Tasman Inks Pty Ltd v Caltex Oil (Australia) Pty Ltd
[1989] TASSC 112
•20 September 1989
Serial No B34/1989
List “B”
COURT: SUPREME COURT OF TASMANIA
CITATION: Tasman Inks Pty Ltd v Caltex Oil (Australia) Pty Ltd [1989] TASSC 112; B34/1989
PARTIES: TASMAN INKS PTY LTD
v
CALTEX OIL (AUSTRALIA) PTY LTD
FILE NO: 887A/1987
DELIVERED ON: 20 September 1989
JUDGMENT OF: Neasey J
Judgment Number: B34/1989
Number of paragraphs: 7
Serial No B34/1989
File No 887A/1987
TASMAN INKS PTY LTD v CALTEX OIL (AUSTRALIA) PTY LTD
REASONS FOR JUDGMENT NEASEY J
20 September 1989
The plaintiff, a small proprietary company proposing to start business in Tasmania as a manufacturer of newsprint ink, bought some ink oil from the defendant. The plaintiff's principal and in effect only employee, Mr Batten, who had left his original occupation as an industrial chemist in order to start up the business, was able to buy this oil at a slightly less cost from the defendant than he could from the only other supplier, the Shell Oil Company. He bought a sample, applied a few simple tests to it, including a test for odour, found the sample satisfactory, and ordered enough to start production. He took delivery at the gate of the defendant's oil refinery at Kurnell in New South Wales, into a tanker which or the use of which he had hired from a transport company, and had the oil carried thus to Hobart.
At Hobart, Mr Batten arranged to sell a quantity of his ink to the Mercury newspaper, for a trial run on its printing presses. Mr Batten had had some previous experience with newsprint ink, and he knew how to make it. He proceeded to make up a quantity, by using the oil as a base and adding several other ingredients to it, in various orders and quantities, and mixing them in specialised equipment. He was satisfied with the quality of the ink produced, and took it to the Mercury for the trial. The ink proved to be effective for its printing purpose, but unfortunately during the course of the printing process a very offensive odour was produced, which was such that the printing operatives could not and would not work with it, and the Mercury people decided at once that they would not use this ink any more. Naturally, this was a serious setback for Mr Batten's business, and he immediately contacted the defendant about the problem.
Some negotiations occurred between the parties. The defendant, while not admitting any defect in the oil, agreed to take it off the plaintiff's hands for storage purposes, and to take samples of it to Sydney for testing. They did this, and after a period advised Mr Batten they had tested it and could find no defect in it. The plaintiff was not satisfied, and has sued the defendant under the Sale of Goods Act. The plaintiff alleges that the oil supplied was unsuitable for use in the manufacture of newsprint ink, in that in use on printing presses it emitted a foul odour; and thus it was supplied in breach of implied conditions under the Act that it should be reasonably fit for its purpose, and should be of merchantable quality. The plaintiff claims that as a result of these breaches it has been put to loss and expense, including loss of profits. The defendant denies these allegations. The action has been tried before me, and is for determination.
The trial of the case was perhaps unusual for its type, in that no expert or other evidence was called to prove the cause of the emission of the foul odour, or, it follows, that the odour was caused by some defect or quality of the ink oil supplied by the defendant. The plaintiff relied upon the facts, of which Mr Batten gave evidence, that after the failure of the defendant's oil, he manufactured newsprint ink with ink oil supplied by the Shell Oil Company, using exactly the same manufacturing process, and this ink was bought and used by the Mercury and Examiner newspapers with complete satisfaction and the production of no offensive odour at all. There was no contest about any of that evidence, and counsel for the defendant, Mr Thompson, conceded that the implied conditions were applicable, but argued that nevertheless it had not been proved on a balance of probabilities that the offensive odour had been caused by any defect in the defendant's oil supplied to the plaintiff, or that there was any such defect.
The defendant's lubrication manager from Sydney, Mr Reeve, gave evidence that the defendant had carried out tests on a sample of the oil from the batch which the plaintiff had used at Hobart, and had found no fault in it, and no difference of any consequence between it and the general run of their other oil of the same kind. Further, Mr Reeve gave evidence that the defendant company has been manufacturing this particular formula of ink oil since 1984, and has sold large quantities of it to three of the four major Australian manufacturers of ink oil, and has never had any complaint about it from any other purchaser.
In this state of the evidence I have to agree with the defendant's submission that it has not been proved on a balance of probabilities that the ink oil in question was defective at the relevant time or that the foul smell was caused by a fault in the oil. There is no significant contest about the primary facts. None of those stated above is in dispute, and I accept all the evidence I have recounted. The issue is, what inferences should be drawn? The fact that the same manufacturing process used by the plaintiff with Shell oil produces no odour in use for printing, whereas it does when used with the defendant's oil, does not establish a probability that it is the defendant's oil which is at fault. That the same kind of oil produced by the defendant has been used in great quantity by mainland manufacturers of newsprint ink without any trouble of a similar kind is strongly probative of the proposition that the oil is not at fault, but on the contrary tends to suggest that some unfortunate combination of ingredients used in the plaintiff's manufacturing process, or like fortuitous circumstances, produced the unfortunate reaction when the ink was used for printing. I think it should be held to be improbable that there was any unusual quality of the paper or of the printing press or the like which was causative of the smell; and also it should be held on the probabilities that the container in which the oil was brought to Hobart did not cause a contamination of the oil, because of the evidence that the sample oil was not different from the general run. That leaves the possibility of some unfortunate and unknown combination of ingredients or circumstances as the cause of the smell, and I think this is just as probable as that the oil was at fault.
Proof on a balance of probabilities requires that the proven circumstances give rise to more than conflicting conjectures of equal degree of probability. The court must be able reasonably to say that one inference has some greater degree of likelihood than competing inferences – Jones v Dunkel (1958–59) 101 CLR 298, per Dixon CJ; Holloway v McFeeters (1956) 94 CLR 470. (And see Rhesa Shipping SA v Edmunds [1985] 1 WLR 948). In this case I am not able to find on a balance of probabilities that the ink oil in question was not reasonably fit for its purpose, or not of merchantable quality. The defendant succeeds.
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