Gough & Gilmour Holdings Pty Ltd v Peter Campbell Earthmoving Pty Ltd

Court of Appeal (NSW)|2009-02-16|Before: McColl JA, Macfarlan JA, James J, Coll JA, MacFarlan JA

For the reasons already given, PCE has not established that either the August or November FOCUS Contracts contained the High Availability Warranty. 86 One difficulty with the pleading of the second term is that it does not make clear how the specified percentage is to be calculated or, for that matter, applied. A second difficulty is that the percentage selected is what might be described as the cumulative weighted percentage in the last notional year of the FOCUS Contracts. A third difficulty is that the allegations of breach of warranty relevantly claim only that "the FOCUS Contracts did not in practice provide for high levels of availability". The cross-claim does not specifically plead breach of a warranty requiring G&G to ensure a minimum, quantifiable level of machine availability. 87 Despite the apparent deficiencies in the pleadings, PCE appears to have conducted its cross-claim on the basis that G&G, among other breaches of contract, breached a warranty to ensure that the machines achieved the minimum percentage availability specified in the spreadsheets. In support of this case, reliance was placed on the "Annual available hours" figure of 3120 hours contained in the "Summary of proposed contract". PCE's written submissions at the trial correctly explained the calculation of the percentage figure (95.8%) appearing on page 7 of the P49 Contract. The submissions also pointed out that the specified annual availability rate of 3120 hours represented a calculation based on the standard 10 ten hour day, six day week, 52 weeks a year operation. 88 It cannot be said that PCE's case at trial focussed with any precision or clarity on the Minimum Available Hours Warranty that I have concluded formed part of the FOCUS Contracts. Nonetheless, I think that PCE's pleadings and submissions encompassed, even if only in very general terms, a contention that G&G was contractually obliged to ensure that the machines achieved a minimum level of availability determined by reference to the "minimum available hours" specified in the spreadsheets. 89 PCE's notice of cross-appeal, to which I referred earlier (at par 21 above), does not provide any details of the contractual terms for which PCE contends. Nonetheless, the cross-appeal challenges the findings that the percentage levels of availability specified in the spreadsheets attached to the FOCUS Contracts did not create contractual warranties. PCE's submissions on the appeal, like those at trial, did not focus on the Minimum Available Hours Warranty that, as a matter of construction, I have concluded formed part of the FOCUS Contracts. However, reference was made in the course of argument to such a warranty as an available construction of the FOCUS Contracts. 90 In the circumstances I think that PCE's notice of cross-appeal is sufficient to keep alive on the appeal the contention that G&G breached the Minimum Available Hours Warranty of the FOCUS Contracts. It follows that I do not accept a submission put by G&G, although not developed in any detail, that PCE cannot now rely on the minimum available hours term. In my view, PCE can rely on that term in the FOCUS Contracts to support its claim for damages against G&G.

Defences Not Addressed 91 By leave of the Court, G&G filed supplementary written submissions after the hearing had concluded, contending that the primary Judge had failed to address certain of G&G's pleaded defences to PCE's contractual claims. In substance, G&G submits that it pleaded in par 14 of its further amended defence to cross-claim ("Defence") that, if it had failed to comply with a Minimum Available Hours Warranty, its apparent failure was due to PCE's breaches of its obligations under the FOCUS Contracts. In particular, G&G had pleaded that PCE had: · operated machines beyond their capacity and failed to modify the bowls of scrapers as it was contractually required to do; · did not ensure that the machines would be accessible to G&G for the provision of maintenance and repair services; · did not conduct regular fluid checks on the machines; and · allocated inexperienced or incompetent operators to the machines. 92 G&G acknowledges that it relied on the evidence relating to these matters principally for other purposes at the trial, such as supporting a claim made by G&G itself that was ultimately abandoned. Nonetheless, G&G submits that PCE well appreciated that the matters pleaded in par 14 of the Defence were put forward as: "an explanation by [G&G] for why the FOCUS Contracts did not provide the rate of availability [PCE] claimed to have expected … [T]he parties were alive to the fact that [G&G] put these matters forward as being relevant not only to the representation claim but also to the contractual claim, and were being put forward as matters of positive defence." 93 G&G argues that the primary Judge did not address the defences pleaded in par 14 of the Defence, either in the preliminary judgment or the second judgment. Since there was substantial evidence relating to a number of the pleaded matters, G&G contends that the proceedings should be remitted to the primary Judge for further findings to be made in relation to the defences pleaded by it. 94 PCE, in a lengthy reply to G&G's supplementary submissions, concedes that the defences relied on by G&G were appropriately pleaded and were the subject of costs evidence and submissions at the preliminary hearing. PCE also acknowledges that his Honour, in the preliminary judgment, made findings that G&G had established a factual basis for certain of the matters pleaded. However, according to Mr Cotman SC who appeared with Mr Gristci for PCE, the findings were made in the context of addressing G&G's contention that any pre-contractual representations made by it to PCE were, to PCE's knowledge, founded on certain assumptions made by G&G as to PCE's responsibilities. 95 Mr Cotman points out that it was at the second hearing that the parties debated whether there had been a breach of the High Availability Warranty. (The primary Judge did not need to consider at that hearing whether G&G had breached a Minimum Available Hours Warranty, since he had found that the FOCUS Contracts contained no such warranty.) PCE says that it was incumbent on G&G to bring to his Honour's attention what PCE describes as the "causation" point in a "coherent manner". Mr Cotman argues that the only time that G&G raised the so-called causation point at the second hearing was in a brief passage in G&G's written submissions, as follows: "These assumptions predominantly required PCE to do certain things (such as carry out daily checks and maintenance, clean the vehicles prior to repair, modify the coal bowls to the design specification) or not do certain things (such as operate the machines outside their operational limits). To that extent, and to the extent that the representations were found to be terms of the contracts, the assumptions therefore operated as dependant [sic] obligations on the part of PCE. Alternatively, to the extent that PCE has not done or refrained from doing the things that G&G to PCE's knowledge assumed would be done/not done, then PCE has failed to co-operate with the performance of the FOCUS contracts, or has prevented G&G from performing the contracts. Because the co-operation is essential to the performance by G&G of an obligation to provide high availability, G&G is excused from performance, and therefore there is no breach established.' 96 The primary Judge can readily be excused for not addressing the so-called causation issue. The ways in which the parties presented their cases were confusing and the formulation of a multitude of preliminary issues did not help to simplify the matters in dispute. G&G's submissions at the second hearing, like PCE's submissions relating to the terms of the warranties, did not develop the "causation" argument in a clear or coherent fashion. 97 Nevertheless, the fact is that G&G pleaded that its apparent breach of any warranty that might be found in the FOCUS Contracts was due to PCE's failure to comply with its dependent contractual obligations. G&G's pleaded defences were supported by evidence given at the preliminary hearing. His Honour made certain findings on the basis of that evidence, albeit in the context of other questions requiring resolution. G&G's submissions at the second hearing relied, albeit briefly, on the pleaded matters as defences to PCE's contractual claims. 98 G&G can be criticised for not developing the arguments before the primary Judge and its failure to do so may be relevant to the question of costs, both on the appeal and at trial. But it cannot be said that G&G abandoned or ignored altogether its pleaded defences. G&G is entitled to have those defences determined and, to that end, to have the necessary factual findings made by the primary Judge. 99 It follows, most regrettably, that in the absence of agreement between the parties, the proceedings will have to be remitted to the primary Judge to resolve G&G's defences pleaded in par 14 of the defence, insofar as they have not been disposed of by findings already made by his Honour.

DAMAGES 100 The primary Judge assessed damages for breach of the High Availability Warranty. I have concluded that the FOCUS Contracts did not include any such warranty. The approach used by his Honour to assess damages for breach of the High Availability Warranty cannot be applied to the assessment of damages for any breach by G&G of the Minimum Available Hours Warranty (assuming breach to be established). I have explained the methodology that should apply in the latter (at par 80 above). That methodology is quite different from the approach taken by his Honour. Accordingly, his award of damages for breach of the High Availability Warranty must be set aside.

CONCLUSION 101 The parties should have an opportunity to consider this judgment. It is to be hoped that they can reach agreement on: (a) whether the evidence establishes a breach of the Minimum Available Hours Warranty; and

(b) if so, the quantum of damages attributable to the breaches (subject to the resolution of G&G's pleaded defences).

The parties should also endeavour to reach agreement on consequential issues, such as costs. 102 To avoid any uncertainty, it is appropriate to record that, in my view, the evidence is sufficient to enable the matters referred to in the previous paragraph to be determined. G&G suggested in argument, again without elaboration, that PCE had failed to prove any breach of the Minimum Available Hours Warranty. The evidence adduced before the primary Judge addresses the relatively straightforward calculations that need to be made. 103 In summary, I have reached the following conclusions: (i) on the proper construction of the August FOCUS Contracts and the November FOCUS Contracts, each included a Minimum Available Hours Warranty by G&G to PCE; (ii) the FOCUS Contracts did not include the High Availability Warranty found by the primary Judge to be a term of those Contracts; (iii) it is open to PCE on the appeal and in any future proceedings to rely on the Minimum Available Hours Warranty; (iv) the award of damages by the primary Judge cannot stand, since the assessment depends upon an analysis that cannot apply to a breach by G&G of the Minimum Available Hours Warranty; (v) G&G is entitled to a determination of its pleaded defences to PCE's claims based on the Minimum Available Hours Warranty, insofar as the defences have not already been resolved by his Honour's findings; (vi) the parties should have an opportunity to consider this judgment and to reach agreement on: (a) whether the evidence establishes a breach or breaches by G&G of the Minimum Available Hours Warranty; and (b) if so, the quantum of damages attributable to the breach or breaches (subject to the resolution of G&G's pleaded defences); (vii) the parties should also have the opportunity to reach agreement on other consequential issues, such as costs; and (viii) in the absence of agreement, the proceedings should be remitted to the primary Judge to determine the outstanding issues, consistently with the judgment of this Court. 104 The outstanding issues include: · whether the evidence establishes a breach or breaches by G&G of the Minimum Available Hours Warranty; · whether G&G has established any of the defences pleaded in par 14 of its Defence to Cross-Claim, insofar as the defences have not already been resolved by his Honour's findings; and · the quantum of damages attributable to any breach or breaches by G&G of the Minimum Available Hours Warranty. 105 It is appropriate to make two further comments. First, my present view is that each party should bear its own costs of the appeal. Each has enjoyed some measure of success (and some measure of failure). Each bears responsibility for the critical issues in the case not being exposed with clarity. 106 Secondly, it is to hoped that the parties are able to agree not only on relatively mechanical matters, such as the quantification of damages flowing from any breach of the Minimum Available Hours Warranty, but on orders that will finally resolve these extremely protracted and expensive proceedings. It is plainly in the interests of both parties to avoid yet further delay and expense that would necessarily be involved in a further hearing. 107 The orders that would seem to be appropriate (leaving aside the question of costs) are as follows:

The judgment entered on 3 September 2008 in favour of the cross-claimants (the cross-appellants) by James J in the sum of $2,129.881.65, inclusive of interest, be set aside.

The proceedings be remitted to James J to determine the outstanding issues consistently with the judgment of this Court. 108 Before the Court makes orders in this form, the parties should be given the opportunity to consider the judgment and determine whether they can reach agreement on some or all of the outstanding issues. If they reach agreement, they should file agreed short minutes of order. If not, the parties should file brief written submissions, limited to any disagreement as to: (i) the orders that should be made in relation to the costs of the appeal and of the proceedings before the primary Judge; and (ii) the form of the proposed orders.

The written submissions should not exceed five double spaced pages in length and should not canvass any of the substantive issues that, in the absence of agreement, will be the subject of the remitter to the primary Judge. 109 The only orders that should be made at this stage are as follows:

If the parties reach agreement on all or any of the outstanding issues in the proceedings, they file agreed short minutes of order giving effect to the agreement within fourteen days.

If the parties do not reach agreement on costs or the form of the orders prepared in the judgment, the respondent (PCE) file written submissions on each of these issues within fourteen days.

The appellant (G&G) file written submissions in reply within a further seven days.

Each of the written submissions referred to in orders 2 and 3 not exceed five double-spaced pages in length. **********

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Trade Practices Act 1974(Cth)

CITATION: Gough & Gilmour Holdings Pty Ltd v Peter Campbell Earthmoving Pty Ltd [2009] NSWCA 37

Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41 Oscar Chess Ltd v Wiliams [1957] 1 WLR 370 CASES CITED: Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

LOWER COURT MEDIUM NEUTRAL CITATION: [2007] NSWSC 172

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at 179 [40] per curiam , citing Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at 461 - 462 [22], per curiam ; Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65; (2007) 69 NSWLR 603 at 655 [262], per Campbell JA (with whom Mason P and Tobias JA agreed). 60 Page 3 of the P49 Contract states that: "This agreement represents a comprehensive product support programme which will: 1. Provide a High Rate of Machine Availability . by utilising advanced diagnostic techniques and tooling, unscheduled down time will be minimised …" 61 If this provision is read alone, there may be difficulty in determining what the parties intended by the use of such non-specific language. No doubt it was for this reason, that a good deal of the argument before the primary Judge and in this Court focussed on whether the expression "High Rate of Machine Availability" was too vague and uncertain to constitute a contractual promise enforceable by PCE against G&G. It is necessary, however, to read page 3 of the P49 contract with page 7. When the two are read together, it can readily be seen that the figures specified on page 7 give more precise content to G&G's promise to provide a high rate of machine availability. 62 The "Summary of Proposed Contract" includes an item "Annual available hours - 3120". It is clear enough that this figure represents and was intended to represent 60 hours per week over the 52 weeks of the year. There was evidence, for example, from Mr Hutson (G&G's Product Support Manager), that the industry norm was a working day of 10 hours, six days per week and that the figure of 3120 on page 7 of the P49 Contract reflected the norm. 63 The percentage figures in the "Cumulative" box under the heading "Annual cost analysis" are calculated by reference to the figure of 3120 annual available hours. Thus the figure of 95.4% for year 1 is derived by deducting the specified number of "down h[ou]rs" (144) from the annual available hours (3120) and expressing the resulting figure (2976) as a percentage of 3120. The calculation is as follows:

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