Zaramede Pty Ltd v Pengala Pty Ltd
[2010] VCC 744
•6 July 2010
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| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-08-02495
| ZARAMEDE PTY LTD | Plaintiff |
| v. | |
| PENGALA PTY LTD | Defendant |
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| JUDGE: | HIS HONOUR JUDGE ANDERSON |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 9-13, 16-20 & 27 November, 1-4, 7-9 December 2009 |
| DATE OF JUDGMENT: | 6 July 2010 |
| CASE MAY BE CITED AS: | Zaramede Pty Ltd v Pengala Pty Ltd |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 0744 |
REASONS FOR JUDGMENT
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| Catchwords: | Contract – Supply, installation and commissioning of olive oil bottling line – Whether the bottling line performed according to specifications – Whether delays in installation and commissioning due to defendant’s failure to supply samples and consumables. |
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D. Connell | Law 554 |
| with Mr D.J. Cole | ||
| For the Defendant | Mr P. Barton | Prosperity Legal |
| HIS HONOUR: |
1 Bottling olive oil involves sophisticated processes. In late 2006, the plaintiff (“Oenobev”) installed bottling lines at the premises of the first defendant (“Modern Olives”) at Lara near Geelong. The main items of equipment in the line had been manufactured in Italy by TMG, SIEM, Nortan and PE. In this proceeding, the plaintiff claims the sums of $151,403.89 and €115,597 for the items comprising the balance of the purchase price of the equipment and the cost of installing the lines. The total contract sum was approximately $1.2 million.
2 Modern Olives and the other defendants (associated companies of Modern Olives) were dissatisfied with Oenobev’s performance and counterclaimed for:
a. the cost of rectifying the lines so that they operated in accordance with the parties’ agreement; b. the losses to Modern Olives and its associated companies arising from delays by Oenobev in the installation and commissioning of the lines. 3 The dispute concerning the operation of the bottling lines is to be primarily determined by a consideration of:
a. what were the performance parameters for the lines specified in the agreement between the parties; b. whether the lines performed to expectations; c. whether Modern Olives and its associated companies can recover damages: i. to bring the lines up to specification;
ii. to compensate for lost production.
4 The dispute concerning the delays in installing and commissioning the bottling lines will be determined by a consideration of:
a.
whether Modern Olives provided samples of bottles, cartons, labels and other consumables to Oenobev and to the Italian manufacturers of the equipment in a timely manner;
b.
whether during commissioning, there were sufficient consumables and varied production run throughput to appropriately commission the lines;
c.
whether Oenobev is liable to pay damages to Modern Olives and its associated companies in respect of the late installation and commissioning of the lines to compensate the defendants for lost orders and lost production.
The contract for the supply of the bottling lines
5 The contract for the supply of the bottling lines is not contained in a single document executed by the parties, as might be expected for the supply and installation of such expensive and sophisticated equipment. Rather, the parties rely upon documents,
discussions and conduct over many months which they assert govern their
relationship, including Oenobev’s obligations to companies associated with Modern
Olives.6 Rather than exhaustively examine each of these matters, I propose to do so only in respect of the obligations of a party which are relevant to a claim or counterclaim in the proceeding. These include:
a. Oenobev’s obligations in relation to: i. the supply, installation and commissioning of the olive oil bottling lines;
ii. the performance requirements of the lines, and particularly the ability of the glass line to run at 6,000 bottles per hour;
iii. the installation of the bottling lines at Modern Olives’ Lara premises by 17 July 2006 or some other date, and whether liquidated damages would be payable if Oenobev failed to do so;
iv. Modern Olives’ associated company, Boundary Bend Marketing Pty Ltd (it was conceded that a counterclaim by the second plaintiff to counterclaim, Olive Management Pty Ltd, could not succeed).
b. Modern Olives’ obligations:
i.
to pay for the equipment during the various stages of ordering, delivery, installation, and commissioning;
ii.
to provide samples to Oenobev for the Italian manufacturers during the manufacture of the equipment;
iii.
to have sufficient consumables available to enable Oenobev to commission the bottling lines.
7 Modern Olives first contacted Oenobev in 2004. On 25 August 2005, Oenobev quoted for a 6,000bph glass line. Further meetings and discussions took place including a meeting involving a TMG representative, Marco Vettore in December
2005. On 9 February 2006, Oenobev made a presentation to Modern Olives at Lara. managing director, Mr Bruce Priesley, and Modern Olives’ general manager, Mr Andrew Burgess, Modern Olives submitted a “letter of acceptance” and a purchase order. Oenobev agreed to provide two lines – a glass bottling line, and a volumetric line which would largely be used for tins.
8 The glass line was to be fully automated, and included the following equipment:
a. an automatic depalletiser manufactured by TMG; b. a monoblock filler manufactured by SIEM; c. a capsuler manufactured by Nortan; d. a rotary labeller manufactured by PE; e. a combi-packer manufactured by TMG; f. a palletiser manufactured by TMG; g. connecting conveyers manufactured by TMG; h.
associated equipment including an air compressor and a cling pallet shrink wrapper.
Contractual arrangement – installation and commissioning of lines
9 Oenobev accepted that it had an obligation to install and commission the lines. This obligation was not specifically defined. I consider that what the parties meant by the “commissioning of the lines” was that Oenobev would put the lines into “active
service” or a “usable condition” so that the lines could run in accordance with the
agreed performance capabilities.10 Oenobev’s responsibility to commission the lines was referred to in a number of documents passing between the parties. It is sufficient to refer only to 3 documents:
a.
The “terms and conditions” offered by Oenobev provided that the final 5% of the purchase price would be payable “two months from signing off of Commissioning Certificates”.
b.
In the letter dated 20 February 2006 by Modern Olives to Oenobev, Mr Burgess wrote, “we accept your offer to design, source, deliver, install and
commission, service and train our staff regarding the 6,000bph and 2,000bph
filling and packaging lines as per your quote and verbal commitments”.
c. documents headed “Oenobev – Modern Olive Document”. The document set
out the “technical support and services” Oenobev would provide in theAt some stage, probably in 2005, Oenobev sent to Modern Olives a commissioning.
11 site during the installation and commissioning of the lines, that Oenobev accepted
responsibility for ensuring that the lines were in working order and capable of
performing at the agreed performance levels. Mr Priesley gave evidence that
Oenobev’s commissioning responsibilities meant that it would “bring the lines into
operation” and “ensure they are operational” but “not that the lines are fullyThese documents confirm what was apparent from the evidence of the witnesses on site. Mr Kotaras spent about 6 months at Lara. Mr Kotaras said in evidence that his responsibility was to “install the machine; to get it to work” and to “assist in the commissioning with the Italian technicians”.
Contractual arrangement – performance requirements of the glass line
12 The glass bottling line was specified to have a performance capability of 6,000 bottles per hour (“bph”). This was confirmed in an email exchange between the parties in May 2006. I am satisfied that what was meant by the parties in this regard was that the line would be demonstrated to run at that speed without interruption for a reasonable period of time for the standard bottles, being the 250 and 500 ml Marasca bottles. During normal operation, however, the line would only be run at about 85% capacity.
13 This conclusion is based on an accumulation of the evidence, including the statements of witnesses with expertise in bottling lines. Mr Burgess was perhaps the only dissenting voice. Ultimately, he conceded in evidence that he did not regard 6,000bph as a consistent operational speed for the line. Mr Burgess’s complaint was that the glass bottling line had, apart from a reported period of 20 minutes in February 2007, never come close to achieving the stated speed during normal production runs.
Contractual arrangement – installation to be completed by 17 July 2006
14 Modern Olives anticipated that the bottling line would be installed within a specific time frame so that Modern Olives and its associated companies could commence production.
15 The technical information forwarded by Oenobev to Modern Olives on 25 August 2005 contained “terms and conditions” which stated that the “delivery time” for the equipment would be “approximately three (3) working months upon receipt of the
official purchase order countersigned, of the down payment, of all the samples … and
from the settlement of all technical information” and that “the delivery time will be
confirmed according to the production programme when the order is placed”.16 In the letter dated 20 February 2006 from Modern Olives to Oenobev, Mr Burgess stated as one of the agreed terms that, “It is vital to our business that the lines are
ready for use by Monday 17th July 2006. For every week after this date that the line is not ready for use a penalty of 1.5% of the total purchase price shall be deducted from
the final payment”.
17 Two issues arise from this letter:
a. whether there was an obligation on the part of Oenobev to have the lines “ready for use” by 17th July 2006; and b. whether a failure to achieve that date carried an obligation by Oenobev to pay the stated “penalty”. 18 In the letter dated 20 February 2006, the reference to the “ready for use” date of 17 July 2006 followed a listing of matters which Modern Olives required to be included as “conditions” in the “purchase contract”. The “vital” significance of the date is then stated followed by the reference to the “penalty” for Oenobev not meeting that date. Although the issue of the “penalty” appears to be expressed as an “agreed” term, Mr Burgess conceded that the “penalty” issue had not been discussed with Oenobev
prior to sending the letter. Mr Burgess said that there was a later conversation in
which the matter was discussed and agreed.19 Mr Priesley said that, after receiving the letter dated 20 February 2006, he had raised the matter in conversation with Mr Burgess to disavow any such agreement. The implication in the letter dated 20 February 2006, that a 1.5% penalty was part of the parties’ agreement, was not disputed in the correspondence that immediately followed between the parties. It was submitted that Oenobev had proceeded with the agreement for the supply of the equipment on the basis that it accepted the terms contained in the Modern Olives letter dated 20 February 2006, including the term not previously discussed, that a 1.5% penalty would apply in the event the equipment was not “ready for use” by 17 July 2006.
20 The two issues of the “ready for use” date of 17 July and the “penalty” for not achieving the date are, in my view, tied together. They were additional to matters previously discussed between the parties. The “ready for use” date was inconsistent with the previous basis for the supply of the equipment. A “penalty” for failing to achieve a particular date had not been previously discussed. Mr Priesley said that he disavowed these matters in a later conversation. My Burgess suggested in evidence that in a later conversation with Mr Priesley these matters were agreed. I am not satisfied, in the absence of evidence of a precise conversation between Mr Burgess and Mr Priesley, that either a specific date for the equipment to be “ready for use” or a “penalty” for non-performance were agreed.
21 In any event, as the obligation is expressed to be a “penalty”, it would not be enforceable unless it were shown to be a genuine pre-estimate of Modern Olives’ losses. Mr Burgess gave evidence of calculations he had made at the time. There was no contemporaneous record of the calculations made by Mr Burgess, and I do not accept his evidence in this regard. It is more likely, in my view, that Mr Burgess simply adopted the “penalty” figure of 1.5 per cent, as it was the same figure by which he had been able, in the conversation on 20 February 2006, to persuade Mr Priesley to reduce the overall purchase price. The “calculations” Mr Burgess said he made at the time were said to be based on an anticipated production figure of $20,000 per day. This figure was not otherwise substantiated, and it is unlikely that Mr Burgess would, at that time, have converted a monetary amount to a “penalty” expressed as a percentage of the overall purchase price of the equipment.
22 In my view the “penalty” clause, even if part of the parties’ agreement, was not a genuine pre-estimate of loss, and was, as stated, a “penalty”. Modern Olives must prove any loss it has suffered as a result of any failure by Oenobev to comply with its delivery and installation obligations at the time it agreed to complete them.
Contractual arrangement – to pay for the equipment and installation costs
23 Modern Olives’ obligation to pay for the equipment was agreed to be at the following stages:
20% deposit with order
65% on arrival of carrying vessel in Australia
10% on commissioning
5% two months after signed commissioning certificate.
Contractual arrangement – to provide samples to enable equipment to be configured and to provide consumables for trial production runs
24 Modern Olives accepted that it had an obligation to provide samples to Oenobev so that the Italian manufacturers could appropriately configure the equipment before it was shipped to Australia. In its letter of acceptance dated 20 February 2006, Modern
Olives recognised this requirement by its request that Oenobev “advise ASAP number of samples that we need to supply you”.
25 terms and conditions
Oenobev to Modern Olives on 25 August 2005, the “delivery time” for the equipmentIn the “” included with the technical information forwarded by required” included “2 x dozen of each bottle type” and other specific matters for “corking/capping”, “labelling” and “packaging”. It was noted that, “Samples are
required for the designing and testing of the machines. All costs regarding the supply
and delivery will be at the customer’s expense”.
26 The dispute in relation to the provision of samples concerned:
a. the number and type of samples to be provided, including whether there were possible samples which may not have been available at that time and which Modern Olives accepted may require later modification of the equipment if that particular product were to be processed on the lines;
b. whether the samples were to be provided to the plaintiff direct or to the Italian manufacturers or to TMG for it to on-send to the other Italian manufacturers. 27 Modern Olives accepted that, when the equipment arrived in Australia, it had an obligation to provide the necessary “consumables” to enable the bottling lines to be installed, tested and commissioned. Mr Seeger-Snowden gave evidence that substantial quantities of bottles and the associated consumables would be required in order to adequately test the line with each different bottle type and size.
Parameters of the dispute between the parties
28 It was conceded by Modern Olives that it had not paid for the invoices set out in Oenobev’s statement of claim and transcribed in Schedule A to these reasons. Modern Olives alleged that it was not obliged to pay these sums because Oenobev
had failed to install and commission the bottling lines as it was obliged to do, and there were losses suffered by Modern Olives which should be set off against any sums owing. There were further sums claimed in the proceeding by Modern Olives
principally relating to the delays in the installation and commissioning of the lines.
Liability of Modern Olives to pay for outstanding invoices
29 disputed by Modern Olives. I consider that apart from the claim for
The breakdown of Oenobev’s claims are set out in Schedule A. Certain invoices were Modern Olives are entitled to, that Oenobev should recover the balance of the invoices which are owing.
30 The claim for $75,786.15 “charged for Oenobev and Italian technicians’ labour and meal costs” was explained as, “The labour charges relate to extra time spent at Lara by the technicians that had not been originally budgeted for (ie > 14 days)”. In view of my later findings in relation to which party should bear responsibility for the delays in the installation and commissioning of the lines, I consider that it would be appropriate to reduce Oenobev’s entitlement to 50% of the sum, or $37,893. this would appropriately reflect the costs incurred before and after January 2007.
31 Oenobev claims a total of $27,266.04 for freight and landing expenses. It placed reliance upon clause 5 of the terms and conditions attached to the “Pricing Summary” given to Modern Olives, which read as follows: “Freight costs are estimated only and are charged at cost”. Some delays were experienced in obtaining the release of the containers when they arrived in Australia. There apparently was a fear of contamination and some containers were fumigated. I consider that these costs are to be regarded as “freight costs” and appropriately charged to Modern Olives.
32 The claim for the balance of the costs of the shrink wrapper and the TMG conveyor were also disputed. The shrink wrapper may not have been what Modern Olives expected. However, in my view there was no contractual basis for Modern Olives to avoid liability for the cost of these items.
33 In the circumstances, Oenobev would be entitled to $151,403.89 less $37,893.15, (or $113,510.74) and €115,687 (or $171,109.30 converted at the RBA exchange rate on 2 July 2010), a total of $284,620.04.
a. in the “terms and conditions” included with the technical information forwarded by Oenobev to Modern Olives on 25 August 2005, it was anticipated that Modern Olives would provide samples (which included “2 x dozen of each bottle type”). In its letter of acceptance dated 20 February 2006, Modern Olives acknowledged the requirement to provide samples. b. 22 February 2006 notified Modern Olives that Oenobev needed
“specifications” of “the bottles, cans, labels and cartons … including drawings
and or pictures” (by 27 February 2006), specific samples including “13 bottles
by type for each [of the Italian] manufacturer[s]” (by 28 February 2006) and
Whether late delivery of the equipment was due to Modern Olives not providing samples
34 Whilst Modern Olives asserted that Oenobev was contractually obliged to have the lines “ready for use” by 17 July 2006, both parties had apparently anticipated that the equipment would be delivered to Modern Olives by about that date. The equipment was delayed and was said to have left Italy at about the end of July 2006. With approximately 4 weeks for the transport of the equipment to Melbourne, there was a period of about 2 months’ delay after the earliest date it was anticipated that the equipment would arrive in Melbourne. This would inevitably affect when the lines were “ready for use”. The adjusted date for delivery was consistent with the earlier discussions between the parties that the equipment would be delivered within 3 months of the provision of samples and technical information, as the correspondence indicates that by late April and into May 2006, all the required samples had not been received by the Italian manufacturers.
35 Considerable time was spent at the trial presenting evidence about the delivery of samples by Modern Olives and summarising and analysing that evidence. The parties tendered in evidence two lever arch folders containing many hundreds of documents comprising mainly emails and attachments to emails. Witnesses were taken laboriously through this material. Each of the parties prepared comprehensive tables seeking to analyse what had happened in relation to each of the samples required.
36 At the end of the trial, I had not reached any firm conclusions as to whether Modern Olives had complied with its obligations in regard to the provision of samples. Since the trial concluded, I have reviewed the material in evidence and the parties’
submissions in relation to the evidence. My conclusions are as follows:
immediately following the placement of the order, Oenobev by email dated including labels, cartons, capsules, tins, plastic bottles and caps (by 22 March 2006). Discussions followed between Mr Burgess and Mr Tim Smith from Modern Olives and Mr John Enders from Oenobev. As a consequence, Mr Enders sent an email dated 7 March 2006 to Mr Burgess listing the samples required.
c.
Mr Burgess and Mr Smith gave evidence that they spoke to Mr Enders by phone following receipt of the email, and it was agreed that certain products would be deleted (for example, Coles), certain products would be included (for example, the red tins), and that the number of samples to be delivered would be reduced to a total of 54. Although Mr Enders had no recollection of any such conversation, I generally accept the evidence of the Modern Olives witnesses about this issue, as it is confirmed by notations made upon a copy of the 7 March email.
d.
Modern Olives sent certain samples to TMG for distribution by TMG to the other Italian manufacturers. It is not clear whether this arrangement was made with the knowledge and agreement of Oenobev and TMG. It appears that the samples were distributed by TMG to the other Italian manufacturers, although some delays did occur before this happened.
e.
In this and other respects, Modern Olives did not fully comply with its obligations. Whilst most samples were provided, some were late and some were not provided at all. The explanation given by Mr Burgess in relation to some of the samples not provided was that Modern Olives decided that it would not proceed with certain products it had initially considered as “options”. The email correspondence between the parties generally does not contain any explanation for the failure by Modern Olives to provide samples on time or, in some cases, at all.
f.
It is important to carefully consider what the effect of this failure was. In Mr Enders’ notes of a discussion with Mr Burgess on 28 April 2006, he recorded, “… we advised that because samples hadn’t been received in timely manner
there were delays in producing the lines and the delays were between 3 – 4
weeks”. TMG had advised in an email to Oenobev dated 28 April, “… you can
see we received only few information. NOT ENOUGH FOR expressing big worries, and your promises to send us samples. Up to now we did not receive any samples. PRODUCTION IS DELAYING UNTIL WE RECEIVE ALL SAMPLES”.
g. On 16 May 2006, Mr Enders notified Mr Burgess by email that “… unfortunately delays to delivery of samples … some of our suppliers are
advising us that their delivery times have extended to the second week in July
2006. This means the equipment cannot be on the shipping line until
approximately the end of July 2006. With approximately four weeks in transitfrom Italy this will mean delivery into your site in late August 2006”. On 7 June
2006, Mr Enders informed Mr Burgess by email that Oenobev had “beenadvised that your order will be ready for collection from various factories in
Italy from 25th June 2006”.
h. On 13 June 2006, Mr Enders notified Mr Burgess by email that Oenobev’s “log of incoming and outgoing goods and deliveries” indicated that Oenobev “first received samples from Modern Olives on the 5/4/2006” which it “dispatched to Italy the following Tuesday 11/4/2006” and that “on the 16th and 18th May 2006 we received further samples of cartons and PET bottles from Modern Olives
via your suppliers”.
37 In the circumstances, I am satisfied that any delays in the manufacturing of the equipment constituting the bottling lines was as a result of the failure by Modern Olives to provide samples to Oenobev in a timely manner. Further, I am not satisfied that Oenobev had an obligation to have the lines “ready for use” by 17 July 2006, or that if Oenobev did have that obligation, the failure to fulfil the obligation was the responsibility of Oenobev and arose from the actions of Modern Olives. If there were an agreement to deliver the machinery within three months of the provision of samples and technical information, I am also satisfied that such a condition was substantially complied with.
Delays in the installation and commissioning of the bottling lines
38 The shipping and other delivery records disclose that the equipment arrived in four containers in Melbourne in about late August 2006. There were some delays getting the containers off the wharf. Mr Priesley said that the last container was delivered to Lara on 23 September 2006, whilst Mr Burgess said that the depalletiser, the combi- packer and certain conveyors were not delivered until 28 September 2006.
39 bottling line. The items of equipment were provided by different manufacturers in
Italy. Each manufacturer conducted factory acceptance tests on the individual itemsThe lines comprised different items of equipment joined by conveyors in an overall completed with the bottle and packaging samples supplied. In an email dated 10 July 2006, Mr Burgess asked Mr Perham “to confirm that all the trials that were completed with our equipment in Italy were successful”. Mr Perham responded on 11 July 2006 that, “All trials were successful in Italy with the bottles and packaging supplied, except for the dividers that were supplied”.
40 said, that once the line was laid out on the factory floor at Lara there would need to
It was obvious however, as Modern Olives’ expert witness Mr John Seeger-Snowden equipment operated together as a functional bottling line”. I reject, however, the suggestion of Mr Seeger-Snowden that the site acceptance test for the whole bottling line should have been conducted in Italy. That was never anticipated by the parties, and would not be common practice.
41 Modern Olives said that Oenobev was never able to demonstrate that the lines were able to achieve the performance levels promised by Oenobev. On the other hand:
a.
Oenobev issued a commissioning certificate on 30 April 2007. The certificate was dated 26 February 2007, signed by Bruce Priesley and Tim Perham and certified that “The following machines have been commissioned and tested by
Oenobev technicians and relevant Italian technicians and have performed to
specification on sample supplied…”. What followed was a list of each item of
equipment comprising the lines. The certificate stated it was “for olive oilvolumetric line and olive oil 6,000bph bottling line”.
b. Mr Kotaras remained on site until about May or June 2007, when following correspondence between the parties’ solicitors, he was directed to leave site. 42 Tim Perham and Paul Kotaras of Oenobev were to supervise the installation and commissioning of the bottling lines. They arrived at Lara in early September 2006. TMG’s technicians arrived at Lara on 28 September 2006 and stayed until about 25 October 2006. The SIEM technicians were at Lara between about 13 and 18 October and later returned in December 2006.
43 In June 2006, Oenobev had informed Modern Olives that the equipment might be forwarded from the Italian factories later in the month. On 11 July 2006, Oenobev confirmed to Modern Olives that the trials in Italy had been successful and it was hoped to commission the lines and hand them over to Modern Olives before the end
of August. During August, as it became apparent that delivery of the equipment had
been delayed, Oenobev informed Modern Olives that commissioning may be
delayed. At the end of August 2006, Modern Olives informed Oenobev that a
production run of three litre tins was planned using the volumetric line from 11
September. Oenobev agreed to accommodate the production run.44 On 20 October 2006, Oenobev advised Modern Olives that TMG had recalled its two technicians to Italy “due to inadequate numbers of samples that you are able to supply” and that the technicians would “return only when you have adequate samples of all products available on the floor to test 10-13 formats”. Mr Priesley came to Lara on 24 October to speak with Mr Burgess and to the TMG technicians before they left. Somehow, Mr Burgess missed seeing Mr Priesley whilst he was at Lara. Mr Burgess asserted on 24 October “that there are a number of samples ready for programming and testing”. TMG, at about this time, notified Oenobev of the problems their technicians had incurred in attempting to commission the TMG equipment forming part of the line.
45 The principal matter of concern to TMG appeared to be that there were “no samples
for testing and when they [the technicians] got some, they were different from the
ones we considered in the contract”. TMG advised, “We can send new technicians
only when customer prepare the samples of boxes and bottles for the definitive
formats”. This led to an exchange of emails between Mr Priesley and Mr Burgess on 30 and 31 October 2006. The correspondence is self-serving and there is little point analysing it. It was essentially from that time that the relationship between the parties
deteriorated and they became locked into positions which prevented them from
successfully cooperating to complete the project.46 supply of samples by Modern Olives during the commissioning process. By this
In early November 2006, the parties corresponded about the requirements for the that the requirements for the orderly commissioning of the lines by a programmed schedule of testing, were compromised. Despite this fact, Oenobev acquiesced in this arrangement and generally facilitated the production runs nominated by Modern Olives.
47 On 9 December 2006, Mr Paul Kotaras removed certain change parts from where they were stored at Lara. His justification was that the invoice for the change parts remained unpaid. This resulted in a delay of production of some hours on the
following Monday morning until the matter was resolved. Perhaps, more significantly, it led to further antagonism between the parties. The documents tendered in evidence include a substantial volume of email correspondence between the parties, and
internal correspondence within each party, which attests to the difficult relationship.
48 A study of this correspondence, even with the benefit of having heard evidence from each of the main participants, has not resulted in sufficient clarity for me to make definitive findings of fact. Instead, one is left with the impression that:
a. Oenobev did not have sufficient experience or competence to fully commission the lines; and b. the Italian technicians from TMG and SIEM were frustrated by what they perceived to be lack of adequate samples or consistent production runs for each of the proposed bottles and tins to be used on the lines. 49 This situation continued throughout 2007. However, comparison between Modern Olives’ “finished goods forecasts” for 2007 for its “base case” (rather than the “upside case”) indicates that the level of production achieved seemed to demonstrate that the two bottling lines were operating as anticipated. If further orders had been received, Modern Olives may have achieved the higher production targets involved in the “upside case”. Further, the reports by Mr Burgess to the Modern Olives board of directors were generally positive and optimistic about the production achieved, although the reports raised the issue of responsibility for delays in the delivery of the equipment from Italy and problems in the commissioning of the lines resulting from lack of samples.
50 A standoff developed between the parties. Oenobev stated that until all equipment was paid for in full by Modern Olives, TMG refused to supply Modern Olives with any service or parts. Mr Burgess, on behalf of Modern Olives, regularly from April 2007 sent lists of outstanding issues to Oenobev. Threats and counter-threats were made by the solicitors for the parties. Modern Olives called on Oenobev to perform its contractual obligations and Oenobev advised Modern Olives that it intended to complete the contract as soon as possible. It was not, however, until September 2007 that formal contractual relations were terminated. However, even this matter was not formalised until Modern Olives’ solicitor’s letter to Oenobev’s solicitors dated 21 November 2007.
51 Prior to, and into 2007, a number of factors were operating, including:
a. the effect of Modern Olives’ failure to have provided adequate samples, both to the manufacturers in Italy and at the time when the equipment was delivered to Lara, and b. Oenobev’s inability to commission the equipment, both because of the problems with the air compressor but also adjustments that were necessary in order for the equipment to run efficiently. 52 The conclusions I have reached in relation to the performance by Oenobev of its contractual obligations for the installation and commissioning of the lines are as follows:
a.
If there were an obligation on the part of Oenobev to install and commission the bottling lines by a particular date, and specifically the date of 17 July 2006, Oenobev was unable to achieve that date as a result of the actions of Modern Olives.
b.
The bottling lines could not have been commissioned until the problems with the compressor had been resolved which was not achieved until about April 2007 when a 22kw compressor replaced the 7kw compressor installed in
2006.
c.
By that stage, the TMG and SIEM contractors had gone off site and Oenobev did not appear to have the necessary expertise or experience to commission the lines itself.
53 and although the lines were generally able to run and achieve anticipated levels of
A series of technical difficulties were encountered during the commissioning process potential. From September 2007, the contractual arrangements between the parties were effectively terminated when Modern Olives accepted the alleged inability of Oenobev to complete its contractual obligations as a repudiation of the contract. From that time, Modern Olives had an obligation to mitigate its losses.
The expert evidence about Oenobev’s performance
54 Expert evidence was given on behalf of each of the parties. Mr Seeger-Snowden, an electrical engineer, was first engaged by the Modern Olives solicitors’ in May 2007 “to review certain technical aspects of the two production lines”. Mr Seeger-Snowden provided his findings to the solicitors in June 2007. He considered that “the two production lines had not been fully commissioned”.
55 return to the site until 12 February 2009 when he reported that, although the two
production lines looked similar, “a number of changes have been implemented on theMr Seeger-Snowden was not asked to do anything further at that time. He did not opinion, “in real terms only a slight improvement has been attained since my first visit”.
56 Mr Seeger-Snowden’s main criticism was that the “significant failings in the total
capability and capacity of the bottling line and can-filling line ... are due primarily to
the poor integration of each machine into a single production line”. Mr Seeger-
Snowden noted that, “Modern Olives has sought the services of other companies totry and overcome some of the difficulties encountered. Some of these problems have been due to hardware failures. Modifications have been made to the machines to try
and improve performance, by Modern Olives’ sub-contractors”.
57 On 12 February 2009, Mr Seeger-Snowden carried out testing of the bottling line. At the start of the test, the machine was set at a running speed of 3,500bph. The speed was increased to 4,000bph and apparently ran “without failure for a short period of
time”. At 4,500 and 5,000bph, the bottle capper jammed and, at the higher speed,
there was an electrical trip and other faults. At 5,500bph, there were further problems,
and at 6,000bph, “bottles started to break”. Mr Seeger-Snowden’s opinion was that
“the actual average throughput of the machine, over say an 8 hour period, would beless than 4,000bph due to the intermittent failures, time taken to rectify those failures
and clean up”.
58 Mr Seeger-Snowden gave an estimate of “the likely cost of engaging other contractors to complete the contract” if Oenobev refused to complete. He estimated a total cost of $50,000, including $40,000 for “commissioning by Italian technicians” although he said that “these technicians could be difficult to find and, if not engaged
direct from the manufacturers (and this has a problem) would impact on warranties
etc. If the technicians were engaged direct from the machine manufacturers, they
would have to be experienced in the total line workings rather than their ownequipment specifically”. Mr Seeger-Snowden noted that “these costs do not include
any machine modifications that may be necessary if it is found the machines do [not
or] cannot perform to the original specifications”.
59 Mr Matthew Ross, a qualified electrical fitter, who had “provided technical consulting services on bottling machines for more than 10 years”, was engaged by Oenobev to prepare an expert report. He attended the Lara site on 4 May and 10 June 2009. On the second occasion, Mr Ross was permitted to nominate the speed at which the line should operate, but not to direct that any adjustments might be made to the
equipment on the line. On that day, at speeds over 4,000bph, bottle smashes
occurred and production at higher speeds was limited.60 Mr Ross concluded that, “The production tests carried out on the glass line indicate that the Rinser/Filler/Screwcapper cannot reliably perform at the specified speeds”. Mr Ross postulated several reasons for the unreliability including “synchronising
issues”.
61 Mr Ross was informed that work had been carried out “to improve performance or reliability ... by third party companies”. Mr Ross considered that “the current condition of the machines may have changed from the original set-up”, and that “production
downtime due to cap jams and bottle breakages ... may be prevented from occurring
if the machines have been well maintained and correctly set up and with change partsthat suit the products being run”.
62 Mr Ross also considered that if, as he believed from studying certain documents, Oenobev may have had difficulties with the installation and commissioning of the lines, due to the fact that Oenobev were “not only attempting to integrate the line
(their role) but were also trying to resolve issues with the operation and functioning of
the individual machines (the supplier’s role) which may not have occurred if therequested samples had been supplied”.
63 Pursuant to an order I made on 12 November 2009, after the trial had commenced, the experts were directed to confer and to provide a joint report to the Court. The experts reported that in the bottling line, “The filling machine, rinser/screwcapper
represents the major constraint on the entire line [and] because of these failures in
this machine, it is not possible to fully assess the capabilities of the rest of the line”. In the volumetric line, the experts noted that the “capping machine represents the major constraint on the whole volumetric line”. They also noted that the “Labelling machine has not been commissioned”.
64 The most significant part of the experts’ joint report was their identification of “four possible options that the Court may consider” for further work “to ensure that the bottling lines meet the capacities they should”. The four options were:
a. At an estimated cost of $100,000 (”excluding replacement equipment or parts, equipment manufacturer’s time and travel costs; Modern Olives’ consumable
cost”), if Oenobev and Modern Olives “agree to mutually resolve all technical
issues with the machines”. The experts considered this option,“unmanageable”.
b. ”Remove machines as necessary, eg do not meet capacity”, at the cost of the “machine replacement”. c. At an estimated cost of $150,000 to $250,000 (with the same exclusions as in paragraph (a)), to “nominate independent Project manager/administrator/company to test each machine independently with
recourse to Oenobev Technology and machine manufacturers. Then toestablish and perform site acceptance test”.
d. At an estimated cost of $50,000, “agree to current bottling lines capacity based on product samples that the lines were initially supplied for. Perform a
SAT [site acceptance test] based upon the agreed line capacities”.
65 Mr Seeger-Snowden did not agree with option (d). Mr Ross stated in evidence that options (a) to (c) were Mr Seeger-Snowden’s and option (d) was his. Mr Ross said that the estimated cost of $50,000 was based on a 3-6 month line analysis. Later, Mr
Ross said in evidence that, to ascertain what was causing the bottles to smash at the higher speeds “may take several weeks of elimination and checking”. Mr Ross was confident that there were several companies with the experience and expertise who would be able to do this work.
66 Mr Seeger-Snowden considered that it would be “speculative” to single out any one cause of bottles breaking during test runs. He stated that he had been given no instructions to do an engineering survey and said that, at present, an engineering solution was “an unknown quantity”. It would be necessary to test each machine individually to see if it performed to specification and then the line must be tested as a complete entity to see if it could run at the specified speed.
67 Mr Seeger-Snowden said that to test every bottle type would require a minimum of one hour’s production or 6,000 bottles, if the line were to run at the specified speed. He agreed that all the different types of bottles Modern Olives intended to process on the line should have been specified by it at the time of purchase.
68 I consider that the following conclusions follow:
a. As a result of Modern Olives’ failure to supply sufficient samples to the manufacturers in Italy in the first half of 2006 and to have adequate samples available for commissioning after August 2006, that Modern Olives should bear responsibility for any lost production to the end of 2006. b. As a result of the problems with the air compressor and Oenobev’s general inability to fully commission the lines, despite Oenobev indicating as late as 5 June 2007 through its solicitors that it intended to complete the contract as soon as possible, it did not do so and the contract was terminated in September 2007 and Modern Olives took over responsibility for resolving the outstanding problems (although not necessarily meeting the cost of doing so). c. In those circumstances, I consider that it is appropriate to generally allow to Modern Olives the costs that it has incurred in making modifications to the line and adjustments to improve its operation. The invoices paid by Modern Olives total $67,352 and are set out in Schedule B to these reasons for judgment. d. Modern Olives would ordinarily be entitled to the cost of bringing the performance of the lines, and the individual items, up to specification. However, this issue will be the subject of further discussion below. e. In addition, Modern Olives would be entitled to any consequential losses it can January 2007 until a period of three months from the date when Modern Olives accepted that the contractual arrangement had been terminated. I consider the period of 3 months is appropriate having regard to the originally programmed time for installation and commissioning the line, the correspondence between the solicitors before delivery of the equipment confirming this period, the originally programmed time for installation and commissioning the line and the lack of evidence as to what further works are required to have the lines perform to expectations.
Production forecasts and results; reports to the Modern Olives Board
69 In considering the consequential losses to which Modern Olives might be entitled, I have taken account of the production achieved by Modern Olives when compared with its “base case” forecasts and the reports made by Mr Burgess to the board of directors of the company. It is appropriate to refer to Mr Burgess’ reports to the board
of Modern Olives in some detail. The reports appear to contain an objective recording
of events which I was not always confident was the case in the contemporaneous
correspondence or in Mr Burgess’s evidence at the trial.70 that delivery of 3 of the 6 containers had been delayed “in shipping”. However,
“installation has begun and we plan to be filling with the small line on Tuesday 12th
September”. The production records show that from 12 to 29 September, over 20,000
tins were filled. It appears Modern Olives had orders for tins it wished to fill and that
Oenobev accommodated Modern Olives although it was not conducive to the orderly
commissioning of the line. The line was not operating automatically and a number of
tasks were performed manually with unskilled labour. On 8 October 2006, Mr BurgessOn 4 September 2006, Mr Burgess noted in his report to directors of Modern Olives packaging equipment”.
71 In the next report on 1 December 2006, Mr Burgess recorded various steps in the installation and commissioning process: “The filling, capping, capsuling and labelling
equipment are now operational with just under 80,000 units filled in the last few
weeks. The depalletiser, auto-packing and palletizing is installed but not yetoperational and one piece of equipment is still to be delivered to site. Four Modern
Olives staff has been trained and can operate all the currently working equipment unassisted … The SIEM technicians (fillers) have returned to the site to finish the commissioning of the fillers and make adjustments to the PLC and timing of the
machines as well as sort out any technical and training issues. This is progressing
well and it is anticipated that the majority of work will be finished by Friday 8th
December. TMG (Italian company that supplied the conveyor, depal, packaging and
auto-palletising) need to return to finish programming and trialling this equipment.
They also need to make some modifications to the depalletiser. We are currentlynegotiating the extra cost associated with their return”.
72 Mr Burgess then gave a summary of the ongoing dispute with Oenobev, in the following terms: “Oenobev are attributing the continual delays in finishing the
commissioning on the late delivery and lack of samples back in April. We are
currently compiling a folder of communications and preparing our case should we
need to defend our actions should we withhold all or some of the final payment due tolate delivery”.
73 On 5 February 2007, part of the report is deleted as privileged. The balance of the report read as follows: “The bottling plant has operated nearly every working day
during December and January filling over 253,000 units since mid November. The staff has quickly become proficient with the different pieces of equipment and can now operate with minimal supervision. The depalletising and packaging equipment is
still not commissioned. The difficulties with getting our supplier Oenobev to organise
the Italian suppliers to finish installing and commissioning the line persist. We arehopeful of an Italian technician being on site this week”.
74 On 23 March 2007, Mr Burgess reported that: “The Italian technicians left the site this
month after finishing the installation of the programming of the depalletiser and
packaging equipment. Oenobev have been on site rectifying installation and OH & S
issues. Production volumes are healthy and the line is running every day. We are
now concentrating on developing systems and procedures to create greater
efficiencies. Nothing further has progressed as far as legal action against Oenobev isconcerned”.
75 On 4 May 2007, the report dealt with production, accreditation and the Oenobev dispute. Mr Burgess recorded that, “Pleasingly bottling volumes have grown
significantly since the start of the year and the fillers are working every day. January below. We are currently exploring other opportunities and rolling out the marketing of
and February volumes were restricted as parts of the line were still not operational.the service”.
76 In relation to the ongoing dispute, Mr Burgess reported that: “Since February we have
been communicating to Oenobev that we do not consider the line to have been
commissioned and have supplied the reasons why. On the 3rd of May, Oenobev
faxed through commissioning certificates for the line back-dated to 26th February.
Oenobev states the commissioning is complete and that the next payment is now due
and have sent through invoices. We have further responded with a list of outstanding
issues that we need addressed. On the 4th of May, Oenobev’s lawyers sent through
a letter demanding payment within 14 days and making a claim for other expensesincurred”.
77 On 15 June 2007, Mr Burgess reported: “Total number of packed units increased
again in May which is especially pleasing as a large number of tins were filled in May
which are significantly slower to pack than the bottles. Compared to the budget,
which was last updated in August 06, revenue is between $18,000 to $20,000 per
month greater than budgeted however costs such as labour and depreciation andamortisation are also significantly higher than budget”.
78 The report on 20 July 2007 noted that: “Recently we invited Oenobev to attend a
bottling run to assess the capability and speed of the bottling line in an endeavour for
both parties to witness the line running consistently at 6,000 bottles per hour. A
number of issues arose during the session and the line failed to run consistently atthe required speed”.
79 The reports on 3 September, 15 October and 3 December 2007 were primarily “Since 3rd August we have filled and dispatched 830,000 units to Kraft as well as our
olive oil bottling orders. Our systems, procedures and efficiency during this period
have increased significantly…Splatt Engineering has been engaged to finish off the
set up and fix the ongoing operational issues of the bottling equipment. Their workhas already seen a marked improvement to productivity of the line”.
80 A third line was installed in 2008, primarily to pack the Kraft salad dressing line. The Kraft contract was cancelled after a year as the product, apparently, was not well received by Kraft’s customers. After the installation of the Kraft line, it is very difficult to determine the productivity of the two lines installed by Oenobev. However, in the reports to directors, Mr Burgess continued to record positive increases in the production of olive oil.
81 On 6 March 2008, Mr Burgess reported: “Bottling during February totalled 202,834 units compared with 61,014 units for the same month last year”. The report also noted, “Most products that were being filled at third party packers have been brought back in house”. On 19 May 2008, Mr Burgess reported: “Bottling numbers for April
totalled 160,129 which were 24,000 units less than March and 20,000 units more than
April 2007”.
82 On 16 June 2008, Mr Burgess reported: “Bottling volumes increased significantly
during May to 250,295 units which was the 5th highest monthly volume total and the
highest since November last year”. On 21 July 2008, it was reported that, “Olive oil bottling volumes remained healthy totalling 234,678 units”. On 10 September 2008, Mr Burgess reported: “Olive oil bottling volumes remained healthy totalling
approximately 240,000 and 245,000 units”.
83 Although no coherent chronology emerged from the evidence, there were a number of conclusions which could be drawn:
a.
Modern Olives were impatient to have the lines operational and during the commissioning process, the product used to test the lines was in many cases determined by the production requirements of Modern Olives.
b.
Relations between Modern Olives and Oenobev quickly deteriorated. On 24 October 2006, Mr Priesley came to Lara to meet with Mr Burgess to sort out the problems. Although Mr Priesley spent some hours at the Lara premises, he did not meet with Mr Burgess. On 9 or 10 December 2006, Mr Kotaras
removed and secured various parts which Oenobev claimed had not been
paid for. Modern Olives said that the commencement of production runs thefollowing day were delayed for some hours until the parts were released.
c. Modern Olives claimed to Oenobev that the lines were not running satisfactorily. These problems were not however reflected in Mr Burgess’ reports to the Modern Olives Board of Directors between September 2006 and September 2008. d. Production records show that from about November 2006, substantial processing of product was completed on the lines. e. From about October 2007, Modern Olives engaged independent consultants, including Kempe Engineering and Splatt Engineering to resolve the outstanding issues with the lines. After that date, Modern Olives took the consultants’ advice as to what was required to commission the lines. Acting on the advice, Modern Olives undertook substantial modifications and made significant adjustments to the lines to maintain Modern Olives’ production requirements. No evidence was adduced to explain the ongoing problems which remained unresolved or to explain the lack of further investigations or remedial work. 84 In the circumstances, it is appropriate to conclude that from September 2007, Modern Olives accepted responsibility for the commissioning of the line subject to payment or allowance by Oenobev of the cost of bringing the line up to the specified standard. In the absence of evidence of alternative time estimates, the evidence of the
modifications carried out during late 2007 suggests that Oenobev should accept
responsibility for the delays to the commissioning of the lines to the end of 2007, but
not beyond.
Losses as a consequence of commissioning problems with the bottling lines
85 As a consequence of the problems encountered by Oenobev in commissioning the bottling lines, Modern Olives and Boundary Bend Marketing Pty Ltd claimed to have suffered loss and damage. The loss and damage comprised:
a. To Modern Olives, the cost of rectifying the equipment installed by Oenobev. b. To Modern Olives and Boundary Bend Marketing, the production and other losses resulting from the delays in the lines becoming operational. 86 There is no dispute that the specification of the requirements for the air compressor were inadequate. A problem was obvious from early in the commissioning process. The technical issues were not resolved until Oenobev provided Modern Olives with a
revised specification on 5 March 2007 and the need for a more powerful compressor
was confirmed by the subcontractor on 19 March 2007. Modern Olives ordered a new
compressor on 10 April 2007 and it was installed on 1 May 2007. Until that date, the
line was not fully operational and Oenobev was not entitled to assert that the line had
been commissioned.87 By letter dated 21 November 2007, Modern Olives’ solicitors advised Oenobev’s solicitors that Modern Olives accepted Oenobev’s repudiation of the contract by its failure to remedy its breaches. The letter advised that Oenobev was “not required to
re-attend at Modern Olives’ premises as it will make its own arrangements to
complete the contract”. Modern Olives’ solicitors had first forwarded a “list of
outstanding issues” to Oenobev’s solicitors on 25 June 2007 which Modern Olives’
solicitors on 19 October 2007 said would be relied upon as repudiation by Oenobev
of its contractual obligations. Modern Olives had sent earlier lists of outstanding
issues to Oenobev on 17 April 2007 and 1 May 2007.88 From about October 2007, Modern Olives took steps through its consultants to carry out adjustments and modifications to the items of equipment comprising the bottling line. This also involved the purchase of certain parts. In my view, Modern Olives is
entitled to recover the costs of rectifying the equipment installed by Oenobev. The
costs are set out in Schedule B to these reasons for judgment. They include the costs
expended to comply with Occupational Health and Safety requirements.
Cost of bringing the lines to the agreed performance standards
89 The glass line was to have the capacity to run for a reasonable period at 600bph, although a consistent operational speed would be somewhat less than that figure. The failure of Oenobev and the Italian technicians to commission the line, and the resultant delays, were the principal complaints by Modern Olives.
90 Snowden apparently advised Modern Olives of this position in June 2007. He was not
The experts recognised the failure by Oenobev to meet its obligations. Mr Seeger- Modern Olives had terminated the contractual arrangements with Oenobev and late in 2007, Modern Olives engaged contractors to advise on modifications and adjustments necessary to make the lines operate to expectations.
91 The evidence presented by Modern Olives to quantify its losses in this regard was unsatisfactory. Modern Olives seemed to primarily claim as its loss, the difference between the value of a glass line with a bottling speed capability of 3,000bph and a
line with a capability of 6,000bph. Evidence was presented of the cost of a 3,000bph line in the form of a quotation prepared by Mr Adam Gibbs of J.B. MacMahon Pty Ltd in about March 2009, although priced “as at the November 2006 to March 2007
period ”. I do not consider, however, that this is a satisfactory basis for assessing maximum speed of 3,000bph with certain non-automated features and ignores the fact that, since the lines were installed, the glass line itself has processed over 4.5 million bottles and the lines were generally able to achieve Modern Olives’ “base case” forecasts and consistently run at over 3,000bph.
92 Mr Seeger-Snowden’s witness statement was filed in March 2009. The only cost estimate given at that time was $50,000 (including $40,000 for the technicians). No estimate was given for any necessary “machine modifications”. Mr Ross’s statement was filed in September 2009 and contained no cost estimates.
93 Mr Seeger-Snowden apparently revised his estimates before the joint experts’ conference. The figures given at the conference had a wide range and again did not include “replacement equipment or parts” and other costs to Modern Olives. The contractors who advised Modern Olives in late 2007, and upon whose advice certain modifications were made to the lines at significant cost, did not provide any evidence of what works would be required to improve the performance of the lines.
136 This claim must also fail because of my previous findings. In any event, the calculations of loss are tenuous and speculative.
137 Contract packing - Boundary bend makes claims in respect of the extra cost of packaging being carried out by contract packers rather than Modern Olives for the following periods:
a. to January 2009 – total cost $225,089 apportioned between 250ml, 375ml, 500ml and 750ml bottles and three litre tins. The additional cost claimed was $0.10, $0.01, $0.07, $0.04 and $0.09 per unit respectively and totals $18,139. b. from February to December 2009 – loss claimed of $15,954. This total includes 250ml, 375ml and 500ml bottles. The loss per unit claimed was $0.10, $0.01 and $0.07 respectively. c. beyond December 2009 – the loss claimed of $816,284 was not pursued. 138 Each of these claims relates to periods beyond which Oenobev should have any responsibility. The quantum of the claims is speculative and tenuous and should not be allowed in any event.
139 Extra transport costs - $45,197 is claimed as to cost of transporting oil and consumables from Lara to the contract packers to the end of 2009. There were invoices tendered in evidence which were relied upon to calculate the cost of transport of consumables to the co-packer. There was also evidence that some oil and consumables were sent to Lara and had to be sent on to the contract packers.
140 $10,735 was claimed as the estimated extra transport cost from January to December 2009, based on invoices dated between February and December 2008. There is no basis for this claim because of my previous findings. In any event, I consider the alleged losses to be speculative and tenuous. A claim of $483,347 as the “grossed up” figure (present value $338,343) for transport costs into the future from December 2009 was not pursued.
Sundry Claims
141 Oenobev to pay for the attendance of the Italian technicians - Modern Olives claimed that in a conversation between Mr Priesley and Mr Burgess on 20 February 2006, Oenobev agreed to meet the cost of accommodation of its employees during the commissioning phase, provided Modern Olives paid for the cost of the overseas technicians. In an email sent to Oenobev by Modern Olives on 24 August 2006, arrangements were made for the accommodation during September 2006. The email stated, “It is envisaged that one cabin/unit will be for Oenobev staff and one for the
technicians from Italy. As such, Modern Olives will pay the cost of one cabin/unit for
the for the four weeks that the technicians will be in Australia”.
142 The Oenobev employees were accommodated at the Riverglen Holiday Park in Geelong. Oenobev refused to pay for their employees’ lodging. Modern Olives paid the account to keep faith with a local trader. There was a disputecdawes as to whether Modern Olives was obliged to meet the cost of the extended “commissioning time” and whether the oral agreement could be enforced by Modern Olives in these circumstances. Mr Perham and Mr Kotaras were accommodated near Lara well into 2007. Only two invoices were produced for 2007 – both for the period 6 February to 6/7 March 2007, one for $1,500 and the other for $1,440. I consider that Modern Olives should only recover $1,440.
143 Manuals in English - Modern Olives claimed that Oenobev had agreed to supply two copies of all manuals in English. The letter from Modern Olives to Oenobev, dated 20 February 2006, stated that the purchase contract was to include provision for, “Two copies of all manuals in English”.
144 Modern Olives complained that certain manuals supplied were wholly or partly in the Italian language or had not been supplied. The relevant manuals provided by Oenobev were tendered in evidence. On 26 April 2007, Mr Stahl sent an email to Mr Perham noting that two copies of two English language manuals, only one copy of nine English language manuals, two Italian language manuals and one half-English language and half-Italian language manual had been supplied, that there was no manual for the pumps (apart from one for the vacuum pump in Italian) and the electrical drawings for the SIEM equipment were only in Italian.
145 Modern Olives led evidence from the office manager of an Italian language translation firm that shortly before she gave evidence, she had provided an estimate for the cost of translating the Italian language manuals into English. The quotation was for
$16,000 plus GST. The witness was a Chinese language specialist and not an Italian
speaker and prepared the quotation on the basis of a “visual check” and estimate of
the number of words in the document. I consider that the evidence of loss did not
have an adequate basis. In the circumstances, I consider that only the sum of $4,500
should be allowed, representing about 25% of the quoted figure with an allowance for
photocopying the single manuals supplied.
Conclusions
146 The results of my findings are as follows:
a. Oenobev are entitled to be paid $284,620.04 in respect of its unpaid invoices. b. Modern Olives should recover the following sums totalling $278,298 as follows: (i) $67,352 as the costs to date to improve the performance of the lines;
(ii) $117,352 as the future costs to investigate the lines and carry out further works;
(iii) $87,654 for lost production;
(iv) $5,940 for the sundry claims.
147 I will allow the parties time to study my reasons for decision before addressing further submissions on the form of the final orders including matters of interest and costs.
Certificate
I certify that these 36 pages and Schedules A and B are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 6 July 2010.
Dated: 6 July 2010.
……….……………………………………..
Caroline Dawes
Associate to His Honour Judge Anderson
SCHEDULE A
| Invoice | Date of | Description | AUD | EUR |
| No. | Invoice | |||
| 235 | 04-Sep-06 | Shrink wrapper balance | $ 2,551.50 | |
| 3736-01 | 04-Sep-06 | Carton sealer EXC-103SD | $ 745.70 | |
| 3754-01 | 04-Sep-06 | Imaje 9020 small character ink jet | $ 4,268.50 | |
| printer/coder | ||||
| 3744-01 | 01-Nov-06 | Installation/commissioning/training | $ 33,209.00 | |
| 00003878 | 27-Mar-07 | Accommodation/labour/labour/airfare | $ 75,786.15 | |
| 00003879 | 28-Mar-07 | Brass clamps for PE labeller | $ 352.00 | |
| 3617 | 28-Mar-07 | PE labeller, fumigation, tailgate | ||
| 3618 | 28-Mar-07 | TMG Impainti/landing/fumigation fees | ||
| 3619 | 28-Mar-07 | Nortan landing charges | ||
| 3625 | 28-Mar-07 | PE landing charges | ||
| 3655 | 28-Mar-07 | SIEM landing charges | ||
| 3683 | 28-Mar-07 | TMG landing charges/fumigation/cartage | ||
| 3689 | 28-Mar-07 | TMG Impanti landing/fumigation/cartage | ||
| 3722 | 28-Mar-07 | Storage charges | ||
| 3616 | 28-Mar-07 | Freight/fumigation/cartage charges | ||
| 3537 | 28-Mar-07 | Freight/fumigation/cartage charges | $ 27,266.04 | |
| 00003914 | 30-Jun-06 | Running of filler/plant and equipment hire | $ 7,225.00 | |
| 229 | 04-Sep-06 | TMG conveyor balance | € 12,600.00 | |
| 230 | 04-Sep-06 | Siem RCS20/feed pump/vacuum device/mobile nozzles/control/turret/gas on capper/ceiling and laminar flow/elevator | € 16,785.00 | |
| 231 | 04-Sep-06 | Prisma 40T/Nortan Bypass rails | € 3,667.00 | |
| 232 | 04-Sep-06 | PE Master MS 96/540/3S-3E/auto speed control/Pre/predisposed for 4th station/rotary label slide | € 10,053.00 | |
| 233 | 04-Sep-06 | TMG conveyor/platform, Vega 60/safety guards/Device/chain conveyor/outfeed conveyor etc. | € 56,300.00 | |
| 236 | 04-Sep-06 | SIEM RVPL/dose for cans/main tank/electronic control/doses/Laminar flow roof/gas injection | € 7,963.00 | |
| 237 | 04-Sep-06 | SIEM RPL 30 | € 742.00 | |
| 238 | 04-Sep-06 | SIEM TP 78/03/ROPP caps/Apply plastic | € 3,975.00 | |
| 3700CP1 | 04-Sep-06 | TMG changeparts | € 1,497.00 | |
| 239 | 15-Sep-06 | OMB ET 1000/back label station/capsule dispenser/head | € 2,015.00 | |
| Totals | $151,403.89 | € 115,597.00 |
SCHEDULE B
| Date | Supplier | Inv. No. | Detail | Amount | Total |
| Line | |||||
| efficiency | |||||
| 20-Nov-07 | Splatts | 6086 | Mechanical and electrical work to | $7,380 | $7,380 |
| attempt to establish line efficiency | |||||
| Depalletiser | |||||
| Bottles smashed by machine | $2,015 | ||||
| 31-Jul-08 | Lange Eng. | 21267 | Pincers manufactured for | $450 | |
| interlayer | |||||
| 31-Dec-07 | Hi Tech Elec. | 104743 | Globe failure on reset button | $279 | |
| Replacement of interlayer | $900 | $3,644 | |||
| Monoblock Filler | |||||
| 12-Jan-07 | Aust Eng. | 107248 | Filler valve/O rings | $160 | |
| 10-Apr-08 | Splatts | 6284 | Modification to ROPP capping | $489 | |
| heads | |||||
| 10-Apr-08 | Splatts | 6285 | Program encoder (and work | $1,208 | |
| under other headings below) | |||||
| 21-Jul-08 | Splatts | 6365 | Synchro and program encoder | $3,272 | |
| (part of bill below) | |||||
| 22-Dec-06 | Contamination of product with | $816 | |||
| white flakes from monoblock | |||||
| 10-Jun-08 | Des Munday | 2197776 | Replacement of cap sorter motor | $465 | |
| 30-Dec-08 | Sage | PLC problems | $672 | $7,081 | |
| Nortan Capsuler | |||||
| 27-Oct-06 | Alternative | 18977 | Purchase change parts for olive | $4,635 | |
| Plastics | oil bottles | ||||
| 10-Apr-08 | Splatts | 6285 | Investigate gearbox problem (part of larger bill above) | ||
| 21-Jul-08 | Splatts | 6365 | Replace incorrect gearbox | $675 | $5,310 |
| PE Labeller | |||||
| 20-Sep-07 | FCR Motion | 175150 | Stepper motor replaced | $730 | |
| Tech. | |||||
| 30-Sep-07 | Hi Tech Elec. | 104384 | Stepper motor failing | $1,190 | |
| electronically and mechanically | |||||
| 25-Oct-07 | Hi Tech Elec. | 104433 | Stepper motor failing | $512 | |
| electronically and mechanically | |||||
| 09-Jan-08 | FCR Motion | 176985 | Stepper motor replaced | $730 | |
| Tech. | |||||
| 05-Mar-08 | FCR Motion | 178116 | Stepper motor replaced | $730 | |
| Tech. | |||||
| 20-Mar-08 | Tronics | R93220 | Modification to attempt suitability | $896 | |
| for wrap around labels | |||||
| 10-Apr-08 | Splatts | 6285 | Determine requirement for full wrap labels | ||
| 21-Jul-08 | Splatts | 6365 | Modify labeller to suit wrap | $2,760 | |
| around | |||||
| Cost to apply medallions | $1,000 | $8,548 | |||
| Imaje Inkjet printer | |||||
| 22-May-07 | Imaje. | 182406 | Purchase of encoder | $417 | $417 |
| TMG | |||||
| combipacker |
| 28-Feb-07 | Aust Eng. | 107456 | Plastic change parts and steel | $95 | ||
| panel | ||||||
| Loss due to no change parts for | $2,550 | |||||
| new containers | ||||||
| 31-May-07 | Hi Tech Elec. | 103908 | Machine cycling too slow, carton | $210 | ||
| present/erector not registering | ||||||
| 29-Jun-07 | Hi Tech Elec. | 104052 | Carton erector vacuum failing | $70 | ||
| 10-Oct-07 | Kempe | 5AHG024 | New vacuum system for carton | $1,652 | ||
| 477 | erector | |||||
| 31-Aug-07 | Hi Tech Elec. | 104276 | Bottle divider motor fault | $270 | ||
| 31-Oct-07 | Hi Tech Elec. | 104526 | Bottle divider & PLC faults | $710 | ||
| 25-Oct-07 | Hi Tech Elec. | 104434 | Safety cut out would not reset | $270 | ||
| 30-Nov-07 | Hi Tech Elec. | 104653 | Carton erector sensor failing | $338 | ||
| 30-Nov-07 | Hi Tech Elec. | 104655 | Replacement of transfer trolley | $426 | ||
| encoder | ||||||
| 30-Nov-07 | Hi Tech Elec. | 104657 | Axis arm motor fault, mechanical | $142 | ||
| problem with motor | ||||||
| 30-Apr-08 | Des Munday | 3141749 | Valved spring and eyelets for | $312 | ||
| broken spring on carton cartridge | ||||||
| 19-May-08 | Nordson | 32205 | Replacement of solenoids and | $863 | ||
| nozzles, labour to eliminate poor glue finish | ||||||
| 31-Mar-08 | Lange Eng. | 20546 | Repairs and modifications to pick | $740 | ||
| up mechanism | ||||||
| 30-Sep-08 | Lange Eng. | 21553 | Repairs and modifications to pick |
| ||
| up mechanism | ||||||
| Volumetric filler | ||||||
| 31-Jan-08 | Lange Eng. | 20275 | Manufacture to nozzles to allow | $300 | ||
| filling Silvertree 375ml bottle | ||||||
| 29-Feb-08 | Lange Eng. | 20455 | Modifications to nozzles to allow |
| ||
| filling Silvertree 375ml bottle | ||||||
| Siem capper | ||||||
| Splatts | 6086 | Manufacture of new chute and plunger | ||||
| Australian Safety Standards etc | ||||||
| 06-Mar-07 | Hypersafe | MO/07/01 | OHS compliance visit and report | $1,850 | ||
| 13-Jun-08 | Zone | 2982 | Purchase of safety access control | $3,648 | ||
| system (castle key) - depal and autopal | ||||||
| 26-Aug-08 | BKM Invoice | 2430 | Installation of safety access | $1,050 | ||
| equipment to depal and autopal | ||||||
| 31-Aug-08 | Hi Tech Elec. | 105512 | Electrical connection of safety |
| ||
| access equipment to depal and autopal | ||||||
| Advice concerning the lines etc. | ||||||
| 10-Apr-07 | B1006 | Cost of first inadequate | $8,330 | |||
| compressor | ||||||
| 01-Sep-06 | A. S. Chapman | 545b | Wiring up of incorrect compressor | $459 | ||
| 10-Sep-06 | A. S. Chapman | 522b | Materials required for incorrect | $93 | ||
| compressor | ||||||
| 18-Oct-06 | Reece | 94503794 | Incorrect fittings purchased and | $462 | ||
| Industrial | welded for filter/pump of Monoblock filler | |||||
| 12-Feb-07 | A. S. Chapman | 658b | Call out fee for checking incorrect | $150 | ||
| compressor | ||||||
| 01-May-07 | Menzel's | 954 | Labour, scissor lift, air lines, |
| ||
| Maintenance | repeated checks to inadequate compression | |||||
| Spare Parts etc. | ||||||
| 26-Nov-07 | West Vic. | 517365 | Tooling and supply of grippers to | $2,325 | ||
| Industrial | combipacker | |||||
| 03-Apr-08 | West Vic. | 518531 | Manufacture bellow for combi, | $1,563 | ||
| Industrial | large | |||||
| 17-Apr-08 | West Vic. | 518682 | Pnuematic couplings | $104 | ||
| Industrial | ||||||
| 24-Apr-08 | West Vic. | 519365 | Manufacture of bellows for combi, | $562 | ||
| Industrial | large and small | |||||
| 30-Apr-08 | West Vic. | 518813 | Manufacture of bellows for combi, | $617 | ||
| Industrial | small | |||||
| 25-Jun-08 | West Vic. | 519363 | Manufacture of bellows for combi, | $84 | ||
| Industrial | small | |||||
| 31-Aug-08 | Lange Eng. | 21415 | Machine/manufacture of gripper |
| ||
| sleeves, inner and outer |
Total $67,352
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