Codylan Farms Limited v Northern Farm Services Limited
[2015] NZHC 1678
•20 July 2015
IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY
CIV-2013-043-262 [2015] NZHC 1678
BETWEEN CODYLAN FARMS LIMITED
First Plaintiff
VERO INSURANCE NEW ZEALAND LIMITED
Second Plaintiff
AND
NORTHERN FARM SERVICES LIMITED
Defendant
Hearing: 16 - 20 February 2015 Appearances:
A W M Britton for First and Second Plaintiffs
P J Napier and N J Pye for DefendantJudgment:
20 July 2015
JUDGMENT OF M PETERS J
This judgment was delivered by Justice M Peters on 20 July 2015 at 12 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date: ...................................
Solicitors: C & M Legal, New Plymouth
Keegan Alexander, Auckland
CODYLAN FARMS LTD v NORTHERN FARM SERVICES LTD [2015] NZHC 1678 [20 July 2015]
[1] The Plaintiffs (“CFL” and “Vero”) seek to recover from the Defendant (“NFS”) costs incurred in repairing damage to a water bore on CFL’s farm in Taranaki. The damage was caused when several lengths of “riser” pipe and a pump, both of which NFS had installed, fell to the bottom of the bore. The costs of repair were approximately $175,000 including GST.
[2] It is common ground that CFL engaged NFS to install a pump and riser pipe in the bore and that it was a term of the contract that, in doing so, NFS would exercise reasonable skill and care. The matters in dispute are whether NFS breached that term of the contract and, if so, the quantum of damages.
[3] The issue of whether NFS was in breach comes down to whether, in omitting to install “lugs” on the riser pipe and to attach a “safety wire” to the pump, NFS failed to exercise the degree of skill and care required. I am satisfied that it did fail, in so far as it omitted to attach a safety wire.
[4] Vero is said to have insured CFL in respect of some of the damage. It is a party to the proceedings to recover approximately $32,000 which it is said to have paid CFL. For reasons to which I refer below, Vero’s claim has not been proved and it is unable to recover.
[5] Subject to that, and subject to a relatively small deduction for one item, I am satisfied that the quantum claimed is reasonable.
[6] NFS raises an affirmative defence as to quantum, alternatively counterclaims against CFL to recover outstanding costs. CFL acknowledges liability for the sums claimed by NFS.
[7] Although I have determined the various claims, I shall delay entering judgment until the parties advise whether they seek judgment for the GST inclusive sums they have claimed or exclusive of GST.
Background
[8] The principals of CFL, NFS and Total Control Drilling Limited (“TCD”) are,
respectively, Mr David Smith, Mr Herbert Fisher and Mr Jamie Thomas.
[9] CFL is the owner of a substantial farm in Taranaki. In August 2012, Mr Smith asked Mr Fisher to investigate why the existing 5 inch (diameter) bore on the farm was performing poorly.
[10] NFS is a long established business in Taranaki, offering services connected with pumping equipment and machinery to the dairy industry. NFS is also an authorised dealer in Grundfos hydro pumps, which Mr Fisher is qualified to install.
[11] Mr Fisher’s investigations revealed that the existing bore was past its useful life and he advised Mr Smith to engage Mr Thomas of TCD to drill a new bore. Mr Thomas and Mr Fisher had worked together previously and, indeed, Mr Fisher had worked with Mr Thomas’s father who was also in the drilling industry.
[12] TCD provides drilling services and systems for a range of applications, large and small, throughout New Zealand. It has offices in Tauranga and Taranaki and specialises in various drilling techniques including “deep-hole” (up to 1,000 metres) and “rotary mud” drilling; mineral exploration; and geothermal, environmental and geotechnical drilling. Mr Thomas’s evidence was that water wells and bores have been the cornerstone of TCD’s drilling operations, that TCD has completed “hundreds” of such projects successfully and, of relevance to this case, that TCD would have drilled between 40 and 50 ten inch bores.
[13] Mr Smith having explained his requirements, Mr Thomas considered that an
8 inch bore was needed. Mr Thomas offered, however, to drill a 10 inch bore for the price of an 8, as he had surplus 10 inch bore materials on hand. Mr Smith agreed and TCD commenced the drilling work required shortly thereafter, on 9 September
2012.
[14] Mr Thomas considered the bore to be large-scale and commercial in nature, given its design, construction and capacity. The bore was capable of producing up to
145,800 litres of water per hour. Mr Thomas thought that it might be possible to draw up to 22,500 litres of water per hour using a 6 inch (diameter) Grundfos centrifugal pump, which Mr Fisher and Mr Smith had agreed should be installed to produce the quantity of water that Mr Smith required. Mr Thomas contrasted this capacity with smaller 4 or 6 inch bores found on most dairy farms which are capable of producing up to 6,000 litres per hour.
[15] The drilling, construction and “commissioning” of the bore took three TCD employees approximately two weeks, overseen by Mr Thomas. Mr Fisher visited the site from time to time whilst TCD was undertaking the work.
[16] TCD first drilled a “test” hole and took soil samples, which it had analysed so as to identify the size of “screen” to be installed to prevent or restrict sediment entering the bore.
[17] TCD then drilled the bore to a depth of approximately 124 metres. It placed a steel “cap” at the bottom to seal the bore, with the cap welded to a 3.5 metre long “sump” to collect any sand or sediment entering the bore over time.
[18] The screens – a matter of controversy in the trial – were immediately above the sump and cap. Each screen had a series of 0.5 mm slots in it and TCD welded five together to give a continuous 15 metre length.
[19] Water filters through the slot of a screen and, ideally, sediment does not. Screens typically are made to order in Australia but TCD had some on hand which it considered met the requirements revealed by the soil analysis. NFS’s expert well driller, Mr Philip Webb, gave evidence that TCD should have installed screens with a smaller (0.3 mm) slot, the suggestion being that TCD had served its own interests by using screens it had on hand rather than ordering the correct size. Mr Thomas rejected that suggestion and I accept his evidence on the matter.
[20] Above the screens the bore was lined to slightly above ground level with
lengths of steel “liner” pipe, to maintain the structural integrity of the bore.
[21] Having constructed the bore, TCD then “commissioned” it between 15 and
23 September 2012. The purpose of commissioning is to remove all sand and sediment, so that the bore produces clear water. I accept Mr Thomas’s evidence that TCD did not leave the site until the water was clear.
Installation of pump and riser pipe
[22] The bore completed, it was for Mr Fisher to install the pump and the riser pipe to bring water from the bore to the surface.
[23] At least once before leaving the site, and in the context of the proposed installation of the 6 inch pump, Mr Thomas suggested to Mr Fisher that he fit “centralisers” or “lugs” to the riser pipe to be installed and that he attach a steel safety wire to the pump. Mr Fisher did not do so and, as I have said, the question of breach comes down to whether he should have.
[24] At a meeting on 4 February 2015, the experts who gave evidence agreed that the purpose of a safety wire “is to prevent the pump and attached equipment/components falling down inside the bore”.1 A safety wire would keep a pump suspended if something untoward occurred, as it did.
[25] Lugs are fitted to the outside of a pipe and “centre the pump within the bore”.2 They would have served to brace the riser pipe against the well liner pipe, have kept the riser pipe and pump centred in the bore (if it were not already) and reduced movement of the same within the bore. There was dispute at trial as to whether the combined weight of the riser pipe, water in the pipe, the pump and electric cable – at least 750 kgs in total – would have made lugs superfluous.
[26] I do not propose to address the Plaintiffs’ case on the use of lugs in detail. The damage giving rise to this claim would have been avoided had a safety wire been used and the Plaintiffs’ case on that omission is as strong, if not stronger, than on the use of lugs.
[27] The new 6 inch pump had not been delivered by the time TCD completed its work. CFL required water as a matter of urgency and it was agreed that, as a temporary measure, Mr Fisher would install a 4 inch Grundfos pump which was only four months old.
[28] Some 13 lengths of 2 inch riser pipe were required to install the temporary pump, as opposed to the 3 or 4 inch that would be required for the new pump. At Mr Smith’s request, Mr Fisher agreed to re-use the riser pipe from the old bore, subject to his being satisfied that it was in good order.
[29] Over the course of several days, Mr Fisher and his employee, Mr Anthony
Stevens, prepared and inspected the 10 lengths of old riser pipe, each being
6.5 metres, and 3 lengths that TCD had left on site, and were satisfied it was suitable to use.3
[30] A length of the pipe was screwed into the top of the temporary pump and then lowered into the bore. A length of riser pipe has a threaded “male” end which fits to a socket on the “female” end from the next length of pipe. The 13 lengths of pipe were joined and installed in this way, so that the pump sat at a depth of approximately 84 metres, some 40 metres above the bottom of the bore. The 10 lengths from the old bore were lowered first, and a power cable taped to the riser pipe as it was lowered.
[31] There was much evidence at trial about whether the pipe was secured at the top of the bore and whether Mr Fisher had used and bolted the correct 10 inch steel circular flange. Mr Fisher was adamant that he had done so and I proceed on that basis.4
[32] Having installed pipe and pump, Mr Fisher and Mr Stevens ran the pump for approximately 30 minutes until the bore was producing clear water. Satisfied as to its operation, they left the site at approximately 3.00 pm on 28 September 2012.
[33] On returning at 8.30 am the next morning, Mr Fisher and Mr Stevens discovered that no water was being pumped to the surface and that the electrical cable to the pump was taut. From this they deduced that the pump had fallen from the riser pipe, as it had.
Repair and reconstruction
[34] Mr Thomas and other TCD personnel came to the site shortly thereafter. By that time Mr Fisher and Mr Stevens had extracted the riser pipe that remained attached at the top of the bore, that being 10 of the original 13 lengths.
[35] The pipe broke because of “fatigue failure” at the joint between the female and male ends of the third length of riser pipe above the pump. This was agreed by Mr Purdie, a metallurgist called by the Plaintiffs, and Mr Jackson, an expert engineer called by NFS.
[36] Mr Purdie’s view was that the fracture resulted from cyclic stress caused by movement of the pump within the bore, and that it was apparent from corrosion on the joint that the fracture had occurred when the pipe was in the bore and not before. Hence the allegation that lugs should have been used, as on the Plaintiffs’ case they would have reduced the cyclic stress on the pipe. Mr Jackson disagreed with Mr Purdie’s evidence, doubting that the movement of the pump could exert sufficient stress to fracture galvanised pipe within 24 hours. Mr Jackson thought the fracture must have been pre-existing.
[37] Were it necessary for me to decide the issue, I would prefer Mr Purdie’s evidence given his field of expertise and the considerable advantage he had in examining and testing the broken pipe.
[38] That said, the general tenor of the evidence at trial was that a break in galvanised steel pipe is a rare, if not unheard of, event. Mr Fisher’s evidence was
that he had never heard of galvanised pipe breaking in his 30 years in the industry.5
5 Evidence of H Fisher, Notes of Evidence at 228.
[39] TCD retrieved the pump and the other three lengths of riser pipe on
25 October 2012.6 I accept Mr Thomas’s evidence that the pump was located at the bottom of the bore, still attached to the three lengths of riser pipe, those three lengths together measuring approximately 20 metres. On bringing the pump to the surface, Mr Thomas discovered a substantial “rip” at the bottom of its exterior housing, caused by it hitting the cap at the bottom of the well. Mr Thomas also determined that the bottom 20 metres or so of the bore contained heavy volumes of sand and
silt.7 This indicated to Mr Thomas that the pump and pipe had damaged the screens
and pierced the cap at the bottom of the bore, allowing sand and silt to enter.
[40] By letter dated 25 October 2012, Mr Thomas advised of his findings and recommendations, ie that it would be necessary to extract the screens; that doing so would cause further damage to them; that the screens would need to be replaced; and that the remaining hardware could be re-used but that it would need to be extracted
and re-engineered.8 Once this work was completed the bore would be re-built and
the pump and riser pipe installed.
[41] TCD was authorised to proceed with this work, which it did between 6 and
22 November 2012. TCD also assisted in the installation of the permanent pump and riser pipe (with lugs and safety wire), that installation being carried out by Mr Nathan Hitchcock of Moa Pumping and Milking Taranaki Limited (“Moa”).
Criticisms
[42] As I have said, Mr Webb was critical of several aspects of Mr Thomas’s
operations.
[43] First, Mr Webb considered that Mr Thomas had installed the wrong screen size at the outset and that this error, rather than damage to the screens etc, accounted for the 20 metres of silt and sediment at the bottom of the bore. On the face of it, the fact that TCD installed screens with a slot size of 0.3 mm in the re-construction gave
some support to this suggestion.
6 Evidence of J M Thomas, Notes Evidence at 114.
7 Letter Total Control Drilling dated 25 October 2012 Re Damaged Water Bore, at CB 188.
8 Ibid.
[44] Secondly, Mr Webb was critical of Mr Thomas for failing to lower a camera into the bore to ascertain the damage caused, if any, by the pump and pipe as they fell. Mr Webb thought this an easy and cost effective step to take before commencing the reconstruction. Mr Thomas advised against this in his letter of
25 October 2012.
[45] Thirdly, Mr Webb doubted that the pump had made the hole found in the cap of the bore on extraction. Mr Webb said that sand and sediment in the cap/sump assembly would have prevented such a hole being made. Mr Webb suspected that hole, and any other damage, had been caused by Mr Thomas’s crew dropping a drilling rod or similar down the bore.
[46] In short, Mr Webb suspected that Mr Thomas misrepresented the damage caused by the falling pump and riser pipe to remedy the errors of his own crew.
[47] Mr Thomas rejected these suggestions. In so far as concerns the failure to install a camera, in his letter of 25 October 2012 Mr Thomas said such would be a waste of time and money, particularly as the camera would not get beyond the silt and sediment.
[48] As for the slot size of the screens, Mr Thomas’s evidence in cross- examination was as follows:9
Q. … why did you change the slot screen size?
A. Again when we got the screens out of the hole … we talked to the manufacturer in Australia. The potential time was going to be 21 to
24 days from placement of order. [CFL] had no water. We were offering them our water tank facilities on site and they were using
our equipment to transport water to the farm so that they could run their own business. At that present time my other branch up in
Tauranga had some 0.3 screens for an irrigation bore for a kiwifruit orchard. I talked to the client. I explained the situation. He said, “Not a problem. Go and help that guy out. You use my screens and
you order me some more.” That was done as a favour for the client
to take away the stress factor of waiting an additional 21 days for screens to be made, air freighted, custom cleared and delivered to
New Zealand and then you’re gonna have one or two days of fabrication time once it arrives here so you’re talking 25 days, 24
days? A farm can’t run without water for 25 days sorry.
9 Evidence of J M Thomas, above n 6, at 164.
Q. The real reason that you used 0.3 millimetre screens … was what
was necessary to ensure that no sediment entered the well, isn’t it?
A. That’s incorrect because, to squash that theory, if the 0.5 screens were incorrect, the pump, the temporary pump to Mr Fisher would have been pumping sand. It wasn’t pumping sand. It was pumping sand-free water …
[49] Mr Thomas also rejected the suggestion that his crew had dropped anything in the bore and that the hole in the cap had been caused by anything other than the pump, as appears from the following:10
Q. Mr Webb will say that ... in the well cap, like this one, there will always be at least a couple of inches of sand or sediment that’s settled out of the water?
A. Well my reply to that would be Mr Webb needs to apply a more higher degree of completion towards his bores, because there shouldn’t be any sediment in the bottom. If you, if you want to get right down to the nuts and bolts of it, you may be talking a cupful in the bottom, you know what I mean, of a sump, but the purpose of a sump is to, main function is with age and time, there’s earthquakes or whatever in the ground, it allows sediment to fill up over time, that’s its sole purpose.
Q. So, sediment does come in?
A. With age. As I said earlier, a bore should operate 30, 40, 50 years without any, you know major reconstructions, if it’s done right.
…
Q. No, Mr Webb’s point … is that at the bottom of this completed bore there would have been some sand and sediment and that … would have taken the initial jolt from anything that fell so it didn’t go clean through it?
A. The answer to that question is no, I’ve said there’d be, you’d be lucky if there’s a cupful, I’ve just explained and described the development process that’s required. When you go and work for councils and high profile Government companies, their protocol and processes for our development is a lot, lot more than that. They won’t allow you to finish a job until you have less than five particles in a bucket.
[50] I accept this evidence from Mr Thomas. Mr Thomas impressed me as conversant with all aspects of the drilling process and the construction of a water bore and I found him to be a straightforward and direct witness. With no disrespect
10 At 175 and 176.
to Mr Webb, I do not doubt that Mr Thomas and TCD staff performed the work required, and only the work required, to a proper standard.
Discussion
Breach
[51] The relevant part of CFL’s pleading is:11
9)[NFS] breached the Contract Terms in any one or more of the following particulars:
(a) failed to secure the temporary pump with a wire safety rope to prevent it from falling into the well should it break away from the 2” piping; and
(b) failed to brace the 2” pipe with lugs or centralising flanges against the inside of the 10” well liner; and
...
[52] As counsel for NFS submitted, it is for the Plaintiffs to prove a breach on the balance of probabilities,12 that is to prove as a matter of fact that NFS failed to exercise reasonable and proper care, skill and judgment.13
[53] As to how the Plaintiffs might do so, counsel for NFS submitted as follows:14
5.2.2To prove negligence [CFL] must prove either that failure to apply a safety wire [and lugs] was something commonly done by other persons in the circumstances, or that it was something so obviously wanted that it would be folly in anyone to neglect to provide [it].
[54] The second part of that submission, “something so obviously wanted that it would be folly in anyone to neglect to provide it”, derives from Morton v William Dixon Ltd and was discussed at some length by Richmond J in McLaren Maycroft &
Co v Fletcher Development Co Ltd.15 In McLaren Maycroft, Richmond J allowed an
11 First Amended Statement of Claim dated 24 September 2014 at [9].
12 Defendant’s Closing Submissions dated 20 February 2015 at [5.2].
13 Sulco Ltd v E S Redit and Co Ltd [1959] NZLR 45.
14 At [5.2.2].
15 Morton v William Dixon Ltd 1909 S.C. 807 (IH (1 Div)); and McLaren Maycroft & Co v
Fletcher Development Co Ltd 2 NZLR [1973] 100 (CA).
appeal by engineers and applied the “folly” test referred to by counsel for NFS as
follows:16
... whether one approaches the case on the basis of a failure to comply with the general practice of engineers or on the more general basis that the Court can in a sufficiently obvious case say for itself that the omission of some particular precaution is something which falls short of the exercise of reasonable professional care and skill. ...
[55] Turning to the present case, the evidence did not establish that Mr Fisher had failed to comply with the general practice of other pump installation firms undertaking the same task in similar circumstances. I accept that Mr Thomas commonly installs lugs and a safety wire, whether he is installing a pump on a temporary or permanent basis. The evidence of the two other installers called at trial
– Mr Hitchcock of Moa for the Plaintiffs and Mr Malcolm Burrows for NFS – was that they did not, at least not at the relevant time. Nor was there evidence of industry, rather than individual, practice.
[56] It is also apparent that, although the Grundfos manual recommends the use of a safety wire if plastic riser pipe is used, such pipe being more likely to stretch or break, it is silent if galvanised steel pipe is used, as in this case.
[57] That leaves the issue of whether I am satisfied that this is a sufficiently obvious case in which to say that the omission of safety wire or lugs fell short of the reasonable exercise of care and skill. I have concluded that it is, in so far as NFS omitted to install a safety wire and for the reason given above it is unnecessary for me to express a view on the omission of the lugs.
[58] In reaching this conclusion I have taken the following into account.
[59] First, there is the discussion between Mr Thomas and Mr Fisher in which Mr Thomas, an experienced and competent well driller, informed Mr Fisher that a safety wire ought to be used when installing the permanent pump.
[60] Mr Thomas’s evidence in chief on this issue was as follows:17
17.Around this time, I spoke to both [Mr Smith] and [Mr Fisher] as to installing the [6 inch pump]. It was a group discussion. In particular, I said that [NFS] needed to brace the [6 inch pump’s] riser pipes with the Well Liner using centralisers/lugs. This was needed to prevent the [6 inch pump] and riser pipes moving around inside the Well Liner as a result of the centrifugal forces created during pumping. I also said that, as a back-up [NFS] needed to attach a safety cable to the [6 inch pump] to ensure that it was securely fastened at the top of the Well Liner.
[61] This discussion was comprehensively addressed at trial, as appears from the following exchanges.
[62] Counsel for NFS to Mr Thomas:18
Q. … When you suggested that centralisers and a safety cable be used in the installation of the pump, you were talking about the installation of a 6-inch permanent pump weren't you?
A. The only discussion I had with Northern Farm Services and, and the Smith property was that half, probably half way through or three quarters the way through the programme, when, when we knew roughly what dynamics were going to unfold from the bore, and the potential flow rates, that’s when Northern Farm Services went and obviously done their pricing exercise for a pump. A 6-inch pump was suggested to get the flow rates. I'd made the recommendation that a safety cable and centralisers be put in place because of the size of the commercial 10 inch bore.
[63] Counsel for the Plaintiffs to Mr Fisher:19
Q. Now, when you met on one of these occasions with Jamie and David, Jamie told you about what was needed in that bore didn’t he? He told you that you needed centralisers and a safety cable didn’t he?
A. That discussion, the first discussion about centralisers and safety cable was at our workshop, not on the job.
Q. So you accept that Jamie Thomas has told you at your workshop that you needed –
A. We discussed –
Q. – safety cables?
A. – it. He didn’t tell me. We discussed it.
Q. So Jamie Thomas has recommended to you, for this bore, 10-inches in diameter, “Mr Fisher, you need to put in centralisers. You need to put on a safety cable.”?
A. We discussed the issue of centralisers. He didn’t tell me we had to.
At the end of the day, I own my company, Jamie owns his. I don’t go along to his drilling rig and say, “You’ve got to do this.” At the same time, he doesn’t come into our workshop and tell us what to do. We discussed it.
…
[64] I asked Mr Fisher the following questions:20
Q. … did he, when he dropped it off, did he say, “Now are you going to put a safety wire and some lugs on this?” Or, is that how it started or what?
A. Yeah it just sort of came up in general conversation and I said, well, “I’ve put heaps of 6 inch pumps down, 12 inch pumps, 10 inch, 8 inch, and I’ve never, ever put safety wires on them.” My main reason is health and safety reason, ’cos you’ve got two other guys helping me, I’m in the lifting rig, working that, and you got two other guys, you know they’re experienced guys, around a situation, and you’ve either got the safety cable on a coil or on a drum, which is feeding down the hole or it’s looped up on the ground and I’ve heard of accidents before where guys have lost fingers or one guy got it wrapped around his leg and if it wasn’t for the guy on the truck that stopped the –
…
Q. Did you think you should talk to Mr Smith about whether that would be a good idea or not?
A. Not really. I’ve – it sort of, ah, it's one of those installer things.
Everybody’s different and you just say well, you know, do we do it
or, or don’t we and it's just, you know, I prefer not to for that safety reason and I've pulled other pumps out that the safety cable has actually worn through the electric cable and fused the motor and just blown the, the safety cable in two.
[65] Mr Fisher’s evidence was that he preferred not to install a safety wire because he considered it posed a health and safety risk, both on installation and extraction. On the evidence I heard, however, that risk was capable of being managed. At the very least Mr Fisher should have discussed the matter with Mr Smith but he did not. It was open to Mr Fisher to decline to install a safety cable if Mr Smith wished to use
one. In that case, it would have been for Mr Smith to find another installer.
20 At 274 and 275.
[66] Mr Fisher also suggested that Mr Smith would not have been willing to meet the additional cost of a safety wire, which Mr Fisher considered would have been
$1,500, possibly more. Again, however, he did not discuss the point with Mr Smith.21 Nor was it put to Mr Smith that he would have declined to meet the cost of a safety wire.
[67] The fact that a “warning” had been given was a relevant factor in Wilson & Horton Ltd v Attorney-General.22 In that case the Court held that Wilson Horton had breached its duty to minimise the effect of any fire that might occur in a warehouse in which it was storing newsprint. One matter which led to that finding was that:23
… the relationship between excessive paper storage and fire risk had actually been drawn to WH’s attention prior to the Mt Wellington fire, albeit in connection with different premises.
[68] In addition to Mr Thomas’s advice, I take into account the fact that the bore was larger than most commonly found on farms in Taranaki; Mr Fisher had seen for himself the work that had gone into drilling, constructing and commissioning the bore; Mr Fisher was well aware that Mr Smith required a substantial and consistent supply of water; and Mr Fisher did not propose to install lugs.
[69] I have considered whether these factors may be outweighed by the temporary nature of the installation (although Mr Fisher rejected any suggestion that he omitted the lugs or safety wire because of that),24 the lack of any clear industry practice, the reasons given for failing to install and the improbability of a fracture in the pipe. Ultimately, however, I consider Mr Fisher and therefore NFS fell short of the required standard. Liability is proved accordingly.
Quantum
[70] The Plaintiffs’ case is that they have suffered total losses of $175,271.50 including GST as a result of the breach by NFS. This sum comprises:
21 Evidence of H Fisher, above n 5, at 275.
22 Wilson & Horton Ltd v Attorney-General [1997] 2 NZLR 513 (CA).
23 At 521.
24 Evidence of H Fisher, above n 5, at 256.
(a) $4,476.95 being costs CFL contends it incurred consequential on the bore being inoperable;25
(b)$32,332.94 being the sum paid by Vero to meet the cost of replacement screens and engineering and fabrication costs;26 and
(c) $138,461.61 being the costs charged by TCD for its repair and reconstruction work.27
Vero’s claim
[71] Vero alleged that it had insured and indemnified CFL under the terms of CFL’s relevant policy of insurance in respect of the costs referred to above.28 NFS put it to proof on these matters.
[72] The common bundle included what was said to be the relevant policy but it was not referred to until counsel for the Plaintiffs made his closing submissions. Counsel for NFS objected on the grounds in High Court Rules, r 9.5(4) and (5) which provide:
9.5 Consequences of incorporating document in common bundle
(4) A document in the common bundle is automatically received into evidence (subject to the resolution of any objection to admissibility) when a witness refers to it in evidence or when counsel refers to it in submissions (made otherwise than in a closing address).
(5) A document in the common bundle may not be received in evidence except under subclause (4).
[73] I upheld counsel’s objection, following which the Plaintiffs applied to adduce further evidence.29 NFS opposed that application and I declined it for reasons set out
in my judgment of 10 March 2015.30
25 Letter Billings to Northern Farm Services Ltd dated 31 January 2013 at CB 334.
26 Total Control Drilling Invoice 148(a) dated 5 November 2012 at CB 279.
27 At CB 280 and 281.
28 First Amended Statement of Claim dated 24 September 2014 at [2].
29 Second Plaintiffs Interlocutory Application to Adduce Further Evidence dated 24 February 2015.
30 Codylan Farms Ltd v Northern Farm Services Ltd [2015] NZHC 420.
[74] It follows from this that Vero’s claim has not been proved and I am only required to determine issues in respect of the balance of the claim.
Balance of CFL’s loss
[75] Having heard Mr Smith’s evidence on the matter, I am satisfied that CFL should recover the out-of-pocket costs it incurred consequential on the bore being inoperable, with the exception of the sum claimed in respect of Mr Smith’s time ($1,785 excluding GST).31 This claim is not supported by any timesheets or similar documentation and am I not satisfied that the hourly rate proposed is reasonable. I decline this part of the claim accordingly.
[76] I allow the remaining costs of $2,108 excluding GST, $2,424.20 including
GST.32
[77] I turn now to the balance of $138,461.61 including GST, charged by TCD in respect of the repair and reconstruction work.
[78] In his evidence in chief, Mr Webb expressed the view that the re-development work was unnecessary, that he did not consider there would have been any damage to the screens from the falling pump and that at most he would allow $3,220 (including GST) for investigative work.33
[79] I am satisfied that the temporary pump did damage the bore when it fell and, accordingly, reject Mr Webb’s evidence on this point.
[80] Mr Webb next gave evidence that, if the screens were damaged, they would have been capable of repair and reinstatement. I reject this evidence also. I am satisfied on Mr Thomas’s evidence that the screens were damaged and that it would have been a “false economy” to try to repair them, given the anticipated life of the
bore of 20 years or more.
31 Letter Billings to Northern Farm Services Ltd, above n 27.
32 Ibid.
33 Brief of Evidence of P N Webb dated 22 December 2014 at [57] and [58].
[81] In any event, as I have said, Vero paid for the new screens and the re-engineering of them. I have already held that NFS is not liable for those costs.
[82] Mr Webb then gave evidence that he considered the costs charged by TCD for the reconstruction to be grossly excessive. As I understood Mr Webb’s evidence, he arrived at this conclusion by applying an hourly rate he considered reasonable (if he were doing the work), multiplied by the number of hours TCD charged, and added costs for establishing and disestablishing a rig on site, and hardware and
materials required in the reconstruction process.34
[83] Mr Thomas rejected Mr Webb’s suggestion that he had charged excessively. Mr Thomas’s evidence was that TCD had substantial and valuable equipment on site, which made it possible for the required works to be performed with greater expedition than Mr Webb would have achieved. Mr Thomas did not consider that Mr Webb’s costings were relevant, as he was not comparing “apples with apples”. I accept Mr Thomas’s evidence that TCD had a substantial, high performance drilling rig on site which enabled the necessary work to be completed quickly. In addition, Mr Thomas also said that he had not charged for all the time spent on the job, given Mr Smith’s predicament. This too would affect Mr Webb’s analysis.
[84] It follows from the above that I allow CFL’s claim with the exception of the sum sought in respect of Mr Smith’s time. I also award interest at the rate sought, being that allowed under the Judicature Act 1908, from the date proceedings were commenced, being 30 July 2013, to the date of payment.
Affirmative defence/counterclaim
[85] There is no dispute that CFL is indebted to NFS in the sum of $36,984.80 including GST. This sum is the total of invoices rendered by NFS to CFL between
12 September 2012 and 23 October 2012.
34 At [61].
[86] NFS pleaded an affirmative defence in respect of $30,428.71 of these costs, being the cost of the new pump and related components. NFS also counterclaimed against CFL for the total outstanding sum of $36,984.80.
[87] CFL did not file a reply to the affirmative defence nor a statement of defence to the counterclaim. Counsel for CFL advised me at the opening of the trial that the counterclaim was accepted. Accordingly, NFS must have judgment in respect of the sum for which it has counterclaimed.
[88] NFS has also sought an award of interest on the judgment sum at the rate of four per cent per month, as follows:35
24. The defendant’s standard terms and conditions applied to these
invoices including:
(a) All invoices are due and payable by the 20th of the month following the date of the invoice.
(b) Interest at the rate of 4 per cent per month on all amounts that have not been paid in full by the 20th of the month following delivery will be charged.
[89] This claim is borne out by the copy of NFS’s terms of trade.36 Counsel for CFL took no point as to the rate of interest claimed by NFS and, given that, I allow NFS the award of interest it seeks.
[90] I shall delay entering judgment in respect of the losses claimed pending advice from each party as to whether they seek judgment on a GST exclusive or inclusive basis.
Result
[91] I am satisfied that NFS failed to exercise reasonable skill and care in the respect referred to above.
35 Amended Statement of Defence to Amended Statement of Claim and Counterclaim by
Defendant against the First Plaintiff dated 22 October 2014 at [24].
36 Northern Farm Services Ltd Invoice 7346 with Terms of Trade at CB 153 and 154.
[92] Subject to [90] above, I allow CFL’s claim for damages of $2,424.20 and
$138,461.61, both including GST. CFL is to have interest at the rate prescribed by the Judicature Act 1908, from the date proceedings were commenced, being 30 July
2013, until the date of payment.
[93] I dismiss the claim by Vero for the reasons given above.
[94] Subject to [90] above, NFS succeeds on its counterclaim for $36,984.80 including GST. I award interest on this sum in accordance with NFS’s terms of trade.
[95] The parties are to advise by 4 pm, 27 July 2015 whether judgment is to be entered for GST inclusive or exclusive sums.
[96] The parties may make submissions on costs if they are unable to agree.
..................................................................
M Peters J
3
1
0