-27 July. The balance of evidence indicates that delivery to Spring Gully Pickles was on 23 July and that processing was between 20 July and 22 July.

Mr Graziano said that he went to inspect the onions at Safrate because he was worried by what he had seen. I accept that he did but his evidence about the day he went, is not clear. It became a plank in his case that he went to Safrate on 20 July, i.e. the day after the load was retrieved. Close analysis of his evidence (T76-79) does not necessarily support that. He did not volunteer the date. I need to set out a good part of the transcript to get the flavour of his evidence. In evidence-in-chief he said that he inspected these onions:

"Q.    Did you notice anything about them.
A.     They were starting to root.
Q.     Yes.
A.     What made it more obvious is, after we processed them, that’s when the internal damage was indicated, you know, the shoot inside. See all - if I can say - all these other onions were sold as a raw unprocessed product. When we got to the 12 pallets -
Q.     That’s on 19 July.
A.     Yes, which is only four days after the 15th, is when you start processing, the indications were very clear that they were starting to sprout internally.
Q.     Okay, so let’s just take that a bit slower. On the 19th you had removed the 12 pallets.
A.     Correct.
Q.     What type of onions were they.
A.     Small brown onions.
Q.     Were they for any particular customer.
A.     For Spring Gully Pickles.
Q.     They were brought back to your shed.
A.     Correct.
Q.     What was to happen to them once they got back there.
A.     To be peeled and delivered to Spring Gully for bottling.
Q.     In the normal way you would deal with Spring Gully.
A.     Correct.
Q.     That is, you would peel the skin off.
A.     Yes. Top and tail.
Q.     Top and tail them, thank you; and put them into a bin with a liner.
A.     Correct.
Q.     And it was during that process was it, that it became apparent there was a problem.
A.     Correct.
Q.     How did you become aware of the problem. Do you remember if you saw it or someone told you about it.
A.     The indications were they were starting to root.
Q.     Yes, the question is, how did you become aware of a problem. Did you see the onions as soon as they came back, or did someone say to you ‘Look Tony there’s a -’.
A.     I saw the onions. I saw the onions when the guys brought them back to the factory.
Q.     They were in bags were they.
A.     Correct.
Q.     Because they were on a pallet.
A.     In bags.
Q.     What could you see.
A.     A fine rooting.
Q.     What do you mean by that.
A.     The little, fine - on the bottom of the onion, the fine hair white roots appear and that’s they’re just starting to root
...........................................................................................

Q.     Given that they were already starting to turn, why did you go through the processing thing.
A.     They were starting to root and shoot internally, but they hold together very, very well until a day or two in the Spring Gully process in their brining and bottling where they just fall apart.
Q.     We’ll get to that in a minute, but at the time that you were processing them, did you think they were going to be worth anything, or did you realise that they were not good.
A.     They were starting to deteriorate, but I thought they would have been okay.
............................................................................................

Q.     As a result of realising there was a problem, what did you do to the other onions at Safrate.
A.     Sorry?
Q.     What did you do as a result of seeing the onions - the problem with the onions - what did you do in relation to Safrate.
A.     I didn’t do anything. On the out turn of those onions, the following day - the following day -
Q.     That’s the 20th.
A.     Yes. In the afternoon I went for a drive down to Safrate.
Q.     Safrate at the airport.
A.     At the airport, at the cold stores, with the ute."
        (Emphasis mine)

From then on, it was accepted that Mr Graziano was fixing that visit as being in the afternoon of 20 July, i.e. that he went down to Safrate the day after he first saw fine white roots when the onions arrived at HPS. As I have said, he did not volunteer that date but he did agree with it. However, in assessing that evidence, there are two matters to bear in mind.

Firstly, as can be seen from this extract of evidence, Mr Graziano at times tended to jump ahead and had to be brought back into sequence. He sometimes became preoccupied with a topic and answered without paying close attention to the question. In agreeing that it was the 20th, he answered quickly and I did not get the impression that he gave any special thought to the exact date. Like many people, he showed on occasions (e.g. the delivery date to Spring Gully Pickles) that he had trouble with dates unless there was a record to help him.

Secondly, as can be seen from the underlining, his reference to "the following day" in describing what he did as a result of "seeing the onions - the problem with the onions" was after he had described seeing not only the fine white roots, but also signs of internal shooting in the course of processing. That would also be consistent with his saying that when he first saw the fine white hairs, he was not particularly worried. His concern developed when he saw internal sprouting. I am not sure what he meant by "the out turn of those onions" so that does not help.

However, taking the passage of evidence as a whole, and leaving aside the date suggested by counsel, he could reasonably be understood as saying that he went to Safrate in the afternoon of the day after he became aware of "the problem" - i.e. not only the fine roots on the base (on 19 July) but signs of internal shooting (during processing between 20-22 July). If so, his evidence would put that trip to Safrate somewhere between 21-23 July. It is necessary to have regard to other evidence (notably some temperature charts) to arrive at the most likely date and I shall discuss that in Part 5. In short however, I consider that the balance of the evidence points to 23 July.

On arrival at Safrate, he said he went to the cool room and as he walked in, the room felt very warm and the air was still. He said the fans did not appear to be working. He described the room (T191) as being "warm, unpleasant, very wet, humid." The bins were stacked two high and he said that he climbed up and walked around on top of the onions. He said that he could see by looking at his shoes that they had become wet and slimy from the onions. He noticed roots and some mould. During his evidence in chief, the following occurred (T80):

"Q.    So what did you do.
A.    Well I looked around the onions, and I was climbing ------- and I was walking around on the top of the bins looking at the onions.
Q.    What could you see. What could you see of the onions.
A.    They were wet, slimy, and not good.
Q.    What about shooting.
A.    Starting to shoot, roots, a bit of mould here and there, and I was moving them around with my feet, ............."

He said he was "fuming".

On the face of it, he has said that he saw they were starting to shoot - i.e. grow at the top. However, that is the only time he mentioned shoots as distinct from roots at the bottom, on that day. In cross examination, he was adamant that there were no shoots visible at all that day. There is no doubt that shoots appeared on some of the onions at a later date.

Did Mr Graziano change his evidence in cross examination or is there another explanation? It is important to address this issue because shoots on the tops at that time could be a significant pointer in interpreting expert horticultural evidence.

I am not persuaded that I should give greater weight to this answer in evidence-in-chief than to his emphatic evidence to the contrary in cross-examination. Nor does it follow that he changed his evidence. I have already described some of Mr Graziano’s shortcomings in answering questions. When asked "what about shooting" he was not reminded that he was only being asked what he saw. By the time he got to Safrate, he knew from what he had seen during processing of the onions for Spring Gully Pickles that some were "starting to shoot", i.e., internally. There is also other evidence that assists. Once shoots begin to show, they grow fairly quickly. Photographs taken on 25 August 1993 show that there were only a few green shoots on bagged onions and almost none on those taken from bins. This tends to confirm that as much as one month earlier, it is most unlikely that shoots would have been visible. In the circumstances, I do not understand Mr Graziano to be saying that he saw shoots on the onions during this visit. To the extent that his evidence is ambiguous, I accept his denial that shoots were visible that day.

Mr Graziano said that by "wet" - he meant they were moist and slimy, not that there were drops of water on them or that they were dripping as though they had been under a tap. He said, he could not see moisture just by looking at them but became aware because his boots were wet and slimy. He said he touched the onions on top but did not put his hands down into the bins. The slime was like a thick milky paste.

Mr Graziano’s evidence continued. While he was there, a man whom he now knows to be Mr Cecchi, came in and he asked Mr Cecchi what the temperature was in the cool room. After he was told it was 4oC, he said "Well, how about trying 0oC". Mr Cecchi replied that he would do that, walked out of the cool room and came back shortly afterwards, saying that the temperature had been reduced.

Mr Graziano estimated that he was at the cool room for about 20 minutes and during that time, he climbed over the bins kicking the onions around. He said there was not much conversation with Mr Cecchi; he was feeling "fairly aggro", he was conscious that his onions were ruined and he did not know what to do. He selected a bin of onions which was put into the back of his utility and he took it back to HPS at Pooraka.

Mr Cecchi’s evidence about the circumstances leading to Mr Graziano’s discovery of slimy onions is different. Around mid June he went to cool room no. 3 with Mr Clarke to look at the onions and noticed they were shooting. He said that Mr Clarke instructed him to tell Mr Graziano and so he rang Mr Graziano who said he would come and look at them. Within two or three days, Mr Graziano arrived with another person and the three of them went into the cool room and inspected the onions. To the contrary, Mr Graziano said that he did not learn about the problem from Mr Cecchi and was adamant that when he first went to Safrate and found it, he was alone apart from the short time Mr Cecchi was in the cool room with him.

Mr Cecchi said that in the course of the inspection, he and Mr Graziano dug down into the bins some 6-8 inches and found that the onions were very slimy, with some having green mould on them. Mr Graziano said that he did not dig down into the onions on that first visit because he knew he would get his hands and forearms into a mess and he had no way of cleaning it off. Mr Cecchi said that part way through the inspection, Mr Graziano accused him of ruining the onions and asked what the temperature of the room was. When told that it was 4oC, Mr Graziano replied that he had requested 0oC. Mr Cecchi said that he disagreed with Mr Graziano but nonetheless, he went out and arranged for that to be done.

Mr Clarke said in evidence that he was curious about Mr Graziano’s onions and one day, while he was at Export Park delivering seed potatoes, he asked Mr Cecchi to show them to him. He said that they went into the cool room and he noticed that some of the onions had black stains near the top, some (maybe 4%-5%) had shoots on them - as long as 1-1 1/2 inches but that the onions he felt on the outside of bins, were dry to the touch. He said that he was concerned and asked Mr Cecchi to contact Mr Graziano. Mr Clarke, relied on memory and basing his assessment on a combination of his usual practices and when he thought he took his last delivery of seed potatoes to Safrate for that year, thought that these observations were on Tuesday 20 or Wednesday 21 July.

In my opinion, Mr Cecchi is mistaken about when he looked at the onions with Mr Graziano. It cannot have been in June. On 29 July, he wrote to Mr Graziano expressing concern about the condition of the onions "as observed last week". That does not help with what day it was but it is not consistent with it being June. It is consistent with it being late July. There was nothing wrong with any of the onions removed up to and including 15 July. On 30 July, Dr Bottrill went to the cool room with Mr Graziano to inspect the onions and to put some temperature probes at various locations in the room, including in some of the bins. The probabilities are that Mr Cecchi was thinking of that occasion when he said that Mr Graziano arrived with someone else and the three of them inspected the onions, including digging down into the bins.

I have not found Mr Clarke’s estimate of 20-21 July as the date on which he inspected the onions, to be helpful in determining either when it was that Mr Graziano first inspected the onions and found them slimy, or what the condition of the onions was at any particular time. Mr Clarke fixed the occasion by reference to a delivery of seed potatoes he made to Safrate. He found a receipt for a delivery of seed potatoes from Victoria at about that time but his invoices from Safrate do not indicate there was any delivery to Export Park around that time.

I am sure Mr Clarke was doing his best to fix when he inspected the onions but he had no particular reason at the time to note the date and he cannot point to anything that helps to pin it down. I accept that at some stage he went into the cool room out of curiosity to look at the onions and that he noticed that some of them were shooting. It is odd, however, that by then, the onions having been there for quite some time, he would do that unprompted. The most likely reason his curiosity was aroused, is because he had heard something about the condition of the onions. In my opinion, the likelihood is that his visit to the cool room was some time after Mr Graziano inspected them and found a problem. The evidence does not allow me to be any more specific.

I have already found that the onions were supposed to be stored at 0oC and not 4oC. As has been noted, Mr Cecchi said the temperature was supposed to be 4oC but he arranged to drop the temperature to 0oC after Mr Graziano spoke to him in the cool room. Mr Clarke gave evidence of a conversation during which Mr Cecchi told him that Mr Graziano had asked him to store the onions at 4oC and that he, Clarke, had replied that he believed that the wall chart suggested 0oC and that Mr Checchi should ring to tell Mr Graziano about that. Mr Cecchi also gave evidence of a conversation along those lines, adding that when he next saw Mr Graziano on site within about a fortnight or so, he asked him again and Mr Graziano confirmed that 4oC was the correct temperature.

I do not find the conversation between Mr Cecchi and Mr Clarke helpful in determining whether Mr Cecchi can be accepted in preference to Mr Graziano in relation to the temperature that was requested. I found Mr Clarke to be a forthright witness but as I have mentioned, I am not satisfied that I can rely on his unaided memory to assist with finding the sequence of events. Because of what happened to the onions and the ongoing dispute, it is probable that there has been a number of conversations between Mr Cecchi and Mr Clarke about what Mr Graziano requested. I cannot be satisfied that there was a conversation to this effect before Mr Graziano asked Mr Cecchi to lower the temperature from 4oC to 0oC.

As to the assertion by Mr Cecchi that after the conversation with Mr Clarke, he spoke to Mr Graziano and obtained confirmation that the requested temperature was 4oC, I consider that to be a fabrication to avoid what he believes could be the consequences of not storing at 0oC. Mr Graziano denied that there was ever such a conversation. The matter was explored further in cross-examination. Mr Cecchi was asked whether in the course of confirming the temperature of 4oC with Mr Graziano, he (Cecchi) made any reference to a temperature of 0oC and he said that he had not. He said that he just asked Mr Graziano again what temperature he wanted the onions stored at and was told that it was 4oC. Even on Mr Cecchi’s version, by then he had been told by Mr Clarke that onions should be stored at 0oC and he was aware of what was specified on the wall charts, at least at Safrate International. When asked why he did not mention that Mr Clarke had told him that the onions should be stored at 0oC, he said "it was none of my business at what degrees he wanted to store them at" (sic). Apart from Mr Graziano’s denial that it occurred, such a conversation is highly improbable. Even less credible is Mr Cecchi’s explanation of why he did not refer to the very thing Mr Clarke wanted mentioned and was said to be the reason for speaking to Mr Graziano.

Further, I do not believe that Mr Cecchi rang to tell Mr Graziano the onions were shooting two or three days before Mr Graziano first went to Safrate to inspect them. If there was any telephone call by Mr Cecchi at around that time, it is likely to have been between the day Mr Graziano first inspected the onions and 30 July, when Mr Bottrill came with Mr Graziano to the cool room. However, that would not be drawing the problem to Mr Graziano’s attention. A likely reason would have been to make some arrangements for Mr Bottrill’s testing with his probes.

I accept that Mr Graziano was extremely upset by what he saw at Safrate. The next day, he and his brother took the sample bin from the utility and tipped the onions out. He found that the onions closer to the centre of the bin were worse than those near the outside. He rang Mr Cecchi and told him the onions were ruined.

The load sent to Spring Gully Pickles on 23 July was made up from onions retrieved from Safrate on 15 July and 19 July. Those retrieved on 15 July were also used to make up a delivery to another customer, Apple Valley, and there were no complaints about them, just as there were none about those retrieved earlier. In my opinion, the evidence supports an inference that the defective onions sent to Spring Gully Pickles came from those retrieved on 19 July.

Mr Webb, who was then the purchasing officer for Spring Gully Pickles, rang Mr Graziano and complained about the quality of the onions. Mr Webb was not sure about the date; he put it as being about mid July. I am satisfied that the evidence as a whole points to it being around Monday/Tuesday 26/27 July. Spring Gully Pickles usually buys its onions sliced or diced and Mr Webb noticed that a significant proportion of this load had broken down and was slimy. As I have said, 4 tonnes were discarded as unusable and a credit was given by HPS.

I believe Mr Graziano in saying that he had never experienced anything like this before; a vast quantity of wet and slimy onions. As time went by, their condition became worse and in due course some sprouts appeared. He went into considerable detail about the steps he took to try to salvage onions over the next 6-7 weeks and to sell them for what he could get. It is not necessary to canvass the details. I accept that he did the best he could in the circumstances to mitigate his loss and I shall refer to the figures in due course. In summary, as time went by, the onions at Safrate deteriorated further, with the result that about 70% was dumped but there was a restricted market for the balance.

I accept that the onions, of mixed grades and sizes, which HPS bought from the same suppliers but kept in its own cool room instead of sending to Safrate, were stored at 0oC and did not cause any problem. They were processed gradually over time and sold in the normal way, finishing in about September/October 1993. Mr Graziano was not sure about the quantity he retained in the HPS cool room but he estimated it was about 40 bins and pallets. I have no reason to doubt that estimate and depending on the mix, that means somewhere around 30-40 tonnes.

DEFROST CYCLE MALFUNCTION

There was a malfunction of the defrost cycle in cool room no. 3 from 17 July until 28 July 1993 when it was repaired by Mr David Miller, an industrial refrigeration mechanic. This trial commenced on 15 April 1996, almost 3 years after the event. It was not until the trial started that the plaintiffs revealed to the defendants for the first time that there had been a problem with the defrost cycle. This was a significant piece of information and understandably, the defendants were taken by surprise. On 17 April 1996, the trial was adjourned to enable further discovery and inspection and for the parties to obtain such expert opinions as they may be advised. For various reasons, the trial could not be resumed until 7 April 1997, almost 12 months later.

It is necessary to describe the operation of the refrigeration units. The evidence about refrigeration extended over some seven days, of which, about one day was devoted to the principles of refrigeration and how the units in cool room no. 3 worked. This was extremely helpful in understanding what was involved but in view of my ultimate findings, there is no need to delve into some of the finer points that were the subject of a considerable amount of evidence. Thus, although it is far from being a comprehensive summary, it will serve the purpose.

Cool room no. 3 has two refrigerator units. Each has an evaporator that consists of fine rippled aluminium fins through which passes a seamless copper tube (coil) containing refrigerant, in this case R22, which is at a temperature of about -6oC. The evaporator acts as a heat sink. As fans draw the room air over the evaporator, the heat is transferred to it, thus cooling the air. Moisture from the air is also deposited on the evaporator forming ice or frost, and the cooled, dried air passes beyond the evaporator to recirculate in the room. Ice is frozen water without any air in it, while frost is ice with entrapped air. Over time, the deposits of ice and frost on the evaporator will build up to form a coating over the fins and tube, so reducing the efficiency of the evaporator.

At the risk of oversimplifying, it can be said in general terms, that the greater the difference in temperature between the air coming to the evaporator and the surface of the evaporator itself, the more efficient will be the transfer of heat and moisture from the air to the surface of the evaporator. The rate at which ice or frost will build up on the evaporator, is dependent on a number of things but particularly, the amount of moisture in the air. The capacity of a surface to remove moisture as well as heat from the air, is also temperature dependent. In short, that surface must be at a temperature below dew point, so that condensation will occur. Moisture will then freeze to form frost or ice if the temperature of the surface on which it is deposited is less than the freezing point of water, namely 0oC.

If the ice or frost builds up on the coil, it has an insulating effect because that then becomes the surface in contact with the surrounding air and it will be at a higher temperature than would have been the case if the metal of the evaporator was the exposed surface. The thermal conductivity of metal is very high but that of ice and air is comparatively low. In broad terms, the ability of the evaporator to remove both heat and moisture from the surrounding air, will decrease progressively as the build up continues. Since the thermal conductivity of frost is even lower than that of ice, the inefficiency will be more marked if there is a significant frost content.

Each evaporator is governed by two cycles. In this cool room, both evaporators run off one set of controls. The first cycle is controlled by the thermostat. The temperature of the air in the room is set by selecting the required temperature on the thermostat which has a sensor in the hottest part of the room, near the ceiling. When the sensor registers that the surrounding air has dropped to the required temperature, it operates a valve which shuts off the flow of R22 so that no refrigerant passes through the coil. When it senses that the temperature has increased, it opens the valve to admit refrigerant again.

The second is the defrost cycle, designed so that periodically, the ice/frost build-up on the evaporator will be removed. In this cool room, the defrost was set to operate every 6 hours. The cycle takes 40 minutes and is governed by time only; it over-rides any call from the thermostat. At the start of the defrost cycle, the fans stop so that water from melting ice is not drawn back into the room. Each evaporator has three 4,000W heaters in the coil block and two 800W heaters in the drain pan at the bottom of the evaporator, that takes away water from the melted ice. Ice can build up in the pan as well as on the evaporator itself.

As mentioned, the two evaporators work in concert and there are three fuses to accommodate all the heaters. The first coil heater in each evaporator is connected to one fuse and the second coil heater in each evaporator is connected to a second fuse. The third coil heater and the pan heaters in each evaporator, are all controlled by a third fuse. The heaters operate for a set time and are designed to melt frost or ice build up. When the heaters are turned off, the refrigeration valve opens to admit refrigerant into the coil. This will snap freeze any molecules of water left on the surface of the fins or the coil, so that they will adhere to the evaporator surface and not be drawn into the room by the fans which come on about one minute later. The refrigeration cycle will recommence because there has been no refrigerant circulating during the defrost cycle and the thermostat sensor will demand cooling.

Mr Miller had previously serviced the refrigeration units at Safrate International and in response to a request, he went there on the morning of 28 July. He was there for about 3 hours. Mr Cecchi could not explain why Mr Miller had been called. He said that in 1993 he was unaware that there had been a problem with the defrost cycle or that Mr Miller had been called. He left Safrate in the first half of 1995 to take another job and he said that he did not become aware of any of this until a few days before he gave evidence in April 1997.

The Operations Manager at Safrate International, i.e., the person in charge of the cool room complex, was a Mr Leigh Lewis. Neither Mr Lewis nor anyone else who worked in the cool room complex was called to give evidence. There was no evidence led by the plaintiffs as to why Mr Miller was contacted. Although Mr Miller could remember clearly what occurred when he got to the cool room, he had no independent memory of the reason given when he was asked to attend. The best he could do, was to refer to the invoice which he had filled out on 28 July 1993, where the following is recorded as the reason for the call:

"Room 3 Defrost Heaters Not Working. Room Not Coming Down".

Mr Miller was asked to describe what it was like when he walked into the cool room. He said (T536-538):

"The room felt moist. It wasn’t a crisp cold, like you’d expect in a refrigeration room. It’s a bit hard to describe it, but it’s probably like somebody walking in fog that’s blind. It’s dense in front of you, it’s moist. ... ... ... ... ... ... ... ... . There’s moisture in the room that shouldn’t really be there."

He explained that by likening his situation to being "blind " in a fog, he meant that he could feel moisture on his face even though he could not see it. He inspected the evaporators and saw a significant build-up of ice on both, extending from the bottom of the evaporator (just above the drain pan) up the front and back into the centre, almost to the top on the face of the evaporator. There was little space between the fins. He thought that there would still be "a bit of air movement " through the evaporator but that it would be severely restricted by the ice build-up.

He went to the plant room and found that two of the three fuses that control the heaters on both evaporators were blown, such that in each evaporator, two of the three heaters in the coil block were not working. The third coil heater and the two heaters in the drain pan were still functional in each unit. He went back to cool room no. 3 and checked the electrical connections in the junction box and found two that needed repair. As best he could recall, one was broken and the other was affected by moisture. He was unable to determine why this had occurred but he repaired them, replaced the fuses, checked the system and found that it worked normally.

To get rid of the ice build-up, Mr Miller by-passed the time clock and ran a defrost cycle. When that finished there was still some ice left, so he ran another defrost cycle. After he was satisfied that everything was working correctly, he reset the time clock so that the next defrost would occur at the normal time, a few hours later.

Mr Miller was unable to say when the heaters began to malfunction. However, temperature charts for the cool rooms are helpful. The temperatures in all the cool rooms are monitored and recorded at a central point. Apart from an LED readout, there is a continuous paper chart on which the temperature of each room is recorded by an ink tracing; each room having its own colour. The recorder is re-loaded with paper periodically. These records were referred to at trial as temperature charts.

Evidence was called from two witnesses with expertise in refrigeration. The defendants called Mr Ray White, a refrigeration engineer, and the plaintiffs called Mr Ian Jurgs, a consultant in commercial refrigeration. In the course of giving their evidence, both these witnesses devoted considerable time to the temperature charts, interpreting various recordings and their possible significance. I shall have more to say about their evidence later, but on this issue, I am satisfied that the temperature charts indicate that the defrost cycle in cool room no. 3 began to malfunction on 17 July. In all, therefore, there was a malfunction in the defrost cycle over a period of about 10 days until Mr Miller rectified it on 28 July. I shall discuss the significance of that in due course.

ADJUSTING THE THERMOSTAT FROM 4OC TO 0OC
The temperature charts assist in identifying when Mr Graziano is likely to have first gone to Safrate International after seeing there were problems with the load retrieved on 19 July. The graph for cool room no. 3 records that from about 3.00 pm on 23 July, there was a lower temperature established, consistent with the thermostat having been lowered from a setting of 4oC. It did not go down to 0oC but fluctuated around 2oC for the rest of that day. According to the expert evidence, the maximum time between someone altering the thermostat and when the graph would record a change in room temperature, would be a matter of a few hours. The inference to be drawn from this is that the thermostat was lowered from a 4oC setting between about midday and 3.00 pm on 23 July.

As mentioned earlier, the evidence of Mr Cecchi is that when Mr Graziano asked him to change the room temperature from 4oC to 0oC, he left the room immediately, arranged for that to be done and then returned and resumed his conversation with Mr Graziano. He did not alter the thermostat himself. Mr Graziano confirmed that Mr Cecchi left the room and returned shortly after. The person who probably would know or would have known, when the thermostat was changed was Mr Leigh Lewis but, as I have said, he did not give evidence. There is no direct evidence of how quickly the thermostat was changed after Mr Graziano’s request.

Mr Lovell submitted that I should find that although Mr Graziano asked for the thermostat to be changed on 20 July, it was not done until some 3 days later. I have already explained why I find that Mr Graziano did not go to Safrate on 20 July but between 21 and 23 July. Although it is possible that no one carried out Mr Cecchi’s instruction to lower the thermostat for 24 hours or more, in all the circumstances, it is not likely. Mr Graziano was upset and angry when he discovered the condition of his onions and was insistent that the temperature should be 0oC and not 4oC. Clearly, he was persuasive enough to have Mr Cecchi leave the room immediately to ask for the thermostat to be changed. It was obvious to both of them that something was wrong with the onions, whatever might be the cause.

In the circumstances, it is inherently improbable that Mr Cecchi would have allowed a slack response to his request. The strong probability is that the thermostat would have been altered shortly after the request was made. There is a further consistency. Mr Graziano described going to Safrate after lunch, around 1.30-2.00 pm. That is within the time frame indicated by the temperature chart during which the thermostat setting was adjusted down from 4oC on 23 July.

For these additional reasons, it is my opinion that the most probable date on which Mr Graziano inspected the onions and asked for the temperature to be lowered was, 23 July. It should be noted however, that although the thermostat was adjusted to a setting of 0oC, the room did not settle at that temperature until Mr Miller repaired the defrost system. For much of the time recorded on the temperature charts, it remained around 4oC and sometimes around 2oC.

AUGUST/SEPTEMBER

The evidence about the date is not clear but around mid-August, Mr Graziano and Mr Cecchi had a conversation about future storage of the onions. Again there was a conflict about what was said and how the discussion occurred.

Mr Cecchi’s evidence was that he needed the space in cool room no. 3 so he rang Mr Graziano to ask if he would agree to his onions being moved to the Pooraka premises. He said that Mr Graziano agreed and as part of the deal, he, Mr Cecchi, offered to move them at Safrate’s expense and said he would give HPS two weeks’ free storage at Pooraka, that being the time Mr Graziano had indicated he was likely to need before the onions would all be gone.

Mr Graziano’s evidence was that although they spoke briefly on the telephone, it was a few days later when Mr Cecchi came to see him, that this conversation occurred. They talked about the onions and the fact that they had been stored at the wrong temperature and were of no value. Mr Graziano said that he then asked Mr Cecchi what Safrate would do and that Mr Cecchi replied that the only thing that could be done, would be not to charge rent from that day on. Mr Graziano said in evidence that his attitude to paying Safrate for storage was then governed by two considerations. First, as the onions were not stored at the correct temperature until the problem was rectified on (as he recalled it) about 20 July, he was not obliged to pay storage fees before 20 July. Second, since there was an agreement that no storage fees would be payable after the day of Mr Cecchi’s visit, about 18 August, he was only liable for storage fees between 21 July and that date.

It was arranged for all the remaining bins to go to Pooraka except for 13 pallets containing the last of the bagged onions, which came direct to HPS for dumping. Invoices from Safrate indicate that most of the onions had been removed from Export Park by 15 August and the balance on 22 August. Overall, it appears that about 200 bins were moved to Safrate’s cool room at Pooraka, with a storage charge being raised from 17 August.

In September 1993, HPS sent Safrate a cheque for $3091.29 with a covering note showing it was for fees from 21 July until the week ending 22 August, adjusted according to the number of bins in storage at the relevant times. During the trial, after Mr Graziano found out about the malfunction in the defrosting cycle, he said that if he had been aware of that in 1993, he would not have paid any storage fees.

The last of Mr Graziano’s onions were not removed from Pooraka until about 15 September. Safrate presented HPS with an account for storage at Pooraka from 17 August until either 6 September or 15 September. It is hard to tell from the invoice whether onions stored between 6-15 September were from this batch and there is no other evidence about it. That need not be resolved. The important thing to be noted is that Safrate has made no allowance on the invoice or since then, for the two weeks free storage Mr Cecchi claims to have arranged with HPS. When Mr Cecchi was asked why there was no such deduction, he said that because the onions stayed at Pooraka for longer than two weeks, he decided that an account would be sent for the whole period and that there would be no deduction.

Although Mr Cecchi would not admit it, I find that he came to an agreement as described by Mr Graziano, namely that no fees would be payable after the time of their discussion. It is consistent with his understanding of what the arrangement was, that in September 1993, Mr Graziano paid fees from the day after he believed the temperature was brought from 4oC to 0oC(21 July) until 22 August but nothing after the onions went to Pooraka. Although it is of only limited assistance, this conduct by Mr Graziano tends to support his version of the agreement. More to the point, neither Mr Graziano’s conduct nor the terms of Safrate’s own invoice, are consistent with an agreement as alleged by Mr Cecchi that there be a fee holiday for two weeks. Once again, I am unable to accept Mr Cecchi’s evidence.

OTHER MATTERS CONCERNING MR CECCHI
This is a convenient point at which to refer to some other matters that have concerned me about Mr Cecchi and led to the conclusion I expressed earlier, namely that I cannot accept him as a witness on whose testimony I could safely rely. I do not mean to be exhaustive.

The indications are that Mr Cecchi did not know much about what was happening in the cool rooms. As already mentioned, in spite of all that happened, including proceedings being commenced by Safrate in February 1994, he was unaware up to the time he left Safrate in about mid-1995, even that there had been a defect in the defrost system at the relevant time for some 10 days. Similarly, for the whole time he was General Manager of Safrate, he was unaware that the temperature records for all the Export Park cool rooms were kept on a single chart and not as he thought, on separate charts for each room. He was unaware until about the time of trial, so he said, that a temperature chart for cool room no. 3 for July 1993 still existed.

Mr Graziano said that he was aware that onions going into storage should be dry. Mr Ian Wilkinson, a transport driver for some 28 years, has transported a lot of produce for Mr Graziano. Mr Wilkinson gave evidence about a number of matters but as relevant here, he spoke about the transport of onions, something he has been doing for many years. He took all but three of the loads to Safrate. Mr Wilkinson struck me as being careful to look after produce. He said that he knew it was important to keep onions dry and I accept that it was his practice that if there was risk of rain during a journey, he would cover the load appropriately. The method of covering depended on whether the load was pallets or bins but those details do not matter. I am satisfied that he would not have allowed a load of onions to be exposed to any significant rain.

Mr Cecchi said that it was his belief that provided onions are in sound condition and dry, they would not deteriorate during storage in a cool room, even at 4oC; the corollary being of course, that if onions are wet when they are put into cool room storage, they are likely to deteriorate.

In evidence-in-chief, Mr Cecchi, speaking of a load from the defendants, said (T594):
         "I happened to be out on the dock at the time when the pallet was taken off the truck and as it was being removed off the truck there was water draining from the bottom of the bin - sorry, not a pallet, it was a bin - and I instructed the staff not to put it in the cold store because I didn’t want water everywhere in the cool room and I told them to put it under the dock until it stopped dripping and we put it in.
Q.     Did you have any opinion about the desirability of putting a bin of onions in that state into the cool room after they had stopped dripping.
A.     As long as it wasn’t going to make a mess in the room - no I didn’t have a problem with that".
(Emphasis mine)

On the following day, Mr Cecchi was cross-examined about that topic and it is necessary to refer to a considerable portion of the transcript (T696-698):
"Q.    You gave some evidence yesterday about some onions which you say were delivered to the airport which were wet.
A.     Yes.
Q.     Do you remember what day that was.
A.     No.
Q.     Can you tell us anything else about that day.
A.     I was out in the yard, a truck pulled into the yard -
Q.     You saw the truck come in.
A.     Yes.
Q.     How many pallets did it have on it.
A.     It was a full truck; I don’t know. They would have had I suppose either six, eight or twelve, depending on the size of the truck. I didn’t count them.
Q.     Who was driving.
A.     No idea. The truck pulled up to the dock, the driver jumped on the forklift, pulled a pallet off the truck - or a bin - off the truck and when the tines went into the holes of the bins they lifted them up, pulled away from the truck and there was water running out of the bin.
Q.     Just the one.
A.     Yes, that I saw, yes.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Q.     Was the truck tarped.
A.     No.
Q.     Was it raining at the time you saw this.
A.     It was spitting; it wasn’t raining heavy.
Q.     What sort of rain, see if you can describe it.
A.     Rain that you could walk 50 yards without getting soaked.
Q.     But you would get wet.
A.     Yes.
Q.     What did you do when you saw the water.
A.     I told a person on the dock not to put the bins into the cold store until they were drained.
Q.     Who was that.
A.     I don’t know, whoever was the storeman on the dock at the time.
Q.     We could determine that from dockets, could we.
A.     Should be able to, he was someone that received it.
Q.     Just the one bin you asked him to store.
A.     No, I told him to put them all down.
HIS HONOUR
Q.     I missed the answer.
A.     The whole load - to leave it outside.

XXN
Q.     How many bins do you say were left outside.
A.     I would be guessing - I would say six or eight.
Q.     Yesterday you told us it was one, do you remember that.
A.     No.
Q.     You have always known it was more than one.
A.     Yes, it was a whole load.
Q.     The whole load stayed outside.
A.     Yes.
Q.     How long for.
A.     I would be guessing if I say - but it would be for whatever that afternoon was.
Q.     Just an afternoon.
A.     At a guess.
Q.     Didn’t you take some interest in this.
A.     - the interest was that I didn’t want water running all over my coolroom.
Q.     Exactly.
A.     Yes.
Q.     I presume you checked the onions before they went back in.
A.     No, I let the storeman do that.
Q.     You just can’t remember who the storeman was.
A.     Storeman was - no.
Q.     He had to check the whole load of bins.
A.     No, we - as far as I was concerned there wasn’t any need to check the whole load after the first bin came off with water running on it I assumed the rest of them had the same problem."

Given his belief about the effect of wet onions in a cool room, he was asked whether he contacted Mr Graziano to tell him. He said he had not (T699):
"It’s his product, he tells me what he wants to put in. As long as it doesn’t damage my coolroom, I’ll put in there whatever he gives me".

He said that once the water was drained, the onions went into the cool room. By damage to the cool room, he meant water getting under the timbers of the floor. When questioned further about whether he felt any responsibility to customers in a situation like this, even if the onions were rotten, he said (T700):
"If he brought rotten onions in they would have gone in the store, yes".

Mr Cecchi’s cross-examination continued into the next day. His attention was drawn to a statement he made for the purposes of the case, sometime between March 1995 and the start of the trial in April 1996. He confirmed that in that statement he had said that he believed that if wet onions were put into the cool room, they would raise the level of the moisture content in the room and in turn, that would affect the storage of the onions generally. He said that he believed this to be so in 1993.

Both Mr Graziano and Mr Wilkinson denied strenuously that there was any load, or even part of a load, that was wet. Mr Cecchi’s evidence on this topic was inconsistent and in relation to it, his demeanour was particularly unimpressive. There seem to be three possibilities, none of which do him any credit. The first is that there was a load of dripping wet onions and once the excess water was drained off, they went into the cool room. Given his belief about the likely effect of this on the onions generally, that would make his conduct cavalier in the extreme. The second possibility is that there was one bin of wet onions and he embellished it to make the story better. The third possibility is that the whole story about one bin and then a whole load of wet onions, is false.

The mere fact that his evidence is open to three different interpretations says much about his unreliability. More however, in my opinion, it is the third possibility that applies. Other evidence to which I have referred, not only does not support a possibility of wet onions arriving at Safrate for storage, it is against it. Mr Cecchi had a motive for fabricating a story about wet onions being delivered; that motive being consistent with his belief that if wet onions are put into the cool room, not only would they deteriorate but they would have an adverse effect on the others. That might exonerate him. In my opinion, he invented the story about a bin of wet onions and then exaggerated it to a whole load. Once he was committed to that, his evidence became quite absurd.

Another example of the unreliability of his evidence is as follows. At one point in cross-examination, he was asked whether by late July, the onions had any smell about them and he said (T679): "I didn’t smell anything unusual". He said no one had suggested this to him and there was nothing unusual; nothing other than an ordinary onion smell. The topic was revisited in cross-examination on the following day. It was pointed out, and he accepted, that in the statement he had given between March 1995 and April 1996, he had said that on 17 July, he noticed there was a bad stench of onions and that on 19 July, he telephoned Mr Graziano to advise him of that. He was asked (T745-746):

"Q.    Did you say in your statement ‘There was also a bad stench of onions’.
A.     That’s what’s written here, yes.
Q.     You said yesterday that there was no smell of onions.
A.     Well I obviously forgot."

There are other instances of prevarication and inconsistent evidence. I do not propose to canvass them all. Apart from my observations about his demeanour, these matters and others I have mentioned when dealing with particular topics, indicate that Mr Cecchi was an unreliable witness.

SAFRATE SOCIETY LIMITED/ SAFRATE INTERNATIONAL PTY LTD
The plaintiffs admit that at all relevant times, Safrate International has been a wholly owned subsidiary of Safrate Society but deny any principal/agency relationship. As I have said, I do not regard the distinction between the two companies as material for the purposes of this case. Although it is raised on the pleadings and there was evidence and cross-examination about it, there were no submissions by Mr Apps in his address that it was still a live issue. I shall therefore state my reasons briefly.

I accept that Mr Graziano was unaware in 1993 of the difference between the two companies. As far as he was concerned, there were two premises operated by Safrate, one at Pooraka and one at Export Park. That understanding is relevant but it is not determinative. Of more significance, is the way the two companies conducted themselves, particularly through Mr Cecchi.

When Mr Graziano made his first inquiry, he rang the premises at Pooraka and was given Mr Cecchi’s mobile telephone number. When Mr Cecchi spoke on the telephone, he did not draw any distinction between Safrate Society and Safrate International. He simply talked about space being available at Export Park. Mr Graziano had no cause to enquire whether there was more than one Safrate entity.

Strictly speaking, Mr Cecchi was employed by Safrate Society but he acted as manager of both companies. Although there were two boards, one for Safrate Society and one for Safrate International, the same nine members made up each board. In his dealings with customers and generally, Mr Cecchi did not distinguish between the two companies and it was common for him to refer to "Safrate" as having rooms at Pooraka and rooms at the airport. He had no main office. He operated out of both premises and he described his main office as being (T609) "where I was at the time". Sometimes, that was in his car with a mobile phone. Mr Cecchi said that as far as he was concerned, it was all one company and he did not say anything to Mr Graziano to indicate otherwise.

The circumstances surrounding the removal of the onions from Export Park to the Pooraka cool room, are consistent with the behaviour of a company’s manager moving goods from one place under his control to another. Whatever the terms of the offer, there is no suggestion in the evidence that there was any material benefit to Safrate Society (as distinct from Safrate International) in offering free storage at Pooraka for onions that were taking up space at the premises of Safrate International.

Mr Graziano contacted Safrate Society and asked its general manager, Mr Cecchi, to store onions. Mr Cecchi purported to do that and neither he nor any other employee or agent of either Safrate Society or Safrate International, gave Mr Graziano any cause to believe otherwise. There are not only no grounds to suggest that Mr Graziano ought to have thought he was contracting with some party other than Safrate Society, the conduct of the plaintiffs would have confirmed his understanding that Safrate Society had premises at Pooraka and Export Park. The evidence shows that the contract was between Mr Graziano on behalf of the defendants and Safrate Society, which through Mr Cecchi, provided storage facilities at the premises of its subsidiary, Safrate International. To the extent that Safrate International provided a service, it did so as the agent of Safrate Society.

THE CAUSE
The plaintiffs and the defendants called witnesses as experts in refrigeration and horticulture.

9.1 REFRIGERATION
As mentioned, the defendants called Mr Ray White, a refrigeration engineer and the plaintiffs called Mr Ian Jurgs, a consultant in commercial refrigeration. Both of them have had long experience in commercial refrigeration.

Mr White was called first and he spent a considerable time explaining the principles of refrigeration, especially how it operates in a cool room, and he having done that, Mr Jurgs was able to deal with those matters more briefly. There were some differences in their use of those principles but none that has practical significance here.

The substance of Mr White’s opinion is that the malfunction in the defrost cycle had an adverse effect on the air in the cool room. The temperature chart indicates that the malfunction began to take effect on 17 July. Because the defrost cycle is governed by a time clock, it will commence at appointed times and if the heaters are working properly, the temperature sensor will record an increase in air temperature because of them. Thus normally, temperature peaks would be recorded every six hours to coincide with the defrost cycle. No such peaks occur after the early morning of 17 July. There is no way of knowing when each fuse blew or even whether both failed on the same day. However, the temperature chart indicates that fully heat assisted defrosts ceased on 17 July.

The remaining heaters in each evaporator, i.e. the third coil heater and those in the drain pan, would have come on during the defrost cycle. It was Mr White’s opinion that the effect of reduced heating would be that not all of the ice or frost build up would be removed during the 40 minute defrost cycle and that as time went by, there would be a gradual accumulation. He considered that because these units had excess capacity, the temperature in the room would be kept at or near the chosen level, at least in the early stages, but there would have been a build up in the relative humidity of the air in the cool room. That would happen because the surface temperature of the ice on the evaporator would be 0oC and not lower. Thus the difference between the temperature of the circulating water molecules and that of the outside of the ice would be less and therefore, less likelihood of the water molecules being attracted to the ice, with the result that they would be left in suspension.

Mr White said that not only would moisture molecules not be removed from the air, but more would be released into the room by respiration of the onions and so the increase in relative humidity would become progressively faster. Moreover, he said, as the evaporators became less efficient with the progressive build up of ice and relative humidity, notwithstanding their excess capacity for that room, it may well be that even though the thermostat was set at 0oC, the actual temperature of the room would not come down to that level because it could no longer be achieved. As the relative humidity increased, it would have reached a point where moisture began to show on the onions. That moisture comes from the onions themselves, its transfer being retarded or prevented by moisture already in the air.

Mr White was cross-examined over a number of days. There were some areas where he conceded that he had made some errors - e.g. in interpreting the temperature charts, and he then set about addressing issues on the basis of the corrections made. If he was faced with either a misinterpretation on his part or a possible alternative explanation for something, he was frank and quick to concede other possibilities. He conceded that even if only one heater was operating in each evaporator as well as those in the drain pan, there would be some melting of the ice on the fins and coil and further, that he could not say categorically that one heater would necessarily would be insufficient to melt all the ice in one cycle. He acknowledged that there were some anomalies he could not explain. Notwithstanding all these matters however, he was unshaken in the principal thrust of his opinion about the effect of the malfunction in the defrost cycle.

Mr Jurgs agreed there had been a malfunction in the defrost cycle but he came to very different conclusions. He did not consider that there would have been any significant increase in the relative humidity of the air in the room. When he gave evidence in court, he said that the most probable explanation of what happened was that the heater at the top of each coil failed on 17 July and the heat from the lower elements was sufficiently dissipated, such that it was not registered by the temperature sensor. He believed that the second fuse probably failed on about 26 July, rendering the drain heaters inoperative with consequent icing up, commencing in the drain pan. This was so, he said, because since July 23, the room was set at 0oC and the melted water would not drain away. It was his opinion that this was responsible for an ice build up that started in the drain pans and travelled up through the evaporator. In short, it was his opinion that there was no reduction in the efficiency of the evaporators until about 26 July and the problem was fixed by Mr Miller within about 48 hours; in other words, hardly a problem at all.

It is an expert’s function in court, to apply his expertise in a recognised field of knowledge to the facts, either as they are acknowledged to be or as he is asked to assume them, for the purpose of assisting the court to decide the ultimate issues and, depending upon the complexity of the case, to set out the matters he has taken into account as the facts or assumptions upon which the opinion is based (TPC v Arnotts Ltd (1990) 92 ALR 527).

It is not uncommon for experts to differ in their opinions; indeed that happened here with Mr White and Mr Jurgs. Sometimes a single set of facts may give rise to conflicting conclusions. Sometimes the relative value of differential conclusions will depend on which set of conflicting facts is accepted by the court. Sometimes the facts may be uncontroversial but the application of principles from the relevant area of expertise, leads to differing conclusions. Sometimes an expert may alter an opinion in the course of giving evidence. Such matters in themselves, are unremarkable. However, important matters for a tribunal in assessing the value of an expert’s opinion, are the integrity of the witness’s process of reasoning and the degree of objectivity in approach.

Mr Tugwell noted that the onions were purchased and delivered to the cool room in May and June and included consignments of brown and white onions. For reasons that are not clear, he said that these onions would have been harvested, commencing with white onions in February and concluding with brown onions in early March. He assumed that they had been stored in sheds on growers’ properties, at ambient temperatures varying from 15oC-30oC for 1-3 months prior to Mr Graziano’s buying them. He concluded that when these onions were put into storage at Safrate, they could be expected to have only a short storage life since internal sprouting would have already commenced. It was his opinion that the onions were at or near the end of their dormancy when put into the cool room and that the cool room storage would have extended the remaining storage life by only a few weeks.

It was his opinion that the onions were not top quality, grown and harvested for the purpose of long term storage. He pointed out in a report of 21 August 1995, that onions were in short supply in 1993 and that it could be assumed that as the lowest market price was $700 per tonne in May, the HPS onions which were worth only $230 per tonne must have been of inferior quality. He said that if sprouts were visible, on some onions as early as about 20-21 July, it was likely that others were beginning to sprout, even though that was not then visible, because the presence of sprouts indicates that some of that population of onions are beginning to grow. He said that once you get 50% or more of a population showing signs of sprouting, it is reasonable to infer that a very high percentage is close to the same stage and putting them in the cool room will slow that growth but will not stop it.

In summary, it was Mr Tugwell’s opinion that these onions sprouted and were ruined because they were of poor quality, had reached the end of their dormancy and were beginning to grow again by the time Mr Graziano went to inspect them after retrieving the load on 19 July. I have some difficulty with Mr Tugwell’s evidence, principally because some important assumptions on which he based his opinion are incorrect.

Mr Tugwell said the onions were of poor quality. That is not only not supported by the evidence but contrary to it. None of the onions were bought from a supplier that Mr Graziano had not used before, even though some, e.g. Hall, had only supplied on rare occasions. One of the suppliers (St George) was his father. Mr Graziano said that his father had never sent him a bad onion. He said that he had never had reason to be concerned that any of these suppliers would send him poor quality onions or ones that had already been stored for too long. He said he checked the onions for signs of rot, roots or shoots before sending them to Safrate and there were none. He has had long experience with onions and he was keen to make a profit later in the year. Of course, anyone can make a mistake, but it makes sense that, as he said, he would not have sent them to the cool room unless he was satisfied they would keep. All but a couple of loads from Caretti and Condo came first to HPS before being taken to Safrate.

Mr Graziano said that he did not see any wet onions among the loads that HPS took to Safrate. It was suggested to him that the one or two loads of onions which he had kept in his own cool room at 0oC before removing and taking them to Safrate, would have formed surface condensation once they came from 0oC to ambient temperature and would have been taken wet to Safrate. He could not recall any such problem. Having heard the expert evidence, the likelihood is that those onions would have condensation on them as they were removed from his cool room, but I accept Dr Bottrill’s opinion that even if some condensation survived the trip on the back of a truck from Pooraka to Export Park, that sort of moisture would in all probability have been removed within a few days by the ordinary operation of the evaporator in the Safrate cool room.

Some time was devoted during the trial to a remittance advice from HPS to Hall and whether an employee of HPS had written the word either "wet" or "net" in relation to a supply of onions and also the word "waste". These notations were relevant to adjusting the amount payable. It was suggested that these indicated that Mr Graziano had accepted poor quality onions from Mr Hall, i.e. wet onions and rubbish. I need not traverse all that evidence and cross-examination and can deal with it fairly briefly.

Mr Hall gave evidence that the onions he sent to Mr Graziano were of good quality and he was angry that Mr Graziano wanted to reduce the price. His evidence as to what was said in a conversation between himself and Mr Graziano about "wet" or "net" and "waste", was very vague and did not take the matter any further. He was not asked to recall these matters until sometime in 1996, some three years after the event and he said that he had argued with Mr Graziano a number of other times about reducing the price of produce for one reason or another. I am not satisfied that either of these entries tend to prove that the onions Mr Graziano put into the Safrate cool room were of other than good quality.

The largest single supplier of the onions was Caretti, with more than 100 tonnes. The combination of Caretti, Condo, Hall and St George make up the bulk of the deliveries. Ms Cathy Trimboli is the secretary of a business, Anthony Trimboli Pty Ltd., (Trimbolis) run by her brothers Domenic and Joe Trimboli who pack and sell onions for Condo. Ms Trimboli has worked in the business since 1972. Her evidence was as follows. She knows Mr Graziano and had supplied him with onions from Condo previously. Trimbolis pack for other people, but in 1993 it was mainly for Condo. Packing starts in November with onions from Virginia and the Gawler River area and continues until April/May when the majority of onions would come from the Riverland. She described the process of inspecting and grading onions by using a machine which cuts off the leaves and roots and removes the loose dirty skin. In her experience, although there will be the odd one that breaks down, onions have kept in their sheds until the following year.

Ms Trimboli sent the onions grown by Condo to Mr Graziano. She has been dealing with him for some 10-12 years and said that she knows he wants good quality. I accept her evidence that she would not have sent onions of dubious quality to Mr Graziano or for that matter, to anybody else. She confirmed that the onions she sent him were second grade but that was what he asked for. As mentioned earlier, that does not reflect on their quality. She said that it was common to get the odd bad onion in a load but they have never had any problem with bad onions in any quantity. She said that bad onions are easily seen and taken out during grading.

Evidence was given by Mr John Caretti who works for Caretti, growers and packers of onions, a business run by his father. He has been the manager for the last eight years and is mainly involved with packing and dealing with growers. He said that they get their supplies from growers in various areas including Virginia, the Gawler River area, the Riverland and the South East. As part of the process of grading, it is their practice to reject any onions that are showing mould or rot, or are otherwise unsatisfactory. They have a number of big sheds that keep the onions dry and well ventilated. He confirmed that onions are graded into first and second grade which, he said, refers to their appearance and does not reflect on their quality.

Mr Caretti has dealt with Mr Graziano over the years and he handled the onions purchased in June 1993. He said that Mr Graziano bought a lot of onions at that time and told him at the time, that he intended to put them into cold storage. He said that the onions he sold Mr Graziano were good quality and had been harvested from late February through March and April. I accept Mr Caretti in saying that he would not sell poor quality onions.

There was no evidence that any of the onions bought by Mr Graziano were of poor quality. In addition to the evidence of Mr Graziano, Ms Trimboli and Mr Caretti, Dr Bottrill inspected them on 30 July. He cannot recall seeing any rotting onions on that occasion. Some of the onions taken from the Safrate cool room were salvaged and sold in August and September 1993. Dr Bottrill said that this indicated that in spite of those onions having been subjected to high humidity for a period of some 10 days in July, the fact that some of them survived and were salable at all in August and September, indicated that they must have been of good quality when they were put into storage, with an extensive storage life ahead of them. Moreover, although they were only a comparatively small percentage of the onions bought by Mr Graziano, those that he kept in his own cool room at Pooraka and did not send to Safrate, had nothing wrong with them and were marketed in September/October. It defies belief to say that, fortuitously, Mr Graziano kept the good onions at Pooraka and sent the poor quality ones to Safrate. There is no evidentiary basis for Mr Tugwell to assert that they were not of good quality.

Nor is there an evidentiary basis for his saying that the onions were at or near the end of their dormancy. I have found that there were no shoots visible to Mr Graziano when he went to inspect his onions on 23 July. As there were some 240 tonnes in the room, that does not exclude the possibility that there may have been some but it is fair to infer that if so, there were very few and could not reasonably be regarded as more than the odd rogue onion. Mr Tugwell’s inferences based on the percentage assumed to be sprouting, are irrelevant. He gave his answers to questions directed to 20 and 21 July but the same reasoning applies if the date is 23 July.

There is no evidentiary basis for Mr Tugwell to assert that the onions were harvested in February and early March. In this regard, there was a curious and unexplained feature about his evidence. He maintained that he had not been told anything about the history of the onions that were sent to Safrate. As I have mentioned, the single largest supplier was Caretti. On 15 June 1995 the solicitors for Safrate wrote to Mr Tugwell enclosing a copy of a letter dated 6 June 1995 from Caretti to Mr Clarke, together with copies of Caretti’s invoices to HPS, showing the prices. He was informed that Caretti’s onions made up "a fairly large part of the onions which were stored". In the letter of 6 June 1995, Mr John Caretti advised Mr Clarke that the onions supplied to HPS in June were harvested between March and April, that they were then stored in a shed with ventilation at ambient temperature from March until June and that they were "of sound and good second grade quality and did not have much skin". Mr Tugwell received that letter and enclosures in June 1995 but was unable to explain why he did not make use of that information. It is reasonable to assume that he read this material. Given his conclusions, he either ignored it or forgot it.

Further, Mr Tugwell was provided with a letter from inquiry agents acting on behalf of the plaintiffs dated 18 July 1995, advising that Mr Hall had told the agents that the onions he supplied to Mr Graziano had been harvested between February and May. He received that letter prior to writing his report of 21 August 1995. That letter also advised that Mr Graziano paid $600 per tonne for some of the onions. Mr Tugwell made no mention of any of this information either in his report or in his evidence-in-chief. This is contrary not only to when he says the onions were harvested but the alleged value of $230 per tonne mentioned in his report. Again, he could give no satisfactory explanation.

Many of the assumptions used by Mr Tugwell as the basis for his opinion, are not only not supported by the evidence but in large part, they are contrary to it. Mr Tugwell conceded that in working back to try to find out what caused the problem with the onions, he worked on the premise that the cool room functioned properly and that the problem must have originated in the onions themselves. That was an unwarranted assumption and it ignored one of two major fields in which the cause might be found. Moreover in working back, it appears that he only used assumptions that would be consistent with such a result. Such an opinion cannot be reliable. In the circumstances, Mr Tugwell’s opinion cannot be given any weight.

Dr Bottrill’s opinion that the onions were adversely affected by the prolonged period of high humidity and that this was aggravated by a room temperature of 4oC instead of 0oC, corresponds with and is supported by, other evidence. Root growth was prevalent. That occurs because of moisture or high humidity, whereas broken dormancy is signalled by sprouting. I accept the combined effect of Mr White’s and Dr Bottrill’s opinions, that the defect in the defrost mechanism would have led to high relative humidity. I repeat a matter that I mentioned earlier. The onions which Mr Graziano kept at Pooraka and marketed as late as September/October, were from the same general group as those that went to Safrate and there was no problem with them. That tends to confirm that the problem was not in the onions but in the place they were kept.

In my opinion, the evidence establishes that the onions deteriorated because, for a substantial part of the period 17 July - 28 July, they were subjected to unacceptably high relative humidity and that during that time, their condition deteriorated progressively such that, despite salvage efforts by Mr Graziano, only a small percentage had any market value.

It is not possible to say categorically whether this would have happened, at least to enough onions to have caused a substantial loss, if from 25 May until 23 July, the room had been set at 0oC and not 4oC. However, given that the metabolic rate of an onion is halved with every 5oC temperature reduction, it can be said that storing at 4oC instead of 0oC would have had less effect in slowing the metabolic rate of the onions and so, the higher temperature is likely to have resulted in more growth. This means that there would have been more moisture output at 4oC than at 0oC, thus compounding the problem of climbing relative humidity. The evidence does not permit me to be more specific.

LIABILITY
The plaintiffs were bailees for reward. Mr Cecchi arranged for Safrate Society to perform that task through the services of Safrate International. The allegation against them is that they failed to take sufficient care of the goods. The plaintiffs properly concede that they carry a burden of proof namely, that to escape liability if goods are damaged or lost while in the possession of a bailee, there will be liability unless the bailee proves either that it took appropriate care of the goods or that the failure to do so did not contribute to the loss (Travers & Sons Ltd v Cooper [1915] 1 KB 73). That burden is a legal one and not merely a shifting or evidential onus (Frankhauser v Mark Dykes Pty Ltd [1960] VR 376 at 377: Pipicella v Stagg (1983) 32 SASR 464 at 469).

For the reasons I have given, neither plaintiff has discharged that onus. More, the defendants have proved that the loss was caused by a failure on the part of the plaintiffs to take proper care of the onions. The standard of care required by law is not absolute but that which may be expected of a reasonable person and the factors to be taken into account in that assessment, include the difficulty of taking alleviating action in response to a real risk (Wyong Shire Council v Shirt (1979-1980) 146 CLR 40 at 47). That there is a risk of damage to vegetable produce in storage if the required environment is not maintained, is obvious.

The temperature chart was easily accessible and one of its purposes was to enable employees of Safrate International to monitor the operation of the cool room. The temperature chart for all but one day or so between 17 July and 28 July, was produced at the trial. Notations on it indicate that one or more employees had access to it from time to time. During that period it would also have been necessary for the recorder to be loaded with fresh paper. It can be seen on looking at the chart, that from 17 July there is a change of pattern in relation to cool room no. 3, with no periodic peaks in temperature consistent with the heaters working during defrost cycles. It would have been a simple matter for someone who was experienced in reading the chart, to have noted that change and requested that someone such as Mr Miller be called to check the units. When Mr Miller was called he was able to identify the problem and fix it immediately. The absence of temperature peaks on the record for cool room no. 3 would have been obvious after only a couple of defrost cycles and there is no reason therefore, why the problem could not have been fixed within the first 24 hours or so. Given that some of the onions taken from the cool room on 19 July showed signs of degradation, it is possible that under those circumstances, there may still have been some damage but it is likely to have been minimal.

In the absence of any explanation to suggest otherwise, the inference to be drawn from this evidence is that there was either no monitoring of the cool room’s environment or if there was, it was inadequate. There was no explanation. As I have already observed, the person most likely to be able to say what monitoring and chart reading was done, is the then Operations Manager, Mr Leigh Lewis, who was not called. He is someone whom Safrate International might reasonably be expected to have called if his evidence assisted its case. No explanation was given by either of the plaintiffs as to why he was not called and in the circumstances, I am prepared to draw the inference that his evidence would not have been helpful to the plaintiffs’ case (O’Donnell v Reichard [1975] VR 916 at 929; Brandi v Mingot (1976) 12 ALR 551 at 559). In the circumstances, I am unable to find whether there was no system of monitoring, or whether there was such a system but it was either inadequate in itself or not managed properly. It does not matter. On any of these scenarios, there was a breach of duty of care by Safrate International.

In addition, as I have found, contrary to Mr Graziano’s request, the onions were stored from 25 May until 23 July with the thermostat setting for the room at 4oC instead of 0oC and although the extent is not quantifiable, this contributed to the increasingly high relative humidity. I am unable to find a reason for Safrate not complying with the requirement of 0oC storage temperature. Various submissions were put by counsel but the evidence does not permit a finding. I have disbelieved Mr Cecchi’s explanation. It is possible that it occurred through carelessness; that it was because it would be less costly to Safrate to store it 4oC rather than 0oC; that it had something to do with the storage of some cheese that Mr Miller saw in the cool room when he attended on 28 July; or there could be other reasons. I am unable to say.

In view of my finding in negligence, the plaintiffs are jointly and severally liable to the defendants for the loss of the onions; Safrate International as the immediate tortfeasor and Safrate Society, vicariously, as its principal. Safrate Society is also in breach of contract because of failure to comply with its terms.

The plaintiffs cannot succeed on their claims. There was no agreement between Safrate International and the defendants. The only contract on foot was between Safrate Society and the defendants and for the reasons given, Safrate Society is in breach and it has no entitlement to storage fees. As I have said, Mr Graziano paid $3,091 (rounded off) by way of storage fees in September 1993, unaware that there had been a defect in functioning of the cool room. That will be taken into account in assessing the defendants’ damages.

QUANTUM
11.1 GENERAL
As best can be accounted for, the total quantity of onions put into the cool room as at 30 June was about 265 tonnes made up of 337 bins and 59 pallets, mixed brown and white. There were three sizes: small, jarrer and medium. For present purposes, nothing is to be gained by distinguishing between brown and white and I shall therefore refer to the onions only by size. There were 13 bins and 35.5 pallets of small onions; 97 bins and 23.5 pallets of jarrers; 227 bins of medium onions.

Onions were removed on 25 June, 2 July, 15 July and 19 July. The total removed over that period was 14 pallets of small onions, 4 bins and 4 pallets of jarrers and 4 bins of medium onions. As from 19 July, the cool room contained about 239 tonnes, comprised of 13 bins and 21.5 pallets of small onions, 93 bins and 19.5 pallets of jarrers and 223 bins of medium onions. Mr Graziano managed to salvage and sell some onions in August and September to four buyers: Fawcett Bros., Chef’s Pantry, Provera & Son and Parsley People. Invoices show that on 2, 3, 10, 12, 19 and 27 August and 1 and 7 September, a total of 18.75 pallets of jarrers and 41 pallets (about 86 bins) of medium onions were sold. The total gross return on those sales was $25,236. All other onions were dumped. The quantity dumped can be calculated as follows:

SMALLB=BinsP=Pallets    JARRER     MEDIUM
In storage from 19 July:        13B + 21.5P      93B + 19.5P       223B
Less sold 2 August -7 September:  Nil  18.75P        86B
Total Dumped:  13B + 2l.5P          93B +   .75P         137B

Although their practice varied, it was common for the defendants to sell, or at least price their sales, by the bag. These quantities should therefore be converted into the equivalent number of bags. Using figures of 19kg per bag, 64 bags per pallet, 1216kg per pallet and 575kg per bin, the total dumped was 8,777 bags made up of 1,769 bags of small onions, 2,862 bags of jarrers and 4,146 bags of medium onions.

11.2 LOSS ON SALES OF SALVAGED ONIONS
For the onions sold in August and September, the defendants claim the difference between what they could reasonably have expected if the onions had not been affected and the prices they obtained. The comparison between the amount received per bag and Mr Graziano’s evidence of the price he could have otherwise achieved on each of the relevant dates, can be summarized in the following table:

DATE  SIZE                   PER BAG  PER BAG
  RECEIVED                  ACHIEVABLE
2 August  Jarrer           $5  $9 - $10
3 August  Medium                 $7   $13
10 August  Medium                 $9  $13 - $14
12 August  Medium                 $7  $13 - $14
19 August  Medium                 $9  $13 - $14
27 August  Medium                 $8  $16
1 September                 Medium                 $8  $15 - $16
7 September                 Medium                 $8.50  $16 - $17

Because so much of his stock was ruined, comparative sales figures from Mr Graziano are sparse but there are enough to justify, with one exception, his estimate of prices that would otherwise have been obtained. I am also satisfied that in those cases where a range is given, the higher figure is reasonable. The exception is his evidence that he would have expected $9 - $10 per bag for jarrers on 2 August. There were sales of first grade jarrers in August at $7.50 and $7.75 per bag. However, I also bear in mind that there was volatility in prices across the board as well as special bulk prices for Spring Gully. I think a more realistic estimate of an achievable price for jarrers at the start of August, would be in the order of $8 per bag.

The loss on those sales is therefore as follows:

DATE        PURCHASER     LOSS
2 August     Fawcett Bros.      $3/bag x 1200 =   $3,600
3 August     Chef’s Pantry       $6/bag x 640 =     $3,840
10 August   Provera & Son     $5/bag x 128 =       $640
12 August   Chef’s Pantry       $7/bag x 640 =     $4,480
19 August   Parsley People     $5/bag x 32 =         $160
27 August   Provera & Son     $8/bag x 320 =     $2,560
1 September        Provera & Son     $8/bag x 384 =     $3,072
7 September        Provera & Son     $8.50/bag x384 = $3,264
TOTAL  $21,616

Some of the onions retrieved from the cool room on 19 July and sold to Spring Gully were returned to HPS, for which Mr Graziano gave a refund of $3,000. That must be added to these losses, thus making the total loss on actual sales (rounded off) $24,600.

11.3 LOSS ON DUMPED ONIONS
Mr Graziano intended to hold the onions in storage and sell them over a period up until about November 1993. I accept Mr Lovell’s submission that a reasonable approach is to say that the defendants would have sold the onions at the rate of about one third in each of the months August, September and October. Having regard to the records of sales between July and November, the defendants claim they could have received the following prices per bag:

MONTH  SMALL  JARRER  MEDIUM
August   $10        $10           $14
September                     $11        $11           $15
October   $12        $12           $16

Bearing in mind that these are claimed as an average throughout each of the relevant months, I consider the amounts to be reasonable. In all but a couple of them, the figures are well below comparative sales.

On that basis the expected return on the 8,777 bags of dumped onions, by size, would have been as follows:

SMALL     JARRER     MEDIUM
August       589 bags/$10= $5890    954 bags/$10= $9,540   1382bags/$14=$19,348
September 590 bags/$11= $6490    954 bags/$11= $10,494 1382bags/$15=$20,730
October     590 bags/$12= $7080    954 bags/$12= $11,448 1382bags/$16=$22,112
Total 1769 bags     $19,460        2862 bags     $31,482        4146 bags      $62,190

Gross loss on dumping:
         Small   $19,460
         Jarrer  $31,482
         Medium   $62,190
                  Total                       $113,132

Some allowance must be made for the risk of natural wastage. Mr Graziano said that depending on the time of year, one could expect normal wastage at 5% but with 10% as the worst scenario in summer months. Here we are concerned with winter and spring.

Mr Apps submitted that I should take into account other wastage figures set out in literature referred to by the experts. Significantly, he said, in one paper detailing a trial of the storage life of specially selected onions in a cool room, there was 14% wastage. He submitted that using that figure as a base, the wastage allowance should be greater than 14% because unlike those in the trial, these were not specially selected onions. In my opinion that is not a helpful guide. The sample quantity referred to in the paper was very small and does not provide a sound basis for extrapolation of percentages. There was other imprecise evidence of an industry allowance for shrinkage in the order of 1% per month. For the period May - November, that would mean an overall loss of about 6%.

Mr Graziano based his estimate on his experience and knowledge of the industry and in my opinion there is nothing to show that it is not reasonable. Therefore, bearing in mind the time of year, I propose to allow 5% for natural wastage. After that adjustment, the gross figure of $113,132 is reduced to a rounded off figure of $107,500.

As I have mentioned earlier, the figures used for expected returns over those three months were moderate. It is quite feasible that the defendants could have achieved considerably higher prices. Equally, Mr Graziano may have kept some onions until November when comparative sales figures indicate that even higher prices could have been expected. On the other hand, in estimating the defendants’ losses, it is appropriate to take into account ordinary overheads like transport, wages for handlers, the use of machinery for grading and processing, incidental expenses, etc. In Part 11.5, I shall deal with a claim for income lost because of HPS not processing some of the onions, but for present purposes, I include the overheads that would be associated with that processing. However, I exclude the cost that would have been incurred for storage at Safrate and I shall deal with that separately.

Thus, on the one hand there should be an allowance for the contingency of higher profit margins and on the other, there should be a deduction for these sorts of overheads. There is no specific evidence on either and in the circumstances, it is reasonable to use a broad axe and set one off against the other.

11.4 COST OF STORAGE
There is a substantial overhead which should be taken into account separately, namely, the cost the defendants would have incurred in storing the onions at Safrate during the period May-October, during some of which, they would have been gradually putting them onto the market. In arriving at a figure to cover that cost, it is appropriate to divide the total period into three intervals namely 25 May - 19 July, 20 July - 31 July and 1 August - 31 October. The cost of storage was $3 per week per item, i.e., bin or pallett. It is unlikely that storage costs would be affected by natural wastage since it is more likely that this would be discovered only after the onions were removed.

11.4.1 25 MAY - 19 JULY (8 weeks)
The total quantity of onions put into storage over the period 25 May - 30 June was 337 bins and 59 pallets. After onions were removed on 25 June, 2 July, 15 July and 19 July, there were 329 bins and 41 pallets in storage at the end of 19 July. The bulk of the removals were on 19 July and to arrive at an average over the 8 weeks, I consider that it is appropriate to use a figure of 333 bins and 57 pallets, making 390 items. The cost would therefore be: 390 x $3 = $1,170 per week x 8 weeks = $9,360.

11.4.2 20 JULY - 31 JULY (1.5 weeks)
It is reasonable to expect that if nothing had gone wrong, some onions would have been removed between 20-31 July. I propose to take a figure of 325 bins and 41 pallets, making 366 items. The cost would therefore be: 366 x $3 = $1,098 per week x 1.5 weeks = $1,647, say $1,650.

11.4.3 1 AUGUST - 31 OCTOBER (13 weeks)
The assumption is that there were 366 items in storage (325 bins and 41 pallets) on 1 August and that over a period of 13 weeks, approximately one third was removed each month. If one assumes that 122 items were removed at the end of each of the 4th, 8th and 13th weeks, it would produce the following calculation for storage costs over that period:

366 items x $3 x 4 weeks       =               $ 4,392:
         244 items x $3 x 4 weeks       =              $ 2,928
         122 items x $3 x 5 weeks       =                $ 1,830
  Total  $ 9,150

However, it would be artificial to assume that the onions would have been removed in just three discrete lots. The likelihood is that they would have been taken gradually over that period and therefore, there must be some reduction in the estimated cost of storage to take account of that. After making that allowance, I assess a figure of $8,300.

11.4.4        OVERALL:   25 MAY - 31 OCTOBER
         The total assumed storage costs at Safrate for the whole time are:
         25 May - 19 July:  $ 9,360
         20 July - 31 July:  $ 1,650
         1 August - 31 October:  $ 8,300
  Total  $ 19,310

However, Mr Graziano paid storage fees of $3,091 in September and that must therefore be credited:

Estimated cost of storage  $19,310
         Less fees paid  $ 3,091
                 Balance  $16,219
  Say:  $16,200

11.5 LOSS ON PROCESSING
Mr Graziano said that although it was his intention to simply sell most of the onions in storage at an appropriate time, he would have processed some of them. I accept that if the onions had not been ruined, he would have processed about 25%. The charge for processing depends on the size of the onion and ranges from 40c-65c per kg. I propose to take an average of 52c per kg.

As at the end of 19 July, there were 329 bins and 41 pallets in storage. The calculation of loss on processing 25% of those onions is as follows:

329B x 575kg   189,175 kg
         41P x 1216kg   49,856 kg
         Total     239,031 kg
         25%:     59,758kg
                 x $0.52
                 $31,074

I have already taken account of general overheads associated with processing when dealing with contingencies in loss on the dumped onions. However, some of the onions recovered in August and September were processed. There was only about 30% recovery and making the best estimate he could, Mr Graziano said that of them, two thirds were thrown away and only one third was usable. Therefore, only a fairly minor adjustment needs to be made to account for monies received from onions which were processed during salvage. As against that, Mr Graziano described the effect of putting the affected onions through his machine namely, it became plastered with slime and broken down skins. He said that it was necessary for him to use extra labour to clean it from time to time and that involved delay, extra handling, etc., Not surprisingly, Mr Graziano did not keep any separate figures in relation to these problems.

In my opinion, both those factors can be accounted for in a general way by rounding off the loss on processing at $30,000.

11.6 LOSS OF BUSINESS
Mr Graziano said that he had done business with Fawcett Bros. for many years before 1993 and that it had grown progressively. After 1993, he received no further orders from them. He said that Chef’s Pantry was a new customer and that he had no further dealings with it after that season. He spoke generally of problems he had with his customers because of the events of 1993.

I accept that there would have been some loss of custom but there is no evidence of any actual loss beyond that which I have already allowed. Such a gap in clientele could well be filled by other customers. The defendants submit that some allowance should be made for loss of business but I accept the submissions of Mr Apps. On the evidence before me, that would involve speculation. In the absence of evidence showing actual loss, it is not appropriate for any allowance to be made.

11.7 SUMMARY

Overall, damages are therefore as follows:
         Loss on sales of salvaged onions:               $ 24,600
         Loss on dumped onions:  $107,500
  Total  $132,100
         Less anticipated storage costs  $ 16,200
  Balance  $115,900
         Loss on processing  $ 30,000
  Total  $145,900

Interest is payable on the judgment. These losses were incurred progressively between late July and the end of October 1993 but mainly during September and October. In my opinion, a reasonable approach is to allow interest on 90% (i.e. $131,310) for 4 years. For that period, I consider 5% to be a reasonable rate. Interest on $131,310 at 5% for 4 years, calculates to a figure of $26,262. I allow $26,260. The total is therefore $172,160.

The plaintiffs’ claims will be dismissed. The defendants are entitled to judgment on their counter claim against both plaintiffs, jointly and severally, for $172,160. However, given the structure of the actions, I will hear counsel on the form of the orders and on costs.

[1997] SADC 3680

30 September 1997