Twentieth Super Pace Nominees Pty Ltd v Australian Rail Track Corporation Ltd (No 2)
[2006] VSC 500
•19 December 2006
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
No. 2003 of 2003
| TWENTIETH SUPER PACE NOMINEES PTY LTD (ACN 005 855 327) Trading as SPECIALIZED CONTAINER TRANSPORT | Plaintiff |
| v | |
| AUSTRALIAN RAIL TRACK CORPORATION LTD (ACN 081 455 754) | Defendant |
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JUDGE: | Gillard J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 29 and 30 November, 1, 11 and 12 December 2006 | |
DATE OF JUDGMENT: | 19 December 2006 | |
CASE MAY BE CITED AS: | Twentieth Super Pace Nominees Pty Ltd v Australian Rail Track Corporation Ltd (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2006] VSC 500 | |
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DAMAGES – Train derailment – Plaintiff train operator successful in contract and tort – Claimed as damages costs of investigation of derailment and replacement value of two wagons written off – Applicable principles – Entitled to recover costs of investigation as damages – Entitled to capital loss of wagons and not replacement cost – Means of calculating loss - Evidence of value at time.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M. Colbran QC with Mr P. Booth | Wisewoulds |
| For the Defendant | Mr C. Blanden SC with Mr H. Redd | McCabe Terrill |
TABLE OF CONTENTS
The Parties and Liability.................................................................................................................. 2
Damages Issues.................................................................................................................................. 3
Facts...................................................................................................................................................... 5
Damages - Principles....................................................................................................................... 12
Costs of Investigation...................................................................................................................... 17
Damages for Wagons Written Off................................................................................................ 24
Indemnity.......................................................................................................................................... 31
Conclusion......................................................................................................................................... 32
HIS HONOUR:
This is the continuation of a proceeding in which the issues were divided between liability and damages. The liability issues were decided in favour of the plaintiff, and the plaintiff now seeks damages.
The Parties and Liability
The plaintiff, Twentieth Super Pace Nominees Pty Ltd, trading as Specialized Container Transport (“SCT”), operates, inter alia, a rail freight business. It has for many years owned wagons used for rail freight.
The defendant, Australian Rail Track Corporation Ltd (“ARTC”), leases the standard gauge railway line between Melbourne and the South Australian border from the State of Victoria, and is responsible for its condition.
At approximately 4.11pm on 25 January 2002, a freight train operated by SCT travelling between Perth and Melbourne was slightly east of Kiata and approaching Dimboola in this State, when a substantial number of freight wagons derailed. Extensive damage was caused to 18 wagons owned by SCT, and to the railway line and sleepers.
On 11 February 2003, SCT instituted a proceeding in this Court against ARTC, seeking damages which it suffered as a result of the derailment. It pleaded three causes of action, namely, a claim for breach of the contract between SCT and ARTC, an indemnity pursuant to a clause in the contract, and a claim in common law negligence.
ARTC counterclaimed against SCT for the damage caused to the rail track, pleading the same three causes of action.
The issues in the proceeding were split and the Court heard the issues relating to liability. The main issue was a factual one, namely, what was the cause of the derailment? SCT alleged that the state of the track caused the derailment, whereas ARTC contended that the derailment occurred because of a defective wagon of the train operated by SCT.
The Court held that the cause of the derailment was the state of the track at the relevant time and, accordingly, SCT was entitled to damages. See Twentieth Super Pace Nominees Pty Ltd v Australian Rail Track Corporation Ltd.[1]
[1][2006] VSC 353.
Damages Issues
As a result of the derailment, some 18 wagons suffered damage. Two of the wagons were damaged beyond repair. The wagons damaged in the derailment were ABFY wagons, sometimes referred to as box cars or louvre vans. Each wagon is a single enclosed steel van, 23.8m long and supported at each end by a bogey on four wheels. The wagons had been in use for many years. The wagons were designed for transport of freight and at the time had 50 tonne bogies. Construction of ABFY wagons commenced in about 1972 and continued over a number of years. ABFY wagons, having a 50 tonne bogey, have a gross mass of 80 tonnes, that is, an unladen vehicle weight of 30 tonnes and a carrying capacity of 50 tonnes. The said wagons were approximately 30 years old. The evidence revealed that the use to which SCT put the wagons, namely, the kilometres travelled and the weight carried, was significantly greater than that which the wagons had previously experienced.
In the latter half of 2002, SCT engaged Williams‑Worley Rail to perform a structural review of ABFY wagons on the basis that the bogies would be replaced and the carrying capacity would be increased to 54 tonnes. The opinion was reached that on a conservative basis, the wagons thereafter would have a residual life span of about 15 years. During the period leading up to the derailment and thereafter, SCT increased its business with the result that it has, since the derailment, acquired more freight wagons, both new and secondhand. There is no dispute between the parties as to the repairs to the various wagons or the cost of repairs. However, there are two issues for consideration and determination, namely:
(i)The first issue concerns the costs of the investigations carried out by SCT on the day of the derailment and over the following few months. It is the contention of SCT that it was obliged as a matter of statute law, and potentially under the contract, to carry out an investigation; that the loss flowed from the derailment; and that but for the derailment, the investigation would not have been performed. Further, as a train operator, it was necessary in the circumstances for SCT to proceed expeditiously in investigating the derailment, for reasons of safety and efficient operation, and to protect its reputation. There is no dispute as to the circumstances of the investigation carried out by three persons, or the cost incurred. The contention of ARTC was that SCT was not entitled to recover the amount as damages, but may be entitled to recover the cost as part of the costs in the proceeding. The three investigators gave evidence in the proceeding.
(ii)The second issue concerns the replacement of the damaged wagons. Subsequent to the derailment, SCT was able to negotiate the purchase of 15 used ABFY wagons from Pacific National which were overhauled and reconditioned. ARTC submits that the two wagons damaged beyond repair should have been replaced by two of the 15 secondhand wagons, since they were in a similar condition. It was argued that the costs of bringing them up to a proper condition and the costs of acquisition, were the true amounts of the damages suffered by SCT. SCT submitted that it was not obliged to replace the two wagons written off by the secondhand wagons purchased, as they were purchased in the course of, and to increase, the business. It argued that it was fortuitous that the used wagons came on the market well after the derailment, and that SCT should have the full benefit of its good fortune in increasing the number of its freight wagons. It was submitted that SCT is entitled to recover the full cost of the manufacture of two wagons to replace the ones written off. On the other hand, ARTC submits that if SCT is entitled to recover the cost of replacing old with new, there should be a discount on the basis that SCT now has two brand new wagons to replace two old wagons that had a substantially lesser working life than the new wagons. In other words, the ‘betterment principle’ should apply and the plaintiff’s claim should be reduced accordingly.
Facts
The basic facts can be summarised in chronological form and are not in contention.
25 January 2002 Derailment of 17 wagons of goods train resulting in substantial damage to the wagons. There was also some damage to wagons which had not been derailed.
SCT engaged three persons to investigate and report on the derailment and its cause. Mr Philip Dunn, employed by Halcrow Pacific Pty Ltd, arrived at the scene at about midnight on 25 January 2002. Mr Lovro Lubjanovic arrived at about the same time as Mr Dunn. Both of them remained at the scene overnight and the following morning. They carried out investigations. The third person engaged was Mr Ross Mitchell, who was unable to attend the scene but commenced his investigation on 1 February 2002.
The three men investigated and prepared reports during the period from 25 January 2002 to late 2002.
April 2002 SCT ascertained that Pacific National, a rival train operator, was considering selling some 55 used ABFY wagons similar to the wagons involved in the derailment. SCT personnel inspected the wagons with a view to purchasing them. Pacific National was not prepared to sell.
19 June 2002 Quotations obtained for repairing seven of the damaged wagons, numbered 2500J, 2682G, 4451R, 4407X, 4414C, 2453A and 2813T.
31 July 2002 Decision made shortly before end of July to write‑off two wagons damaged beyond repair, numbered 2504W and 4454V. On 31 July, the lease on the wagons was paid out and the wagons were written off.
5 September 2002 Seven wagons the subject of the June quotations were repaired and invoices sent.
4 October 2002 Quotes obtained for repairs of two further wagons, numbered 2457N and 2489J.
23 December 2002 Quotes obtained for repairs of four further wagons, numbered 2824N, 4436A, 4462L and 4411X.
29 January 2003 Quotes obtained for repairs of three further wagons, numbered 3112N, 4478E, 3095F. [The said seven further wagons have still not been repaired.]
28 February 2003 Interim invoices for repairs to two wagons quoted in October 2002 were received for wagons numbered 2457N and 2489J.
October 2003 SCT prepared a written rolling stock review.
28 October 2003 Discussions between SCT and Queensland Rail for the design and manufacture of a new wagon, similar to the ABFY wagons, known as an MPV wagon, which had a capacity to carry a larger weight.
27 November 2003 Another report prepared by SCT relating to future wagon development.
Early 2004 SCT makes decision to proceed with manufacture of new wagons by Queensland Rail and the works commenced in early 2004.
10 February 2004 Acceptance of Queensland Rail’s tender for 82 wagons. Two of the wagons were ordered to replace the wagons that were written off as a result of the damage caused in the derailment.
March 2004 Decision to convert 17 ABFY wagons to refrigerated wagons.
May 2004 SCT ascertained that Pacific National were proposing to dispose of approximately 55 used ABFY wagons, which had been the subject of a request to purchase in April 2002. Pacific National were not prepared to sell to SCT and in June 2004, SCT wrote to the Australian Competition and Consumer Commission raising concerns about competition in the rail industry and seeking to bring pressure to bear on Pacific National to stop breaking up the wagons for scrap.
25 August 2004 Agreement between SCT and Pacific National to purchase the remaining 15 ABFY vans for a total sum of $99,000 inclusive of GST.
The wagons required considerable work and upgrading to enable their use in SCT’s wagon fleet. They were fitted with 70 tonne bogies rather than 50 tonne bogies. The total cost per wagon including acquisition was $68,564.80. The total cost to renovate, excluding GST, was $929,472. As the work on the wagons was completed they were progressively put into service in SCT’s fleet from November 2004 through to August 2005. They replaced 15 ABFY wagons which had been converted to refrigerated wagons. The refrigeration conversion had been undertaken between March and April to respond to an increase in demand for such wagons. November 2004 First Pacific National wagons put into service.
20 December 2004 Contract signed with Queensland Rail for the manufacture of 82 wagons. However, it is clear from the evidence that the decision to acquire these wagons was made late in the previous year and the works commenced as set out above in early 2004.
12 August 2005 Queensland Rail delivered the last new manufactured wagon.
31 October 2005 Final invoice for repair of two wagons numbered 2457N and 2489J.
30 November 2006
Noted that the 7 wagons quoted in December 2002 and January 2003 have not been repaired.
The above facts were not in dispute. They were events which occurred on or about the dates referred to. However, it was put on behalf of ARTC that certain conclusions ought to be drawn from the conduct of SCT’s business which demonstrate that SCT had a global approach to acquiring new freight wagons, being to acquire wagons when the business required it. ARTC argued that wagons were not purchased to replace the ones damaged or written off in the derailment. The evidence revealed that SCT was able to operate its freight service in the following years despite the damaged wagons, and it did not make any claim for income losses due to the damaged wagons not being available. The acquisition of the new wagons from Queensland Rail in early 2004 was part of its business development. However, I accept the evidence that it did order two extra wagons in 2004 to replace the two written off in mid 2002.
SCT was established in 1981 in this State and is a specialised freight forwarding company. Not only does it move freight by rail, it also moves freight by road, particularly along the east coast of Australia. Its core business is the movement of freight by rail from the east coast to warehouse facilities on the west coast. It commenced the first private goods rail service between Perth and Melbourne in July 1995. It used the ABFY wagons. These wagons had been used for many years by rail operators but their use had declined because of the use of containers for sea transport. The advantage of a louvre ABFY wagon is that it can accommodate approximately 142m3 of freight, compared with the standard container, which has an internal volume of between 32 to 90m3. A decision was made by SCT to use these wagons. As a result, the business has been successful and has been rapidly growing. The total weight of goods transported between 2001 and 2006 has doubled.
SCT’s present fleet includes the louvre wagons, some refrigerated and flat bed wagons, as well as container wagons. Over the years, SCT has experienced a shortage of used louvre wagons, especially as they are not being used by other rail organisations. Accordingly, SCT entered into agreements with Queensland Rail and Gemco Rail to manufacture new louvre wagons. As set out above, it was in late 2003 that negotiations with Queensland Rail began, leading to the manufacture of wagons which commenced in the following year. Eighty two new louvre wagons were manufactured.
The order for 82 new louvre wagons was calculated on the basis that a train consist from Adelaide typically comprised 72 wagons, an additional four wagons were required for rotating preventative maintenance, a further four wagons were required for out of work repairs, and the additional two wagons were ordered to replace the two which had been written off.
The evidence leads to the conclusions that SCT is an ever-expanding business, using ABFY wagons which have been in service for many years, and also a more recent version of a similar, but slightly bigger, wagon called an MPV, and that the acquisition of the secondhand wagons and the new wagons was in furtherance of increasing the rail business of SCT. I am satisfied that the purchase of the secondhand wagons from Pacific National was an acquisition in the course of SCT’s business and was made to increase the number of freight wagons. It was fortuitous that the opportunity came along. SCT took advantage of it and acquired the secondhand wagons.
The wagons which were damaged beyond repair in the derailment had been in service for many years. As stated, the Williams‑Worley report concluded that the residual life of the wagons was in the order of 15 years plus. Mr Warren Williams, who carried out the investigation and prepared the report, stated that there were various methods available to calculate the estimated residual fatigue life of a wagon, and that it necessitated a number of assumptions, which were conservative. I accept his evidence that 15 years is a minimum residual life for the wagons in question, although it was not possible to calculate with any degree of certainty how many more years the wagons may have lasted. It depended upon a number of factors, including maintenance, repair and use of the particular wagons. However, the parts that wore out on these wagons could usually be replaced, and realistically, the wagons that were written off had a residual life in the order of 20 to 25 years.
Mr Peter Mason, a director of SCT, gave evidence as to the growth of the business of SCT since it began the east‑west rail operation in 1996. Because of the substantial growth through the period from 1996 until the present, SCT has had a continual thirst for louvre vans. Initially, it was able to source its wagons from other railways, however, by about 2004 the used wagon market had dried up. Accordingly, SCT, in order to continue its growth, had to acquire the new vans that it acquired. Mr Mason gave evidence that he estimated SCT would be using louvre vans for a long time into the future. Mr Mason has an engineering as well as a business background, and it was his view that ABFY vans tend to last almost forever. He noted they were extremely heavy and strong and needed repairs from time to time, but that because of the simplicity of construction and the steel used, in essence any part that wore out could be renewed. He noted the particular components necessary in terms of maintenance costs. He noted that many of the parts lasted for very long periods and that if necessary, parts can be renewed.
The new wagons purchased from Queensland Rail enabled a greater amount of weight to be carried in the order of 7 tonnes. As a result, the trip to Perth generated a $114 increase in income.
The new wagons purchased from Queensland Rail are a modern equivalent of the ABFY wagon. They differ from the original wagons in that they are of lighter construction and have a greater cubic capacity, due to a lower floor height and better utilisation of permissible outline. Because they are new wagons, the maintenance costs have been less than for the old ABFY wagons. Anthony Fidock, who was employed as a fleet maintenance manager at Gemco Rail Pty Ltd, the company involved in servicing SCT’s rolling stock, opined that although there are many factors which influence the level of maintenance and the life of the wagons, a new ABFY wagon and the new MPV wagons, if properly maintained, should last for at least fifty years, if not longer. He opined that any fatigue fractures appearing could be welded.
Another expert, Douglas Cummings, who has had considerable experience in the field of railways, opined that the original ABFY wagons, if they had not been converted to carrying a greater weight, would have had a greater residual operating life. Whilst I note that evidence, it does not seem to me to be relevant, as SCT took the step of altering its wagons after 2002 to enable them to take a greater weight. Mr Cummings was of the view that the residual operating life calculated by Mr Williams in respect to the ABFY wagons having stronger bogies was conservative, and that if properly maintained, the wagons would achieve a workable utilisation well past the theoretical design fatigue life. His evidence tends to support the conclusion that the written-off ABFY wagons had a residual life span in the order of 20 to 25 years and maybe even longer.
The new wagons that were manufactured by Queensland Rail were designed to have a long working life, and although it was suggested that perhaps their lifespan might not be much greater than 20 to 25 years, I have difficulty accepting the suggestion. They were designed and manufactured with the intention of a long working life, of course being properly maintained and repaired during their freight life. In my view, one can proceed on the basis that the working life of the new wagons was something in the order of 40 years plus, based on the evidence of Mr Fidock. Accordingly, the new wagons replacing the old wagons had a working life in excess of that of the old wagons in the order of 15 to 20 years.
The contract between SCT and ARTC contained a provision which obliged SCT, if called upon, to prepare an investigation plan which would be adopted in the event of a derailment.
Clause 11.2 of the agreement dealt with plans for dealing with incidents. It provided that in consultation with SCT, ARTC would formulate and periodically review and update plans which were consistent with its accreditation requirements for dealing with incidents, and make such plans available to SCT. The clause went on to provide that SCT would formulate a plan for dealing with incidents and provide it to ARTC. The contract provided that the plan must be consistent with any plan prepared by ARTC and would be subject to the approval of ARTC. In fact, that clause was not complied with. However, Noel Ramsey, the National Manager – Rail of SCT, did prepare an accident and incident investigation plan for SCT’s internal use.
Mr Ramsey was informed of the derailment on 25 January 2002, and he quickly formed the opinion that it was a Category A incident, namely, a serious derailment, and set about co‑ordinating an appropriate response in accordance with SCT’s investigation plan. I will refer later to the contractual, as well as the statutory, obligations in relation to the investigation and report. Mr Ramsey stated, and I accept his evidence, that he telephoned Mr Mitchell at around 5.00pm on 25 January 2002 to commence investigations but Mr Mitchell was not available until around 29 January, and Mr Ramsey then engaged Mr Lubjanovic and also Mr Philip Dunn of Halcrow Group Pty Ltd. They attended the site of the derailment shortly before midnight. Mr Ramsey arrived at the site at about 6.30pm on 25 January 2002 and observed and noted what had happened in the derailment. He said it became apparent during discussions with personnel from ARTC that there was a disagreement as to the cause of the derailment. The contention of ARTC was that it was due to a defective brake at the front of the first wagon which had derailed, whereas SCT formed the opinion through its investigators that the cause was a defect in the railway track. Mr Ramsey continued with the investigations into the cause of the derailment, and although he requested ARTC to provide any information it had in relation to the investigation, it was not until the institution of the legal proceeding by SCT on 11 February 2003 that he received the investigation report prepared by Ms Southern on behalf of ARTC.
I will trace hereafter when dealing with the issues the steps taken by Mr Ramsey to comply with contractual and statutory obligations. The total cost of the repairs and expenses involved with the derailment was $1,173,962.13. The cost of replacing the two wagons was $158,524.66 per wagon, giving a total sum of $317,049.32. The total investigation cost charged by Messrs Dunn, Ljubanovic and Mitchell, including travel and accommodation, was $62,070.92.
Damages - Principles
As a result of the findings made in respect to liability, SCT is entitled to recover compensation for breach of the contract between the parties, for the tort of negligence and also pursuant to an indemnity in the contract. In stating the principles relating to damages and their assessment, I will, for the moment, put to one side the claim for an indemnity.
The guiding principle in assessing damages is compensatory. The object of damages is to award the plaintiff an amount of money that will, as nearly as money can, put him in the same position as if he had not been injured by the wrongful act of the defendant. The guiding principle was stated by Lord Blackburn in Livingstone v Rawyards Coal Co,[2] where his Lordship said:
“I do not think there is any difference of opinion as to its being a general rule that, where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation.”
[2](1880) 5 App Cas 25 at 39.
That case was concerned with a tortious claim, but it has been recognised that the statement of principle by Lord Blackburn applies equally to a claim in contract. Earlier, in the case of Robinson v Harman,[3] Park B stated the rule in somewhat similar language in relation to a claim in contract. His Lordship said:
“The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same position, with respect to damages, as if the contract had been performed.”
[3](1848) 1 Ex 850; (1848) 154 ER 363.
The application of that rule in the present context means that damages are to be paid as compensation to place SCT in the position it would have been in if there had not been a breach of contract and the contract had been properly performed.
These principles have been applied often in this country. See Wenham v Ella[4] (a contract case), Johnson v Perez[5] (a tort case), and Commonwealth v Amann Aviation Pty Ltd,[6] (contract case). The guiding principle was stated by the High Court in Haines v Bendall[7] as follows:
“The principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, would put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed.”
[4](1972) 127 CLR 454 at 471.
[5](1988) 166 CLR 351 at 367.
[6](1991) 174 CLR 64 at p.80.
[7](1991) 172 CLR 60 at 64.
This guiding principle expresses the aim or object of the assessment of compensation. However, it does not provide a formula to calculate the damages. The approach taken in any given case, to put the victim back into the same position he would have been in if the contract had been performed and the tortious act had not been committed, as well as the actual calculation, will depend upon the particular circumstances of each case. However, the authorities dealing with a variety of different factual circumstances have established guiding principles to apply in assessing the damages.
The plaintiff bears the burden of proving his loss. There are some instances where the burden, that is, the legal burden, is upon the wrong‑doer, and in some cases the wrong‑doer has an evidentiary burden. But a plaintiff is not entitled to recover more than his loss. The point was underlined in Haines v Bendall,[8] where Mason CJ, Dawson, Toohey and Gaudron JJ, after stating the settled principle quoted above, said:
“Compensation is the cardinal concept. It is the ‘one principle that is absolutely firm, and which must control all else’: Skelton v Collins per Windeyer J. Cognate with this concept is the rule described by Lord Reid in Parry v Cleaver, as universal, that a plaintiff cannot recover more than he or she has lost.”
[8]Supra at p.63.
In respect to a claim in both contract and tort, the rules of causation delineate the boundary of recoverable damages. Counsel for ARTC did not raise any question of causation, which is not surprising, bearing in mind that the two categories of damages in issue were suffered as a result of the derailment. If the derailment had not occurred, SCT would not have engaged independent investigators to investigate the cause of the derailment. In addition, it is clear that the derailment caused the damage to the two wagons which have been written off. However, reference to the principles relating to remoteness stated in the famous case of Hadley v Baxendale,[9] assists in providing an answer to the investigation costs claim. Alderson B stated the principles as follows:[10]
“Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such a breach of contract shall be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as a probable result of a breach of it.”
(Emphasis added).
[9](1854) 9 Ex 341; 156 ER 145.
[10]At ER p.151.
More recently, Lord Reid stated the rule in C. Cnarnikow Ltd v Koufos,[11] where his Lordship said:
“The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contract to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation.”
[11][1969] 1 AC 350 at p.385.
The rule has the effect of carving out the boundaries of recovery, and limits the general rule relating to assessment of damages. See Burns v M.A.N. Automotive (Aust) Pty Ltd.[12]
[12](1986) 161 CLR 653 at 667.
The plaintiff, SCT, carries the burden of proving its damages. Of course, SCT is not entitled by an award of damages to be placed in a superior position than it would have been in if the contract had been performed or the tort not committed. See The Commonwealth v Amann Aviation Pty Ltd.[13] Giving effect to that principle means that in some cases, a plaintiff may have to bear some of the cost and the damages are reduced accordingly.
[13]Supra at p.82 per Mason CJ and Dawson J.
In addition, whilst in a claim for economic loss the Court expects the best evidence available to establish the loss, the fact that it is difficult to estimate damages does not relieve the Court from the responsibility of assessing them. In the Commonwealth v Amann Aviation Pty Ltd,[14] Mason CJ and Dawson J said:
“The settle rule, both here and in England, is that mere difficulty in estimating damages does not relieve a court from the responsibility of estimating them as best it can. Indeed in Jones v Schiffmann[15] Menzies J went so far as to say that the ‘assessment of damages … does sometimes, of necessity involve what is guesswork rather than estimation’. Where precise evidence is not available the Court must do the best it can.”
[14]Supra at p.83.
[15](1971) 124 CLR 303 at 308.
The general rule, both for tort and for breach of contract, is that damages are assessed at the date of the breach or the wrong. Sometimes, however, the rule may yield if in particular circumstances, another date is necessary to provide adequate compensation. See Johnson v Perez.[16] Although damages are assessed by reference to circumstances at the date of breach, it does not mean that events which have occurred after that date may not be considered. See Wenham v Eller.[17]
[16]Supra at p.367.
[17]Supra at p.473.
It is one thing to state the aim of compensation and it is another to calculate the loss. However, the cases do lay down guidelines with respect to particular categories of loss. In the present proceeding, the Court is dealing with a claim in respect to chattels which have been damaged beyond repair and which were eventually replaced. The Court is not dealing with repairs to those chattels. It is dealing with their loss and their eventual replacement. The principles developed by the courts in respect to destruction of ships provide an appropriate guideline to the assessment of damages in this case. I will refer to the principles when dealing with this issue.
With those principles in mind, I now turn to the issues raised in respect to the damages.
Costs of Investigation
To briefly recap, on the night of the derailment, SCT engaged three independent investigators to investigate and report on the cause of the derailment. It was very apparent by dawn on the following morning that ARTC was blaming the derailment on an errant brake beam at the front of one of the wagons, and was exonerating the state of the track. On the other hand, it was an opinion formed fairly early by at least one of the investigators employed by SCT that the cause was the state of the rail track. There is no doubt on the common sense approach to causation that, but for the derailment, these costs would not have been incurred. I did not understand counsel for ARTC to raise any issue on the causation. However, it was the contention of ARTC that costs of investigation are not recoverable as damages, but rather as costs in the litigation.
The total cost incurred was $62,070.92. The work carried out by the three investigators was completed by the latter part of 2002. There is no dispute as to the work done or the cost of same. The work was completed some months prior to the institution of the proceeding, which occurred on 11 February 2003. It is the contention of SCT that it was necessary to carry out the investigation for at least three reasons, namely (1) statutory, (2) potentially contractual, and (3) for good business and safety reasons and to protect the reputation of SCT.
Part VI, Division 3 of the Transport Act 1983, which was in operation at the time of the derailment, dealt with the accreditation of railway and tramway services. The object of the division was to improve the operation of rail based transport by providing for the accreditation of the managers of rail infrastructure and the providers and operators of rolling stock, to maintain appropriate levels of safety.[18] By reason of s.108, a person who was to provide and operate any rolling stock in this State had to be accredited. It is common ground that SCT was an accredited person within the meaning of the Act.
[18]See s.103.
Section 129T obliged SCT to enquire into the derailment. The section provided:
“A person who holds an accreditation must enquire into any railway accident … that may affect the safe operation, construction, maintenance, repair or alteration of the rail infrastructure or rolling stock in respect of which the person is accredited.”
(Emphasis added).
By reason of s.129V, the Secretary to the Department was obliged to conduct a safety audit of the operations of every person accredited under the Act, at least once every 12 months. A safety audit involved an inspection, inter alia, of rolling stock and the operation, construction, maintenance, repair or alteration of rolling stock, and also an assessment of the performance of the employees of the accredited person in relation to, inter alia, rolling stock, to ensure the accredited person was complying with the statutory obligations. I accept the evidence of Mr Ramsey that these audits were carried out and the personnel from the Department attended and discussed all aspects of the operation of the rolling stock and freight business. In addition, by reason of s.129U, the Minister could require the Secretary or any other person to enquire into and report to the Minister on any railway incident which affected the safe operation of, inter alia, rolling stock.
In considering the application of these statutory provisions, the circumstances which occurred afer the derailment must be considered. The evidence revealed that the steps which were taken after the derailment, were those commonly taken after a derailment. It is observed that the derailment occurred on the single line standard gauge between Melbourne and Adelaide. The line carries substantial traffic in both directions each day. The derailment occurred at about 4.15pm. The personnel from both SCT and ARTC arrived at about 6.30pm, and investigations continued during the hours before dark, during dark using artificial light, and at dawn the following day. The evidence revealed that the scene was not interfered with for a number of hours, but in the early hours of the following day, steps were taken to clear the track and to reinstate it. The track was reinstated by 6.00pm the following day, being 26 January 2002, which was some 26 hours after the derailment. The circumstances of the investigation were not entirely satisfactory because of darkness and the pressure imposed on those investigating the scene to gather evidence quickly and to form preliminary opinions before and during the repair work. This happens in every derailment. Time is of the essence. It was necessary for SCT to engage these investigators to survey the scene, gather evidence and form provisional views. Mr Mitchell joined the investigating team on 1 February 2002. Messrs Lubjanovic and Dunn also joined him at the scene on that day, inspected it and also inspected the rolling stock. Also present during this day and carrying out a similar task were representatives of ARTC. The situation of gathering evidence under pressure and quickly is commonplace after any serious derailment on a main railway line. This would have been known to the parties well before this derailment, and the course that was followed by both parties was commonplace, expected and usual. There is no doubt that at the date when the contract was entered into, it was contemplated that these steps would be taken. In order to perform its statutory obligations, SCT was obliged to enquire into the incident.
Mr Blanden SC, who appeared with Mr Redd on behalf of ARTC, submitted that the statutory obligation did not require a detailed investigation by SCT because, first, the legislation empowered the Minister to require the Secretary or a person to enquire into and report to the Minister on any railway incident and, secondly, the statutory obligation concerned rolling stock. The Minister did not make any request. However, that does not, in my view, lead to the conclusion that any enquiry by SCT pursuant to s.129T was to be an inquiry of a minor nature because a Minister’s inquiry, if required, would be far reaching. The wording of s.129T limited the enquiry by SCT to the safe operation, construction, maintenance, repair or alteration of rolling stock because SCT was accredited in relation to that. But in my view, it would be artificial in the extreme if SCT was to confine the investigation to rolling stock. The counter allegations were that the rolling stock was to blame, and that the track was responsible. It would be impossible in those circumstances to confine an investigation to rolling stock and fully discharge the statutory obligation to enquire into the incident. To fully enquire into the rolling stock in the circumstances that prevailed required investigation of the cause of the derailment.
Mr Colbran QC, who appeared with Mr Booth for SCT, also referred to the Transport (Rail Safety) Regulations 1998 (SR No. 140/1998). Regulation 7 was concerned with the conditions of accreditation in respect to notifiable occurrences. Regulation 7A relevantly provided:
“It is a condition of accreditation that the accredited person must –
(a)notify the Secretary as soon as is reasonably practicable of the following occurrences in relation to the activities for which the person is accredited and provide to the Secretary a written report about any occurrence within 72 hours of the occurrence unless a later time has been agreed to by the Secretary –
…
(iii)any derailment of any unit of rolling stock for which the person is accredited which resulted in significant damage to any property or equipment.”
Regulation 7(b) required SCT as an operator of rolling stock to notify the Secretary as soon as was reasonably practicable of any significant unplanned delay to the provision of rail services, and to provide to the Secretary a written report about any such occurrence within 72 hours.
Regulation 8 defines “Notifiable Occurrence” as meaning any activity which resulted in any damage to property or equipment, including any derailment of any unit of rolling stock, any defect or failure of any part of infrastructure, and any failure or breach of any practice or procedure. It was a condition of accreditation that SCT must give the Secretary a summary report of all notifiable occurrences that occurred in a calendar month by the 10th of that month. The accredited person was required to give a report in the form and manner required by the Secretary.
Mr Blanden emphasised that the Secretary did not request any detailed report into this incident. The evidence revealed that Mr Ramsey sent a facsimile to Mr McIntosh of the Department of Infrastructure informing him of the derailment on 29 January 2002. It is apparent that there had been some discussion between Mr McIntosh and Mr Ramsey prior to the facsimile being sent, and the facsimile set out what was described as the train control report, which briefly summarised what had happened. It also highlighted the delays caused to other trains. Mr Ramsey indicated he would provide terms of reference associated with the incident investigation. On 30 January 2002, Mr Ramsey provided Mr McIntosh with a copy of the terms of reference. The proposed terms of reference included identifying factors which contributed to the occurrence of the incident. Mr McIntosh, on 30 January 2002, made a number of suggestions about modifying the terms of reference. They concerned the preservation of evidence and the timing of reports.
After Mr Mitchell, one of the investigators, had prepared a preliminary assessment, he wrote to SCT a letter dated 8 February 2002, which raised concerns about the state of the track and it being the cause of the derailment, and suggested remedial steps. SCT wrote to ARTC setting out its views as to the cause of the accident, namely, the state of the track. On 23 April 2002, Mr Ramsey wrote to Mr McIntosh to provide an interim report on the derailment. The letter noted that a number of investigators were considering the causes of derailment. Mr Ramsey provided an interim report as to the cause of the derailment based on Mr Mitchell’s preliminary assessment. The draft report was submitted in August 2002, but was not finalised prior to the issue of the proceedings because SCT was unable to source all the track data from ARTC.
There is no doubt, in my opinion, that SCT was obliged to carry out a proper and detailed investigation into the incident by reason of the statutory obligations. Further, in my view, the investigation was not to be confined to the state of the rolling stock. The issue had been raised on the night of the derailment that an errant brake beam had caused the derailment. SCT, for its part, formed a view the following day that the derailment was caused by a track buckle. In my opinion, the SCT report also had to address that issue. The cause of the derailment was inextricably bound up with the state of the track and whether it was a cause. It would not have been possible to provide a meaningful report on rolling stock unless the cause of the derailment was properly investigated.
In addition, the contract between the parties contemplated the provision of a report. Clause 11.1 defined an “incident”, and there is no doubt that the derailment was an incident within the meaning of the contract. Clause 11.2 dealt with the plans for dealing with an incident which had not been complied with by the parties. I have already referred to the fact that SCT had, for its internal purposes, a plan for dealing with an incident. Clause 11.3 obliged both parties to follow any plan which had been adopted. It is accepted there was no joint plan in existence pursuant to clause 11.2. However, clause 11.3 obliged both parties to “comply with their respective obligations under the Rail Safety Acts.” There was no suggestion that the obligations under the Transport Act and Regulations were not obligations under the Rail Safety Acts. Clause 11.4 required each of the parties to notify the other party of any incident as soon as possible. Clause 11.5 is important and it provided:
“11.5Investigation of Incidents
(a)Incidents will be investigated as required by law in the absence of a requirement by law in accordance with the applicable Rail Safety Act.
(b)Each party will cooperate with an investigation under this clause and make available records and personnel relevant to the incident.
(c)The parties will consult with each other to determine any action to be taken as a result of any investigation.”
This clause clearly contemplated that the parties would cooperate in any investigation and provide information. Clause 11.6 dealt with what was described as the “operator’s report”. It was submitted by Mr Blanden that the clause did not operate because ARTC had not given written notice to SCT to prepare a report. Clause 11.6 provided:
“11.6 Operator’s Report
Without limiting clause 11.4 if an incident occurs which involves the operator and in relation to which ARTC has given written notice to the operator that a report is required the operator must promptly prepare and submit to ARTC a written report which must include the following (to the extent relevant to the incident and reasonably possible for the operator to ascertain):
(a)The time and location of the incident;
(b)…
(c)the factors which may have contributed to the cause of the loss or damage to the operator’s train and to the network. (The parties acknowledging that such statement will not be binding on the operator and will not be taken to be an admission by the operator for any purpose, including insurance and indemnification purposes (notwithstanding the terms of any insurance policy to the contrary));
…“
Mr Blanden emphasised that ARTC did not call for such a report. In my opinion SCT would have to proceed on the assumption, especially bearing in mind the other obligations under the contract and the statutory provisions, to prepare a report in case it was required under clause 11.6. In my view, it is not an answer to this claim to say that ARTC did not require the operator SCT to provide a report. Potentially, there was always the possibility in at least the first few weeks after the derailment that such a report may be required. Putting aside the statutory obligations, it was reasonable in the circumstances for SCT to proceed on the assumption that a report may be required.
I have no doubt at all, that it was in the contemplation of the parties at the time when the contract was executed, that if a serious derailment occurred, both parties would take steps to prepare reports based upon a detailed and thorough investigation into the cause of the derailment. I am further satisfied, insofar as it is relevant, that any reasonable person placed in the shoes of the parties and with their knowledge, would have reasonably foreseen that if a derailment occurred, both parties would incur expenses in investigating the cause of the derailment.
However, in addition, an investigation was an inevitable consequence of the derailment, irrespective of statutory and contractual considerations. It was necessary to carry out an investigation for business, safety and reputation reasons. This was clearly in the contemplation of the parties at the date of the contract, and was a foreseeable consequence of any major derailment. ARTC had the same interests to protect.
In my opinion, the cost of the investigations was caused by the derailment and by the negligence of ARTC, and naturally flowed from the breach of the contract by ARTC.
It was submitted by Mr Blanden that SCT should not recover the costs incurred as damages but should recover them as part of the costs of the litigation. When the costs and expenses were incurred, there was no certainty that there would be any legal proceedings and, of course, the costs would not be recovered as costs in a piece of litigation unless the litigation was determined, either by compromise, in which the parties would agree on costs, or by judgment, in which an order for costs would be made. In my view, it is no answer to the claim for damages to say that these costs would have been recoverable in the proceeding. At the time when they were incurred, there was no proceeding on foot. The costs have come about by reason of the breach of contract and the tortious conduct of ARTC, and in my opinion, in accordance with the principles relating to causation, remoteness and assessment of damages, the plaintiff, SCT, is entitled to recover the costs incurred. Of course, it follows that those expenses cannot be claimed as costs in the litigation. Each of the three investigators was called as a witness in the proceeding, and there is little doubt that all three relied on their earlier reports to give evidence. The fact is that the expenses were incurred prior to the institution of the proceeding, and as a direct result of the breach of contract and the tortious act.
SCT is entitled to recover damages in the sum of $62,070.92 incurred in investigating the derailment prior to the institution of the proceeding.
Damages for Wagons Written Off
There is no doubt that the derailment caused two wagons to be written off. There was no dispute as to causation. In accordance with the well-established principles, SCT is entitled to be placed in the position it would have been in but for the breach of contract and the tortious act. There was no secondhand market for ABFY wagons and, accordingly, it was not open for SCT to go into the marketplace and purchase two wagons of the approximate age and condition of the two written-off wagons.
It was submitted on behalf of ARTC that, having acquired the 15 secondhand wagons from Pacific National, SCT should have allocated two of those wagons as replacing the two wagons written off, and the measure of its damages would be the cost of acquisition of the two used wagons, plus the cost of putting them in a proper state of repair and maintenance to enable them to be used as freight wagons. This would have been in the order of about $65,000 for each wagon, as against the cost of replacement of $158,524.66.
The evidence revealed that the opportunity to acquire the secondhand ABFY wagons arose some months after the derailment, at which time the approach was rebuffed and not secured until mid-2004, which was some two and a half years after the derailment. The evidence revealed that SCT’s business was expanding, and that SCT was on the lookout to acquire any wagons of the ABFY variety where it could obtain them. It was fortunate from its business point of view to be able to purchase the 15 wagons from Pacific National. But in my opinion, it was not obliged to give to ARTC the benefit of that fortuitous transaction by setting aside two to replace those wagons that were written off. In my opinion, that submission must fail. SCT was not obliged to allocate two of these wagons to replace the two that were written off. It did not do so. This argument must fail.
What SCT did was to purchase new wagons. These cost more than twice as much as the used wagons. It was submitted on behalf of ARTC that to award SCT the full cost of the replacement was to overcompensate the plaintiff for the loss it suffered, because the new wagons for old wagons put SCT in a better financial position. In addition, the evidence revealed that the new wagons had a slightly larger carrying capacity than the old ABFY wagons, which produced more income, and that being new they would entail less expense for maintenance and repair in the early years, and would be used for a period in the order of 40 years, which was greater than the rolling stock life of the old wagons. It was submitted that the true measure of damages was in the order of $65,000. Mr Blanden pointed out that based upon the figures that were placed before the Court, over a 30 year span, the plaintiff would earn about $160,000 extra because of the superior size and carrying capacity of the new wagons. Whilst he conceded that his calculation was rough and ready, and did not take into account factors such as taxation and the like, it nevertheless underlined that the acquisition of the new wagons would result in a substantial financial gain by SCT. I accept that his rough and ready calculation demonstrated, as did the evidence that there would be less service and repair in the earlier years, that SCT would gain financially from acquiring the new wagons. It was submitted that the Court should deduct from the new price approximately 50%-60% to ensure proper compensation and not overcompensation.
Mr Colbran submitted that SCT was entitled to recover the cost of the new wagons as its true measure of damage, to give effect to the basic principle of assessment of damages, and he referred to the principle of restitutio in integrum – restitution to the original position. He submitted that there was no secondhand market for the wagons. Hence, SCT had no other option but to acquire new wagons, and was entitled to the full cost and not to a reduced amount on the basis of betterment. He referred to what the eminent Admiralty lawyer, Dr Lushington, said in the case of The Gazelle.[19] That case was concerned with damage to a ship, which was subsequently repaired. The case was not dealing with the replacement of a chattel written off because of damage. Dr Lushington held[20] that the recovery was restitutio in integrum and said:
“This restitution is bound to make without calling upon the party injured to assist him in any way whatsoever. If the settlement of the indemnification be attended with any difficulty (and in those cases difficulties must and will frequently occur), the party in fault must bear the inconvenience. He has no right to fix this inconvenience upon the injured party; and if that party derives incidentally greater benefit than mere indemnification, it arises only from the possibility of otherwise effecting such indemnification without exposing him to some loss or burden, which the law will not place upon him.”
(Emphasis added).
[19](1844) 2 W Rob (Adm) 279; 166 ER 759.
[20]At p.760 (ER).
Whether or not a court should apply that rule without deduction in this day and age is a moot point. However, the principle does not apply in the present proceeding. What Dr Lushington was saying is that if there is any difficulty involved in determining the total loss, the injured party should not be prejudiced by the difficulties of assessment. His observations underline the fact that in giving effect to the guiding object of an award of damages, assessment may prove difficult. But the Court must do its best on the evidence in assessing the damages, giving a money sum to compensate the victim and no more, and being fair to both parties.
In this proceeding the claim is for the cost of replacement of two wagons and not their repair. It is appropriate at this stage to analyse the nature of the claim as follows:
(i)On 25 January 2002, two wagons written off after being extensively damaged as a result of the derailment.
(ii)ARTC as the track operator was liable for the derailment and the resulting damage in both contract and tort.
(iii)As a result of the two wagons being written off, SCT’s rolling stock fleet was reduced by two.
(iv)The loss of the two wagons did not disrupt the business operated by SCT as it was still able to maintain its train fleet with additional wagons. No claim has been made for loss of income.
(v)SCT lost both the value of the wagons and their use in the freight fleet. The latter loss did not cause any loss of income.
(vi)SCT’s business was increasing and although it did not have to replace the wagons at the time of the derailment or within 12 months thereafter, an increase in their business necessitated the purchase of new wagons, including two wagons to replace the wagons destroyed in 2004. No issue was raised that SCT had to replace the wagons to mitigate its loss.
(vii)There was no secondhand market for ABFY wagons and hence SCT was obliged to purchase replacement wagons which had to be manufactured.
(viii)However the financial loss actually suffered was the value of the two ABFY wagons. Although the Court mentioned that if there was a cost associated with the raising of money to purchase the two wagons and it might be recoverable, no evidence was placed before the Court that there was a cost.
(x)The financial loss actually suffered was the value of the two ABFY wagons.
Given that a plaintiff is entitled to be compensated by a sum of money which fully compensates him for his actual loss, the value of the secondhand wagon at the time of the derailment represented the actual loss. This sum would restore the plaintiff to his pre-accident asset position. No sum was claimed for loss of income.
The cases establish that in a claim for compensation, where there is a total destruction of the chattel, the prima facie rule of assessment is the value of the chattel at the relevant time, plus any profits that may have been lost if it was an income-producing chattel. These principles have been developed in the Admiralty jurisdiction dealing with the destruction of ships. In the Liesbosch Dredger v Edison S.S. case,[21] Lord Wright said the following in relation to a ship which had been destroyed:
“The true rule seems to be that the measure of damages in such cases is the value of the ship to her owner as a going concern at the time and place of the loss.”
[21][1933] AC 449.
In my opinion, that is the principle that applies in this proceeding. In assessing the damages, the correct sum is the value to the owner of the chattel which was written off and any loss of profits that may have been suffered as a result of its loss of use.
Lord Wright discussed the situation where a ship had a number of pending engagements, which is not the position here, and he then dealt with the position where there were no engagements. His Lordship said:[22]
“But different considerations apply to the simple case of a ship sunk by collision when free of all engagements, either being laid up in port or being a seeking ship in ballast, though intended for employment, if it can be obtained, under charter or otherwise. In such a case the firm measure of damage will be simply the market value, on which will be calculated interest starting from the date of loss, to compensate for delay in paying for the loss.”
[22]At p.464.
However, as his Lordship pointed out, each case depended on its own particular circumstances and, accordingly, it was difficult to lay down a defining rule as to the measure of damages. As His Lordship observed:[23]
“I think it is impossible to lay down any universal formula.”
[23]At p.465.
When analysed in that way, it is my opinion that the question of betterment does not arise in this case. The loss suffered by SCT was the loss of the wagon as an income‑producing chattel. No claim is made in respect to loss of profits. Accordingly, the true measure of SCT’s loss is the value of the wagon at the relevant time. In the circumstances of this case, that is not the replacement value. That would overcompensate the plaintiff and be more than its true loss. That conclusion is supported by McGregor on Damages.[24]
[24]17th ed., at para 34 – 045.
The next question is, how does the Court value that loss? It is trite to observe that each case must depend on its particular circumstances. It is equally trite that there may be a number of ways of valuing a secondhand chattel in the absence of a secondhand market. In my opinion, SCT carries the burden of proving the loss. It is not a question of betterment. It is a question of the value at the time. There is some evidence which establishes the value of the two wagons written off. This is based upon the acquisition by SCT of the 15 wagons from Pacific National. The cost of acquisition, plus the cost of renovating the wagons to put them in a proper and safe condition, provides evidence of the approximate market value at the relevant time. Mr Blanden suggested that it was a true measure of the loss. In my opinion, the plaintiff has on the balance of probabilities proven that that was its loss. When approached in that way, the betterment principle has no application. The true measure of the loss suffered by SCT was the value of the wagons written off at the relevant time. The value is a matter of assessment. The evidence established a value based on the acquisition of the used wagons.
My conclusion accords with the approach by Colman J in Voaden v Champion.[25] In that case, the plaintiff owned a pontoon in the sea off Plymouth. In the course of bad weather, the pontoon was damaged and sank. It was a total loss. His Lordship referred to the cost of replacement and stated that in his view, there should be a reduction for new in place of old. But with respect to the statement of principle in The Gazelle, his Lordship said:[26]
“If one would pay X pounds for a brand new pontoon with a life expectancy of possibly as much as 50 years, what would one pay for an old and well-worn pontoon in the last few years of its life? This approach is not inconsistent with the principle that there should not be a new for old deduction in collision cases where ships have been damaged and can be repaired as in The Gazelle, for the basis of indemnity is quite different: in the case of a total loss the starting point is the capital value of that which has been lost, whereas in the case of damages to property, subject to principles of acting reasonably to mitigate loss, the starting point is reinstatement.”
(Emphasis added).
[25][2001] 1 Lloyd’s Rep 739.
[26]At p.751.
His Lordship had to assess the value of the pontoon lost, and did so by calculating the cost of a new pontoon and then discounting it. In other words, he did not have any evidence of a recent sale and acquisition. Of course, there is a difficulty of assessment in a case where there is no secondhand market, the reason being because it is difficult to then calculate the true loss. What his Lordship did was to demonstrate that the cost of a new pontoon would be X pounds, and then make a deduction to reflect the capital value of the written-off pontoon. Fortunately, in the present case there is evidence of the sale and acquisition of a secondhand wagon. If it was necessary to commence with the cost of the new wagon, in my view, taking into account all the circumstances, which included the increased lifespan of the new over the old, the increase in the income over the life of the new wagon as compared with the old, and less expenses involved in the initial years concerning repairs, servicing and maintenance, the cost of replacement would have to be discounted to reflect the true loss, which I estimate would be very close to the quantum based on the acquisition of the second-hand wagons.
In summary, the true loss is the capital loss of two wagons. In order to calculate that loss, there is evidence of the purchase of secondhand wagons, which, together with the cost of putting them into a serviceable condition, leads to a money sum that in my opinion, is fair compensation for the loss suffered by SCT. If one was to approach the calculation on the basis of the new with a discount for betterment, then, in my view, the calculation would produce much the same result.
This gives a value of the wagons at the relevant date of $68,564.76 for each wagon. The calculation involves the cost of the acquisition of the wagons, plus the cost per wagon (excluding GST) in bringing the wagons up to a safe and serviceable condition.
Accordingly, I find that SCT is entitled to recover damages in the sum of $68,564.76 for each of the two wagons that were written off. This makes a total of $137,129.52. The question of interest can be dealt with under s.60 of the Supreme Court Act 1986.
Indemnity
Clause 15.2 required ARTC to indemnify SCT and keep it indemnified in respect of any claims by it in relation to any loss, damage or destruction of any of its property. The Court has held that ARTC is obliged to indemnify SCT in accordance with that clause. SCT’s counsel provided some written submissions concerning its application but it was not a live issue in the claim for damages. In my view, the clause does not provide any greater sum of damages than have been calculated in accordance with the principles relating to the causes of action in contract and tort. Accordingly, it is unnecessary to say anything more about the indemnity.
Conclusion
The plaintiff, SCT, is entitled to recover the following damages:
Compensation for repairing the property damaged in the derailment
$1,173,962.13
Compensation for the two wagons written off
$ 137,129.52
Cost of investigation
$ 62,070.92
TOTAL:
$1,373,162.57
The plaintiff is entitled to judgment in the sum of $1,373,162.57. Subject to submissions by counsel, I propose to enter judgment for that amount. I request the parties to check the calculations. I will hear the parties on the questions of interest and costs.
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