W.L. Mack Engineering Pty Ltd v Australasian Pipe & Tube Pty Ltd

Re: W.L. MACK ENGINEERING PTY LTD
And: AUSTRALASIAN PIPE and TUBE PTY LTD
No. G141 of 1991
FED No. 340
Contract - Tort - Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.(1)

CATCHWORDS

Contract - Terms - Breach - Damages - Contract to make roll forming machines to manufacture stainless steel piping.

Tort - Detinue - Wrongful taking of parts of roll forming machines.

Practice and Procedure - Non-appearance of respondent - Withdrawal of instructions from counsel and solicitor - Course of action.

Trade Practices Act 1974: s. 52, 82, 87

Federal Court of Australia Act 1976: s. 51A

Federal Court Rules: Order 45 Rule 6

HEARING

SYDNEY

#DATE 21:6:1991

Counsel for the Applicant: J. Svehla

Solicitors for the Applicant: Walls and Rodriguez

Counsel ceasing to act
for the Respondent: F. Curtis

Solicitors ceasing to act
for the Respondent: Stuart and Mills

ORDER

On the applicant giving the usual undertakings as to damages, the respondent by itself, its servants and agents be restrained until further order from selling, disposing of, encumbering or dealing with or parting with possession of the Hassall Street goods or the Blackstone Road goods.

The applicant serve the respondent with a sealed copy of the Court's reasons for judgment delivered today together with a letter from the solicitors for the applicant stating that the matter has been adjourned to 12 July 1991 at 9.30 a.m. and if the respondent does not then appear it is liable to suffer final judgment against it on all issues arising in the case.

Service be effected as aforesaid upon the respondent at its registered office and at 13 Barrinia Street, Slacks Creek, Queensland, 4127 and 3 Binnacle Court, Raby Bay, in each case by pre-paid ordinary mail and by delivering the same personally to the registered office of the respondent, the said personal service to be effected and the documents to be posted by 26 June 1991.

The matter be relisted before the Court on 12 July 1991 at 9.30 a.m. to hear any further evidence or submissions.

If the respondent proposes to take any further step in this proceeding it should notify the solicitors for the applicant in writing of that fact and of the steps which it proposes to take not later than 9 July 1991.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This case concerns the making by the applicant to the respondent's specifications of two machines known as roll forming machines which are used to manufacture stainless steel piping.

The applicant claims that it did everything that it was contractually bound to do under its contract or contracts with the respondent; that delays occurred in the fabrication of the two machines due to alterations or errors to the specifications provided by the respondent to the applicant; and that, although certain payments were made by the respondent to the applicant, the respondent still owes the applicant more than $330,000 for the machines. The applicant asserts that on 27 March 1991 the respondent took possession from the applicant of certain of the parts of the machines on the express undertaking of the respondent that it would pay for them the following day, but the respondent never intended to honour the promise and did not have the funds to do so, and that payment was not made on the following day or subsequently. The applicant also claims that on the night of 27 March 1991 the respondent unlawfully took from the premises in which they were housed by the applicant certain parts for the second machine without the knowledge or authority of the applicant and still retains possession of them. The applicant seeks the return to it by the respondent of all the goods which it says were taken from it on 27 March on the basis that the respondent has no title to or right to possession of the goods, the cause of action being based in detinue. The applicant seeks judgment for the return of the goods or recovery of their value as assessed; or, alternatively, if its case in detinue is not established, it seeks damages for breach of contract. The applicant also asserts that there have been contraventions of s. 52 of the Trade Practices Act 1954 and seeks damages under s. 82 and ancillary relief primarily designed to ensure the return of the goods pursuant to s. 87.
The matter was specially fixed for final hearing on Monday, 17 June on the basis that the Court would determine the questions whether any, and, if so what, representations were made by one party to the other (the respondent had filed a cross-claim itself asserting the making of representations by the applicant) and the terms of any contract or contracts between the parties relating to the manufacture of the two machines, the intent of the Court's order being to hear all matters at issue between the parties in the case other than the questions of performance or breach by either party of any contract between them and relief to be granted.
When the matter came on for hearing before the Court last Monday, counsel and the solicitor for the respondent appeared and informed the Court that their instructions had been withdrawn by the respondent so they would no longer be appearing in the matter. Later the solicitor for the respondent filed a notice of ceasing to act pursuant to order 45 rule 6. The respondent did not appear.
The Court does not therefore have the benefit of any evidence from the respondent and what I say in these reasons for judgment and the findings which I make is on the basis of the evidence adduced by the applicant. The course which I took was to hear the whole of the applicant's case on all issues relating to its claim against the respondent. I indicated to counsel that I would not make any declarations or orders or grant any relief at this stage (except such relief as may be necessary to dispose of the questions of the making of representations and the terms of any contract between the parties) until the respondent had had an opportunity to decide whether it wished to play any further role in the case. I took this course notwithstanding the directions previously given by another Judge of this Court, to which I referred earlier, as to the basis of the final hearing, because the respondent did not appear and the evidence adduced by the applicant presented a strong case that the respondent was in financial difficulties, had deliberately decided against appearing at the final hearing because it was assisting an alleged creditor of the applicant (the debt, if any, having arisen out of the contractual arrangements between the parties which is the subject of the proceedings in this Court) to wind up the applicant in the Supreme Court of New South Wales and render this litigation abortive, and for other tactical reasons was seeking to delay the enforcement of any judgment which the applicant might obtain against the respondent.
In my view, in all the circumstances, it would be open to the Court to make final orders now, disposing of the whole litigation between the parties; but the course which I propose to take is that mentioned earlier, namely, to make my findings on all issues presented in the applicant's case against the respondent and then stand the matter over for a short time so that the respondent may consider its position. Any other course would cause injustice to the applicant, further costs and undue delay in having this litigation disposed of.
I turn to the facts. The evidence discloses a fairly long and complicated course of dealing between the parties relating to the fabrication of the two machines. It has not been easy to determine the precise terms of the contract or contracts between the parties, a result anticipated by the applicant who put its case in the alternative, so that, if no specific contract could be found between the parties, there nevertheless arose a right on the part of the applicant to recover damages against the respondent on the basis of a quantum meruit.
I have considered all the evidence and my conclusions may be stated fairly briefly. On 9 October 1990 the parties agreed that the applicant would fabricate to the respondent's specifications the two machines for a price of $150,000, with a 10 percent deposit being payable by the respondent to the applicant and progress payments being made each month. The figure of $150,000 was based upon certain assumptions made by the applicant arising from information provided to it by the respondent and by the respondent's designer, a Mr Sogal. Following a number of discussions between the parties, the contract was substantially varied during the first week of November 1990 when the applicant received further drawings relating to the first machine from the respondent or its designer. The relevant discussions were between Mr Eric Gawith, the managing director of the applicant, and Mr Rodney Alexander, the managing director of the respondent. The applicant was then to manufacture the first of the two machines to substantially different specifications from those which had been first proposed to it. Other substantial changes were made to the agreement between the parties relating to both machines. The agreement was that the applicant would make the machines for the respondent on the basis that the respondent paid it $46 per man hour worked by employees of the applicant, that materials purchased by the applicant for the production of the machines would be charged against the respondent at cost plus 10 percent, that certain of the work would be let out on subcontracts to others, and that the applicant would be entitled to charge the respondent with the costs of the subcontractors as invoiced to the applicant plus 5 percent. The applicant was to provide the respondent with all relevant invoices every 30 days, the respondent would then pay the amounts then due to the applicant, and the balance of the contract moneys would be payable upon delivery of the machines.
I am satisfied that it was a term and condition of the agreement made in November 1990 that property in the two machines would not pass from the applicant to the respondent until their delivery to the respondent.
Various problems, which it is unnecessary for me to state, arose in the performance by the applicant of its contract. I am satisfied that the difficulties which confronted it in completing the machines and in delivering them to the respondent were due substantially to alterations and errors to the specifications provided by the respondent to the applicant.
During the course of the contract, namely, in December 1990, the respondent granted the applicant a licence without fee to occupy premises near those of the applicant (the applicant's premises being at 94 Hassall Street, Wetherill Park, Sydney, the licensed premises being Unit 3, 9 Blackstone Road, Wetherill Park) so that the applicant could store materials and parts for the two machines and conduct assembly and testing of them before delivery. The Blackstone Road premises were leased by the respondent at its own expense. The applicant placed orders with certain subcontractors in accordance with the arrangements between the parties. They too experienced difficulties and delays in producing parts for the two machines primarily because of difficulties with the specifications provided by the respondent. During the period from October 1990 until March 1991 the respondent delivered to the applicant somewhat sporadically the specifications for the two machines and the applicant fabricated the first machine during that time as and when specifications or amended specifications were received by it. From mid December 1990 until 27 March 1991 or thereabouts the applicant fabricated itself and through its subcontractors the second machine as and when specifications or amended specifications were received from the respondent. By 27 March 1991 the applicant had rendered invoices to the respondent totalling $184,815.35 and the respondent had paid that sum to it.
On about 20 March 1991 the applicant told the respondent that the amount of work done and the value of material supplied during February 1991 in accordance with the contract amounted to $143,283.14 and the applicant then demanded payment of that amount which the respondent agreed to pay by 28 March 1991. On 2 April 1991 or thereabouts, again in accordance with the contract, the applicant sent an invoice to the respondent for a further sum of $215,203.02 owed by the respondent to the applicant for its work done in relation to the fabrication of the machines during the month of March 1991. The respondent pressed the applicant from time to time for delivery of the machines and parts to it. On 27 March 1991 Mr Alexander told Mr Gawith that if the applicant would release and deliver to the respondent certain specified parts and components of the machines then located at the applicant's premises in Hassall Street, Wetherill Park ("the Hassall Street goods") the respondent would pay by 4 p.m. on the following day (28 March 1991) the full amount owing under the applicant's invoices of 20 March 1991, namely, $143,283.14. Mr Gawith accepted the statements of Mr Alexander as being true, and, in the belief that it was true, he released the Hassell Street goods to the respondent. The respondent then took possession of those goods into its own premises in Brisbane but has not paid the sum of $143,283.14 or any part of it.
On the night of 27 March 1991 the respondent, without the permission and authority of the applicant, entered the leased premises at Blackstone Road and took from them the parts and components for the machines which were there ("the Blackstone Road goods"). Those goods were removed by the respondent also to its Brisbane premises. Other parts of the two machines which had been made by one of the subcontractors (Comtool Pty Limited) were also delivered by Comtool into the possession of the respondent in circumstances which on the evidence before the Court adduced by the plaintiff shows deception of Comtool by the respondent.
Shortly after the taking of these goods by the respondent into its own possession, the applicant demanded that they be delivered up to it, but the respondent refused to do so.
I am satisfied that the respondent obtained possession of the Hassall Street goods and the Blackstone Road goods in circumstances where it obtained no title to them, the title having been at all times and still being with the applicant. They are the applicant's goods. The applicant succeeds in its case of detinue against the respondent and is entitled to the usual order for the return of the goods or their value.
As to the applicant's right to recover in detinue see General and Finance Facilities Limited v Cook's Cars (Romford) Limited (1963) 2 All ER 314; Hymas v Ogden (1905) 1 KB 246; Benjamin on Sale, 8th ed. 1950 pp 436-441 and cases there cited (this edition of Benjamin preceded the enactment of the Torts (Interference with Goods) Act 1977 (UK) under which detinue ceased to be a tort in England on 1 June 1978); Fleming, The Law of Torts, 7th ed. pp 53-58; Street, The Law of Torts 6th ed. pp 58-61 and The 95th Report of the Law Reform Committee of South Australia on The Law of Detinue, Conversion, and Trespass to Goods, 1987, in particular pp 4, 5, 18-26, 35-38 and 56-64.
I am satisfied that the amounts claimed by the applicant as constituting the contract value of the works or damages are reasonable. Indeed, the evidence especially from Mr G.F. Cranwell, managing director of Comtool and a man who has spent his working life in the relevant industry, suggests that the amounts claimed are not only reasonable, but are at the lowest scale of reasonableness. Accordingly, I am satisfied that the value of the Hassall Street and the Blackstone Road goods is $330,958.78; and I am satisfied that, if the applicant were not entitled to the usual order in a case of detinue, but were entitled to damages for breach of contract, the same figure ($330,958.78) would represent the damages suffered by the applicant. If there were to be an award of damages the applicant would be entitled also to interest on the amounts constituting the damages in accordance with the Federal Court of Australia Act 1976 (s. 51A) and the Rules.
The question arises as to the future course of this proceeding. I do not think it appropriate in the circumstances to make final orders to-day, but to give the respondent a last opportunity to consider its position and decide what course it wishes to take, if any. I am not inviting the respondent to take any further role in the proceedings; but simply indicating that, if it wishes to do so, it will be heard on the date to which I propose to adjourn these proceedings, namely, 12 July 1991 at 9.30 a.m. I also propose to now give the following directions and orders:
(1) On the applicant giving the usual undertakings as to damages, the

respondent by itself, its servants and agents be restrained until further order from selling, disposing of, encumbering or dealing with or parting with possession of the Hassall Street goods or the Blackstone Road goods.

(2) That the applicant serve the respondent with a sealed copy of the

Court's reasons for judgment delivered today together with a letter from the solicitors for the applicant stating that the matter has been adjourned to 12 July 1991 at 9.30 a.m. and that if the respondent does not then appear it is liable to suffer final judgment against it on all issues arising in the case.

(3) That service be effected as aforesaid upon the respondent at its

registered office and at 13 Barrinia Street, Slacks Creek, Queensland, 4127 and 3 Binnacle Court, Raby Bay, in each case by pre-paid ordinary mail and by delivering the same personally to the registered office of the respondent, the said personal service to be effected and the documents to be posted by 26 June 1991.

(4) That the matter be relisted before the Court on 12 July 1991 at

9.30 a.m. to hear any further evidence or submissions.

(5) That if the respondent proposes to take any further step in this

proceeding it should notify the solicitors for the applicant in writing of that fact and of the steps which it proposes to take not later than 9 July 1991.

As at present advised, and if the evidence remains in its present form and in the absence of any submissions which would lead me to a contrary conclusion, I would propose on the adjourned day to make the following orders:
1. That judgment be entered in favour of the applicant for the return

of the Hassall Street goods and the Blackstone Road goods or recovery of their value as assessed in the sum of $330,958.78, the form of the judgment to be that the applicant have a return of the said goods or recover against the respondent their value assessed in the said sum. (It will then follow that the respondent will have the option of either returning the goods or paying their assessed value or the applicant will have the option of issuing a writ of delivery for the goods or other appropriate writ for an amount equal to its value. If the goods cannot be found the plaintiff has the options open at law which were the former remedies of distress levied on the respondent's goods or alternatively a writ of fi fa for the assessed value of the goods. As to the appropriate form of procedure see Federal Court of Australia Act 1976, s. 53, order 35 rule 1, order 37 rule 7 of this Court's Rules and order 47 of the Rules of the Supreme Court of Queensland. The evidence indicates that the relevant goods are presently situated in Queensland in the custody of the respondent, hence the applicability of the rules of the Supreme Court of Queensland).

2. If the goods are not returned to the applicant and the applicant's

entitlement to damages arises then liberty to apply would be reserved to the applicant or the respondent on the question of the payment of interest up to judgment under s. 51A of the Federal Court of Australia Act.

3. The cross-claim be dismissed. 4. The respondent pay the applicant's costs of these proceedings

including reserved costs, if any.

5. On the applicant giving the usual undertakings as to damages, the

respondent by itself, its servants and agents be restrained until further order from selling, disposing of, encumbering or dealing with or parting with possession of the Hassall Street goods or the Blackstone Road goods except in so far as it is necessary to do so for the purpose of complying with the orders earlier mentioned.

6. Liberty to apply is reserved to either party on two days notice in

relation to the working out of these orders or any matter arising therefrom and generally.

[1991] FCA 340

21 JUNE 1991