WesTrac Equipment Pty Ltd v Gendredge (Australia) Pty Ltd - [2003] WASC 251

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: WESTRAC EQUIPMENT PTY LTD -v- GENDREDGE (AUSTRALIA) PTY LTD [2003] WASC 251

CORAM: EM HEENAN J

HEARD: 12, 13 & 14 JUNE 2002

DELIVERED : 18 DECEMBER 2003

FILE NO/S: CIV 2722 of 2000

BETWEEN: WESTRAC EQUIPMENT PTY LTD (ACN 009 342 572)
Plaintiff
AND
GENDREDGE (AUSTRALIA) PTY LTD (ACN 079 991 816)
Defendant

Catchwords:

Contract - Claim for damages - Repudiation - Sale of machinery to be modified for mining operations - Variations - Extent of modifications - Neglect by purchaser to facilitate supply of equipment necessary for modifications - Delay - Neglect to take delivery - Conduct by purchaser inconsistent with performance of contract according to its terms - Repudiation - Termination of contract - Assessment of damages

Legislation:

Property Law Act (1969), s 21

Sale of Goods Act (1895), s 10

Trade Practices Act (1974) (Clth), s 51A

Result:

Judgment for plaintiff

Category: B

Representation:

Counsel:

Plaintiff: Mr D R Clyne & Mr P Savik
Defendant: Mr M L Bennett & Mr R A S Rowick

Solicitors:

Plaintiff: Corrs Chambers Westgarth
Defendant: Bennett & Co

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

Barrow v Arnaud (1846) 8 QB 604
Chaplin v Hicks [1911] 2 KB 786
Ciavarella v Balmer (1983) 153 CLR 438
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423
Hadley v Baxendale (1854) 9 Ex 341; 156 ER 145
Harlow and Jones v Panex (International) [1967] 2 Lloyd's Rep 509
Mehmet v Benson (1965) 113 CLR 295
Ratcliffe v Evans [1892] 2 QB 524
Shevill v The Builders' Licensing Board (1982) 149 CLR 620
Simonius Vischer & Co v Holt [1979] 2 NSWLR 322
Summers v The Commonwealth (1918) 25 CLR 144
TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd (1963) 180 CLR 130

Case(s) also cited:

Ardlethan Options Ltd v Easdown (1915) 20 CLR 285
Associated Newspapers v Bancks (1951) 83 CLR 322
Carr v J A Berriman Pty Ltd (1953) 89 CLR 327
Copperart Pty Ltd v Bayside Developments Pty Ltd (1996) 16 WAR 396
Foran v Wight (1989) 168 CLR 385
Howard v Pickford Tool Co [1951] 1 KB 417
Hungerfords v Walker (1985) 63 ALJR 210
Kyrwood v Drinkwater [2000] NSWCA 126
Progressive Mailing House v Tabali (1985) 157 CLR 17; (1985) 57 ALR 609
State Trading Corporation of India Ltd v M Golodetz Ltd [1989] 2 Lloyds Rep 277
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR(NSW) 632
Universal Cargo Carriers Corp v Citati [1957] 2 QB 401; [1975] 2 All ER 70
Wenham v Ella (1972) 127 CLR 454

EM HEENAN J: In June 1999 the defendant, Gendredge (Australia) Pty Ltd ("Gendredge"), approached the plaintiff, a machinery supplier, and placed an order for the purchase of two Caterpillar excavators with specially extended booms to be modified to carry and operate a special dredging head or pump, which the defendant would supply. The equipment was to be used by the defendant on mining operations in various parts of the State and in the Northern Territory. The intended function of the machines was to insert the dredging pump, at the end of the long boom, into holding tanks, dams or other large receptacles containing liquids, slurries or sediment, and then to operate the dredge pump which would agitate the sediment or slurry so that it could be pumped out and transferred to some other location. This might involve the boom of the excavator being placed over the wall of an above ground tank or other receptacle and into the base of that tank for operation, or down to the bottom of some below ground receptacle, or through an entry port into some other form of holding tank. No exact dimensions of the dredging pump to be fitted at the end of the boom were given, except that it was said to weigh less than 2 tonnes and to extend about 2 metres from the end of the excavator boom. For the dredging pump to work a set of hydraulic lines had to be fitted to the excavator boom, with flexible lengths at the moving parts of the boom. In addition, large discharge piping would need to be fitted to carry the slurry that was pumped out of the tank or other receptacle. Modifications and additions to the chosen model of the Caterpillar excavators were necessary to provide machines of the configuration desired by the defendant.
The order by the defendant to Westrac Equipment Pty Ltd ("Westrac") was for the supply of two such specially modified excavators on the basis that Gendredge would supply the two dredging pumps required and the special discharge pipes that were needed for their operation. As will be seen, the contract for the supply of the dredging excavators underwent several revisions. Originally, it was proposed that the first modified machine would be supplied, if possible, in time for the defendant to exhibit it at a machinery exhibition in Darwin in early July 1999 and for the second to be supplied a month or so later. In the event, this proved impossible and the time for the supply of the machines was tacitly extended again and again as difficulties in completing the modifications were encountered. For a variety of reasons, the modifications were never completed and neither of the two machines was delivered, or tendered for delivery, to the defendant.
Westrac, as vendor, alleges that there was an anticipatory breach of contract for the purchase of the machines by Gendredge in that the latter made it clear that it was not willing to complete the agreement according to its terms and that this justified the plaintiff in accepting the repudiation and terminating the contract. The anticipatory breaches alleged were that Gendredge had repeatedly neglected to take or authorise steps needed for the installation of the hydraulic lines and discharge pipes and had indicated that it would accept only one machine asserting that the agreement for the supply of the second was conditional on the satisfactory performance of the first.
Gendredge, on the other hand, contends that the vendor was never able to supply a modified machine suitable for the purpose, because the configuration proposed was unstable and, further, that the vendor was unwilling to perform the contract according to its terms in that, unilaterally and belatedly, it imposed a condition for the payment of a deposit before completing the modification. For these reasons Gendredge contends that the plaintiff, as supplier of the machinery, had committed a breach of contract which constituted a repudiation and which it, as purchaser, accepted so that it was no longer under any obligation to take or pay for one or both of the modified excavators. The defendant also contends that these alleged breaches of contract by Westrac meant that the vendor was not entitled to terminate the contract on the grounds of any alleged breach by Gendredge. Earlier, the defendant had counterclaimed for damages caused by the alleged breaches of contract by Westrac, but the counterclaim was not pursued at trial. Accordingly, the trial was concerned with the plaintiff's claim for damages for breach of contract arising from the defendant's anticipatory neglect or refusal to take delivery of the machinery supplied and specially modified to order. Both parties accepted that the contract for the supply and modification of the machinery had been terminated but for different reasons.
Since the termination the machines have been remodified by the plaintiff and sold into the trade, leaving some valuable parts still in the plaintiff's hands. Some issues of importance arise in the correct assessment of the damages claimed by the plaintiff, if the plaintiff is entitled to recover, but these can be deferred until later in these reasons.

Pleadings

By its statement of claim the plaintiff alleges that on or about 29 June 1999 the parties entered into a contract for the sale and purchase of two Caterpillar model 330BL hydraulic excavators. The contract was partly oral and partly in writing. The written components were of Quotation No 0235070 from the plaintiff headed "Revision 3 – 28th June 1999" and a "New Equipment Purchase Agreement" dated 29 June 1999. Insofar as it was made orally, it resulted from discussions between Cameron Callaway, a machinery salesman of the plaintiff and Henry Ynema, a director of the defendant, occurring on 17, 18, 21, 24 and 29 June 1999.
The plaintiff contends that the contract contained express terms that the plaintiff would sell and the defendant would purchase the two excavators for a total price of $1,052,000, being the $526,000 for each modified excavator payable prior to delivery of each excavator. The excavators were to be modified as specified in the written orders to enable them to be used for dredging. The defendant purchaser would supply a dredge pump and associated components to be attached to each end of the excavator's boom as part of the modifications. It is further alleged that the plaintiff was to arrange for the defendant to receive an artist's impression of the modified excavators for use in a trade exhibition at Darwin on 5 July 1999.
The defendant substantially admits these allegations but pleads that the excavators were to have a boom and stick reach of 20 metres; that a Dragflow white metal series dredging pump HY85B with cutters should be affixed to the end of the stick by a Quickhitch connection; that stainless steel piping should be fitted to the boom and stick to operate the dredging pump and that the excavators, as modified, would be required for dredging tanks with wall heights of 6 metres approximately and at other long reach dredging locations. The defendant also pleaded that the excavators should be properly counterbalanced so as to ensure that they would not tip over in the intended dredging operations and so that they could be operated safely during the course of such operations.
The plaintiff replied to deny that a boom and stick reach of 20 metres was ever agreed or ordered pleading that the defendant's requirement was to have a boom and stick reach of 18 metres. Further, the plaintiff denied that any specification was made by the defendant in relation to the wall height of any dredging tanks. The plaintiff further replied that the defendant specified that the excavator should have a lift capacity of 2 tonnes (being slightly more than the weight of the dredging units) at full boom and stick extension.
The defendant then pleaded that, in the course of the negotiations leading to the order for the modification and purchase of the excavators, the plaintiff had given several collateral warranties, namely:
•that the plaintiff had the ability and skills and would supply suitable excavators and design and effect modifications thereto so that the excavators would be capable of and suitable for fulfilling the defendant's requirements of being able to operate with stability and safety during the course of the proposed dredging operations;
•that the plaintiff could supply the first modified excavator by August 1999 and the second excavator duly modified by November 1999;
•that the excavators duly modified would be free from defects in materials and workmanship.
All such express warranties are denied by the plaintiff. But, at the trial, it did not dispute that it was under an implied obligation to supply modified excavators which would be stable in operation and would be free from defects in materials and workmanship.
The defendant further pleaded that, in the course of negotiations leading to the purchase order, the plaintiff represented that Caterpillar finance was available for the funding of the defendant's acquisition of the modified excavators from the plaintiff. The defendant also alleged that it was orally agreed between Henry Ynema for the defendant and Cameron Callaway for the plaintiff that the plaintiff would procure Caterpillar finance to enable the defendant to fund payment of the moneys due under the purchase agreement.
Two further oral terms are alleged by the defendant to have been agreed between the parties during the course of the negotiations, namely that:
•time was of the essence in relation to the delivery of the first modified excavator which was needed for use on dredging contracts in Kalgoorlie and Darwin; and
•the plaintiff would deliver an artist's impression of the modified excavators for use at a trade exhibition at Darwin on 5 July 1999.
In relation to performance under the contracts, the plaintiff alleges that between May and November 2000 the defendant evinced a clear intention no longer to be bound by the contract. The particulars given in support of that plea are that despite requests in writing made by the plaintiff on about 3 May and 31 May 2000, the defendant failed or refused to supply the plaintiff with the Dredging Units required to complete the modifications; that on or about 6 June 2000 the defendant notified the plaintiff that the purchase of one of the excavators could proceed that month only if the defendant had sufficient work booked for it; and that despite written requests made by the plaintiff on about 28 June and 6 November 2000 and oral requests on 16 October and 17 November 2000, the defendant failed or refused to make arrangements with the plaintiff for the completion of the contract. The plaintiff contends that this course of conduct and omissions by the defendant constituted a repudiation of the contract which it accepted by letter dated 5 December 2000, thus terminating the contract.
The defendant denies these allegations that it was in breach of the contract and repudiated it and pleads, instead, that on 3 May and again on 31 May 2000, the plaintiff refused to perform the contract according to its terms by unlawfully requiring a payment of a deposit for each excavator before proceeding. This is followed by pleas that the plaintiff is in breach of the agreement for the modification and sale of the machinery in that:
•the excavators as modified are defective both with respect to materials and workmanship;
•the excavators are not properly balanced and cannot be operated safely to the specifications required;
•the excavators are not fit for the purposes for which the defendant purchased them;
•the excavators had not been completed by the delivery date and were never completed;
•the plaintiff demanded that the defendant should pay a higher price than specified in the contract.
In addition, the defendant pleads that the alleged collateral warranties were misleading in that the modified excavators have not been and cannot be suitably modified and asserts that this constitutes misleading and deceptive conduct with respect to future events contrary to the provisions of s 51A of the Trade Practices Act 1974 (Clth). The defence went on to allege that, as a result of these pleaded breaches of contract by the plaintiff, Gendredge had suffered loss and damage in respect of which there was a subsequent counterclaim. However, it is not necessary to detail or address these allegations because, as already noted, the counterclaim has not been pursued.
It is necessary, therefore, to determine the terms agreed upon between the parties for the modification and supply of these excavators, including the times for delivery, the length of the booms, their lifting capacity and any agreements or arrangements for the procuring of finance to assist the defendant in the purchase. Once the terms of the agreement have been determined, the performance of both parties must be identified and the mutual allegations of breach of contract addressed and decided.
At the trial evidence was given for the plaintiff by Mr Cameron Callaway, the salesman who dealt with Mr Henry Ynema for the defendant in relation to the purchase, and by Mr Michael Phelan the marketing manager who was Mr Callaway's superior and who supervised the transaction. Their evidence was supplemented by considerable documentary material and both witnesses were cross‑examined. No witnesses were called to give evidence on behalf of the defendant and there was no expert or other evidence concerning the capacity or potential capacities of the excavators as modified or at all or with regard to their fitness for the purpose or defects relating either to materials or workmanship which, as already noted, was said to constitute breach of the collateral warranties pleaded by Gendredge. I am quite satisfied that both Mr Callaway and Mr Phelan were witnesses of truth who honestly and dispassionately described the events which occurred, according to the best of their recollection and without any dissimulation or embroidery. I regard them as reliable witnesses whose evidence, subject to confirmation on some matters of detail from the documentary record, should be accepted. Except in relation to minor corrections which they acknowledged were necessary, nothing in their cross‑examination has caused me to entertain doubts about their evidence. Accordingly, and especially because no evidence was called for the defendant and no reason was advanced to suggest that Mr Henry Ynema was not available to give evidence on any issue where the defendant's pleaded case was at variance with the plaintiff's allegations, I have concluded that on issues of fact, such as the length of the boom, the assertion that the boom should be capable of operating with tanks whose walls were of a height up to 6 metres, and in relation to the disputed allegation that the plaintiff agreed to procure finance for the purchase, the plaintiff's version of events has been established.

Contract terms

The initial approach was made by Mr Henry Ynema for the defendant to Mr Callaway by telephone on 14 June 1999 when the former enquired about buying two excavators for his dredging business. This resulted in a meeting at Mr Ynema's office at Burekup on 17 June 1999 between Mr Ynema and Mr Callaway. Mr Ynema explained that he desired to purchase two machines, each a 330BL Caterpillar hydraulic excavator, to be adapted for his dredging work. He explained that a Dragflow dredge pump, a photographic illustration of which he provided at the time, would need to be connected to the extended boom of the excavator in place of the excavator bucket usually provided. He outlined the details of particular modifications which the defendant required as being an 18 metre length and stick and boom; a lift capacity at full extension of 2 tonnes (a little more than the weight of the dredge pump); a control valve in the cabin and various sign writing, window tints, additional lights and other non‑contentious details. Delivery of the first machine was proposed, if possible, to be at Darwin in time for a machinery exhibition on 5 July 1999.
Mr Callaway maintains, and I accept, that at this meeting the request was for a boom and stick of 18 metres in length, although he acknowledged that if the dredge pump were to be attached and fully extended this would involve a maximum extension of 20 metres or thereabouts at full stretch.
Mr Callaway explained that there would be some difficulty in having a machine modified in time for presentation at the Darwin exhibition on 5 July 1999. Following that he explained that the plaintiff would certainly assist in providing some form of presentation at that exhibition. On the next day, 18 June 1999, Mr Callaway completed a quotation requisition form and faxed that to Mr Ynema. Within the plaintiff's organisation Mr Phelan, at the Guildford office, prepared a quotation, sent that to Mr Callaway who delivered it to Mr Ynema. This was a quote for one Caterpillar 330BL hydraulic excavator of detailed configuration, including an 18 metre reach stick and boom for a selling price of $360,000. This was quotation No 0235070 and provided for delivery within 10 to 14 weeks from date of order, subject to prior sale and events of force majeure which would delay delivery and which were beyond the control of Westrac Equipment Pty Ltd. Delivery was to be to the purchaser's works at Bunbury and payment was to be made prior to delivery. The quotation indicated that Caterpillar finance was available but did not contain any undertaking or assurance that it would be procured.

A further meeting took place between Mr Ynema and Mr Callaway when Ynema asked for additional modifications to the excavators. At that meeting Ynema asked for the first excavator to be delivered to Darwin before the July 1999 exhibition without modifications which could be done afterwards. The second excavator could be delivered to Kwinana a month or so later. As a result of this discussion a "New Equipment Purchase Agreement" was completed by Callaway and signed by Ynema which made reference to the quotation of 18 June 1999. This document (Tab 5 to Exhibit 1) provided for Westrac to sell and for Gendredge to purchase 2 x 330BL long reach excavators as per quotation 0235070:
"-One machine to be delivered to Darwin
-with standard boom and stick for expo on 5th, 6th July. Long boom and stick to be fitted in Darwin."
Delivery was requested for one machine at Darwin and one locally, the first on 5 July 1999. The cost was $395,000 per machine or a total of $790,000 and the terms of payment were pre‑delivery. The New Equipment Purchase Agreement is dated 21 June 1999.
Mr Callaway then took steps to order and commission the equipment and various modifications and sought a quotation from Victorian Highlands Logging Co Pty Ltd for the supply of a boom and arm to reach 18 metres from the centre of a slew ring at a cost of $65,000, plus a 4 tonne counterweight and other equipment. However, by 24 June 1999 Westrac realised that the quotation it had given for the Caterpillar excavator contained an error, in that the price quoted was for a 325BL excavator rather than the 330BL excavator selected. It indicated that it was unable to supply at the price quoted, even though an order had been accepted, and submitted a new quotation at a unit price of $445,000 (revision 24 June 1999). Mr Callaway explained this to Mr Ynema who accepted the position and raised no objection to a revision of the agreement to provide for the correct pricing. In addition, Mr Ynema desired further changes to be made to the order which were noted by Mr Callaway who then sought a further quotation (Exhibit 1, Tab 11), resulting in a price, after a special discount, of $526,108 per unit. That was delivered to Mr Ynema by Mr Callaway on 29 June 1999 and a new Equipment Purchase Agreement was signed to replace the earlier contract. This document "New Equipment Purchase Agreement" is Exhibit 1, Tab 12. It provided for the supply of 2 x 330BL excavators, as per quotation No 0235070, revision 3, 28 June and for the customer to supply quick couples for attachment. This order cancelled the previous order No 0912. The cost was $526,000 per machine or a total of $1,052,000. The first machine was to be ready in early August and the second machine in October and November. This agreement (No 915) was dated 29 June 1999.
By this date it was accepted that it would not be possible to deliver even an unmodified machine to Darwin in time for the Expo on 5 and 6 July. Instead, Mr Ynema instructed Westrac to arrange for an artist's impression of the excavators to be prepared by a company named Immersive Technologies Pty Ltd and for these illustrations to be sent for display at the Darwin Expo. Mr Callaway agreed to this on behalf of the plaintiff and duly had the graphic design work done and dispatched to Darwin. The plaintiff paid $2,025 to the graphic designer for this work and seeks the recovery of this sum as part of its claim against the defendant.
The second and third quotations for the supply of modified excavators by Westrac also contained payment terms stipulating that payment prior to delivery was required, together with a statement that Caterpillar finance was available and that for more information calls should be made to Westrac Equipment Pty Ltd or Caterpillar Finance on numbers provided. There is nothing in the quotations, in the order agreements, or elsewhere in the evidence to suggest that the equipment sale agreements were subject to or conditional upon finance being provided by Caterpillar Finance or by any other financier. Consequently, I conclude that this was an unconditional agreement for the sale and purchase of the modified excavators and that the entire sale price for each unit was payable prior to the delivery of that unit.
The equipment to be provided and the modifications undertaken by Westrac was not sufficient for a fully operating dredging excavator of the kind required by the defendant. This was because certain essential items of equipment were to be supplied by the defendant, as needed, while the modifications progressed. This necessary equipment to be provided by the defendant was identified at this stage as comprising:
•the dragflow dredging pumps which were to be attached to the end of the boom and stick of each of the excavators;
•an "adaptor plate", to be fashioned for the purpose, which would allow the dredging pump to be connected to the end of the boom and stick of the excavator;
•discharge pipes to carry the slurry which was being pumped out by the dredging pump to wherever it was to be deposited.
At this early stage, the dimensions of these discharge pipes were not finalised nor was their location fixed. Mr Ynema had indicated that he expected to obtain the discharge pipes from South Africa and that he proposed using stainless steel because of its better anti‑corrosive properties. Later, he decided to have the discharge piping attached to the length of the boom and stick (again with moveable joints at necessary points) and it was much later before the dimensions of these discharge pipes (8 inches in diameter) was finalised. This had implications for the modification and operation of the dredging excavators because suitably sized brackets needed to be installed on the boom and stick to bear the discharge piping. Further, and importantly, the piping itself, and the slurry that it would contain during operations, added to the weight of the boom and stick significantly with consequences for the stability of the entire apparatus at full stretch. These issues were not addressed at the time of the contract.
Unexpected delays were encountered in obtaining the supply of extended excavator arms that had been ordered from Victorian Highlands, and worse delays were experienced in obtaining the stainless steel piping for the hydraulic lines and discharge piping. The extended arms were eventually obtained on about 6 August 1999 and arrangements were made to seek the stainless steel piping for the hydraulic lines from another supplier. Mr Callaway discussed this development with Mr Ynema and expressed regret that Westrac was behind schedule because of the delay in obtaining components. Mr Ynema accepted this position and indicated that, in the circumstances, he would accept the use of rubber hosing for the hydraulic lines with stainless steel ends, provided an additional set of lines was provided against the possibility of rupture. At this point Mr Callaway asked for specifications for the size of the clamps that were to carry the discharge piping, but Mr Ynema was unable to provide details because the discharge piping was still being sourced from South Africa. Later on, about 19 August, Mr Callaway was contacted by one of Mr Ynema's staff in Darwin seeking information about noise levels that would be reached with the excavator in use. As a consequence, the plaintiff arranged for an acoustic test to be done by a firm Herring Storer Acoustics, to provide that information. The cost of this test, not included in the order, is also part of the claim advanced by the plaintiff (see Exhibit 1, Tab 20). It was $150.
At the request of Mr Ynema, Mr Callaway sent to the defendant, on 7 September 1999, a manufacturer's chart listing the lifting capacities of the excavators on the basis of a standard boom and stick at various lengths.
An inspection of the work on the excavators was conducted by Mr Ynema at the plaintiff's yard in Guildford on 9 September 1999. Mr Phelan was present on that occasion and work was proceeding on both excavators at that date. No dissatisfaction at the rate of progress, by then appreciably delayed, was voiced by Mr Ynema and shortly afterwards he sent a fax authorising Westrac's proposal for the attachment of the hydraulic hoses to the stick of the excavator arm and commenting on other matters discussed at the inspection. Mr Ynema asked for drawings so that he could order the discharge pipes from South Africa later.
By early September 1999 Mr Callaway learned that the defendant's application for finance to Caterpillar Finance had been refused, so he telephoned Mr Ynema to enquire how he proposed to pay for the excavators in these circumstances. He was told by Mr Ynema that he would then obtain finance from Esanda. Either then, or shortly afterwards, Mr Ynema informed Mr Callaway that he wanted at least one of the excavators to be fitted with an air compressor. Mr Callaway accepted this and took steps to have an air compressor obtained and fitted. This is an extra to the modifications and equipment sought in the original order and the additional cost of $3,800 quoted for this by Westrac also forms part of its claim.
By the end of September 1999 work on the modifications had reached the stage where the plaintiff's staff needed details of the size of the discharge pipes that were to be used so that appropriate clamps to house the piping could be attached to the boom and stick being assembled. Telephone enquiries were made of Mr Ynema, but the details were not forthcoming. In this situation, Mr Callaway issued instructions to fit clamps to take 8 inch diameter discharge piping and, if necessary, to modify these later. Work proceeded by the plaintiff for the ordering and fitting of injectors, hose and fittings and other necessary items. On 18 October Mr Ynema, by facsimile transmission, confirmed the purchase order for the air compressor, already mentioned.
The dredging pumps which were to be attached to the end of the stick and boom were, as already noted, being supplied by the defendant. However, a special adaptor plate to connect the dredging pumps to the end of the boom and stick had to be manufactured and this could only be done if one of the dredging pumps, or all its relevant dimensions, were supplied. The defendant did not supply a dredging unit to allow the manufacture of the adaptor plate and this caused delay. The manufacture of the adaptor plate was not included in the contract for the purchase and modification of the excavators and was, therefore, to the defendant's cost. The plaintiff's subcontractor communicated with Mr Ynema direct, in order to obtain the dimensions necessary for the manufacture of the adaptor plate and to quote a cost for it. Mr Ynema instructed the subcontractor to proceed on 18 October 1999 and the job was completed and the adaptor plate delivered to the plaintiff's workshop in Guildford on about 2 November 1999.
By this stage it was clear to all concerned that the original proposals for the delivery of the modified excavators in August and October‑November 1999 had become unrealistic. However, there is no evidence of complaints on either side being voiced about the delays which had occurred. Both Westrac and Gendredge were proceeding on the footing that the mutual obligations under the contract for the modification, sale and purchase of the machinery continued and that the work would be completed and the machines delivered as soon as practicably possible. Despite the allegation by Gendredge in its defence that the time for delivery of the first modified excavator by August 1999 was of the essence, I cannot see anything in the evidence to support that plea. There is no express provision to that effect in any of the contract documents, nor is there any oral evidence of such a term. The history of the negotiations is inconsistent with the plea. The initial proposals to have a modified machine available for display at the Darwin Expo on 5 and 6 July 1999 were expressions of hope that this might be possible and no obligation for delivery by then was ever accepted by the plaintiff. By the date of the revision to the contract of 29 June 1999 it was obvious that a modified machine could not be ready in time for the Expo and, again, there was a proposal that an excavator could be sent to Darwin for display at the exhibition and returned to Perth for modification later. This was quickly realised to be unrealistic and, hence, the instructions to have graphic designers prepare illustrative material for the defendant which could be displayed at Darwin was adopted as an alternative.
Consequently, I am satisfied that the time for delivery of the machines was never made the essence of this contract. The times for delivery set by the revision of 29 June 1999 were soon realised to be unachievable. Perhaps this first became obvious when delays were experienced in obtaining the extended booms and sticks from the supplier in Victoria. But the situation was confirmed and aggravated by successive delays in obtaining other equipment and information necessary to allow the modifications to progress. In the circumstances, I am satisfied that the parties to the contract, and in particular the defendant, waived compliance with the dates for delivery of the machines set by the contract on 29 July 1999 and that, thereafter, the obligation on the plaintiff became a duty to provide the modified machinery within a reasonable time, having regard to all the circumstances – Property Law Act (1969), s 21; Sale of Goods Act (1895), s 10; Mehmet v Benson (1965) 113 CLR 295; and Ciavarella v Balmer (1983) 153 CLR 438.
A second inspection by Mr Ynema of the defendant on the process of the works was conducted at the plaintiff's Guildford premises on 15 November 1999. Mr Phelan for the plaintiff was also present. The meeting had been arranged in order to test the machine fitted with the extended boom and with a dredging pump attached to the end. Mr Ynema brought a dredging pump in to allow this to be done. At the inspection it was found that the excavator with the dredging pump attached operated satisfactorily at full stretch when the boom was directed in parallel with the tracks. But, when rotated to right angles to the excavator's tracks, there were signs of instability in that the rollers in the track of the excavator, on the opposite side to the boom, were lifting off the ground. At this stage the discharge piping of the dredging unit had still not been supplied or fitted but it was obvious that when this would be done, and particularly if the piping were filled with slurry, the additional weight along the extended boom would increase the observed instability at that point of rotation. Mr Phelan and Mr Ynema recognised this problem at this inspection and discussed means of dealing with it. They were agreed that additional counterbalancing at the rear of the tractor would be needed and that further testing should be done. The meeting concluded on the basis that additional work would be done on providing a heavier counterweight and that this should be effective in overcoming the problem. Mr Ynema needed the dredging pump for use on a project at Kalgoorlie and was unable to leave it with the plaintiff's workmen for further testing or evaluation, instead taking it away with him after that test had been completed. It was not returned until 23 December 1999 when there was another test performed at the Guildford workshop in the presence of Mr Ynema, Mr Phelan and Mr Callaway.
At the second test of the excavator dredger conducted on 23 December 1999 the plaintiff's workmen had made adjustments to provide for the additional weight which would be carried by the boom and stick once the discharge pipes were fitted and filled with slurry. That was done by chaining additional weight to the boom and stick. Further, additional weight of approximately 1 tonne was added to the existing counterweight to compensate for the instability which had been noticed at the test on 15 November 1999 and for the additional weight now to be carried by the boom and stick. In this configuration the modified machine was found to be stable and none of the problems noticed at the earlier testing was experienced. Mr Phelan described the position as being that the 18 metre arm with the dredging unit and additional weight attached could be turned sideways and extended to its full reach without the rollers and the backtrack lifting off the ground and that, in addition, the machine continued to work correctly when the arm was at upper extension. Counsel for the defendant cross‑examined in an endeavour to establish that there was still instability of the machine apparent at this test on 23 December 1999 or that, at the very least, there was disagreement between Mr Ynema on the one hand and the plaintiff's representatives on the other as to whether or not the machine was operating in a stable manner. Those allegations were rejected by the plaintiff's witnesses who, as I have already observed generally, I accept as being truthful. Consequently, I find that with the adjustments which had been made to the machine, it was found to operate in a stable fashion and to the satisfaction of the parties at the inspection conducted on 23 December 1999.
After the testing of the first modified excavator on 23 December 1999 there were only three significant tasks yet to be performed before the work upon the machine was complete and it would be ready for delivery. These were, first, to attach the additional counterweight to the back of the machine in a satisfactory manner; second, to attach hydraulic hoses for the dredging pump on that unit; and third, to clamp the discharge piping for the dredging pump to the excavator arm once that piping had been supplied by the defendant. At that meeting there was a discussion between Mr Ynema and Messrs Phelan and Callaway about the supply and fitting of the hydraulic lines and the discharge piping to the boom and stick. As a change to the previous arrangements under which the defendant would supply the discharge piping, Mr Ynema asked if the plaintiff could supply the discharge piping (the rigid components) and the hydraulic piping and fit both to the excavator, boom and stick. The plaintiff agreed to obtain quotations for the supply of discharge piping and hydraulic lines with stainless steel fittings with a view to discussing this issue further in due course. The meeting concluded on that basis and Mr Ynema left the dredging unit at the plaintiff's workshop to allow all necessary further work to be done.
During the period from 29 December 1999 to 10 January 2000 there was a series of communications between the plaintiff, suppliers of hydraulic hoses and discharge piping and Mr Ynema, culminating in quotations for the supplies of these components being sent by the plaintiff to Mr Ynema on 31 December 1999 and 5 January 2000 (see Exhibit 5, Tabs 13 and 14). At this point the size of the discharge pipes (either 6 inch or 8 inch diameter) had still not been specified by Gendredge. Then followed communications between Mr Ynema and the plaintiff in which the former sought more details of the size of the proposed hydraulic hosings and for detailed drawings of components of the discharge pipes. At that stage, Mr Ynema indicated that he was endeavouring to ascertain whether or not the hydraulic piping could be supplied from the defendant's own stores of equipment.
Despite the stability of the adjusted excavator which was demonstrated and accepted at the test on 23 December, this issue came up for further attention again on 31 December 1999. Mr Ynema pointed out that the size of the discharge piping would impact on the total weight of the excavator arm when it was in operation, although there does not seem to have been any suggestion that a pipe larger than 8 inch diameter would be used. More significantly, perhaps, Mr Ynema expressed concern, for the first time, that the operation of the circular cutters at the base of the dredge pump would have the effect of placing a downward force on the pump while in operation, drawing it into the sediment in which it was operating, and so causing additional downward pressure on the end of the boom and stick. The extent of this force was never quantified or estimated but the potential effect was sufficient to cause the parties to explore other options to ensure that the machine would be stable in operation. The solution lay in an addition to, or a variation in the operation of, the increased counterweight to be fixed to the back of the excavator.

At this point it is appropriate to recall that the specification given by the defendant when ordering the two machines was for an 18 metre boom and stick with a carrying capacity of 2 tonnes at full stretch. This was the design criteria and the lifting capacity adopted by the plaintiff but there is no evidence, at any point in the case, about the actual carrying capacity of the machine at full stretch. There is no evidence about the weight of the dredging pump which was supplied for use at the tests, nor of the dimension of the potentially additional downward forces on the boom and stick arm caused by the operation of the digging rotors in the pump itself.
The nearest the evidence came to the lifting capacity of the modified excavator at full stretch was that, at the test conducted on 23 December 1999, on the dredge pump supplied by the defendant, and with additional weights fixed to the boom and stick to simulate the presence of discharge piping filled with slurry, and with an increased counterweight, the machine was stable at all points of operation. I consider that I should treat this evidence as establishing that, with the adjustments described, the machine had the lifting capacity at full stretch specified in the purchase order. I appreciate that the lifting capacity was not measured in tonnes on that occasion but the machine satisfied the tests which the 2 tonne lifting specification had contemplated. In my view this is, at least, sufficient to show at a prima facie level that the lifting capacity of the machine conformed to the specification and, as there was no evidence to the contrary led by the defendant, and as it was not suggested in cross‑examination that the lifting capacity was less than 2 tonnes, that is the finding which I make.
If the concerns expressed by Mr Ynema about the additional force exerted on the boom and stick by the drilling effect of the rotors in the dredge pump are to be taken into account, then the only conclusion justified is that there were additional potential forces on the boom and stick which were recognised for the first occasion at the end of 1999 and that these meant that a greater lifting capacity than 2 tonnes at full stretch may be required. The consequence of this is that extra lifting capacity for the machine beyond the specification in the contract became a factor for investigation in January 2000, but that no breach of contract by the plaintiff in failing to meet the contract specifications for lifting capacity has been established on this account nor has it been shown that the lifting capacity of the apparatus at full stretch was less than 2 tonnes. At the time, however, neither of the parties raised any issue in this regard but concentrated, instead, on the practical task of investigating how the lifting capacity might be improved to meet Mr Ynema's concerns.
The response adopted in the light of Mr Ynema's concern about the lifting capacity of the boom and stick was for Westrac to investigate how the lifting capacity may be increased. This was done by Mr Callaway and another of the plaintiff's staff, Mr R Albuquerque from the Guildford workshop, liaising and seeking advice from an external mechanical engineering company, McDowall Affleck Pty Ltd. These investigations were conducted during January and February 2000 and resulted in a proposal to install a special retractable counterweight which would automatically extend behind the excavator as the boom was extended at the front. Other alternatives were for the use of an 8‑1/2 tonne counterweight to be attached to the base of the excavator or for the widening of the track base on the machine. There were advantages and disadvantages with each of the alternatives and these were submitted to the defendant following a meeting held on 28 January 2000 attended by Mr G Affleck of McDowall Affleck Pty Ltd, Mr Ynema, Mr Callaway and Mr Albuquerque and are to be found in Exhibit 1, Tab 46. Drawings of the proposed retractable counterweight system were also provided (Exhibit 1, Tab 47A). These were supplied on 10 February 2000.
McDowall Affleck Pty Ltd charged Westrac $6,873 for the consulting fees, inspections and design work involved in the recommended system for a retractable counterweight by an account dated 1 March 2000. Westrac paid this account and seeks recovery of this as part of its claim against the defendant. Whether it is properly recoverable will be discussed in more detail later in these reasons. Westrac then quoted to the defendant for the cost of modifying the excavators to incorporate the retractable counterweight system. This extra cost was communicated to Mr Ynema by telephone on about 10 March, then later hand delivered and faxed to him on 31 March 2000. No response or authorisation to proceed was ever given by the defendant.
Also, in late December 1999, there were continuing communications about the question of who was to supply the hydraulic hosing for the dredging unit and for a quotation to be given by Westrac for the discharge piping. The quotation by the plaintiff for the discharge piping was submitted to Mr Ynema in early January 2000 but there was no acceptance forthcoming and the issue of the costs and the supply of the discharge piping was deferred by the defendant while attention switched to the possibility of the installation of a retractable counterweight system.
By a facsimile transmission of 31 December 1999, Mr Ynema sent to Mr Callaway at Westrac a memo showing some dissatisfaction about the progress of the excavator modifications. This is to be found at Exhibit 1, Tab 41. The main points raised by Mr Ynema were:
•the absence of final weight allowances for the operation of the dredge bed, referring to the diameter of the discharge pipe and hence to the weight of the slurry to be carried;
•the additional force on the boom and stick caused by the operation of the dredger because of the effect of the cutters in the mud/sand or silt;
•the loss caused to Gendredge by having to pass up jobs where the modified excavator could have been used and which would have produced income to finance the purchase;
•the need for a four week delay to have the flexible joint sections of the discharge piping manufactured;
•an intention to refurbish another dredging unit of the defendant as a priority which would take 30 days.
There was also an implied criticism by Mr Ynema about the need to accommodate for the additional weight of the discharge piping filled with slurry when in operation, and for the additional downward force on the boom and stick caused by the operation of the rotors of the dredge pump in operation, asserting that these should have been accommodated by Westrac from the commencement in the light of the specifications of the dredge pump which Mr Ynema had supplied. However, I accept the explanation by the plaintiff that the early contractual specifications which it was obliged to meet under the contract in this respect were that the boom and stick should have a lifting capacity at full stretch of 2 tonnes as the contract documents record. There was no suggestion or agreement at the time of the contract for the modification, sale and purchase of the modified extractor was agreed upon to provide for any greater lifting capacity or to investigate the possible effect of the dredge pump while in operation. I accept the plaintiff's explanation that its obligation was to provide a machine with this specified lifting capacity of 2 tonnes and, that on the evidence of the test results of 23 December 1999, the configuration of the machine as then proposed satisfied this requirement.
Accordingly, the position in early 2000 was that, despite the attention which had been given from late December onwards to the provision of the inflexible components of the discharge lines by Westrac instead of by Gendredge, consideration was then being given to alternative counterbalance measures to provide increased lifting capacity. No decisions or instructions about these alternatives had been relayed to the plaintiff by Gendredge nor had any instructions been given to proceed with any of the alternatives which had been proposed.
In early April 2000 Mr Phelan and Mr Callaway were concerned at the absence of progress and the lack of response by Mr Ynema to the outstanding issues for the supply of discharge piping and for the modification of the counterweight system. Another factor contributing to their concern was the lack of any identification by the defendant of a financier to support the project. This led Mr Phelan to suggest to Mr Callaway that the plaintiff should seek a deposit from Mr Ynema before proceeding further. Eventually, a meeting was arranged between Mr Callaway and Mr Ynema and this took place on 3 May 2000. Mr Callaway gave to Mr Ynema a list of all the extra additions for the contract, including the proposed retractable counterweight system and asked for formal orders for the additional materials and work. This document (Exhibit 5, Tab 19) provided for a total cost of each machine of $556,530 made up as follows:
Original selling price with modifications    $526,000
Addition of air compressor as ordered           $3,800
Addition of steel lines on boom for
dredge – 8 inch line on boom and stick        $14,612
Addition of counterweight brackets as per
retractable counterweight system proposed   $12,118
$556,530 per machine
The document proposed delivery of the first machine within three to four weeks and asked for a required delivery date for the second unit. It also contained the following:
"Gendredge Australia needs to supply the following:-
Deposit of $55,000 per machine.
Flexible couplings for out‑let pipe and hose over back of machine.
Hydraulic hose connections from stick to head and taps if required.
Dredge head to enable machine to be tested."
The dredge pump delivered for the December 1999 tests had been taken away again by the defendant and was needed for further work to be done. Mr Ynema did not sign this document at the meeting with Mr Callaway on 3 May 2000 but rather said that he would give a response after his return from Kalgoorlie on an imminent trip there. There was a second meeting between Mr Callaway and Mr Ynema on 24 May, but again Mr Ynema explained that he had not been able to consider the Westrac document or to follow up the plaintiff's request to supply the dredging units to allow progress to be made but would respond on 29 May. On 29 May Mr Ynema advised by telephone that he needed further time and would respond by 2 June 2000. This increased the concerned of Westrac, resulting in Mr Callaway sending a facsimile to Mr Ynema on 31 May asking for an answer to "our requirements --- so we can proceed with the project and deliver the first unit pre GST".
As the conduct of Westrac in making these demands on 3 May 2000 is relied upon by the defendant as constituting a breach of contract amounting to a repudiation, it is necessary to consider these demands more closely. The most significant aspect of the document of 3 May 2000 proffered by Mr Callaway on behalf of the plaintiff was that it proposed a variation of the existing contract. It did so in several respects. First, there was the incorporation into the contract of the earlier collateral contract for the supply of an air compressor, secondly, there was the addition of the steel lines on the boom and the counterweight which had been the subject of recent discussions, all of which increased the contract price to $556,530 per machine. Then there was a stipulation for a deposit of $55,000 per machine to be paid. If this new proposal was not accepted by the defendant that would leave the original contract with the mutual obligations of the parties remaining in force. If the proposal were accepted then the original contract would have been varied to the extent so agreed. Demanding the payment of a deposit as part of the terms for a variation of the original contract does not constitute a breach of the terms of the original contract. Failure to agree on the proposed variations obviously would create difficulties, and further delays in the completion of the original contract because of the need for the defendant to supply the discharge piping, as originally agreed, and for the plaintiff to resolve the stability of the machine by different means sufficient to provide a lifting capacity for the boom and stick at full extension of 2 tonnes – presumably by adopting the anticipated configuration which proved effective at the test on 23 December 1999.
If those measures were regarded, by either of both of the parties as insufficient to deal with the practical difficulties, then some different variation of the contract might have been proposed and agreed. However, I do not regard the demand for the payment of $55,000 deposit per machine, or the other demands for documentation of proposed variations in the contract by the plaintiff by the document of 3 May 2000, as constituting a breach, still less a repudiation, of the contract for the modification and sale of two excavators for dredging. Nor does it appear that Mr Ynema or the defendant regarded this as a repudiation of the contract at the time because Mr Ynema continued to communicate with the plaintiff, admittedly to delay further performance of the contract and to suggest that delivery of one rather than two of the machines should proceed, but no attempt was made to terminate the contract. Mr Ynema even suggested that he would be willing to pay a deposit of 5 per cent for one of the machines on the basis that the other variations, including the retractable counterweight, would be adopted. This is evident from a facsimile from Mr Ynema to the plaintiff of 6 June 2000 (Exhibit 1, Tab 53) which, while making a series of allegations and complaints against the plaintiff, proposes that the contract for the modification and sale of one of the machines should proceed later in June.
At the request of Mr Ynema, Mr Callaway arranged an appointment with a finance broker for 16 June 2000 in order to explore the prospects of the defendant obtaining alternative finance for the transaction, but it seems that the proposed meeting did not go ahead. On 22 June the plaintiff wrote to the defendant addressing the complaints made by Mr Ynema on 6 June and stating again that, before additional work could be carried out on both the units, the plaintiff would require a 5 per cent deposit and invoicing details as sought in the document of 3 May. Again, however, this demand was made on the basis that the extra work involved would include special counterweight extensions recommended by McDowall Affleck Pty Ltd. The letter concluded with the plaintiff advising that if the defendant did not wish to proceed with the purchase that Mr Ynema should respond in writing "to reach a settlement for our current outstanding expenditures". The defendant replied by letter of 31 July, explaining the delay as due to Mr Ynema's absence overseas, and going on to say:
"A couple of points still appear to be causing confusion.
1.Agreed 2 units were ordered, but with a clear understanding one (first) unit needed to be delivered and operational 3 (three) months before the second.
2.Time frames were agreed at the time to which Gendredge (Australia) Pty Ltd then went ahead and commercial marketing and accepting preliminary works.
3.No unit was ready for delivery at the agreed time.
The above sequence still stands. However, of late you have requested payment of 5% deposit approx. $30,000 before proceeding. This is not acceptable as at this stage there is no indication the equipment will actually work to the specifications originally given – with technical delays, to date there is little comfort to Gendredge (Australia) Pty Ltd to pay for equipment that may not perform.
Finance – At the original discussion you advised CAT Finance had a special deal for excavators new purchase – this was accepted. I doubt we offered to approach Esanda, we hardly deal with them other than very low volume on near complete vehicles (less than $15K). It would not make sense then to go to them when the cost offer from CAT was attractive. As far as Gendredge (Australia) Pty Ltd is concerned, CAT is the equipment provider, CAT Finance is the obvious equipment financier along the line originally contemplated.
I will not be in a position to address anything on this matter until September due to other matters being finalised during August."
This resulted in a response from the General Manager of the plaintiff on 7 November 2000 referring to attempts made by members of the plaintiff's staff to contact Mr Ynema on three occasions during October and November requesting a meeting which never eventuated. This letter concluded by saying:
"Please contact me before 2 pm on Friday 10 November 2000 to agree the completion date for the sale and purchase and delivery of the machines. In the event completion does not take place shortly, Westrac will seek reimbursement from you of its costs to date and the cost that it will incur to restore the machines to their standard specification.
I look forward to hearing from you next week."
No meeting resulted from this communication but Mr Ynema did reply by letter dated 12 November in effect repeating the complaints and explanations which he had made on 6 June, repeating his reference to advice that Caterpillar funding would be available and stating that the machines had not been delivered on time. This letter concluded by saying:
"However there is potential of a project early New Year, which would suit this type of equipment, the work will be tendered as soon as documents are available.
I trust this opens the picture a little for you, as it appears there may be some matters missed in the flow of events that are of importance.
I would be keen to hear from you as to what we do now, obviously it has cost us both cash and there is no current resolution to enable the initial unit to be completed and then for it to generate revenue, your thoughts please."
The Manager of the plaintiff then wrote to Mr Ynema on 5 December in a letter which included the following:
"Gendredge (Australia) Pty Ltd has, by its continued failure to complete the contract for the purchase of the two (2) CAT 330BL Excavators made with Westrac Equipment Pty Ltd ('WesTrac') on 29 June 1999, repudiated the contract. WesTrac accepts the repudiation. The contract is, therefore, at an end. As a consequence, WesTrac has suffered loss and damage in the amount of $1,052,000.
Please forward your payment of this amount to me within seven days of the date of this letter.
WesTrac reserves all its rights."
Finally, there was a fax from Westrac to Gendredge on 14 December observing that there had been no response to the letter of 5 December and that instructions had been given to solicitors to commence proceedings seeking damages for breach of contract. This produced a letter from Mr Ynema of 14 December denying liability for damages and forecasting that the defendant itself would seek damages and nominating a firm of solicitors to receive legal correspondence. It concluded by referring to an opportunity to utilise the first unit being assembled but not until early 2001. The current proceedings were then commenced.
Effectively there was no progress in the modification of the excavators from January 2000 onwards, although proposals for the retractable counterbalance and quotes for this and for the provision of the discharge piping had been put forward by the plaintiff from 10 March 2000. After that, there were repeated delays by the defendant in responding to any communications or proposals from the plaintiff. Request for confirmation of the proposed variations and additions to the contract of 3 May 2000 were not directly answered. In this situation each of the parties could rightly have insisted upon completion of the contract according to the terms contained in the revision of 29 June 1999, plus the supply of a compressor to the first machine as had been later agreed. Neither party sought to do so, apparently recognising that the practicalities made it desirable that agreement on the proposed variations, or some others, should be reached and that this may be imminent. But, as time wore on, the prospect of this occurring dwindled and, in combination with the defendant's proposal to take only one modified excavator it became obvious that the defendant was not willing to perform the contract according to its terms. I consider that this stage was reached by 2 August 2000 when Mr Ynema's letter of that date was sent (Exhibit 1, Tab 58). However, the plaintiff kept the prospect of completing the contract alive and renewed its efforts to have the defendant complete it over the ensuing months until November 2000 before treating the defendant's conduct as a breach of contract and a repudiation which it purported to accept by its letter of 5 December 2000 (Exhibit 1, Tab 62). I am satisfied that the defendant's conduct, from April 2000 onwards did signify a refusal to complete the contract according to its terms and a repudiation – Summers v The Commonwealth (1918) 25 CLR 144. It should follow that the plaintiff was justified in accepting that repudiation and terminating the contract on 5 December 2000 and seeking redress. However, that conclusion is only justified if the plaintiff was refusing to perform the contract or if the defendant had not itself terminated the contract for a repudiation by the plaintiff before then – DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 and Shevill v The Builders' Licensing Board (1982) 149 CLR 620 at 626.

It was not part of the contract for the modification sale and purchase of the excavators of 29 June 1999 for the plaintiff to supply the discharge piping, or to design and fit a retractable counterbalance. It must be accepted that the plaintiff was obliged to provide modified excavators, incorporating additional components supplied by the defendant, which were stable and fit for operating as dredges as proposed. There is nothing to show that the plaintiff was unwilling or unable to provide excavators which met these specifications and, indeed, the test of 23 December 1999 showed that with an addition to the existing counterweight of approximately 1 tonne this could be done. While the evidence is sparse on the subject, the inference which I draw is that the plaintiff was, and remained, willing and able to complete the modification and delivery of the machines in the configuration contemplated at that December test. There were several reasons, however, why this did not occur. There was the failure of the defendant to provide the parts for the discharge piping, then it neglected to authorise the plaintiff to supply and install those parts at the costs which the plaintiff had quoted for this extra work. Secondly, there were the additional concerns about the stability of the apparatus raised by Mr Ynema arising from the extra downward pressures exerted by the digging operation of the dredging pump which had not been previously disclosed or specified. There was no obligation on the plaintiff to undertake this work unless it was authorised by the defendant at a price to be determined by a further agreement between the parties. Consequently, the failure of the plaintiff to proceed with modification work after December 1999, in circumstances when the defendant was proposing these variations to the performance of the contract, does not in my view constitute any breach of contract by the plaintiff and certainly not a repudiation of the contract by the plaintiff. This explanation also accounts for the demand by the plaintiff for a greater price and for a deposit for the contract, as varied, which I have previously reviewed.
The position, therefore, from January 2000 onwards was that the plaintiff had done most of the work on the first machine required in accordance with the contract of 29 June 1999 and the only work remaining to be done was the fitting of hydraulic lines and discharge pipes to be supplied by the defendant and increasing the weight of the existing static counterweight by 1 tonne, as had proved satisfactory at the December test.
While there is no direct evidence on the subject, the implication which I draw from the fact that the plaintiff offered to complete the works with a modified retractable counterweight and by procuring and fitting the discharge pipes (a task involving more work than contemplated under the existing contract) within three to four weeks by its document of 3 May 2000, is that the contract for the delivery of the first machine could have been completed within less than three or four weeks from the test of 23 December, had approval to do so then been given. There is even less evidence about the time which would have been needed to complete the second modified excavator according to the original specifications, but I consider that it is quite safe to conclude that this machine could have been completed and delivered by the beginning of April 2000 had the defendant been willing to accept delivery according to the original specifications. On the basis that the defendant would supply the discharge piping, the plaintiff's remaining work would in that case have been to fit those to the boom and stick and to increase the static counterweight in the manner described.
The fact that neither machine was fully completed by the plaintiff or tendered for delivery gives rise to some difficulty in assessing damages, which I will examine more closely later. At this point, however, I consider that the evidence warrants a finding that the contract for the modification and supply of the two excavators for dredging was substantially completed by the plaintiff in December 1999 and that the further work required to complete the contract according to its terms was then of a comparatively minor value, not involving the supply of any further parts other than additional weight for the static counterweights. I have already examined and rejected the plea by the defendant that there were collateral warranties as alleged, that they constituted misleading or deceptive conduct in relation to future events, or that the contract was subject to or was conditional upon finance being supplied to the defendant by CAT Finance or any other financier. It follows that I am satisfied that the plaintiff has proved an entitlement to damages for breach of contract and that it is necessary to assess damages.

Assessment of damages

Essentially, this case is a claim for damages by a vendor of goods to be supplied, subject to modification, where the purchaser has refused to take delivery at a time when the contract works were substantially performed. The conventional measure of damages in such circumstances is the contract price, less the value of the goods, in the market if any, or otherwise available from reasonable endeavours to sell the goods, plus costs reasonably incurred by the vendor in remodifying or rendering the goods fit for the resale. Where the work under the contract for the completion of the goods has not been completely performed, the damages resulting from the application of these principles should further be reduced by the cost which would have been incurred to complete the work according to the specifications in the contract: see "McGregor on Damages", 16th ed (1997), Sweet and Maxwell Ltd at 920 – 936. This method of assessment allows the vendor plaintiff to recover the profit which it would have made, if any, had the contract been completed according to its terms. But, at the same time, is self‑adjusting if the contract was not profitable so as to ensure that the plaintiff does not, by legal action, recover a profit from a contract which would have been unprofitable if performed. The rule is that the value of the goods at the date of the breach should be credited to the defaulting purchaser on the basis that the goods could and should have been sold into the market as soon as practicable once the contract had been terminated. If there is no market for the goods in question, then sale to a third party is evidence, but not conclusive evidence, of the value of the goods at the date of breach: Barrow v Arnaud (1846) 8 QB 604 at 610 and Harlow and Jones v Panex (International) [1967] 2 Lloyd's Rep 509. Occasionally, consequential losses may also be recovered as part of the damages on the failure of the purchaser to take delivery of goods. These may constitute storage charges during the period before the vendor succeeds in selling the goods to a third party and there are other possible areas of consequential loss which need not be discussed on this occasion (see McGregor (op cit) at 935 – 936).
In this case the plaintiff has not framed its claim for damages on this basis but, rather, seeks to recover the cost (including overhead costs and profit margins) on all the work actually done in purchasing and modifying the two excavators for the proposed sale and then, later, in remodifying them for sales to third parties, less the proceeds of the sale to third parties and with the addition of a calculation of the further profit which would have been made had the contract been performed. To this process of calculation is added "holding costs", on the basis of the interest paid on the capital invested (in goods and labour) on the machines until eventual sale, plus interest under s 32 of the Supreme Court Act. The formulation of the damages claimed by the plaintiff is found in Exhibit 6 and is as follows:
"(a)Cost of purchasing two excavators
and modifying them pursuant to the
contract with the defendant  $984,967
(b)Add cost of remodifying both excavators
for sale to third party (to mitigate loss)               $143,507
(c)Deduct sale price of both excavators
and various items to third parties   ($625,495)
(d)Add loss of profit (profit on sale to
defendant should have been $7,213.23
plus $39,609.32 equals $46,822.55.
Profit on sale to DM Civil was $8,106.46
plus $7,654.22 equals $15,760.72.
Difference is $46,822.55 minus $15,760.72)     $31,061.83
(e)Add holding costs and cost of finance
rate of 7% per annum for 14 months
from date when excavators were ready for
delivery to defendant (May 2000) to date
of their eventual sale to DM Civil (July 2001)
on the purchase price of both excavators
($411,546)  $33,609.59
Subtotal  $567,650.42
(g)Interest at Supreme Court Act rate of
6% per annum on $567,650.42 from
May 2000                to be calculated
Total            $567,650.42 plus interest"
The defendant has established several major reasons for rejecting this approach to the assessment of the plaintiff's damages. In the first place, it does not conform to the established measure of damages which I have previously outlined. Furthermore, as the evidence revealed, the plaintiff's measure of the value of the goods supplied and work done on the contract to the point of termination was no more than a tally of the cost of all purchases, with the plaintiff's profit margin included, and the charge‑out rates for the plaintiff's labour and services, without regard to the sale value of the machinery, improved by the work done. It follows that if the plaintiff was working inefficiently on the contract, or was charging for poor workmanship which had to be replaced or repeated, then an inflated value would be reached by this method. There were several instances where the defendant challenged individual items for labour charged by the plaintiff to this job (for example, repairing bad welding) which exemplified these problems. Furthermore, to charge for the value of goods supplied and work done on a basis which included margins for profit, then to make a supplementary claim for adjusted loss of profits involves a high degree of risk of duplication or overlap. Further, in relation to charges raised for remodifying the goods to enable them to be sold to a third party, the charge‑out rates for labour, including profit margins, involves a claim in which a profit is sought outside the scope of the contract work rather than confining these additional damages to actual losses.
The plaintiff's claim for "holding costs" in the form of finance expenses from the date when the excavators "were ready for delivery" to the date of eventual sale, fails for different reasons. I do not consider that it could be said that it was in the contemplation of the parties at the date of the contract that, in the event of a breach of contract by the defendant, the costs of all the plaintiff's borrowings associated with the particular work were losses which should be paid by the defaulting purchaser or, for that matter, that these were damages suffered by the plaintiff flowing directly from the breach, as opposed to being a result of the plaintiff's own internal financial arrangements – Hadley v Baxendale (1854) 9 Ex 341. There is nothing to suggest that the plaintiff's financing arrangements for work in progress were disclosed to, or known by, the defendant in this case. While I have concluded that the plaintiff's work on these two machines would have been completed by April 2000, had there been approval to proceed as originally contemplated, and that the contracts were substantially complete in early January 2000, there was no delivery tendered or contemplated in May 2000 and the contract was not terminated until 5 December 2000. It follows that I conclude that the plaintiff's claim, as formulated, for holding costs cannot succeed.
Turning to the plaintiff's claim for costs of remodifying the excavators for eventual sale to third persons, I consider that, properly measured, damages are recoverable under this heading as steps reasonably taken by the plaintiff to mitigate damages. However, this claim cannot be isolated from the question of whether or not there was a market for the resale of these goods or a determination of the date at which the value of the goods should be assessed for this purpose.
I am satisfied that there was no ready market for these specially modified excavators. That the defendant could not buy them on the open market, without modification, in the first place is perhaps the best indication of this. The 18 metre boom and stick, with a counterbalance sufficient for a 2 tonne lifting capacity at full extension, was a special requirement and involved the removal of the hydraulic bucket usually fitted to the boom on such an excavator. The adaptor plate and the fittings for the hydraulic lines and discharge pipes all made these machines special items for particular purposes. This satisfies me that there was no ready market for the excavators, modified as they were at the date of the breach, or at any other time. Indeed, there was no evidence to suggest that there was. Nevertheless, the plaintiff's witnesses acknowledged in cross‑examination that the excavators themselves were regular items of machinery for which a market existed and this led counsel for the defendant to submit that there had been no evidence of market value of the machines at the time so that the plaintiff had failed to formulate a claim for damages which conformed to the measure required by law. I cannot accept this submission because the evidence, in context, did not amount to more than an obvious acknowledgment that there was a market for Caterpillar 330BL excavators. But an excavator will need a boom, bucket or other digging tool and will need to be fitted with appropriate hydraulic controls suitable for general or particular use. That these excavators, stripped of the specially procured and modified booms and sticks, might have been sold separately if substitute apparatus were added, does not persuade me that the general measure of damages for goods for which there is a ready general market, is the only approach to assessment.
I consider that the plaintiff was justified in leaving these machines, in their particular configuration, on display in its yards where as a general machinery supplier, it hoped that they would attract interest within the trade. The period from the termination of the contract on 5 May 2000 until eventual sale to a third party in July 2001 is some seven months which does not seem unreasonable in these circumstances, nor a basis from which to infer that there had been any appreciable change in the value of the machinery. The evidence was that the machines were sold to DM Civil in July 2001 and subject to a discount generally offered in the trade by the plaintiff. I consider that the plaintiff has established that the sale price achieved was reasonable in the circumstances and that there were no reasonable prospects of obtaining a better price then or in the near future. The price obtained of $625,495 is made up as follows:
Excavator 330BL – PC 98488L:-
18 metre reach stick and boom to Earthex    $65,674
4 tonne counterweight to Earthex                  $5,747
Lincoln auto tube including extra plumbing
from boom and stick to Earthex  $4,925
1 x 3 metre batter bucket to provencal           $6,435
Sale of excavator to DM Civil                   $255,000
AM/FM radio cassette to DM Civil                  $575
Less Caterpillar dealer discount                  $12,852
$351,208
Excavator 330BL PC 98459L:
1 x 3 metre batter bucket to provencal           $6,435
Sale of excavator to DM Civil                   $255,000
Less Caterpillar dealer discount                  $12,852
$274,287
TOTAL  $625,495
It can be seen that the second 18 metre reach stick and boom was not sold. The evidence is that this remains in the possession of the plaintiff but could be sold and would probably fetch $65,000. I consider that the value of that item should be brought to account in reduction of the damages and allowance for this will be made later.
The costs for remodelling the two excavators for sale to DM Civil are itemised in Sch 2 of Exhibit 6 and total $143,507 for which the plaintiff claims. These include charges for labour in undertaking the remodifications as follows:
Machine PC 98488L $36,354
Machine PC 984859L $26,356
$62,710
Again, the evidence establishes that these labour costs were computed by aggregating the plaintiff's charge‑out rates for labour on the various categories employed on the job including a general component for overheads and profit. There was no evidence that these were general rates applicable in the industry or what the actual cost to the plaintiff for this labour was. Accordingly, I am satisfied that the plaintiff has not proved that these charges actually constitute the cost which it incurred in carrying out this remodification and are, in fact, greater than that figure whatever it may be. As there was no evidence which would allow the actual cost to be dissected from this larger sum, it follows that the plaintiff has not established what the actual cost of the remodifications were and that this component of the remodelling costs has not been established. I do, however, consider that the balance of the remodelling costs of $80,797 ($143,507 minus $62,710) is recoverable.
With further regard to the defendant's submissions that the plaintiff had failed to prove the value of the goods at the date of the breach (on my finding 5 December 2000) and had failed to take reasonable steps to mitigate damages by holding the machinery in its yard until the sales in July 2001, I observe that there was no evidence from the defendant to suggest any higher, or any, value of the machinery after the termination of the contract nor any evidence to suggest that another sale, still less a sale at a better price, could have been achieved before July 2001. While the onus is on the plaintiff to prove both the existence and the quantum of any damages claimed, in a case where a defendant in substance alleges a failure to mitigate damages then the onus of proving the failure to mitigate rests on the defendant – TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd (1963) 180 CLR 130 at 138. In this case the defendant has simply not established that there was any failure by the plaintiff to have acted in a way in which the damages which I am now assessing would probably have been materially reduced.
In adopting the difference between the contract price payable for the machinery under the agreement of 29 June 2001, less the value obtained or obtainable for the goods left on hand but adding the costs of remodifying the goods to allow them to be sold, the contract price is $1,052,000 for the two machines without any allowance for the plaintiffs supplying the discharge piping or the retractable counterweight which was never agreed or authorised by the defendant. However, this figure should be increased by the extras which were agreed by the defendant, namely the cost of preparing the graphic designs for use at the Darwin exhibition, the cost of the special acoustic test made at the defendant's request and the contract price for the installation of a compressor on the first excavator expressly agreed by the defendant. For these additional items the prices were:
Graphic design work  $2,025
Acoustic test  $150
Compressor  $3,800
(see Exhibit 6, Sch 1, Item 14)             $5,975
I have concluded that the evidence shows that the plaintiff had substantially completed the work required under the original contract for the supply and modification of the two excavators by early January 2000. However, there was still work to be done, although of a relatively minor nature. I am satisfied that the passage in McGregor (op cit) at 1154 applies in such circumstances, namely, that general principles would put the normal measure of damages at the contract price, less the cost to the plaintiff of executing or completing the work. The difficulty in this case is of assessing the cost to the plaintiff of completing the work which remained to be done, especially where there is no direct evidence on this point. These costs would largely have been for labour because, apart from providing increased mass for the counterweight, the only remaining work was to fit hydraulic lines and discharge piping to be provided by the defendant. The situation presents the court with another example of the need to make an assessment of damages, although the method of doing so cannot be precise. Once it has been established that loss has occurred the court must do the best it can to evaluate: Ratcliffe v Evans [1892] 2 QB 524 CA and Simonius Vischer & Co v Holt [1979] 2 NSWLR 322 at 356 – 357. Difficulty in assessment of damages and lack of precision or certainty are not reasons for withholding an award of damages: Chaplin v Hicks [1911] 2 KB 786 and Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64.

Having regard to the charges made by the plaintiff for labour on the work done in the performance of the contract, as appears from Exhibit 6 of the document supporting Sch 1, notwithstanding that I have rejected this as a prime basis for assessing the plaintiff's damages, I consider that an estimate of the costs to complete the machines to the original specifications from January 2000 on can be made, even if this involves a degree of approximation. Realising that over estimation favours the defendant and that, on this occasion it is preferable that if any erroneous estimate be made the error should be in that direction, I consider that the cost to the plaintiff of completing the contracts to the original specifications would not have been more than $15,000.
These conclusions now allow me to make the following assessment of the plaintiff's damages:
Contract price – 2 Excavators x $526,000                  $1,052,000
Agreed price for supply of compressor  $3,800
Plus graphic design work for Darwin Expo  $2,025
Plus cost for special acoustic test  $150
Plus cost to modify machinery for resale,
less labour component  $80,797
Less proceeds of sale in July 2001  ($625,495)
Less the value of the remaining boom and stick
on hand  ($65,000)
Less estimate of cost to plaintiff to complete
to contract specifications  ($15,000)
$433,277
The plaintiff also claims interest pursuant to s 32 of the Supreme Court Act but, for reasons already given, I consider that this should be calculated from 5 December 2001 when the plaintiff terminated the contract on account of the defendant's repudiation. This is, therefore, a period of two years and 13 days to the date of this judgment and as the plaintiff has not been paid for any part of this period and the defendant has, in effect, had the advantage of withholding money which should then have been paid to the plaintiff, I consider that interest should be allowed for the whole of this period on the whole of the damages assessed. Having regard to Supreme Court Rules O 36 r 20 and s 142 of the Supreme Court Act I consider that the rate of interest should be 6 per cent which, will produce a figure of $52,919.00. It therefore follows that the plaintiff is entitled to judgment as follows:
Damages  $433,277.00
Interest to the date of judgment              $52,919.00
TOTAL                   $486,196.00