Mikro Holdings Limited v Digga NZ Limited
[2024] NZHC 2281
•14 August 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-2016
[2024] NZHC 2281
IN THE MATTER of a money claim BETWEEN
MIKRO HOLDINGS LIMITED
First Plaintiff
RICHARD DRILLING LIMITED
Second PlaintiffAND
DIGGA NZ LIMITED
Defendant
Hearing: 22 – 30 July 2024 Appearances:
K Badcock and L Badcock for the Plaintiffs J Long and H Short for the Defendant
Judgment:
14 August 2024
JUDGMENT OF BLANCHARD J
This judgment was delivered by me on Wednesday, 14 August 2024 at 12:15 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
Solicitors: Badcock Law, Rotorua
Quigg Partners, Wellington
Counsel: J Long, Shortland Chambers, Auckland
H Short, Shortland Chambers, Auckland
MIKRO HOLDINGS LIMITED v DIGGA NZ LIMITED [2024] NZHC 2281 [14 August 2024]
Table of contents
Background [7]
Purchase of the UD300 [11]
First use in 2017 at Wellington International Airport [17]
Use in 2018 at Turks Poultry Farm [19]
Use in early 2019 at Wellington Town Hall and increase in pressure [20]
Use in May 2019 at Cuba Street and Ports of Auckland and first
failure of the UD300 [24]
Use of a replacement UD250 in May to July 2019 at Cuba Street [30]
Repair of the UD300 in the second half of 2019 [32]
Use in March to June 2020 at Victoria Lane Carpark and second
failure of the UD300 [34]
Inspections of the UD300 [38]
The claims, counterclaims and defences [40] Whether the UD300 had the capacity to operate at 300,000Nm [53] Racking [69]
Working the UD300 too hard [81]
Conclusion [106]
Mikro’s claim for breach of the express term in the sale agreement [107] Mikro’s claim for breach of the term implied under s 138 of the CCLA [109] Was the particular purpose made known by Mikro? [111]
Was the UD300 fit for purpose? [123]
The plaintiffs’ claim for breach of the FTA [124]
Richardson’s estoppel claim [125]
Mikro’s damages claim [131]
Richardson’s damages claim [137]
$57,375 to purchase accessories [138]
$40,063.85 to modify the excavator [145]
$28,354.34 for consequential losses due to the unavailability of the
UD300 in May 2019 [147]
$58,678.84 for consequential losses due to the unavailability of the
UD300 in June 2020 [153]
Digga’s counterclaim for repair works [155]
Richardson’s claim for breach of the repair contract [164] Digga’s counterclaim for the cost of airfreighting the upgraded
UD250 from Australia [165]
Result [170]
Costs [174]
[1] The plaintiffs, Mikro Holdings Ltd and Richardson Drilling Ltd (Mikro and Richardson), bought a UD300 screw pile drive and accessories from the defendant, Digga NZ Ltd (Digga). The machine was sold to them on the basis that it had a rated capacity for screw pile installation of up to, and including, 300,000 Newton metres (Nm) of torque.
[2] The machine broke down twice while installing piles. Both times its gearsets suffered a catastrophic failure.
[3] The plaintiffs claim that the UD300 is not capable of installing piles at 300,000Nm without breaking down. Based on this, they make claims for breach of contract and the Fair Trading Act 1986 (FTA) and for estoppel. They seek to recover the full purchase price of the UD300 and the accessories, as well as consequential losses.
[4] The plaintiffs did not lead any expert evidence as to the reason for the failure. They were not able to say why the machine failed. They could not point to any latent defect that it had. Their claims rely on inference. They submitted that I can infer from the fact that the machine broke down twice that it was a “lemon” or a “dud”.
[5] Digga submits that the plaintiffs have failed to discharge the burden of proof. The evidence led by Digga suggested other reasons why the UD300 might have failed. These included the way the machine was operated.
[6] At the end of the trial, I was left uncertain as to why the machine failed. I can only speculate about what occurred. I have therefore concluded that Digga is correct that the plaintiffs have not discharged the burden on them.
Background
[7] Mikro is Richardson’s parent. It is also the owner of construction plant that is used by Richardson in its contracting operation. Richardson is a piling contractor. Its operations include installing screw piles.
[8] Digga sells machinery, including screw pile drives manufactured by Digga Australia Pty Ltd (Digga Australia). Digga Australia was once the owner of Digga, but they are now under separate ownership.
[9] A screw pile drive is a high-torque machine with a hydraulic motor that is mounted on a carrier, such as a loader or excavator. The UD300 is used to insert very large screw piles into the ground.
[10] “Nm” is a measurement of torque. That is a measurement of rotational force. The higher the torque, the more force is applied to the screw pile.
Purchase of the UD300
[11] In late 2016, Richardson needed a new screw pile drive. Gijsbert Buunk, the Manager of Richardson, contacted Digga about purchasing a new machine. He dealt with Dean Hewlett, Digga’s Product Manager.
[12] In their early telephone discussions, Mr Buunk told Mr Hewlett that Richardson needed to operate the screw pile drive up to and at 300,000Nm of torque. He also told him that the screw pile drive would need to be able to mount on Richardson’s 30T Hitachi excavator.
[13] Mr Hewlett recommended the UD300 screw pile drive. Based on Mr Hewlett’s recommendation, it was decided that Mikro would purchase a new UD300.
[14] On 12 May 2017, Richardson confirmed acceptance of Digga’s quote for the UD300 and accessories. It also asked Digga to invoice the cost of the UD300 to Mikro and the accessories to Richardson.
[15] On 19 June 2017, Digga issued two invoices. The first was to Mikro for the UD300 in the amount of $120,000 excluding GST. The second was to Richardson for accessories in the amount of $57,375 excluding GST. Richardson needed the accessories to mount the UD300 to the excavator. The invoices were paid on the same day.
[16] Due to an issue with Digga’s computer system, its terms and conditions of sale were not sent out with the invoices. Nor were any terms and conditions provided by the plaintiffs.
First use in 2017 at Wellington International Airport
[17] On 20 July 2017, Richardson started using the UD300 for the first time at a job at Wellington International Airport. In August 2017, Richardson’s operators noticed that the UD300 was making a strange noise. They were unsure whether to be concerned about it. Mr Buunk contacted Mr Hewlett and told him about the noise. Mr Hewlett arranged for a hydraulic engineering company, Dynaflow NZ Ltd (Dynaflow), to go to the site and take video footage of the UD300 while it was operating.
[18] On 15 August 2017, Mr Hewlett emailed Mr Buunk and said Digga Australia had reviewed the footage and they were not concerned about the noise. Richardson then went on to complete the first stage of the Wellington International Airport job using the UD300, and between November and December 2017, it completed the second stage of the job.
Use in 2018 at Turks Poultry Farm
[19] In March 2018, Richardson used the UD300 on a job at Turks Poultry Farm in Foxton. It was used to install screw piles at up to 150,000Nm of torque without any problems.
Use in early 2019 at Wellington Town Hall and increase in pressure
[20] From late January to early April 2019, Richardson used the UD300 for test piling on a project at Wellington Town Hall. Test piling is carried out to verify the piling design is correct based on actual ground conditions. This is followed by production piling, which is the actual installing of the piles for the project.
[21] In January to March 2019, Mr Buunk and Mr Hewlett exchanged emails regarding the possibility of increasing the maximum torque of the UD300 by
increasing the pressure on the pressure relief valve (PRV). The PRV limits the amount of pressure that can be applied to the screw pile drive by the excavator.
[22] A UD300 is designed to operate at 300,000Nm when it is placed under pressure of 240 bar. The factory setting of the PRV on the UD300 is 240 bar.
[23] On 22 March 2019, Mr Hewlett emailed Dynaflow providing instructions on how to increase the pressure on the PRV from 240 to 280 bar. Dynaflow then made the adjustment. This increased the maximum torque of the UD300 to around 350,000Nm.
Use in May 2019 at Cuba Street and Ports of Auckland and first failure of the UD300
[24] On 8 May 2019, Richardson used the UD300 briefly on a job at Cuba Street in Wellington. It was used to install one test pile. There were no problems.
[25] Later in May 2019, Richardson started using the UD300 for a piling job for Ports of Auckland. After installing between 25 and 35 piles, the UD300 started locking-up and not rotating. This happened for a few moments on several occasions.
[26] Mr Buunk called Mr Hewlett and told him. Digga sent a technician to the site. Digga’s technician cleared Richardson to carry on using the UD300. Richardson then finished installing the piles at Ports of Auckland and transported the UD300 back to Cuba Street to install more test piles.
[27] When the first test pile was being installed at Cuba Street, the UD300 locked up again. The UD300 was then taken back to Richardson’s Palmerston North workshop for investigation.
[28] On 17 May 2019, the UD300 was opened at Richardson’s workshop. Mr Buunk called Digga before the UD300 was opened. He initially spoke to Mr Hewlett, but from this time onwards his main contact was John Neilan, Digga’s General Manager.
[29] When the UD300 was opened it was discovered that the gearsets in the machine had suffered very serious damage. Both Mr Buunk and Mr Neilan described this in evidence as a catastrophic failure.
Use of a replacement UD250 in May to July 2019 at Cuba Street
[30] In late May 2019, Richardson was due to return to the Cuba Street job to install piles with the UD300. As the UD300 had broken down, an urgent solution was needed. Mr Neilan arranged the loan of a UD250 from Digga Australia. Digga Australia installed UD300 gears in the UD250 to upgrade its performance. This was intended to make its performance similar to a UD300.
[31] Between May and July 2019, Richardson continued the Cuba Street job using the UD250. Some issues arose with the UD250 but Richardson was able to resolve them and, on 17 July 2019, it completed the Cuba Street job.
Repair of the UD300 in the second half of 2019
[32] In early June 2019, Richardson sent the UD300 to Digga in Auckland. Digga had the UD300 from then until December 2019.
[33] On 24 December 2019, Mr Neilan sent Richardson two invoices. The first was in the amount of $57,322.90 for repairs to the UD300. The second was in the amount of $5,436.79 for airfreight of the upgraded UD250 to New Zealand. Richardson did not pay these invoices.
Use in March to June 2020 at Victoria Lane Carpark and second failure of the UD300
[34] In December 2019, Richardson received the repaired UD300. It did not use it from then until March 2020.
[35] From March to June 2020, Richardson used the repaired UD300 at Victoria Lane Carpark. In March 2020 it was used to do some test piling and a small amount of production piling.
[36] Between May and June 2020, the UD300 was used to do more work at Victoria Lane Carpark. On 10 June 2020, the UD300 stopped rotating and the operator could not get it to operate again. Richardson then transported the UD300 back to the Palmerston North workshop.
[37] Richardson asked Digga to send a technician to look at the UD300. Digga told Richardson to send it to Digga’s Auckland workshop. However, it remained in Palmerston North.
Inspections of the UD300
[38] On 1 November 2022, after Richardson commenced proceedings against Digga, Richardson took the UD300 apart and inspected it. The gearsets had again suffered a catastrophic failure.
[39] On 21 March 2023, Dynaflow tested the PRV of the UD300. The test showed that the pressure had been increased from the factory setting.
The claims, counterclaims and defences
[40] Mr Buunk said in evidence that during the early discussions regarding the purchase of a screw pile drive he told Mr Hewlett that Richardson would need to operate the screw pile drive up to and at 300,000Nm of torque. It is not in dispute that Mr Buunk made this statement. Mr Hewlett agreed it was made. This is the starting point for the plaintiffs’ claims.
[41]Mikro claims that the sale agreement with Digga included:
(a)an express term that the UD300 had a rated capacity for screw pile installation of up to, and including, 300,000Nm of torque; and
(b)a term implied under s 138 of the Contract and Commercial Law Act 2017 (CCLA) that the UD300 was fit for purpose as a screw pile drive for installing screw piles up to, and including, a rated capacity of 300,000Nm of torque.
[42] Mikro says that Digga breached both of these terms. Digga admits that the sale agreement included the express term but denies the application of the implied term. It says that s 138 does not apply because Mikro did not make the particular purpose for which the goods were required known to Digga. It also denies that the express or implied term were breached.
[43] Both plaintiffs also make a claim under the FTA that Digga falsely represented that the UD300 had a rated capacity for screw pile installation of up to, and including, 300,000Nm of torque. Digga admits the representation was made but denies it was false.
[44] Richardson makes a claim for estoppel based on the same representation. Digga says that no purpose is served by an estoppel as Digga is admitting what is alleged.
[45] Mikro pleaded some other claims but abandoned them during the trial. These were claims for breach of warranty and for breach of an implied term similar to the one implied by s 138 of the CCLA and a claim for estoppel.
[46] During the plaintiffs’ opening, I asked whether the plaintiffs had considered making a claim under s 35 of the CCLA. During closing submissions, counsel for the plaintiffs advised that they had considered the possibility of seeking to amend the statement of claim to add a claim under s 35 but they had decided against that course.
[47] The relief sought by Mikro is the same in relation to each of its claims. Mikro seeks to recover the full amount that it paid for the UD300.
[48] Similarly, Richardson seeks the same relief in relation to each of its claims. It seeks to recover the full amount that it paid to purchase the accessories and consequential losses.
[49] There is also a claim relating to the repair of the UD300. Digga makes a counterclaim against Richardson for the cost of the repair. Richardson denies any liability to pay this amount. It says it never agreed to pay for the repairs.
[50] However, Richardson also relies on the repair contract to make a further alternative claim. It says that, if it is wrong, and there was a repair contract, Digga breached an implied term in that contract requiring it to carry out the repair work with reasonable care and skill. Richardson seeks to recover the same amounts for breach of this implied term.
[51] The final claim is a further counterclaim by Digga against Richardson for the cost of airfreighting the upgraded UD250 from Australia to New Zealand. Richardson denies it agreed to meet this cost.
[52] At the commencement of the trial, Digga abandoned a counterclaim for the cost of servicing the UD300’s hydraulic motor.
Whether the UD300 had the capacity to operate at 300,000Nm
[53] It was common ground that the essential issue at the heart of all the plaintiffs’ claim is whether the UD300 had the capacity to operate at 300,000Nm. It is therefore sensible to consider this question before addressing the plaintiffs’ claims individually.
[54] There is no doubt that the UD300 was capable of reaching 300,000Nm of torque. The piling sheets included in the evidence show that it did so multiple times. However, the plaintiffs say that the UD300 should last for many years without breaking down, and the fact that it broke down twice after a limited amount of use shows that it is not capable of operating at 300,000Nm.
[55] The plaintiffs point to the fact that the UD300 broke down within less than two years and following the installation of only 225 screw piles. They also note that, once repaired, it broke down again within six months following the installation of only 65 screw piles.
[56] The plaintiffs did not lead any expert or other evidence to suggest that the UD300 had any particular characteristic meaning that it was not capable of reaching 300,000Nm of torque without eventually breaking down. They did not lead any evidence suggesting that this particular UD300, or UD300s in general, have a latent
defect. The plaintiffs acknowledge that they are unable to say why the UD300 broke down.
[57] Accordingly, the plaintiffs’ claim relies entirely on inference. They ask me to infer from the fact that the UD300 broke down twice that there must be some problem with this particular UD300 or UD300s in general. They ask me to infer that the UD300 was a “lemon” or a “dud”.
[58] Digga’s response is that the plaintiffs have the burden of proof and they have failed to discharge that burden. It says that there are other reasons why the UD300 may have broken down that had nothing to do with the machine itself. Digga submits that, in the circumstances, there is real doubt as to why the UD300 broke down, and therefore the plaintiffs have failed to discharge the burden of proof.
[59] The plaintiffs submit that they were denied the opportunity to prove that the UD300 had latent defects. They say that they requested specification details in relation to the gearsets and, because these were not provided, it was impossible for the gearsets to be tested to see whether they were consistent with the specifications. Digga was unable to provide the specifications because Digga Australia (which is under different ownership) refused to provide them.
[60] At the time that Digga advised the plaintiffs it could not provide the specifications, it suggested that the plaintiffs may need to take steps to obtain them directly from Digga Australia. They could have done this by applying for an order for a letter of request.1 But they did not pursue an application of that kind.
[61] It is also not clear to me that the plaintiffs are necessarily right that the gearsets could not be tested without the specifications or that there were not other steps that were available to an expert engaged by the plaintiffs to attempt to ascertain whether the UD300 had a latent defect.
1 Cedco Publishing Co v Hodder Moa Beckett Publishers Ltd HC Auckland, CL33/00, 29 May 2001.
[62] Ultimately, it does not matter why there is an absence of direct evidence regarding the reason why the UD300 failed. The fact is that there is no direct evidence. The plaintiff bears the burden of proof and the absence of direct evidence leaves room for real doubt as to why the UD300 failed.
[63] The plaintiffs also place some reliance on evidence that came out at trial regarding other UD screw pile drives that have needed repair. Mr Neilan said that there are seven UD machines in New Zealand. He said that he has carried out repairs on three UD machines in his time. This includes the repair to Mikro’s UD300. The plaintiffs say, if the failure of Mikro’s UD300 is included twice, the UD machines in New Zealand have failed four times. The plaintiffs submit that four failures when there are seven UD machines in New Zealand is an “extremely high failure rate”.
[64] But this is a very small sample size. Digga products are manufactured in Australia under ISO 9000 standards and sold worldwide. There was no evidence regarding the performance of UD products outside of New Zealand.
[65] The reasons for the failures of the UD machines also need to be taken into account. In one case, there was no evidence about the reason for the failure. The other case involved the failure of a UD300 owned by Lattey Group Ltd (Lattey), a competitor of Richardson. Mark Donnelly of Lattey gave expert evidence for Digga. He said in evidence that Lattey’s UD300 failed approximately two years after it was purchased. His view was that it failed due to failure by Lattey to maintain it properly. Specifically, its oil was not changed frequently enough. He went on to say that it has performed without any problem for eight years since it was repaired.
[66] The plaintiffs also refer to a comment made in an email from a competitor of Digga saying that “Digga units do not provide longevity”. However, the author of the email did not give evidence and it would be unsafe to place any reliance on it.
[67] There is no obligation on a defendant in a case like this to suggest other possible explanations for what occurred. It is entitled to simply take the position that the plaintiffs’ evidence fails to discharge the burden of proof. Further, if the defendant
does propose other possible explanations, there is no obligation on the defendant to prove its alternative case.2
[68] In this case, Digga has suggested some other possible explanations for the failure of the UD300. These include that the damage to the gearsets was caused by “racking” or by the UD300 being worked too hard.
Racking
[69] Before I explain what racking is, I need to explain what is meant by “working backwards and forwards” or “working up and down”. This occurs when a screw pile stalls before penetrating to the required depth. This happens when a pile hits an obstruction or hard layer in the ground. The screw pile drive stalls because the PRV places a limit on the amount of pressure that is exerted. In the case of the UD300, the PRV is set so that it cuts in when the machine reaches around 300,000Nm. The operator puts the screw pile drive into reverse to back the pile up by a few turns, and then puts it back in to forward to screw the pile in again. This process might allow the pile to get through the hard layer or obstruction.
[70] It was common ground that it was acceptable for an operator to continue to work backwards and forwards provided the pile continues to descend. Where there was disagreement over was what an operator should do if the pile is not descending.
[71] The plaintiffs called two expert witnesses, Matthew Draper and Nathan Gifford-Moore. They are both from competitors of Richardson. Mr Donnelly said that Lattey requires its operators to cease working backwards and forwards if on the second try the pile has not moved any further. At this point, Mr Donnelly considered that the pile has reached “practical refusal”. Mr Draper and Mr Gifford- Moore both took a different view. Mr Draper said that his firm treats a pile as having reached practical refusal after around six attempts. Mr Gifford-Moore treats it as having reached practical refusal after around 10 attempts. Mr Buunk’s evidence was that Richardson’s operators were instructed to make no more than three to five attempts.
2 Rhesa Shipping Co SA v Edmunds [1985] 1 WLR 948 (HL).
[72] Racking is something that can occur when the operator is working backwards and forwards. It occurs due to operator error. When working backwards and forwards commences, the pile is under great pressure. Racking occurs if the pressure is released in an uncontrolled way. To avoid racking, before the operator puts the screw pile drive into reverse, it is put into neutral for around five seconds. This allows the pressure to release. The operator can then put the machine into reverse safely without racking occurring. But if the operator makes a mistake and puts the machine into reverse without first putting it into neutral, racking will occur. The pressure is released into the machine causing damage to the gearsets.
[73] Racking is not a term that is used in the industry. It is a word that Mr Neilan used in his evidence and all the other witnesses adopted it as a useful name to describe the phenomenon.
[74] All witnesses agreed that racking is bad for the gearsets and must be avoided. It was also common ground that, if racking occurred, it could have caused the damage to the gearsets that occurred in this case.
[75] Screw pile drives like the UD300 have an energy control valve (ECV). This makes it harder for racking to occur. However, racking is still possible despite the ECV if there is operator error.
[76] Three of the four Richardson operators who used the UD300 gave evidence at trial. They were Christopher Richardson, Jonathan Richardson and Gert Ferreira. All three said that they did not rack the UD300.
[77] The fourth operator was “Dylan K”. He was one of the operators who used the machine before it broke down the second time. Mr Buunk said he was a good operator, but as he did not give evidence, there was no evidence from him regarding the possibility that racking occurred when he used the machine.
[78] It is normal practise for a piling sheet to be completed by the operator in relation to each pile installed. This is a one- or two-page template document that contains information about the installation of the pile. There is nothing in any of the
piling sheets to suggest that racking occurred. However, some piling sheets seemed to be missing and some of them were completed in a rather sloppy way with information missing. Moreover, racking is something that an operator might be reluctant to own up to. Mr Draper and Mr Gifford-Moore both accepted in cross- examination that it would be unlikely for an operator to own up to racking by recording it on a piling sheet.
[79] There is no doubt that operators do not want to rack. They are careful to try to avoid doing it. As a result, it is not something that occurs often. However, it can and does occur if the operator loses concentration. As I have said, if it does occur, it can cause exactly the sort of damage to the gearsets that occurred in this case.
[80] Some of the piling sheets show that piles were worked backwards and forwards for several hours. This includes the piling sheets from the Cuba Street and Victoria Lane Carpark jobs at which the UD300 was being used the two times it broke down. Mr Donnelly suggested that it would be difficult for an operator to avoid racking when working backwards and forwards in these circumstances because it would require the operator to remain concentrated for long periods of time. As Digga submitted, Richardson’s operators are only human, and it is quite possible that they were unable to maintain their concentration.
Working the UD300 too hard
[81] The second possible explanation for a failure of the UD300 suggested by Digga is that the machine was worked too hard. Digga submitted that 300,000Nm is the maximum capacity of the UD300, not the level at which it could reasonably be expected to operate on a consistent basis. It further submitted that to preserve the lifespan of the machine it should be run at 80 per cent capacity and only occasionally be operated at its maximum capacity.
[82] Digga points to the fact Richardson gave serious consideration to purchasing a screw pile drive more powerful than the UD300. During the negotiations for the purchase of the UD300, Mr Buunk thought about purchasing a Digga XD410, which can be operated at up to 400,000Nm. After the UD300 broke down the first time, Mr Buunk considered trading it in for an XD410. He went as far as requesting
Mr Neilan to provide a quotation for a trade in. This suggests that the UD300 might not have been powerful enough for Richardson’s needs and provides a possible explanation as to why Richardson might have ended up working the UD300 too hard.
[83] Mr Draper and Mr Gifford-Moore saw no difficulty with operating at maximum capacity on a regular basis. However, Mr Donnelly gave evidence that Lattey only operates its UD300 at maximum capacity occasionally and that he expected that, if it was operated at maximum capacity on a regular basis, he would see increased wear in the gearsets.
[84] Mr Donnelly made specific reference to the practice of working backwards and forwards. He highlighted the piling sheets showing that piles were worked backwards and forwards for several hours.
[85] The plaintiffs’ position is that there is nothing untoward about this. It is acceptable to work backwards and forwards for long periods as long as the pile continues to descend. A screw pile drive needs to be able to reach its maximum capacity on a regular basis to do its job. The machine is protected by the PRV, which causes it to stall when maximum capacity is reached. However, Mr Donnelly considered that using the UD300 in this way is likely to cause increased wear in the gearsets.
[86] Ultimately, the plaintiffs submit that, even if Mr Donnelly’s evidence is preferred, his position was simply that operating at maximum capacity on a regular basis will cause increased wear in the gearsets, not that it will cause catastrophic failure. There is some force in this submission. It might suggest that this factor on its own is unlikely to have caused the UD300 to break down. It could only have contributed to the machine breaking. However, the picture is complicated by the fact that the pressure level on the PRV was increased.
[87] I have explained above that the PRV pressure was increased in March 2019. Thus, it had been increased before the UD300 broke down for the first time in May 2019. I have also explained that, when the repaired UD300 was tested by Dynaflow in March 2023, it was found that the pressure had been increased from the factory
setting. This presumably means that when the machine broke down the second time in June 2020 it was operating with the increased setting.
[88] In a 10 January 2019 email about the pressure being increased, Mr Buunk said about this possibility that, “Clearly the risk would be ours to take”. In his evidence, Mr Buunk said that the risk he was referring to was increased gearsets wear, not catastrophic failure. But Mr Hewlett and Mr Neilan said that they did not interpret the statement as being qualified, and I do not think a reasonable recipient of the email would view it in that way.
[89] It is something of a mystery how the repaired UD300 came to have its pressure level increased. Mr Buunk said that Richardson did not change the PRV setting in the repaired UD300. His explanation of how the pressure level came to be increased was that Digga must have installed the original valve (with its increased pressure level) back into the UD300 when it was repaired. On the other hand, Mr Neilan says that he installed a new valve with the factory setting when the machine was repaired.
[90] I do not think I need to resolve this controversy. The question I am addressing is whether the UD300 failed because it was not capable of operating at 300,000Nm or because of the way in which it was operated. In this context, what matters is that the pressure was in fact increased, not how that came to be.
[91] The plaintiffs say that nothing turns on the fact that the PRV pressure was increased. They say that the piling sheets show that, even though the pressure was increased, the machine was never operated above its original maximum of 300,000Nm.
[92] But, as I have already indicated, the piling sheets may not be accurate. In addition, relevantly to the second time the UD300 broke down, there are three piling sheets from the Victoria Lane Carpark project that may suggest that the repaired machine was pushed far beyond its maximum capacity.
[93] I say that they “may” suggest this because these piling sheets proved difficult to interpret. It was originally thought that the piling sheets recorded 370,000Nm. But ultimately all the witnesses agreed that the piling sheets recorded 370 bar.
[94] Bar is a measurement of pressure, not torque. Nobody was able to explain why these sheets switched to recording pressure rather than torque. This included Jonathan Richardson who was the operator at the time and the person who filled out the piling sheets.
[95] Under cross-examination, Mr Richardson suggested that the UD300 may not have been in use at the time. A different screw pile drive might have been in use. But there was no other evidence suggesting the involvement of another screw pile drive and Mr Richardson was unable to say what screw pile drive this was, or why this might have resulted in the switch to recording pressure rather than torque. The plaintiffs’ written closing referred to the possibility that a different screw pile drive was involved, but in oral submissions this suggestion was abandoned.
[96] There was some evidence that Richardson’s excavator (the 30T Hitachi) had a pressure gauge as well as an Nm gauge. The plaintiffs suggested that the bar readings may have come from the pressure gauge. This was the possibility that was preferred in the plaintiffs’ closing oral submissions, but still there was no explanation as to why Mr Richardson might have switched to recording bar.
[97] A reading of 370 bar could well be much worse than one of 370,000Nm. 370 bar is a very high pressure reading and, if the UD300 was put under that pressure, the torque that would have been produced would have far exceeded the machine’s maximum capacity. The UD300 is designed to produce 300,000Nm of torque when under 240 bar of pressure. Mr Donnelly calculated that if the pressure was increased from 240 to 370 bar, the result would be torque of around 450,000Nm.
[98] When Mr Neilan was asked about this, he said that if the UD300 had been put under 370 bar of pressure it would have “blown to bits”. Based on this, the plaintiffs submitted that in reality the UD300 cannot have been exposed to that much pressure. The three piling sheets in question record multiple references to 370 bar. This appears
to suggest that the UD300 was exposed to 370 bar of pressure for some time. But that cannot be the case because the UD300 would not have lasted long under that level of pressure.
[99] The plaintiffs submitted that the explanation must be that, although the excavator’s pressure gauge showed 370 bar, in fact only 240 bar of pressure was being applied to the UD300 because Richardson’s excavator had its own, separate PRV that would have limited the pressure to 240 bar or thereabouts.
[100] There was some evidence from Mr Hewlett that supported this theory. He was involved in the original set up of the UD300 and he said he recalled that at the outset the excavator’s PRV was set to 240 bar. It is possible that the excavator’s PRV remained at that level from then onwards.
[101] When the three piling sheets in question were put to Mr Neilan, he did not accept that they necessarily showed that the UD300 had been put under pressure for a long period of time. He suggested that the 370 bar readings might have been reached repeatedly but very briefly as a result of what he called a “hydraulic hammer.” He said that a hydraulic hammer can result in something like 370 bar of pressure being recorded, albeit very briefly, even if the PRV valve on both the screw pile drive and the excavator is set to 240 bar. A hydraulic hammer occurs if a pile is under pressure and the operator puts the screw pile drive into reverse for a moment and then immediately puts it back into forward again. If this occurs there will be a collision between the force being released from the pile as a result of the machine going into reverse and the force exerted by the machine as a result of immediately being put into forward again. Mr Neilan described this as being like two cars colliding. The pressure that results from the collision is the sum of the two forces. Mr Neilan said that the sum of the two forces could result in a number like 370 bar even if the PRVs in both the UD300 and the excavator are set at 240 bar. The pressure exerted by the machine will be 240 bar or less, but once the pressure in the pile is added, a total pressure like 370 bar is possible.
[102] It is also quite possible that the plaintiffs’ theory that the excavator’s PRV was set to 240 bar is wrong. It seems likely that the excavator’s PRV was increased to
280 bar when Dynaflow increased the UD300’s PRV to that level in March 2019. It would make no sense for Dynaflow to only increase the PRV in the UD300 and not to also increase the PRV in the excavator. If it did not, then the increase to the UD300’s PRV would have had no effect.
[103] If we assume that the PRVs in both the UD300 and the excavator were set at 280 bar, then the UD300 was exposed to at least 280 bar of pressure during the installation of the three piles in question. If the UD300 was operating at 280 bar it would be producing torque of around 350,000Nm. This significantly exceeds the UD300’s maximum torque of 300,000Nm.
[104] The plaintiffs point out that, when the pressure was increased in March 2019, neither Digga nor Digga Australia referred to a risk that this could result in catastrophic failure. But this does not necessarily mean that this was not a possible outcome, particularly if it was pushed beyond 300,000Nm for significant periods of time.
[105] In an email to Mr Hewlett on 28 February 2019, Mr Buunk suggested that, if the pressure was increased, the UD300 would only be operated at 350,000Nm for a “short duration of about 10 seconds”. But it is quite possible that in fact it was operated at that level for significantly longer periods of time.
Conclusion
[106] The plaintiffs themselves say they do not know why the UD300 broke down, but they ask me to infer that it was because of a problem with the machine. I have reviewed the evidence carefully to try to form a view regarding what caused the UD300 to fail twice. For the reasons I have explained, it seems quite possible that the machine broke down due to the way it was operated. But ultimately I am left uncertain as to why the failures occurred. Accordingly, I conclude that the plaintiffs have failed to discharge the burden of proving that the UD300 was not capable of performing at 300,000Nm. In my view this is one of the cases Lord Brandon had in mind when he said:3
3 At 955–956; quoted with approval by Ellis J in Bergman v Bergman [2014] NZHC 555 at [18] and upheld on appeal in Bergman v Bergman [2015] NZCA 278, [2015] NZCCLR 16 at [60].
… the judge is not bound always to make a finding one way or the other with regard to the facts averred by the parties. He has open to him the third alternative of saying that the party on whom the burden of proof lies in relation to any averment made by him has failed to discharge that burden. No judge likes to decide cases on burden of proof if he can legitimately avoid having to do so. There are cases, however, in which, owing to the unsatisfactory state of the evidence or otherwise, deciding on the burden of proof is the only just course for him to take.
Mikro’s claim for breach of the express term in the sale agreement
[107] As I have explained, Mikro claims that the sale agreement included an express term that the UD300 had a rated capacity for screw pile installation of up to, and including, 300,000Nm of torque. Digga admits that the agreement contained this term but denies that it was breached.
[108] I have concluded above that Mikro has failed to prove that the UD300 was not capable of installing screw piles at 300,000Nm. It follows that Mikro has failed to prove breach of the express term.
Mikro’s claim for breach of the term implied under s 138 of the CCLA
[109] Mikro claims that the sale agreement included a term implied under s 138 of the CCLA that the UD300 was fit for purpose as a screw pile drive for installing piles up to, and including, a rated capacity of 300,000Nm of torque. Section 138 reads:
138 Implied condition that goods are reasonably fit for purpose
(1)This section applies if—
(a)the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgement; and
(b)the goods are of a description that it is in the course of the seller’s business to supply (whether or not the seller is the manufacturer).
(2)There is an implied condition in the contract of sale that the goods are reasonably fit for the purpose referred to in subsection (1)(a).
(3)However, in the case of a contract of sale for a specified article under its patent or other trade name, there is no implied condition that the article is fit for any particular purpose.
[110] Digga has two responses. First, it says that s 138 does not apply because Mikro did not make the particular purpose for which the goods were required known to Digga and therefore the condition in s 138(1)(a) was not met. Second, it says that, if s 138 does apply, the UD300 was fit for purpose.
Was the particular purpose made known by Mikro?
[111] Digga accepts that the particular purpose was made known by Mr Buunk. What it does not accept is that it was made known by Mikro.
[112] Mikro relies on agency. It says that Mr Buunk was its agent and therefore any statements made by Mr Buunk must be treated as statements by Mikro. Therefore, Mikro made the particular purpose known to Digga.
[113] Digga denies that Mr Buunk was Mikro’s agent. It says that there is no evidence that Mr Buunk (or Richardson) was acting as an agent for Mikro.
[114] The parties disagree over the facts. Specifically, they disagree over when Digga was first told about the involvement of Mikro. Mr Hewlett said that he did not recall Mr Buunk telling him that Mikro would be purchasing the UD300. His evidence was that the first he knew of Mikro’s involvement was when Richardson emailed him on 12 May 2017 accepting Digga’s quote and requesting that the cost of the UD300 be invoiced to Mikro and the accessories to Richardson.
[115] Mr Buunk said in evidence-in-chief that during the negotiations he told Mr Hewlett that Mikro would be purchasing the UD300. Under cross-examination, Mr Buunk modified his position somewhat. He said he was certain that he would have told Mr Hewlett that Richardson was owned by Mikro but he could not remember whether he told him that Mikro would be purchasing the UD300.
[116] I am in no doubt that Mr Buunk was Mikro’s agent. It is not in dispute that the result of the negotiations was a contract between Mikro and Digga. That contract plainly came about through the agency of Mr Buunk. Although there was no evidence regarding what passed between Mikro and Mr Buunk, I have no difficulty in inferring that Mr Buunk had actual authority to represent Mikro in the negotiations.
[117] Digga argues in the alternative that, if there was an agency, then certain other requirements need to be met before Mr Buunk’s statements can be treated as statements on behalf of Mikro. Digga relies on the following statement in Ware v Johnson:4
… it is plain that a representation made to one person with knowledge on the representor’s part that that person is merely the agent of an undisclosed principal for the purpose of receiving and transmitting the representation to the principal is effective as a representation made to the principal – provided of course that it is relayed to the principal and in fact acts as an inducement.
[118] However, Ware v Johnson involves a different situation to the present one and I do not see this statement as being relevant here. Ware v Johnson concerned the circumstances in which a misrepresentation made to an agent should be treated as a misrepresentation that is actionable by the principal. In contrast, the present case concerns whether statements made by an agent should be treated as statements made by the principal.
[119] The central thrust of Digga’s argument seems to be that the statements made by Mr Buunk should not be treated as statements made on behalf of Mikro because Digga did not know that Mr Buunk was Mikro’s agent. However, at the time the contract was formed, Digga clearly knew of Mikro’s involvement because Mikro was the purchaser under the contract. It also knew that all the steps that led up to Mikro entering the contract had been taken by Mr Buunk. In the circumstances, Digga either knew or reasonably ought to have known that Mr Buunk was Mikro’s agent. In any event, there is no requirement that Digga know of the agency relationship.5
[120] Digga also relies on the statement in Hickman v Turn and Wave Ltd that, “knowledge acquired before the agency began … should not in general be imputed to the principal.”6 But again I do not see this as being relevant in this case. The issue in Hickman concerned whether knowledge by an agent should be imputed to the principal. That is not the issue here.
4 Ware v Johnson [1984] 2 NZLR 518 (HC) at 537.
5 WNY Group Ltd v Crown Range Holdings Ltd [2020] NZHC 1585 at [32].
6 Hickman v Turn and Wave Ltd [2011] NZCA 100, [2011] 3 NZLR 318 at [194] quoting Jessett Properties Ltd v UDC Finance Ltd [1992] 1 NZLR 138 (CA) at 143.
[121] Digga relies on Hickman to support a submission that the statements by Mr Buunk should not be treated as statements made by Mikro unless they were made after the agency commenced. Digga says that there is no evidence that the agency had commenced when the statements were made. I accept that there is no direct evidence about this, but in my view, it can be inferred that the agency had commenced prior to the statements being made. Mr Buunk’s evidence was that Mikro is the owner of all of Richardson’s major plant. In the circumstances, it is reasonable to assume that Mikro and Mr Buunk intended from the outset that the new screw pile drive would be purchased by Mikro. Even were that not the case, any statement made in the process of the negotiations but before the agency commenced can be inferred to have been ratified by Mikro.7
[122] I am satisfied that Mikro made known to Digga the particular purpose of the UD300.
Was the UD300 fit for purpose?
[123] The issue is whether the UD300 was fit for purpose as a screw pile drive for installing piles up to, and including, a rated capacity of 300,000Nm of torque. I have concluded above that Mikro has failed to prove that the UD300 was not capable of installing screw piles at 300,000Nm. It follows that Mikro has failed to prove that the UD300 was not fit for purpose.
The plaintiffs’ claim for breach of the FTA
[124] The plaintiffs claim that Digga breached ss 9, 10 and 13 of the FTA. These claims are all founded on an allegation that Digga falsely represented that the UD300 had a rated capacity for screw pile installation of up to, and including, 300,000Nm of torque. Digga accepts that the representation was made but denies it was false. It follows from my conclusion above regarding the evidence concerning the UD300’s capability that the plaintiffs have failed to prove that Digga breached the FTA.
7 Clark v Libra Developments Ltd [2007] 2 NZLR 709 (CA) at [163]–[165].
Richardson’s estoppel claim
[125] Richardson makes a claim for estoppel based on the representation that the UD300 had a rated capacity for screw pile installation of up to, and including, 300,000Nm of torque. Digga’s response is that no purpose is served by an estoppel as Digga is admitting what is alleged.
[126] The issue here relates to the way that Richardson has pleaded its claim. It pleads the representation and then it pleads that Digga is estopped from denying that the representation was made. Digga says that it does not deny making the representation. Accordingly, it says, no purpose is served by the estoppel claim.
[127] It is apparent from the alleged losses that are pleaded and the damages that are claimed in the prayer for relief that Richardson is not merely seeking an order preventing Digga from denying the representation. It is seeking to recover the full amount that it paid to purchase the accessories and consequential losses.
[128] Richardson’s claim could be worded better. However, it is clear that the claim that it is making is really one of promissory estoppel. It is seeking to enforce what it alleges was a non-contractual promise made by Digga that the UD300 had a rated capacity for screw pile installation of up to, and including, 300,000Nm of torque. It is recognised that claims of this kind can be made and they can result in a remedy of equitable damages.8
[129]The elements of estoppel are:9
(a)a belief or expectation by the plaintiff has been created or encouraged by words or conduct by the defendant;
(b)to the extent an express representation is relied upon, it is clearly and unequivocally expressed;
(c)the plaintiff reasonably relied to its detriment on the representation; and
8 Wilson Parking New Zealand Ltd v Fanshawe 136 Ltd [2014] NZCA 407, [2014] 3 NZLR 567.
9 At [44].
(d)it would be unconscionable for the defendant to depart from the belief or expectation.
[130] Richardson may be able to satisfy (a) and (b), although my impression is that promissory estoppel claims normally involve promises by the defendant to the plaintiff to do or not do something rather than promises in the nature of a warranty about a particular state of affairs. However, based on my conclusion above regarding the evidence concerning the UD300’s capability, Richardson cannot satisfy (c) and (d). The estoppel claim therefore fails.
Mikro’s damages claim
[131] The plaintiffs’ claims have failed, but I set out below what I would have concluded on damages had the claims succeeded.
[132] Mikro claims $120,000, which is the full amount that it paid for the UD300. It does so on the basis that the value of the UD300 is nil. Mikro says that the UD300 is worthless because it suffered two catastrophic failures.
[133] Even if I had concluded that the UD300 must have failed because it was not capable of operating at 300,000Nm, this would not necessarily mean it has no value once it has been repaired again. Because there is no direct evidence about why the UD300 failed, I could only speculate about what the UD300 was capable of. The machine was able to complete several projects without breaking down. It may not have met Richardson’s needs, but it might still have been capable of performing satisfactorily at a lower level and therefore may have had some resale value.
[134] No evidence was led regarding the likely value of the machine. No expert opinion evidence was given regarding its value. But the resale value would undoubtedly have been much less than Mikro paid for it.
[135] Had I been required to determine damages, I would have treated the value of the UD300 as being a quarter of what Mikro paid for it. Accordingly, I would have treated it as having a value of $30,000 and would have awarded damages of $90,000.
[136] Logically Mikro should also be able to recover the costs of repair, but it has not made a claim in relation to those costs.10
Richardson’s damages claim
[137] Richardson seeks to recover $184,472.03. This is made up of the following costs:
(a)$57,375 to purchase the accessories for the UD300;
(b)$40,063.85 to modify its excavator to accept the UD300;
(c)$28,354.34 for consequential losses due to the unavailability of the UD300 in May 2019; and
(d)$58,678.84 for consequential losses due to the unavailability of the UD300 in June 2020.
$57,375 to purchase accessories
[138]Richardson purchased four accessories from Digga:
(a)A Ryno Hitch for $6,240. This is a specialised hitch that supports and cradles UD screw pile drives.
(b)A dual pin hanging bracket for $1,600. This bracket connects an excavator to equipment, including the UD300.
(c)A torque pin kit for $35,665. This is an electronic torque measuring device which provides a display in the cab of the excavator.
10 The cost of repairing the UD300 the first time was $57,322.90. That amount has not been paid. I consider below whether it is payable by Richardson. Mr Neilan said that the damage to the gearsets after the second failure is not as extensive as it was the first time. He estimated the cost of repair at $30,000. That is the only evidence regarding the likely cost of the second repair.
(d)A seven-metre extension beak for $13,870. This was a custom-built seven-metre extension that lengthened the arm of the excavator and could be used to extend the UD300 over longer piles.
[139] Richardson seeks to recover the full amount paid for each of these items. The implication is that the items have no value and are of no use to Richardson.
[140] However, Mr Buunk accepted that the accessories still have value and could be used on other equipment if Richardson decided to do so. More specifically, Mr Buunk accepted that:
(a)The Ryno Hitch was not UD300 specific but was specific to the UD series. It could be used with other UD screw pile drives, of which there are four including the UD250 and 300. Mr Buunk also suggested that half of the Ryno Hitch had been used by Richardson since the UD300 failed.
(b)The dual pin hanging bracket for Digga is not UD specific. It can be adapted to work with other equipment. It has been used by Richardson since the UD300 failed.
(c)The torque pin kit was not Digga or UD specific and can be used with other equipment where the operator wants to measure torque.
(d)The seven-metre extension beak was a bespoke piece of equipment made by Digga for the Wellington International Airport project. Richardson modified the extension beak in early 2018 to shorten the beak and make it useful on other projects. Mr Buunk accepted Richardson had used it on other jobs, and that the modified extension beak was still usable on future jobs.
[141] Based on the above, Digga submits that none of the accessories can properly be regarded as wasted costs for which Richardson should be entitled to recover the full purchase price.
[142] There was no evidence regarding the resale value of the equipment but it is likely that this equipment had some resale value. However, it will be much less than what Richardson paid for the equipment.
[143] In reality, without the UD300, this equipment was of limited value to Richardson. Richardson appears to have been able to put some of the equipment to other uses. But I expect that for the most part the alternative uses of the equipment have been limited.
[144] Had I been required to, I would have awarded damages of three quarters of the amount paid for this equipment. On this basis, I would have awarded damages of
$43,031.
$40,063.85 to modify the excavator
[145] This is the amount that Richardson paid Tracgrip Hydraulics & Equipment Ltd (Tracgrip) in mid-2017 to modify its excavator to accept the UD300. Digga submits that it was always going to be necessary for the plaintiffs to purchase a new screw pile drive from Digga or another supplier, and to pay a hydraulic technician to make that new equipment work. On this basis, it says that the cost of fitting new equipment to Richardson’s excavator was a cost that was always going to be incurred, regardless of the screw pile drive that was chosen or how that machine later performed. Accordingly, it was a necessary cost, not a wasted cost.
[146] In my view, the cost to modify the excavator is a wasted cost. As discussed below, Richardson replaced the UD300 with an Earthworm screw pile drive. It cannot recover the costs of modifying the excavator to accept the Earthworm machine. However, it ought to be able to recover the cost of modifying the excavator to accept the UD300. Otherwise, as a result of breach, it would end up having to pay the cost of modifying the excavator twice, when if the breach had not occurred, it would have only paid it once. I would therefore have awarded damages for the full amount claimed.
$28,354.34 for consequential losses due to the unavailability of the UD300 in May 2019
[147]The figure of $28,354.34 is made up as follows:
(a)$8,900 for two days of “stand-down time” because Richardson could not work on the Cuba Street job on 6 and 7 June 2019.
(b)$1,345.25 paid to Tracgrip for assisting Richardson in dismantling the UD300.
(c)$2,683.10 paid to Tracgrip for inspecting the UD300 on the Cuba Street job.
(d)$9,743.08 paid to Tracgrip for setting up the upgraded UD250.
(e)$532 paid to Tracgrip for stripping and inspecting the UD250 motor. This payment was necessary because the UD250 was not working properly. It was found that the top bearing was missing.
(f)$3,352.19 paid to Tracgrip for replacing the seals on the UD300 motor in July 2019. At this time the UD300 motor was being used in the UD250 because there was a problem with the UD250’s motor.
(g)$448.72 paid to SAECO Wilson for tools needed to dismantle the UD300.
(h)$1,350 paid to PTS Logistics Ltd (PTS) for transporting the dismantled UD300 to Digga in Auckland for inspection ($450) and transporting a backup screw pile drive hired from Chris Moore Building Construction Ltd (Chris Moore) for the Cuba Street project back to Chris Moore ($550). These amounts in fact total $1,000.
[148]Richardson advised during closing that it does not pursue the following items:
(a)The $448.72 paid to SAECO Wilson.
(b)$350 of the payment to PTS. Richardson accepted that the correct amount is $1,000, not $1,350.
[149] I would have concluded that the $8,900 for stand-down time is recoverable. The figure is calculated using a contractual rate agreed with LT McGuinness Ltd, Richardson’s client on the Cuba Street job, but Mr Buunk said that the rate was calculated using actual costs that Richardson would have incurred in the event of delay.
[150] I would have concluded that all the amounts paid to Tracgrip are recoverable. They all represent amounts that Richardson was required to pay as a result of the breakdown of the UD300 in May 2019. It would not otherwise have paid these amounts.
[151] I would have concluded that the two amounts paid to PTS are recoverable. Digga accepts that the $450 is payable. The $550 was paid to transport the backup screw pile drive to the Cuba Street project. Mr Buunk explained that it was only necessary to arrange a backup machine because the client became concerned about the possibility of the UD250 failing. The reason for that concern was that the UD300 had failed.
[152] After deduction of the amounts that Richardson decided not to pursue, its claim reduced to $27,555.62. I would have awarded damages of this amount.
$58,678.84 for consequential losses due to the unavailability of the UD300 in June 2020
[153]The figure of $58,678.84 is made up as follows:
(a)$8,775 paid to Texco Drilling & Piling Ltd (Texco) for hiring an excavator and screw pile drive and adapting that equipment so it would fit the piles that Richardson already had for the Cuba Street job.
(b)$4,500 paid to Chris Moore for hiring a backup screw pile drive because the client insisted that Richardson have a backup onsite following the failure of the UD300.
(c)$16,500 paid to Texco for hiring an excavator and screw pile drive.
(d)$3,400 paid to AdvanceQuip NZ Ltd (the supplier of Earthworm screw pile drives) to modify Richardson’s new Earthworm screw pile drive to fit its existing excavator.
(e)$790 paid to Power Up Lubricants NZ Ltd for an oil additive that Richardson needed to buy to make the Earthworm machine work with its existing equipment.
(f)$4,641.51 paid to Dynaflow for making alterations to Richardson’s excavator to fit the new Earthworm machine.
(g)$625.79 paid to Pirtek (Wellington) Ltd (Pirtek) for making alterations to Richardson’s excavator to fit the new Earthworm machine.
(h)$7,567.20 paid to “Eaststeel” for fitting an Auger torque drive to Richardson’s excavator. It was unclear whether this cost related to the new Earthworm machine, or another screw pile drive all together.
(i)$3,065.04 paid to Pirtek for altering the Earthworm machine to work with Richardson’s excavator.
(j)$1,709.48 paid to Pirtek for altering the new Earthworm machine to work with Richardson’s excavator.
(k)$7,104.82 paid to RI Hydraulic & Industrial Services Ltd for manufacturing a different valve system to make the Earthworm machine perform at UD300 specifications.
[154] I would have concluded that the amounts paid to Texco and Chris Moore are recoverable. These are sums that Richardson was required to pay as a result of the UD300 breaking down. However, none of the other amounts are recoverable. They all relate to setting up the new Earthworm machine. As I have explained above, the wasted costs of this kind that Richardson is entitled to recover are the amounts paid to Tracgrip in mid-2017 to modify its excavator to accept the UD300. It cannot also recover the amounts paid to fit the excavator to the Earthworm. I would therefore have awarded damages in this category of $29,775.
Digga’s counterclaim for repair works
[155] Digga claims $57,322.90 for the cost of repairing the UD300. The invoice for this amount was sent to Richardson on 24 December 2019. Digga says that Richardson agreed to pay this amount. Richardson says that there was no such agreement.
[156] Mr Neilan said that the agreement was reached between him and Mr Buunk by telephone in November 2019. He said that Mr Buunk called him and told him to repair the UD300. He said that Mr Buunk understood that any repairs would be at Richardson’s cost.
[157] Mr Neilan said that the cost of the repairs was discussed at a meeting on 21 August 2019. He made no reference to this in his brief, but he was adamant during cross-examination that the cost of the repairs was discussed during the meeting.
[158] Mr Buunk denied that the telephone call took place. He said that he never told Mr Neilan to proceed with the repairs. He also denied that Mr Neilan ever advised him what the repairs would cost.
[159] I must determine which version of events is more likely. This is made more difficult by the fact that both Mr Neilan and Mr Buunk were credible witnesses.
[160] Mr Buunk said that he became aware that Digga was carrying out repairs to the UD300 midway through those repairs. He found this out when Mr Ferreira attended Digga’s workshop. Mr Buunk and Mr Ferreira both agreed that upon becoming aware that the repair was happening, no one from Richardson said anything
about it. No negative comment was made, no steps were taken to stop the work, and no attempt made to clarify who would be paying for the repairs.
[161] The UD300 broke down in May 2019. The repairs did not occur until December 2019. It seems unlikely that Digga would have done nothing for six months and then commenced repairing the machine without receiving confirmation from Mr Buunk that this is what Richardson wanted.
[162] The only document that is relevant to this issue is an internal email sent by Mr Buunk to Mike Romanes (the sole director of both Mikro and Richardson and the sole shareholder of Mikro) and others on 6 January 2020. The email attaches Digga’s invoice for the repair and comments, “A bit disappointing but not unexpected …”. The email goes on to propose wording for an email in response to Digga. That email, which was not sent, does not say that Richardson never agreed to pay the costs. It simply asks Digga to “look closely at your numbers and reconsider the expectation of your charges.”
[163] Taking these points into account, my conclusion is that Mr Buunk did tell Mr Neilan to proceed with the repair. Digga’s invoice for the repair costs is payable by Richardson.
Richardson’s claim for breach of the repair contract
[164] Richardson says that, if it is wrong and there was a repair contract, Digga breached an implied term of that contract requiring it to carry out the repair work with reasonable care and skill. But there is no evidence from which I can infer that the repair work was defective. I conclude that Richardson has failed to discharge the burden of proof in relation to this claim.
Digga’s counterclaim for the cost of airfreighting the upgraded UD250 from Australia
[165]Digga says that Richardson agreed to pay this cost. The amount invoiced was
$5,436.79. The invoice was sent on 24 December 2019, at the same time as the invoice for the repairs to the UD300.
[166] The invoice aside, there is no documentation relating to this claim. Mr Neilan again said that Mr Buunk agreed orally that Richardson would meet the cost of the airfreight. This was during a conversation in May 2019. Mr Buunk denied that he agreed Richardson would meet the costs in this conversation or at any other time.
[167] My conclusion is that Richardson did not agree to pay these costs. I have reached this view for two reasons. First, in May 2019, Digga was unhappy because of the failure of the UD300. Digga was working hard to keep Richardson on side. Digga decided to make the UD250 available for free. It seems more likely than not that Digga would also have opted not to charge Richardson for the airfreight of the UD250.
[168] Second, had Richardson agreed to meet the costs, then Mr Neilan would likely have sent Richardson an invoice for the costs in May 2019. The fact that he did not send the invoice until December 2019 suggests to me that it is more likely that there was no agreement.
[169] It will be seen that there is an apparent inconsistency in my approach because the airfreight invoice was attached to the email Mr Buunk sent to Mr Romanes and others on 6 January 2020, along with the invoice relating to the repair costs. I suggested above that this email indicates it is likely that Mr Buunk approved the repair costs, and yet I have concluded that he did not approve the airfreight invoice. However, the airfreight invoice was not the focus of the email and, considering the whole picture, I think my conclusion regarding that invoice is reasonable.
Result
[170] I dismiss the plaintiffs’ claims. I enter judgment for Digga in relation to those claims.
[171] I uphold Digga’s claim for the costs of repair to the UD300. I enter judgment in favour of Digga against Richardson for the sum of $57,322.90.
[172] Digga is entitled to interest on that amount under the Interest on Money Claims Act 2016. Interest is payable from 24 December 2019 until the date of payment.
[173] Digga’s counterclaim for the cost of airfreight of the UD250 is dismissed. I enter judgment for Richardson in relation to that claim.
Costs
[174]If the parties cannot agree on costs, then I direct as follows:
(a)Digga is to file and serve a memorandum of no more than five pages within 20 working days of this judgment; and
(b)the plaintiffs are to file and serve a memorandum in response of no more than five pages within a further 10 working days.
[175]I will then deal with the issue of costs on the papers.
Blanchard J
5
1