French t/a Avoca Mushrooms v Tyco New Zealand Ltd HC Auckland CIV 2006-404-6895
[2007] NZHC 2029
•23 August 2007
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2006-404-6895
BETWEEN ANITA TONI FRENCH AND DARREN PETER ALBERT NICOLAI TRADING AS AVOCA MUSHROOMS
Plaintiffs
ANDTYCO NEW ZEALAND LTD Defendant
Hearing: 30 April and 1, 2 and 3 May 2007
Counsel: Ms French First-named Plaintiff in person for plaintiffs
Iain Thain and Anna Wilson for Defendant
Judgment: 23 August 2007 at 11:00am
RESERVED JUDGMENT OF WILLIAMS J
This judgment was delivered by
Hon. Justice Williams on
23 August 2007 at 11:00am
Pursuant to Rule 540(4) of the High Court Rules
……………………………………………..
Registrar/Deputy Registrar
Date:………………………
AThe plaintiffs are entitled to judgment against the defendant on liability with a sum payable to them being reduced for their failure to mitigate their loss as described in the judgment.
BThe parties are to have one month from date of delivery of this judgment to confer and endeavour to agree on issues of quantum having regard to the observations made in the judgment. If the parties are unable to agree, a telephone conference will be convened as set out in para [120].
ANITA TONI FRENCH AND DARREN PETER ALBERT NICOLAI TRADING AS AVOCA MUSHROOMS V TYCO NEW ZEALAND LTD HC AK CIV 2006-404-6895 23 August 2007
TABLE OF CONTENTS
Paragraph
Introduction and pleadings [1] Facts [12] Submissions [48] Discussion on liability [54] Quantum [93]
Introduction and pleadings
[1] The plaintiffs, Ms French and Mr Nicolai, trade as Avoca Mushrooms on
Norfolk Island. They are the only mushroom growers on Norfolk.
[2] The commercial mushroom growing process was described by the defendant’s expert, Dr Martin, in the following way:
Commercial mushroom growing is a complex multi factorial process, however there are certain fundamentals especially in relation to compost preparation which if correctly followed can lead to a modicum of success. The plaintiffs’ mushroom operation is based on the plastic bag system of growing … which is ideally suited for small scale family operations growing a few tonnes of mushrooms per week. …
In composting the aim is to create a pathogen free selective substrate upon which the cultivated mushroom can grow without competition from other fungi. Compost for mushroom production is made from a carbon source, ideally wheaten straw, and a nitrogen source, usually waste poultry litter, blended together with water and gypsum, the latter provides calcium and lowers the pH of the compost. In the phase 1 process naturally occurring heat tolerant moulds and fungi under the right conditions cause a rapid break down of cellulose found in cereal straw and also release ammonia from the nitrogen source. Temperatures in the centres of the traditional windrows used for phase 1 composting rapidly reach 70 to 80 degrees Celsius. The Phase 1 process takes between 2 and 3 weeks to complete.
On completion of phase 1 the compost must be subjected to a pasteurization and conditioning process known as phase 2. In a bulk pasteurising tunnel compost is loaded into an insulated box up to a height of between 1.5 to 3 metres. The floor of the box is slatted beneath which is situated a plenum chamber allowing air to be forced through the compost. The volume of re- circulated air required during this process is high, as much as 150 cubic metres of air per tonne of compost per hour. Insulated ducting allows air to be re-circulated from the top of the compost through the fan and back under the compost. By the use of dampers fresh air can be introduced into the tunnel and the proportion of fresh and re-circulated air can be varied to adjust the temperature of the compost. The phase 2 process takes between six and seven days and in a properly constructed and managed bulk tunnel all the energy required for the process is generated by the bio mass in the compost.
Following phase 2, commercially manufactured spawn is thoroughly mixed through the compost. Spawn is essentially mushroom mycelium propagated on sterilized rye or wheat grain purchased from a commercial laboratory. … It takes between 13 and 14 days for the spawn to completely colonise the compost under ideal conditions. In order to promote the development of mushroom fruit bodies casing soil, a mixture of peat moss and lime is placed over the surface of the compost. … From adding casing soil a further 15 to
18 days is required before the first mushrooms appear. Mushrooms are produced in distinct flushes at weekly intervals. Most growers would take
three to four flushes, since production declines after the second flush and beyond four flushes the likelihood of disease increases.
At every stage in the process there can be difficulties faced in crop management, but … poor phase 2 composting can have the biggest negative effect upon the potential productivity of a mushroom operation.
[3] The claim was brought in contract and tort. Avoca Mushrooms claims it sought advice from the defendant, Tyco New Zealand Limited, on or about 10 July
2003 concerning the ventilation system it required for Phase 2, the pasteurization process of their proposed operation. They wanted a system with a capacity of 90-
120 cubic feet per minute airflow per ton of compost at a static pressure of 4 inches of water gauge, and were advised by Tyco to buy a Ductline SCD 355-4D in-line centrifugal ventilation fan and other equipment for $36,730.00. That fan, the plaintiffs assert, was represented as able to meet their ventilation requirements, but in fact it was discovered, after installation, that it could not do so. The fan initially supplied by Tyco was capable of developing less than a quarter of Avoca’s ventilation requirements and was thus unable to pasteurize their compost.
[4] The parties agreed on a substitute fan on 3 February 2005 and Tyco supplied a new fan capable of producing the required airflow on or before 20 April that year at no cost to Avoca.
[5] The plaintiffs claim they lost mushroom production between 1 November
2003-20 April 2005 worth $246,867.75, plus consultants and other costs, to give a total claim of $263,073.04.
[6] The plaintiffs claim Tyco breached its contract and also sue in negligence, claiming Tyco owed them a duty of care and negligently advised them which fan to buy initially.
[7] The issues in the case were significantly reduced by sensible co-operation between the parties (including Avoca’s solicitors who could not be funded to conduct the trial) and the parties’ experts.
[8] Tyco said the initial fan could supply an estimated airflow of 375-500 L/S at
200 pa system static pressure and it admitted that the fan it supplied Avoca was not capable of circulating 90-120 cubic feet per minute airflow per tonne of compost at a static pressure of 4 inches of water gauge, approximately 1000 pa. The fan it supplied could only produce about 200 pa. It says, however, that it supplied what it contracted to supply and was accordingly neither in breach of contract nor negligent.
[9] Its positive defences include affirmation of the contract by the plaintiffs on or before 24 November 2003 and a failure on Avoca’s part to mitigate its losses or contributory negligence in that it persisted in using the original fan to process
33 batches of compost up to 20 April 2005, even though not one achieved the required condition, the yield was poor and the cost of producing each batch exceeded the value of the crop.
[10] The issues were also reduced by the respective experts, Mr Harper for Avoca and Dr Martin for Tyco conferring and agreeing on the following statement:
Both experts agree that the fan initially supplied to the Plaintiff was inadequate for the purpose of Phase 2 composting. The fan could not
develop sufficient static pressure to push the required volume of air through the mass of the compost.
The major cropping difficulties faced by the Plaintiff, a high level of pests, disease and poor production, is entirely consistent with inadequate Phase 2 composting resulting from the use of an under-sized fan in the bulk pasteurizing tunnel coupled with the need to use electric heaters in an attempt to compensate for a lack of air.
After the initial fan was replaced with a fan able to meet the static pressure required and deliver sufficient air to manage the Phase 2 composting process properly, the plaintiff’s mushroom production increased substantially.
On the basis of our mushroom growing experience, both experts agreed, all things being equal, that had a suitable fan be supplied from the start a production figure of 90 Kilograms of fresh mushrooms per tonne of Phase 1 compost filled would be a reasonable outcome for the Plaintiff’s operation over the first six months or so of operation. This figure was arrived at after giving due consideration to the unusual circumstances in relation to the remote location, with its limited range of composting raw materials, a new start up and the inexperience of the operators.
Both experts acknowledge that a complete mushroom cropping cycle is ten weeks and that throughout this period there are indicators which point to the likelihood or otherwise of a successful crop. Inexperienced growers, without any assistance, may not be able to discern problems as quickly as experienced growers. Both experts agree that an experienced commercial mushroom grower filling compost on a fortnightly basis, in a similar manner to the plaintiff, could be expected to identify quickly that a severe cropping problem exists and take early action to mitigate the effects. In any case, both experts acknowledge that to continue operating beyond ten weeks or five batches of compost in such a scenario with an unsolved severe cropping problem would result in severe economic loss and at the same time would expect the operator to seek external assistance.
Given the Plaintiff’s inexperience of commercial mushroom growing, the operation’s isolation and the confusion surrounding the pasteurizing tunnel’s fan capability, both experts agreed that it would have taken longer for the Plaintiff to realise that the operation was facing serious difficulties compared with an experienced grower. However, after the problems faced with the initial 8 batches of compost we would expect a reasonable operator to seek outside expertise at this stage, in the form of a mushroom consultant or ventilation expert or both.
From figures supplied by the Plaintiff, overall in the first 8 batches of compost a total of 28.985 tonnes of Phase 1 compost were filled into the pasteurizing tunnel, although conditions were not optimal. These
8 composts produced 528 Kilograms of fresh mushrooms.
At a cropping potential of 90 Kilograms of fresh mushrooms per tonne of Phase 1 compost filled the expected yield is 2 609 Kilograms of product. Given that the first 8 composts actually produced a yield of 528 Kilograms, this is a shortfall of 2 081 Kilograms of fresh mushrooms, which can be attributed to inadequate Phase 2 composting resulting from the incorrectly specified fan being supplied by the Defendant.
[11] In a joint statement of issues remaining for decision, Tyco accepted the experts’ view and that the inadequacy of the original fan inhibited the plaintiffs’ ability to pasteurise compost and produce mushrooms. The issues at trial were accordingly whether the Contractual Remedies Act 1979, s 6(1) applied in respect of the contract for the original fan, whether Tyco owed a duty of care to the plaintiffs, whether Avoca failed to mitigate its loss or was contributorily negligent, and the correct quantum of loss should the plaintiffs be held entitled to recover.
Facts
[12] Ms French spoke of the research she and Mr Nicolai did over some five years before they decided to embark on commercial mushroom growing and the network of those in the industry they built up over that period.
[13] On 1 July 2003, they asked Energy Products, a Tyco division, to design and supply their peak heat unit and faxed the company some five pages of a booklet called the “Mushroom Cultivator”, which included the requirement for the ventilation system to be “powered by a centrifugal, high pressure belt driven blower, with a capacity of 90-120 CFM per ton of compost at a static pressure of up to four inches of water gauge”. The peak heat unit facilitates pasteurization and conditioning of the compost in phase 2 of commercial mushroom cultivation.
[14] Ms French’s request passed through several Tyco divisions before reaching Mr Dixon, the then engineering manager of Tyco Services Refrigeration Consultancy. He emailed Ms French on 10 July 2003 seeking additional information. She replied by email the same day giving the additional data and some indicative costings. She wanted a heating element built into the peak heat unit which would be used monthly and saying that “the critical component of this unit is the fan which needs to circulate the air around and through the compost”.
[15] On Kooline Refrigeration letterhead, a Tyco division, Mr Dixon faxed Ms French his estimate of the requirements for the project on 16 July 2003 to give the airflow required by the “Mushroom Cultivator”. Mr Dixon estimated the airflow as 375-500 L/s @ 200 Pa system static pressure and recommended the “Ductline
SCD 355-4D inline centrifugal ventilation fan” for the peak heat room. The quoted price was $69,468.75, including GST with Tyco sending installers to Norfolk to do the work.
[16] After significant email correspondence over details of the quote, the plaintiffs accepted a revised quote of $36,730.00 sent on 31 July 2003 and paid that amount by international money transfer on 1 August 2003.
[17] Something was sought to be made during the hearing of the fact that Tyco’s formal quote was addressed to “cash sales” and a Mt Wellington box number. But this was explained by Mr McKay, an accountant called by Tyco, as being a not uncommon device adopted by businesses for one-off sales. Nothing further depends on that point.
[18] The equipment was installed by local labour but it became obvious to the plaintiffs early on that something was wrong.
[19] They first sought assistance from Mr Dixon who, by email dated
11 September 2003, gave them advice about the peak heat room machinery due for delivery that day. The local electrician had difficulty installing it. A replacement peak heat controller was delayed in transit.
[20] Even with the first batch of compost ready for pasteurization on
29 September 2003, difficulties occurred. There was, even then, the threat of legal action between the parties. Ms French said they were losing $10,000 on that batch.
[21] The plaintiffs on 24 October 2003 asked Mr Dixon to travel to Norfolk to assist because they had “lost the first lot which never pasteurized”.
[22] Mr Dixon was on Norfolk between about 30 October-4 November 2003. Ms French said that Mr Dixon drilled a hole in the peak heat unit housing to measure the water gauge pressure with the room loaded with compost and the unit running. She said it should have been obvious to him that the fan was generating insufficient pressure. He also monitored the peak heat process on his laptop and downloaded the
program for them. The program operated the damper settings within the peak heat room.
[23] Having checked the operation, she said Mr Dixon supervised the loading of batch 2 into the peak heat room but when he turned on the peak heat unit, the room pressurised and blew open the sealed double doors. He directed the removal of half the 3,800 kgs of compost. She said that, too, should have indicated the fan and motor were too small.
[24] When the peak heat process for batch No. 2 was completed, the trio found the compost completely dehydrated by continuous use of the heaters. That was contrary to the original specifications. Mr Dixon hosed the compost to rehydrate it.
[25] Mr Dixon, however, said he understood his brief for the visit was only to ensure the Tyco equipment had been properly installed and operated according to specifications. He made the point he is no expert in mushroom growing and therefore did not regard his role as teaching Avoca how to pasteurise compost or grow its crop. He said he did a “dry run” without compost on an accelerated cycle to check the components and found the dampers had been incorrectly wired. All other components were working to specifications, including the fan. His investigation showed the fan was operating within specification, that is at 200 Pa static pressure, but at the time he did not appreciate a fan of that capacity was inadequate for pasteurizing the volume of compost the plaintiffs wished to process. He acknowledged the peak heat room doors blowing open but thought it was at a later stage in the cycle than described by Ms French. Halving the compost load was a joint decision, as was hosing the dehydrated compost. He said he thought the process during his visit went “fairly well”, but that was “because all the equipment had worked according to specifications”. With no experience of mushroom farming, he was unaware that dehydrating compost with heaters results in poor mushroom yield.
[26] There was a difference of view between Ms French and Mr Dixon as to what, if anything, he agreed to do in relation to Avoca’s problems on return to New Zealand. She suggested he undertook to look for fans of greater capacity. Her brief,
but not her file note, said that in her conversation with a Mr Lewis on 10 August
2004 she told him:
Arthur [Dixon] had agreed during his visit to our farm that he would look into fans when he returned to NZ although he did not indicate that the one we had was too small.
[27] Mr Dixon said he was to check into the availability of another fan should the existing one be damaged by water. His concerns had been aroused by drilling the hole in the fan casing while on Norfolk.
[28] In a 12 November 2003 email to Tyco, Ms French was positive of good results, but whether that was from the rehydrated compost in batch 2 or the pinned compost from batch 1 was debated during a batch by batch cross-examination of Ms French certain details of which will require later consideration.
[29] Ms French said the plaintiffs’ ebullience was soon misplaced. They continued to persevere with the third load of compost loaded into the peak heat room on 23 November 2003 and the cycle proceeding thereafter but she said production was significantly less than expected. They were harvesting about .39 kgs of cut mushrooms per 10 kg bag of compost against an expected yield of 2 kgs. Dehydration, mites and coprinus, a mushroom pathogen, remained a persistent problem. Compost temperature control was difficult because of the fan’s inability to recirculate air. That in its turn required use of heaters to achieve the necessary high temperatures for pasteurization and condition to counteract heat loss. They reduced the amount of compost loaded into the peak heat room but doubled the number of batches. All of that notwithstanding, they were unable to achieve their expected yield.
[30] Even so, apart from a few desultory email contacts between November
2003-February 2004 about minor parts, there was no contact whatever between the plaintiffs and Tyco until 10 August 2004. Though Ms French said Avoca’s phone records listed several brief calls to Mr Dixon during the period, they were only to leave messages and produced no replies.
[31] In the meantime, Ms French said the plaintiffs persevered, assuming their inadequacies were the cause of the ongoing poor yields.
[32] Finally, on 10 August 2004, in frustration Ms French tried to telephone Mr Dixon. She found he left Tyco a couple of months previously. She spoke to Mr Lewis and recorded the gist of the conversation in a contemporaneous file note which relevantly read:
-reported continuing problem with peak heat unit – now 20 batches of compost and still not 1 batch has achieved required conditions
-advised Greg [Lewis] that Arthur [Dixon] had said the machine was used on other farms in NZ and suggested perhaps communication with them may be useful
--asked for co-operation in achieving a solution together as opposed to need for legal action
--Greg agreed to speak with his boss and Arthur and get back in contact with us within a couple of days.
[33] In a further conversation with Mr Lewis on 24 August 2004 she was told that Mr Lewis’s manager, a Mr Kilduff, had “spoken with someone in the mushroom industry who was helping him understand the issues”. That proved to be a Mr Barnes from Meadow Mushrooms.
[34] Mr Lewis emailed Ms French on 23 September as to an approach he had made to a spawn laboratory and to another fan supplier which was “involved to select a fan motor that will fit in the same space and improve air velocity through the compost”. He said Tyco was “hoping to come up with a solution as soon as possible”, and promised to maintain contact. That followed a telephone call by Mr Nicolai to Mr Lewis on 8 September 2004 in which the latter promised to follow the matter up.
[35] There was no further contact between the parties until 8 November 2004 when Ms French emailed Mr Barnes saying Avoca intended to take legal action against Tyco. The email said that “we have just cooked our 25th batch” and estimated their losses at over $100,000. She complained:
Given their continued failure to assist in correcting a problem that has been known by them for at least 12 months and now we are able to categorically prove that our performance is directly attributable to continued failure to pasteurise.
[36] Mr Barnes’ response the same day indicated Tyco’s approach had been about “the amount of air required for the peak heat process”. Mr Barnes thought other causes were possible. He had given Mr Kilduff the “amount of air per ton of compost that our peak heats operate to”, that being “between 300 and 500 cubic metres of air per tonne of compost per hour”.
[37] Having heard nothing further, Ms French emailed Mr Lewis on 21 November
2004 saying:
Could you please advise exactly what progress Tyco has made in resolving the outstanding problem with our peak heat unit.
We are less that [sic] satisfied with the way Tyco has handled our grievance. Please review your files to understand the instructions we provided prior to
purchase (capacity) and subsequent communications with regard to
continuing difficulties despite having needed to vary from what was requested.
Please advise whether legal action is in fact the only option to have Tyco give this the priority it rightfully deserves.
As you are aware from my telephone calls to you – we have experienced significant financial losses given the continued failure of the peak heat unit to pasteurise as it was intended to. These losses cannot be sustained any further and despite the attempts we have made to be reasonable in good faith that Tyco would do the decent thing this simply has not happened.
[38] On 30 November 2004, Mr Kilduff emailed Ms French in reply saying Tyco had been in “contact with several fan suppliers and discussed outstanding problems experienced with several of your associates in the mushroom industry” and that “information gleaned from these conversations indicate a number of possible reasons for the poor production you have experienced to date”, going on to suggest composition of the compost as the most likely.
[39] Ms French responded the same day saying:
The single biggest problem is the continued inability of the fan to push the air up through the stack and circulate the heat. Our original specifications
requested the ability to peak heat 6-9 tonne of compost and yet the unit we have can barely cope with 1.5 tonne. This is a significant error.
[40] By that date, the email said the plaintiffs had processed 27 batches of compost and industry advice received was that the compost composition was correct but that “it is our opinion that there has been a gross miscalculation of fan size and in accordance with technical and industry practice this has not been correctly provided”.
[41] On 6 December 2004, Mr Kilduff said Tyco was “awaiting additional information from our fan suppliers” and data from mushroom growers. Similar advice was in an email on 7 January 2005 in response to a prompting email from Ms French the previous day. Ms French inferred Mr Kilduff was trying to use as many excuses as possible to avoid accepting responsibility on Tyco’s behalf.
[42] In January 2005 the plaintiffs engaged Mr Harper. He visited Avoca between
2-6 February 2005. His report covered a variety of criticisms of the plaintiffs’ set-up but said that:
Phase 2
Tunnel system: a major design error results in severely compromised functioning, and prevents the proper & complete Phase 2 processing necessary for mushroom growing, with serious consequences for the cropping process.
The major system error, in fan sizing prevents proper Phase 2. Although correct specifications appear to have been supplied by Avoca Mushrooms to the facility manufacturer, the fan supplied with system has insufficient power to circulate the volumes of air required (140 m3 air per tonne compost per hour). Specification supplied called for 90-120 cfm per ton at 4” static pressure. The fan supplied developed less than 1” (200 Pa approximately), or ¼ the specified value (measured after the fan in ductwork by manometer), and no significant airflow was observable through the compost mass. This lack of airflow results in:
• Lack of temperature control. …
• Extreme drying of compost from the use of heaters …
• A requirement for very small volumes of compost in the tunnel – in an attempt to obtain manageable temperatures and some airflow - …
[43] On 3 February, Ms French emailed Mr Kilduff advising of the plaintiffs’ engaging the expert and his report “that there has been a major fan sizing error which has severely compromised our ability to pasteurize our compost”. She detailed the specifications sought and the fact the fan Tyco supplied was capable of only furnishing about 20-25% of what was required. She said that “We need to have this major problem with the fan addressed immediately” as they were then into their 31st batch of compost and wished to avoid problems for all future batches.
[44] Importantly, that produced a response from a Mr Rawnsley of Tyco that day saying that “We are in agreement over the inability of the existing fan to work against a static pressure of 4” water gauge” and that “we are committed to correcting this fault and expect our fan technicians to come back to us by Monday with an answer and fan selection”.
[45] Tyco offered a new fan by email on 7 February 2005. After obtaining Mr Harper’s approval, Avoca accepted Tyco’s offer in a 9 February 2005 email with certain consequential changes required as “fundamental” to correcting the error. Differences concerning specifications of the replacement fan by contrast with the original were sorted out over the following days and on 14 February 2005, Ms French asked Mr Kilduff when delivery could be expected.
[46] Further delays occurred. Mr Kilduff said by email on 24 February that Tyco had been unable to get a firm delivery date from its fan suppliers. By 1 March he was saying Tyco would receive the fan by 15 March. It was eventually received on
29 March 2005 and installed by local labour on 5 April.
[47] Problems in controlling airflow persisted which the local electrician was able to solve with assistance from an Auckland supplier, but on 17 May 2005 Ms French was able to email Tyco saying:
Just a quick email to let you know that the batch of compost that we recently processed in the tunnel was a success and having the invertor gave us the ability to completely control air movement and subsequently we achieved all the required parameters for pasteurization and conditioning with minimal use of the heaters and optimum fresh air intake.
I have waited a week from the time the batch was complete to monitor how the spawned substrate performed and again can confirm that this is good too. The final test of course will be cropping which we will monitor and I will let you know the results.
So finally it looks like the peak heat unit problems are behind us all. Thank you for your assistance with this.
Submissions
[48] Though Ms French competently conducted the plaintiffs’ case, understandably her submissions focused principally on issues of fact.
[49] For Tyco, Mr Thain submitted there was no misrepresentation by Tyco at the time the equipment was purchased. All it did was offer to provide “project budgeting estimates” in its email of 10 July 2003, which Avoca accepted. Tyco then only gave an “estimate of the refrigeration and ventilation requirements for your project, equipment selections and estimate of cost” in its fax of 16 July 2003. The fan was offered for supply by trade name. Avoca bought the equipment on that basis in its 29 July 2003 email. Mr Thain noted the fan was supplied without warranty, the equipment was installed locally and the plaintiffs checked other aspects of the installation, such as heating capacity.
[50] Mr Thain also submitted there was no basis for a finding of a duty of care in what was essentially a contract matter. Accordingly, his submissions on contractual matters also applied to the negligence claim.
[51] Even if Tyco were in breach of a duty of care, Avoca was contributorily negligent judged objectively (Badger v Ministry of Defence [2006] 2 All ER 173 at
187, para [48]).
[52] After the equipment was initially supplied, the plaintiffs failed to mitigate their losses or were contributorily negligent up to 12 November 2003 in relying on Mr Dixon, whom they knew to have no mushroom farming experience. They were unable to control the temperature in the peak heat room and the compost was either dehydrated or failed to kill pathogens and mites. Their email of 12 November 2003 was an affirmation of the contract. Thereafter the plaintiffs again either failed to
mitigate or were contributorily negligent in making no complaint to Tyco until 10
August 2004, despite unsatisfactory results with every batch and incurring losses on each. Given the experts’ views, even allowing for the plaintiffs’ inexperience, continuing to process compost after eight batches without notification to Tyco of the problem and their continuing losses was also either a failure to mitigate or contribution.
[53] Even after the phone call on 10 August 2004, Mr Thain submitted the plaintiffs were dilatory in obtaining expert assistance to diagnose what ultimately turned out to be a simple problem. By contrast, he submitted Tyco, once aware of the plaintiffs’ problems following the 10 August phone call, acted diligently and reasonably in replacing the inadequate fan and motor.
Discussion on liability
[54] The plaintiffs wished to set up a mushroom farm on Norfolk Island and, after researching what was required, approached Tyco to supply the necessary equipment.
[55] A deal was made during the hearing of the “research” which the plaintiffs undertook before that approach, but it was not detailed and may well have consisted of no more than speaking with New Zealand mushroom growers at conferences and obtaining the “Mushroom Cultivator” book. Whatever may be the correct position in that regard, it is clear the plaintiffs were not experts in mushroom growing at any time within the period of this claim, particularly the earlier part of the claim period.
[56] It is equally clear that at no time were the plaintiffs experts in satisfying the engineering requirements for their mushroom growing operation. In their request for supply the plaintiffs merely sent Tyco the detailed specifications appearing in the “Mushroom Cultivator”, including the necessity for a ventilation system to meet the specific detailed requirements from that book cited earlier and relied on Tyco to recommend and sell them equipment which would meet those requirements and amplified their requirements in their email of 10 July 2003.
[57] Tyco’s “estimate” of 16 July 2003 of the requirements repeated the airflow requirements for the peak heat room. Its “equipment selections” were for the “Ductline SCD 355-4D inline centrifugal ventilation fan” in the peak heat room.
[58] Though there were later variations negotiated in other componentry and cost, the Kooline refrigeration quote of 25 July 2003 essentially repeated the 16 July 2003 estimate and it was that quotation which the plaintiffs accepted in their 28 July 2003 email.
[59] The only conclusion to be taken from that exchange is that the peak heat room ventilation system described in the 25 July quote was represented by Tyco as being equipment capable of fulfilling the plaintiffs’ requirements for the ventilation system in that part of their process as detailed in the “Mushroom Cultivator” extract. It matters not that Tyco used the fan’s trade name: the focus was on fan capacity.
[60] As Tyco accepted in its 3 February 2005 email and in its pleadings, the fan recommended and supplied was incapable of meeting the specifications required.
[61] The conclusion must accordingly be that the plaintiffs were induced to enter into the contract with the defendant on the representation by the defendant that the fan and motor initially recommended for the peak heat room would meet the ventilation requirements appearing in the “Mushroom Cultivator” and that the representation was false in that the equipment was incapable of meeting those requirements.
[62] In those circumstances, it is unnecessary to deal in any detail with the alternative claim in negligence beyond recognising that this is essentially a contract claim. Whilst concurrent liability in contract and tort is now well embedded in New Zealand law, in this case at least the liability must be both concurrent and co- extensive and the result as far as relief is concerned identical whichever route is adopted (see the discussions in Burrows Finn and Todd: Law of Contract in New
Zealand 3rd ed (2007) paras 2.3.5 p 25-25, 7.3.4 p 205 and Todd et al Law of Torts in
New Zealand 4th ed (2005) para 1.1.03 p 4-6).
[63] Once that conclusion has been reached, in essence everything else in this claim bears on the defendant’s efforts to rectify the breach and whether the plaintiffs’ actions show a failure on their part to mitigate their losses or that they were contributorily negligent.
[64] The can be subdivided into three lesser periods:
1 November 2003-12 November 2003, the dates selected by Avoca or the plaintiffs as the commencement of their losses and the date of Avoca’s email on which Tyco relies;
12 November 2003-10 August 2004, the date of Ms French’s first call to Mr Lewis; and
the balance of the period to 20 April 2005, the date nominated by the plaintiffs as the date their production losses ceased.
[65] Although it precedes the period of claim, the first period effectively begins with the delivery and installation of the equipment and Ms French’s email to Mr Dixon of 24 October 2003 asking him to travel to Norfolk following failure of the plaintiffs’ first batch of compost to pasteurise.
[66] Mr Dixon travelled to Norfolk to assist and in his evidence said the purpose of his visit was to ensure the equipment performed to specifications. He gave no advice about mushroom growing, being ignorant of the process.
[67] However, two observations must be made in that regard.
[68] The first is that, as is now accepted, since the equipment supplied did not meet the plaintiffs’ requirements, whether or not the peak heat fan and motor achieved the specifications in Kooline’s quote is beside the point. It recommended the fan and motor and has been held thereby to have represented they would meet the plaintiffs’ specified requirements as set out in the “Mushroom Cultivator”.
[69] The second is that Mr Dixon clearly went beyond merely checking compliance with the equipment’s specifications. His reaction to the peak heat room doors blowing open, his recommendation to halve the compost load and his hosing the dehydrated compost on completion of the phase 2 process all show that, with the
plaintiffs, he was endeavouring to ensure the equipment supplied met the plaintiffs’ requirements, not merely its specifications. Since the plaintiffs and Mr Dixon thought a cause of the problem was that they had not operated the peak heat room correctly, it therefore becomes more likely that Ms French was correct in her evidence that when Mr Dixon left Norfolk he said he would “look into fans” on his return.
[70] Seen in that light, Ms French’s email of 12 November 2003 should be seen as an expression of relief that the measures adopted whilst Mr Dixon was on Norfolk might have solved the problems with batch 2, but not as an affirmation that the contract had been properly performed. The plaintiffs could not have been affirming the contract in that email as they simply did not know at that stage whether their problems had been overcome. It accordingly follows that the affirmation defence is not made out and the plaintiffs have not been shown to have failed to mitigate their losses during this period or were contributorily negligent during this part of the claim period.
[71] The second part of the claim period is the most problematic.
[72] What is clear is that, apart from desultory correspondence on equipment matters not germane to the claim, the plaintiffs made no complaint whatever to Tyco about their problems operating the peak heat room between Mr Dixon’s departure from Norfolk on 4 November 2003 and the phone call of 10 August 2004, despite the fact that by the latter date, they had processed 20 batches of compost through the peak heat room, not one batch had been satisfactorily treated, and each batch had caused them significant financial loss.
[73] Ms French said they were considering other possibilities, they were undecided as to the cause of their problems, they were more inclined to attribute the problems to their inexperience than to inadequate equipment, and there are hints of a lack of unanimity between the plaintiffs in this period as to the cause of their woes.
[74] Principally by reference to the plaintiffs’ batch summaries, Ms French was extensively cross-examined with a view to demonstrating that Mr Nicolai and she
did, or should, have recognised at a much earlier stage than they said they did that the peak heat room fan must have been the cause of the fact that not one of the batches of compost they processed during this period met their expectations in terms of saleable crop. She resisted the suggestion that, even from the first batch, the plaintiffs should have recognised the problem was in the peak heat room. They thought the failure of the compost to pasteurize was simply due to their inexperience and incompetence. She gave a similar explanation for the reduced volumes of compost they processed per batch and the fact that coprinus was a continuing problem and resulted from failure to remove all ammonia in the Phase 2 peak heat process. Rehydration was a repeated necessity because they regularly used heaters beyond what was expected. They doubled their planned production to two batches of compost per month to try to overcome their yields being well down on what they expected. Despite all those indicia, she said “it never occurred to us that the problem was right in the middle” of the process. She adhered throughout to her view that it was only just prior to her call to Mr Lewis on 10 August 2004 that Mr Nicolai and she finally concluded there could be no explanation for their problems and reduced yields other than inadequate capacity in the peak heat room fan.
[75] She also continued to maintain that position despite extensive cross- examination in which she accepted they knew their costs as against their returns were such that, although they did not know the quantum, they were losing money with each batch. They only managed to keep going by selling compost, Mr Nicolai taking outside work, borrowing from family members and Ms French prematurely leaving her job to gain the advantage of a cash payment.
[76] They may have been hoping, as Ms French implied, that their management of the process, including the peak heat room, would improve as they became more experienced – indeed there were yields from batches 8-15 inclusive showing rather greater income than any other of the first 20 batches – but the actual yields were well below their expected yields (other than for batch 12), and there was no satisfactory explanation as to why they did not seek expert advice during that period, or complain to Tyco. After all, even if they thought Mr Dixon left Norfolk to look into improved fans on his return, they heard nothing from him in that regard and it is pertinent to note that, when they engaged Mr Harper, it took him very little time to diagnose their
problem and recommend a solution. Had they engaged him at about, say, batch 10, the quantum of their claim is almost certain to have been greatly reduced.
[77] In evaluating that evidence, it is pertinent to bear in mind that Dr Martin said the plaintiffs should have taken action to address the problem immediately after processing the first batch of compost. He regarded it as “quite remarkable that the plaintiffs then proceeded in the way they did”. He concluded:
I would have expected a reasonable mushroom grower in the plaintiffs’ position to have taken action to seek expert mushroom advice at a much earlier stage than they subsequently did. I have known very experienced growers when faced with particularly difficult disease issues to actually cease operations until they have solved their problems rather than continue to make further batches of compost and suffer continuing economic loss. After 5 batches of compost had been processed through the bulk pasteurising tunnel the plaintiffs must have realised that they had a serious problem. Given that the plaintiffs were new to the business, given that mushroom growing is notoriously difficult and that it takes up to 4 or 5 weeks after the phase 2 process is completed before mushrooms appear I can accept the plaintiffs waiting a little longer before seeking outside help.
[78] Dr Martin supported that view by reference to what he thought was the plaintiffs knowing from the first batch of compost that there was a problem in the bulk pasteurization tunnel, Mr Dixon’s visit failing to solve the problem, continuing problems after his departure including the need for heaters, dehydration, continuing mite and disease problems and other factors, including the plaintiffs’ inexperience. Whilst he acknowledged their persistence in carrying on, it was, he said, in the face of losses they must have known they were incurring.
[79] Dr Martin said the plaintiffs should have engaged the services of an expert long before they involved Mr Harper because he recognised the issue almost immediately. As Dr Martin put it in answer to a question in cross-examination, they could have:
… saved themselves a lot of angst by within the first say four to five months of operation the first 8 batches … if you put your hand up and said ‘I have a major problem with my operation’. You could have contacted one of these experts … he could have come out to your operation and helped you right at the beginning. Honestly Ms French I cannot for the life of me understand why you continued to operate in the way you did.
[80] Dr Martin justified his eight batch estimate by reference to the problems the plaintiffs experienced at the outset and the continuing problems of the same nature so that after eight batches the plaintiffs “should have decided that you wanted to re- think what you were doing”. That should have alerted the plaintiffs to the fact they had a problem, particularly allied with their poor yields, mites, coprinus, and the like. He said:
I believe that you should have recognised that problem much earlier [than August 2004] and, for the life of me, I cannot comprehend how you would continue to spend vast sums of money put batches of compost through without actually making any alterations to the situation.
[81] In response to Ms French’s evidence that the problem in the peak heat room never occurred to the plaintiffs before August 2004, and asked why inexpert growers such as they should have recognised symptoms such as inadequate air flow as early as the first batch, Dr Martin said that “all the signs should have indicated to a reasonable mushroom grower that the issue was fairly and squarely with the phase 2 operation”. His view was justified, not only by the factors just outlined but also because he thought they had looked at other operations and presumably had seen properly pasteurized phase 2 compost elsewhere, with that comment, in its turn, being largely based on research Ms French said the plaintiffs had undertaken.
[82] Tyco has the obligation to show the plaintiffs failed to meet their obligation at law to take reasonable steps to mitigate the losses, though, as the learned authors of Burrows, Finn & Todd op cit para 21.2.4 (a), p 711) say:
The burden which lies on the defendant of proving that the plaintiff has failed in his or her duty of mitigation is by no means a light one, for this is a case where a party already in breach of contract demands positive action from one who is often innocent of blame.
[83] There is force in Ms French’s submission that by continuing to process compost, the plaintiffs went some way towards mitigating their loss by generating a certain income and, without that, had they stopped production entirely, Tyco would have criticised them for their inactivity and its assertion of a failure to mitigate would have had more weight. This is thus a case either of partial satisfaction of the plaintiffs’ obligation to mitigate their loss or the accrual of benefits to the plaintiff as a consequence of their conduct after breach (British Westinghouse Electric &
Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673, Burrows, Finn and Todd (op cit para 21.2.4 (b) p 713).
[84] The experts’ view was that, even factoring in the plaintiffs’ inexperience and other relevant circumstances, reasonable growers in the plaintiffs’ position would have sought outside help after processing eight batches of compost. Given that even the plaintiffs’ expert agreed with that estimate, it is therefore extremely difficult to understand why the plaintiffs soldiered on through so many batches of inadequate pasteurization before complaining, still less retaining an expert.
[85] During this period there is no reasonable explanation for the plaintiffs’ failure to conclude that the inadequate fan and motor were the cause of their failures, or for their failure to take expert advice, or for their failure to complain to Tyco earlier and require it to rectify its default.
[86] The plaintiffs are held to have fully complied with their obligations to mitigate their loss in respect of batches 1 and 2, the first failure and the limited production achieved following Mr Dixon’s visit. Of the 18 further batches of compost which they processed up to Ms French’s phone call of 10 August 2004, all produced below expectations. It would be reasonable to regard the experts’ eight batch realisation threshold as commencing from and including batch 3, as the joint views of the experts indicate. On that basis, on all the evidence during this part of the claim period, the plaintiffs must be held to have been shown to have failed to comply with their obligation to mitigate their losses in respect of batches 11-20 inclusive. The monetary consequences of that finding will require more detailed consideration in the quantum section of this judgment.
[87] The third period requires much less detailed consideration.
[88] As a result of Ms French’s telephone call on 10 August 2004, Mr Lewis agreed to investigate the plaintiffs’ problems. Little happened beyond Mr Lewis’s email of 23 September 2004 until after the plaintiffs took their own advice from Mr Barnes in early November 2004, threatened legal action in their email of
21 November and identified the fan problem again in their email of 30 November.
[89] Even that failed to galvanize Tyco into effective action. It had dissembled and procrastinated up to that point for nearly four months. There does not appear to have been any sense of urgency shown on Tyco’s part in correcting the plaintiffs’ problems even though they had been identified as stemming from Tyco supplying an inadequate fan and motor.
[90] During the period between the 30 November 2004 email and Mr Rawnsley sending the 3 February 2005 email, Tyco’s dissimulation continued. It suggested other causes than the inadequate fan and motor for the plaintiffs’ problems rather than accept responsibility for its engineering failure. Its contact with mushroom industry representatives in New Zealand seems spasmodic at best. It failed to recognise that Avoca’s problem was an engineering one and it was for Tyco, the engineer, to overcome it.
[91] Both parties agree that Tyco acted with reasonable despatch to rectify Avoca’s problems following its 3 February 2005 admission down to the end of the claim period, consistent with agreement as to the capacity of the replacement fan, delivery opportunities and the like.
[92] In all those circumstances, no case has been made out by the defendant which could lead to any conclusion that the plaintiffs failed to mitigate their loss or were contributorily negligent during the whole of the period from 10 August 2004-
20 April 2005.
Quantum
[93] Questions of quantum are not without difficulty in this case. This is largely because, as not infrequently occurs, the parties – especially Avoca – principally focussed at the hearing on liability. As a result, as will be seen, a number of quantum issues remained unclear at the conclusion of the hearing and, if the parties are unable to settle quantum as a result of the tentative conclusions which follow, a further hearing may be required, notwithstanding the cost and inconvenience such would entail.
[94] The first issue relates to the plaintiffs’ possible production and the market for their mushrooms.
[95] The plaintiffs’ claims summarised earlier in the judgment were in $NZD and were calculated on the plaintiffs being able to produce 300 kgs of mushrooms per week at 70% efficiency, 210 kgs per week, for each of the 76 weeks between
1 November 2003-20 April 2005. It appears they therefore claim on the basis they should have been able to produce 15,960 kgs (210 kgs pw for 76 weeks) during the claim period but only produced 2,433 kgs and accordingly must be claiming for the deficiency, 13,527 kgs. However, their production overview for batches 1-33 inclusive for the whole of the claim period showed they expected to harvest 6,982 kgs of mushrooms (at 2 kgs per 10 kg bag of compost) but their actual yield was
2,760.6 kgs, a deficiency of 4,221.4 kgs. The experts’ figures appear to differ again. Those differences plainly require explanation.
[96] A number of additional observations require to be noted as far as the claim is concerned:
a) It was agreed that Norfolk is a closed economy for fresh fruit and vegetables. Neither importing or exporting of such commodities is permitted.
b)The plaintiffs have a near monopoly on the supply of mushrooms to Norfolk. There was mention in the evidence of their principal competition being tinned mushrooms from the Australian mainland and the possibility was mentioned that another mushroom grower might set up operations, but the claim proceeded on the basis that the plaintiffs have an effective monopoly on fresh mushrooms for the Norfolk market.
c) The claim was calculated on the basis that the plaintiffs had and could have sold all their mushroom crop at $A16 per kg (translated to
$18.25 per kg in $NZD at the rate of exchange current when the claim was filed). That is a high price per kg but there was no dispute during
the hearing that the plaintiffs had sold and would have been able to sell their entire crop at that price during the claim period.
d)Norfolk has a permanent population of about 2000 and about 30,000 visitors per annum. The plaintiffs maximum weekly market was accordingly about 2,500 people (2,000x52 = 104,000+30,000=
134,000 ÷ 52= 2,577). In fact the plaintiffs actual market per day or per week must be significantly less than that figure given that not everybody on Norfolk on any given day would choose to eat fresh mushrooms. That notwithstanding, Ms French said Avoca sells all the mushrooms it produces.
e) The plaintiffs put in evidence what were said to be their financial statements from 15 September 2003-30 June 2003, their sales and receipts for the same period and a statement of their receipts and payments for the period 1 July 2005-31 December 2006 plus details of their expenses, loans, production, cropping and sales summaries together with operation overviews. Though in the form customarily used by chartered accountants, Mr McKay made the point that no accountancy firm was named on the document, nor were there the customary explanations as to the basis on which the figures had been prepared. That is of some importance since the figures suggested that processing each batch of crop cost the plaintiffs $A6555.50 without allowance for overheads or electricity, yet there was no objective verification, let alone evidence, as to the way that figure was calculated.
f) As mentioned, the claim was translated from $AUD to $NZD at the rate of exchange current when the claim was filed. That does not seem the appropriate measure. Avoca’s expenditure was in $AUD and they are entitled to be paid whatever the amount of the judgment may be in $NZD sufficient to produce the correct figure in $AUD at the exchange rate operative at the date of payment.
[97] As mentioned, Avoca’s claim was for loss of production at 300 kgs gross and
210 kgs net based on 70% efficiency throughout the claimed period. The plaintiffs ability to harvest 300 kgs per week gross is accordingly critical in calculating their loss.
[98] Has Avoca showed that, had Tyco supplied a fan and motor of represented capacity, they would have achieved weekly production of 300 kgs gross throughout the claim period?
[99] The plaintiffs’ claim of a crop of 300 kgs per week before efficiency deductions was based on Mr Harper’s assertion in his report that once the plaintiffs problems with the fan and motor were overcome their:
… farm has the capacity to produce at or above 300 kg per week finished product level.
[100] Mr Harper was not called to give evidence and Tyco objected to that passage in his report on the basis that it was not admissible as truth of its contents in Mr Harper’s absence.
[101] Ms French said Mr Harper’s absence arose through misunderstanding on their part. It is difficult to accept that submission when, in the pre-trial conference before Potter J on 24 April 2007, the Judge noted Mr Harper would be a witness for the plaintiffs and that “both expert witnesses would be coming from Australia to give evidence”. In those circumstances, objection to Mr Harper’s opinion as to possible production from Avoca’s operation must be upheld and that opinion ruled inadmissible.
[102] However, that is not the end of that aspect of the matter since Ms French said that up to the hearing Avoca was producing over 300 kgs of mushrooms per week and selling all its crop. The difficulty with that assertion is that it is almost entirely unsupported by evidence.
[103] The plaintiffs’ production overview of their performance with the new fan – probably the most reliable indicator of their likely performance during the claim period had adequate equipment been supplied – was that in batches 34-49 inclusive,
20 April 2005 to December 2006, their actual yield was 5,971.7 kgs or, over that 88 week period, 67.86 kgs per week.
[104] That may be contrasted with the operation overview figures for the yield from batches 1-25 inclusive, those batches processed during the 76 week claim period, of 2,760.6 kgs or 36.33 kgs per week.
[105] If that comparison is valid, during the claim period Avoca lost the difference in production between those two figures, 31.53 kgs per week or 2,396.28 kgs over the claim period, amounting, at Avoca’s constant sale price of $A16 per kg, to
$A38,340.48 before deductions for Avoca’s failure to mitigate.
[106] The plaintiffs have been held to have failed to mitigate their loss for about half the 39 week period from 12 November 2003-10 August 2004. Batches 3-20 inclusive, those produced during that period, would appear to have yielded the plaintiffs a total of 1,832.6 kgs or 47 kgs weekly. As against the average actual production of 67.86 kgs per week achieved during the period after 20 April 2005, the amount by which the plaintiffs’ notional production during the 12 November 2003 –
10 August 2004 period exceeded actual production was 20.86 kgs per week, giving a loss over that 39 week period if this approach is valid of 813.54 kgs, approximately half of which at $A16, $A6511.52 should be deducted from Avoca’s losses giving a net loss to Avoca on this method of calculation of $A31,828.96.
[107] However, those calculations are patently speculative and may not be the appropriate measure of the plaintiffs’ loss for at least three main reasons.
[108] The first is that the differential of 31.53 kgs p.w. is not the equivalent of loss per batch of compost processed. Processing each batch of compost to completion of its harvest takes 10 weeks and accordingly the tentative figures just discussed may not accurately reflect Avoca’s gross and net losses.
[109] Following on from that, the second point is that the experts’ measure of production potential was based on a kg yield of fresh mushrooms per tonne of phase 1 compost. Although that method of calculation appears suspect if for no
other reason than it depends on how many batches of compost are processed within a given period, the possibility cannot be discounted that the experts’ measure may be one adopted in the mushroom growing industry for production loss calculations.
[110] The third reason for taking the view that a straightforward comparison between the expected yield and actual yield over the claim period and the subsequent period may not be the appropriate measure may lie in the question of efficiency.
[111] The evidence did not discuss in any detail the concept of efficiency (or a reduction in expected yield for inefficiency) beyond a certain amount of evidence suggesting the industry norm is that expected production is reduced by a percentage, presumably to cover such matters as disease and other production factors affecting yield. Presumably production loss calculations in the mushroom growing industry are based on saleable yields, that is to say the net production following allowance for the factors mentioned, but, even if such is the case, there was a difference in view as to the appropriate percentage reduction. Mr Harper’s figure as reflected in the claim was that 70% efficiency was appropriate. In evidence, Ms French was disposed to accept that 65% efficiency was appropriate. But Dr Martin estimated Avoca’s likely yield during the period to April 2005 with an adequate fan at 80-100 kgs of fresh mushrooms per tonne of raw phase 1 compost for about the first year of operation with that figure then rising with greater experience and skill to the average 123 kgs per tonne of phase 1 compost they have achieved since the replacement fan was installed. The 123 kgs figure was, he thought, in the plaintiffs’ circumstances a reasonable level of production not likely to increase much in the future. Plainly those differences also require explanation.
[112] The next uncertainty concerns the question of the plaintiffs’ losses.
[113] Much was made during the hearing of the calculation from the financial records that Avoca’s processing of each batch of compost cost a constant $A6555.50 before allowing for electricity and overheads when the returns for each batch came nowhere near meeting that figure. Mr McKay made the point that the total cost to Avoca of retaining its experts was less than the cost of processing just one batch of compost. His view and that of Dr Martin was that the plaintiffs should have
instructed experts at some stage during the November 2003-August 2004 period and either reduced production or ceased production altogether until their problems were identified and corrected.
[114] Other than in one respect, the Court’s present view is that evidence of the plaintiffs’ losses was irrelevant to issues of quantum.
[115] This is a claim for lost income during the relevant period through reduced production occurring because the machinery supplied by Tyco was inadequate for the required performance parameters. It is not a claim for loss of profits. Accordingly, the fact the plaintiffs were making losses has no bearing on quantum.
[116] The only aspect of the claim in relation to which the plaintiffs’ loss is relevant is whether they should have done earlier what Dr Martin and Mr McKay suggested and either reduced production or ceased production altogether and retained an expert in order to diagnose their problems. However, had they done so, they may have been open to criticism in the way earlier discussed. In that respect, the Court accepts Ms French’s evidence that Avoca knew that they were losing money on processing each batch of compost but were unaware, until well after these proceedings were issued, how much they were losing on each batch. In any event, the question of losses may be irrelevant because some business proprietors continue to run loss-making businesses for reasons such as tax benefits, lifestyle or other factors unassociated with making profits.
[117] It may also be helpful to detail the Court’s views on the other items specifically included in the claim. They are:
a) Consultants’ costs $NZ5588.50. These consist of Mr Harper’s fees and disbursements totalling $A3300 and Mr Dixon’s travel and accommodation $A2000. The plaintiffs would appear to be entitled to recover from the defendant the total of $A5300.
b)Electrical services $NZ294.37. The two invoices are for $A186.70 and $A70. The plaintiffs would appear to be entitled to recover from the defendant the total of $A256.70.
c) Engineering services $NZ700.79. The invoice is for $A614.45 and the plaintiffs would appear to be entitled to recover that sum from the defendant.
d)Additional electricity expenses. Originally claimed at $9409.22, the parties agreed during the hearing that the sum recoverable by the plaintiffs from the defendant under this head was $NZ5000, translated into $AUD at the exchange rate applicable at date of payment.
e) Disbursements including toll calls of $NZ912.41. These seem to be Norfolk Telecom’s account for all charges for the plaintiffs’ telephone. ABD 305 to 313 is Norfolk Telecom’s telephone accounts to the plaintiffs with annotations for the calls to Mr Dixon and other Tyco employees. It is for the parties to agree on the sum for which the plaintiffs are entitled to judgment against the defendant for this item, again in $AUD.
[118] Then, turning to costs, the plaintiffs were legally represented up to the hearing but not during it. The Court’s present inclination is that costs are allowable to the plaintiff on a 2B basis up to the commencement of the hearing and the plaintiffs are each entitled to refund of their travel and accommodation costs and their disbursements, including Court fees, for the whole of the proceeding including the hearing. Ms French is also entitled to an allowance for witnesses’ expenses for the whole of the hearing. Mr Nicolai did not give evidence but it was reasonable for him to be present throughout the hearing and the plaintiffs are entitled to recover his travel and accommodation expenses.
[119] The plaintiffs are also entitled to be paid their Court disbursements and the judgment sum should bear interest at the rate payable under the Judicature Act 1908 from the end of the claim period down to the date of payment.
[120] The parties are to have one month from date of delivery of this judgment to confer and endeavour to agree on issues of quantum having regard to the observations made in this section of the judgment. They are to report the result of those discussions by memoranda and if agreement cannot be reached, a telephone conference involving the plaintiffs and both sets of solicitors will be organised on a date and time to be fixed by the Court taking account of the time difference between New Zealand and Norfolk so necessary arrangements can be made as to the means by which the hearing can be concluded.
………………………………..
WILLIAMS J.
Solicitors:
White Fox & Jones (BM Nathan) P.O. Box 1353, Christchurch
DLA Phillips Fox, PO Box 160, Auckland
Copy for:
A T French, First-named Plaintiff at Email: [email protected]
Indra Gamage, Case Officer, Auckland High Court
Email: [email protected]
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