Irrigation Services (Wairarapa) Limited v Benton

[2012] NZHC 2559

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2010-441-000280 [2012] NZHC 2559

BETWEEN  IRRIGATION SERVICES (WAIRARAPA) LIMITED

Plaintiff

ANDALEXANDER ELMON BENTON AND STEWART WILLIAM BENTON PARTNERSHIP

Defendant

ANDADRIAN EDWARD MANNERING Counterclaim Defendant

Hearing:         30-31 July 2012, 1-3 August 2012, 5 September 2012 and 7

September 2012

Counsel:         J O Upton QC and I W Thorpe for Plaintiff and Counterclaim

Defendant
T J Anderson and W J Hamilton for Defendant

Judgment:      4 October 2012

In accordance with r 11.5 I direct the Registrar to endorse this judgment with the delivery time of 2.30pm on the 4th day of October 2012.

RESERVED JUDGMENT OF COLLINS J

TABLE OF CONTENTS

Introduction ....................................................................................................................................... [1] Overview ............................................................................................................................................ [6] The irrigation system ...................................................................................................................... [5] The agreement to install an irrigation system ................................................................................ [5] Installation and commissioning of the irrigation pump and irrigation system ............................. [26] Computerised control and monitoring system .............................................................................. [52] Effluent disposal and water reticulation contract ........................................................................ [55] Effluent disposal ........................................................................................................................... [55] Stock water reticulation system .................................................................................................... [67] Supply of water to the milk shed ................................................................................................... [73]

Is the defendant required to pay the balance of the contract price for the irrigation system?. [77]

Damage caused when inserting the pump .................................................................................... [90]

IRRIGATION SERVICES (WAIRARAPA) LIMITED V AE BENTON AND SW BENTON PARTNERSHIP HC WN CIV-2010-441-000280 [4 October 2012]

Commissioning of the bore and irrigation system ........................................................................ [93]

Should the plaintiff have tested the bore before the bore and irrigation system was commissioned?

.....................................................................................................................................................[110] Cause of the bore collapse...........................................................................................................[117] Variations to the irrigation contract ............................................................................................[119] Computerised control and monitoring system .............................................................................[119] Bore redevelopment and hydrocyclone ....................................................................................... [127] Counterclaims relating to the irrigation system ......................................................................... [130] The effluent disposal and water reticulation contract................................................................ [136] Effluent system ............................................................................................................................ [136] Stock water reticulation system .................................................................................................. [143] Variations to the stock water reticulation system ....................................................................... [149] Milk shed water supply ............................................................................................................... [150] Interest ........................................................................................................................................... [154] Conclusion...................................................................................................................................... [162]

Introduction

[1]      The plaintiff, Irrigation Services (Wairarapa) Ltd, is an irrigation contracting company.  It seeks $307,044.581 from the defendant, Alexander and Stewart Benton, who together are a farm partnership.   The plaintiff’s claim concerns two different contracts,2  variations to those contracts and interest.  The plaintiff claims that it is owed:

(1)       $43,532.25 being the balance of the costs of an irrigation system the

plaintiff installed on the defendant’s farm;

(2)$200,184.73   for   an   effluent   disposal   system   and   stock   water reticulation system that the plaintiff installed on the defendant’s farm;

(3)       $10,820.41 for additions and variations to these contracts;  and

(4)       $52,516.17 interest.

1      In this judgment all monetary sums are inclusive of GST unless stated otherwise.

2      The first contract concerned the installation of an irrigation system for the farm partnership. The second contract concerned the installation of an effluent disposal and stock water reticulation system. There were variations to both contracts. The defendant has treated the second of these contracts as comprising three separate contracts. However, the essential terms and conditions of the second contract were the same for all components of that contract. Accordingly, this judgment addresses the parties’ dispute on the basis that there are two contracts.

[2]      The defendant denies the plaintiff’s claim based in contract.  The essence of the defences are that the plaintiff has not performed its contractual obligations.  The defendant says:

(1)it should not have to pay the balance of the sum under the irrigation system contract because the irrigation system does not work;

(2)the effluent disposal system and stock water reticulation systems have not been properly completed and nothing is payable in respect of those systems until those systems are finished and working properly;

(3)       the variations to the contracts were never agreed to;  and

(4)       interest was never agreed to.

[3]      The defendant has brought a counterclaim against the plaintiff for breach of contract. The defendant claims it is owed:

(1)$156,905.96  for  costs  it  incurred  as  a  result  of  delays  in  the installation of the irrigation system.  The defendant says these delays were the plaintiff’s fault;  and

(2)$1,234,439.81 for additional costs the defendant says it has incurred because of the way the plaintiff installed the irrigation system pump and/or commissioned the pump and irrigation system.

[4]      Alternatively,  the  defendant  seeks  $1,234,439.81  from  the plaintiff or  its managing director, Mr Mannering.  This aspect of the counterclaim alleges either the plaintiff or its managing director negligently caused the defendant damage in relation to the installation of the irrigation system pump and/or commissioning of the pump and irrigation system.

[5]      The plaintiff denies all of the counterclaims. The plaintiff says:

(1)The defendant agreed to the extension of time that occurred when the irrigation system was installed;

(2)Shortcomings to the irrigation system are entirely due to the failure of the irrigation bore which the defendant had developed by another contractor.  The plaintiff says it is not responsible for the failure of the bore;

(3)Any  issues  with  the  effluent  system  and  stock  water  reticulation systems are minor and that the defendant should pay the plaintiff what it says it is owed;

(4)The  plaintiff  and  Mr  Mannering  also  deny  that  they  negligently installed the irrigation system pump and/or commissioned the pump and irrigation system.

Overview

The irrigation system

The agreement to install an irrigation system

[6]      Mr  Alex  Benton  (Mr  Benton)  and  his  brother  Stewart  Benton  own Wainawhenua Farm (the farm) which is a 118 hectare dairy farm situated at Kaiwaiwai in the southern Wairarapa.  Although the farm is owned by a partnership, Mr Benton has had the day to day responsibility for the overall management of the farm since 2001.  Mr Benton and his brother purchased the farm from their father in

1992. The Benton family have been farming in the Kaiwaiwai region since 1851.

[7]      The success of any dairy farm is highly dependent upon a reliable source of water.  Without a reliable source of water a dairy farm is unlikely to be able to grow the types of pastures that dairy herds require.   Reliable water systems  are also essential  for  drinking  water  for  stock,  cleaning  yards,  cooling  milk  vats  and disposing of effluent.

[8]      The southern Wairarapa often experiences drought conditions during hot, dry and windy summers.  Dairy farms which lack suitable water supplies in the southern Wairarapa are required to take expensive steps to mitigate the effects of poor water supply.   Those steps include importing supplementary feed for stock and grazing stock off site.

[9]      In 2004 the defendant decided to explore additional sources of water on the farm.  A production bore was drilled by Baylis Bros in March 2004.  Baylis Bros are an experienced well drilling company that has been in business since 1946.  The bore was a success.  It yielded 44.59 litres per second3  of clear water over a continuous seven day pump test carried out between 19 and 26 May 2004.  After this test was concluded the bore was capped.

[10]     In December 2004 the defendant applied for resource consent to use water from the bore drilled by Baylis Bros.  That application was opposed.  The opposition caused significant and expensive delays.  Ultimately the greater Wellington Regional Council granted consent on 19 October 2007 for the defendant to extract water from the bore.

[11]     During  the  course  of  October  and  December  2007  Mr  Benton  invited proposals from several irrigation companies to provide an irrigation system for the farm.   In November 2007 Mr Benton’s then lawyer, a Hawke’s Bay practitioner, provided  Mr  Benton  with  the  contact  details  of  Irrigation  Services  Ltd  and Mr Mannering.   Irrigation Services Ltd is owned by Mr Mannering’s family trust. Irrigation Services Ltd owns Irrigation Services (Wairarapa) Ltd (the plaintiff), and another company, Irrigation Services (Southern) Ltd.

[12]     Mr Mannering met Mr Benton on the farm on three occasions.  At one of those meetings held in May 2008 Mr Benton explained that he wanted an irrigation system  that  could  irrigate  118  hectares,  allow  fertiliser  to  be  delivered  using irrigation lines, operate automatically with minimal involvement of farm staff, and effectively monitor water extracted from the bore.   This later requirement was a

condition of the resource consent granted by the Wellington Regional Council.

3      This was sufficient to irrigate the farm at the rate required by the defendant.

[13]     In  mid  June  2008  Mr  Mannering  visited  the  farm  again.    He  presented

Mr Benton with two documents:

(1)A  “design  brief”  which  was  presented  on  stationery  bearing  the plaintiff’s letterhead, but signed “Adrian Mannering, Irrigation Services (HB) Ltd”;4   and

(2)A plan based on a map of the farm which depicted the proposed irrigation system.

[14]     The design brief included costings relating to some of the equipment and materials that were to be used in the irrigation project.  Excluded from the costings at that stage were costs associated with installation, excavations and electrical work.

[15]     On 18 and 25 June 2008 Mr Mannering sent further “costing breakdowns”. The second of those proposals covered all items other than two items called “stock water reticulation” and “computerised control options”.   The proposal contained a payment schedule comprising:

(1)the payment of a deposit of ten per cent ($43,532.25) on acceptance of the quote;

(2)       the  payment  of  a  progress  payment  on  17  July  2008  comprising

40 per cent of the contract price ($174,128.99);

(3)       a second progress payment on 17 August 2008 comprising another

40 per cent of the contract price ($174,128.99);  and

(4)payment of the remaining ten per cent ($43,532.25) on the commissioning of the system.

4      There is in fact no company called Irrigation Services (HB) Ltd.

[16]     This proposal recorded  that an additional payment schedule and  contract would be supplied “on confirmation of water reticulation” and “computerised control options”.

[17]     On 26 June 2008 a meeting was held at the offices of Markhams, a Masterton accounting  firm.    Present  at  that  meeting  were  Mr  Benton,  Mr  Perry  (from Rabobank, the defendant’s bank), Mr Stewart (from Markhams, the defendant’s accountant and holder of a power of attorney from Mr Stewart Benton), Mr Ladd (a dairy farm consultant, who at that stage was employed by Baker & Associates), and Mr Mannering.

[18]     At this meeting Mr Mannering explained his background, his experience, and the  contents  of  the  proposal.     Draft  contract  documents  were  presented  by Mr Mannering.

[19]     The  proposal  suggested  a  completion  date  of  12  September  2008.    The deadline for completion was discussed at the meeting.  Mr Benton was happy for the final deadline to be 1 October, the traditional start of the irrigation season on the farm.    From  Mr  Benton’s  perspective  he  expected  that  by 1  October  2008  the defendant’s new irrigation system would be fully tested and commissioned.   He expected any defects would be identified and rectified and that by 1 October 2008 the farm would have an irrigation system capable of irrigating the whole farm.

[20]     At the 26 June meeting Mr Benton and Mr Ladd stressed the need for the new irrigation system to be fully functioning by 1 October. A number of crucial decisions relating to the supply of additional stock feed and stock rates were dependent upon the irrigation system working by 1 October 2008.  Mr Perry and Mr Stewart asked questions about the cost of the items that had not been included in the costings to date.

[21]     At the end of the meeting Mr Benton and his advisors decided to accept the proposal  they  had  received  from  Mr  Mannering  on  behalf  of  the  plaintiff. Mr Benton therefore wrote a cheque for $43,532.25 and gave it to Mr Mannering.

This was the ten per cent payment that was payable upon acceptance of the quote. At no stage did the parties sign a written contract.

[22]     The proposal presented to the meeting on 26 June 2008 was confined to an irrigation system.  There had, however, been some discussions between Mr Benton and Mr Mannering about installing a stock water reticulation system.   The only reference to this in the documentation presented on 26 June 2008 were the words “additional payment schedule and contract to be supplied on confirmation of stock water reticulation”.

[23]     In early July 2008 Mr Mannering returned to the farm and introduced to Mr Benton  the  plaintiff ’s  employees  who  would  be  working  on  site.    Those employees were Mr Spiers (project manager) and Mr Coulson, who worked on the project under Mr Spiers’ supervision.  Work commenced on installing the irrigation system soon after this meeting.

[24]     On  or  about  10  July  2008  Mr  Benton  asked  Mr  Coulson  to  talk  to Mr Mannering  about  what  would  be  involved  in  upgrading  the  farm’s  existing effluent disposal system and installing a fresh water system to the milking shed.5

Mr Benton’s purpose in raising these topics was that he wanted to take advantage of the trenches that were being created for the irrigation system.  Mr Benton thought that it would be sensible if all services were contained in the same trenches.

[25]     I will return to issues associated with the effluent disposal system and the stock water reticulation system later in this narrative.

Installation and commissioning of the irrigation pump and irrigation system

[26]     On 19 July 2008 the defendant paid the plaintiff the first progress payment

($174,128.99).

5      The installation of a fresh water system to the milking shed was undertaken as part of the installation of the new stock water reticulation system undertaken by the plaintiff.

[27]     It is accepted by the parties that in mid-July 2008 there was a period of heavy rain which resulted in partial collapsing of some of the trenches that had been dug on the farm to accommodate the irrigation system pipes.  The parties disagree however about the duration and consequences of the bad weather.   It does appear to be accepted however that on or about 24 July 2008 there was a discussion between Mr Benton and Mr Coulson about a suspension in the trenching work schedule to enable existing trenches and surrounding fields to drain.

[28]     In his evidence Mr Benton explained that from his perspective, by early August 2008 the weather conditions were satisfactory.   He said that he sent text messages to Mr Coulson asking him to return to the site.   Mr Benton explained further that when he did not get a satisfactory response from Mr Coulson he telephoned Mr Spiers and requested an immediate resumption of work.  Mr Benton said he was “becoming worried about the increasingly tight deadline to complete the

project by 1 October 2008”.6

[29]     On 20 August 2008 the defendant paid the second progress payment to the plaintiff ($174,128.99).

[30]     There  was  still  no  resumption  of  work.    Mr  Benton  explained  that  on

7 September  2008  he  called  Mr  Mannering  to  complain  that  work  was  behind schedule.   He sought assurances from Mr Mannering who, he said, explained that one of his companies was incurring difficulty with installing an irrigation system in a vineyard and that as soon as that project was finished the plaintiff would return to the

farm and “hit the job with a big hammer”.7   Mr Benton took this to mean that the 1

October 2008 deadline would still be met.

[31]     On 15 September 2008 the plaintiff provided the defendant with an “amended costing breakdown”. That “costing breakdown” related to:

(1)previously uncosted elements of the variations to the irrigation system contract;  and

6      Irrigation Services (Wairarapa) Ltd v A E Benton & S W Benton Partnership HC Wellington

CIV-2010-441-280, 30 July 2012 Evidence in chief, A E Benton at [152].

7 Notes of Evidence, Evidence in Chief, A E Benton at [154].

(2)the supply and installation of the effluent and stock water reticulation systems.

[32]     Mr Benton explained in his evidence that on 26 September 2008 he again telephoned Mr Mannering and asked when work would resume.  He said that after the   1 October   2008   deadline   came   and   went   he   continued   to   telephone Mr Mannering.

[33]     It  appears  to  be  accepted  that  work  did  not  resume  again  until  about

20 October 2008.  On 23 October 2008 Mr Mannering provided Mr Benton with a chart showing the timeline for completing the installation and commissioning of the irrigation, effluent distribution, stock water reticulation and milk shed water supply systems.  By this time it was estimated that all of this work would be completed in early December 2008.

[34]     By 8 November 2008 Irrigation Services (Wairarapa) Ltd was in a position to install a submersible pump down to almost the bottom of the bore.

[35]     At this juncture it is necessary to explain the bore and the pumping system in more detail.

[36]     The bore is 50.5 metres deep.   It proceeds through a number of geological stratas including three layers of peat and several layers of gravel and clay.  Apart from the layers of peat and clay, most of the stratas are water bearing.  At 46 metres the bore enters a layer of water bearing blue gravel.  At the bottom of the bore at

50.5 metres is a layer of peat.

[37]     The  bore  as  constructed  by  Baylis  Bros  included  a  steel  casement  that descends down the bore approximately 48 metres. At the bottom of the bore the well drillers placed a six metre high steel mesh screen.  In this case all but approximately

2.64 metres of the screen was positioned within the last 3.64 metres of the steel casing.

[38]     To  extract  water  from  the  bottom  of  the  bore  the  plaintiff  inserted  a submersible pump (in this case a Grundfos pump) down the bore.  The top of the pump was connected to a series of steel tubes (risers) each of which were 6.5 metres long.  Each length of riser was added as the pump was lowered down the bore.  In its correct position, the pump sits above the steel mesh screen within the water bearing zone near the bottom of the bore.  In this case, the distance from the top of the bore to the intake valve on the pump was 41.1 metres.  The distance between the pump and the top of the screen was 2.1 metres.  The steel risers were connected to the head works  which  comprise  valves  and  pipes  that  regulate the flow of  water that  is pumped from the bore to the irrigation system.

[39]     The diagram annexed to this judgment depicts the bore, the pump, the screen, the risers and the geological stratas through which the bore penetrates.

[40]    On 5 December 2008 the pump and irrigation system was ready to be commissioned.    Two  of  the  plaintiff’s  employees  were  charged  with  this  task; John Jones (an engineer and experienced well-digger) and Colin Montgomerie (who also had considerable experience installing pumps and irrigation systems).

[41]     Mr Jones kept a log of the commissioning process.   He explained that he followed standard procedures which involved flushing debris from the bore.   It is convenient at this stage to quote directly from Mr Jones’ evidence in chief:8

Commissioning was carried out as per routine, with the next stage of the procedure  not  being  started  until  the  previous  preceding  stage  was completed.   Nothing out of the ordinary was done during or after the commissioning procedure.   Each step was done gradually and the system was never allowed to run beyond one half to two thirds of its specified capacity.   However, we did notice a reduction in well capacity once we started commissioning. Alarm bells rang because of two things:

(a)       The water failed to clear.  It remained very discoloured and dirty;  and

(b)       The  drawdown  of  water  in  the  well  was  very  rapid, compared with the draw down rate on the original pump test back in 2004.

8      Irrigation Services (Wairarapa) Ltd v A E Benton & S W Benton Partnership HC Wellington

CIV-2010-441-280, 30 July 2012 Notes of Evidence, Evidence in Chief, John Jones at [24].

[42]     In this case, a rapid “drawdown rate” in the well is an indication that the

volume of water in the bore is lower than expected.

[43]     The  bore  continued  to  discharge  dirty  water.    By  14  December  2008

Mr Benton could see that “the water that was being pumped visibly contained peat and sand, and was obviously discoloured”.9     He became increasingly concerned when on 17 December 2008 he observed that the bore water was continuing to discharge peat and mud.   Mr Benton explained in his evidence that on 22 and 23

December 2008 he became aware of extensive blockages to many of the irrigation lines.10    Mr Benton said that in late December 2008 he was aware that there were significant problems with the irrigation system.  The spray from the sprinklers was rising and falling rapidly.  On 6 January 2009 Mr Benton collected a wheelbarrow full of peat/gravel material from the irrigation line in two of the farm paddocks.

[44]     Efforts to remedy the problems that were found with the irrigation system proved to be unsuccessful.   In his evidence Mr Benton explained that the key problems with the irrigation system are:

(1)       an insufficient supply of water to the farm paddocks;

(2)insufficient water pressure at the head works above the bore.  This in turn means that the “pods” at the end of irrigation lines do not operate efficiently;

(3)sprinklers in irrigation lines and hydrants are blocked with gravel, sand, mud and peat;

(4)the water supplies from the bore are laden with gravel, sand, mud and peat.

[45]     In the second week of January 2009 Mr Mannering met Mr Benton and

Mr Ladd at the farm.  Mr Ladd was quite blunt.  He pointed out that the irrigation system was supposed to have been fully functioning by 1 October the previous year.

9 Notes of Evidence, Evidence in Chief, A E Benton at [173].

10 Notes of Evidence, Evidence in Chief, A E Benton at [178].

During the course of this meeting Mr Mannering raised the possibility of installing a hydrocyclone at the head works.  A hydrocyclone is a device that is used to extract debris such as gravel from water.   The hydrocyclone was installed on or about

14 January 2009.  The hydrocyclone proved to be ineffective because it was not able to extract organic material such as peat.   In fact, the pressure of the hydrocyclone may have contributed to a reduction in pressure and consequential water flow to the extreme ends of the irrigation system which were up to two kilometres from the bore.

[46]     After the hydrocyclone was installed the plaintiff completed construction of a bridge over a stream on the farm.  The plaintiff also completed repairs to the effluent spreader system.  According to Mr Benton this work was completed on 18 February

2009.  He says this was the last work the plaintiff did on the farm.

[47]     During the course of the next month the plaintiff sought payment of the balance of the money it believed the defendant owed.   Mr Benton refused to pay. From his perspective the works were not complete.

[48]     On 9 April 2009 a second meeting was held at the offices of Markhams in Masterton.  Those present at the meeting were the same gentlemen who attended the first  meeting  at  the  accountant’s  offices  on  26  June  2008.    At  that  meeting Mr Mannering explained why the outstanding invoices should be paid.  Mr Stewart’s notes of the 9 April meeting clearly record that at that stage the defendant and its advisors  thought  the  failure  of  the  bore  was  not  the  plaintiff’s  fault  and  that Baylis Bros would need to address the problems with the bore.

[49]     The Grundfos pump which had been installed by the plaintiff was removed on 8 August 2009.  On the same day Baylis Bros carried out work on the bore in an effort  to  improve  its  efficiency.     Baylis  Bros  continued  these  efforts  in  late September 2009.  Their efforts were not particularly successful.  In mid-November

2009 Baylis Bros installed a borrowed pump into the bore.  This also proved to be ineffective.   Between 11 and 15 January 2010 Baylis Bros removed the borrowed pump, cleaned out the bore and removed the steel mesh screen.  A pump test was carried out by Baylis Bros on 15 February 2010 which revealed a maximum water

yield of just 20.57 litres per second.  On 8 March 2010 the replacement pump had to be removed as it was not functioning.

[50]     In the end it became apparent that the bore was incapable of producing the necessary volumes and quality of water that the farm required.  I will discuss issues relating to the failure of the bore in more detail later in this judgment.

[51]     The  dispute  between  the  parties  encompasses  variations  to  the  original contract for the installation of the irrigation system.  I will now briefly outline the issues relating to the dispute concerning the installation of the computerised system for controlling and monitoring the extraction of water from the bore.

Computerised control and monitoring system

[52]     It was a condition of the resource consent for the irrigation bore that water extracted from the bore be carefully controlled and monitored.  Thus, it was always understood by the parties that the irrigation system would require a computerised control and monitoring system.

[53]     The costs of the computerised control and monitoring system were explained in the 15 September 2008 “amended costing breakdown” sent by the plaintiff to the defendant.   That document explained that the computerised control system would cost $13,312.13.

[54]     The plaintiff arranged for an “i-Quest” computerised control and monitoring system to be installed.   The defendant disputes that it is liable to pay for the “i- Quest” system that was installed by the plaintiff.   I will deal with the issue of liability concerning the computerised control system later in this judgment.

Effluent disposal and water reticulation contract

Effluent disposal

[55]     Dairy cows are milked twice a day.  On the farm, cows are required to stand in the yard adjacent to the milking sheds for up to three hours a day.  The effluent produced from the cows is collected in a sump under the milking shed yard where it is segregated over a stone trap and then transferred via pipes to be dispersed by a spray irrigator that slowly moves over paddocks.

[56]     In  2008  the  defendant  resolved  to  upgrade  the  existing  effluent  disposal system.  A firm called Ordish & Stevens was engaged to undertake this work.  The upgrade included the installation of underground pipes to transport effluent to certain paddocks, and the installation of hydrants at various points in those paddocks to which the spray irrigator could be connected.

[57]     In June 2008 Mr Benton discussed with Mr Mannering the possibility of the plaintiff working with Ordish & Stevens so that some of the trenches which were to be dug for the irrigation system could also be used for the effluent disposal system. No agreement was reached on this issue at this time.

[58]     In early July 2008 Mr Benton discussed the effluent disposal system with Mr Coulson.   As a result, Mr Coulson offered to see if the plaintiff could locate suitable hydrants to be used in the effluent disposal system.  Further discussions also took place at this time about the plaintiff doing some of the installation of the effluent disposal system.

[59]     In his evidence, Mr Benton explained that he sought a price from the plaintiff for its proposed role in the installation of the effluent system.  As a result of these discussions, Mr Benton said he then discussed  options for the effluent disposal system with Mr Donaldson, an employee of the plaintiff.   He said he then asked Mr Donaldson to provide him with a written proposal similar to that which had been presented on 26 June in relation to the irrigation system, so that it could be assessed and discussed.  Mr Benton’s evidence was that he never in fact received “a design or

detailed pricing for the effluent system”.11   Instead, he said that Mr Coulson showed him a sample of a hydrant that Mr Coulson had sourced.  He said that “a week or so later several hydrants turned up” and that when he asked Mr Coulson for information about  the  cost  and  design  of  this  work  he  was  told  not  to  “...  worry.   Adrian Mannering will look after you”.12

[60]     Mr Benton explained that once Mr Coulson:13

started installing effluent mains and hydrants in each of the paddocks that they were [installing the irrigation system, he] felt powerless to stop him continuing without causing significant delay to the project.  This was even though no price or design had been agreed by the farm partnership.

[61]     The 15 September 2008 costing breakdown contained a payment schedule. Included in that schedule was a reference to payment for the computerised control system for the irrigation system.  All other references in the payment schedule relate to the supply and installation of the effluent and stock water reticulation systems. The payment schedule specified that 80 per cent of the total costs relating to the supply and installation of the effluent and stock water reticulation system (and the computerised control and monitoring system) was to be paid in September 2008. The remaining 20 per cent was to be paid in January 2009.  When GST is added to the figures contained in the 15 September 2008 schedule I calculate that the plaintiff was requiring payment of:

(1)$163,147.80 in September 2008  being 80  per cent of the cost of supplying and installing the effluent and stock water reticulation systems (including 80 per cent of the computerised control equipment for the irrigation system);  and

(2)$40,036.95 January 2009 being the remaining 20 per cent relating to the cost of supplying and installing the effluent and stock water reticulation system (including 20 per cent of the computerised control

and monitoring equipment for the irrigation system).

11 Notes of Evidence, Evidence in Chief, A E Benton at [124].

12 Notes of Evidence, Evidence in Chief, A E Benton at [126].

13 Notes of Evidence, Evidence in Chief, A E Benton at [128].

[62]     As with the irrigation system no written contract was signed by the parties. Mr  Mannering  and  Mr  Benton  appeared  at  this  stage  to  be  relying  on  the

15 September 2008 “additional costs breakdown” and their verbal understanding of the basis of the contracts.

[63]     It appears that effluent pipes and hydrants were installed by the plaintiff in all but eight of the 37 paddocks.14   The eight paddocks which were excluded from the effluent disposal system were judged to be too close to streams and water courses to enable effluent to be sprayed.   There is no issue about the fact that the effluent disposal system does not extend to these paddocks.

[64]     The defendant has refused to pay for any of the effluent disposal system.

[65]     Mr Benton has said that the effluent disposal system does not work properly. In his evidence he said that some of the problems encountered with the effluent disposal system include:15

(1)       blockages in the effluent mains at two places;

(2)a section of the effluent pipe was laid at too acute an angle under a water course, thereby causing a substantial loss of flow and build up of heavy materials at that point;

(3)effluent is only applied to seven of the paddocks that are closest to the effluent sump;

(4)effluent is not supplied at a consistent pressure and rate as required by the resource consent permit that had been granted for the disposal of effluent on the farm;

(5)the effluent main pipe passes through a stream bank near water levels which creates obstacles when water flows are increased.  In addition

14     I had treated paddocks 7 and 7A and 8 and 8A on the map at agreed bundle of documents tab 6 as being separate paddocks.

15 Notes of Evidence, Evidence in Chief, A E Benton at [131].

the effluent main has been washed out twice where it crosses a water course called the Battersea Stream.

(6)       there is no effluent main to paddocks 24 to 28.

[66]     Later in this judgment I will address the issues associated with the disputes over the effluent disposal system.

Stock water reticulation system

[67]     To be successful a dairy farm requires an efficient stock water reticulation system.  If there is an inadequate supply of water to cows then milk production is compromised.  The location of water troughs in paddocks is also important to reduce stock movement and consequential pasture damage.

[68]     Mr  Benton  said  in  his  evidence  that  in  early  2008  he  explained  to Mr Mannering the farm’s requirement for stock water.  It is accepted that by the time of the 26 June 2008 meeting no proposal for a stock water reticulation system had been prepared by the plaintiff.   The only reference in the 26 June 2008 irrigation system proposal to a stock water reticulation system is a reference to an additional payment schedule and  contract being supplied once the stock water reticulation proposal had been agreed to.

[69]     Mr  Benton  said  that  in  fact  he  “did  not  receive  any  design,  plan  or specification to the stock water system”16 until 15 September 2008 when he received the amended payment schedule which, (when GST is added) stated the price for supplying and installing the stock water reticulation system was $107,450.47.

[70]     In August  2008  several  truck  loads  of  1300  litre  drinking  troughs  were delivered  to  the  farm.   Although  he  was  not  provided  with  a  written  proposal Mr Benton was nevertheless sure that the plaintiff knew what it had to deliver.  From

his perspective Mr Benton was expecting:17

16 Notes of Evidence, Evidence in Chief, A E Benton at [101].

17 Notes of Evidence, Evidence in Chief, A E Benton at [105].

(1)an appropriately sized pump in the bore used to supply stock drinking water (this is a different bore from the irrigation bore);

(2)risers and head works connected to a network of pipes to take the stock water to the troughs located in paddocks across the farm;

(3)a suitable shed to accommodate the electrical equipment required to control the water reticulation system;  and

(4)the necessary number of troughs to provide sufficient water to stock in each paddock.

[71]   The defendant has not paid the plaintiff’s invoices for the stock water reticulation  system.    Mr  Benton  says  that  the  stock  water  reticulation  system installed by the plaintiff has proved to be very unreliable.  He explained that “for the period 2008 to 2010 the farm did not use the new stock water system because of reliability problems”.18    In essence, the defendant says the stock water reticulation

system does not function because (among other reasons):19

(1)The  variable  speed  drive  controlling  the  reticulation  of  water frequently stops;

(2)The variable speed drive does not automatically restart once it shuts down;

(3)Three  stock  troughs  were  not  supplied  and  one  was  damaged  on delivery;  and

(4)       Supply lines were not adequately ploughed into the paddocks.

[72]     I will return to the issues of liability relating to the stock reticulation system later in this judgment.

18 Notes of Evidence, Evidence in Chief, A E Benton at [101].

19 Notes of Evidence, Evidence in Chief, A E Benton at [101].

Supply of water to the milk shed

[73]     The supply of water to the cow shed is best considered as a variation to the contract to supply the effluent and stock water reticulation system.

[74]     In the 15 September costing breakdown the plaintiff sent to the defendant, there is a reference to supplying water to the farm milk shed at a cost of $11,816.84 (not including GST)

[75]     In his evidence, Mr Benton acknowledges he engaged the plaintiff to lay an

80 millimetre pipe to the milking shed to provide potable water to that shed from the stock water bore.  However, he also said “this does not currently work because of the problems with the variable speed drive that prevents us using it for stock water”.20

[76]     I will consider the issues of liability relating to the milk shed water supply dispute later in this judgment.

Is  the  defendant  required  to  pay  the  balance  of  the  contract  price  for the irrigation system?

[77]     The parties’ respective positions on this issue can be succinctly stated:

(1)The plaintiff says it has supplied the irrigation system it agreed to supply and that the defendant is therefore legally obliged to pay the balance of the contract price ($43,532.25).

(2)The defendant says the irrigation system is not functioning and that it has not received what it contracted to receive, namely an irrigation system that would irrigate the farm with water of an appropriate standard and quantity.

[78]     Save for some minor matters, there is no significant dispute that the irrigation system supplied and installed by the plaintiff is quite capable of performing to the

20 Notes of Evidence, Evidence in Chief, A E Benton at [135].

standard expected provided it is connected to a suitable supply of clean water.  The parties agree that soon after the plaintiff installed the irrigation pump down the bore and commissioned the irrigation system, the bore constructed by Baylis Bros in 2004 failed.  The key issue in relation to the dispute over the irrigation system is whether the defendant is entitled to refuse to pay the balance of the contract sum because of the failure of the bore.   The defendant’s case is that the bore failed because the plaintiff’s failed to do its work to the standards expected and that the plaintiff’s actions caused the bore to collapse.

[79]     The proposal which Mr Mannering put to the defendant and its advisors on

26 June 2008 was for the plaintiff to install an irrigation system described in detail in the irrigation design plan which was also presented on 26 June 2008.  The plaintiff undertook to install an irrigation system “... in a good workman like manner and as good installation practice requires”.21   In addition, the plaintiff undertook to comply with installation specifications concerning:

(1)       trench depths;

(2)       the “bedding in” of pipe work;

(3)       the laying of field cables; (4)    backfilling of the trenches;

(5)the use of components with a “proven track record” that “conform with industry best practice for the function they are required to perform”.22

[80]     The contract price and payment schedule were explained in Schedule 2 of the proposal.  The contract price was $396,627.14 (excluding GST) although it was also noted that the price did not include the “computerised control option” required to

comply with the consent issued by the Regional Council.

21     ABD 9/174.

22     ABD 9/175.

[81]     The irrigation design plan recognised that there were strict conditions to the consent permit which had been issued by the Wellington Regional Council.   The irrigation design plan identified the water source as being:

(1)       The 50.5 metre irrigation bore said to produce 50 litres per second23;

and

(2)       A monitoring stock water bore, producing five litres per second. [82] The irrigation design plan also explained:24

(1)       The pump specification;

(2)       The irrigation application rate;

(3)The  area  to  be  irrigated  (116.7  hectares)  using  73  lateral  lines connected to sprinklers with an output of 450 litres per hour which were designed to apply 46 millimetres of water to paddock surfaces over a 17 hour period;

(4)That the design differed from “most pod systems” and required “a greater number of pods” at “greater cost” but that the spacing and better sprinklers being proposed ensured the most efficient irrigation system compared to other methods.

[83]     There is no dispute that the plaintiff ’s proposal was accepted on 26 June

2008.  Mr Benton provided the plaintiff with a cheque for $43,532.25 that day, being ten per cent of the contract price that was required upon acceptance of the quote.

[84]     There is also no dispute that at the time the irrigation plan was developed, and the contract agreed to, all believed that the irrigation bore developed by Baylis

Bros in 2004 would produce clear water at a rate of 45 litres per second.

23     In fact it produced 44.59 litres per second when tested in May 2004.

24     ABD 9/136.

[85]     There is also no dispute that save for some minor matters, the plaintiff did supply and install the irrigation system it contracted to supply, albeit two months later than originally agreed.

[86]     I have described as “minor matters” the aspects of the irrigation system that did not fully conform with the irrigation design plan.   The types of matters I am referring to include:

(1)       damage to sprinkler heads caused by sand and silt;

(2)       the location of some bridges carrying pipes over water courses; (3)    issues relating to irregularity of electricity supply;

(4)       problems relating to the construction of the pump shed;  and

(5)       the location of some irrigation hydrants.

[87]     However, these particular items are comparatively insignificant.  The cost of remedying these problems has not been quantified.  Mr Ian McIndoe, a water and soil engineer who was called by the defendant to give expert evidence fairly and accurately agreed the defects to the actual irrigation system were nothing more than

“teething issues” that could be “easily fixed”.25

[88]     The most contested factual dispute in this case concerns the reasons for the failure of the bore, and whether the plaintiff was in any way responsible for the bore’s failure.

[89]     The defendant advanced a number of theories as to why the bore failed.   I shall now address each of the defendant’s suggestions as to why the bore failed and then assess whether any responsibility for the bore failure could be placed upon the

plaintiff.

25     Notes of Evidence, I McIndoe at 309, line 14.

Damage caused when inserting the pump

[90]     The defendant has suggested that the plaintiff caused damage to the bore by dropping the pump or other heavy object down the bore.  The origin of this theory was that when Baylis Bros removed the steel mesh screen on 15 February 2010 it was found to be quite seriously damaged.   Mr McIndoe inspected the damaged screen and explained that the damaged proportion of the screen was approximately

1.16 metres long and was located in the section of the screen between approximately

1.32 metres and 2.48 metres from the upper end of the screen.  The damaged portion of  the  screen  would  therefore  have  been  located  within  the  bore  casing.26

Mr McIndoe formed the opinion that the damage to the screen “was caused by a high compression loading on the screen from above”.  He thought it was “possible that a pump [had] been dropped onto it”.27    He also thought that “if the damage to the screen resulted from the pump being dropped, the impact may have been sufficient to cause a collapse around the screen”.28   What Mr McIndoe was suggesting was that if the pump had been dropped during the process of inserting it down the bore, that may have accounted for the damage to the screen and may also have caused the bottom portion of the bore to collapse thereby significantly reducing the quality and quantity of water that could be extracted from the bore.

[91]     I am satisfied that the pump was not dropped at the time it was installed on 8

November 2008.  I am also satisfied that no other heavy object was dropped down the bore causing damage to the screen or bore by any of the plaintiff ’s employees. My reasons for reaching this conclusion are:

(1)Mr Jones explained the process that is followed when inserting a submersible pump and steel tube risers down a bore.  The top end of the pump is screwed into the bottom of the first riser and held in place at the top of the bore casing by a special clamp called a “frying pan”. The bottom section of each riser is firmly screwed into the top of the

lowered riser which is in turn held in place by the “frying pan” clamp

26 Notes of Evidence, Evidence in Chief, I McIndoe at [59].

27 Notes of Evidence, Evidence in Chief, I McIndoe at [60].

28 Notes of Evidence, Evidence in Chief, I McIndoe at [60].

before it is lowered down the bore.   Thus, while the process for lowering  the  pump  and  risers  into  the  bore  is  not  completely foolproof, the process followed provides a high degree of assurance that nothing untoward happened.

(2)More importantly, Mr Jones struck me as being a very honest person who when cross-examined was frank and unequivocal.  He explained that he has seen a pump drop down a bore hole and that it is very obvious when it happens.   He explained that if a pump is dropped down a bore the bore is:29

rendered  useless  unless  and  until  the  position  can  be rectified.   To retrieve a pump and motor is beyond the expertise and equipment available to an irrigation contractor. It is necessary to get the well driller back with specialist extraction gear to do the job.   Even then sometimes it is impossible to retrieve the unit.  All that can be done then is to close the bore off and drill another one.

Mr   Jones   emphasised   that   nothing   untoward   happened   on

8 November 2008.  He says the pump unit was installed in a routine manner, without any problems.

(3)Mr Montgomerie endorsed Mr Jones’ evidence.  He said there was no problem with installing the pump.   He explained that he has been involved with installing pumps in bores “plenty of times” and that the job on 8 November 2008 was no different from any of the others that he has been involved with.30

(4)Mr Benton was also present when the pump and risers were inserted down the bore.  While he had some concerns about aspects of what he observed,  nothing he described  came close  to  suggesting a major calamity, such as the dropping of the pump or other heavy item down

the bore on 8 November 2008.

29     Notes of Evidence, Evidence in Chief, J Jones at [10]; Cross-Examination of J Jones at 207, lines 10-22.

30 Notes of Evidence, Evidence in Chief, C Montgomerie at [2].

[92]     The evidence produced to me does not provide any factual foundation for the theory that the bore was damaged by the dropping of the pump or other heavy item down the bore by the plaintiff’s employees.

Commissioning of the bore and irrigation system

[93]     Another suggestion from the defendant was that the plaintiff caused the bore to collapse by not adhering to recognised standards when commissioning the irrigation system.  Mr McIndoe explained “it is well known in the irrigation industry that the initial start up procedure is important”.  He said that in this case the pump should have been carefully started at a low flow, ramping the flow up to about 25 per cent of maximum capacity, and held at that position until the water was clear before increasing the pump to 50 per cent of maximum capacity and not moved up to 75 per cent of maximum capacity until the operator was sure that at each stage clear water

was coming from the pump.31

[94]     Mr McIndoe explained that running the pump at a higher flow before being sure that it was safe to do so creates two risks, namely:32

(1)       engaging the pump at too high a capacity may cause a “surge” which

in turn may trigger a collapse of the bore;

(2)engaging the pump at too high a capacity may lead to too much debris being  removed  from  the  bore  thereby undermining  the  long  term stability of the bore.

[95]     Mr McIndoe’s evidence was that if water is not clear after an hour or two of commissioning the bore, continued pumping is not likely to result in water cleaning. He  said  that  continued  pumping  of  water  with  sand  and  other  debris  “would

eventually damage the pump or the bore or both”.33

31 Notes of Evidence, Evidence in Chief, I McIndoe at [33].

32 Notes of Evidence, Evidence in Chief, I McIndoe at [33].

33 Notes of Evidence, Evidence in Chief, I McIndoe at [34].

[96]   There is no dispute that when the pump was first started during the commissioning process on 5 December 2008 it was found that it was wired with reverse polarity.34   It was also accepted that this is not an issue as there is always a

50 per cent chance when a three-phase motor on a pump is first connected that the polarity will be wrong.35    The effect of reverse polarity was to substantially reduce the pump’s output.  Reverse polarity, however, does not cause reverse flow.36

[97]     Mr Jones’ evidence was that the pump was started no more than three times.

There was no surging or high flows.37

[98]     The process of commissioning the bore and irrigation system was carefully documented by Mr Jones in a commission log which he maintained as the commissioning  process  was  undertaken.    He  explained  the  process  that  he  and Mr Montgomerie followed:

(1)They measured the static water level in the bore to give them a start point for measuring water drawdown in the bore after pumping commenced. The static water level was 3.1 metres from the top of the bore casing.

(2)All flush caps were removed and the furthest valves in the irrigation system were mechanically opened.

(3)Mr Jones checked the head works and opened the butterfly valve so that it was opened  approximately one-eighth  to one-quarter of its capacity.   He did this to ensure the flow rate was restricted at the

initial start up phase.

34     The connections to the negative and positive contact points on the pump were reversed.

35 Notes of Evidence, Evidence in Chief, J Jones at [16]; Evidence in Chief, C Montgomerie at [34]; Evidence in Chief, I McIndoe at [36].

36     Notes of Evidence at 208, lines 19-20.

37 Brief of Evidence, J Jones at [24].

(4)Mr Jones arranged for the electrician on site to reduce the minimum speed of the pump from 50 Hz to 35 Hz38 so as to reduce strain on the pump.

(5)Mr Jones also got the electrician to adjust the pressure transcender on the pump so as to reduce the chances of surge occurring.

(6)When the pump was started the reverse polarity was noticed and corrected.

(7)Once the pump was functioning properly the irrigation main line was flushed.  Mr Jones explained that the whole of the irrigation system “was charged up and filled with water.”39

(8)The bore water level was noted.  Mr Jones said the water level in the bore drew down to 12 metres at a flow rate of 16 litres per second (i.e. approximately one-third of its capacity when tested in May 2004).

(9)Mr Jones said that the flushing of the irrigation system continued “as per standard procedure”40  until all debris was seen to be gone from the flushed water.  It was noted, however, that the flushed water was still grey.  Mr Jones said this can occur in bores that have not been used for some time.41

(10)Mr Jones explained that he and Mr Montgomerie continued to flush the valves, one at a time, following standard procedures until all sub main lines had been flushed to remove debris.   However, the water was still discoloured grey at this time.

(11)     The pump was then switched off and all valves closed and flush caps reapplied.  At this point the main butterfly valve was fully open.  At

38     hertz (a unit of frequency equal to one cycle per second).

39 Notes of Evidence, Evidence in Chief, J Jones at [17].

40 Notes of Evidence, Evidence in Chief, J Jones at [18].

41 Notes of Evidence, Evidence in Chief, J Jones at [18].

the same time the electrician increased the speed of the pump from

35 to 45 Hz which is 5 Hz below its maximum speed.   Mr Jones explained that he did not want the pump to operate at full capacity in order to reduce the prospect of straining the bore.

(12)The  nearest  valves  were  then  opened,  the  pump  started  and  the irrigation sprinkler system tested without difficulty.

(13)     Valves in the irrigation system were then opened and a flow rate of

45 litres per second achieved.   The drawdown in the well was 26 metres below the top of the casing, which was still above the previous drawdown of 38 to 39 metres below the top of the casing.

(14)     At this stage the commissioning was completed.

[99]     Mr Jones said in his evidence that each step in the commissioning process “was done gradually and the system was never allowed to run beyond one-half to two-thirds of its specified capacity”.  Mr Jones said, however, that “alarm bells” rang because:

(1)       The  water  failed  to  clear  and  remained  discoloured  and  dirty.

However, a bucket test revealed that there was no sediment or peat pumped from the bore at this time.42

(2)The drawdown rate of the water in the bore was very rapid compared to the drawdown rate which had occurred when the bore was tested in May 2004.43

[100]   Mr  Jones  telephoned  Mr  Mannering  and  explained  what  had  happened. Mr Mannering’s evidence was that he then telephoned Baylis Bros and spoke to Mr Baylis after which the decision was made to continue pumping.  Mr Baylis said

he could not remember speaking to Mr Mannering at this time.  The water extracted

42     A bucket test involves water from the bore being pumped into a clear white bucket so as to enable the operator to see if there is any sediment or other debris in the water.

43 Notes of Evidence, Evidence in Chief, J Jones at [24].

from   the   bore   continued   to   be   discoloured.      However,   by   approximately

14 December 2008 Mr Benton noted that particles of peat were being pumped from the bore.  Mr Mannering explained that following his discussions with Mr Baylis he thought it was safe to keep the pump running.

[101]   When distilled to its most basic, the key issue relating to the commissioning of the bore and irrigation system is whether the plaintiff failed to adhere to expected standards of workmanship by continuing to pump the bore, knowing that the water being extracted remained discoloured.

[102]   The defendant says the plaintiff failed to adhere to expected standards of workmanship.  It relies on the evidence of McIndoe and Mr Lowe.

[103]   Mr McIndoe says that after a few days of pumping dirty water, the pump should have been stopped, removed, and investigations undertaken into the performance of the bore.  Mr McIndoe says that, if necessary, the bore should have been redeveloped and tested.   It is his opinion that the continued operation of the bore resulted in further material being extracted from the bore and that the continued extraction  of  material  from  the  bore  ultimately  compromised  any  chance  of

rehabilitating the bore.44

[104]  The defendant called Mr Lowe as a witness.   He is a hydrologist who supervised the seven day continuous pump test of the bore conducted in May 2004. When he gave his evidence Mr Lowe was cross-examined about the commissioning of the bore and irrigation system in December 2008.   He agreed that it was “acceptable” to run the pump, even though the water was cloudy, provided it was expected that the “cloudiness” in the water would clear.  He agreed that it was a good sign that the bucket test conducted by Mr Jones and Mr Montgomerie did not reveal

any sediment.45

[105]   I am satisfied Mr Jones and Mr Montgomerie followed orthodox procedures when  commissioning  the  well  and  irrigation  system.    Mr  McIndoe  has  raised

44     Notes of Evidence, Evidence in Chief, I McIndoe at [8(c)].

45     Notes of Evidence, H T Lowe at 447, lines 1-9.

questions about whether the commissioning process contributed in some way to the ultimate failure of the bore.  However, Mr McIndoe’s evidence goes no further than to raise questions.   There is not sufficient evidence before me to allow me to be satisfied on the balance of probabilities that the commissioning process in fact contributed to the collapse of the bore.

[106]   I am, however, satisfied on the balance of probabilities that continuing to pump the bore when it was apparent that peat and other material was being extracted from the bore was probably a material cause of the ultimate collapse of the bore.  I agree with Mr McIndoe that by no later than 14 December 2008 the bore pump should have been stopped.

[107]   However, while continuing to operate the bore pump when it was apparent that peat and other material was being extracted probably contributed to the collapse of the bore, the significant issue is whether it was reasonable for the plaintiff to rely on the advice it says it received from Baylis Bros about continuing to run the pump.

[108]   I am satisfied that Mr Mannering probably did confer with Mr Baylis about continuing to pump the bore after Mr Jones had alerted Mr Mannering to the problems he had observed.   I accept that Mr Baylis honestly cannot recall that conversation.    However,  Mr  Mannering  was  adamant  that  he  did  confer  with Mr Baylis.     It  seems  to  me  to  have  been  entirely  likely  and  logical  that Mr Mannering would have spoken to Mr Baylis because he, Mr Mannering needed to know whether or not it was safe to continue to pump the bore.  Mr Mannering needed  to  confer  with  the  well  driller  to  get  that  information.    Mr  Mannering received assurances from the well driller.

[109]   While  it  now  appears  that  shutting  the  bore  pump  down  on  or  about

14 December  2008  would  probably  have  mitigated  further  problems,  I  cannot attribute fault to the plaintiff for the decision to keep the bore pump running.  In my view the plaintiff responsibly sought advice from the well driller.  The plaintiff was entitled to rely on the advice and assurances of the well driller about what was happening in the bore.  Accordingly, I find that the decision to continue to keep the bore pump running from 14 December did not constitute either a breach of contract

on the part of the plaintiff, or a breach of any duty of care that the plaintiff and its managing director may have owed the defendant.

Should the plaintiff have tested the bore before the bore and irrigation system was commissioned?

[110]   The defendant also suggested that the plaintiff had a duty to test the bore before commissioning the irrigation system and that its failure to do so constituted a breach of the plaintiff ’s duty to adhere to workman like standards.  The defendant submitted that the failure to test the bore before the irrigation system was commissioned resulted in the irrigation system being run in circumstances where prior testing of the bore would have revealed problems with the bore which in turn would have led the plaintiff not to have commissioned the irrigation system.  The defendant relied on Mr McIndoe’s evidence to support this submission.  Mr McIndoe explained in his evidence that because the bore had not been used since May 2004 it would have been good practice for the well driller to have returned to the site to check and retest the bore.  In his opinion the plaintiff should have ensured that this

occurred before commissioning the bore and irrigation system.46

[111]   When cross-examined, Mr McIndoe accepted that the primary obligation of the plaintiff was to consult with Baylis Bros about whether or not the bore needed to be retested.47   Mr McIndoe appeared to accept in cross-examination that an irrigation contractor such as the plaintiff was entitled to rely on the advice of the well driller and that it was for the well driller to advise whether or not a dormant bore should be retested.

[112]   In this case Mr Mannering explained that he did in fact consult Mr Baylis about the nature of the bore, its capacity, and where the pump should be placed in the bore.48   In his evidence in chief Mr Baylis was adamant that this conversation did not take place.  Mr Baylis suggested that it would be the responsibility of the hydrologist

to advise an irrigation contractor about the capacity of the well.49    However, when

46 Notes of Evidence, Evidence in Chief, I McIndoe at [32].

47     Notes of Evidence, Cross-Examination, I McIndoe at 313, line 20 to 316, line 24.

48     Notes of Evidence, Evidence in Chief, A E Mannering at 8, line 8 to 9, line 15.

49 Notes of Evidence, Evidence in Chief, R D Baylis at [3].

cross-examined, Mr Baylis said he did recall Mr Mannering contacting him at the time Mr Mannering was designing the irrigation system.  Mr Baylis said that he gave Mr Mannering the details from the bore log and explained what he, the well driller did on site.  He said he could not recall advising Mr Mannering to retest the bore.50

From  Mr  Baylis’ perspective,  once  the  bore  was  drilled,  tested  and  capped  his contractual responsibilities were at an end.51     Mr Baylis also said that the usual practice of his company was to retest any bore that was unused for two years.52

Unfortunately, however, it would seem that in this case Baylis Bros did not convey this suggestion to either Mr Mannering or Mr Benton.

[113]   The practice of Baylis Bros of retesting a dormant well does not appear to be followed by a number of others in the industry.  In this particular case:

(1)Mr Jones, a man of nine years experience as a well driller, and ten years experience in the irrigation contracting industry said he had never seen a situation where an irrigation contractor needed to redevelop and test a well.  He said that in his experience this does not happen, even where bores have been drilled years before they are commissioned.  He said “in normal circumstances, well performance

will not change between drilling and commissioning”.53

(2)Mr Sharratt, a man with 40 years experience of drilling wells in the lower North Island, including 50 to 60 irrigation wells said that when an irrigation contractor designs and installs an irrigation system, the irrigation bore does not normally have to be retested or re- commissioned.  He said:54

If  the  well  has  already  been  tested  and  pumped  and  a resource consent obtained there shouldn’t be any issue about how much water it can produce or water quality issues.  It can just be fired up and away it goes.

50     Notes of Evidence, Cross-Examination, R D Baylis at 363, line 5.

51     Notes of Evidence, Cross-Examination, R D Baylis at 363, line 10.

52     Notes of Evidence, Cross-Examination, R D Baylis at 367, line 10.

53 Notes of Evidence, Evidence in Chief, J Jones at [27].

54 Notes of Evidence, Evidence in Chief, L G Sharratt at [3].

(3)Mr  Butt,  a  very  experienced  well  driller  from  Blenheim,  whose company has constructed approximately 1300 wells said that an irrigation contractor is entitled to rely on the information supplied by the well driller.  He said that:55

In normal circumstances, it would not be necessary for a well to be redeveloped and tested, even if it had been idle for several years.  Well performance does not normally change unless there was some catastrophic failure, and that there was nothing to indicate such a failure in this case.

Mr Butt also said:56

Even if Irrigation Services (Wairarapa) Ltd did not check the well condition before the installation of the pump set, that is usual practice.   It would not normally expect to.   All the necessary and relevant data was contained in the bore log and other information provided by the Bentons [bore test results and council permit] which Irrigation Services could rely on without further enquiry.

(4)Mr James, the managing director of Waterworks (Marlborough) Ltd, an   irrigation   contractor,   was   in   no   doubt   that   “in   normal circumstances, it would not be necessary for a well to be redeveloped and tested, even if it had been standing idle for four years or more”. He said that in his “experience, well performance does not normally change unless there is some catastrophic failure ...” and that “... there was nothing to be concerned about so far as Irrigation Services was concerned.  In fact, totally the opposite.  It is common to have wells

sitting idle for several years after testing”.57

[114]   When cross-examined, Messrs Jones, Sharratt, Butt and James did not change the evidence which I have referred to in the previous paragraph.

55 Notes of Evidence, Evidence in Chief, J Butt at [7].

56 Notes of Evidence, Evidence in Chief, J Butt at [8].

57 Notes of Evidence, Evidence in Chief, P James at [6].

[115]   I draw the following conclusions from the evidence which I have heard:

(1)It is not common practice for irrigation contractors to retest bores that have been idle for periods of four to five years.

(2)Irrigation  contractors  are  entitled  to  rely  on  the  information  they receive from a well driller about the characteristics of a bore.

(3)Baylis Bros routinely retest bores that have been idle for two years or longer.

(4)In this case Baylis Bros did not suggest that the bore which was drilled  and  tested  in  May 2004  be  retested  before  the  pump  and irrigation system was put in place and commissioned.

(5)       The plaintiff could not reasonably have expected to know that Baylis

Bros routinely retest bores that had been idle for two years or more.

(6)Unless  told  by  Baylis  Bros  that  it  was  advisable  to  retest  this particular bore, the plaintiff could not reasonably be expected to have known that it might have been advisable to retest this particular bore before inserting the pump and commissioning the pump and irrigation system.   The plaintiff’s omission to retest the bore beforehand therefore cannot be said to have caused the bore’s ultimate failure.

[116]   I have deliberately refrained from determining if Baylis Bros had a duty to warn the plaintiff of the advisability of retesting the bore in this case.  Baylis Bros are not a party to this proceeding.  My focus is solely upon the responsibilities of the plaintiff.  I have concluded the plaintiff did not breach its contractual responsibilities, or its duty of care when it did not retest or arrange for the retesting of the bore. Similarly, Mr Mannering did not breach any duty of care he may have owed the defendant by not retesting the bore.

Cause of the bore collapse

[117]   A considerable amount of hearing time was spent exploring various reasons why the bore collapsed.  It is not necessary for me to actually determine the cause of the bore collapse.  My focus is upon whether the plaintiff breached the terms of its contractual duties or was negligent when it performed its functions.

[118]   However, as the parties have invested so much effort in exploring the reasons for the collapse of the bore it may assist if I explain that, in my assessment, two factors contributed to the collapse of the bore:

The placement of the steel screen on the bore

(1)In this case six metres of steel screen were placed in the bore but the well casing was lifted to expose just 2.64 metres of screen.  This in turn meant that water passed through the screen at an inlet velocity of

0.54 metres per second when the bore was pumped at 45 litres per second.58    During the course of evidence reference was made to an American textbook “Groundwater and Wells” by F G Driscoll.  This book was referred to as being the “well drillers’ bible”.59     In that textbook the authors refer to research on the causes of bore collapses and suggest that inlet velocity of more than 0.3 metres per second is likely to damage a bore.  In my assessment, the limited exposure of the steel screen below the bottom of the bore casing probably contributed in a material way to the ultimate failure of the bore.

Continued pumping of the bore after 14 December 2001

(2)Once it became apparent that the bore was discharging peat and other material, continued pumping of the bore also contributed to the ultimate collapse of the bore.  By 14 December 2008 it was apparent

that the bore was discharging peat and other debris.  That should have

58     Notes of Evidence, I McIndoe at 326, lines 20 to 25.

59     Notes of Evidence, P James at 279, lines 20 to 25.

alerted the well driller that continued pumping would probably only exacerbate the problems with the bore.

Variations to the irrigation contract

Computerised control and monitoring system

[119]   It was a condition of the bore permit that when the bore was utilised, it needed to be carefully monitored and regulated so that the Greater Wellington Regional Council could fully assess the impact of the extraction of water from the farm partnership’s bore to bores on surrounding property.

[120]   To comply with the consent permit the plaintiff arranged for a computerised monitoring system to be installed.  The system installed was a sophisticated system developed by a company called “i-Quest”.

[121]   The cost of the computerised control system was explained in the plaintiff’s revised schedule of costs dated 15 September 2008.   By my calculations the sum involved was $13,474.13.

[122]   After  the  i-Quest  system  was  installed  the  plaintiff  sought  payment  of

$13,474.13.   When that sum was not paid the plaintiff disconnected the i-Quest system.

[123]   Mr Benton said in his evidence that the i-Quest system did not function properly.

[124]   From the evidence presented to me I am satisfied that any shortcomings in the  i-Quest  system  were  probably attributable  to  the  fact  that  the  bore  did  not function properly.  In other words, I am satisfied that if the bore functioned properly then, in all likelihood, the i-Quest system would also have functioned properly.  If

there were any teething problems with the i-Quest (such as incompatible batteries)60

then those problems were very minor.

60     As referred to by Mr Benton.

[125]   I am satisfied therefore that the computerised control and monitoring system was delivered and installed.   The failure of the bore meant that the computerised control and monitoring system did not deliver the type of information that was expected.  Nevertheless, that is not the fault of the plaintiff.

[126]   It was always understood by the parties that the defendant would have to pay for a computerised monitoring and control system.  The failure of the bore does not absolve   the   defendant   from   its   contractual   responsibilities   to   pay   for   the computerised control and monitoring system that was installed, but which has since been disconnected.

Bore redevelopment and hydrocyclone

[127]   The plaintiff has also sought payment of the sum of $2,057.06 associated with work it apparently did in 2009 relating to redevelopment of the bore.  It has also sought payment for the hydrocyclone which it installed in 2009.

[128]   The defendant says these alterations were carried out by the plaintiff on its initiative and without the defendant agreeing to this additional work.

[129]   The evidence presented to me does not enable me to conclude that the parties agreed  to  these variations  or additions  to  the irrigation  contract.    It  is  possible Mr Mannering thought there was agreement but, having observed the way he gave his evidence it is probable that Mr Mannering did not carefully explain that these additional works constituted a variation to the contract.  Mr Mannering was not very clear in this part of his evidence.  This is an instance where his failure to properly explain himself has created a situation where there was no meeting of minds by the parties over these variations.  This in turn means the plaintiff will have to bear the costs of these additional works as part of its overall cost of undertaking the works in question.

Counterclaims relating to the irrigation system

[130]   The defendant has claimed that delays associated with the installation of the irrigation  system  resulted  in  the  defendant  bearing  the  burden  of  significant additional costs.   The defendant says that these costs related to the purchase of additional supplementary feed over the farm’s normal requirements.  The cost of this additional fee was $156,905.96.

[131]   My finding that the plaintiff was not responsible for the shortcomings in the irrigation system renders it unnecessary for me to fully analyse the defendant’s counterclaims.

[132]   I am satisfied on the evidence that the defendant did not agree to the two months’ delay  to  the  installation  of  the  irrigation  system.    The  defendant  was expecting the irrigation system to be installed and commissioned by 1 October 2008. While Mr Benton was willing to tolerate a short delay of perhaps two weeks, the two months’ delay was way beyond the defendant’s contemplation and never agreed to. There was therefore a prima facie breach of contract by the plaintiff.

[133]  However, that breach did not, on the balance of probabilities, cause the defendants any loss.   Specifically, it  cannot be said that, but for the delay, the defendant would have had a working irrigation system.  The reality is that, even if the plaintiff had installed and commissioned the irrigation system on 1 October 2008 instead of 5 December 2008, the bore was still likely to fail (see conclusion at [118(1)] above).  The defendant would, therefore, have still incurred the costs which they incurred once it became apparent that the new irrigation system was not going to operate effectively.   The plaintiff’s delays were not the cause of the defendant having to incur the additional costs associated with extra stock feed after 1 October

2008.

[134]   The defendant has also counterclaimed for $1,234,439.81 from the plaintiff. The defendant says this sum reflects all the additional costs it has been forced to incur because of the way the plaintiff installed and commissioned the irrigation system (including the bore pump).  The defendant claims this sum either pursuant to

breach of contract, or on the basis the plaintiff, or Mr Mannering, should be liable for this sum because of their negligent conduct.  In summary, the defendant says that the plaintiff and Mr Mannering breached their duty of care to the defendant by failing to use reasonable care, skill and diligence in the design, construction, installation and commission of the irrigation system.  In particular, the defendant alleges that:

(1)       The irrigation system was delivered late;

(2)       The irrigation system and pump were not properly commissioned; (3)          During commissioning the production bore was damaged;

(4)During  commissioning  continued  pumping  of  the  bore  caused accelerated catastrophic damage to the pump and accelerated wear and tear on the irrigation system components;

(5)Continued pumping of the production bore in the presence of silt, sand and peat led to the eventual collapse of the bore.

[135]   My finding that the failure of the bore caused the irrigation system not to perform, coupled with my finding that the plaintiff was not responsible for the bore failure renders it unnecessary to analyse deeply this aspect of the defendant’s counterclaim.  Suffice it to say, in my assessment, the plaintiff is not liable for any additional losses which the defendant claims to have suffered as a result of the alleged breach of contract by the plaintiff and/or negligence by the plaintiff and/or Mr Mannering.   In addition, I have found the plaintiff acted in accordance with acceptable  industry  standards  when  it  performed  its  tasks  in  relation  to  the installation and commissioning of the irrigation system (including the pump).  For these reasons neither the plaintiff or Mr Mannering can be held liable in either contract or negligence for the defendant’s alleged losses.

The effluent disposal and water reticulation contract

Effluent system

[136]   The defendant accepts that on 15 September 2008 the plaintiff quoted a price to supply and install the farm effluent system.  The defendant points out there was no formal acceptance of this quotation.  However, the quotation was not questioned and the defendant clearly accepted the plaintiff’s quotation by agreeing to the plaintiff supplying and installing the effluent system.

[137]   The defendant’s real concern is that the effluent disposal system currently has a number of defects and it has not been commissioned and tested to ensure that it complies with resource consent permits.

[138]   In his evidence Mr Mannering accepted that the effluent system has not been commissioned.  He also did not dispute the deficiencies in the system identified by Mr Benton.  Mr Mannering confirmed in his evidence that the plaintiff would repair the defects to the effluent system and ensure that it complies with the conditions of the resource consent permit.61

[139]   The issue therefore is whether the agreement between the plaintiff and the farm partnership required the plaintiff to be paid in full once the effluent system was commissioned and proven to be compliant with resource consent permits.

[140]   In my assessment, the payment schedule annexed to the 15 September 2008 “additional costing breakdown” clearly envisaged that the defendant would pay the plaintiff  in  September 2008  80  per  cent  of  the  contract  price  for  installing  the effluent system, while the balance of 20 per cent was to be paid in January 2009. While the 15 September “costing breakdown” specified that the remaining 20 per cent of the contract price was to be paid in January 2009, in my assessment the parties intended that this 20 per cent would be paid in January 2009 because by then the effluent system would have been commissioned and fully operating.   In other

words, the 20 per cent was considered to be a retention that was to be paid once the

61     Notes of Evidence, Re-Examination, A E Mannering at 148, lines 1-5.

effluent system was commissioned and found to be functioning in accordance with the conditions of the consent issued in relation to this particular project.

[141]   In my assessment, had the parties been asked on 15 September 2008 if they intended the last 20 per cent of the contract price would be paid once the effluent system was commissioned and fully operating they would have answered in the affirmative.  Implying this term into the contract is, in my assessment, necessary to give business efficacy to the parties’ contract.62

[142]   It  follows  therefore  that  in  my  judgement  the  defendant  is  liable  to immediately pay the plaintiff 80 per cent of the price of the effluent system, and the remaining 20 per cent once the plaintiff has remedied the issues that have prevented the system from fully functioning.

Stock water reticulation system

[143]   The parties agree that on 15 September 2008 the plaintiff provided the farm partnership with a quotation for the supply and installation of the stock water reticulation system.

[144]   Mr Mannering accepts that Mr Benton gave him the specifications for the stock water system.63

[145]   Mr Benton was expecting a system that would: (1)     supply 70 litres of water per cow per day;

(2)have a suitable pump at the stock water bore to reticulate stock water throughout the farm;

(3)       have two 13 litre troughs at each end of the four hectare paddocks;

62     See for example, Liverpool City Council v Irwin [1977] AC 234 at 239, Southland Harbour

Board v Vella [1974] 1 NZLR 526 (CA).

63     Notes of Evidence, Cross-Examination, A E Mannering at 119, line 22 to 120, line18.

(4)       utilise the existing smaller troughs in the smaller paddocks;  and

(5)       have troughs located back to back between paddocks.

[146]   The defendant is concerned that there are a number of defects with the stock water reticulation system. Those defects are:

(1)The variable speed drive that controls the flow of water through the system fluctuates and at times cuts out.  Mr Mannering appeared to accept that there was indeed a problem with the variable speed drive and that this in turn has compromised the reliability of the stock water reticulation system.64   It was not until 2011 that the farm partnership discovered that the plaintiff had possibly installed the wrong variable speed drive.   This discovery was made when the installed variable speed drive was sent to a company in Christchurch called “Drive

Dynamics”.

(2)       Not all the large troughs that were required were in fact supplied.

According to Mr Benton the defendant had to purchase four new troughs at a cost of $1,633.96.  Mr Mannering does not dispute this.

(3)The  supply  lines  to  the  stock  water  system  were  not  adequately ploughed  in.     Mr  Mannering  did  not  dispute  the  evidence  of Mr Benton  when  he  explained  that  the  defendant  has  had  to  pay

$13,310 to another contractor to have this work completed.65

(4)The stock water reticulation system has not been fully tested and commissioned.  Mr Mannering has offered to return to the farm and test the water reticulation system to ensure that it works properly.66

[147]   On  the  basis  of  this  evidence  I  conclude  that  the  defendant  has  paid

$14,943.96 to remedy deficiencies in the stock water reticulation system.

64     Notes of Evidence, Cross-Examination, A E Mannering at 122, line 16 to 123, line 35.

65     Notes of Evidence, Evidence in Chief, A E Benton at [240] and [243].

66     Notes of Evidence, Cross-Examination, A E Mannering at 124, lines 7-19.

[148]   I have also concluded that on 15 September 2008 the defendant accepted that it would have to pay the plaintiff 80 per cent of the contract price relating to the installation of the stock water reticulation system.  In my assessment, the defendant should pay that sum less the $14,943.96 it has paid in relation to this project.  The defendant should only be liable to pay the remaining 20 per cent of the sum quoted for the stock water reticulation system once that system is commissioned.   The plaintiff will need to ensure that the variable speed drive is working properly (if necessary, a new variable speed drive will need to be installed by the plaintiff) before the remaining 20 per cent of the contract price is paid.

Variations to the stock water reticulation system

[149]   The plaintiff also seeks payment for a number of variations to the stock water reticulation system. Those variations are:

(1)The erection of a temporarily water supply.  The defendant maintains that the construction of a temporary water supply was part of the overall price for supplying and constructing a stock water reticulation system  for  the  farm.     Mr  Mannering  appeared  to  accept  that connecting the stock water supply system to the old bore was part of the installation of the stock water reticulation system.67   Furthermore, the plaintiff did not produce any evidence that showed that connecting a temporary water supply was an agreed variation to the contract.

Accordingly I conclude that the plaintiff cannot seek additional payment for connecting a temporary water supply to the stock water reticulation system.

(2)The plaintiff claims that the construction of the stock water pump shed was a variation to the stock water reticulation contract.  When cross-examined Mr Mannering appeared to accept that the pump shed was  part  of  the  stock  water  reticulation  project.68      However,  the

payment  schedule  to  the  15  September  2008  costing  breakdown

67     Notes of Evidence, Cross-Examination, A E Mannering at 123, line 32 to 124, line 11.

68     Notes of Evidence, Cross-Examination, A E Mannering at 122, line 15.

identifies the stock water pump shed as a separate item ($9,487 plus GST). Accordingly, I believe the evidence establishes that this was an accepted variation to the contract.

(3)The plaintiff has also claimed that the supply of electricity to the stock water pump shed was a variation of the stock water reticulation contract.   I do not accept this is a variation to the stock water reticulation  contract.    If  the construction  of  the  pump  shed is  an integral part of the contract, so too must be the supply of electricity to that shed be an integral part of the contract.   The plaintiff has not pointed to any evidence to suggest that the supply of electricity to the stock water pump shed was an agreed variation to the contract. Accordingly, I hold that the plaintiff cannot claim the costs associated with the supply of electricity to the stock water pump shed as an additional item.

(4)The supply and installation of a power cable between the irrigation and stock water pump is now accepted as being a legitimate variation to the contract.  The defendant has now agreed to pay $678, which is the sum claimed for this additional work.69

Milk shed water supply

[150]   The defendant accepts that it asked the plaintiff to install a water supply line from the backup bore to the milk shed and that in the 15 September breakdown sent by the plaintiff to the defendant the plaintiff quoted the sum of $10,262 plus GST for undertaking this work.

[151]   The defendant maintains that because of the difficulties associated with the stock water reticulation system, the supply of potable water to the milking shed has

been compromised.

69 Notes of Evidence, Evidence in Chief, A E Benton at [115].

[152]   Mr Mannering did not appear to dispute that the supply of water to the cow shed has been compromised by difficulties associated with the variable speed drive that regulates the flow of water to the stock water reticulation system.

[153]   Consistent with my conclusions in relation to the other matters referred to in the 15 September 2008 costing schedule, the defendant shall pay 80 per cent of the costs of the milk shed water supply variation to the stock water reticulation contract. The balance should be paid on satisfactory completion of the work involved in supplying potable water to the milk shed.

Interest

[154]   The draft contract which Mr Mannering presented on 26 June 2008 contained the following clause:

Clause 15 – Terms of Trade

Irrigation  Services  Ltd  terms  of  trade  still  applies  and  are  available  on request.

[155]   The terms of trade were never sought by the defendant.  A copy of the terms of trade for the plaintiff were presented in evidence.  Clause 21.2 of those terms refer to interest at a rate of two per cent month being charged on outstanding invoices.

[156]   My calculations suggest the interest rate which the plaintiff has applied to the outstanding invoices in this case is actually 17 per cent per annum.

[157]   The issue I have to decide is whether the defendant agreed to pay interest on outstanding invoices, and if so what rate.

[158]   In this case it is agreed the parties did not sign any contract.  At most the plaintiff is entitled to rely on the quotations it supplied and which the defendant accepted.

[159]   In my assessment, at the time the two contracts in question were agreed to there  was  no  discussion  at  all  about  what  interest  rate  was  to  be  charged  on

outstanding invoices.   The defendant was never aware of the plaintiff’s terms of

trade and did not agree to pay interest at any rate on outstanding invoices.

[160]   The plaintiff bears the onus of proving on the balance of probabilities that the defendant agreed to interest being paid on outstanding invoices.  The evidence does not come close to establishing the existence of any agreement on this issue.

[161]   Accordingly the plaintiff cannot succeed in this aspect of its claim.   The plaintiff is, however, entitled to interest at the usual Judicature Act 1908 interest rates.

Conclusion

[162]   The plaintiff’s claim in contract succeeds to the following extent:

(1)       It is entitled to be paid the balance of the irrigation contract;

(2)It is entitled to be paid 80 per cent of the effluent and stock water reticulation contract and  the variations identified in this judgment (less $14,943.96);  and

(3)It is entitled to be paid the remaining 20 per cent of the effluent and stock water reticulation contracts and variations thereof upon those projects being completed and commissioned.

[163]   The plaintiff is entitled to interest at Judicature Act 1908 rates but no other interest.

[164]   The defendant’s counterclaim in contract and negligence fails.

[165]   The plaintiff is entitled to costs.  I am inclined to award costs on a scale 2B basis but will reserve an opportunity for the parties to file memoranda on this issue within 15 days of the date of this judgment if there is a dispute about the rate that costs should be calculated.

D B Collins J

Solicitors:

Gifford Devine, Hastings for Plaintiff
Gibson Sheat, Wellington for Defendant