Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd; Dynamic Lifter Pty... [2004] NSWSC 943 | Case summary

Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd; Dynamic Lifter Pty... [2004] NSWSC 943 | Case summary | Zoe

CATCHWORDS : A claim by Linfox against Yates was compromised during the hearing. Yates brought a cross-claim against Linfox, essentially for breach of a contract to project manager a move from one Yates warehouse to another. The contract had been made informally. Several questions were litigated, and resolved in accordance with established principles, concerning the terms of the contract. - Illegality: Linfox said that Yates' claim for damages was defeated because it involved the occupation and use of a new building, without an occupation certificate, in breach of s109 M (i) of the Environmental Planning and Assessment Act 1979. Defence rejected. - Practice and Procedure: In an action in contract, as in an action in negligence, it may be appropriate to direct a party to amend its pleadings, so as to reflect the issues litigated. - Evidence: inferences to be drawn from the failure to call a witness - no inference if the evidence would go only to questions about credit. - Damages: held that certain claims in respect of lost sales to hypothetical questions, to be assessed not on the balance of probabilities, but upon an assessment of the probabilities. - Damages: it is not an essential ingredient to a claim for loss of profits on the sale of goods that the claimant owns the goods. - Legal Practitioners: Directions given about possible misconduct and possible costs orders. Corporations Act 2001 (Cth) Environmental Planning and Assessment Act 1979 LEGISLATION CITED : Evidence Act 1997 Insurance Contracts Act 1984 (Cth) Supreme Court Act 1970 (NSW) Trade Practices Act Alexander v Cambridge Credit Corporation Limited (1987) 9 NSWLR 310 Allen v Tobias (1958) 98 CLR 367 Allied Maples Group Limited v Simmons & Simmons [1995] 1 WLR 1602 Armory v Delamirie (1722) 1 Stra 505, 93 ER 664 Babcock International Ltd v Babcock Australia Ltd [2003] NSWCA 6; 56 NSWLR 51 Biggin & Co Limited v Permanite Limited [1951] 1 KB 422 BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Browne v Dunn (1893) 6 R 67 Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410 Commercial Union Assurance Company of Australia Limited v Ferrcom Pty Limited & Anor (1991) 22 NSWLR 389 Commonwealth of Australia v Amann Aviation Pty Limited (1991) 174 CLR 64 Davies v Taylor [1974] AC 207 Fink v Fink (1946) 74 CLR 127 Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215 GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50 G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631 Hawkins v Clayton (1988) 164 CLR 539 Henville v Walker (2001) 206 CLR 459 Holman v Johnson (1775) 1 Cowp 341; 98 ER 1120 Houghton v Immer (No 155) Pty Limited (1997) 44 NSWLR 46 I & L Securities Pty Limited v HTW Valuers (Brisbane) Limited (2002) 210 CLR 109 Industrial Rollformers Pty Ltd v Ingersoll-Rand (Australia) Ltd [2001] NSWCA 111 Insurance Commissioner v Joyce (1948) 77 CLR 39 Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd (1988) 5 BPR 11,110 CASES CITED : Leotta v Public Transport Commission (NSW) (1976) 50 ALJR 666 L J P Investments Pty Limited v Howard Chia Investments Pty Limited (No 2) (1990) 24 NSWLR 499 Makita (Australia) Pty Limited v Sprowles (2001) 52 NSWLR 705 Malec v JC Hutton Pty Limited (1990) 169 CLR 638 Maloney v Commissioner for Railways (NSW) (1978) 52 ALJR 292 March v E & M H Stramare Pty Limited (1991) 171 CLR 506 Mummery v Irvings Pty Ltd (1956) 96 CLR 99 Murphy v Overton Investments Pty Limited (2004) 78 ALJR 324 Nelson v Nelson (1995) 184 CLR 538 Nilon v Bezzina [1988] 2 Qd R 420 Ophelia, The [1916] 2 AC 206 Payne v Parker [1976] 1 NSWLR 191 Placer (Granny Smith) Pty Limited v Thiess Contractors Pty Limited (2003) 77 ALJR 768 Poseidon Limited & Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Ratcliffe v Evans [1892] 2 QB 524 Richardson v Mellish Robinson v Harman (1848) 1 Exch 850; 154 ER 363 Sabag v Health Care Complaints Commission [2001] NSWCA 411 Shorey v P T Limited (2003) 197 ALR 410 Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310 SS Pharmaceutical Company Ltd v Qantas Airways Ltd [1991] 1 Lloyd's Rep 288 State of New South Wales v Moss (2000) 54 NSWLR 536 Water Board v Moustakas (1988) 180 CLR 491 Watts v Rake (1960) 108 CLR 158 White v Australian and New Zealand Theatres Ltd (1943) 67 CLR 266 White v Overland [2001] FCA 1333 Linfox Transport (Aust) Pty Ltd (Plaintiff in 50125/2000, Defendant in 50112/2003) PARTIES : Arthur Yates & Co Ltd (Defendant in 50125/2000) Dynamic Lifter Pty Ltd (Plaintiff in 50112/2003) FILE NUMBER(S) : SC 50125/2000; 50112/2003 COUNSEL : Mr SK Wilson QC, Mr GL Meehan (Plaintiff in 50125/2000, Defendant in 50112/2003) Mr RM Smith SC, Mr NJ Kidd (Defendant in 50125/2000, Plaintiff in 50112/2003) SOLICITORS : Corrs Chambers Westgarth (Plaintiff in 50125/2000, Defendant in 50112/2003) Coudert Brothers (Defendant in 50125/2000, Plaintiff in 50112/2003)

2 In the course of the hearing of Yates' cross-claim, Linfox contended that part of the loss, that Yates said it had suffered, had in fact been suffered, not by Yates, but by Yates' subsidiary company, Dynamic Lifter Pty Ltd. That company then commenced an action against Linfox, claiming damages for the alleged loss in question, and thereafter the two actions were heard together. The Background Facts 3 In 1997 Yates embarked upon a project it called Operation Leapfrog. That project included these strategies: reducing the number of Yates' operating sites, so as to reduce costs; setting up new purpose built sites; appointing a warehouse contractor to manage its warehouses and to perform other services; installing a computerised warehouse management system (WMS); and outsourcing some manufacturing functions. Since Yates' business was seasonal, peaking in spring each year, the project was regarded as "time critical", in the sense that either Yates completed the project before the commencement of its spring peak activities in a given year, or, practically speaking, there would be a delay of a year. Yates decided that it wanted to complete the project by its spring 1999 season, a decision that imposed urgency in relation to the details that had to be implemented. 4 The plan was to undertake the project in two stages. The first stage included disposing of premises at Milperra, where there was located Yates' head office and a warehouse; relocating the head office to other premises at Homebush; acquiring a temporary warehouse (at Clyde, as it happened); and relocating from the Milperra warehouse to the temporary warehouse. The second stage including acquiring new premises (at Wyee, as it happened), and setting up a new manufacturing centre there; building a new distribution centre at Mt Druitt, adjacent to Yates' then existing manufacturing plant there, and relocating from the temporary (Clyde) warehouse to that new warehouse, or distribution centre; and also closing down and setting up various other sites. 5 Yates saw it as desirable to appoint a specialist contractor to handle its warehouses, and its distribution work, so as to enable its management personnel to concentrate on manufacturing, marketing and sales issues. After negotiations, Linfox was appointed to this position, and it performed the functions of warehouse contractor for some time. During this period, it and Yates had lengthy discussions about, amongst other things, the introduction of a WMS. In 1997 Yates had a computer system called PRMS, which it used amongst other purposes to control its inventory. To state matter briefly at this stage, it proposed to continue to use the PRMS as its host computer system, but to add a WMS that would interface with the PRMS. There was a question dividing Linfox and Yates as to which brand of WMS would be most suitable, Linfox advocating the "Exceed" brand, and Yates advocating the "Paperless" brand. In general terms, they expected to choose one, and then to install it, before the commencement of the move from the temporary warehouse at Clyde to the new distribution centre at Mt Druitt. However, delays occurred. 6 By arrangement with Yates, Maincon Holdings Pty Ltd (Maincon Holdings) acquired the land upon which the Mt Druitt distribution centre was later erected, and Maincon Holdings entered into an agreement with Yates to the effect that it would lease the land to Yates, upon the completion of the construction of the new warehouse. Maincon Pty Ltd (Maincon) entered into a separate agreement with Yates, to the effect that Maincon would construct this building for Yates. If Operation Leapfrog was to be implemented as planned, it was critical that Maincon complete the construction of the warehouse in sufficient time for Yates to move into it before the commencement of the spring 1999 season. 7 Another complication arose from the circumstances surrounding Yates' occupation of the temporary warehouse facility at Clyde. Yates took possession of these premises as a sublessee, but the relevant head lease was about to expire, and the head lessor was negotiating with a proposed new tenant. As matters developed, it was regarded as critical that Yates vacate the Clyde premises by 16 August 1999, and fulfil its obligation under the sublease to "make good" those premises by that date. 8 That is, Yates needed to vacate Clyde by then, and it needed Maincon to complete the construction of the new Mt Druitt warehouse before it could be fitted out and occupied, and Yates perceived that it needed to complete the move to Mt Druitt before the commencement of the 1999 spring season; and this meant that various matters had to be attended to in a timely manner. 9 The Clyde warehouse contained a significant quantity of racking, that is, racks in which products on pallets could be stored. Good practice required the move from Clyde to Mt Druitt to be conducted on a "rack-to-rack" basis. That is, each pallet would be taken from its then position on a rack at the Clyde facility, and placed on a rack in the new warehouse at Mt Druitt. This required considerable planning, so that those actually placing the pallets into the racks at Mt Druitt could know where each pallet was to be placed; and, of course, the racking had to be in place before the pallets arrived at Mt Druitt. Simply stated, Yates says that Linfox failed to arrange the timely procurement of all the racking components necessary to set up the racks needed at Mt Druitt. It says that as a result of this failure, when stock was moved from Clyde to Mt Druitt, there was insufficient racking available to permit a rack-to-rack transfer. As a further result, some thousands of pallets of product were placed on the floor of the warehouse, and in the open air outside the warehouse, leading to great congestion in and around the warehouse. Yates also says that Linfox failed to act in a timely manner, more generally, neither commencing the move out of Clyde at the appropriate time, nor completing the move into Mt Druitt at the appropriate time. It says that, in consequence, there was a profound disorder in and outside the Mt Druitt warehouse; its staff could not find stock, needed to make up orders for its customers; delays and errors in deliveries resulted; sales were lost, and therefore profits were lost; and it suffered significant losses. 10 Linfox disputed most of the factual allegations made. It asserted that there were a number of causes of the congestion and disorder, so that issues arise as to the extent, if at all, to which Linfox might be held responsible for the congestion, and for the difficulties and delays encountered in filling orders for Yates' customers. Linfox also said that there were other, additional causes for the lost sales, and for the other alleged losses. That is, there are two separate groups of causation issues: whether the congestion and disorder were caused by Linfox's conduct; and whether the various losses made were the result of the congestion and disorder mentioned.

The Pleadings 11 By its amended cross-claim (hereafter "cross-claim") Yates pleaded in paragraphs 1-10 a variety of formal and preliminary matters. By its further amended defence to the amended cross-claim (hereafter "defence") Linfox put several of these matters in issue, but some of them are no longer really in contention. In short, it is now accepted or readily established that Linfox conducted a business of providing some warehouse and logistical services; and that in early 1998 Yates operated various distribution centres, including one at Milperra and another at Laverton, in Victoria. By paragraph 7 of the cross-claim Yates pleaded that from about April 1998, at the request of Yates, Linfox managed and operated the Laverton Distribution Centre (DC), and that Linfox managed and assisted in relation to Yates' Milperra DC, and in the operation of the Clyde DC, and that Yates provided logistical services to Yates. Linfox pleaded that at the request of Yates it had assisted Yates in these respects. Similarly, in paragraph 8 of the cross-claim, Yates pleaded that from about June 1998, at the request of Yates, Linfox managed and operated the Clyde DC, while Linfox pleaded that it had only assisted Yates in this regard. 12 In paragraph 9 of the cross-claim Yates pleaded what it called "The Agreement", although one needs to bear in mind that this agreement is not the agreement said to have been breached. It said that from at least June 1998 Yates and Linfox agreed that Linfox would operate the Clyde DC, and subsequently the Mt Druitt DC. Linfox pleaded that it was agreed that, subject to Yates' direction, it would be involved in the operation of the Clyde DC, and that it was implied that upon the relocation of the Clyde DC to the Mt Druitt DC Linfox would be involved in the operation of the Mt Druitt DC, subject to Yates' direction. 13 In paragraph 10 of the cross-claim Yates pleaded that, from about early 1999, at the request of Yates, Linfox provided advice to Maincon as to the design and layout of the Mt Druitt DC. Linfox pleaded that it provided information to Maincon as to certain aspects of the internal fit out, and as to the provision of certain services at the Mt Druitt DC. 14 In paragraph 11 of the cross-claim, Yates pleaded the making of what it called the Relocation Management Agreement, being the agreement said to have been breached. It said: "In about May 1999 Yates and Linfox agreed that Linfox would manage the fit out of the Mt Druitt DC and the relocation of the NSW distribution centre from the Clyde DC to the Mt Druitt DC."

(b) alternatively in about early June 1999, Linfox represented to Yates: (i) that, in exercising reasonable care, Linfox would undertake the relocation of the Clyde warehouse to the Mt Druitt DC, with the objective of achieving: (ii) the earliest possible occupation of the Mt Druitt DC: (A) by transferring goods commencing on what was then estimated to be the earliest possible transfer date, namely 26 July 1999; (B) by commencing full operations on what was then estimated to be the earliest possible commencement date, namely 3 August 1999; (iii) The earliest possible departure from the Clyde warehouse on or before 13 August 1999 being the date that Yates told Linfox was the latest possible departure date; all subject to the matters set out in sub-paragraphs (1) - (10) below: (1) Access to the whole of the Mt Druitt DC being available to Linfox's racking contractor commencing 5 July 1999; (2) The racking at Mt Druitt being fully installed, with location labels, on or before 26 July 1999; (3) The first pallets of stock being able to be received at the Mt Druitt DC on or before 26 July 1999; (4) As at 26 July 1999, stock held at Clyde having been reduced by Yates to no more than approximately 7,500 pallets; (5) The whole of the Mt Druitt DC being completed on or before 29 July 1999 (including amenities, plumbing, fire systems, painting and electrical services); (5A) There being adequate power supply and power outlets to enable the materials handling equipment to operate at peak capacity for the timely put away of stock; (6) The Mt Druitt DC being handed over to Yates for occupation on 30 July 1999; (7) Yates' spring season peak business cycle not having commenced at the time of the move; (8) Linfox being permitted by Yates to use Linfox's Smithfield warehouse, if necessary, between 1 July and 31 August 1999, as a transit warehouse for non-essential (reserve) stock from the Clyde warehouse, and for output from Yates' facilities at Revesby, Rouse Hill and Tamworth; (9) Yates' directions; and (10) A WMS having been established at the Mt Druitt DC and interfaced with PRMS to record the receipt of stock and perform stock control and management functions, including the put away of stock to pre-allocated locations, electronic confirmation of orders, automatic adjustment of stock inventory, identification of multiple stock locations and radio frequency direction of pickers. 18 The effect of paragraph 12(b) - the assertion that Yates represented to Linfox the matters mentioned in subparagraphs (i) to (iii), subject to the matters mentioned (1) to (10) - is obscure. Linfox pleaded elsewhere various matters said to estop Yates from making various allegations. 19 In paragraph 13 of the cross-claim Yates pleaded that Linfox beached the Relocation Management Agreement by failing to arrange the timely procurement of all necessary racking for the Mt Druitt DC, failing to carry out the relocation from Clyde to Mt Druitt on a "rack-to-rack" transfer of stock, failing to commence the installation of racking at Mt Druitt on 5 July 1999 and complete it on 26 July 1999, failing to commence the transfer of stock and equipment from Clyde to Mt Druitt on 26 July 1999 and complete it by 2 August 1999, and failing "to exercise reasonable care in its management functions". The particulars of breach given were in these terms:

(a) Linfox first sought Yates' approval to place a purchase order for installation of racking at Mt Druitt on 5 July 1999. Yates gave that approval on the same day it was sought. The installation of racking did not commence until approximately mid August 1999 and was not completed until approximately the end of August 1999; (b) The transfer of stock and equipment from Clyde to Mt Druitt commenced in or about the end of July 1999 and was not completed until mid to late August 1999; (c) As the racking was not installed at the time of transfer of stock, the stock was not transferred "rack to rack". Instead, approximately 3,000 of the approximately 4,500 pallets of stock transferred were stored on the Mt Druitt warehouse floor or in open yard areas (including loading bays) at the Mt Druitt site. Linfox failed to record the stock in a timely and proper manner in the warehouse inventory system; (d) As a consequence, warehouse staff were unable to efficiently locate and extract stock to fulfil sales orders and were unable to accurately record such sales orders as were fulfilled on the warehouse system. Sales orders were not fulfilled. Sales orders were delayed and not accepted by customers. Customers cancelled purchase orders due to the delay. No or inadequate records were kept of the sales. Carriers were kept waiting at the site to be loaded. Carriers were dispatched partially loaded. Full particulars will be provided prior to trial; [There is no (e)] (f) Linfox commenced the relocation of stock from reserve shelves at the Clyde warehouse on or about 2 August 1999, without there being sufficient reserve racking erected at the Mt Druitt warehouse to permit product removed from the reserve racks at the Clyde warehouse to be relocated into reserve racks at Mt Druitt; (g) In the absence of reserve racking at the Mt Druitt warehouse, product removed from reserve racks at Clyde was block stacked at the Mt Druitt warehouse, initially within the warehouse in the area in which the racking contractor was erecting reserve racking then in the staging area within the warehouse, then underneath the awning in front of the loading dock at the warehouse and subsequently in the driveway and along the boundaries of the driveway at the warehouse; (h) When block stacking product, Linfox failed to: (i) implement any system or procedure to record the precise product or products and the quantities of such products which were located within the block stacks; (ii) constructed the block stacks in a way which made access to the products making up such stacks impossible; (i) Failed to plan the locations at which product would be placed in the reserve stacks at Mt Druitt; (j) Allowed product which was block stacked in the area in which the racking contractor was working in the warehouse to be removed from block stacks in that area and placed into reserve racking when erected without any plan as to where such product should be placed within the reserve racking shelves and failed to keep any record as to where such product was placed in those racks; and (k) Failed to plan in relation to product received into the Mt Druitt warehouse from manufacturing plants and suppliers where: (i) such product would be located during the relocation; and (ii) where such product was block stacked in the location of that product and access to such product. 20 By paragraph 13 of its defence Linfox denied each allegation made in paragraph 13 of the cross-claim, and then pleaded that between 31 July and 15 August 1999 Linfox effected the relocation from the Clyde DC to the Mt Druitt DC with all reasonable care, having regard to the circumstances it had pleaded in subparagraphs (1) to (10) of paragraph 12 of the defence not being met. 21 The cross-claim went on to allege loss, and then to assert the existence of what were in substance alternative claims, in negligence, and for breach of the provisions of sections 51A and 52 of the Trade Practices Act, and to raise a claim in respect of the ownership of certain racking, located in the Clyde DC and sold by Linfox on behalf of Yates at about the time of the move. It said that Linfox had not accounted to it for certain proceeds of sale. This issue can be put aside for the time being. 22 By paragraph 17B of the defence, Linfox asserted that the Relocation Management Agreement, which Linfox described as the Initial June Agreement, was replaced or varied by what Linfox called the July Agreement. It said that, by the new agreement, it had agreed that it would, commencing on 31 July 1999, implement the relocation of stock, equipment and personnel from Yates' Clyde DC to the incomplete Mt Druitt DC, with the objective of completing the relocation within 14 days or, in any event, no longer than 19 days (that is, before the date upon which Yates had to move out of the Clyde DC). 23 The terms of this agreement were pleaded in paragraph 17C of the Defence: that Linfox would not be responsible to Yates for the consequences of having to effect the relocation: (a) not on a rack-to-rack basis and before the racking was complete with the consequence that a significant quantity of at least 2,000 pallets of stock would have to be stored on the floor of the Mt Druitt DC; (b) while the Mt Druitt DC was still incomplete; (c) before an Occupation Certificate had been issued; (d) when - absent an Occupation Certificate - Yates was without insurance cover for the relocated stock or the Mt Druitt DC; (e) while racking and construction works were still in progress; (f) by fully evacuating the Clyde warehouse into Mt Druitt inside 14 days (31 July - 13 August 1999), when the Mt Druitt facility was underpowered to run the mobile put-away machinery necessary to service deliveries and dispatches; (g) without a WMS to record the receipt of stock and perform stock control and management functions, including the put away of stock to pre-allocated locations, electronic confirmation of orders, automatic adjustment of stock inventory, identification of multiple stock locations and radio frequency direction of pickers. 24 The particulars given in respect of paragraph 17B and 17C might be summarised by saying that the contract arose from conversations that took place on 21 and 30 July 1999, and by implication. Linfox personnel told Yates personnel of a lack of progress in relation to the move; Mr Jacob of Linfox then advised Mr Ballantyne of Yates against moving, generally having regard to the lack of progress concerning the racking and to the lack of an Occupation Certificate from the local council, leading, it was said, to some insurance problem; but Mr Ballantyne instructed Linfox that the move should go ahead. Linfox said that the terms it had pleaded were implied "to give business efficacy to the agreement in the circumstances that, to the knowledge of the parties, prevailed at the time of the making the contract". 25 Then, between paragraphs 17D and 17FA Linfox pleaded that Yates was estopped from making the claims made. In paragraph 17E it pleaded that Yates directed Linfox to transfer its stock and equipment to the Mt Druitt DC, when both Yates and Linfox knew or assumed what Yates described as "the commonly assumed facts", namely: (a) not all of the necessary racking for the Mt Druitt DC had been procured with the result that a significant quantity of at least 2,000 pallets of stock would have to be stored on the floor of the Mt Druitt DC; (aa) the spring season had come early and as a result the move from Clyde to Mt Druitt DC would coincide with the onset of increased customer orders for the spring season; (b) Linfox had neither commenced installation of the racking on 5 July 1999 nor completed it on 26 July 1999; (c) Linfox had not commenced the transfer of stock to Mt Druitt on 26 July 1999 and Linfox could not and would not complete any transfer by 2 August 1999; (d) the transfer of stock that it was directing Linfox to implement could not and would not be a rack-to-rack transfer; (e) building and racking works were in progress at the Mt Druitt site; (f) the Mt Druitt DC was still incomplete, and unfit for occupation and use; (ff) a WMS had not been established at the Mt Druitt DC and interfaced with PRMS to record the receipt of stock and perform stock control and management functions, including the put away of stock to pre-allocated locations, electronic confirmation of orders, automatic adjustment of stock inventory, identification of multiple stock locations and radio frequency direction of pickers, and would not be installed until in or about November 1999; (g) no Occupation Certificate had been issued; (h) absent an Occupation Certificate, Yates could not expect to have insurance cover for the building or the stock moved in to it; (i) Yates was not lawfully entitled to occupy or use its Clyde warehouse past 13 August 1999; (j) the Mt Druitt facility was underpowered to run the mobile put-away machinery necessary to service deliveries and dispatches; and (k) of the consequences that might attend a transfer in these circumstances; (l) Linfox had advised Yates that it should not undertake the move to Mt Druitt at that time and in the circumstances set further above, which advice Yates had declined to accept; (m) Linfox had offered Yates the use of an alternative warehouse located at Smithfield, which offer Yates had rejected. 26 In paragraph 17EA Linfox pleaded that by varying the Initial June Agreement and/or entering into the July Agreement and/or giving Linfox the directions pleaded in paragraph 17E, Yates caused Linfox to assume, or knew or ought to have known that Linfox would be induced to assume that "in carrying out the move from Clyde to Mt Druitt and in Linfox's subsequent management of the Mt Druitt DC Linfox would not be liable to Yates in respect of any loss or damage suffered by Yates caused by the move taking place in the circumstances of any one or more of the commonly assumed facts, and that Yates accepted the risk of such loss and damage". 27 In paragraphs 17EB to 17EF Linfox pleaded, additionally or in the alternative to paragraph 17EA, that Yates and Linfox varied the Initial June Agreement or entered into the July Agreement on the basis of what it called the "commonly assumed facts", that is, the facts set out in paragraphs 17EA just quoted, that Yates did not correct the assumption made by Linfox as to the accuracy of the commonly assumed facts, and that Linfox would not have carried out the move otherwise. In paragraph 17EE Linfox pleaded that as a result of the move in the circumstances and upon the basis of the commonly assumed facts, there was a measure of disruption caused to the move and the subsequent management by Linfox of the Mt Druitt DC; and Linfox then said that it would be unconscionable for Linfox to be held liable to Yates for the consequences of Linfox acting as directed by Yates and for Linfox carrying out the move in the circumstances of the commonly assumed facts, or for Linfox to resile from any one or more of the commonly assumed facts, or for Linfox's having assumed those facts. 28 Paragraph 17G asserted the absence of a duty of care in the circumstances previously pleaded, and paragraph 17H asserted the existence of a waiver, given the circumstances said to have founded the estoppels already pleaded. 29 Paragraphs 17HA to 17HJ asserted the existence of a different estoppel. Linfox pleaded that on or before 30 July 1999, Yates, through Mr Ballantyne, knew, as was the fact: (a) the spring season had come early and that as a result, if the move from Clyde to the Mt Druitt DC went ahead as planned, it would coincide with the onset of a significant increase in customer orders; (b) not all of the racking would be erected at the Mt Druitt DC in time for the move and in fact, a substantial proportion of the reserve racking would not be erected by reason of which at least 2,000 pallets of stock would have to be placed on the floor of the Mt Druitt DC; (c) the move from Clyde to the Mt Druitt DC, originally planned to take place over a period of 14 days and if necessary up to 19 days, would have to be effected over a period of between 8 to 9 days; (d) there would be no WMS established at the Mt Druitt DC and interfaced with PRMS to record the receipt of stock and perform stock control and management functions, including the put away of stock to pre-allocated locations, electronic confirmation of orders, automatic adjustment of stock inventory, identification of multiple stock locations and radio frequency direction of pickers; (e) the WMS system would not be installed at the Mt Druitt DC until at least November 1999; (f) there would be inadequate power supply and power outlets to enable the materials handling equipment to operate at peak capacity for the timely put away of stock and handling of deliveries and dispatches. 30 The pleading then asserted that Linfox, through Mr Jacob, advised Yates, through Mr Ballantyne, not to undertake the move then, but to delay it until the Mt Druitt DC had been completed, including the erection of the racking, and the obtaining of an Occupation Certificate; that Linfox "offered Yates … the use of Linfox's fully racked warehouse at Smithfield as an interim warehouse in which to locate the whole of Yates' stock pending the satisfactory completion and establishment of the Mt Druitt DC including the erection of the racking therein"; that Yates, through Mr Ballantyne, rejected that advice and the offer of the use of the Smithfield warehouse, and informed Linfox, through Mr Jacob, that Yates, through Mr Ballantyne, was aware of the difficulties that would be encountered with the timing of the move, but that Mr Ballantyne had decided to proceed with the move, and directed Linfox to proceed; that Yates thereby represented to Linfox that if Linfox accepted Yates' direction to move, Yates would accept the risk of any loss or damage occurring to Yates in the circumstances pleaded in paragraph 17HA; that Mr Jacob of Linfox reported these matters to Mr Bennett of Linfox who, on behalf of Linfox, acted accordingly, that is, relying on Yates' representation that Yates would not hold Linfox relevantly responsible; and that Linfox would not have otherwise undertaken the move or the subsequent management of the Mt Druitt warehouse. 31 In paragraph 17HH Linfox pleaded that, as a result, there was a level of disruption caused to the move and the subsequent management of the Mt Druitt warehouse; and the pleading went on to assert an estoppel. 32 Paragraph 23A raised a defence of illegality. Linfox said that no Occupation Certificate was issued with respect of the Mt Druitt DC until 21 October 1999; that section 109M of the Environmental Planning and Assessment Act 1979 prohibited the occupation or use of the Mt Druitt DC in the absence of that certificate; that all occupation and use of the Mt Druitt DC without the certificate was unlawful and illegal; and that Yates could not sue for lost profits in respect of the illegal occupation and use of the Mt Druitt DC. 33 Paragraphs 23B and 23C asserted the existence of an agreement that Linfox would not be responsible for any stock deficiency existing or recorded, said to have been suffered by Yates until an effective warehouse management system had been installed by Yates; and no such system had been installed. 34 Then, by paragraph 23D, Linfox pleaded contributory negligence on the part of Yates. On the face of the pleading, paragraph 23D extends to all of the causes of action pleaded by Yates, but in submissions it was limited to the claim in negligence. The particulars given were as follows: (i) Failing to ensure that a WMS was installed and functioning at the Mt Druitt DC within a reasonable time after the termination of Linfox on or about 1 September 1999. The WMS project had progressed to the point whereby at the termination of Linfox, Yates using its best endeavours ought to have been able to have a fully installed WMS operative at the Mt Druitt DC by no later than early November 1999, whereas it did not have a fully functional operating WMS in place at the Mt Druitt DC until in or about mid-2000; (ia) Failing after 10 September 1999 to use the racking location plan identifying the location of all Yates stock in the Mt Druitt DC as at September 1999 which plan was prepared by Higgins and provided by him to Yates on or about 10 September 1999, alternatively, failing to implement its own stock management and location plan after its termination of Linfox; (ii) Yates' own stock management, stock records and stock control systems were deficient and were not properly maintained by Yates; (iii) On various occasions during July and August 1999 Yates' PRMS either incorrectly printed invoices or alternatively failed to operate at all; [There is no (iv)] (v) In July and August 1999 Yates failed and refused to: (A) acquire sufficient material handling equipment for use at Yates' Mt Druitt warehouse site; (B) failed and refused to install sufficient re-charging facilities for material handling equipment at the Mt Druitt warehouse; (C) failed and refused to acquire spare batteries for material handling equipment at the Mt Druitt warehouse. (vi) In August 1999, Yates engaged Mr Ken Wilkinson to work in the Mt Druitt warehouse to direct Linfox regarding order and delivery priorities. Mr Wilkinson delayed the order picking process and misplaced crucial documents that caused delays and errors at the Mt Druitt warehouse; (vii) Yates failed and refused to adopt, accept or rely upon Linfox's advice regarding the timing of the relocation of stock from the temporary warehouse at Clyde to Mt Druitt. Yates: (A) refused and failed to delay the relocation from Clyde to Mt Druitt; (B) refused and failed to extend the lease at the Clyde temporary warehouse facility beyond approximately 13 August 1999; (C) refused and failed to accept Linfox's advice that stock should be moved to Linfox's Smithfield and/or Homebush warehouse(s) until all construction at the Mt Druitt site was complete and a final certificate of occupancy issued; (D) refused and failed to accept Linfox's offer to utilise Linfox's Smithfield and/or Homebush warehouse(s) as a temporary warehouse facility until all construction at the Mt Druitt site was complete and a final certificate of occupancy issued. (viii) Yates decided to effect the relocation in late July and August 1999, rather than delaying the relocation until after the spring season; (ix) Yates failed to extend the lease at the Clyde temporary warehouse and facility beyond 13 August 1999; (x) Yates sold pallet racking at the Clyde warehouse site when the racking could have been used at the Mt Druitt warehouse; (xi) Yates failed to provide Linfox with all relevant information and specifications regarding floor loadings at the Mt Druitt warehouse, which information was relevant to Linfox's logistic operations; (xii) Yates failed to effect a stock reduction program at the Clyde warehouse prior to the relocation to Mt Druitt with the effect that after taking into account stock transferred to the Mt Druitt DC from Yates' other warehouses, manufacturing plants and third party suppliers there was, within about two weeks of the move, stock located at the Mt Druitt DC that was in excess of its racked capacity; (xiii) In July and August 1999 Yates increased the output of its manufacturing facilities including Mt Druitt and Wyee without making any or sufficient provision for that product to be accommodated at warehouses other than the Mt Druitt warehouse; (xiv) Yates failed to advise Linfox of the quantity, type and timing of stock deliveries to the Mt Druitt warehouse during the relocation in July and August 1999; (xv) During July and August 1999 Yates moved substantial quantities of stock from its adjoining factory into the Mt Druitt warehouse without informing Linfox or making any other provision for its incorporation into the warehouse; (xvi) After 1 September 1999 Yates operated the Mt Druitt warehouse without appropriately qualified or experienced staff; (xvii) After 1 September 1999 Yates operated the Mt Druitt warehouse without due care or skill. (xviii) After 1 September 1999 Yates damaged and lost stock at the Mt Druitt warehouse; (xix) Linfox repeats paragraph 17E above. 35 Paragraph 23E pleaded, in substance, a lack of causal connection between the conduct of Linfox, the subject of Yates' complaints, and the damage suffered by Yates. Paragraph 23F pleaded that Yates had failed to mitigate its loss. Virtually the same particulars were given in respect of this as were given in respect of paragraph 23D; and I will return to this detail later. 36 Then, in paragraph 29, Linfox raised a defence of voluntary assumption of risk, in substance relying upon the matters that had been pleaded in paragraph 17E. 37 Otherwise, Linfox put in issue virtually every allegation that had been made by Yates. The hearing proceeded on the basis that all the matters of fact pleaded by Linfox in its defence to the cross-claim had been the subject of an implied joinder of issue: SCR Pt 15 r 21. 38 It should be noted that the defence raised by Linfox, that there was a lack of causal connection between Linfox's alleged conduct and Yates' alleged damage, was founded upon the conduct, not only of Yates itself, but also the conduct of EXE Technologies, Inc (EXE), the company that was to have supplied the Exceed WMS computer facilities. 39 The pleadings between Dynamic Lifter Pty Limited and Linfox generally follow a similar pattern, but also raised issues concerning the right of Dynamic Lifter Pty Limited to sue. The Contract between Yates and Linfox 40 One aspect of Operation Leapfrog was the appointment of a warehouse contractor. There were negotiations between Yates and Linfox concerning the possible appointment of Linfox in this role. 41 The parties reached an initial agreement that Linfox would carry out certain work, charging Yates for the cost incurred, plus a margin. They also agreed to conduct monthly "Board of Review" (BOR) meetings, where representatives of the parties negotiated with a view to entering into a long term (that is, five years) contract, and also concerning other matters. There resulted what might be described as incidental contracts for the performance of various functions on a temporary basis. The compromise of Linfox's claims for fees means that much of this detail in no longer significant. 42 The negotiations concerning the formation of a long term contract failed. In short, this was because the parties could not agree about the mechanism necessary to work out a long term pricing arrangement, and because of a difference of opinion as to whether and in what circumstances Linfox might be liable to Yates in respect of stock shortages, pending the adoption of a WMS and the integration of the information stored in the WMS with the information stored in the PRMS In the meantime, there were at least eight drafts prepared of the proposed written contract, and if one puts aside disputes about pricing and responsibility for lost stock, it seems clear that the parties had agreed, at least in a general way, what work Linfox would do if the proposed contract came into being. The eighth draft is marked "issue date 26 June 1998", but, it seems, the negotiations after that date focused upon pricing and stock control questions, and matters incidental to them, and upon Linfox performing various tasks the subject of particular requests made by Yates. 43 Earlier, Linfox conducted a study called "Optima" and then submitted a proposal to Yates dated 24 March 1998, offering to provide various services. That document contained the following passages: MANAGEMENT SUMMARY

The flow on effect would be to improve documentation accountability especially when combined with Lintrac and the documentation retrieval facility. These improvements would apply to the management of the Warehouse by Linfox and to the carriers who service the Yates operation (Linfox or others) … 44 The eighth draft of the proposed contract defines the term "Logistics Services" as meaning "Warehouse Services and Transport Services". There was a definition of "Transport Services" that is no longer relevant, but "Warehouse Services" were defined in different ways, according to whether the relevant warehouse operations were carried out in New South Wales or in Victoria. Services in the former category were defined in these terms: Manage and operate the Transport Centre for Yates initially at the temporary location at Clyde for the period of approximately fourteen (14) months from commencement of operation and subsequently at the permanent facility to be developed at Mount Druitt. The scope of services includes: · Provision of site management, supervision and administration. · Offering employment to Yates permanent warehouse staff based at Milperra. · Purchase from Yates of materials handling equipment (MHE) and storage equipment at market value, subject to such equipment being determined suitable in an Assessment of Assets. · Purchase or lease of materials handling equipment (MHE) at the Transport Centre · Provision of a Warehouse Management System. · Provision of office equipment and a PC based reporting system. The warehouse tasks to be undertaken are defined as follows:- a) Receiving and Putaway · Receiving of the products sent from Yates factories including Mt Druitt and Revesby. · Receiving of other products purchased by Yates from other suppliers and manufacturers. · Goods received loose stacked are to be either palletised for putaway or allocated storage locations according to Linfox defined pallet layouts and storage locations and methods. · Product requiring a quality inspection by Yates as to the suitability for storage is to be quarantined until inspected or cleared by Yates. · Returns from customers are to be received into a quarantine area for approval by Yates prior to being put away in a warehouse location or otherwise disposed of as directed. b) Inventory Management · Each SKU [Stock Keeping Unit] shall be mapped to a specific storage location. · Stock shall be managed on a FIFO [First In First Out] basis, or Batch, or Best by Date. · Damaged product shall be quarantined and Yates notified for inspection. · The accuracy of stock information shall be maintained through cyclical stock counts. · Stock discrepancies are to be notified to Yates for update of their PRMS system. c) Picking, Loading and Dispatch · Picking will be pre-planned from the allocation of picking slips received on the day prior to the pick. · Results of the order pick will be recorded by the picker and, where appropriate, a reason for unavailability recorded. This will subsequently be passed onto Yates. · Completed orders will be loaded according to transport delivery/dispatch times. · Dispatch of replenishment orders for Yates Queensland and Western Australia warehouses will be in palletised format … 45 The draft contract contained the following provisions: 2.1 Appointment Yates hereby: a) Appoints Linfox to provide the Logistics Services; and b) Agrees that all its requirements for Logistics Services and services substitutable for the Logistic Services, as described in Schedule 1, will be provided by Linfox during the Term.

Stock levels are maintained by the host PRMS system on the AS 400. DRP logic will determine how much stock of national products will be ordered into each warehouse … 49 These documents provide a deal of background information, and provide a general description of what it was that Yates wanted Linfox to do, so far as concerns the day to day provision of warehouse management services, but provide less help in coming to an understanding about what Linfox was to do, precisely, concerning particularly the planning for and execution of the move from Clyde to Mt Druitt. There is a significant dispute about this, dealt with below. Nobody has suggested that the draft contracts were other than non-binding drafts. The Clyde Distribution Centre 50 Zandean Pty Ltd ("Zandean") purchased the land in question on a date that is not clear. The previous owner had leased the land to Southcorp Wines Pty Ltd ("Southcorp"), and Southcorp vacated the property in the early part of 1998. There were two old warehouses on the property, described as the large warehouse, and the small warehouse. Linfox suggested to Yates that the premises would be suitable for use as a temporary warehouse facility or "distribution centre", and Yates accepted this suggestion, and later Yates became the sublessee of Southcorp. Before this happened, Linfox obtained a dilapidation report dated 18 April 1998. In general terms, it described the warehouses as being in a poor state of maintenance and repair. 51 The warehouses were about 8,000 square metres in size overall, and had a capacity to hold about 8,500 pallets, in approximately 1,000 different Stock Keeping Units ("SKUs"). After Yates moved there, its PRMS was used to control the inventory, and this was supplemented by a manually operated system devised and put into place by Linfox. 52 As the expiry of the term of the lease to Southcorp approached, Mr Wiener, who effectively represented Zandean at all relevant times, looked for and found a potential new tenant, Academy Warehousing and Storage (NSW) Pty Ltd ("Academy"). As affairs progressed, Zandean agreed that Yates might hold over beyond the date of the expiry of the sublease, but required Yates to vacate the premises and to make them "good" by 16 August 1999, and that date became non-negotiable. The head lease is not in evidence. However, without objection, there was attached to Linfox's 4 May 2004 submissions a copy of an annexure to the lease. That document suggests that the term of the lease expired on 31 January 2000, and its clause 7 provided, in summary, that the lessee was to maintain the premises and yield them up "in good repair and condition", subject to a qualification in respect of fair wear and tear; and the lessee acknowledged that the premises were in good repair and condition at the commencement of the term of the lease. 53 When appropriate Mr Wiener on behalf of Zandean dealt with Linfox, as Yates' warehouse manager, and in that capacity he spoke to Mr Pearce of Linfox in May 1999. There is a dispute as to what was said, but it is clear that Academy was interested in taking a lease of the premises, with there being in place at the commencement of the proposed lease the racking that then stood in the two warehouses at Clyde, and that Mr Wiener considered that it was desirable, from Zandean's point of view, to be able to grant a lease on terms that the racking was in place. 54 After the disputed conversation, Mr Wiener took the stance that Yates, through Linfox, had agreed to sell the racking, or some of it, to Zandean (or its nominee, Academy), whilst Linfox took the stance that there was no such agreement, as distinct from a preliminary inquiry on the subject. Mr Wiener spoke to Mr Ballantyne of Yates. In time, Mr Wiener in substance threatened to require a substantial amount of work to be done to make the premises good when Yates vacated them, and Mr Ballantyne considered that this was a significant threat to Yates, so that he on behalf of Yates effectively put pressure on Linfox to somehow compromise Zandean's claim, with the result that it was agreed that Yates and Linfox would leave certain racking behind when Yates vacated the premises. Yates and Linfox agreed that between them they owned that quantity of racking that was left behind, but there is a dispute to be resolved as to the details of this shared ownership. 55 One practical consequence of this chain of events is that some of the racking at Clyde remained there, and could not be dismantled, and taken to Mt Druitt for re-erection and use there; and this circumstance is linked to other circumstances, concerning Yates' claim that Linfox was relevantly at fault in not procuring in a timely manner the purchase of a sufficient quantity of the parts needed for the racking at Mt Druitt, so that there was not sufficient racking in place at Mt Druitt at the relevant time, and so that a rack-to-rack transfer to Mt Druitt of the stock that had been stored at Clyde could not be effected. The Mt Druitt Distribution Centre 56 Yates already had a manufacturing facility at Mt Druitt. Arrangements were made for Maincon Holdings to buy another parcel of land, which it later leased to Yates. Generally speaking, the newly acquired land is to the north and to the east of the land that Yates already held, and both lots are on the southern side of Kurrajong Avenue. 57 In September 1998 Yates and Maincon agreed between themselves, after some input from Linfox, upon a design for the then proposed building, and a development application was made to and later approved by the local council. Generally speaking, the ground covered by the building is in the shape of the letter "L", formed by two rectangles. The larger rectangle is 100 metres (east to west) by 71 metres (north to south) in size; and the smaller rectangle is situated on the northern side of the larger rectangle, at its eastern end, and is 49 metres (east to west) by 30 metres (north to south) in size. 58 The construction drawings for the building show a grid pattern for the steel columns of the building. Broadly speaking, and omitting some complexities, there are rows of columns, identified as grids 1 - 7, going from north to south, and there are rows of columns, identified as grids A - M, going from east to west. There are no columns within the area covered by the prolongations of the grids 1 - 4 and E - M, reflecting the "L" shape of the building. 59 There are a series of docks on the northern face of the eastern part of the building. The docking area generally is within the space covered by grids 1 - 3 and A - E. Immediately to the north of the docking area, outside the building, there is a large concreted apron, where heavy vehicles can manoeuvre, and a driveway leads northwards from the apron towards Kurrajong Avenue. An awning that extends northwards from the docking area covers the southernmost part of the apron area. 60 To the south of the docking area, within the space covered by grids 3 - 5 and A - E, there is an area variously described as the staging area, the packing area, or the receiving and dispatch area. In substance, this is a large area of open floor, kept free so that incoming and outgoing goods can be marshalled here. More precisely, the eastern part of the staging area was called the dispatch area, and was used to marshal outgoing goods, whilst the western part was called the receipt or receiving area, and used to marshal incoming goods. 61 Another area, located to the south of the staging area within the space covered by grids 5 - 7 and A - F, is called the pick face area. There are racks located here, each of which runs from north to south. Using mechanical handling equipment, or "MHE", persons known as pickers "pick" stock from the racks here. That is, they pick out items of stock stored (on pallets) in these racks, and take those items of stock over to the dispatch area, so that orders placed by customers can be made up there, for later loading onto vehicles in the docking area. 62 There is a further area of the warehouse, within the space covered by grids 4 - 7 and F - M, generally to the west of the pick face area, and also to the west of the southern part of the staging area, knows as the reserve stock area. Here there are located rows of racks, running from east to west, where stock is stored, on pallets, in bulk. Generally speaking, as products are delivered into the warehouse, whether from Yates' various manufacturing plants, or from its other suppliers, it is off loaded from vehicles, moved initially into the receiving area, and then moved again, and placed in racks in the reserve stock area, using MHE. 63 As pickers pick stock for delivery to customers, the pick face racks are depleted. They are then replenished, initially from stock stored in the pick face racks, but at a higher level, not so conveniently accessible as to allow prompt picking to fulfil orders. In turn these "replenishment racks", situated at the higher levels of the pick face racks, are themselves periodically replenished by stock being moved from the reserve stock area, where stock is stored in bulk. 64 For environmental reasons the mechanical handling equipment used within the warehouse consists of battery powered vehicles. This means that it is necessary to have battery recharging facilities close at hand. Broadly speaking, each piece of this equipment requires its battery to be recharged after each shift. These batteries are very large: each one weighs about sixty or seventy kilograms, and stands about thigh high. 65 The September 1998 design of the warehouse provided for a battery recharging area, located at the eastern end of the northern wall of the reserve racking area, that is, approximately along the line of grid 4, near grid F. It later became apparent that there had been inadequate provision made for battery recharging; and eventually the recharging area was extended so that it ran along the line of the northern wall of the reserve racking area, approximately from grid F to grid J along the line of grid 4. This was still inadequate, and in the period immediately after Yates moved into the new warehouse, various items of machinery handling equipment frequently exhausted their batteries.

68 Yates procured additional items of equipment, as well as additional batteries, but the lack of equipment, the lack of batteries, and the insufficient provision of battery recharging facilities, considered together, contributed to the congestion, and to the difficulties and delays encountered in meeting the orders of customers. A significant area of disputation concerns the responsibility of Linfox for this set of circumstances. The Disputed Facts about the Contract and its Terms: the events of April and May 69 The issues identified by the pleadings are those set out at [12]-[17] and [22]-[24]. In support of their respective contentions about the terms of the contract, each of the parties referred to various aspects of their conduct, both before and after the supposed date of the contract. By about the end of April 1999 the position had been reached where Linfox was managing Yates' warehouses at Laverton and Clyde, and it was known that Yates would have to move from Clyde to the new distribution centre at Mt Druitt, then in the course of construction. There was a general expectation that the new premises might be occupied from about 31 July. This date had been mentioned to Mr Bennett of Linfox on 19 October 1998, when he made a note recording, he says of his thinking at the time, that this would result in an "interesting August" of 1999, a reference to his expectation that the move might coincide with Yates' spring season. Linfox had negotiated the terms of Yates' sublease of the Clyde premises. By early 1999, generally speaking, Linfox was charging Yates fees representing the costs incurred by Linfox plus a margin for profit. 70 The negotiations concerning a long-term agreement between the parties were faltering. The eighth draft of the proposed agreement had been circulated in June 1998, and this seems to have been the last such draft. Yates expressed concern that Linfox had not produced the expected costs savings. Mr Bennett considered that this view was misguided. The evidence does not permit a finding to be made as to which position was correct, and it probably does not matter. 71 A question arose concerning the adequacy of Linfox's performance at the Clyde Distribution Centre at about Easter 1999. Yates complained, and sought compensation. Mr Bennett said that he considered that the complaint was without substance, but upon the instructions of Mr Brockhoff (the managing director of Linfox), and for reasons of commercial expediency (Linfox wanted to keep Yates as a customer) he in substance compromised the claim. The incident is not significant in itself, except that it may well have been one of the matters that helped to sour the relationship of the parties, and except to the extent that it was used by the parties in aid of arguments advanced at other points, and it is because of the latter circumstance that I need to say something about it, noting that the evidence to what happened or did not happen at the Clyde warehouse at this time is generally quite indirect. 72 Mr Frost had been retained by Linfox to act as manager of the Clyde Distribution Centre. Whilst he was on holidays, a Mr Bakasetas (whose name is spelled in various ways at different places in the evidence) acted in that position. On 31 March 1999 Mr Rich of Yates wrote to Messrs Brockhoff and Bennett of Linfox complaining, saying that he understood that the situation at Clyde that morning was "chaotic", seeking compensation, and saying: I cannot overstate the seriousness of this unprofessional conduct from Linfox. Apart from discussing the future relationship between our companies, I assume you will take account of my comments noted above. 73 Mr Bennett reported to Mr Brockhoff and Mr Dixon (a director of Linfox) on 18 April. Amongst other things he said: Although T. Bakasetas had previously been shown up as inadequate under the pressure of the peak period, it was thought in the less busy period just prior to Easter, he would be able to cope well. Indeed it was considered a bonus that we had the services of this person who was so familiar with the Yates operation and able to provide depth to the management of the site. The performance of this employee was far worse than anticipated. His employment was terminated. The result of his dereliction of his duty was: · Delays in the dispatch of some orders. · Reduced labour costs in the lead up to end of the month. · Increased overtime in the two days prior to Easter and in the couple of days after. · Some additional delivery charges on Easter Saturday - $300 at the most … Putting the matter into perspective, for the two weeks that Gary Frost was absent, the environment at Clyde reverted to the previous Yates culture. As a result, 30 to 50 orders were delayed up to two weeks … 74 I have omitted a good deal of material in which Mr Bennett said, in short, that Yates' claim was exaggerated and unreliable, and dealt with other topics. 75 In a memo dated 10 December 1999, presumably written in response to a letter of demand sent by Yates to Linfox, Mr Jacob (the National Operations Manager of one of Linfox's divisions) spoke of "the Easter stuffup." 76 One matter that flowed from this incident and the way that the parties treated it, was that during the course of the trial, Messrs Bennett, Jacob, Frost and Morrow of Linfox accepted that, subject to the availability of stock, it was Linfox's responsibility as manager of the Clyde Distribution Centre, and later when it was manager of the Mt Druitt Distribution Centre, to make sure that orders for goods placed on Yates by its customers were filled and delivered, on or before the date nominated by the customers' orders. (In final address, Linfox questioned the breadth of Mr Bennett's acceptance of this. In the circumstances this hardly matters.) This meant that, unless the customer nominated a later delivery date, each order had to be filled and delivered within 48 hours of receipt, except when the product ordered was out of stock. Further, in cross-examination Mr Jacob accepted that not to fulfil 30 to 50 orders for two weeks would constitute a serious delay that could potentially cause Yates to lose sales and therefore profits. In cross-examination, Mr Frost accepted that the incident indicated a serious failure within the Clyde warehouse. 77 Mr Bennett disputed the proposition, advanced by Yates, that Linfox had dismissed Mr Bakasetas because of this incident. He also questioned the extent to which Mr Bakasetas had been guilty of a "dereliction" of his duty. Again, the evidence does not permit a finding to be made about these matters, but it does not seem to matter. Either Mr Bakasetas was dismissed, or he resigned upon being reprimanded. Mr Jacob agreed in re-examination that Mr Bakasetas was "sacked". Mr Bennett said that he had only responded to Yates' claim in a placatory manner in order to keep Yates' business, and he said that he had done this on the instructions of Mr Brockhoff, who did not give evidence. 78 By the end of April 1999, Linfox personnel were conscious that Yates personnel were unhappy with Linfox's performance. Mr Pearce advanced a view to other Linfox personnel that Yates might terminate Linfox's services. Some of the Linfox personnel considered that Yates, particularly through Mr Ballantyne, resented paying Linfox the fees that Linfox was charging Yates, thinking that Yates could do the work (or some of the work) being done by Linfox, for less. 79 Mr Bennett, for his part, wanted at that stage to keep Yates' business and considered that Linfox needed to change Yates' perception about Linfox. 80 In the meantime, the proposal that a WMS be introduced had not progressed, as had been anticipated. I will deal later with this topic, which is the subject of considerable contention, but for the moment, it is sufficient to say that by May the project was well in arrears. 81 By May the commercial relationship between Yates and Linfox was tense and strained. In general terms, Yates personnel considered that Linfox personnel were not as efficient as had been expected, and that the cost savings foreshadowed had not been realised. Linfox personnel considered that Mr Ballantyne in particular was trying to save money at the expense of Linfox, and considered that Yates' claims in respect of the Easter incident were exaggerated. They also questioned the competence of Mr Ballantyne. Later the relationship deteriorated further, with Yates personnel considering that Linfox personnel had not been frank and truthful. 82 At some stage, the date of which is not established, Mr Rich said to Mr Bennett:

A further passage from his evidence is extracted at [313]. 86 It is clear that Linfox started to do some work, with a view to procuring the racking parts that would be needed for the racking to be erected at the Mt Druitt Distribution Centre, as early as September 1998. The relevance of the detail of this work concerns the light that it is said to throw upon the questions what Linfox agreed to do, including whether it took a responsibility for procuring the racking parts, whether the transfer was to be effected on a rack-to-rack basis, and also whether Linfox breached any term of the contract. 87 Within Linfox, Mr Pearce was charged with the task of procuring the racking parts. He seems to have enjoyed a good relationship with Mr Webb, an experienced specialist racking contractor who apparently controlled The Pallet Racking Supply Company Pty Limited (PRS), a company that was a distributor of Dexion brand racking. I will refer to the supplier of that brand of racking, Dexion (Australia) Pty Ltd, as "Dexion." At the request of Mr Pearce, Mr Webb caused to be prepared a first racking plan in September 1998, and in March 1999 a revision of this plan (drawing 7306-02 LFX). At this stage, the intention was that all of the racking to be erected at Mt Druitt would be new racking. That is, there was no intention of reusing at Mt Druitt any of the racking then in use at Clyde. 88 On any view of the matter, the quantity of racking parts to be supplied was going to be large. Messrs Bennett and Jacob made diary entries dated 16 and 17 March 1999 indicating that they were conscious then of the need to plan ahead on the basis that racking parts might be needed by the end of July, and, perhaps, that Mr Jacob then spoke to Mr Pearce about this. On 9 April Mr Jacob advised Yates that Mr Pearce was the Linfox Project Manager in relation to various projects including the "Mt Druitt development." The evidence includes an email sent by Mr Ian Thompson of Yates saying that he "spent half of April and most of May chasing Mark Pearce to get the racking tenders out", but the next contemporaneously recorded event concerning the procurement of racking parts did not occur, so far as the evidence shows, until 4 May, when Messrs Pearce and Webb spoke about the forthcoming racking tender. On 5 May Mr Pearce asked Mr Webb for two copies of the drawing 7306-02 LFX. I think that it is clear that Mr Webb was, generally in the period May to July, actively pursuing the objective of PRS procuring a contract for the supply and erection of the racking for the Mt Druitt Distribution Centre. He presented as a cheerful, enthusiastic man, keen to get the work. He seemed to enjoy the task of competing with his business rivals, and to take pleasure in explaining how he had succeeded in obtaining this particular job for his company. He also seems to have comprehensive diary records. 89 Mr Webb caused to be prepared a further drawing, dated 7 May, known as drawing FOX 9901. On 10 May Mr Webb again discussed the matter with Mr Pearce, and obtained from Mr Pearce the names of the other potential tenderers so that he, Mr Webb, could plan his campaign to try to get the work. 90 Mr Pearce apparently began to prepare a document titled "Request for quotation," which he intended (when the form of the document had been finalised) to be sent to potential tenderers. A word processing footer to this document records its date of creation as being 14 May, but Mr Pearce did not send it to anyone until 20 May, when he sent it to Messrs Bennett and Jacob. Its then form spoke of tenderers submitting their tenders by 21 May, of an expectation that the tender would be awarded to the successful tenderer by the end of May, and spoke of the Mt Druitt site being expected to be available for racking erection work progressively from 5 July. It referred to drawing FOX 9901. That is, it contemplated that all of the racking parts to be used at the Mt Druitt site would be new racking parts. Mr Pearce's memo to Messrs Bennett and Jacob of 20 May spoke of his then wishing to send the document out to potential tenderers on 24 May, and the need to make corresponding adjustments to the draft document before it was sent out to those potential tenderers. 91 Also on 20 May, Mr Ballantyne sent an email to Mr Jacob, outlining his views on a number of topics, in effect so as to give notice of his views about these matters in anticipation of a BOR meeting scheduled for 26 May. He said of the move to Mt Druitt: "The time of this move is now irrevocably set. The planning and resource needs to carry it out should begin now." Mr Jacob agreed that he set about doing this, this being a wise thing to do. 92 In the same email Mr Ballantyne referred to then ongoing discussions about the fees Linfox might charge Yates if a long-term agreement was negotiated, and expressed dissatisfaction with the progress that had been achieved concerning the implementation of the WMS 93 It is common ground that the move necessarily involved working to a tight timetable, so that Linfox had to act efficiently and plan carefully in order to achieve the objective. There were about 8,000 pallets to be moved, and a truckload of pallets consists of about 22 pallets. The plan was to conduct the move over a period of two weeks, and for Linfox to maintain its ordinary customer service levels during this period, except for one day when, in substance, customer service would be suspended. This concept necessarily involved the position being maintained at Clyde until the move was effected, and established at Mt Druitt as soon as the move had been completed, that staff would be able to pick orders for Yates' customers. That is, the pickers had to be able to locate goods on the racks, pick the goods from those racks, and take them to the staging area for loading onto trucks, for delivery to the customers. As Mr Frost put it:

The entire process of moving 8,000 pallets over a two-week period and then having them all positioned at the Mt Druitt warehouse in such a way [as] to maintain customer service levels was a very big task in itself if everything went to plan. So really, there was just no room for error for all. 94 There is a sharp conflict between Messrs Ballantyne and Jacob as to what passed between them on the occasion of the BOR meeting on 26 May. Mr Jacob says that Mr Ballantyne said: "I want to be relocated from Clyde and put into Mt Druitt directly by way of a rack-to-rack. I don't want to use any other staging locations." Mr Jacob says that about that time he explained to Mr Ballantyne that Linfox had available as a facility, for possible use by Yates in connection with the move, a site at Smithfield. Mr Jacob says that about this time he suggested to Mr Ballantyne that Yates consider this alternative facility, and says that he told Mr Ballantyne that a rack-to-rack move might not possible, and there is support for this in an email that he sent to Mr Pearce on 27 May, set out at [506]. 95 Mr Ballantyne agreed that at the BOR meeting on 26 May he said that he wanted the move to be a rack-to-rack move, but denied the other matters as asserted by Mr Jacob. Mr Ballantyne says there was no discussion at about that time, or until some time later, of the possible use of the Smithfield site, or any other staging facility. The contract pleaded by Yates 96 I will deal first with the issues concerning the agreement made in May or June 1999, summarised at [14]-[17], deferring consideration of the allegation of Linfox that this agreement was later varied, mentioned at [22]-[24]. 97 The issue to be decided is whether the agreement contained the terms asserted by Yates set out at [14] and [16], or those asserted by Linfox, set out at [15] and [17]. It does not really matter very much precisely when the contract was made, but Yates submits that it had been formed by 26 May, and I accept that a contract had been formed by that date, preferring the evidence of Mr Ballantyne as to this. By 26 May Yates and Linfox had agreed that the move would be undertaken, consequent upon the conversation recorded at [82]. Linfox had proposed that it procure the racking to be erected at Mt Druitt, and Yates had agreed that Linfox might do this. Linfox told Yates that it had started to do this work, and that the tender document had been prepared on 20 May, and that Mr Pearce would manage the tender. Linfox also said that it would manage the move and Yates assented to this. 98 Linfox advanced a number of arguments as to why it should not be said that it was liable in contract. It said that, in the context of the Rich/Bennett conversation recorded at [82], Yates was an offeror, and that the evidence did not establish that Linfox had accepted the offer. It said that, if there was a contract, it was formed in that one conversation, and that it was not permissible to look either at pre-contract conduct or post-contract conduct. It said that its obligation was (relevantly) a limited one: "to project manage the move", and that there was no obligation to project manage the fit out of the Mt Druitt premises, and that its obligations were limited to physically moving objects from Clyde to Mt Druitt, as a principal, and otherwise acting as the agent for Yates, subject Yates' direction and control. It said that the effect of the agreement was that some agreement was necessary, to fix what work it was to do. It said that Yates had not pleaded that it had any contractual obligation concerning the block stacking of materials, so that Yates should not be permitted to assert that now; and it said that there was no contractual obligation to provide all new racking parts at Mt Druitt. 99 What I have already said shows, in my view, that the parties had agreed that Linfox would procure the racking parts. There were no express words that this would be done in a "timely" manner, but the implication that the racking was to be provided in good time is plain. The timing of the move was "irrevocably set", and this had been accepted; and as Mr Jacob accepted, he knew that Mr Ballantyne was concerned that the move be properly planned, a process that involved the acquisition of the necessary racking on a timely basis. I do not think that it is of any consequence, for present purposes, that the parties had, or might have previously agreed that Linfox would procure the racking for the Mt Druitt and Wyee warehouses. On the occasion of the Rich/Bennett conversation, they made an agreement that for a fee Linfox would procure the Mt Druitt racking, without further specification. If a question had arisen as to the precise quantity of racking to be procured, a court would probably have found an implied term to the effect that a reasonable quantity be procured, and a question of fact might have arisen as to what was reasonable, but no such question ever arose. Similarly, there is no sound basis for finding that the obligation to procure the racking in a timely manner only arose when Yates gave some specific directions as to time. 100 As to the second term for which Yates contends (that the relocation be carried out on a rack-to-rack basis), the position also seems clear. It was agreed by all (relevant) witnesses, that, generally speaking, such a form of relocation is desirable. It is the most efficient and accurate way of moving large quantities of stock from one warehouse to another. It places less demand on materials handling equipment if such a relocation is effected, contrasting that with what happened in this case: a large number of pallets taken to Mt Druitt were placed on the floor of the warehouse or on the ground outside, and then had to be moved again, into racks, later. Additionally, pallets stored on the floor or the ground tended to obstruct other activities conducted in the vicinity, and in the absence of detailed information as to what particular product was stored where, in this manner on the floor or on the ground, it was difficult to locate particular product when it was wanted. All this tended to detract from the capacity of a warehouse operator to conduct normal warehouse operations. Mr Morrow, who was employed by Linfox as a project coordinator, and who was in charge of the receipt of product into the Mt Druitt premises, and putting that product away, said that, until immediately prior to the move, he hoped that there would be sufficient racking available, to enable the move to be conducted on a rack-to-rack basis. 101 Mr Ballantyne said that at the meeting of 26 May he insisted on a rack-to-rack transfer. Mr Jacob said, in chief, that Mr Ballantyne had said that he wanted this; and he went on to say that at "about the time" of that meeting he suggested the possibility of Yates using the premises at Smithfield, as a staging post, and said that a rack-to-rack transfer might not be possible. Mr Ballantyne made a note at the meeting which reads, in part: "Methodology rack-to-rack move. To be confirmed." Asked about this in cross-examination, he said that he had obtained a "commitment" that the move be done on a rack-to-rack basis, but that he would not be confirmed, or confident, that this was going to happen until he had seen a project plan prepared by Linfox showing that Linfox had a plan for the purchase of the racks, and the carrying out of the move on this basis: the project plan later received was to confirm these matters. 102 Linfox submitted that Mr Ballantyne's statement at the meeting (that he wanted a rack-to-rack transfer not using the Smithfield premises as a staging facility) was made in response to Mr Jacob's suggestion that the Smithfield premises be used; and Linfox said that this was the "significance" of the meeting. It referred to para 54 of Mr Jacob's 2002 affidavit, but the submission goes further than this evidence justifies. 103 In any event, I prefer the evidence of Mr Ballantyne to that of Mr Jacob notwithstanding Mr Jacob's email of 27 May, mentioned at [94] and quoted at [506]. It is not clear, from anything Mr Jacob said, when it was that he pointed out that a rack-to-rack move might not be possible. I accept that this was not said at the meeting of 26 May, or that if something like this was said, it was not said in such a way as to convey a message, other than that Mr Ballantyne's insistence on a rack-to-rack move would be satisfied. I note too that subsequent events demonstrate that the parties acted for some weeks after 26 May on the basis that the move would be carried out on a rack-to-rack basis, and that the plan was changed in this respect only because of the failure of Linfox to procure the necessary racking parts in time, and the appreciation of this circumstance, matters that tend to corroborate the evidence of Mr Ballantyne on this subject. I will deal with the detail of this later. I find that the contract contained the second term contended for, as an express term. If that view was incorrect, I would find that there was an implied term to that effect. 104 The fifth term for which Yates contends (that reasonable care be taken) is readily implied, once it is accepted that Linfox agreed to undertake management functions. However, there is a question about the third and fourth terms contended for (that the installation of the racking take place between 5 and 26 July, and the transfer of stock and equipment from Clyde to Mt Druitt take place between 26 July and 2 August). I do not think that the evidence establishes that these terms had been agreed upon as at 26 May. 105 At the meeting of 26 May Mr Ballantyne sought assurance that Linfox had the position adequately in hand. Perhaps in response to this, perhaps because Mr Jacob was concerned in any event that the project be properly planned, and perhaps because it would have happened in any event, Linfox submitted a draft relocation plan to Yates on 4 June, followed by a further plan dated 7 June. The latter plan assumed importance during the hearing for a number of reasons. It was in these terms:

RELOCATION OF YATES WAREHOUSE FROM CLYDE TO MT DRUITT PROJECT DEFINITION AND SCOPE Background Yates Clyde warehouse will move to the new site at Mt Druitt in July/August 1999. This paper serves to nominate the Project Management Team, list key timings, define the objective and define limitations on the objective. Objective of the Relocation The relocation is being undertaken so that the warehouse is co-located with the Yates production facility at Mt Druitt. The timing of the relocation allows earliest occupation of the new warehouse and a departure from the Clyde sub-lease and site as soon as possible and in advance of the commencement of spring operational peak. Relocation Overview Narrative The movement of the warehouse pickface and inventory essential to the continuity of operations is proposed to occur over a three day weekend. Output from factories of non-essential inventory and thinning out of the Clyde inventory will commence as soon as racking at Mt Druitt is erected and locations assigned. The relocation project is closely tied to the WMS implementation program. Mt Druitt Building Key Dates The key dates for the construction site at Mt Druitt are detailed below. (Information as supplied by the building project manager on 2nd June 1999). · 5th July 1999. Earliest access for the racking contractor to start drilling and erecting frames. (Whole of warehouse will be available but access only through the south doors nearest the factory). · 19th July 1999. Distribution area at north east corner complete. · Period 19th to 29th July 1999. Completion of amenities, plumbing, fire systems, painting, electrical, etc. · 30th July 1999. Building Handover. Limitations on the Objective and Key Assumptions · Racking is planned to commence at Mt Druitt on 5th July 1999. · The first pallets of stock may be received at Mt Druitt from 26th July 1999. · Clyde has to be vacated, including make good at the site, by Monday, 16th August 1999. · There will be approximately 7,500 pallets of stock in the Clyde warehouse at the commencement of the relocation. · The Mt Druitt racking is fully installed by 26th July 1999, including location labels. · Linfox Smithfield (formerly Kmart) is available as a transit warehouse, if required, from 1st July to 31st August. The transit warehouse may be used for non-essential stock from Clyde and/or for stock from Revesby, Rouse Hill and Tamworth that would normally have been booked into the warehouse. · A curfew exists on the roads at Clyde between 10 pm and 6 am. The shuttle of stock between warehouses is possible between 6 am and 10 pm. · Normal Operations and customer service are to be offered throughout the move, with the exception of the following point. · One day (adjacent to a weekend and probably Monday, 2nd August 1999) will be made available by Yates to be free from normal warehouse operations. · Definition of the critical stock to be moved over the long weekend will be available to Yates by 16th July 1999. Project Management Linfox is responsible for the achievement of the objective within the limitations detailed above. Key project Management appointments are as follows: · Project Manager Gary Frost · Yates Sponsor John Ballantyne · Transport Operations Coordinator TBC by Gary Frost Cost estimates relevant to the relocation, especially labour and MHE, will be forecast to Yates (attn John Ballantyne) by the Project Manager by 30th June 1999. Timing

Relocation to Mt Druitt GF [Mr Frost] supplying draft plan this week. Plan to start moving 26th July - completed 2nd August. 111 I conclude that by 12 June, Yates and Linfox had accepted the terms of the relocation plan of 7 June. That is, whilst at 26 May, the third and fourth terms for which Yates contends had not been agreed upon, by 12 June, the position had changed. As happens from time to time, Yates and Linfox did not direct their minds to concepts of offer or acceptance, or to the precise formulation of what had or had not been agreed, as at any given date. However, by 12 June the parties had adopted the 7 June relocation plan. This does not mean that Yates' case, that there was a contract formed by 26 May, containing the five terms pleaded, must therefore fail, because two of the terms pleaded had not been agreed upon by 26 May: Sinclair Scott & Co Ltd v Naughton (1929) 43 CLR 310, 317; G R Securities Pty Ltd v Baulkham Hills Private Hospital Pty Ltd (1986) 40 NSWLR 631, 634 and Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 71-79. 112 However, I do not think that the 7 June relocation plan contains contractual promises by Linfox, to the effect of the third and fourth terms pleaded. The language used is not as definite as this. To the contrary, it seems to me, Linfox accepted that it was "responsible for the achievement of the objective within the limitations detailed above", but the "objective" was not stated as achieving the erection of the racking, or the movement of the stock or equipment, by or on particular dates. Additionally, it seems clear that Linfox and Yates were both dependent (at least in part) on Maincon in so far as the dates recorded under the heading "Mt Druitt building key dates" were concerned, and no one had control over the seasons. Nevertheless, Linfox accepted responsibility, conditionally, planning to commence racking erection on 5 July, to complete that erection and to start receiving pallets on 26 July, and to complete the move by 16 August. 113 For these reasons, subject to the other arguments advanced, mentioned at [98] and considered below, I conclude that Yates has established that it and Linfox had reached a binding agreement by 26 May, which agreement contained the first, second and fifth terms pleaded by Yates, but not the third or the fourth of the terms pleaded. I should record that Linfox submitted that, in considering these questions, I should apply the test stated in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, 283, and in succeeding High Court cases, whilst Yates submitted that since the parties had not reduced their contract to writing, it might more readily be inferred that the parties actually intended some term, or terms, not expressed: see Hawkins v Clayton (1987) 164 CLR 539, 571-573 and Byrne & Frew v Australian Airlines Ltd (1995) 185 CLR 410, 422 and 441-2. I do not think the distinction is significant in the circumstances of this case, having regard to the terms Yates contends for. Each of the five conditions listed in BP is satisfied, as to the first, second and fifth terms (The inquiry is, of course, directed to the inferred actual intention of the parties, and not to some intention imputed to them by law, by reference to some category of contracts.)

114 Linfox submitted that, before trial, Yates had foreshadowed varying approaches to how it might prove the contract sued upon, and as to its terms. This appears to be correct, but it hardly matters now. It was Mr Bennett of Linfox who deposed to the conversation recorded at [82], and, at trial, Linfox did not seek to qualify or withdraw his evidence, whilst Yates did not challenge it, and now relies upon it. Further, Linfox cross-examined Mr Rich, who agreed with Mr Bennett, on this point. 115 However, the parties differ as to the significance of what followed. The submissions of Linfox tended to assert that the contract was formed, completely, in that one conversation, so that Yates cannot now point to other matters, because they either pre-date or post-date the contract. (The parties did agree about one matter: evidence of post-contract conduct is admissible when considering whether there was a contract, but was not admissible as to what the contract meant.) Yates emphasised Mr Bennett's statement that Linfox would prepare a schedule for the move, and it submitted that the plans of 7 and 23 June, which Yates accepted, constituted this schedule, and recorded and identified the content of what it was that Linfox was to do, when it agreed to "project manage the move". I consider that Yates' submissions should be accepted: Brambles, and the authorities collected there. However, for the reasons stated at [112], I do not accept that the 7 June plan, or, later, the 23 June plan, contained contractual promises such as would justify the findings Yates seeks, as to the third and fourth terms. 116 As already mentioned, Linfox pleads that the agreement was made in June rather than May, and that it contained other and different terms; and it also pleads that the agreement made, whenever it was made and whatever its terms were, was later varied, as well as raising cases in estoppel and waiver. It is convenient to go first to the events that occurred in the period leading up to 30 July, and then to return to an examination of these issues. The events of June and early July 117 Within Linfox, Mr Pearce was responsible for procuring the racking, and was generally in charge of affairs concerning the racking. He agreed that he was responsible for ordering the racking parts in sufficient time to enable the racking to be erected at Mt Druitt, so as to enable a rack-to-rack transfer to proceed. He said that he was experienced at this sort of work, had previously worked for Dexion, and that he had prepared hundreds of racking specifications. 118 If Linfox was to move the product from Clyde to Mt Druitt on a rack-to-rack basis, there had to be racks in position at Mt Druitt, into which the product could be moved. That meant that the racks had to be erected, and the erection work could not be done until there was on hand a sufficient supply of racking parts. Putting aside presently unimportant aspects, these parts consisted of horizontal members, called beams, and vertical members, called frames or uprights. On any view of the matter, several thousand beams would be required. Ordinarily, specialist contractors, such as PRS, carry out racking erection work of this general kind. Neither contractors nor manufacturers could be expected to have on hand at any one time a sufficient supply of beams and uprights to enable a job of the size in question to be carried out, so that the racking contractor would need to place an order with the manufacturer for the beams and uprights. According to Mr Webb, whose evidence on this point I accept, the ordinary "lead time" for the supply of parts, sufficient for a job of the size under consideration, was four to six weeks, so that a racking contractor would need that amount of time in which to procure the necessary parts. There was a certain amount of latitude involved in this: the contractor might have some parts in stock, as might the manufacturer; and it might be possible to rearrange the affairs of another customer of the manufacturer or the contractor, so as to divert parts from that other customer for use on this particular job. Additionally, it might have been possible to arrange affairs so that the move from Clyde to Mt Druitt could start, when the racking erection at Mt Druitt was only partially complete, although this would require careful planning: some of the product stored at Clyde, destined to be placed on racking yet to be erected at Mt Druitt when the move started, would be left at Clyde for a short time, pending the completion of the erection of the racking at Mt Druitt. However, all these possibilities were of relatively little importance. The critical matter was to enable the racking contractor to order the great bulk of the racking parts at an early time. 119 It will be remembered that, according to both the draft invitation to tender drawn by Mr Pearce in May: [90], and the relocation plan of 7 June: [105], the racking erection work was to commence on 5 July. In cross-examination, Mr Pearce was asked whether it was necessary for tenders to be called no later than 5 June, and he said: "Ideally, yes"; and that "ideally" the invitation to tenderers should have been approved internally by Linfox before that date. It may be that Mr Pearce's draft was the subject of lengthy consideration by Linfox's in-house lawyers from 20 May to 17 June, but Linfox did not attempt to explain how or why this delay occurred, if in fact the delay was caused by some lawyerly consideration of what seems to have been a fairly standard document from Linfox's perspective. Perhaps the fact is that Mr Pearce simply allowed the matter to drift along during this period. Linfox now submits that nobody bothered to hurry the lawyers along, because the requests for tenders could not be sent out to potential tenderers until the specification had been settled; and this could not be done, because Yates had failed to provide the necessary information to Linfox. However, no witness said that this was the explanation for the delay, and a consideration of the evidence regarding Linfox's negotiations with EXE suggests that Linfox might have been giving priority to those negotiations: see particularly the last two sentences of [479], and [516]. The invitations to tender were not in fact sent out until 25 June. Those documents said that the closing time for tenders would be 1 July, and spoke of work commencing on 5 July. They referred to the use of all new racking parts. 120 Nevertheless, Linfox denied that this apparent delay on its part constituted any breach of obligation, and denied that it was causative of any loss. In the main, its case at this point turns on the evidence of Mr Pearce. Yates described the position by saying that Mr Pearce gave five reasons for his not having called for tenders before 25 June, and Linfox apparently accepted that description. First, notwithstanding repeated requests that he made to Mr Ballantyne, the latter had failed to provide him with certain product master data, needed for the preparation of a satisfactory invitation for racking tenders. Secondly, Mr Ballantyne failed to advise him how many pallet spaces (and therefore how much racking) Yates wanted at Mt Druitt. Thirdly, he needed information about the loads that the racking would impose on the floor of the Mt Druitt building. Fourthly, Yates had agreed that Linfox might reuse at Mt Druitt some 4,600 beams, to be taken from the Clyde warehouse, but Yates later repudiated this agreement. Fifthly, the erection work was delayed because of the late completion of the building work being carried out at Mt Druitt by Maincon. 121 There is a significant body of evidence concerning each of these five topics. Yates challenges Linfox's case in respect of each of them, saying that none of these five matters delayed Linfox or Mr Pearce. It points out although Mr Pearce swore four affidavits (two of them substantially identical), and made a supplementary written statement as well as giving oral evidence-in-chief, it was only in the course of his cross-examination that the fourth and fifth matters were raised; and the fifth matter goes to delay encountered after PRS had been appointed as the racking contractor. 122 At this stage I will concentrate on the matters leading up to 30 July, and the questions concerning the contract and its terms On about 27 May there was a conversation between Mr Pearce and Mr Wiener (of Zandean, the owner of the Clyde premises). According to Mr Wiener, Mr Pearce said that the racking within the "small warehouse" at Clyde was available for sale to Zandean for $54,000. Mr Wiener then conducted some negotiations with Academy (Zandean's incoming tenant), and on 30 June Mr Wiener accepted or purported to accept that offer. However, Mr Pearce denied having said that the racking in question was for sale. 123 In the meantime Mr Webb continued to deal with Mr Pearce, endeavouring to obtain the racking contract. Mr Webb caused to be prepared by PRS for Linfox drawing FOX 9902. On 3 June Mr Pearce asked Mr Webb for five copies of this drawing, apparently so that a copy could be sent out with the invitations to tender, to each of the five companies invited to tender, showing what was required. On 9 June Mr Pearce told Mr Webb that he expected to ask for quotations as soon as possible, and that Linfox would place an order by the "end of next week"; and he said that the work should be done between 5 and 28 July. 124 At a meeting of Linfox personnel on 10 June Mr Pearce spoke of his perception that Yates might terminate the services of Linfox, perhaps reflecting, or recording a view formed as early as 22 April: see [463]. On the same day Mr Bennett wrote to Mr Ballantyne, reviewing the existing position of the parties: [107]. On 12 June Mr Ballantyne wrote to Mr Frost: [108]. On 15 June Mr Frost spoke at Yates' customer services meeting: [110]. Within Linfox there were internal communications about the drafting of the invitations to tender, which continued up until 18 June. On 21 June Mr Webb spoke to Mr Pearce again, to be told that the tender documents would be sent out the next day, but that the tenders were to be lodged with Linfox by Friday 25 June and that a decision would be made about them on 28 June. Mr Webb then telephoned Dexion and was told that the lead time for the supply of the necessary racking parts was four to six weeks. Mr Webb then telephoned Mr Pearce again. He said that there were about 3,000 hours of work to be done on the job, as well as the lead time mentioned, so that it would take 10 to 12 weeks. Mr Webb made a note that Mr Pearce "confirmed trade in value for existing racking at Yates Clyde $138,000". 125 Continuing with the narrative for the moment, there was a Maincon project meeting held on 22 June, attended by Messrs Pearce, Frost and Morrow of Linfox and by Mr Ballantyne, amongst others, of Yates. The minutes record: "Warehouse on schedule for access to racking to commence on 5/7/99 and completion 30/7/99." Mr Ballantyne made a note at the meeting, reading: "Racking: cost to be advised Thursday. 3 bids, tender goes Monday ...". 126 Mr Ballantyne said that by this time he was seriously concerned whether the racking could be installed within the project timetable. He had arranged with Maincon for access to be available to the racking contractor from 1 July, but he doubted that the work could start by that date, or even by the date mentioned earlier, 5 July. On 22 June, he sent an email to each of Messrs Pearce and Jacob, saying: Mark / Ross Confirming our discussion (Mark / JB) this morning concerning project planning details for the fit-out and transfer to Mr Druitt … Could you please forward me as soon as possible the following details … 1. A time phased project plan from order placement for racking through to final occupation of the Mt Druitt site. 2. A detailed cost estimate for racking, fit out and project management including the full terms of any leasing agreement that either has been agreed or is proposed for these costs between Linfox and Yates. Also … It was stressed by Maincon (after you left the meeting) the importance of having the racking delivered on trucks rather than semi-trailors [sic] before the warehouse is handed over. Access to the site is severely limited until this time and neither Maincon nor the Mt Druitt factory can afford to have a semi in the rear driveway for an extended unloading process. 127 There was no direct response to this. However, Mr Frost prepared what has been called the relocation plan of 23 June, and on that date he sent a copy to Mr Ballantyne. It reads: Yates Clyde Relocation to Mt Druitt Objectives The relocation of Yates Clyde Distribution Centre is taking place in order to co-locate the National DC with the Mt Druitt production facility. The relocation is timed to allow earliest possible occupation of the new warehouse and departure from the Clyde site prior to the commencement of the spring operational peaks. Linfox aims to accurately transfer stock from Clyde to Mt Druitt at the least possible cost while ensuring minimal disruption to customer service levels.

Estimated Costs TBA 128 There was also an attached bar chart showing when each item of proposed work was to be performed. Yates points particularly to some features of this plan: installation of racking was to occur between 7 and 25 July; the materials handling equipment required was identified; the plan assumed that a WMS would not be in place; and it assumed that all new racking would be used at Mt Druitt (the last two items in the bar chart being "disassemble Clyde racking" and "vacate Clyde"). Mr Frost said that when he prepared this plan, he knew that Yates had to vacate the Clyde premises by 13 August, and knew that the move would occur just before the expected onset of the spring seasonal peak, and he understood that the volume of incoming orders to Yates was likely to double with that onset. He planned the move on the basis that the racking erection would be completed by 25 July and that the move would be on a rack-to-rack basis. He noted that there would be no WMS in place, and said that the absence of such a system made no difference in the end. He sent the plan (or perhaps a draft of it prepared on 22 June, which was not materially different) to Mr Pearce to check, but received no reply that he recalled. It was not until mid July that Mr Pearce told him anything to the effect that the racking installation might be delayed, and it was not until 20 July that Mr Frost formed the view that, because of Mr Pearce's inability to provide the racking, a matter of gross irritation to him, it would be impossible to proceed with the 23 June plan; and he started to prepare a further, quite different plan. 129 Mr Frost said that he sent the 23 June plan to Mr Pearce to check in relation to the assumption that there would be sufficient racking erected by 25 July. Mr Pearce agreed that he received the plan, and it seems that he made no comment to Mr Frost, although Mr Pearce said that this was not a plan that he would have approved. (He also agreed in cross-examination that the plan proceeded on the basis that the move would be conducted on a rack-to-rack basis, using all new parts.) 130 Invitations to tender were sent to the five prospective tenderers, including PRS, on 25 June, requiring tenders to be lodged by 1 July. Four tenders were submitted. PRS's tender was for all new parts, and provided for the work to be done over a period of 10-12 weeks. Mr Webb said in evidence that it was quite clear to him, at the time when he prepared this tender, that it would not be accepted, because this time frame would not meet the requirements of Yates. Nevertheless, he tendered on the basis that this was what Linfox had asked him to do, and he said that he expected to be able to bargain on different terms 131 On Yates' case, by about 21 June Mr Pearce realised that he was in a difficult position in that the racking components needed would not be available in time. There are a number of facets to this question. It is however clear that by early July Mr Pearce was trying to persuade Mr Ballantyne to accept the reuse of some of the beams then at the Clyde warehouse. 132 This is the context in which the dispute arose between Linfox and Zandean, and between Linfox and Yates, as to what had or had not been agreed upon with Zandean, and in which Mr Webb manoeuvred (I do not use that word disparagingly) to obtain advantage for PRS: he appreciated some time before 25 June that Linfox was in difficulties, and that if Yates was to move by 13 August, as it had to, one practical solution would be to reuse some of the Clyde beams He made his plans accordingly, allowing Mr Pearce to call for tenders using his drawing FOX 9902, as well as a specification he had drawn up for Linfox's use when calling for tenders, which documents prescribed the use of all new racking parts, whilst he expected that Linfox would be able to reuse some at least of the Clyde beams, and he expected, as seems to have been the fact, that none of his competitors were aware of these circumstances. As he rather gleefully described it, he had done his homework, but his competitors had not done their homework. 133 On 28 June Mr Webb went to the Clyde site and prepared a "pull-down plan," showing what work he contemplated doing at Clyde, removing racking parts for reuse at Mt Druitt. On the same day, he contacted Dexion again, discussing the proposed job and the fact that his competitors were also tendering for that job. His diary note reads: "relocation option is only suitable option," a reference to the lead time required if all new racking parts were to be used. On 30 June he went to the Clyde site again, meeting Mr Frost, and he prepared a further, more formal plan in respect of the proposed "pull-down" work. On the same day Dexion faxed to Mr Webb a letter saying: Pricing sheet follows. Presently there is a 6 week lead time on the supply of 50% of the goods, with the remaining 50% following a week later. This lead time applies to all the major items (ie. Uprights & beams). Please call to discuss. 134 Mr Ballantyne said that whilst he had numerous discussions with Messrs Pearce and Jacob during June and July, neither of them said anything to the effect that the warehouse racking would not be erected in time for the move. He was not challenged about this statement in cross-examination, and I accept it. However, the problem started to be apparent on 30 June. On that day, Mr Pearce telephoned Mr Wiener and then sent to him a fax reading: Confirming the telephone conversation I had with you this afternoon and with your secretary earlier this afternoon. The pallet racking that is currently on site at 23 Factory Street, Clyde is required by Linfox. It is our intention to remove it from the site when we vacate this site. All previous discussions with myself or Gary Frost regarding the quantity of racking that may or may not be available or otherwise are now withdrawn as all the racking is required by Linfox. 135 On the same day Mr Wiener telephoned Mr Ballantyne complaining that Mr Pearce had "reneged" on an agreement made previously, and saying that he had learned that some of the racking that he, Wiener, had previously thought was owned by Linfox was in fact owned by Yates. According to Mr Ballantyne, Mr Wiener in substance threatened to be difficult about the making "good" of the Clyde warehouse if the matter was not settled to Mr Wiener's satisfaction. 136 Mr Webb was also interested in the possibility that PRS might do some work for Academy. He considered that Academy's business was different to Yates' business, so that Academy would need a different racking layout, when it moved into the Clyde warehouse, and he was interested in obtaining that work. On 30 June he spoke to Mr Butterworth of Academy, and arranged to meet him "early next week to organise layout options". His diary note continues: "Linfox have offered $57,000.00 from existing racking to sell to Academy". 137 Cross-examined about this, he was rather vague, but said that he had understood the offer to relate to part only of the racking then at Clyde, and perhaps a part of the racking (described as "drive in racking") that was unsuitable for reuse at Mr Druitt. He appreciated however that if some of the racking at Clyde was to remain there, it would not be available for reuse at Mt Druitt. He said that he was "pretty sure" that he telephoned Mr Pearce because, if the racking was to be sold, "there was a big problem". He was reasonably confident that Mr Pearce told him that Yates had sold, or had committed itself to selling the racking; and "that was the reason why we had to source some additional beams" 138 Notwithstanding this, he prepared a quotation for the erection of the Mt Druitt racking, dated 1 July. I will return to some of the detail of this later, but for the moment note that it was based on drawing FOX 9902, that is, the use of all new racking parts. Mr Webb did this, because that was what he thought Mr Pearce wanted. 139 A good deal of controversy marks the events of the next several days, but some things are clear. Mr Ballantyne says, and I accept that, after he had spoken to Mr Wiener on 1 July, he tried unsuccessfully to speak to Mr Pearce, and then spoke to Mr Jacob, attributing to Mr Wiener the statement of Mr Pearce that the Clyde racking had been withdrawn from sale; and he asked why - did Mr Pearce intend to use it at Mt Druitt? Mr Jacob said that he did not know but that he would speak to Mr Pearce. Mr Ballantyne said: "Don't forget that the transfer has to be a rack-to-rack transfer. I don't understand how that can be possible if the racking at Mt Druitt is going to be constructed from racking at Clyde." Mr Jacob said that he would speak to Mr Pearce and get back to Mr Ballantyne. He did speak to Mr Pearce, who said that "he did now intend to reuse beams from Clyde to Mt Druitt, but not in a way that would mean stock would have to be put on the ground during relocation"; and on 2 July Mr Jacob sent a email to Mr Ballantyne in these terms: I have spoken to Mark [Pearce] and he confirmed the following: There is no intention to re-use Clyde racking at Mt Druitt such that there would be a requirement to put stock on the ground during the move. ie the move will still be rack to rack. In an effort to minimise costs Mark does intend re-using beams at Mt Druitt that are currently at Clyde. By building the first 4000 or so pallet spaces and moving the stock into Mt Druitt as the racking is being erected it is possible to re-use beams and have a rack to rack move. Frames at [Clyde are] unsuitable for re-erection at Wyee [due] to the higher ceiling at Wyee. Mark will summarise the responses to the racking tender for you early next week and make recommendations on the best choice.

(At this stage, as part of Operation Leapfrog, Yates was building a new manufacturing plant at Wyee, and the intention was that Linfox be involved in some work there. Later, that intention changed.) 140 Later on the same day Mr Ballantyne sent an email to Mr Pearce, with copies to Messrs Jacob and Frost, saying: I understand that you will be using the beams from Clyde for the Mt Druitt warehouse by moving the "first half" of the inventory into new racks at Mt Druitt, then dismantle the vacated Clyde racks and install the beams at Mt Druitt ready for the "second half" of the move. This still achieves the desired rack-to-rack transfer. Could you please let me know the estimated extra cost of dismantling these beams for comparison to the potential sale 'as is' to the building [owner] for $137k. Other un-quantifiable considerations must be ….. How will we sell the uprights without beams and what price can we expect? There is the other issue of a very irate building owner who has mentioned to me that he may be forced to [involve] engineers in his assessment of our make-good work for our departure. How much is at stake here. 141 The parties stressed different aspects of these exchanges. Yates submitted that they demonstrate that it was still proceeding on the basis that there would be a rack-to-rack transfer, and that Linfox had only just disclosed a proposal to do things differently. Linfox submitted that Mr Ballantyne knew that the proposal was to reuse the Clyde beams I accept that it came to Mr Ballantyne's attention on 2 July that there was such a proposal. Linfox then submitted that Mr Ballantyne's email of 2 July constituted a variation of the earlier plan (i.e. for a rack-to-rack transfer), to which Mr Ballantyne "agreed". He clearly did not do so in that email. Then, Linfox submitted that Mr Ballantyne did not say "do not proceed on that basis"; and on this unstable base, Linfox submitted that by this email "Linfox got Yates' approval for the … variation" to the relocation plan. As is plain from the face of the email, what Mr Ballantyne did then was to seek further information. (Linfox also relied upon the cross-examination of Mr Ballantyne as to what he had gleaned from the exchange. This does not seem to me to add anything noteworthy.) 142 On Saturday 3 July, Mr Pearce and Mr Frost met Mr Webb and Mr Carmody (an employee of PRS - later, he was in charge of the rack erection work at Mt Druitt). Up until this time the general plan had been that at Mt Druitt, the reserve racks would be erected before the pickface racks, this having been adopted as a convenient course some time before July, having regard to the Maincon building program. At the 3 July meeting, there was a discussion about the possible reuse of the Clyde beams Mr Webb said and I find that Mr Pearce indicated that he was very anxious to ensure that PRS devise some proposal that would enable a transfer to be made on a rack-to-rack basis, including stock for the pickface, so as to complete the pickface by 1 August. It was then decided that the pickface would be erected first, this being Yates' priority. Product could be moved out of the Clyde warehouse into the new pickface at Mt Druitt, and then the racking at Clyde could be dismantled, and later re-erected as part of the Mt Druitt reserve racking. (Mr Pearce denied having known of the earlier plan, to erect the reserve area racking before the pickface racking, and said that he would have regarded such a plan as unworkable, having regard to some of the detail of the Maincon building program. What he meant by this is perhaps obscure, but since his evidence on the point cannot be reconciled with the evidence of Mr Frost, or that of Mr Ahearn of Maincon, I think it must be rejected. Mr Webb spoke only of his own perception of events, and he spoke on this topic without confidence. It seems likely that his primary, and perhaps sole source of information was Mr Pearce. For the reasons expressed below, I find that the racking erection work at Mt Druitt did not commence until 19 July. I note that Mr Frost said that the decision I find was made on 3 July was made on 22 July, but I accept Linfox's submission that his evidence fixing 22 July as the date was incorrect or confused, since the racking erection work had started before that date.) 143 According to Mr Pearce, on the occasion of this meeting, Mr Webb told him that PRS had available the racking parts appropriate for 2,500 pallets, and that it could obtain the parts for another 2,000 pallet spaces, using parts previously earmarked for a job for another customer, then delayed. Mr Webb in substance corroborated the first of these propositions but not the second. 144 Although Mr Pearce denied it, and Mr Webb tended, hesitantly, to support Mr Pearce, the true position appears to be as Mr Frost described it: he and Mr Pearce appreciated that there were insufficient beams available to erect the reserve racking first, and therefore the previously proposed sequence of work was changed. All concerned agreed that the erection of the pickface was a priority, but the occasion and the reason for the change in the sequence of work was this appreciation. Linfox submitted that Mr Webb always intended to erect the pickface racking before the reserve area racking. However, the evidence shows that Maincon planned to, and did lay the concrete floor slab in the reserve racking area before the pickface area, so as to fit in with the plan to erect the racking in these two areas in that order. Further, the 7 and 23 June plans proceeded on the basis that all the racking erection work would be completed by 26 July. When consideration was given to the position on 3 July, these plans could not be met, and that was why the erection of the pickface racking assumed an urgency that did not exist earlier. 145 There are in evidence two separate quotations from PRS dated 5 July. One of them appears to represent a reworking of the quotation dated 1 July, with the prices quoted being reduced. In brief, and leaving aside some presently unimportant aspects, PRS offered Linfox (or Yates) three options identified as options one, two and three, depending upon the decision that Linfox (or Yates) might make as to the system to be adopted for spreading the loads that the racks would otherwise impose upon the floor at Mt Druitt. In the 1 July quotation, the prices quoted were respectively $848,963, $866,780 and $828,790 whilst, in the 5 July quotation they were respectively $794,963, $802,080, and $774,790. Both these quotations were based upon drawing FOX 9902. 146 The second quotation dated 5 July is quite different. It quoted one price only, $519,777. It was based upon drawing FOX 9903, a drawing Mr Webb had prepared over the weekend. Stated shortly, there were two significant changes between drawing FOX 9902 and drawing FOX 9903: first, 4,600 beams were to be taken from Clyde and reused at Mt Druitt; and, secondly, the number of pallet spaces at Mr Druitt was to be reduced to 12,500 to 10,000. (Broadly speaking, a number of pallet spaces may be equated to the same number of beams) 147 A timetable recorded on the new drawing may be summarised thus. Between 7 and 9 July certain racking at Clyde would be dismantled, and the beams taken to Mt Druitt. The necessary uprights would be delivered to PRS on 9 July. The pickface racking at Mt Druitt would be erected between 12 and 15 July, and the reserve racking between 16 and 26 July. Stock for the reserve racks at Mt Druitt would be transferred from Clyde between 20 and 23 July, and stock for the pickface between 26 July and 1 August. The dismantling of other Clyde racking was to commence on 26 July and the estimated date for practical completion of the job was 13 August.

148 Mr Webb said and I accept that the new drawing reflected what had been said on 3 July. His quotation based on the new drawing corroborates this. Both documents contemplated a rack-to-rack transfer made progressively and using 4,600 beams from Clyde, that is, virtually all of the beams then in use at Clyde, and almost half of the beams to be used at Mt Druitt; and it involved PRS using some "buffer" stock of beams that PRS then held. 149 In an affidavit sworn in 2002 Mr Pearce said that he did not recall seeing the timetable being set out on drawing FOX 9903, and that he believed that Mr Webb had added the timetable to the drawing later on. In cross-examination he effectively conceded that this was incorrect. As I have said, the quotation corroborates Mr Webb's evidence on the point. It expressly refers to the timetable on the drawing "as per discussions," and this seems to be clearly a reference to the discussions of 3 July. 150 Pausing here, PRS was the only entity asked or allowed to quote on the basis drawing FOX 9903, or on the basis that the Clyde beams, or some of them, would be reused at Mt Druitt, or on the basis that the number of beams to be provided was 10,000 rather than 12,500. That may be a tribute to Mr Webb's talents and enthusiasm for PRS obtaining the racking contract, but I am concerned with questions arising between Yates and Linfox, and one needs to assess the position in the light of the evidence of Mr Pearce that he always intended to use PRS if its price was competitive. On the morning of 5 July there was an exchange of emails between Mr Jacob and Mr Ballantyne, mostly concerning the agenda for a meeting that had been arranged for 6 July. However, in his email, Mr Ballantyne said: Also, I would like an answer to my email [of 2 July] concerning the Mt Druitt racking some time today if possible. I am fielding calls from some very irate people about the sale of the racking at Clyde. I need to know what is going on and the more questions I ask the more suspicious I am becoming. (I had a very testy conversation with Mark this morning and came within an inch of asking for his replacement … You must [really] keep me informed) In fact there was only one "very irate" person, namely Mr Wiener. 151 The precise sequence of events is not clear, but on the same day Mr Jacob spoke by telephone to Mr Wiener, who asserted that Mr Pearce had quoted him $54,000 for the racking, but had later said that the price was $137,000, and later still that the racking was not for sale at all. Mr Wiener spoke of the possibility of Academy not taking a lease of the Clyde facility, and Mr Jacob's diary note seems to reflect two men looking for a solution, with Mr Wiener speaking of expecting to receive an engineer's report on 7 July. 152 Mr Jacob then spoke to Mr Pearce. In an affidavit sworn in 2002, Mr Jacob quoted Mr Pearce: We need all of the beams in the racking at Clyde. There are nominally 2,400 pallet spaces in the racking in the small warehouse at Clyde. The list price for 2 new beams is $100. There are problems meeting the installation schedule for the racking at Mt Druitt. 19 July 1999 is the required delivery date of the beams to Mt Druitt, and I need the beams from Clyde. 153 In cross-examination, Mr Jacob denied that Mr Pearce had told him that the reason for Mr Pearce writing to Mr Wiener, in the terms that he had written on 30 June, was because there was no chance of meeting the relocation schedule unless the beams from Clyde could be reused at Mt Druitt. Mr Jacob's diary note of his conversations of 5 July contains some figures in the margin. Apparently Mr Pearce said something that caused Mr Jacob to make some calculations. The note appears to record "4,800 beams on site", and also a note about 2,034 beams that Mr Jacob understood to be the number of beams in the small warehouse at Clyde. Perhaps the effect of the note is that he understood that there were 4,800 beams at Clyde altogether of which 2,034 were the beams in the small warehouse. There is no mention in Mr Jacob's diary note of the suggestion that Mr Webb could have provided any beams from any buffer stock that his company held. 154 Messrs Webb and Jacob both said that, if the beams from Clyde were not to be available for reuse at Mt Druitt, there was no hope of Linfox achieving the installation of the racking at Mt Druitt by 19 July, but in evidence Mr Jacob denied that on 5 July he thought that it was essential that Mr Ballantyne be persuaded to be come to some compromise with Mr Wiener. 155 At some stage on 5 July Mr Jacob sent an email to Mr Ballantyne, primarily dealing with the agenda for the next day's meeting. He said in the course of the email: I spoke to [Mark Pearce] earlier today re the Mt Druitt racking. He is writing a brief for us all but appears that he will be recommending the Dexion tender which is at least 200K cheaper than the others at just short of $560K. This includes the [floor] spreaders and installation. The use of the beams from Clyde saves Yates about $80K and Mark now [thinks] that the remaining racking can be re-used at Wyee to save some more $. The campaign by [the] landlord seems extraordinary. Mark assures me that there is no agreement on the sale of the racking. With regards to his threats over the return of the property you may not be aware that we had Colsten [Engineering] complete a site [Dilapidation] Report before we occupied. This report includes photos and is quite clear on the condition of the site when we took over from Southcorp. I don't think we should be intimidated by [Mr Wiener]. 156 Mr Ballantyne replied: [Confirming] that Mark's summary of costs and his recommendations will include the purchase of new racking and the quoted costs to dismantle and re-erect the [Clyde] racking at Mt Druitt. (After our conversation I had a call from Michael Wiener who advises me that on Wednesday we will have his engineers "crawling all over the building" … is there no way we can find a compromise with this guy?) 157 Mr Jacob replied: I have spoken at length with Michael Wiener and am currently exploring options on racking. Meeting the required delivery date and the correct spec for the beams is the challenge but I am hopeful of finding something that may allow a [compromise]. I'll keep you posted. 158 Mr Ballantyne then responded: "NOW y're talkin' !" [sic]. Linfox submitted that this exchange showed that there had been a change in plan, and that Yates had by 5 July agreed, in the colloquial if not the legal sense, to the re-use of the Clyde beams I consider that the submission strains the language used too much, but in any event, it is clear that the question was still open, at the meeting of 6 July. 159 I have described the events of May and June, so far as they relate to the questions as to what were the contractual terms I need now to back, to say something more, so far as concerns the dealings with Mr Wiener. He said that he had a telephone conversation with Mr Pearce during May, when he asked Mr Pearce whether "you" wanted to take the existing racking away, and Mr Pearce said "No". Mr Wiener said that he was negotiating with a potential new tenant, who had indicated an interest in the racking, and he asked Mr Pearce to work out a price for it. Later, Mr Pearce quoted a price of $54,000 for all the racking at Clyde, and Mr Wiener said: "I'll take the lot". Later again, Mr Pearce told him that the price had been misquoted, that $54,000 was the price for the racking in the small warehouse, and that the price for the racking in the two warehouses was $137,000. Mr Wiener then said that on 22 June he met Mr Frost of Linfox at the Clyde warehouse, who also said that $54,000 represented the price for the racking in the small warehouse. On 30 June Mr Wiener sent a fax to Mr Pearce, saying:

As per our discussions and as confirmed on site on 22nd June,99 by your Mr. Gary Frost, should Academy Warehouse lease the above premises they will be able to purchase all the current racking in the small warehouse which runs East to West for the amount of $54,000. It was confirmed by yourself and Mr. Gary Frost that the racking agreed for sale has a capacity for 3,000 pallets. 160 On the same say, Mr Pearce replied, as noted at [134]. 161 On 1 July, Mr Wiener responded: I are [sic] in receipt of your fax of 30th June, 1999. I confirm that on 27th May,99 you informed me that the racking in the above premises would be available for sale at a price of $54,000. At that time I informed you that if Academy Warehousing signed a lease for the above premises I believed they would purchase the racking. As you are aware we have had a number of subsequent conversations regarding the racking including one conversation at which time you telephoned me to apologise that you had made a mistake on quoting all the racking at $54,000. You told me that your financial controller had informed you that the cost for the racking was not $54,000 as quoted to me by you but $137,000 and it was still all for sale. During the conversation I asked you what racking would be available for $54,000 and you informed me that the racking in the small warehouse was available for $54,000. I then requested we meet on site the next day to confirm definitely what racking was available. You told me that you couldn't make a meeting but Gary Frost would be informed and he could show me the racking available for sale. On 22nd June, 99 I met with Gary Frost and he confirmed what racking would remain for the $54,000. Subsequent to that meeting Academy Warehousing inspected the racking and I confirmed with you that Academy Warehousing would take the racking in the small warehouse for $54,000. I am horrified now to learn that you wish to withdraw you [sic] previous offer. As you are aware we have had numerous conversations in the past weeks regarding your date of vacating the premises and your continual agreement with me to sell the racking. You are also aware that the main proviso of Academy wanted the racking to remain at Factory Street was due to their timing problems and your late vacant possession date. I have spoken to your Paul Bennett and I would hope you would give a copy of this fax to him. I believe that the contents of this fax are accurate and that in the interests of maintaining our good working relationship we can work together to bring about a satisfactory outcome to this significant problem as soon as possible. I am also faxing a copy of a defect notice received from Fire Fighting Enterprises. Southcorp have previously been informed of the problem but no action has been taken. Fire Fighting Enterprises informed me yesterday that the building does not conform due to the damaged fire door and that they are unable to issue a form 15A as requested by our insurers. Please inform me when this damaged fire door will be repaired. 162 To recapitulate a little, on 2 July Mr Ballantyne had asked how it was that savings could be achieved by reusing the Clyde beams at Mt Druitt: [140]. On 5 July he asked for an answer: [150]. No response was given before 6 July. On 5 July Mr Pearce prepared for the meeting that had been arranged for the next day. For Linfox's own internal purposes, it required a Purchase Authority to be signed by someone from Yates, that is, a document authorising Linfox to spend money on behalf of Yates, procuring the racking parts; and obtaining that authority necessarily involved Linfox satisfying Mr Ballantyne, on behalf of Yates, about the price to be paid. 163 Mr Pearce prepared a spreadsheet, recording details of the quotations Linfox had received. It appears that he did not show this spreadsheet to anyone else at the time, but he also prepared a memorandum dated 5 July, addressed to Mr Bennett, marked as being copied to Messrs Frost, Jacob and Ballantyne. In fact, Mr Pearce delivered it to Mr Ballantyne and, it seems, Mr Jacob at the meeting held at 4.30 pm on 6 July. It reads: Subject: Warehouse Racking for Mt Druitt. Linfox sent a Request for Quotation to five (5) racking companies. These were: 1. Colby Systems 2. Storage Ideas - Colby Distributor 3. Leber Storage Systems - Schaefer Storage Systems Distributor 4. Dexion Seven Hills - Dexion Distributor 5. The Pallet Racking Supply Company - Dexion Distributor Linfox received four proposals in response to the Mt Druitt racking tender. Storage Ideas informed us that they would not be tendering. The tender closed at 4 pm on Thursday 1st July 1999. All tenders were received by this time. No tenders were opened until after the tender closing time and all tenders had been received. Appointments were made with each tenderer to present and discuss their proposals on Friday 2nd July 1999 at Linfox Botany office with Mark Pearce and Gary Frost. An evaluation of each Tender was made against the tender criteria comparing price, program and date of completion and suitability of equipment offered. [Emphasis added now] On the first pass of considering pricing it was evident that only two offers had [in fact] provided for the complete works. Discussions were held with the two non-conforming tenderers to make full provision for all materials required. In addition to evaluating each tender against this [criterion], an evaluation was also carried out to determine the operational viability and the cost benefit if any to Yates of utilising the existing racking at Clyde for the Mt Druitt site. After a detailed comparison and evaluation by myself and Gary Frost we can achieve a $79,568 saving to Yates by utilising the existing racking beams from the Clyde site at Mt Druitt. A further saving will be realised by Yates by using the frames at Wyee. This will negate Schaefer and Colby from quoting at Wyee, however we will be able to maintain a competitive tender situation by having three Dexion Distributors tendering. Each of these distributors is an independently owned and operated business. It is my recommendation that the alternative proposal received from the Pallet Racking Supply Company for the amount of $519,777 be accepted. This compares with the following offers. 1. Colby Systems $701,940 (incomplete tender offer) 2. Storage Ideas - Colby Distributor DNQ 3. Leber Storage Systems $887,664 - Schaefer Storage Systems 4. Dexion Seven Hills - Dexion Distributor (incomplete tender offer) $701,360 5. The Pallet Racking Supply Company $774,790 - Dexion Distributor OPTION (incl. s/tax) $519,777

Note These figures do not provide for the fit-out of the DG store. The final amount for the Dangerous Goods Store is dependent on the final layout provided by the consultant John Baker. Maincon are waiting on this. A project contingency of $10,000 would be sufficient to cover the racking and the 'Mesh' protection for the Aerosols. Linfox are still awaiting on John Ballantyne to provide the product slotting details in order to finalise the quantity of carton live storage and long span shelving required. A project contingency amount should be allowed for this estimated at $60,000. Included in this amount is an estimate for accommodating the Watex product range. The allowance for floor painting, aisle signs, emergency egress walkways and emergency exit signs within the racking installation should be allowed for this estimated at $40,000. The pallet storage capacity of the Mt Druitt installation has been reduced by 2,932 pallets to provide a total pallet storage capacity of nominally 9918 pallets. (Previously 12,850 pallets) This was done at the request of John Ballantyne who had requested that it be further reduced to 8,500 pallets. However we detail the following summary of requirements to be accommodated at Mt Druitt. 1. Storage for Point of Sale 800-1000 pallets plus pickfaces 2. Packaging material Plastics factory 500 pallets 3. Packaging material seeds factory 200-300 pallets 4. Accommodate Clyde stock 700 pallets TOTAL 8500 Allow 85% occupancy rate, therefore capacity required nominally 10,000 pallets. It should also be noted that Mt Druitt is to operate as a national distribution centre and therefore the assumptions that Mt Druitt will simply replace Clyde are false as the full impact of the cross docking strategy is not yet known. There is not enough qualitative data to be able to determine the full impact of servicing the interstate cross-docks. Also these figures do on allow for any new products such as the Watex range as Yates to date has not provided details. 164 There are various copies of this document in evidence. Manuscript notes on two of them appear to record that at the meeting on 6 July, those present (Messrs Jacob, Pearce and Frost from Linfox and Mr Ballantyne of Yates) discussed the circumstance that the figure of 8,500 pallets, quoted near the end of the memorandum, was incorrect: it did not allow for the pallets in the pickface, noted as being either 646 or 700 in number. 165 There are disputes about what was said at the meeting, and for the moment, I will continue to record facts about which there is no dispute, or where the dispute is relatively easy to resolve. 166 During the cross-examination of Mr Pearce, Yates challenged the proposition that on a proper analysis of the various quotations received, a $79,568 saving would be achieved by adopting the recommendation contained in the memorandum of 5 July. Initially Mr Pearce said that he could not remember how he had calculated that figure. He was asked to look into the position overnight. On the next day he proffered an explanation: 4,600 fewer beams were to be used; these beams were treated as having a value of $32 each; new beams cost $49.50 each; the difference amounted to $17.50 per beam which he rounded down to $17; and 4,600 extra multiplied by $17 equals $78,200. This explanation was demolished in cross-examination and withdrawn. Mr Pearce accepted that he had made a manuscript note upon his spreadsheet, in which the calculation of $79,568 appeared, and the calculation had quite a different, and complicated derivation. 167 In the spreadsheet Mr Pearce had analysed each of the quotations received. Since two of the offers (those from Colby Systems and from Dexion Seven Hills) had not allowed for certain items of cost, he separated out these items of cost, so as to be able to compare like with like. He noted the delivery and erection times mentioned in the various quotations, and noted that whilst PRS had quoted on a total of 9,918 racks, the others had quoted for 12,530 racks, and he then made a calculation as to the cost per pallet reflected by each quotation. 168 Then, in his manuscript notes on the spreadsheet, he made further adjustments to allow for the fact that the ultimate quotation from PRS (that based on drawing FOX 9903) used 4,600 beams which he treated as being already owned, but which would have to be replaced later, if now used at Mt Druitt, and he allowed for the additional labour costs to be incurred in dismantling these beams at Clyde and reassembling them at Mt Druitt. This led him to record a calculated saving of $79,568, if the ultimate PRS quotation was accepted. 169 However, in the course of cross-examination, he agreed that this calculation contained an error: he had equated the cost of acquiring 9,918 new beams, taken from the ultimate PRS quotation, with the cost of acquiring 12,530 new beams quoted by the others, and when this error was corrected, the supposed saving of $79,568 in fact became converted into an additional charge of $31,559. It may be that, since nobody checked his calculations at the time, the discussion which took place at the meeting of 6 July, when Mr Pearce's 5 July memorandum was distributed and discussed, proceeded on the basis that the calculation was correct. 170 The memorandum was incorrect in a second significant respect, recorded in two of Linfox's documents dated 7 July. In the first of these, an email from Mr Pearce to Messrs Jacob, Frost and Bennett, he said: COMMERCIAL IN CONFIDENCE - LINFOX USE ONLY The following attempts to detail the 'cost' position of the racking fitout as it stands at this point in time for the Yates Mt Druitt warehouse. Supply of NEW Materials $341,015-00 Labour Labour to install NEW materials $94,010-00 to dismantle/re-erect $26,121-00 Clyde racking TOTAL Labour $120,131-00 $120,132-00 Sales Tax $58,630-00

Total $714,977-00 NOTE: This does not provide for the PC (project contingency items) Regards Mark Pearce You may recall that we did try to explain that it wasn't such a good deal! 171 In the second, Mr Jacob reported to his superiors, Messrs Bennett and Stephenson in these terms: Through a torturous day of negotiation on Tuesday, 6th July 1999 a number of issues are clarified, but more still are outstanding and not agreed between Linfox and Yates. Overall I am still very concerned about the general attitude of John Ballantyne and Greg Rich toward Linfox. In essence I believe Yates have no intention of ever forming any sort of partnership with Linfox or ever using Linfox as a third party provider of Logistics Services. Rather Yates view Linfox as a repository of expertise that they can use like a consultant or an extension of their own workforce. The latest example of this is the insistence of John Ballantyne that warehouse consumables are bought by Yates and provided to Linfox warehouses. He sees Linfox as purely a provider of staff, labour and expertise. For the money we make from the various components of the business and the time (overhead) we all spend on Yates the business is, at best, marginal in total value to Linfox. A summary of the various parts of the Yates business is attached detailing my estimates of the value of the account over the coming year. Systems Agreement Mark Pearce had undertaken to have a firm price on the WMS hardware to me by COB Thursday, 8th July. Jason Toomey is reassessing the project resources and the cost implications. The aim is to have a total project cost firmed up by COB 9th July 1999. This will enable the drafting of the Systems Agreement for presentation to Yates next week. Racking Agreement The order had been placed for the Mt Druitt racking based on a Purchase Authority signed by John Ballantyne. (Copy attached). My concern is that we have again conditioned John Ballantyne to expect a charge for an item that will actually be much greater than he expects. Since he signed the PA an additional figure has been quoted to me by Mark for the beams from Clyde that are owned by Linfox. This will not be well received by Yates and it is frustrating that the entire cost of the Mt Druitt fitout could not be quoted in the first instance. Variable Charges John Ballantyne has approached the warehouse manning question from an engineer's perspective and reached a conclusion that Clyde can be operated with 11 people on average throughout the year. Based on our knowledge of the operation and by also using a similar methodology to John Ballantyne, I think that an average of 17 people are required to run the Clyde warehouse operation. Before I start the debate over the variable cost per pallet, we must agree on the manning of the warehouse. Should agreement not be possible, I will concede to John that he should be running the warehouse and invite him to do so. If we can reach agreement on the manning of the warehouse then I will provide the variable rate to Yates. As mentioned earlier we are still not in agreement on warehouse consumables. John Ballantyne thinks that Yates are going to purchase warehouse consumables on our behalf. He is adamant, however I have not agreed to this. [He went on to deal with questions of charges and his perception of Mr Ballantyne's attitude in relation to these matters, and continued] Should Yates want to argue over the manning at Clyde I will be recommending we withdraw our services. 172 Additionally, as Yates points out, Mr Pearce's July 5 memorandum did not refer, except in the then unaccented expression "to program and date of completion," to any possible difficulty in procuring racking parts; nor did it refer to any supposed agreement made by Yates that the Clyde racking would be reused at Mt Druitt. 173 There were a number of meetings and discussions on 6 July, and the sequence of some of these can be fixed only with moderate confidence. There was a Maincon project meeting held at 8 am. Amongst others, Messrs Ballantyne and Pearce were present. The minutes of the meeting record: "Racking to commence Monday 12/7/99." At 11.09 am Mr Pearce sent to Mr Ballantyne (and to others at Linfox) an email which reads: The nett SAVING to Yates of using the existing racking beams at Mt Druitt is about $78,000. There will be a further SAVING in using the frames at Wyee. It is regrettable that Michael Wiener is choosing a path of threats and intimidation to try and hoodwink Linfox out of the site racking. Let me restate that at no stage did I make or accept an offer from Michael for the warehouse racking. He did enquire "if" we did not require the racking would we sell it and he stated several times, as you have, that wouldn't it be cheaper to leave it there than dismantle and re-erect? The answer being as always 'not necessarily as we own it.' I did say to him when asked how much the racking was worth that I thought it was $57,000 "but let me check that and get back to you Michael." Which I subsequently did with Paul Stephenson of Linfox, who confirmed that it was in fact valued at considerably more than this and I then immediately notified Michael of this fact. No further discussion regarding price of racking, quantity of racking or availability of racking then took place. Last Wednesday 30th June I rang Michael at his office to inform him that we were looking at using the existing racking ourselves and that it would not be available. Michael was not in his office so I left that message with his secretary and asked her to get him to ring me. I then received a hastily written fax from Michael confirming acceptance of the racking that Gary had offered him. At no stage did Gary Frost either make an offer of or accept an offer for the racking from Michael. Gary did show Michael the racking on the site and explained how many pallets were in each area. This behaviour of threats and intimidation is regrettable as I personally and Linfox in general have extended to Michael every professional courtesy and assistance since taking over the site. As a consequence we have enjoyed a mutually courteous and co-operative relationship. (I have now learned the true nature of the man, as one does!) We facilitated the negotiation of an upgrade of the warehouse lighting and also had our contractor (Colsten Constructions) provide Michael with proposals to upgrade the site. It is patently obvious that Michael has made commitments to a prospective tenant to try and sway a deal without confirming the details with Linfox first. It should also be noted that I am fully aware that I am not authorised to sell company assets without prior written approval from Paul Bennett or a company director and I would not proffer an offer or accept an offer without first gaining this approval. I believe that both Linfox and Yates show some support and consistency on this issue. Obviously it is everyone's desire to try to help Michael find a satisfactory solution if at all possible but this should not be to Linfox's or [Yates'] detriment and certainly not under the duress of threats and intimidation. Prior to taking over the Clyde site Linfox commissioned Colsten Constructions to prepare a site dilapidation report. Linfox also provided an extensive site condition report to Southcorp Wines and their property consultant Jeremy Blanks of National Portfolio Strategies. These condition reports were acknowledged point by point by Southcorp Wines so the only grief Michael will bring will be to Southcorp and I doubt even he wants that. Yates obligation to Southcorp Wines is to leave the site in the condition it was on entering into the lease. This was well documented and acknowledged by Southcorp Wines. Comments by Michael that he wants us to remove floor fixings and not cut and grind them level is pathetically petty and as the precedent has been established by numerous previous tenants in this building and is not recognised standard practice should not cause us to panic. Forwarded for your information under separate cover is a copy of Gary Frost's response. 174 Mr Jacob's diary records a telephone conversation that he had with Mr Case of Dexion. All that can be said about the timing of this conversation is that it occurred before the 4.30 meeting. The diary note reads: "Beams N/A. Five weeks lead." He said that he had telephoned Mr Case to verify that the program then in contemplation could be achieved, and to check if Mr Pearce had been telling him the truth. He said that he "thought at the time that Mark [Pearce] was being evasive and I needed to corroborate what he was telling me." He agreed that he thought Mr Pearce might have been covering up, and not telling him the truth because Mr Pearce had not done what he should have done; and this was a matter that could have landed Mr Pearce in trouble if a problem arose in relation to the racking. Therefore Mr Jacob telephoned Mr Case to check the position for himself. Mr Jacob agreed that what Mr Case told him indicated that assurances previously given by Mr Pearce to Mr Jacob were unreliable. Nevertheless, Mr Jacob said that he could not recall any of the detail of any discussion he had with Mr Pearce about this topic and he said that he did not remember feeling that there was any particular problem. 175 Yates submits, and I find that Mr Pearce had been evasive and had not told Mr Jacob the true position up to 5 July. Looking ahead for a moment, Mr Webb said that if PRS had been awarded the racking contract two or three weeks before it was actually awarded the contract, he would have been able to procure the racking parts in sufficient time in order to procure a rack-to-rack transfer to have been effected; and I accept this evidence. Yates submits that the inference should be drawn that Mr Pearce appreciated this position and that his failure to send out the invitations to tender earlier was significant; and that this was the cause of his evasiveness. The inference seems irresistible. 176 Yates also seeks a finding that Mr Jacob was concerned, as at 6 July, pointing out that Mr Jacob could give no explanation for his statement that he thought there was no problem. At the lowest level, this is one of the circumstances that makes me think that it is appropriate to consider Mr Jacob's evidence with care. 177 If Mr Jacob was not concerned at this time, it would have been odd, particularly given his apparent intelligence, experience, command of the work entrusted to him by Linfox, his thinking that Mr Pearce had been evasive, and his having thought it appropriate to telephone Mr Case. 178 Mr Webb's diary records two (relevant) conversations that day, each with them with Mr Pearce. The first of these seems to have occurred after Mr Jacob's telephone conversation with Mr Case, and before the meeting at 4.30, and the second after that meeting. The diary note about the first conversation reads: Discussed Ross Jacob's involvement with Yates, relocate, Ross has contacted Dexion direct requesting lead time for beams Mark's request is to ignore Ross! Order will be made placed this afternoon. [commas inserted] 179 The second entry reads: "Mark Pearce … has had meeting with Yates. Existing Granville [that is, Clyde] racking is to stay in current location. Order from Yates to order extra beams to complete main project." 180 Between 3.30 and 4.30 pm there was a telephone conference call involving Messrs Ballantyne, Jacob and Pearce. Messrs Ballantyne and Jacob gave evidence about it, whilst Mr Pearce said he did not recall it. Before the call, Mr Jacob made notes about the matters he wanted to raise, and he explained what his notes meant: he intended to tell Mr Ballantyne that he should "agree to place a purchase order straight away"; that Linfox needed a procurement authority to be signed; and that Linfox "needed it immediately to have any chance of meeting the timetable"; and he went on to say that he had later said these things. 181 Mr Jacob also made a note about topics raised by Mr Ballanytne during the conference call. In evidence in chief he quoted Mr Ballantyne as asking: "why is it that Linfox wants to go with the option of dismantling the racking at Clyde?" 182 There were four people present at the meeting at 4.30: Messrs Jacob, Pearce and Frost for Linfox, and Mr Ballantyne for Yates. During the course of the meeting, there was produced the procurement authority, which read: The following Goods and or Services are required to be purchased as a requirement for the fitout of the warehouse facility at Coventry Place, Mt Druitt, NSW being undertaken by Linfox Transport on behalf of Arthur Yates & Co Limited. DESCRIPTION: Warehouse Racking Fit-out To supply, deliver and install the warehouse pallet racking as detailed in the Pallet Racking Supply Company's proposal No. 7306-01b dated 5th July, 1999. Total $461,146-79 Sales Tax if applicable $58,630-21 In order to expedite this acquisition in the required time to meet your implementation timetable we respectfully request you confirm by signing a copy of this letter and return facsimile to Mark Pearce, Project Manager, 02-9700-0399 183 At some stage during the meeting, Mr Pearce altered this by hand by adding an asterisk and the words "plus the additional beams not supplied from Clyde" at the end. Mr Ballantyne then signed the form. The 6 July Meeting 184 The first question to be resolved is whether anyone from Linfox told Mr Ballantyne that there was a lead-time problem in connection with the beams Mr Ballantyne said that nobody from Linfox made any statement that there was such a problem. On his copy of the 5 July memorandum of Mr Pearce he had written the words "lead-time problem with beams," and he said that he had written these words because it was his belief that there may be such a problem, and not because any representative of Linfox said words to that effect at the meeting. In cross-examination, he said that it was on 6 July that he learned that Linfox had not yet placed an order for the parts; he knew from past experience that there was a lead-time measured in weeks; and he was troubled sufficiently to ask Mr Jacob: "Are you going to get these beams?", whereupon Mr Jacob told him not to worry. 185 Linfox submitted that Mr Ballantyne had denied that there was any discussion about lead time problems, and that this was a false denial. However, the submission misstates what Mr Ballantyne actually said. He referred to the topic in three affidavits. In the first, sworn in 2001, he said that he was concerned, and that he commented to Mr Jacob that he did not think Mr Pearce was going to get the racking up in time. In the second, sworn in April 2002, he referred to the manuscript note he had made during the meeting; and expanded further, saying at one point: "The discussion…was at my instigation because I was concerned that there might be lead time problems with the beams". That is, in his evidence in chief, he did not deny that there was any discussion at this meeting about lead time problems with the beams Challenged in cross-examination, he said he had no recollection of Mr Pearce saying there was such a problem, and added that if this had been said, in such a way that he appreciated it having been said, it would have changed his focus, for the racking erection was due to start on 12 July, six days later. 186 Linfox also submitted that Mr Ballantyne "knew" that there was a lead time problem, but the evidence does not establish more that that he was concerned that there could be one. He said that when he had decided that Yates should take over the establishment of the Wyee facility, he had made inquiries of various racking manufacturers, and had been told that the lead time was of the order of eight to ten weeks. He also said that he knew from previous purchases of racking that the lead time was "weeks and weeks". However, the evidence does not show when this happened, and the submissions did not refer to Mr Ballantyne's evidence that he considered that Linfox was one of the largest customers of Dexion (which he thought was the major Australian racking manufacturer); and that he had therefore accepted Linfox's continued assurances that affairs were going according to plan. 187 Mr Pearce swore two affidavits, and made a supplementary written statement, in which he dealt with the point. Then he was cross-examined about it. Yates points to a pattern of his improving his account as the case progressed, and whilst this is true as a matter of history, it is not by itself destructive of his evidence on the point. However, it was suggested to him in cross-examination that he had read Mr Ballantyne's note on his copy of the 5 July memorandum (this had been discovered, and it was suggested that he had extrapolated from that). Mr Pearce denied having seen the document, but one of his own affidavits refers explicitly to the document. Further, he changed his account, during the course of his cross-examination. At one stage he said that throughout July he believed there were sufficient racking materials available, that he had no cause for concern about this, and that he did not recall either Mr Jacob or Mr Frost asking him if there was any cause for concern, or his telling them that there was no course for concern: his understanding was that there was no lead-time problem. However, on the next day, he said that as at 2 July his thinking was that it was essential to reuse the Clyde beams if a rack-to-rack transfer was to be achieved by 13 August. 188 The latter version appears to be the true one. Mr Jacob said in cross-examination that as at 5 July Mr Pearce had told him that there was a problem in meeting the installation schedule, and it was obvious to him that there was a need to acquire beams from some source other than the usual supplier, an obvious source being Clyde; and he agreed that Mr Pearce had told him that he (Pearce) needed the beams from Clyde. Later he said that Mr Pearce had said that the beams could be obtained from some other (unidentified) source. 189 On 6 July Mr Jacob was sufficiently concerned to telephone Mr Case to check the truth of what Mr Pearce had told Mr Jacob. It is clear that after this conversation, Mr Jacob spoke to Mr Pearce about it, because Mr Pearce related the matter to Mr Webb. Mr Ballantyne had already expressed himself as dissatisfied, and as suspicious of Mr Pearce: [150]. Neither the 5 July memorandum, or any of the other documents put by Linfox to Yates in the period leading up to 5 July frankly drew attention to what must have seemed a problem to anyone at Linfox who paused to think about it. If Mr Jacob was not concerned, he should have been, but I conclude that he was. 190 In any event, Mr Jacob said that he could not remember, but did not dispute that at the meeting of 6 July Mr Ballantyne said that he did not think Mr Pearce was going to get the racking up in time; and he agreed that he probably did say in reply: "Don't worry, we can get the beams", because, he said, that was what Mr Pearce had been telling him. 191 In a supplementary written statement, part of his evidence in chief, Mr Frost said that at the meeting Mr Pearce said: "There is a time problem about the supply of new beams that will have to be ordered." However, in cross-examination, he said that he had no clear recollection about this, and could not explain how it had come about that he had made his earlier statement. It is clear from the general thrust of the evidence that at the meeting he himself was in no position to make the statement that Mr Pearce said he had made on this topic, and, generally, that he left this topic to Messrs Pearce and Mr Jacob to deal with. 192 Mr Frost also said in cross-examination, in a non-responsive answer to a question, that he had formed the impression at the meeting that Mr Ballantyne knew that there would be a problem. Linfox now relies on this, but I think it is impossible to give any real weight to this bald assertion, particularly given Mr Frost's effective withdrawal of what he had said in chief, and his disclaimer of a recollection of the detail of what was said at the meeting. 193 Linfox submitted that Mr Ballantyne decided at the meeting to go ahead with the move, knowing that there was a lead time problem, and that in doing so, and in directing Linfox to proceed, he "knowingly prejudiced or put at risk the Mt Druitt move as the price of appeasing Wiener"; and there were other submissions in similarly exuberant terms The evidence relied upon is said to be at T855-857. In my view, that evidence does not justify these submissions. 194 Looking at the matter overall, and particularly at the contemporary documents, I find that no one at Linfox told Mr Ballantyne at the meeting of 6 July that there was a lead-time problem. 195 The next question is whether Mr Pearce (or anyone else from Linfox) said at the meeting that there was a prior agreement made by Yates to sell the beams to Zandean. (These various questions overlap to some extent.) According to Mr Pearce, he, Mr Jacob and Mr Frost all urged Mr Ballantyne to take 4,600 beams from Clyde, as otherwise there would not be sufficient beams for use at Mt Druitt. It is agreed all round that there was discussion about what should be done concerning the Clyde beams: Mr Ballantyne was troubled about what he and others regarded as Mr Wiener's threats and he was strongly inclined towards achieving whatever compromise could be achieved, whilst Messrs Jacob and Pearce urged him to resist the threats. 196 The immediate question is whether, as Mr Pearce said in cross-examination, he said at the meeting that there was already an agreement, made by Yates, that it would not sell the racking at Clyde to Zandean. He did not say this in his evidence in chief, and he could not explain this. However, in cross-examination he said: "There is a document trail a mile long with [Mr Ballantyne] not to sell the beams at Mt Druitt." Read in their context, the last three words just quoted are plainly either an error in expression or an error in recording: he was being asked about an agreement to sell the beams at Clyde. In any event, there is no such documentary trail, so far as the evidence goes. Indeed, the correspondence and other documents in evidence suggest the contrary, and neither Mr Jacob nor Mr Frost supported the evidence of Mr Pearce on this point. 197 Mr Pearce said that the agreement he mentioned had been made at a BOR meeting, but could not say which meeting. There is no record of any agreement in any minutes of any BOR meeting, and no other witness supported Mr Pearce as to this. Mr Ballantyne denied that there was such an agreement, and given my general views as to the credit of the witnesses, and the contemporary documents, I find that no such statement was made at the meeting as asserted by Mr Pearce. 198 In its final submissions Linfox conceded that if Mr Pearce had intended to convey (as I find he did) that there was a binding agreement reached at a BOR meeting, he overstated the position. Instead, Linfox contended that Messrs Pearce and Webb had agreed that re-using the beams was the best course to adopt, and that this course "had been presented to Ballantyne who agreed with it". At another point, it was urged that there was "a general understanding" to this effect. For the reasons mentioned at [158] and [162] I reject the submission. 199 A further question arises concerning what was said, if anything, at the meeting as to the reason why Linfox proposed to reuse the Clyde beams at Mt Druitt. Mr Ballantyne had asked about this in the telephone conference preceding the meeting, but the only reason proffered was one of cost saving. Nobody at Linfox said anything to suggest that the lead time problem made the reuse of the Clyde beams desirable. Mr Jacob agreed that at the meeting it was present to his mind that the reason why Mr Pearce was advocating the reuse of the Clyde beams was the lead time problem, and he acknowledged that Mr Ballantyne had asked him why Linfox was proposing to reuse the Clyde beams Indeed, according to Mr Jacob, this was done in the hour before the meeting started. He also acknowledged that Mr Ballantyne had asked about the matter again at the meeting, but he would say only that he could not remember either his telling Mr Ballantyne of the true position, or Mr Pearce telling Mr Ballantyne of the true position; and he could not explain how this had happened. 200 Further, Mr Jacob appreciated that Mr Pearce was in an awkward position, and that the solution proposed by Mr Pearce had the benefit of resolving that awkward position, and he thought that Mr Pearce was being evasive with him; and on the next day he appreciated that Mr Pearce had been less than frank with Mr Ballantyne at the meeting on the subject of the costs to be saved, and he reported that matter to his superiors: [171]. If one goes through the contemporary documents, one can see a pattern: Linfox emphasised to Yates the savings said to be available if the Clyde beams were reused, advanced these savings as the only reason why the Clyde beams might be reused, and said nothing to Yates about the existence of the lead time problem, how this problem had arisen, or how it might be resolved. Notwithstanding these circumstances, no one from Linfox told Yates, on or in the period following the 6 July meeting, that the costs savings mentioned had been overstated and Mr Jacob said that he could not remember what had been said at the meeting, in answer to Mr Jacob's question. 201 This leads to a further question. At the meeting Linfox presented to Mr Ballantyne a procurement authority for signature, and after some discussion, it was amended and Mr Ballantyne signed it: [182] and [183]. Linfox pleaded that Yates had been guilty of contributory negligence, saying that amongst other things, Yates sold pallet racking at the Clyde racking site when the racking could have been used at the Mt Druitt warehouse. This contention is quite unfounded: if, as I find was the fact, the only reason given by Linfox to Yates up until the time Mr Ballantyne signed the procurement authority during the meeting on 6 July was one of costs savings (and even that representation was inaccurate), without Linfox mentioning the lead time problem or that the Clyde beams were needed in order to resolve the difficulties resulting from the lead time problem, then it cannot sensibly be said that Yates failed to take reasonable care in this connection. 202 Yates takes another point. On 30 November 1999 Yates wrote a letter of demand to Linfox. One of the complaints made was that the racking parts had not been procured in good time. On 13 December 1998 Corrs Chambers Westgarth, the solicitors for Linfox, replied, saying that the allegations made were "totally without foundation," that "The difficulties encountered in the move to the Mt Druitt premises were entirely of Yates' making and outside the control of Linfox," and that "Mr Ballantyne of Yates failed to authorise the ordering of the racking until 5 July 1999 (the original date for the commencement of installation)." 203 This is one aspect of a general complaint made by Yates that Linfox has acted improperly in resisting Yates' claim from the commencement, and throughout the conduct of the litigation. It points out that the procurement authority was not presented to Mr Ballantyne until 6 July, and that it was signed on that occasion. This point is a small one, but given the context (that Linfox urged Yates to reuse the Clyde beams in order to save costs, and not because of any consideration given by Yates, or suggested by Linfox, that the timing considerations pointed to the advisability of reusing the Clyde beams), it is not insignificant. In cross-examination Mr Jacob conceded that there was no force in the criticism of Mr Ballantyne in delaying the procurement of the racking, although in a memorandum he wrote to Mr Bennett dated 1 December 1999, apparently prepared in response to Yates' letter of demand, he had suggested that Mr Ballantyne did delay the matter. Each of Messrs Bennett, Frost, Jacob and Pearce said at one time or another that Yates, through Mr Ballantyne, had delayed signing the procurement authority. Messrs Bennett and Frost appear to have said this on the basis of what Mr Pearce told them. However, the evidence demonstrates that it was plainly not true, except to the limited extent that, when the procurement authority was presented for signing, there was a discussion about it, and it was amended before it was signed, and that was on the occasion when it was presented for signature. The delay was trifling, perhaps for an hour. 204 Turning back then to what was said at the meeting concerning the amendment added to the procurement authority ("plus the additional beams not supplied from Clyde"), a dispute arose, the detail of which does not seem to me to help in the resolution of any issue raised in the pleadings. 205 Yates referred to Mr Pearce's evidence that at the meeting, he, Mr Jacob and Mr Frost had all urged Mr Ballantyne to reuse the Clyde beams at Mt Druitt, because of the lead time problem and Yates submitted that this evidence was not just untrue but a fabrication. It pointed out that Mr Pearce had a motive for this fabrication (the concealment of his default in procuring the racking parts, and the avoidance of the resultant problems), that his evidence as to what was said at the meeting was irreconcilable with the evidence of Messrs Ballantyne, Jacob and Frost, and that there was a fundamental inconsistency between his having told Messrs Jacob and Frost that there was not a lead time problem, and his saying that he had told Mr Ballantyne there was such a problem. 206 Yates also suggested that Mr Jacob had a motive for not telling Mr Ballantyne at the meeting of the problem: he knew that Mr Pearce had not done his job, and did not himself trust Mr Pearce, but he had done nothing to tell Yates his real views. 207 I do not accept that Mr Jacob's evidence on this point is reliable, but I do not feel justified in saying anything more adverse, in relation to his credit, and in relation to this point. 208 On the other hand, I do find that Mr Pearce's evidence on this topic was a fabrication. When I look at his evidence on this topic, in the context of the events before and after 6 July, I do not see how it might be found that his account was truthful, but merely unreliable. 209 As noted at [142], on 3 July there was a change in plan concerning the sequence in which work was to be done at Mt Druitt: instead of erecting the reserve racking first, and then the pickface racking, the work was to be done in reverse sequence. On 15 July, Mr Morrow (who was employed by Linfox as a project co-ordinator) circulated to Messrs Pearce, Jacob and Frost a "first draft of the new pickface," that is, a set of documents recording the detail of the types of racking to be erected in the pickface area, where that racking was to be located, what products were to be stored at what locations within the racks, and other matters. The document contained a passage: "All selective racking to be constructed first to allow operational pickface setup to occur," tending to corroborate that there had been a change of plan. 210 Mr Carmody's racking erection team started rack erection work at Mt Druitt on 19 July 1999. It is clear that at some stage that work was delayed by water on the floor, consequent upon wet weather and the Mt Druitt building not having been made weather proof, but there is a dispute to when this incident occurred, and as to the details of what happened. I will deal with this detail later when considering Mr Pearce's stated reasons for saying that his defaults did not delay the project, but for the moment note that the incident probably occurred on or after 19 July 1999. The 21 July Meeting 211 I come then to the events of 21 July, when there was a BOR meeting at which Messrs Bennett, Jacob, Pearce, Frost, Parnell and Toomey represented Linfox, and Messrs Rich, Ho, Trevarthen and Ballantyne represented Yates. All of these men gave evidence except Mr Parnell. A document described as the minutes of the meeting, but which was actually prepared by Mr Jacob some days before the meeting, apparently following the usual practice, is in evidence. Section 4 of this document is in these terms: 4. Relocation to Mt Druitt 4.1 Racking Mark Pearce to detail the racking requirement. 4.2 Relocation Key Dates are as follows Mon 26/7/99 Commence transfer of non-critical stock quantities. Fri 30/7/99 Mt Druitt handover and cessation of normal operations at Clyde. Sat 31/7 to Mon 2/8 Transfer of critical stock, including the pickfaces. Tue 3/8/99 Commence warehouse operations at Clyde. Continuing transfer of stock from Clyde. The racking of Mt Druitt will not be complete until late August and, as a result, the storage capacity of Mt Druitt will be diminished. As Clyde has to be vacated by 13/8/99 there may be a requirement to temporarily store product offsite. 212 Mr Bennett produced a manuscript note that he says he had taken at the meeting of 21 July. It is decidedly informal, and reads in part: 1. Mt Druitt transfer - 3 Stages: a) Next Monday 26th July Non critical Clyde to Mt Druitt 2,000 [pallets] to floor. Certificate of occupancy Issue of Maincon re floor loading specifications. Load distribution spread plates under the racking. Have to respond to Maincon in writing Post Load specification.

Don't want to be picking order on the Monday c) Then 2 weeks to clean out. Do it [illegible words] - then make good. [illegible words] by 13th August. 213 It is said that the expression "non critical," near the commencement of the passage quoted, referred to non critical stock. 214 On the Linfox case, the note records that, at this meeting, Linfox told Yates that a rack-to-rack move would not be possible, and that it would be necessary to place 2,000 pallets on the floor at Mt Druitt, because there would not be sufficient racking available, in which to store those pallets at Mt Druitt. On the Yates case, nothing to this effect was said at the meeting. In an affidavit sworn on 2001, Mr Bennett attributed to either Mr Jacob or Mr Frost - he could not remember which of them - a statement in these terms: It is planned to move the non critical stock on Monday 26th June. Two thousand pallets will be put on the floor. On Friday 30th July we plan to commence the move of the bulk of the stock, being 4,000 pallets. This will consist of 300 truckloads then we have two weeks to clean out and make good the process by August 13th. 215 The date 26 June was an error for 26 July. If one compares this statement with Mr Bennett's note, quoted above, one can perhaps discern that the account given in the affidavit contains elements recorded at different stages in the note but I do not think anything much turns on that. A more significant observation is that whilst the minutes said "There may be" a requirement to use another storage facility, the suggested oral statement spoke of a definite need to store 2,000 pallets on the floor - the former being consistent with a rack-to-rack move on a modified basis, and the latter negating such a move. As well, the oral statement to be attributed to Mr Frost as made on 21 July cannot be reconciled with his evidence as to this thinking then: [216]. 216 Subsequently, in 2003, Mr Frost, in effect, simply adopted Mr Bennett's affidavit except that he said that it was he who had made the statement. Mr Frost had not referred to this matter in his earlier affidavits, and he said that he could not remember why. In oral evidence he said that he had no reason to doubt the accuracy of Mr Bennett's note, which he had been shown. He also said that he could not recall what was recorded in the minutes but it is to be remembered that the minutes had been prepared before the meeting, and in any event the recollection to which he deposed seems to have been anything but clear and precise; and of course the minutes do not go anyway near as far as Mr Bennett's note does: in particular they do not refer to there being pallets stored on the floor, either at Mt Druitt or at Clyde, except perhaps in the expression "2000 [pallets] to floor." He could not explain how it had come about that, in a written statement made in July 2003, he said that at the meeting he explained that "several thousand" pallets would have to be placed on the floor, when he could not remember having said that. Also, it was probably only on 22 July that he came to the view that a rack-to-rack transfer, envisaged by his 23 June plan, was no longer feasible. 217 Mr Bennett said in cross-examination that he had first learned that pallets were to go on the floor at Mt Druitt some little time before the BOR meeting of 21 July. Mr Frost had been preparing a draft report for the BOR meeting and reported this fact to him, leading him to speak to Mr Jacob, who stated the reasons: a rack-to-rack transfer could not be achieved, because the racking was incomplete, and the reasons for this were delays to obtaining access to the site, the result it seemed of building problems arising from the conduct of Maincon. Mr Bennett said that he thought that, at the meeting, Mr Frost said that there would be 2,000 or 3,000 pallets to go on the floor (his note having said 2,000). He acknowledged that this evidence was inconsistent with the minutes and that he had not suggested that the minutes be amended to reflect this inconsistency. 218 Challenged about what response there had been from any Yates representative, Mr Bennett became unaccustomedly vague. He said that Mr Rich had asked whether Linfox could handle the move, and that Mr Frost had reassured him. Mr Bennett's evidence in relation to this topic was unimpressive; and Mr Frost did not say that he had given such a reassurance. Yates points out that in his evidence in chief Mr Bennett did not attribute any response to any Yates representative, and that it was not put to any Yates witness in cross-examination that at the meeting any of them had assented to such a change in plan, not considered and not raised until 21 July. 219 In chief, Mr Jacob said, that at the meeting Mr Frost said: The transfer of stock will start on 26th July, 1999 however the pallets will have to be stacked on the floor at Mt Druitt, because the installation of the racking had only just commenced. 220 He did not attribute to any Yates representative any response. In cross-examination, he said that he did not recall Mr Frost using the words he had quoted, to or in the presence of Mr Ballantyne and that he was not prepared to swear that these words had been used in Mr Ballantyne's presence. He also said that, at the time of the 21 July BOR meeting, he did not have it in mind that any product would have to be stacked on the floor at Mt Druitt, and he did not think anyone had suggested that at the meeting. 221 It was still Linfox's preference that there be a rack-to-rack transfer, that being in the interests of both parties. He would have been interested in hearing it said that there was a proposal to stack 2,000 to 3,000 pallets on the floor at Mt Druitt, because that would have been inconsistent with what he had written in paragraph 4.2 of the draft minutes, which spoke of a requirement to temporarily store product "offsite". What he had written reflected what Mr Frost had told him, and how he understood the move was to proceed. Whilst at the time of writing he understood that Mr Pearce had not procured all the racking parts, and therefore that the move could not proceed in accordance with the 23 June plan, he also understood that Mr Pearce might have been able to procure some racking parts, so that the move to Mt Druitt could be conducted progressively, as the Mt Druitt racking erection work was completed. Hence the wording of the last two sentences of section 4.2 of the minutes. 222 On the other hand, he was interested in the possible need to use the Smithfield site on a temporary basis if difficulties arose. His draft minutes make that much clear. In cross-examination he agreed that perhaps there were "at least 2,000" pallets on the ground at Clyde at that time and that perhaps what had been spoken about at the meeting was that 2,000 pallets of non critical stock, then stored on the floor at Clyde, were to be taken away in the first stage of the move. 223 Mr Pearce produced what he described as his note taken at the meeting. It is even briefer than Mr Bennett's note. The relevant part reads: Relocation to Mt Druitt

Floor loading (Maincon). John Ballantyne Exit Clyde 13 August '99… 224 Generally, he disclaimed any relevant recollection of anything significant that happened at the meeting, but agreed that there was a significant quantity of stock on the floor at Clyde as at the date of the meeting, consequent upon the dismantling of the racking there. 225 Mr Ballantyne denied that anything was said in his presence to the effect that stock would be stacked on the floor at Mt Druitt, and he said that he would have been concerned at such a statement being made, and would have asked questions about it. He acknowledged that Mr Frost had said words to the effect that some point of sale (that is, advertising) material and some obsolete stock could go to Smithfield, but otherwise denied that the critical statement had been made. He said that there was nothing said to vary what had been agreed upon earlier, that the move be conducted on a rack-to-rack basis. In cross-examination he said that he did not recall anything being said about 2,000 pallets being stacked on the floor, and repeated that if that had been said, he would have questioned it: "2,000 pallets is a lot of pallets." He said that it was possible that someone mentioned 2,000 pallets on the floor, but not 2,000 on the floor at Mt Druitt, and he spoke of the floor space that would be taken up by 2,000 pallets. Plainly, there would be a lot of floor space taken up. 226 Messrs Rich and Ho (the latter being the chief financial officer of Yates) denied any recollection of it being said that 2,000 pallets were to be stacked on the floor, although Mr Rich said something along those lines "could have been" said, and that he was aware that the racking erection work at Mt Druitt had not been completed. Mr Toomey volunteered no information on the subject. Mr Parnell was not called, nor did Linfox attempt to explain his absence. Yates points out that, at a time before the parties agreed to compromise Linfox's claims against Yates for debt, Mr Bennett agreed in cross-examination that certain conduct of Mr Parnell had been disgraceful. 227 I accept the evidence of Mr Ballantyne on this topic and do not accept the evidence of Messrs Bennett, Jacob and Frost. Independently of questions about the credit and the reliability of the evidence of the witnesses who were present at this meeting, I think there is force in the Yates submission that it is objectively unlikely that, at this meeting, Linfox suggested for the first time that a rack-to-rack transfer would not be possible, and that some 2,000 pallets (or more) would need to be stacked on the floor at Mt Druitt, but that the Yates representatives passively accepted this change in plan, without comment. It must be remembered that the move was to commence at the end of that week, and that the relationship between the parties was strained. Additionally, for the reasons set out below, when dealing with the planning of the move, I find that Messrs Frost and Morrow, the Linfox officers who carried out the planning, did so in the expectation that the move would be conducted on a rack-to-rack basis. Further, I accept Yates' submission that there is a discernible pattern in the conduct of Linfox in not disclosing to Yates matters that might have embarrassed Linfox, putting its relationship with Yates at risk: Linfox's failure to procure the racking parts in good time; its failure to pass on the true expected costs of the racking parts: [162] to [171] and [200]; and its failure to frankly disclose the expected cost of the Exceed licences: [454] and following. Yates asks why it should be thought that Linfox then changed course, at the meeting of 21 July. At this and at other points, Yates points persuasively to Linfox's own documents, and to the concessions made in cross-examination by Linfox's witnesses. 228 At [155] I set out the terms of Mr Jacob's email to Mr Ballantyne of 5 July. Linfox submitted that Mr Ballantyne was put on notice by this email, if it was not already obvious to him, that there was a relationship between the possible reuse of the Clyde beams, and the erection of the racking at Mr Druitt by the required "delivery date"; and these submissions were linked with others to the effect that Mr Ballantyne knew that Linfox intended to reuse the Clyde beams The submissions are also interwoven with submissions that Mr Wiener never believed that he had a binding contract for the sale of the Clyde beams, that Mr Wiener's threats were hollow, and that Mr Ballantyne ought never to have taken them seriously. 229 Mr Ballantyne denied having the knowledge attributed to him, and I accept this. I think it is clearly established that Linfox went to some trouble not to tell anyone at Yates that the true reason it was proposing to reuse the Clyde beams was that it had failed to procure a sufficient quantity of racking parts in time. Its conduct in this respect was deceitful. As to the Wiener threats, and Mr Ballantyne's response to them, Mr Wiener presented as a truthful and reliable witness. He was no doubt intent on looking after his own interests, and the interests of his companies, in 1999, but that consideration does not by itself mean that his evidence should be regarded as untruthful, or unreliable; and his evidence is consistent with the contemporary documents. The submissions made about him in address rose higher than his cross-examination or any other evidence justified. 230 Turning back to the narrative of events, after the meeting of 6 July, Mr Pearce spoke to Mr Webb, telling him that the racking at Clyde was to stay there: [179], and that all new racking was to be used at Mt Druitt. This took Mr Webb by surprise and created a difficult position. He needed some 9,000 beams according to the plan reflected in drawing FOX 9903, and PRS only had 2,500 in stock. He considered that if he put pressure on Dexion, he would be able to be able to get 1,000 that week, another 1,000 the following week, and so on, but that there was no chance of getting enough to finish the racking erection work by the end of August.

231 At some time on 7 July, a PRS crew went to Clyde to start to dismantle the racking there. That work continued on 8 and 9 July. Mr Jacob spoke of a conversation he had with Mr Wiener on 7 July, when the work had already apparently started. Mr Jacob said that he asked Mr Wiener for a price of $40 per pallet space and that Mr Wiener replied that he had changed his mind, and that what he now wanted was the racking in the large warehouse, rather than the racking in the small warehouse. 232 There was a further telephone conversation on 7 July between Messrs Webb and Pearce. The former's diary entry reads: "From discussions last night - is it possible to relocate beams [illegible word] from [Clyde] & replace [Clyde] stock to maintain project timetable." Mr Webb could not remember whether he or Mr Pearce had asked this question. He explained the proposal: he would order all new beams, but take some from the Clyde site in the first instance, use them at Mt Druitt, and later replace these beams at Clyde with the new beams about to be ordered, after they had been delivered. In any event Mr Webb spoke to Mr Case about the matter, and then spoke to Mr Pearce again. Mr Webb's diary note in relation to this conversation records: "Confirm order number … will have access to high-rise portion of [Clyde] site only. Will have to supply balance of material." The evidence does not make it clear just how it came about that Mr Pearce was able to say this. The reference to the high-rise building was a reference to the small warehouse at Clyde. 233 Also on 7 July Mr Pearce sent the email quoted at [170], and Mr Jacob the memorandum quoted at [171]. Mr Pearce said that his email did not say that there was an additional charge to be levied (not mentioned at the meeting the day before), but could not explain how the section headed "ADD" could be read otherwise, and Mr Jacob's interpretation of the 5 July memorandum quoted at [163], and his concern about the implications, is clear; and Mr Bennett said that he had read the document in the same way. Mr Bennet said that he probably spoke to Mr Jacob about it but did not remember what was said, but he did not speak to Mr Ballantyne about the matter. Mr Jacob said in cross-examination that the reason for his concern was that he appreciated that Mr Pearce had misled Mr Ballantyne at the 6 July meeting, by not revealing the proposed additional charge. However, no one at Linfox said anything about these concerns to anyone at Yates. 234 As Yates submits, the position then was that the 5 July memorandum said, incorrectly, that the proposal then advanced would result in a saving of $79,568, when in truth there was involved an additional charge rather than a saving. Mr Pearce says, and Yates did not really challenge the proposition, that this mistake was the result of a calculation error. However, on 7 July Mr Pearce disclosed to his superiors that he in fact proposed to charge Yates an additional $55,200, not disclosed to Yates. The fact that this information was not disclosed to Yates reflects poorly on each of Messrs Pearce, Bennett and Jacob. Mr Jacob agreed that he knew that he should have corrected the omission to disclose this matter, but he did not do so. Nevertheless, he claimed that he had always been open and frank in his dealings with Mr Ballantyne.

Please refer attached confirmation sent to Michael Wiener. 247 Work dismantling the racking at Clyde stopped on 9 July and did not resume until Tuesday 13 July. It seems clear that this stoppage was the result of the question raised about the ownership of the racking, and these negotiations. The PRS crew, led by Mr Carmody, having completed work dismantling the Clyde racking, then moved on to Mt Druitt to commence erection work there on 19 July. (I do not accept that this work started on 12 July. Linfox's submissions misstate Mr Ballantyne's evidence. He said that he believed the work started 12 July, but he was only recounting what Mr Webb had told him. Nor did Mr Ahearn say anything, other than what he thought the documents recorded. I see no reason to doubt the evidence of Mr Carmody, and I prefer his evidence to that of Mr Webb. If, as Linfox now submits, PRS might have had another crew at Mt Druitt in the week commencing 12 July, it is curious that no evidence was led to this effect. I do not overlook the evidence as to work being interrupted by wet weather. I deal with this question below.) Nevertheless, Linfox has contended that there was a delay in the erection work at Mt Druitt about 12 July, caused by the state of the building work at Mt Druitt, and by wet weather conditions that were being experienced. I will deal separately with these two topics, commencing at [343]. The 30 July Meeting 248 On Friday, 30 July, there was a conversation between Messrs Jacob and Ballantyne. On Linfox's case, what was said then constitutes a variation of the earlier contract: [22]-[24]; and it is also important, so far as concerns the defences of estoppel and waiver: [25]-[31]. There are significant disputes as to what was said. 249 To put the conversation into context, Mr Frost had "commenced the move" on 26 July. As he said (in chief), he considered that "if the move did not start as planned, Clyde would not be vacated by 13 August", but then work on the move stopped, perhaps because of some concern about the lack of an occupation certificate. 250 Earlier that week, or perhaps the week before, Linfox seems to have become aware for the first time that no occupation certificate had been issued in respect of the Mt Druitt building. I will deal with the disputes about this question later. Mr Jacob says that he became concerned about the absence of occupation certificate, and that he went to see Mr Ballantyne. He made a record in his diary in these terms: Meeting: John Ballantyne / Ross Jacob of 8.30-9.30 Fri 30/7/99 Notes taken: RJ at Botany 10.45 Fri 30/7/99 Regarding: Relocation Clyde Mt Druitt 1 Cert of occ not issued but expected at inspection next Tuesday, once toilets and fire extinguisher connected.

Ballantyne: I will not even be telling Greg Rich. If things go bad Greg will fire me and that is the way it will be. The move is to commence over the weekend. I will offer you a security guard and I have made the same offer to Richard Ahearn. 253 There was a good deal of cross-examination of both men, and detailed submissions were made, but the position seems to me to be clear. As Yates points out, Mr Jacob's diary note records that he urged Mr Ballantyne not to move "for 2 reasons", namely the lack of an occupation certificate, and the possibility that the presence of stock, coupled with the absence of the occupation certificate, might anger the council inspector. He did not record any other reason at all for his recommendation. The diary note was made, upon instructions, within an hour and a half of the meeting finishing. This is to be contrasted with the account given in the affidavit, and the matters pleaded by Linfox, giving additional reasons for the recommendation, so as to found one defence or another to the general effect that Yates agreed to accept responsibility for the consequences of moving, notwithstanding that the building work generally and the racking erection work at Mt Druitt in particular was unfinished, and that it was known that it would be necessary to block stack large quantities of stock on the floor at Mt Druitt. Yates does not quarrel with the proposition that it agreed to accept responsibility for any consequences that might have flowed from the lack of an occupation certificate, or from the possible angry response of the council inspector, but it denies having agreed to accept responsibility, otherwise. 254 Mr Ballantyne's account of the conversation was generally consistent with the essence of Mr Jacob's diary note, but he denied that the additional matters set out in Mr Jacob's affidavit had been said. He acknowledged that there had been several discussions earlier about the possible use by Yates of the Smithfield premises, not generally, but as a transit facility for the temporary storage of non essential or slow moving stock, point of sale material, and the like. (This is consistent with the 7 June relocation plan: [105] and with the evidence of Mr Jacob as to what he had contemplated in early June.) However, he denied that on 30 July, Mr Jacob spoke of using the Smithfield premises, otherwise than on the same basis as before. More importantly, Mr Ballantyne denied that anything had been said concerning the progress, or lack of progress, relating to the warehouse construction, the racking erection work, or other works, and denied that anything had been said concerning the possibility that a large quantity of pallets would have to be stacked on the floor at Mt Druitt; and Yates emphasised that Mr Jacob's diary note recorded none of these things, as having been said on 30 July. 255 I prefer the evidence of Mr Ballantyne to that Mr Jacob on each of these matters, but will need to say more about other disputed facts concerning the alleged breaches of contract before being able to express adequate reasons for this preference. 256 However, I note now that in cross-examination, Mr Jacob said that he could not remember having mentioned, in the conversation on 30 July, the fact that there had been a delay in the racking erection work, this being one of the matters mentioned in his affidavit, but not in his diary note. In addition, if one accepts, as I do, that at the meeting of 6 July Mr Jacob had stood by whilst Mr Pearce advocated reusing the Clyde beams, as a cost saving measure, without mentioning the lead time problem with the beams, and that Mr Jacob had done nothing to correct what he knew (from 7 July) to be the inaccuracy of the figures put forward by Mr Pearce, there is force in Yates' contention that it is unlikely that Mr Jacob mentioned the delay in racking construction on 30 July. It is not recorded in his diary; and the relationship between the parties means that it might well have surprised Mr Ballantyne, and reinforced his suspicions, if this topic had then been raised. The Contract and its Terms: Other Arguments 257 Drawing together the various arguments as to whether the parties entered into an enforceable contract and, if so, what were its terms, and whether it was later varied, I have found at a factual level that there was a contract initially formed in May; that it contained the first, second and fifth of the terms for which Yates contends, but not the third or the fourth terms; and it was not varied on 21 or 30 July, as Linfox asserts. There remain for consideration a number of other arguments advanced by Linfox, mentioned at [98]. 258 Some of these contentions can conveniently be considered together. Both parties accepted the decision in Brambles, but they relied upon different passages. For the reasons set out in that case at 71-79 (see also Industrial Rollformers Pty Ltd v Ingersoll-Rand (Australia) Ltd [2001] NSWCA 111, 137), I do not think there is any substance in the submission made that Yates should be taken to have been an offeror, whose offer was not accepted. Applying that passage to the facts of this case, first, the Rich/Bennett conversation recorded at [82] was, on the face of the record of the conversation, a complete contract, or to say the same thing another way, there was an offer and an acceptance: Yates offered to employ Linfox to do the work mentioned, for a fee, and Linfox agreed to do it. No doubt the fee had to be agreed, and if not agreed upon, then if a dispute arose, the Court would have to determine what fee was reasonable, but in fact the parties did agree about the fee. However, the content of the promise "to project manage the move" left a lot to be spelt out, somehow; and what Mr Bennett then said, that he would arrange for Linfox to prepare a schedule for the move, amounted to the taking of the first step in that direction. Then Linfox prepared, and submitted to Yates, the 7 June plan and later the 23 June plan, and Yates approved of those plans. Concurrently, Linfox proceeded to prepare for the move. In particular, it took steps towards procuring the racking parts, and it generally kept Yates advised (if imperfectly) of what it was doing. At the same time, Linfox was doing other work for Yates, pursuant to other contracts. The relationship between the parties was a dynamic commercial one, where the terms of the contract, formed by the Rich/Bennett conversation, were being added to, varied and superseded. It would be artificial and wrong to treat the Rich/Bennett conversation in isolation from its factual matrix, or to treat the matter simply in terms of the theory of offer and acceptance. Similarly, it would be artificial and wrong to treat what the parties did and said as being pre-contractual conduct or post-contractual conduct, and therefore unable to be considered, just because some conduct predated or postdated the Rich/Bennett conversation. Yet that is what Linfox seeks to do, at least in one part of its case. 259 The content of the promise to project manage the move is difficult to assess without evidence, additional to evidence of the Rich/Bennett conversation. Linfox referred to various decisions and writings concerning the meaning of the expression "project manage", but each of these dealt with a different factual context to the present one, and in each of the cases referred to, the parties had provided at least some kind of definition of what they meant by the expression. There was no such attempt at definition in the Rich/Bennett conversation, but on the other hand, the 7 and 23 June plans, and the conduct of the parties concerning those plans, provides a good deal of assistance in seeing what it was that the parties intended to convey by the use of those words. 260 Nevertheless, Linfox submitted that evidence of this kind could not be looked at for the purpose of construing the words "project manage the move", and it pointed to Brambles at 26. It submitted that the expression should be understood as meaning the provision of a limited package of services restricted to administration and supervision of the racking tender as an agent for Yates, and went on, itself, to refer to matters which predated and postdated the Rich/Bennett conversation, saying that this pointed in the direction contended for. However, it seems to me that this is legitimate: evidence is admissible to identify the subject matter of the contract, in this case, what it was that Linfox was to do by way of project managing the move: White v Australian and New Zealand Theatres Ltd (1943) 67 CLR 266, 271 and 281. 261 Linfox advanced an argument, supported by reference to the history of the relationship between the parties, that the Rich/Bennett conversation constituted a complete contract, to the effect that Linfox would carry out the relocation work according to the directions of Yates, and that the parties intended that there would be a further agreement or direction by Yates to Linfox in relation to the content of the schedule for that work. It referred to the lack of cross-examination of Mr Bennett, as to his understanding, but since the question has to be decided objectively, his subjective understanding is irrelevant. Various authorities were cited, including Integrated Computer Services Pty Ltd v Digital Equipment Corporation (Australia) Pty Ltd (1988) 5 BPR 11,110 and GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50. I see no profit to anybody in my attempting any further exposition of this branch of the law, for this part of this case turns on the facts. I do not accept that one can spell out of the Rich/Bennett conversation either an agreement that Linfox was to act, or only act on the directions or instructions of Yates, or that what Linfox was to do was to be the subject of a further, separate agreement. The argument strains the words used, too much. There was no express term, and there can be no implied term: the suggested term is not so obvious that it goes without saying, and the contract is efficacious without it. 262 Linfox also submitted that the reasoning in Brambles, commencing at 30, was applicable only to documents. Whilst it is true that in that passage Heydon JA (as he then was) was dealing with the document containing the contractual terms under consideration, I see no reason why, in principle, one should treat the known words of a conversation differently. There is no dispute between the parties as to what was said in the Rich/Bennett conversation, but one needs to ascertain what the words used meant, or to draw the meaning out of the language of the contract itself. 263 I accept that there was no contractual obligation on the part of Linfox to project manage the fit out of the Mt Druitt premises, but I do not consider that the point is significant: Linfox's position has to be judged by reference to its promise to project manage the move. Equally, I accept that Yates did not plead any contractual obligation not to block stack materials at Mt Druitt, but Yates did plead that Linfox failed to exercise reasonable care in the exercise of its management functions, and the particulars appended to that part of the pleading included allegations about block stacking, adequate to enable Yates to rely upon all the matters, about which a great deal of evidence was given. I also accept that there was no contractual obligation for Linfox to provide all new racking parts at Mt Druitt, but, again, the point is not significant. Yates' complaint is not about the age or other qualities of the racking provided, but essentially about the delay in procuring it. 264 At a number of points, Linfox submitted that it contracted as Yates' agent. In some senses, Linfox was Yates' agent, and Yates had the right to direct Linfox what to do, but that of itself does not operate to exonerate Linfox from liability. A solicitor who acts for the purchaser of land, and who acts negligently, so as to cause the client loss, is not excused from liability because the solicitor was the agent of the client. Each of Linfox and the solicitor must act, as agent for Yates or for the client, in the manner contracted for. However, Linfox developed this submission by saying that it was required to act as Yates' agent exercising all reasonable care in carrying out Yates' directions and instructions; that these directions and instructions were subject to change, refinement and modification by Yates from time to time in the light of changing circumstances; and that if Yates was aware of circumstances adversely affecting the move but nonetheless directed Linfox to proceed, then Yates bore the responsibility for the decision. Assuming the correctness of the first part of this, the argument fails factually. The parties entered into a contract containing the first, second and fifth terms; Linfox suggested a variation; and Yates did not agree. That refusal to agree is not properly characterised as the giving of a direction or instruction that Linfox was bound to carry out, or the giving of which carried the consequence of shifting responsibility from Linfox to Yates. Further, Yates did not have the awareness contended for. 265 The parties agreed upon a fee, calculated by reference to the number of pallets to be moved, but that does not mean, as Linfox suggested, that the contract was limited to the carriage of pallets, or other objects, from Clyde to Mt Druitt, and it is plain that the parties contemplated that Linfox would do a good deal more: Linfox was to project manage the move. At one point Linfox submitted that it had two obligations: to carry out the move, and to project manage the installation of the racking, but I do not think the language used can justify this conclusion. 266 Finally, there is a question pleaded by Linfox, set out at [17]. Linfox asserted that its contractual obligations were "subject to" the eleven matters listed. The only evidence that tends to point towards a conclusion of this nature is to be found in the plans of 7 and 23 June set out at [105] and [127]. The 7 June plan identified an objective, limitations on the objective, and key assumptions made, and provided that Linfox was to be liable for the achievement of the objective within the limitations mentioned. This has the effect that, if the objective was not met because one or more of the key assumptions was not made good without any failure on the part of Linfox, Linfox's responsibility was limited. I do not understand Yates to dispute this, but Linfox seeks to take the matter further, and to argue that if one or more of the key assumptions was not made good, its obligations were ended. The words that the parties used did not say that, and do not permit this construction. However, there remain a series of questions as to whether the key assumptions were met and, if not, what follows. I will deal with these later. 267 Linfox referred in submissions to a series of factual matters, said to show that Linfox acted upon the direction of Yates. However, none of these matters go to show that, as a matter of contract, Linfox's obligations were subject to the eleven matters pleaded, or that it was to act or not act "subject to Yates' direction". 268 Summarising my findings so far, by 26 May 1999 Yates and Linfox had entered into a contract that contained the first, second and fifth of the terms pleaded in paragraph 12 of the cross-claim, but not the third term or the fourth term pleaded. There was no term in the contract, such as is pleaded in paragraph 12 of the defence, nor was the contract later varied, as pleaded in paragraphs 17B and 17C of the defence. The First Alleged Breach and the First Answer Given: Product Master Data 269 Yates contends that Linfox breached the first of the terms pleaded, by not arranging the timely procurement of the necessary racking for the Mt Druitt distribution centre. What I have already said shows that Yates has demonstrated a prima facie case of a breach of this term. To put the matter at the lowest level, Linfox needed to either procure the necessary racking parts itself, or to arrange for a racking contractor such as PRS to procure them in sufficient time to enable the racking erection to be carried out, and completed, before the move had to be effected; and it was imperative that the move be completed, and the Clyde premises vacated and made good by 16 August. That necessarily involved placing an order for the racking parts with the racking parts manufacturer in good time. The plan that Linfox proposed, and that Yates approved, contemplated that the racking erection work would commence on 7 July, but Linfox did not call for quotations from prospective contractors until 25 June. Since it was not possible to obtain the large quantity of racking parts needed within four weeks, or probably longer, Linfox's conduct, in not sending out the invitations to tender until 25 June, resulted in there being a shortage of racking parts, and a delay in the erection of the racking. 270 As recorded at [120], Linfox, through Mr Pearce, gives five answers to this, which I will repeat for ease of reference. First, notwithstanding repeated requests that Mr Pearce made to Mr Ballantyne, the latter had failed to provide him with certain product master data, needed for the preparation of a satisfactory invitation for racking tenders. Secondly, Mr Ballantyne failed to advise him how many pallet spaces (and therefore how much racking) Yates wanted at Mt Druitt. Thirdly, he needed information about the loads that the racking would impose on the floor of the Mt Druitt building. Fourthly, Yates had agreed that Linfox might reuse at Mt Druitt some 4,600 beams, to be taken from the Clyde warehouse, but Yates later repudiated this agreement. Fifthly, the erection work was delayed because of the late completion of the building work being carried out at Mt Druitt by Maincon. 271 Dealing with the first of these answers given, and stating the matter shortly to begin with, Linfox says, through Mr Pearce, that he made repeated requests to Mr Ballantyne for certain product master data, and that notwithstanding these requests, Yates and particularly Mr Ballantyne failed to provide the data; and Linfox says that the data was necessary, so that it could prepare a racking specification, to be sent out to prospective racking contractors together with the invitations to tender. Mr Ballantyne acknowledged that Linfox had requested the product master data, but said that it had been requested for a different purpose, namely the proposed WMS implementation, and he denied that Mr Pearce had linked the request for the product master data with the question of preparing a racking specification or sending out the invitations to tender to possible racking contractors. 272 It will be remembered that at this time Yates was using a PRMS computer system, and that Linfox and Yates had been proceeding in the expectation that Linfox would procure a WMS, which would interface with the PRMS The parties expected that the WMS would be implemented by the time the move from Clyde to Mt Druitt took place, but in fact the implementation of the WMS was delayed, and the move took place when the only relevant computer system in operation was the PRMS 273 One of the characteristics of the WMS was that it "visualised" cubic space within a warehouse, so that the computer could be programmed so that products were stored most advantageously, using the cubic space available. This meant that there had to be keyed into the WMS software programme data described as product master data. In particular there had to be entered, in respect of each product expected to be stored in the racks at Mt Druitt, data as to the mass, dimensions and quantities expected to be stored from time to time. In essence, it was this data that is the subject of the present debate. 274 There is no question but that EXE, Linfox and Yates, working co-operatively, set about doing the work that was conceived to be appropriate for the implementation of the WMS, and this included work to be done by Yates gathering together the product master data I have mentioned, which data would in due course be used to populate the relevant fields in the software programme. 275 One of the topics upon which data was needed concerned the dimensions of each category of product expected to be stored. It seems that within the Linfox organisation there is an expression used "Ti-Hi". This refers to the height of a pallet, when loaded with the relevant product. The expression is spelt in various ways in different parts of the evidence. It seems that it is not an expression commonly used. Mr Webb had never heard of it although he was quite familiar with the concept and the importance of the height of a loaded pallet. 276 When considering this topic, it seems important to restate that Linfox despatched the invitations to prospective contractors on 25 June, and it should have done so at least some weeks earlier. Some of the matters relied upon by Linfox do not fit comfortably within this time frame. 277 Essentially, the question to be resolved is one as to what was said between Mr Pearce and Mr Ballantyne, but I will start with the documentary record. 278 On 29 April 1999 Mr Pearce sent to Mr Ballantyne an email reading: The accompanying attachment is a summary at this point in time of the outstanding issues that we have been pursuing with Yates. These require Yates attention and completion at this time in order to achieve an end of June '99 implementation. 279 The attached document was an edited version of a document headed "Project Tasks & Issues" and "WMS Project". The unedited version listed 63 topics and recorded in respect of each topic what work was to be done, whose responsibility it was to do the work (Linfox, Yates or EXE), and the date by which the work was to be completed. The edited version sent to Mr Ballantyne referred only to the matters in respect of which Yates bore responsibility. There were seven of these matters, all categorised as "Product Master", and the dates when the tasks listed were to be completed ranged between 23 April and 2 May. 280 On the face of the document, these tasks related to the implementation of the WMS. The tasks were described in these terms: (a) Yates to assign internal resource to review and fix product master tables. (b) Yates to review specific product master fields in conjunction with Linfox. · Tie highs · TUN's, APN's - eg. Unit = APN, Case = TUN and pallet = pallet TUN · UOM's - conversions - units per case, units per pallet (dictated by tie highs) · Dimensions of products and weight (c) Commercial vs Retail Is a unit an each for commercial as it is for retail? UOM needs to be qualified. (d) Yates to supply Linfox with product master file of what each warehouse is to stock. (e) Yates to define the run out and deletion lines for product master cleansing. (f) Yates to supply full product Master inclusive of all fields for gap analysis of WMS data collection. (g) Are all products going to be ranged for returns in each site. Please define ranged and non-range product lines per site. 281 TUNs and APNs are different forms of bar codes. The letters UOM stand for unit of measurement. 282 This email of 29 April appears to be the only written record of any communication between Mr Pearce and Mr Ballantyne that might possibly be read as a request for product master data. However, Linfox relies upon other emails, and other evidence. The first of these emails relied upon is one dated 3 May sent by Mr Pearce to Messrs Bennett, Toomey and Jacob of Linfox, but not to Yates. It reads: Subject: EXE Impediments to Progress In order for LINFOX to have confidence in the functionality of the software solution being proposed by EXE for the Yates business application we require a detailed functional specification describing the functionality proposed by EXE to deliver the required business outcomes. These requirements were described in detail by both LINFOX and Yates during the course of the three day Business Review Summit. We have provided EXE with our own minutes of the BRS in the hope of assisting in the development of the required outcome. Todate we have not received anything back from EXE. We have provided EXE with more input than they have shared with Linfox. This approach by EXE of avoiding co-operative consultation only further raises my concerns. It should be emphasised that this is not Linfox's approach to Partnering. I require a level of comfort that EXE will provide the required business solution discussed and agreed at the business review Summit and not a solution imposed by EXE due to present shortcoming's in their standard package. The only way I see of coming to an agreed solution is the following: EXE to visit site and truly understand our functional requirements. EXE to go through screen by screen and have Linfox detail their requirements. To date it is obvious that EXE do not understand the business and seem to be forcing us down a path of their standard package with some gaping holes. EXE only have themselves to blame to date. Training was woefully inadequate and if all the functionality was not presented, it only begs the question why not? Particularly as we were supposed to be paying top dollar for this inadequate and incorrect training. The significant holes we presently see with the system are: · Labour Management, · Transport inclusive of staging product, load planning, reverse drop sequencing and RF Directed loading. · Receiving blindly as detailed at the BRS · the non association of UOM to TUN. · the way picking tasks are presented and distributed. · Replenishment and lack of visibility. Least of all EXE's professionalism and demeanour. Their approach to the project has been woeful. In regards to the long term commitment between EXE and Linfox I have these major concerns: What are Linfox deeming their functional requirements of a Warehouse Management System and does EXE provide and surpass this? Is EXE a vertical enhanced software solution to Linfox Integrated Logistics? NO, what about labour management, transport, add-on and take-off modular components. My concern here is are Linfox going to be the leaders with the leading product for now and in 10 years times. It really comes down to EXE knowing our business, how we want to run the operation with a WMS and EXE providing the solution. Providing the solution is inclusive of both verbal confirmation and demonstration. To date we have seen none of the things that I would need to be reassured of in order to go forward with EXE on a multi-site multi license basis. My recommendation is that we limit Linfox's commitment and exposure to EXE to the extent of the Yates contract requirements and use the implementation of the Yates system as a basis for assessing the product and business capabilities of EXE. (Regardless of the great $$$ deals being offered) I do not believe it is in Linfox's best interests at this point in time to commit the company unnecessarily to 50 or 100 licences it may be better off investing elsewhere. EXE is a cut above Paperless but they are by no means the only large Global supplier in our market today. 283 This does not seem to me to be relevant to the present question, but Linfox relies upon it, and in any event it is relevant to another question considered later. Next, Mr Toomey, an IT system manager employed by Linfox, sent an email dated 21 June to various Linfox personnel, circulating a copy of the minutes of a Business Narrative Meeting held on 15 and 16 June. Reviewing the evidence as a whole, it seems clear beyond sensible debate that these Business Narrative Meetings, conducted between representatives of Yates, Linfox and EXE were concerned with the WMS implementation. EXE had no interest in the racking erection. The whole focus of the records concerning these meetings is upon the WMS and related topics. The minutes of the meeting of 15 and 16 June are to this general effect, but Linfox now relies upon two fragments of these minutes: This document is a summary of the key points related to Yates as a result of the Business Narrative Workshop conducted last week. What is required as a result of reviewing this document by Yates/John Ballantyne, is detailed timing of how long and who is responsible within Yates to fulfil these key points and action items Also the final scope of the project has to be agreed by all stakeholders within Yates and signed off. Goal posts on project scope can not change as of Friday 25th June. … Master Data Collation Master data collection is split into 3 sections. 1. Product master and pack key data 2. Warehouse Mapping and location data 3. Stock adjustment reason codes.

3.2 Warehouse Mapping and location data Linfox responsibility Yates to provide sales and product data Linfox is responsible for the mapping of the warehouse and locations. Yates has agreed the ti-hi of pallets will be the minimum customer ti hi. Yates are to identify this ti-hi for all product ranges and specify to Linfox so racking configurations can be confirmed. Yates are also to identify all pallet pack key quotes and provide a sales forecast for each site by product line, so WinFax can zone warehouse and pickmodule in most effective sequence. … 284 Yates submits and I find that these passages were directed to the WMS implementation, and that the word "mapping", appearing in paragraph 3.2, is used in the computer programming sense, rather than by reference to what Linfox needed to do by way of preparing something in the nature of a map, showing the physical layout of the racking proposed to be erected at Mt Druitt. On the other hand, Linfox points to the second and third sentences of paragraph 3.2, and I note para (b) of the definition of "warehouse services" in the draft contract: [44]. 285 On 22 June Mr Toomey sent an email to Mr Ballantyne (and others) in these terms: Subject: MASTER DATA COLLATION As you are aware, there is a lot of work involved in setting up the master data tables for the WMS implementation. It is Linfox's responsibility to complete the Warehouse Mapping master data setup. Warehouse Mapping configuration and setup includes: · Location tables Inclusive of numbering scheme, height, width, length, cube of location, travel path sequence etc · Zoning and Putaway Zones Inclusive of setting up fast and slow zones for most efficient travel paths within warehouse. Enabling shorter travel paths for those pallets replenished frequently. · Area setup for Materials Handling equipment Inclusive of Materials handling equipment restrictions. · Pick Module configuration Inclusive of fastest to slowest movers, heavy to light and slotting product in designated locations. Also includes minimum and maximum location qtys (Pallet ti-hi's), replenishment qty's. In order for Linfox to begin and complete the Warehouse Mapping data setup, there is a number of requirements, actions and data tat need to be provided by Yates. Below is the immediate tasks required by Yates.

… 291 Mr Toomey forwarded this email on to Messrs Pearce, Jacob and Frost saying "I feel it is timely for a meeting with John Ballantyne directly to thrash out my concerns and address any outstanding issues." However, the next relevant meeting was not held until 9 July. 292 Linfox also relies upon the minutes of a Yates Customer Service Meeting held on 28 June where the following is recorded: WMS Issues: [Mr Ballantyne] raised [ti-his] of pallets is major issue to be resolved. It impacts on efficiencies at Wyee along with racking spacing at Mt Druitt. Sales Managers to advise ASAP of all account requirements. [Mr Trevarthen, the General Manager of Yates' National Sales and Marketing Division] to coordinate. … 293 I do not think that the last two sentences quoted are really at all relevant to the present topic. However, Linfox cited them, as well as a diary note made by Mr Webb on 3 August, recording a discussion he had with Mr Pearce that day, noting that some products did not fit into particular racking spaces. I do not accept that the events of 3 August have any relevance to this topic. 294 The immediate question is whether, as Mr Pearce asserted, Linfox delayed in sending out invitations to tender to prospective racking contractors, because of the failure of Yates through Mr Ballantyne to provide product master data, despite several requests for that data. There is no dispute that Linfox asked Yates for the data, in connection with the WMS implementation, but Mr Ballantyne denies that he was asked for that data in connection with the racking procurement, or that Mr Pearce told him that there was any connection between the two subjects. 295 Yates points to the way in which Mr Pearce's accounts improved over time. It starts by pointing out that there is nothing in the documents that Linfox relies upon, just extracted, explicitly linking the provision of the product master data requested for the purpose of the WMS implementation, with the supposed need for that data in order to prepare a racking specification, to be sent out with the invitations to tender, and no written record of any complaint or even a hint that Yates had delayed providing the data, so as to cause Linfox to be delayed in preparing the racking specification, or procuring the racking parts. 296 In an affidavit sworn in 2001, Mr Pearce said that the invitations to tender had been delayed for a number of reasons, one being that "Mr Ballantyne failed to advise or provide me with the product information I had sought", without giving further information as to what that information was; and he referred to Mr Toomey's request of 22 June, before saying: This included agreed ti hi for all pallets and the provision of sales forecast by product for all products that would be ranged in the warehouse. Once we had this information we would have been able to provide a complete racking specification document for the Tender. 297 On 4 April 2002, in substance, Mr Pearce reswore that affidavit, without any relevant change. He swore another affidavit on 29 July 2002 in which he set out a good deal of detail as to his involvement in the co-ordination of the racking work, but he said nothing further on this topic. In a fourth affidavit, sworn on 19 November 2002 (during the trial), part of which I rejected as to form, he said that, with the assistance of Mr Webb, and whilst relying upon some work done by Mr Morrow (a Project Co-Ordinator employed by Linfox) he worked "to map out a racking fitout plan for Mt Druitt", using his knowledge of the racking at Clyde and elsewhere, and extrapolating from that. He said: "This was the only basis open to me in preparing the initial capacity layout for Mt Druitt as I had not been able to acquire from Yates the necessary product ranging information to properly establish these figures. [There was a sentence rejected.] These two areas were inextricably linked because the WMS was to be designed to operate in the environment of the racking plan at Mt Druitt." He went on to say that what Mr Webb had said in an affidavit was correct, but that affidavit referred to a different topic, namely floor loadings. 298 Then, in a supplementary statement dated 14 August 2003 (some nine months after the hearing had commenced), he said that the information requested in his email of 29 April 1999 requested information needed for both the racking layout, and the WMS implementation. He said: They are related systems relying on common data. I made numerous requests of Ballantyne for the relevant information saying words to the effect to him: "I need the product ranging data and related information as soon as possible, as it is necessary both for the racking layout and for the WMS" 299 Later, he said that he had made these requests to Mr Ballantyne "on those occasions that we met and on the telephone", repeating that the information was needed for both purposes, and then he continued: The product ranging data and related information was essential for completion of both the WMS specification and the racking specification requirements for both quantum of particular products to be accommodated and the specific characteristics of the product detail (ie pallet plus load height, width, depth, mass, product characteristics). … I was not able to complete the specification [for the racking tender] because I had not been provided with the required product ranging information that I had sought from Ballantyne as described above and in my previous affidavits. 300 Notwithstanding all this documentary evidence in chief, Mr Pearce also gave quite extensive oral evidence in chief. He explained in more detail why the product master data was needed, in order to achieve maximum efficiency in using the space within the warehouse for storage purposes, and said that it was also needed in order to be able to calculate the loadings imposed upon the floor by the loaded racks. Then, asked how often he had spoken to Mr Ballantyne about the requirement for the product master data, and the link between that and the preparation of the racking specification, he said that he had done so on "many and varied occasions" between April and the issue of the invitations to tender (25 June). Then, he said that Mr Ballantyne had said to him "When we were running out of time" to send out the invitations to tender: "Look, just pro rata it, use what you've got at Clyde and pro rata it". Asked when it was that Mr Ballantyne said that, before the "tender" was sent out, he said "24 hours prior", and then when asked whether he was being facetious or truthful, he said "It was very, very close". 301 On the next day (whilst still in chief), the transcript records the following: Q. Now, you told us yesterday that Mr Ballantyne told you those words within a day or two before your actually sent the tender out? SMITH: He said a day. WILSON Q: Within a day. A. A day or two. Q. Before the tender was set out. … 302 This passage seems to demonstrate Mr Pearce's quick-wittedness, his opportunism, and his willingness to tailor his evidence to suit what he perceived to be Linfox's interests. In any event, he went on to explain what he had done, pursuant to the instructions he said he was given to "pro rata", in a way which was quite unconvincing. He said that he and Mr Morrow considered that, grouping like products together at Mt Druitt, it would be appropriate to prepare a specification showing the racking divided up in certain proportions, as between racking of six different types, known as Type 1, Type 2, etc (the detail does not matter); and he said that he provided this information to Mr Webb who noted it on drawing FOX9902. He said that the specification that was sent out with the invitations to tender was "just pro rataed figures"; and I thought that at this point and at other points he was referring to the proportions in which the different types of racking would be erected, eg X% for Type 1 racking, Y% for Type 2 racking, and so on. However at other times he was using the expression "pro rata" and its variants in different senses. He spoke of "pro rataing" the guide rails (components in the racking) and also the floor loading. Cross-examined about the notation he said Mr Webb made on drawing FOX9902, he seemed to become confused and contradictory. I do not think it is profitable to attempt to explore the detail of his cross-examination in relation to this first answer given to the first alleged breach of contract. Mr Pearce seemed to be in difficulty at a number of points in his evidence, but in particular difficulty in relation to this general topic. He did say, clearly enough, that he had worked out on a provisional basis what proportions of the different types of racking should be erected at Mt Druitt, sometime in 1998 "long before Ballantyne was ever heard of"; but then he said that he and Mr Morrow had checked the matter again on about 23 June 1999, after receive the "pro rata" instruction. 303 Then he said that he could not remember speaking to Mr Webb on the subject, although he said that he would have done so. He could not remember when he received drawing FOX9902 from Mr Webb, but the latter's diary entry of 3 June records that on that day Mr Pearce had asked him for five copies of the drawing, on the basis that Mr Pearce then expected to send out the invitations to tender on 4 June. It seems likely that Mr Webb complied promptly with that request. 304 A significant part of the evidence of Mr Pearce in chief on this general topic was produced very late in the trial, after both Mr Ballantyne and Mr Morrow had completed their evidence and had been excused; and neither of them were asked questions about some of these matters. There was no application made by any party to have either of these witnesses recalled. In cross-examination Mr Ballantyne agreed that Mr Pearce had been seeking information from him about the heights of loaded pallets, but as he understood it, this was in connection with the WMS implementation. He said that he had not understood this to be linked to the need to prepare a racking specification, to be sent out to potential racking contractors. Linfox now submits that in further cross-examination, Mr Ballantyne agreed that information about the height of loaded pallets was relevant to the planning of a new warehouse. He did agree with this proposition, as a matter of theory, but said that his experience was limited to the operation of warehouses, as distinct from building and designing them, and he made it plain that he had not considered this matter before the litigation. By itself, this point does not seem to lead anywhere significant, but Linfox pointed to a further concession that Mr Ballantyne made in cross-examination, that information about the physical dimensions of items of stock expected to be stored would be invaluable to someone planning how the racking in question was to be configured, and where particular items of stock were to be placed in the racking, once erected; and he agreed that in the planning stages, it had been understood that measurements would have to be taken "as part of the process". Yates completed this work, but not until August 1999. Linfox now links this evidence with the agreed circumstance that, at least in the early part of 1999, Yates and Linfox worked on the assumption that the WMS would be implemented no later than the time that the move from Clyde to Mt Druitt took place. This evidence needs to be considered in the context of Mr Ballantyne's evidence in chief, that he was "certain that it was never suggested to him that the ti hi information was required in order to tender for or purchase the racking", and his adherence to this in cross-examination. He said that in 1999 he treated the requests for the product master data as relating only to the WMS implementation, and the need to populate the relevant computer fields with this data. 305 Next, Linfox points to the fact that Mr Webb regarded the data as significant; but the question for decision is whether Mr Pearce asked Mr Ballantyne for the information, in connection with the procurement of the racking, it being Linfox's case that the preparation of the racking specification was delayed because of Mr Ballantyne's failure to provide the information in a timely manner. In the cross-examination of Mr Ballantyne, he was referred to Mr Pearce's memorandum of 5 July quoted at [163], and to the passage in that memorandum that reads: Linfox are still awaiting on John Ballantyne to provide the product slotting details in order to finalise the quantity of carton live storage and long span shelving required. A project contingency amount should be allowed for this estimated at $60,000. 306 Mr Ballantyne said that this refreshed his memory that Mr Pearce had been asking him "for certain information product slotting details in order to finalise" aspects of the racking order, and he said it reminded him that he had been asked to provide information about product slotting. It is not clear what this meant, but I do not attach to it the weight that Linfox does. The memorandum was given to Mr Ballantyne on the occasion of the meeting of 6 July, and he was not asked, when giving evidence, what it reminded him of. If anything, the memorandum seems to favour Yates, in relation to the point now under consideration, namely the first answer given to the first alleged breach of contract. 307 If, as Mr Pearce says, Mr Ballantyne had repeatedly failed to provide essential information, it is surprising that Mr Pearce did not take the trouble to record this complaint of his; and the memorandum of 5 July and the meeting of 6 July were occasions when he might well have made the point that Yates should agree to reuse the Clyde beams, not just because some costs might be saved, but because Yates had delayed Linfox in getting the racking specification prepared and the invitations to tender out in time. 308 Yates takes a further point. It says that, in truth, Linfox did not need the product master data in order to complete the racking specification. Obviously enough, Mr Pearce sent out the requests for quotation, with a racking specification, on 25 June, without the product master data now said to have been needed. Four companies submitted quotations, and one was later accepted, but there is a good deal more evidence than that. 309 Mr Webb made it clear that he did not regard the product master data as essential, and he prepared a series of plans, on five different occasions between September 1998 and July 1999, based upon his observations and experience, and upon what Mr Pearce had told him, and he said that the racking was designed to be readily adjustable for height, as and when required. He had never heard of the expression "ti hi", and he had no difficulty designing racking layouts, making assumptions as to the dimensions and masses of the products likely to be loaded. There is no evidence suggesting that Mr Webb's estimates about these matters led to any perceived need to change the racking layout, after the racking was erected, and Mr. Ballantyne's email of 25 June, extracted at [287], suggests that little or no difficulty was likely to eventuate. 310 I find that the product master data was not in fact needed by Linfox in order to prepare the racking specification. Independently, I find that there was no delay on the part of Mr Ballantyne, or any other officer of Yates, which had the effect of delaying Linfox, or Mr Pearce, in preparing the racking specification, or in sending out the invitations to tender. 311 Yates seeks a finding that Mr Pearce lied about these mattes, deliberately, to deflect attention from his own conduct. These are strong words, but I accept them as accurate. It might be that, in 1998 or in early 1999, he prepared or was involved in the preparation of a preliminary racking layout, whether for the purpose of seeing where the proposed racks would be physically located on the floor of the warehouse, or how they might be arranged in different types, and that he later extrapolated from this experience. The evidence does not permit a finding about this, but whether it is so or not, I am persuaded that his evidence on this general topic is false. The Second Answer Given: The Number of Pallet Spaces 312 In his 2001 affidavit Mr Pearce said that one of the reasons for the delay in sending out the invitations to tender was that Mr Ballantyne "was not certain how many racks he wanted at Mt Druitt. This was ultimately revised down to a nominal 9,000 pallets after the tenders closed." Earlier, he described some work he did with Mr Ahearn (an engineer who was employed by Maincon as Project Co-Ordinator): the design of the warehouse building, and the positioning of its structural columns, depended in part upon the then contemplated racking layout within the proposed building. At that stage (1998, probably), the plan was that there should be 12,850 racking spaces. 313 Mr Pearce then said that "in about July 1999" Mr Ballantyne instructed him to reduce the number to 8,500, and he attributed to Mr Ballantyne a sole stated reason of cost saving. He said that after "several discussions", the number was fixed at 9,918, and: "I redesigned the warehouse racking as directed". 314 Mr Ballantyne swore an affidavit in response in February 2002. He said that he could not recall any discussion, as alleged, taking place in or about July 1999, but spoke of a discussion which he thought had occurred in late May or in June. Mr Pearce then showed him a racking plan containing, Mr Ballantyne thought, provision for about 15,000 pallet spaces. He then said that he thought that only about 10,000 were needed, and that there was a need for more open space within the warehouse (he was referring particularly to the staging area). Mr Pearce spoke of there being a greater need, but Mr Ballantyne said that he thought there were about 8,500 pallet spaces at Clyde, and he authorised erecting racking for 10,000 pallets at Mt Druitt. He said that he believed that the plan produced at that meeting was marked up at the time, to show where the racking was to be reduced. He denied that he had been motivated by costs consideration. He said that he did not recall any other conversations on the topic, and said that he had never been advised that any question about the number of racks might cause any relevant delay. 315 The parties put differing submissions as to what should be accepted as the date or dates of the conversation or conversations mentioned. Linfox submitted that Mr Ballantyne had conceded in cross-examination that the conversation occurred on about 2 July. I consider that the submission tends to overstate the evidence, but in any event, it is likely that the change in number, from about 12,500 to about 9,918, occurred earlier, for on 29 June Mr Webb went to Clyde, to observe what beams he might be able to take away from there for reuse at Mt Druitt, and he then made calculations as to the number of further beams that he would need to procure. 316 He (or PRS) prepared drawing No 9901 on 7 May, drawing 9902 on 3 June and drawing 9903 on 5 July. There are also in evidence marked up or amended copies of drawings 9901 and 9902, not given any separate distinguishing numbers. The evidence does not establish when these amended drawings were marked up or amended, but it seems likely that they were prepared by PRS using its computerised drawing equipment. 317 Drawing 9902 differs from drawing 9901, in that the length of each row of pallet spaces in the pickface area has been reduced (thereby increasing by a little the size of the staging area). At [146] I described briefly the changes effected by drawing 9903. 318 The amended copy of drawing 9901 appears to record some plan to reduce the number of pallet spaces, from about 12,500, to 10,290. Curiously, Mr Webb described the amended drawing 9901 as the drawing he understood Mr Pearce intended to send out with the invitations to tender, although it seems clear that in fact Mr Pearce sent out the unamended drawing 9902 with those invitations to tender. 319 The amended drawing 9902 shows a further small reduction in pallet spaces. 320 I do not think that one can say with any real confidence just when the decision in question to reduce the number of pallet spaces was made or communicated, except that it must have happened no later than 5 July, and probably no later than 29 June. What does seem odd about Mr Pearce's version is that, from about 29 June onwards at the latest, it must have been clear to him that he and Linfox were in difficulties: if, as he says, Linfox was up until 2 July or thereabouts obliged to erect some 12,500 pallet spaces, it is not easy to understand why Mr Ballantyne's stated reduction in the number, communicated on about 2 July, would not have resonated much more loudly in the various accounts of the communications between the parties in late June or early July. Indeed, it seems difficult to look at the sequence of communications, established by the evidence, and to place within that sequence Mr Ballantyne's communication to Mr Pearce of the reduced number, and his response, without some sense of incongruity. 321 It is correct to say, as Linfox does, that there is no plan or drawing in evidence showing 15,000 pallet spaces, although the point might be stronger if the evidence showed that all of the drawings that were called into existence had been tendered into evidence. 322 If this issue had to be decided in isolation, I think I would prefer the evidence of Mr Ballantyne to that of Mr Pearce, but considering it in the context of the whole of the litigation, I have no hesitation preferring the evidence of Mr Ballantyne. 323 Independently of this, Yates submits that, even if Mr Pearce's version was accepted, it would not explain or justify his delay in sending out the invitations to tender. They were sent out on 25 June. This seems to be correct. 324 Further, Yates submitted that there was no evidence that Mr Pearce (or anyone else at Linfox) informed anyone at Yates that the absence of information about the number of pallet spaces needed might delay sending out the invitations to tender. It was the responsibility of Linfox, and within Linfox of Mr Pearce, to procure the racking in good time, and if Linfox needed any information in order to do that, it had a practical responsibility to request that information from Yates. Linfox offered no response to this submission, and it seems persuasive.

The Third Answer Given: Floor Loadings 325 In his 2001 affidavit Mr Pearce said that the issue of the invitations to tender had been delayed for a number of reasons, one of them that there were "unresolved issues with the floor loadings that may have impacted upon the final composition of the racking". It was therefore impractical for him to finalise the racking specification, but he ultimately did so "in order to expedite the timing". As Yates stresses now, he did not explain what the "unresolved issues" were, and in re-examination he said that the floor loading which was ultimately fixed upon did not affect in any way the configuration of the racking or the choice of the number of bay types (types of racking), so that it is not easy to see what the original complaint was; and Yates submits that Mr Pearce's accounts have varied from time to time. 326 In the main, those who spoke or wrote about the floor loadings in the Mt Druitt warehouse were concerned with the loading imposed upon the concrete floor slab of the warehouse by the racking uprights. If such an upright bears a load that is too great for the floor slab, the upright might be forced through the slab, by a process described as punching shear. 327 In February 1999 Mr Ahearn asked Mr Pearce what the total weight might be, in respect of the heaviest load for the racking, "given your design". Mr Pearce said that it might be 8.75 tonnes: the heaviest items stored by Yates weighed 1.25 tonnes each, and in what was sometimes called "a worst case scenario", there might be a tier of racks, seven high, with each rack carrying a load of 1.25 tonnes. It seems that the figure of 8.75 tonnes was sometimes rounded up to 9 tonnes. 328 However, Maincon specified to Yates (and Yates communicated to Linfox) that the maximum loading should be 5.2 or 5.3 tonnes (both figures were used in the evidence, and no-one suggests that the difference is material for present purposes), and there was some discussion as to what should be done, given the discrepancy between the figures of 8.75 tonnes and 5.2 tonnes. 329 Mr Pearce gave unchallenged evidence that in February 1999 Mr Ian Thompson (the then General Manager of Yates, to be distinguished from Mr Bill Thompson, another Yates employee) told him of a decision made by Yates to reduce the floor specification, in order to cut costs. 330 On 14 May 1999 Mr Ahearn wrote to Mr Ian Thompson, advising that, after the completion of geotechnical investigations of the foundation material for the warehouse "it is not possible to increase the post rack load beyond the 5.3 tonnes advised previously" and Mr Thompson faxed a copy of this letter to Mr Pearce. It emerged during the cross-examination of Mr Webb that Mr Pearce had passed this letter on to him. Mr Webb also said that, armed with this information, he considered that he had sufficient information available to enable him to design the racking, shown in his drawings. To state matters shortly, he considered that the problem could be resolved by spreading the load at the base of each upright, either by having the upright stand upon a base plate, or upon a steel "channel"; and it is clear that the invitations to tender asked tenderers to consider these matters, and to tender accordingly. 331 I do not think it is necessary to embark upon an examination of the suggested variations in the accounts given by Mr Pearce, for it is plain that any deficiency in the information provided to Linfox about floor loadings did not cause any relevant delay. Mr Pearce effectively delegated to PRS whatever work was presently relevant in relation to the designing of the racking; Mr Webb thought that he had the information he needed, and he prepared the relevant drawing and the draft racking specification; and Linfox sent out the invitations to tender, accompanied by the drawing and the specification, on 25 June. The information that was available in mid-May was sufficient for that purpose, so that no delay was occasioned in the period leading up to 25 June. 332 Linfox seeks to deflect this finding by submitting that the information was deficient in a different respect, concerning the total floor loading, as distinct from the concept of point loading, mentioned above. However, Mr Webb did not consider the question of total floor loading at the time. This point seems to have emerged either at trial or during the preparations for trial, and to be irrelevant, when one recalls that Linfox asserts that some deficiency in the information provided about floor loadings caused a delay in settling the form of the racking specification and the issue of the invitations to tender - that is, a delay before 25 June. 333 Assuming that either the point loading or the total floor loading specified by Maincon was exceeded, and that good practice demanded that one or both of these matters be attended to, the evidence does not show that any delay relevant to this litigation was thereby caused. 334 The parties debated a question as to whether a conversation between Mr Pearce and Mr Webb occurred on 3 June, or on or before 14 May. For the reasons set out in the submissions of Yates of 11 December 2003, I think that Mr Webb was mistaken as to the date of this conversation, but for the reasons set out above, I do not think that the question is significant. The Fourth Answer Given: Agreement to Reuse the Clyde Beams at Mt Druitt 335 Mr Pearce said that there was an agreement, made by Yates in or about May or June, for the reuse of the Clyde beams I have dealt with this, to some extent, when recounting the events of May to July, and more particularly at [195]-[198], noting that Linfox now puts the matter in terms, not of an agreement, but a general understanding, but I should now say more. 336 As Yates submitted, the proposition that it agreed to this is not only not supported by the evidence of other witnesses, or in the documentary evidence, but it is inconsistent with other evidence, about which there can scarcely be any room for debate, so that one is left to wonder at how it could be that Mr Pearce gave the evidence in question. 337 At [107] I referred to an email from Mr Jacob to Mr Ballantyne of 4 June, forwarding a copy of what became the 7 June plan. In the course of that email Mr Jacob discussed the costs of the proposed racking, and how the cost could be amortised over a period of years, and then said that he had learned that "the racking at Mt Druitt will be new", whilst "the racking at Wyee will be recycled out of Clyde". When Mr Jacob was asked how he knew that the racking at Mt Druitt would be new, he said that Mr Pearce had told him this. Further, both the 7 and 23 June plans were inconsistent with the existence of such an agreement, and the invitations to tender also visualised the use of new beams. (Extraordinarily, in its submissions of 14 May 2004, Linfox referred to the 4 June email, saying the beams "will be new", but said that Mr Ballantyne knew by that date that the beams "were to be reused".) 338 Linfox submitted that paragraph 9 of Mr Bennett's 2002 affidavit was consistent with the proposition that it was always contemplated that the Clyde racking would be reused. It is, but it is also clear from reading this paragraph in its context that Mr Bennett was not then speaking about any agreement, or understanding, such as that now under consideration, and if he was, then this part of his affidavit is also inconsistent with the other evidence that I have mentioned. 339 Yates submitted that Mr Pearce's evidence on this topic was deliberately false, manufactured to extricate himself from the difficulty of reconciling his failure to act promptly with the need for prompt action, and it submitted that one could see the particular moment at which he first spoke of the supposed agreement (T6863). The submissions of Yates on this topic are recorded, commencing at T8397, and Linfox responded on 26 April 2004. I do not think it is helpful to restate this detail now. 340 If there was an agreement by Yates to reuse the Clyde beams at Mt Druitt, as Mr Pearce said, or an understanding to that effect as counsel submitted, some surprising things have happened. When Mr Wiener first said that there was an agreement for the racking (or some of it) to be sold to him, no-one referred to the supposed agreement or understanding with Yates that Yates would not sell it. Linfox attempted to persuade Yates to sell the racking to Mr Wiener, and Yates resisted, but no-one from Linfox reminded anyone from Yates about the supposed agreement or understanding. Mr Pearce went to considerable trouble to prepare his memorandum of 5 July: [163]; and he explained, at length if inaccurately, how money could be saved by selling the racking to Mr Wiener, but he did not mention the supposed agreement or understanding. Notwithstanding all the diligence that obviously went into the preparation of Linfox's case for trial, no witness said anything in any affidavit or witness statement about the supposed agreement or understanding. That is, each of Messrs Pearce, Bennett and Jacob allowed the case to go forward without anything being said about what would seem to have been an obvious defence on the part of Linfox, if it was true. Presumably, it did not occur to any of them, on the occasion of any conference with the lawyers, or when reading and swearing affidavits or signing witness statements, to make this simple point. 341 Linfox also submitted that Mr. Pearce and Mr. Webb had "agreed" in late May to reuse the Clyde beams; but the evidence does not support this. In chief, Mr. Webb said that he "was aware from late May 1999 that second hand racking would be used". In cross-examination he said that he and Mr. Pearce had discussed the possibility of reusing the Clyde racking then. He had recommended this, as was his practice, or sales pitch: why sell old racking, and then buy new racking, if you can reuse the old racking? He also said that, as at 28 May, he considered that "the only proposal" that was workable was to reuse the Clyde racking, having regard to the lead time needed to procure new racking parts. (This does not fit comfortably with Linfox's case, discussed below, commencing at [375], that there was an adequate supply of racking parts available, from 19 July onwards.) 342 I conclude that the finding for which Yates contends should be made. The Fifth Answer Given: Delays in the Building Work 343 Linfox submitted that it "was a condition of the fulfilment of any obligation by Linfox to ensure the erection of racking commenced by 5 July" that "the whole of the warehouse would be available", and that this condition had not been fulfilled. The only legal basis for such a proposition seems to lie in the terms of the 7 June plan. The relevant passage of that document reads: The key dates for the construction site at Mt Druitt are detailed below. (Information as supplied by the building project manager on 2nd June 1999). · 5th July 1999. Earliest access for the racking contractor to start drilling and erecting frames. (Whole of warehouse will be available but access only through the south doors nearest the factory). · 19th July 1999. Distribution area at north east corner complete. · Period 19th to 29th July 1999. Completion of amenities, plumbing, fire systems, painting, electrical, etc. · 30th July 1999. Building Handover. 344 At [112] I rejected Yates' submission that the 7 June plan contained contractual terms, to the effect of the third and fourth terms pleaded. The same reasoning leads me to reject Linfox's submission now, that the 7 June plan (read together with its acceptance by Yates) constituted some contractual term having the effect of excusing Linfox from performance of what would otherwise have been its obligations in relation to the erection of the racking, if Linfox was not given access to the whole of the warehouse by 5 July. 345 The language used does not say that. Rather, the document speaks of an expectation as to what would happen, and when it would happen. If one pauses to contemplate the position of the parties as at 7 June, and shortly afterwards, it is quite unlikely, or as Yates puts it, commercially improbable, that the parties intended to agree upon such a contractual term. 346 There is a further dispute as to what the 7 June plan meant, when it spoke of "access for the racking contractor to start drilling and erecting frames", and about the "whole of the warehouse". Linfox contends that the agreement, or understanding, was that it or its racking contractor would be the only party having access, and its complaint now is that it did not have sole access to the warehouse, or at least to the relevant part of it. Yates disputes this, saying that the agreement or understanding was that Linfox might have access, shared with others. To my mind, the 7 June plan, which was Linfox's document, said explicitly that access was to be given for a limited purpose, and not until 19 July for the pickface (or south eastern) area, and said that between 19 and 29 July Maincon (or its contractors) would be carrying out other work: "Completion of amenities, plumbing, fire systems, painting, electrical, etc." 347 However, Linfox did not confine its submissions to the document. It said that the reference to "the whole of the warehouse" had been clearly taken and understood by Mr Jacob and others, principally Mr Ballantyne, to mean that Linfox would have essentially free and unfettered access to the whole of the warehouse. 348 Linfox submitted that Mr Ahearn had agreed that his understanding was to the effect contended for, but the submission overstates the effect of Mr Ahearn's evidence. He acknowledged being the person referred to in the 7 June plan as the Building Project Manager, but said he had not seen the plan at the time. Asked whether he had said that the whole of the warehouse would be available to start the racking work on 5 July, he said that that did not accord with his recollection. Taken then through the 7 June plan, the transcript records the following: Q. And then, you will see the period 19 to 29 July, "Completion of amenities, plumbing, fire systems, painting, electrical", et cetera? A. That's, the record shows that. Q. Yes. And again, does that accord with your information or best recollection as to what you thought would be the state of the building works as at the beginning of June? A. Yes. Q. And 30 July, building handover; correct? A. Yes. 349 That passage does not justify the submission made, but the matter does not stop there, for the other evidence of Mr Ahearn, as well as the contemporary records, show that it was expected generally that Yates might have access to the warehouse as from 5 July, but only on a shared basis. Mr Ahearn described the different parts of the warehouse in language different to that that I have used. He spoke of the warehouse section, when I have referred to the reserve stock area, and he spoke of the distribution section, when I have spoken of the pickface area. He said in chief (and the contemporary documents demonstrate) that the plan was to lay the concrete slab in the reserve stock area, before laying the slab in the pickface area. From time to time there were project meetings held, and minutes of these meetings were circulated. A progress report dated 7 June, attached to the minutes of the meeting of 8 June, records that the floor slab for the reserve racking area was scheduled for completion on 11 June, and that it would be completed by that date "or very close". The report said as to the slab for the pickface area: "Already commenced, will meet target of 28/6/99". Mr Ahearn said that at or about the time of this meeting he told Mr Ballantyne that he could commence installing the racking from 1 July if he liked, but that Maincon would be "finishing off" until 5 July. A progress report of 22 June, attached to the minutes of the project meeting of the same day, recorded that the slabs in both areas were then "complete", meaning poured, although perhaps not cured or completely cured. Both the reports of 11 and 22 June noted that the warehouse was on schedule for racking to commence on 5 July for completion on 30 July. Similarly, a note made by Mr. Ballantyne of a meeting on 22 June includes the passage: "Access restricted July 5 - July 30". 350 In evidence in chief Mr Ahearn said that the reserve racking area "was in fact ready for installation of racking to commence on 5 July", although this is to be read in the sense that Linfox or its racking contractor would have only shared access to that area at that time. He also said that it was on 5 July that Linfox first asked if it was possible to reverse the sequence for the racking erection work, so that the pickface racking was erected before the reserve area racking. (This is consistent with the decision to change the sequence having been made on Saturday 3 July.) 351 Mr Ahearn signed a letter dated 12 July from Maincon Holdings to Yates, referring to the agreement to lease the land upon which the Mt Druitt warehouse is erected, saying in part: As formal confirmation of advice given at regular site meetings, we advise that Stage 1 of the building between Grids F & M ("Storage Area") was made available for your fitout (installation of pallet racks) on 5 July 1999. Stage 2 of the building between Grids A and F ("Picking Area") will be available for your fitout (installation of pallet racks) on 19 July 1999. It has been acknowledged by both parties that some building works remain to be completed within these areas. However, such works are not expected to interfere with your fitout. Please note that we expect the whole of the main warehouse works to reach the stage of Practical Completion on 30 July 1999. … 352 Linfox emphasised a passage in the cross-examination of Mr Ahearn. He was shown a copy of the 7 June plan, and his attention was drawn to the part headed "Key Dates". There followed this: Q. Does that note refresh your memory of having a conversation to that effect with Mr Jacob, or perhaps Mr Pearce, at that time? A. It doesn't refresh my memory on something that happened that long ago but the records show that a conversation to that could have been taken place at that time. Q. Yes. A. It was probable.

This was later changed, but not in a presently significant way. 355 Linfox pointed to PRS's quotation of 5 July, which said, in part: "… the site should be clear of all obstructions prior to commencement of the installation", and: "The installation area shall be clear of other trades and obstructions and assumes unimpeded access." I doubt that this adds anything significant. It spoke of access for the racking erection work, and access was available. The Linfox argument tends to elevate ideas of access, and freedom from obstructions, for the purpose of racking erection work to something akin to vacant possession of the whole site, and to somehow associate what Mr Webb said on 5 July with what Mr Pearce said on 25 June and earlier. In addition, it is difficult to see why the racking contractor needed unimpeded access to the whole of the warehouse site, or why Maincon or Yates would have agreed to provide it. Linfox submitted, and I accept that the terms of the agreement between Yates and PRS for the erection of the racking cannot govern the obligations of Linfox towards Yates. However, clause 1.21 of the invitation to tender does serve to show what Mr Pearce thought at the time would be the position. 356 In short, the submission that there was some understanding (or more) that Linfox was to be given sole access to the warehouse as from 5 July is inconsistent with some of the evidence, and the evidence cited in support of the submission does not really support it. That is, the factual basis for the submission is not established, and a great deal of what followed falls away. 357 Linfox made lengthy detailed submissions in support of the general proposition now under consideration. Yates submitted that Linfox's submissions were peppered with misstatements as to what the evidence showed, and in some cases "inventions". Yates pointed to many points upon which it said Linfox had misstated the evidence, and Linfox responded in copious detail. Given what I have said already, as to the legal and primary factual basis for the Linfox submission, I do not think I need traverse all this detail, but I should deal with some of the points made. 358 Linfox argued that the racking erection programme was delayed from 5 to 19 July, in circumstances in which no blame could be attributed to it, pointing (amongst other things) to the delay in the building programme of Maincon, and to some wet weather. There were rainy days in the week commencing 12 July, and there was heavy rain in the 24 hours ending 9 am on 14 July, but there was no rain or no significant rain in the following week: see the Bureau of Meteorology Records, and the records created by Maincon in support of its claims for an extension of time under its building contract, but there is a difficulty in reconciling this evidence, now accepted by both parties, with some of the accounts of some of the witnesses. 359 I think it is really quite clear that Linfox cannot rely upon anything concerning the progress of the building work, or the wet weather, in relation to the period 5 to 12 July. Apart from any other consideration, the timetable recorded on drawing FOX9903 shows that Linfox did not intend to start racking erection work at Mt Druitt until 12 July, and what evidence there is on the subject does not suggest that anyone from Linfox or from PRS did or attempted to do or was ready to do anything at Mt Druitt before 12 July. The question may then be narrowed to an enquiry as to what happened between 12 and 19 July. 360 It is also quite clear that as at 12 July, some of the work which Maincon was carrying out to the external fabric of the Mt Druitt warehouse was incomplete. The wall cladding on the southern wall had not been completed, so that, when it rained, and when the wind was coming from the south, as was evidently the prevailing direction, the southern wall of the building was to a substantial extent open to the rain. In addition, but apparently relatively insignificant, there were some gaps in the roof, where ventilation equipment ("rotational turrets") had not been installed. That meant that some rain came through the roof, onto the floor. A number of witnesses spoke about rain water entering the building and lying upon the floor, and obviously enough this resulted in there being some danger associated with the use of electrical equipment. Mr Pearce said that the floor was "inundated", but I think that this overstated the position. 361 In any event, Linfox's case is that this combination of the incomplete state of the building, coupled with the wet weather, resulted in it being delayed between 12 and 19 July. From an early stage, Linfox seems to have relied (in this regard) principally upon the affidavits of Messrs Carmody and Webb. The former said in his affidavit: The first day I attended at Mt Druitt to commence racking was on Monday 19 July 1999. I recall that when I attended the warehouse on that day it was not complete and that a wall was substantially missing from one end of the warehouse. There was at that time I recall still a considerable amount of construction in progress. I recall that soon after commencing erection work I was required to stop erection of the pickface because the southern wall of the warehouse had not been completed. I recall that I was advised, I do not recall by whom, that I should leave enough room for the equipment necessary to install the far warehouse wall. This meant that two bays of racking at each end of each row of pickface could not be installed. 362 In one of his affidavits, Mr Webb spoke of visiting the Mt Druitt premises on an occasion which he fixed as being 13 July. He said: On this morning, the rain was howling into the pickface area. I recall that Pearce, Frost and I joked about the fact that the builders had left till last the wall exposed to the prevailing weather. The slab had been laid, although I am not sure whether the concrete aprons to the building had been laid. Installation of the pickface racking had commenced. I remember that there were some pickface racks standing, partly completed, with water laying around them. Because of the water, we could not run power leads as a result of the potential of electrocution, and so installation had to stop. 363 He also said, in a passage which was rejected, but nevertheless relied upon in initial submissions, that the racking erection work was delayed by the incomplete state of the warehouse combined with bad weather. Later, Linfox restated the submission, without significant practical change 364 Yates criticised the drafting of these portions of these affidavits, as painting a misleading picture, which the two witnesses did not support. In cross-examination, Mr Carmody said: Q. Is this right, because of the condition of the southern wall as you describe it shortly after 19 July you couldn't work in the area that you've drawn on the plan, but there was plenty of other work you could go on with within the pick face; is that right? A. Indeed. Q. So that, in effect, what you did was just not work in the area of the southern wall, but worked on what was a substantial amount of work to be done in any event on other aspects of the pick face? A. That is correct. Q. So the condition of the southern wall didn't, in effect, hold you up in erecting the pick face? A. I don't believe that I said that it did hold me up, actually. Q. I'm not suggesting you did, I just want to be clear about that. So in effect the condition of the southern wall really had no effect whatsoever on you getting on and completing the pick face? A. The only effect that it did have was that it was open to the elements. Q. But it didn't stop you or delay you in getting the pick face up? A. No. 365 In cross-examination, Mr Webb, asked a non-leading question whether anything delayed the implementation of the planned programme, noted on drawing FOX9903, spoke about the pickface racking, and then said: … That pick face rack unfortunately was in the location of the southern end of the building where there was a wall which was incomplete. From our point, we could still stand the rack, which we did. Whether or not it was practical for Yates to use was a different matter, but it obviously ended up that way because there was water all over the floor and we couldn't, in theory, load the racks. … 366 The change in emphasis is clear: the work sequence had to be changed a little, but that was all that happened. On the evidence of these two Linfox witnesses, the answer given by Linfox to the alleged breach of the first term of the contract should be put aside, to the extent that the answer relied upon wet weather delaying the erection of the racking. 367 Mr Webb, referring to his diary, fixed the date of an occasion when he visited the Mt Druitt site, and found that racking erection work delayed by wet weather, as 13 July. Initially, I thought that this evidence was persuasive, but I no longer do. Mr Carmody's evidence points against it: he said that his crew only started at Mt Druitt on 19 July, having worked at Clyde dismantling the racking there during the previous week, and I accept this. I think that Mr Webb must have somehow been mistaken. Accepting also the evidence in cross-examination extracted at [364] and [365], I do not accept that it should be inferred that PRS had a second crew, present at Mt Druitt from 12 July. There is no documentary evidence of the existence of such a crew, and no sensible basis for finding what that crew did. The same evidence shows that they were not delayed by the weather. It is true that PRS caused some racking parts to be delivered to the Mt Druitt site that week, but that is as far as the evidence goes. Other witnesses spoke of wet weather, and a wet floor, but with understandable imprecision about dates, so that their evidence on this point does not really assist in the resolution of the point. 368 During the course of his cross-examination Mr Pearce said that if Linfox had had "clear access" to the site, it would have been able to effect a rack-to-rack transfer, in good time. Asked what he meant by the expression "clear access", he spoke of the need to mark out the position of the proposed racks on the floor slab, and to have a clear unencumbered floor space for this purpose. I do not think that the evidence establishes that there was such a lack of clear access, but in any event, the position appears to have been that the site was made available by Maincon to Yates and Linfox, for the start of racking erection work on 5 July. At that time, Linfox had not engaged a racking contractor. It then engaged PRS, and PRS started work, relevantly, by dismantling the Clyde racking. That work was interrupted by the negotiations involving Mr Wiener, and by Linfox's hesitation about selling so much of the Clyde racking as it owned. It was only after the resolution of these matters that the dismantling work at Clyde was resumed, and the dismantled parts were taken to Mt Druitt, and then, on 19 July, PRS started work at Mt Druitt. Apart from Mr Pearce's claim, just mentioned, no witness spoke of any difficulty in marking out the position of the proposed racks upon the floor at Mt Druitt, or of the racking erection work actually being hindered or delayed by building work still in progress. 369 Linfox submitted that the racking erection work had been delayed because the area that the rackers had decided they wanted to commence in was not available, because there were outstanding building works to be completed; and it pointed to a passage in the evidence of Mr Ahearn. However, reading his evidence as a whole, he said that the reserve racking area was available from 5 July, and the pickface area from 12 July; and this had been planned. 370 On 3 July, neither Linfox nor PRS was ready to commence racking erection work on 5 July. The erection of the pickface was a priority, but this was the product of Yates' need and Linfox's conduct, but not Maincon's conduct. 371 Linfox also pointed to an email sent by Mr Ballantyne on 13 July, commencing: "Now that the Mt Druitt project is physically under way …" dealing with financing. The point might have had force if Mr Ballantyne had been asked whether he meant that racking erection work at Mt Druitt had commenced, or merely racking dismantling work at Clyde. He was not asked. 372 A great deal time, effort and money was expended exploring suggestions that Maincon was in arrears with its programmed building work, and that this somehow resulted or might have resulted in delay concerning the racking erection work, but on the evidence, most of this seems to have been a waste of resources. Perhaps the sensible place to start is to observe that Yates made no claim against Maincon in this connection; that when the work was complete, Maincon claimed and Yates paid, apparently without demur, what Mr Ahearn called a bonus, although perhaps it might more accurately be described as a contractual entitlement arising from the timely completion of the work that Maincon had contracted to do. Mr Ahearn, whom I accept as an independent, honest, reliable witness, indignantly denied that Maincon was behind time in its work, so as to affect the racking erection work, and the copious documentary evidence appears to corroborate what he said. It is the fact, I find, that the pickface area was not available to Linfox or PRS on 12 July, but this circumstance arose because Maincon had proceeded, as had been previously arranged, to lay the slab for the reserve racking area before it laid the slab for the pickface area, and the slab in the latter area had to be allowed to cure before work could be carried out on top of it. It was only on 5 July that Linfox asked Maincon to change this part of the building programme, and by then it was too late to do so. 373 It is the fact that in March 1998, Linfox and Yates thought that Yates would be able to move to Mt Druitt by 1 July 1999, and I assume that they made plans accordingly. However, this "target date" had been revised to 30 July 1999 by September 1998, so that the original target date has no present relevance. 374 I do not overlook the absence of an occupation certificate. Whatever else is said about this, it did not have any impact upon the timely construction of the racking. A Sixth Answer: PRS had sufficient beams 375 Linfox submitted that nothing that had happened by 19 July 1999, the result of any conduct on its part, caused any loss. It said that as at about 19 July, PRS had enough beams to carry out the racking erection work at Mt Druitt, and it then did so without delay. Some facts are reasonably clearly established. The drawing FOX9903 shows that, as at 5 July, Mr Webb planned to use a total of 9,288 beams on the racking erection work at Mt Druitt. At that time, he expected to be able to obtain 4,600 of these beams from Clyde, meaning that he needed another 4,688; and PRS held a buffer stock of about 2,500 beams If they were to be used at Mt Druitt, the buffer stock would need replenishment in due course. 376 PRS placed two orders for new beams with Dexion. Mr Webb said that the first order was placed on 6 July, for about 4,600 beams The Dexion records show that 4,658 were delivered to Mt Druitt on 11 August, and I proceed on the basis that the number 4,658 is accurate and more reliable than Mr Webb's approximation, given from memory, of about 4,600. I note that Mr Webb suggested that the Dexion records might not be entirely accurate as to the date of delivery. Mr Bennett's diary entry records a delivery of two truckloads on 9 August. 377 Mr Webb also said that on 15 July, he placed a further order for 2,500. The Dexion records show that 2,700 were delivered, also on 11 August, and again, I proceed on the basis that this record, as to the numbers, should be accepted. In total, Dexion delivered 7,358 beams to the Mt Druitt site. 378 PRS produced other records, showing that it delivered to the Mt Druitt site 1,836 beams, on or before 22 July, and a further 1,360 on 3 August, a total of 3,196 beams These came either from PRS's buffer stock, or they were diverted from some other job of PRS, or they came from both these sources. Additionally, it seems, 960 were taken from Clyde to Mt Druitt, bringing the last mentioned total up to 4,156. 379 Up until the evening of 6 July, Mr Webb had expected to reuse 4,600 Clyde beams On that day, he ordered 4,658 beams from Dexion, enough (allowing for PRS's buffer stock) for the planned Mt Druitt racking, and for the replenishment of the buffer stock soon afterwards. On 15 July, he ordered a further 2,700 from Dexion. The evidence does not explain why it was that he only ordered 4,658 on 6 July, and a further 2,700 on 15 July, but I infer that something caused him to change his thinking, his planning and his ordering between those two days. Perhaps there was some rough correspondence between the newly ordered 2,700 and the shortfall between the number earlier expected from Clyde and the number now expected (4,600 less 960, or 3,640), but the evidence does not establish this. 380 In summary, however, one can see that 3,196 beams, taken directly or indirectly from the PRS stocks were delivered by 3 August, as well as a further 960 taken from Clyde, presumably delivered to Mt Druitt on or shortly after 9 July, so that there was a total of 4,156 beams, supplied one way or another by PRS by 3 August. A further 7,358 were delivered by Dexion on or about 11 August. 381 Linfox invited me to infer that some unspecified number of beams were diverted from PRS from a job it was doing for another of its customers, identified as Freedom Furniture, and that later some beams were reallocated by PRS to the Freedom Furniture job. Standing back from the dust of conflict now, I wonder why PRS directed or suffered Dexion to deliver beams to the Mt Druitt site, on or about 11 August, if they were not needed there, and so that PRS needed to later transport them elsewhere, but this was not explored in evidence. 382 Linfox seeks a finding that, except for a short time, about 9 or 10 August when there may have been a shortage, there was no problem with the supply of beams: PRS was always in the position, at least from about 19 July, where it had sufficient beams available for the Mt Druitt job, because it could divert a sufficient number of beams from the Freedom Furniture job. It is true that at one stage Mr Pearce said that Mr Webb had told him that there were 8,000-10,000 beams involved in the Freedom Furniture job, suggesting that this number could be diverted to the Mt Druitt job if necessary, but Mr Pearce later withdrew this; and certainly Mr Webb did not give evidence to that effect. Indeed, he said nothing significant in chief about any beams from the Freedom Furniture job. If what Mr Pearce suggested was true, it seems odd that the dispute was ever allowed to arise, and odder still that Linfox did not lead this evidence out of Mr Webb, or otherwise tender some documentary evidence on the point. It is also inconsistent with Mr Webb's evidence that, as at 30 June, he considered that the only available solution was to reuse 4,600 from Clyde, as well as his evidence that, as at 6 July, if the Clyde beams were not available, it would not be possible to complete the Mt Druitt erection work by the end of August. In any event Linfox now disavows the proposition that 8,000-10,000, or any similar number were available from the Freedom Furniture job. 383 Whilst up to a point, I thought Mr Webb rather reliable as a witness, on this point his evidence was not satisfying. He said that he had first accessed the Freedom Furniture beams in mid to late July, but (so far as I can see, and the submissions of the parties refer) he did not say when he first came to consider doing this, as distinct from when he first considered using second hand beams from Clyde. Presumably, it was after Mr Pearce told him that not all of the Clyde beams would be available, and after he placed his order for 4,658 beams with Dexion, on 6 July. His diary entry of 7 July mentions his discussing with Mr Case of Dexion various of PRS's customers including Freedom Furniture, but the evidence does not seem to go any further. Linfox pointed to a passage in the evidence of Mr Webb at T6385.46 - 6385.57, but the question asked about "some point in time"; and the answer suggested, without precision, a change in plan "because the parameters changed, or the lead time became quite crucial." In my view, Mr Webb was speculating about, rather than remembering what had happened, except for the generality that PRS used some buffer stock and diverted some beams from the Freedom Furniture job. I find that 3,196 beams were delivered to the Mt Druitt site, and that these beams had been taken either from PRS's buffer stock, or diverted from some other job, probably the Freedom Furniture job, but I do not accept that any larger number came from these sources. 384 Yates submitted that the evidence showed that, of the 4,156 beams delivered to Mt Druitt by 19 July, 2,600 were used in the erection of the pickface, leaving only 1,556 available for the reserve racking. Therefore, it said, one can see that PRS did run out of beams about 9 August. This seems to be correct. 385 Yates also submitted that the Linfox contention did not address this question: if Linfox (or PRS) had an ample supply of beams by 19 July, why was the pickface racking erected first, before the reserve racking, as had been planned earlier? And why was the whole of the racking erection work not completed by 9 August, that is within three weeks of 19 July, when it had always been expected that the work would be completed within three weeks? In response Linfox challenged the factual bases for the questions, but otherwise did not suggest answers. 386 Yates took a further point, that Linfox had in effect posed the wrong question. The question was not whether the number of beams Linfox (or PRS) had available on or about 19 July, but what number of beams were available earlier, when, with the exercise of reasonable care, or in the furtherance of its own plan, Linfox (or PRS) should have started the Mt Druitt racking erection work. This debate takes one back to the questions whether wet weather, or the Maincon building works delayed Linfox (or PRS) in starting the racking erection work. Breach of the Second and Fifth Terms Pleaded 387 On the findings so far recorded, it follows that Linfox was in breach of the second term pleaded (that the transfer be carried out on a rack-to-rack basis), and also that it was in breach of the fifth term pleaded (requiring the exercise of reasonable care). In the circumstances, the exercise of reasonable care required both that the racking parts be procured in good time, so as to allow the Clyde premises to be vacated and made good by 16 August, and also that the move be conducted on a rack-to-rack basis. 388 However, Yates presented a much wider case than this, in relation to the fifth term pleaded. Yates submitted that Linfox had agreed to relocate the contents of the Clyde warehouse to the Mt Druitt warehouse and to act as Project Manager for that relocation, and that it did so on the express basis that Yates' normal operations and customer service (as those expressions were understood by the parties) would continue up to the time of the move, and thereafter, except for one day. Linfox protested that this allegation had not been pleaded. Yates replied that it had, referred to the particulars of negligence, and submitted that even if it had not been pleaded, the question had been litigated at the trial, so that a direction should be given that the pleading or the particulars be amended appropriately. Linfox protested further, saying that the question had not been litigated at the trial, and that to permit Yates to raise the question now would be to deny it justice. It pointed to what it said was a history of Yates not formulating its claim so as to put Linfox fairly on notice of the case that it had to meet. 389 Similar questions were raised concerning submissions made by Yates that Linfox had undertaken responsibility to procure the racking parts at a sufficiently early time to enable the move to proceed on a rack-to-rack basis, and that Linfox was contractually obliged and had a duty of care to properly plan and to implement the block stacks that were erected, so as to permit the Mt Druitt warehouse personnel carrying out operations replenishing the pickface racks from the reserve area racks ready access to the contents of the block stacks. 390 The particulars that were given are quoted at [19]. The questions to which most attention was given concerned the planning for the block stacks, and the implementation of those plans.

The Planning of the Move and its Implementation 391 Linfox undertook the task of moving several thousand pallets of stock from the Clyde warehouse to the Mt Druitt warehouse. The person within the Linfox organisation primarily charged with this planning was Mr Frost. As he agreed, the project required careful planning, because the time limits were tight. In his evidence in chief, he described how he went about the task. To state it shortly, he devised a plan to achieve the end that each pallet of stock to be moved out of Clyde would be moved into an identified space on a rack at the Mt Druitt warehouse. To achieve the desired end, there were pieces of paper to be physically attached to each pallet stored in a rack at Clyde immediately before the move, telling those actually carrying out the move where to place that particular pallet within the racks at Mt Druitt. He had however to allow for the fact that, between the time of the planning and the time that the move was effected, there would be a continual process of stock being taken out of the racks at Clyde, to fulfil orders for the supply of goods made upon Yates in the ordinary course of its commercial activities, and the replenishment of the emptied racks. 392 A difficulty arose in that at the time of the move, there was insufficient racking actually erected at the Mt Druitt warehouse, so that the instructions recorded in the intended way could not be implemented. In addition, Linfox says, at and about the time of the move, large numbers of pallets of stock were being delivered into the Mt Druitt warehouse from various Yates manufacturing facilities, including the Yates manufacturing facility at Mt Druitt, immediately adjacent to the Mt Druitt warehouse, but also from other manufacturing facilities without any sufficient documentation, so as to enable Linfox, or Yates, to "visualise" this incoming stock; and there was insufficient space available at the Mt Druitt warehouse to enable all the incoming goods, whether from Clyde or elsewhere, to be stored. 393 Yates described the evidence of Mr Frost as embracing two inconsistent assertions, which Yates labelled as the "possible to plan" and the "impossible to plan" approaches. These are only labels, but they serve to throw into relief the suggested inconsistency. 394 In his evidence in chief, summarised, Mr Frost said that he had prepared the 23 June plan on the basis that it would be possible (as well as desirable) to conduct the move on a rack-to-rack basis. It was only during July that he appreciated that this would not be practicable, because of the absence of racking parts, and therefore of erected racking at Mt Druitt. Given the absence of racking, it was necessary to "block stack" pallets of product somewhere at Mt Druitt, that is, stack the pallets on the floor of the warehouse or on the ground outside, in blocks. If there was to be block stacking of pallets, rather than a rack-to-rack transfer, good practice required planning concerning the blocks. One needed to anticipate that, after pallets of product had been block stacked, the warehouse personnel, having to locate stock to be moved from the reserve stock area to the pickface racks, to replenish the pickface racks from time to time, needed to be able to efficiently locate both the relevant block of stacked product, and where the product was within the stack. Viewing the matter overall, the replenishment personnel needed to be able to efficiently locate items of stock ultimately needed to meet the orders of Yates' customers. Commercially, rather than legally speaking, Yates needed to comply with "the 48 hour rule" mentioned at [76], that is, to be able to routinely fulfil orders placed upon it by its customers, usually within 48 hours after the receipt of the relevant orders. 395 On the "possible to plan" approach, Mr Frost should have planned and actually did plan to achieve this end, but was thwarted by the absence of the erected racking at Mt Druitt at the time of the move. On the Linfox case, this was not Linfox's fault. On the "impossible to plan" approach, Mr Frost could not have efficiently planned for what happened. On the Linfox case, this was not Linfox's fault either. 396 In Mr Frost's evidence in chief, and in part of his cross-examination, he set out the detail of the "possible to plan" approach, and how it was thwarted. He prepared his plan on the basis that there would be a rack-to-rack move, in part to enable compliance with the 48 hour rule after the move. It is relatively quick and easy to locate pallets of product stacked in a rack, and relatively slow and difficult to locate them when they are block stacked, but he could have planned to have products stacked in blocks, arranged into categories of products, which would have made it quicker and easier to locate particular products when needed, than if the products were not stacked in blocks in this way, by categories. If he had had the time, he would have planned for this, and for block stacking of products in this way, arranged by categories, and this would have permitted Yates to satisfy the 48 hour rule. If he had known in time that block stacking was needed, good practice would have required him to plan to block stack in this way, and the reason he did not plan to block stack in this way was that he did not have sufficient time available, because he did not learn early enough that there would be an insufficient quantity of racking erected. He agreed that as he understood the position, this had come about because of the failure of Mr Pearce to obtain the racking parts. The failure to block stack the products, with the products arranged into categories, made it "much more difficult" to meet the 48 hour rule, as replenishment personnel effectively had to hunt through the block stacks and have them moved by forklift drivers to find out what was in the stacks. Good planning would have prevented this, and would have had the result that warehouse personnel would have been able to tell where to find products, as needed by Yates in the ordinary course of its business. He did not accept that the result was a logistical nightmare, but said that it certainly produced very difficult circumstances, and very difficult and trying times. At one stage, he agreed that the warehouse conditions were "chaotic", but later said that that word was too strong. 397 If he was to set out to plan the block stacking, he needed to estimate if not calculate the number of pallets to be block stacked, to achieve the object of allowing ready and efficient access to the products in the stacks. He said that he had formed an estimate of the number, but pressed for details became vague, and I do not think that his evidence at this point was reliable. The fact appears to be that there was no planning or no effective planning as to how the pallets were assembled for block stacking purposes. If there was such a plan, it appears that it was not followed, or was not followed properly. Yates proffered a body of evidence to the effect that the products were stocked at random, and Linfox presented evidence to the contrary. If in truth Mr Frost, or anyone else at Linfox had made a calculation or even an estimation of the number of pallets to be block stacked, and had then planned to arrange the stacks with the products grouped into categories, it is curious that there is no record of this, communicating instructions as to how to deal with the problem, and that the detail of such a plan was not spelt out in his evidence in chief. 398 The "impossible to plan" approach first emerged clearly, well into the cross-examination of Mr Frost, and part of what he said in support of this cannot be reconciled with part of what he said in support of the "possible to plan" approach. He had estimated or calculated that the quantity of stock to be moved out of Clyde could not be moved into racks within the Mt Druitt warehouse, and that block stacking would be necessary, but even with block stacking, the product would not fit in to the available space in such a way that the replenishment personnel could have ready access to it, after the move. Notwithstanding that appreciation, he proceeded. He thought that he had told Mr Bennett that there was insufficient space within the Mt Druitt warehouse to block stack the products, and he said that he believed that he would have told Mr Jacob of this. 399 He spoke of discussing with Mr Jacob the use of a temporary warehouse facility elsewhere, so as to help the warehouse personnel to efficiently locate stock, but did not discuss with Mr Jacob a proposal to delay the whole move. To the contrary, he agreed that he had wanted to tell Mr Jacob that a rack-to-rack could have been achieved if some slow moving and obsolete stock had been stored offsite, and it is clear that he meant stored there temporarily. If that plan had been implemented, then the problem that arose within the Mt Druitt warehouse would not have arisen. 400 Mr Frost said that Mr Jacob had told him of Mr Ballantyne's rejection of the proposal to use the Smithfield warehouse. Mr Frost was not a party to that conversation, and he did not himself speak to Mr Ballantyne about the use of a temporary storage facility, because he appreciated that there was tension between the two companies, and he (Frost) considered that Mr Pearce had been at fault. 401 One of the circumstances to be faced at the time of the move and just afterwards, if products were to be blocked stacked, was that the racking contractor had still to erect more racks, so that whilst there was initially empty floor space within the reserve stock area upon which products could be (and were in fact) block stacked, those stacks of pallets would have to be moved from time to time to enable the contractors to complete their work; and if Mr Frost was to plan for block stacking, he had to allow for this circumstance. 402 In cross-examination he said that whilst it would have been possible to block stack 2,000 pallets on the floor without interfering significantly with the needs of the warehouse personnel, this could not be done whilst the racking contractor was working, although in re-examination he said that it could have been done. I consider that what he said in cross-examination should be accepted. 403 In response to Yates' submissions highlighting the "possible to plan" and the "impossible to plan" approaches, Linfox submitted that in the end, it was not possible to better plan the move. It pointed out that some of what Mr Frost said, in support of the latter approach, was consistent with the evidence of Mr Jacob, but otherwise neither adopted nor rejected either approach, except to tend to support the "impossible to plan" approach. 404 If the matter had to be judged solely by reference to Mr Frost's evidence, I consider that what he said in chief on this topic is more likely to be accurate. The alternative account seems to have emerged for the first time, at least on any clear basis, when the trial was some one hundred days old. If the "impossible to plan" approach was correct, providing as it does, if accepted, a defence to Linfox, the delay in setting out this approach requires an explanation. 405 Mr Jacob said that he had seen a plan, prepared by Mr Morrow, who was employed by Linfox as a Project Co-Ordinator, and who was (subject to the supervision of Mr Frost) in charge of the receipt of stock into the Mt Druitt warehouse. Mr Jacob said that Mr Morrow's plan related to not just the pickface, but "all locations" within the Mt Druitt warehouse, and he said that the plan he saw had been marked showing the proposed location of product groups, but not of specific individual products. Linfox did not produce a plan answering this description, and a question arose about this. There are in evidence three plans prepared by Mr Morrow, identified by emails dated 30 June, 15 July and 11 August. None of them answers Mr Jacob's description, and the response given was that Mr Jacob saw the plan on "a screen", being an Excell spreadsheet, and it was said that hard copies of the plan had been left by Linfox with Yates. This explanation for the absence of the plan is not particularly attractive, but on an overall view of the case it hardly matters. Mr Frost said that he knew of no such plan. 406 As between Yates and Linfox, it was Linfox's responsibility to arrange for the erection of the racking. Mr Jacob acknowledged this and said that he had appointed Mr Frost as Project Manager, and that it was Mr Frost's job to plan the move, and to record the plan. He also agreed that, as he understood the position, it was the responsibility of Linfox rather than of Yates to plan the pickface layout (subject to Yates' instructions - but this qualification seems theoretical rather than practical, in that nothing now relevant seems to have turned upon anything said or done by Yates), to plan the location of the reserve racks, and what products were to be placed where in those racks, and to plan for what product was to be block stacked, and the location of those stacks and of the products within those stacks. He said that the plan for the reserve racking was "visual", and there was no record of it. 407 Nor, so far as he knew, was there any plan, or any instruction given to those who moved the product, upon delivery to Mt Druitt, as to where products were to be placed, other than that they were to be placed inside or outside the warehouse. He agreed that good practice required a plan for the location of block stacks, and for the individual stacks to each contain products of a like nature, and that "given time", one should have been prepared, and that the absence of it "certainly slowed things down". After the move, product was delivered into the Mt Druitt warehouse, and block stacked in the staging area, there being nowhere else to put it, and this unplanned use of the staging area led to congestion. As he put it, there was a plan for incoming product to be received into the staging area, but because there were block stacks in the staging area, that plan became null and void. Thousands of pallets of product came to be stored in and around the staging area, the concrete apron outside the warehouse, and along the driveway, with no record of what product was stored where. Those physically engaged in taking pallets from trucks arriving at Mt Druitt had no plan to guide them where to block stack the pallets. They arranged the pallets into six or seven product groups, but that was as far as they went. This, he agreed, was certainly inefficient, and a logistical nightmare. He agreed too that Linfox's failure to prepare a plan was an important contributing factor, but stated that there were a lot of other contributing factors. The absence of the plans meant that the nightmare was on the cards, and that it had occurred, but the absence of plans was the result of Linfox not having time to prepare them. The absence of plans contributed to delay that occurred during August, in that the warehouse personnel experienced difficulty and delay locating items of product. 408 Mr Morrow said that he had started his planning, assuming that the Mt Druitt warehouse would be fully racked when the move took place, and he continued to hope and expect that this would occur, until some date after 22 July; and he gave evidence as to his thinking. The detail does not seem to be important: that was the state of his mind, and neither Mr Pearce nor anyone else at Linfox told him of the reality of the situation. It was during the week before the move that he appreciated that the move could not be conducted on a rack-to-rack basis, and that he therefore had to change his plan so that there was to be, not a rack-to-rack move, but block stacking. Even then, he was unable to obtain precise information as to how much racking there would be erected, when the move commenced. 409 He also said that good practice required block stacks, if used, to be planned so that the warehouse personnel would have ready access to the product in the stacks, and would be able to locate the products in the stacks; that he understood that Yates had and would continue to have to observe the 48 hour rule; that careful planning was necessary; and that he foresaw, before 31 July, that if the block stacks were not properly planned, a disordered mess in the warehouse would result. It was possible to avoid that result by competent planning (and execution) of the move, by taking into account a series of matters, but he lacked some information that was necessary for this purpose, including information as to the quantities of goods that would be coming into the Mt Druitt warehouse, otherwise than from Clyde; how much racking there would be in place; and what quantity of goods would need to be block stacked. In consequence he could not competently plan the block stacks. Before the move took place, he appreciated that he had insufficient information to enable him to properly plan it. 410 The movement of product actually commenced on 31 July. In the period up to Friday 6 August pallets of product were taken from Clyde to Mt Druitt. The plan was that all this stock was to be stored in the reserve stock area, and that during the weekend of 7 to 8 August, the stock destined for the pickface racking at Mt Druitt would be moved from Clyde. No picking work was intended to be carried out on Monday 9 August. That is, the plan was that, so far as possible, normal commercial operations would be carried out at Clyde up until 6 August, except that some stock, not immediately needed at Clyde, would be taken to Mt Druitt during that week. There would then be a three day period (7 to 9 August) when the stock for the pickface at Mt Druitt would be taken to Mt Druitt and placed into the pickface racks; and then normal commercial operations would recommence, from Mt Druitt, on Tuesday 10 August. 411 By the weekend of 7 to 8 August, most but not all of the pickface racking at Mt Druitt had been erected, and part only of the reserve racking had been erected. During the week ending 6 August, the pickface racks were deliberately left empty, and the quantity of stock taken to Mt Druitt exceeded the capacity of the racks by then erected in the reserve stock area, with the result that substantial quantities of product had to be and were block stacked in that area. Mr Morrow accepted that there were a substantial number of pallets block stacked there by 6 August. Some of the products which had been moved from Clyde to Mt Druitt - "dirt products" - were stored, not inside the Mt Druitt warehouse, but outside. Even so, the capacity of the racking by then erected in the reserve stock area was exceeded. Linfox makes much of the fact that some of the pallets of product delivered into the Mt Druitt warehouse in this period came, not from the Clyde warehouse, but from the Yates Mt Druitt manufacturing facility, or from other Yates other manufacturing facilities, whilst Yates contends that this was only to have been expected, and that Linfox should have planned for this. 412 Mr Morrow said that "a week into the move", and immediately before the weekend of 7 to 8 August, there was no longer room in the racks in the reserve stock area, in which to place incoming stock, and "we started to get some serious congestion issues". If the racks had been erected, as he had planned, then in practical terms the pallets would have been stacked four or five high on average (the racks to be erected varied in configuration, up to 7 tiers high), but in the absence of racks, it was only practicable to stack the pallets on the floor or on the ground outside in block stacks "2 high". In general terms, it is safe and practicable to place one pallet of product on top of another in a block stack, but no more than one. Otherwise the weight of the upper products is apt to damage either the products stored below, or the packaging of the products stored below. Mr Morrow agreed that after 6 August, whatever instructions had been given, forklift drivers charged with the task of taking the pallets of products, newly arrived from Clyde, and of storing them somewhere, were taking those pallets from the trucks, and locating the products in block stacks wherever they could find a space. He qualified an answer to this effect by saying "ultimately, yes", and then said that he thought that he was "still directing traffic", and that the forklift drivers were "still trying to group like products, but not in the right zone". There were some "mixed pallets", or pallets containing products of different kinds. He did not agree that there was chaos prevailing in the warehouse, on and after 6 August, but said that it was awkward, that ultimately sections of the warehouse became disorganised, and that it was a mess in terms of the location and composition of block stacks, with the consequence that the operations of the warehouse personnel were slowed down, resulting in the late deliveries of goods ordered from Yates. (He also said that the parties "had pretty much got on top of" the problem before Yates terminated Linfox's services, a proposition that Yates disputes. I will deal with this topic later.) 413 He said it was desirable to plan block stacks so that ready access could be obtained to the products stacked, but at one point that it was not possible, and at another point that it would have been very difficult to achieve this, because of the bulk of the products being block stacked. Later, he said that he could not say what the outcome would have been had he had available information as to the quantities of stock that would be brought into the Mt Druitt warehouse, and he had planned accordingly: the same problem would have arisen, although he could not say to what degree. It was a lack of information that caused the problem. 414 Mr Higgins is a Linfox employee who was employed as a Shift Supervisor at Clyde, responsible for the management of picking operations. When the move to Mt Druitt was being effected he was in charge of the despatch of goods from Clyde to Mt Druitt, and then on 9 August he moved to Mt Druitt. He reported to Mr Frost. 415 He swore two affidavits, which presumably were drawn in the expectation that they would constitute his evidence in chief. He said that Mr Frost "had compiled a comprehensive relocation plan, which assigned procedures and responsibilities as to what exactly had to be done" and said that whilst all products stored in cardboard packaging were on "priority" pallets, which were to be stored inside the Mt Druitt warehouse, other products, stored in bags on pallets, then stored outside the Clyde warehouse, were to be given a lower priority regarding their storage at Mr Druitt. (Other evidence shows that product stored in bags is less susceptible to damage than product stored in cardboard containers.) He said that "priority" pallets were allocated to a particular storage space at Mt Druitt, this being written physically (on pieces of paper) on the pallets. 416 When he arrived at Mt Druitt on 9 August (or perhaps 10 August - both dates are mentioned in evidence, and I doubt that it matters) he found that stock was stored on the floor of the warehouse, and that bagged stock was stored outside, on the driveway, as there was limited space within the warehouse; and he said that "stacks of stock appeared to be quite neat in that like products were block stacked together". 417 Yates contrasts this evidence with a letter that Mr Higgins wrote to Mr Jacob on 2 December 1999. This letter appears to have been one fragment of a general response to a request made of Linfox personnel to provide Linfox's lawyers with information and instructions, to enable the lawyers to reply to a letter of demand that Yates had sent to Linfox. A claim for privilege was made in respect of the letter, but later the privilege was waived for reasons that were not (and did not have to be) explained. In the letter, Mr Higgins described in sometimes almost identical terms to his affidavit a comprehensive relocation plan devised by Mr Morrow, but he continued: At the Clyde site all of these procedures were carried out prior to the product being loaded for shipment, and was shipped with the pretense that it was being handled to Rohans' [Mr Morrow's] instructions at Mt Druitt. The move commenced on the 31 July 1999, and I did not arrive at Mt Druitt until 9 Aug 1999. On my arrival I immediately noticed that the relocation had not gone according to the plan. On walking down the aisles I saw that the pallets with storage locations written on them was not located at that storage area, and in most cases was placed without regard to the product contained within. The large receipt area was almost completely filled with both cartons and bagged products that should have gone to its allocated area. From this we were unable to catch up on the locating of the product to the correct allocated areas as designated and conduct all other operations as required. This procedure was not completed up until the time I left the site 10 Sep 1999. [sic] 418 Mr Higgins agreed that the letter had contained his best recollection of events, and that his account of what he had observed was truthful. He had thought that Mr Morrow's plan was to be put into effect, that it was a sensible way of proceeding, and that in his experience planning and conduct along these lines was essential to avoid a complete mess in the warehouse. He did not agree that what he had found was a complete mess, but agreed that the warehouse personnel had difficulty finding products: they could only be located visually, and not all block stacked products could be sighted. Additionally, a large amount of stock was not located where it should have been. In these circumstances he considered that it would have been very difficult for the 48 hour rule to be met, and he had no explanation as to why Mr Morrow's plan had not been implemented, nor why the matters recorded in his letter of 2 December 1999 had not been recorded in his affidavits. 419 Against this background I come back to the evidence of Mr Frost and to the question whether he proceeded on the "possible to plan" or the "impossible to plan" approach. After he had initially concluded his evidence and had been excused, he came back for further cross-examination, upon the application of Yates, and was taken through what amounts to some arithmetic, said to undermine the "impossible to plan" approach. 420 His 23 June plan, set out at [127] spoke of three stages. In the events that happened the move commenced later than the 23 June plan had spoken about, but did proceed in three stages. During stage 1 (31 July to 5 August) picking operations continued at Clyde, but some stock was taken to Mt Druitt. During stage 2 (6 to 8 August) there were no picking operations conducted, and what became the stock in the Mt Druitt pickface was taken from Clyde to Mt Druitt. Stage 3 covered the period 9 to 13 August. Picking operations at Mt Druitt commenced, and the balance of the stock held at Clyde was transferred to Mt Druitt. 421 At the heart of the "impossible to plan" theory there is a concept that whilst it was possible to have 2,000 pallets block stacked at Mt Druitt, and for work to proceed with reasonable efficiency around these stacks, as it happened the number of block stacked pallets exceeded the figure of 2,000, so that it was impossible for Linfox to properly plan the move. It will be remembered that, on the Linfox case, it had said as early as 21 July that there would have to be 2,000 pallets stored on the floor at Mt Druitt. It is also Linfox's case that events beyond its control meant that the number actually block stacked was much higher than 2,000. 422 Mr Frost agreed that during stage 1, 1,500 pallets were moved from Clyde, 500 were moved out of the Mt Druitt manufacturing facility into the Mt Druitt warehouse, and a further 300 came from other manufacturing facilities, a total of 2,300. He said that of these 2,300, 800 pallets were placed in the racks in the reserve racking area, and the balance of 1,500 including the 500 from the Mt Druitt manufacturing facility, were block stacked. 423 During stage 2, an additional 4,500 pallets were brought to Mt Druitt from Clyde, and a further 500 came from other suppliers. 3,400 pallets were placed into the pickface racks, and 500 pallets (of "dirt" products) were placed outside the warehouse. If there were no additional reserve racking erected by this time, there would then be a total of 2,600 pallets block stacked in the reserve area: a total of 7,300 pallets had come in, 3,400 were in the pickface racks, 800 in the reserve racks, and 500 outside the warehouse. 424 During stage 3, a further 2,000 pallets were taken from Clyde to Mt Druitt, and 500 came from other suppliers. At the same time 500 pallets of stock went out of the warehouse, that is, they were delivered to Yates' customers. 500 of the pallets taken from Clyde contained dirt products and were stored outside, bringing the total number of pallets stored outside up to 1,000. Mr Frost said that by the end of stage 3 there were 1,600 pallets stored in the reserve racks, meaning that 3,300 were block stacked including 500 from the Mt Druitt manufacturing facility, and 300 pallets of obsolete stock, brought from Clyde during stage 3: a total of 9,800 pallets had been taken to Mt Druitt by the end of stage 3; 500 had been delivered to customers; 1,000 were stored outside; 3,400 were in the pickface racks; and 1,600 were in the reserve racks, leaving 3,300 block stacked. 425 This analysis depends for its accuracy upon the accuracy of the number of reserve area racking spaces that were available. Mr Frost had worked on the basis that there were only 800 at the end of stages 1 and 2, and 1,600 at the end of stage 3. If the number of pallet spaces in the reserve racking was higher, then the number of pallets that would have to be block stacked should be reduced. (Various witnesses spoke of there being some reserve racking that was not fully utilised at times. Since the ordinary operation of the warehouse required the continual movement of stock from the staging area to the reserve racks, and from the reserve racks to the pickface racks, this kind of evidence, by itself, is unremarkable. Linfox seems to have been suggesting that the reserve racks were not filled with product on some more general basis, but there is no direct evidence of this, and it would seem to have been not only pointless, but unwise. No doubt, as each rack was erected, it took some time for it to be filled with stock.) 426 Mr Frost was then taken to some contemporary records. A progress report that he prepared, dated 5 August, reads in part: Stock Relocation Approximately 2,000 pallets have been transferred from Clyde and deliveries from manufacturing sites are being sent directly to Mt Druitt warehouse whenever possible. Pallet Racking Pick face racking 95% completed - 100% by Friday 6.8.99, approximately 3,200 pallet spaces available. Reserve storage racking - approximately 800 pallet spaces completed. A further 1200 pallet spaces are scheduled for completion by Saturday 7.8.99. 427 On 11 August Mr Morrow prepared and circulated a document called "Mt Druitt Slotting Update" which reads in part: Double deep racking constructed so far (3 aisles) has been filled to make room on the floor for the Dexion racking staff to erect the remaining 5 aisles. A total of 2720 pallet spaces of reserve racking is now erected and is approximately 85% loaded with stock with a view to being fully loaded in the next two days. 428 Yates points to Mr Frost's prediction of 5 August that the number of pallet spaces in the reserve racking would be 2,000 by 7 August, and to Mr Morrow's statement that it was 2,720 as at 11 August. If this prediction and this statement were accurate, and the prediction fulfilled, the number of pallets to be block stacked as at 7 August should be reduced from 2,600 to 1,400. Similarly, the number to be block stacked at the end of stage 3 should be reduced from 3,300 to 2,180, the latter figure including 300 pallets of obsolete stock that could have been stored outside the warehouse. In short, Mr Frost agreed that if the figures quoted in these two documents were correct, the need did not arise to block stack as many as 2,000 pallets, and the theoretical basis for the "impossible to plan" approach is shown to be unsound. 429 In re-examination, he said that his recollection was that when he left Mr Druitt (upon Yates terminating the services of Linfox, on 31 August) the number of block stacked pallets was well in excess of 2,000. He also said, in a passage that contradicts a different part of Linfox's case, that these block stacked pallets were "throughout the staging areas of the receiving and despatch docks and adjacent to those areas". 430 Various witnesses gave various estimates about pallet numbers. Linfox submitted that Mr Frost had put the figure in respect of the number delivered from various manufacturing sources at 1,800 to 2,000, referring to T6378.55-6379.09, but at that point Mr Frost was speaking about a different topic, namely the number of pallet spaces erected. It then submitted that Mr Carroll had given an estimate of 3,000 to 3,300. In 1999 Mr Carroll was a forklift driver and storeman employed by Yates. As Linfox points out elsewhere, he mostly worked outside the warehouse, rather than inside it. In chief he said that "during the last weeks of the move" there were 8 trailer loads a day of pallets of product, delivered from the Revesby manufacturing facility to the Mt Druitt warehouse, as well as "the equivalent of 3 trailer loads a day", delivered from the Mt Druitt manufacturing facility. These loads were part of a total of 20 to 21 semi-trailer loads a day, including deliveries from Clyde. In cross-examination, he agreed with the arithmetic that 8 trailer loads from Revesby plus 3 from the Mt Druitt manufacturing facility, at 22 pallets per load, amounted to 242 pallets per day being delivered to the Mt Druitt warehouse, other than from Clyde. There followed this passage: Q. And if you take that over the last weeks of the move, say 14, that is about 3,388 pallets over the period of the move? A. Now you know why it was so full. 431 The proposition that there were 14 weeks taken up in the last weeks of the move is quite inconsistent with the rest of the evidence. I doubt that Mr Carroll, whose honesty was not in question, absorbed the arithmetic involved in the question, or the assumption made, but in any event, I regard his estimates as unreliable, whether given in chief or in cross-examination. (By my arithmetic, the number of 3,388 represents 11 trailer loads, of 22 pallets, over 14 days. Perhaps the question was intended to refer to the last 14 days of the move.) I am not confident, either, that he was in a position to make an accurate estimation about deliveries made through the southern door of the Mt Druitt warehouse, of product coming from the Mt Druitt manufacturing facility, located further to the south. My impression is that Mr Carroll mostly worked outside the warehouse, and on its northern side. 432 Then Linfox submitted that Mr Ballantyne agreed with the figure of 3,000 pallets, said to have been delivered to Mt Druitt other than from Clyde. However, the passage relied upon reads: Q. Mr Carroll gave an estimation that during the course of the move something in excess of about 3300 pallets would have come in from sources being Revesby and the Mt Druitt manufacturing plant?

A. Over a period, he's probably right. I've got no way - I can't comment on that. 433 The evidence cited by Linfox does not demonstrate that Mr Frost's estimates were inaccurate, but I do not think that this is necessarily the end of the matter. Linfox sought to persuade me that most if not all of his evidence should be accepted, and that attempt may have had the effect of not criticising or otherwise drawing attention to some aspects of his evidence, so that it seems best to approach his estimates with care, particularly as I did not find a good deal of his evidence acceptable. 434 One feature of his evidence that is particularly troublesome concerns his account, in an affidavit sworn in 2001, of the move; but what has been said about this since then is even more troublesome. The affidavit includes the following passage: 26. On Monday 26 July 1999, I commenced the relocation. I considered that the move would take two weeks. I also considered that if the move did not start as planned, Clyde would not be vacant by 13 August 1999 as was required by Yates. 27. The relocation was planned to occur in three stages. The first stage of the move, during the week 26 July - 30 July was planned to be 1750 pallets of non critical stock from reserve locations at Clyde to reserve locations at Mt Druitt. 28. Several days prior to commencement of the relocation, I do not now recall that exact date, I recollect that I was told by either Ross Jacob or Mark Pearce that approval to occupy the facility had not been given by Council. Despite this, I was advised to commence the relocation. However, I recollect that on the second day of the move, I was advised, although I cannot now recall by whom, that no further stock should be sent from Clyde until clear authority had been given. As a result, little stock was transferred for a two day period and only approximately 500 of the planned 1750 pallets were moved during stage one. 29. The selection of which stock would be transferred from Clyde to Mt Druitt during stage one was made based on the available racking at Mt Druitt. That is, stock at Clyde was selected on the basis that it was appropriate to be stored in the available racking at Mt Druitt. On completion of stage one, almost all the pallets were stored in the available racking at Mt Druitt. 30. When stage one commenced on 26 July 1999, there was already approximately 500 pallets of stock from the neighbouring Mt Druitt manufacturing site placed in the south west corner of the Mt Druitt distribution centre. This stock: (a) did not form part of the Clyde stock; (b) was not stock or product that Linfox had responsibility for; (c) was not stock or product that we had been advised would be on site during the relocation; (d) was not stock or product for which we had made any plans to rack or relocate at Mt Druitt; 31. Stage two of the relocation involved the transfer of critical stock lines and quantities, particularly from the Clyde pick face to the Mt Druitt pick face, plus additional reserve stock required to maintain adequate stock levels at Mt Druitt for the first week of operations. This stage was planned to occur over the weekend 31 July - 2 August 1999, with Monday 2 August 1999 being a day nominated in advance during which neither the Clyde nor Mt Druitt Distribution Centre would operate. However, due to the building being incomplete , the transfer of stage two pallets did not commence until 7 August 1999. 32. During stage two, the balance of approximately 1250 pallets not moved during stage one were also transferred. 33. The transfer of stock from the pick face at Clyde involved labelling each pallet at Clyde with its new location at Mt Druitt, so that each pallet could be unloaded at Mt Druitt and put in its final pick face location without further handling. During this stage, approximately 4,500 pallets were moved over a three day period in order to be ready to commence normal operations from the Mt Druitt Distribution Centre on Monday 9 August. 34. This second stage move was an intensive effort which required approximately 150 truck loads for the 4,500 stage two pallets and approximately another forty truck loads for the remainder stage one pallets. By close of business on Sunday 8 August 1999, the pick face at Mt Druitt was predominantly filled (with about 1800 pallets) and the remainder of the stage one pallets had been stored in racks. 35. During the unloading of the stage two reserve stock pallets, forklift drivers were unable to rack the pallets as quickly as they were being unloaded. This was a direct result of there being insufficient power or spare batteries to power the electrically operated forklifts . There were only five 20 amp power outlets available to recharge forklifts, but nine forklifts which required daily recharging. A forklift could be used for approximately eight hours and then required, depending on the type of charger, either eight or twelve hours to recharge. Consequently not all of the forklifts could be used at the same time and this had a serious impact on our ability to rack the pallets as they were unloaded. 36. As a result, pallets were placed on the floor around the Mt Druitt Distribution Centre while there remained empty racks. I estimate that approximately 3,000 stage two pallets were racked as they were delivered and that 1500 pallets which constituted the remainder of the stage two pallets, were stored either on the floor of the Distribution Centre or outside where it was appropriate to do so. I estimate that at the conclusion of stage two, there were approximately 1000 empty rack spaces. 37. The decision as to which product types were stored inside or outside was made by either myself, Rohan Morrow or Mark Pearce. The decision was based on packaging and specifically, vulnerability to the weather. For instance, bagged dirt products had previously been stored outside at Clyde and as a result, this was one of the products that was stored outside the warehouse at Mt Druitt as it was protected from the weather. 435 The underlined passages were rejected as to form, and paragraph 30(b) was rejected. There was oral evidence given concerning the rejected parts of paragraphs 31 and 35, and paragraph 30(b) was "cross-examined into evidence". 436 In its written submissions of 16 January 2004 Linfox said: 6.16 On 7 August 1999, Stage 2 of the transfer commenced. Critical stock lines, especially the pickface, were transferred on a rack-to-rack basis plus the reserve stock sufficient for Mt Druitt's first operational week. This part of the move had been planned for 31 July 1999 to 2 August 1999 but it had been delayed for the week because the building was incomplete. The Stage 2 pallets were moved, plus about 1,250 Stage 1 pallets that were left at Clyde. 4,500 Stage 2 pallets were transferred over 3 days for the commencement of operations on 9 August 1999. By close of business on 8 August 1999, the pickface was largely full and the remainder of the Stage 1 pallets had been racked. The racking of the Stage 2 pallets lagged behind the unloading. About 3,000 Stage 2 pallets were racked and the remaining 1,500 stored in or outside the DC whilst about 1,000 available rack spaces were empty - ( Frost's Affidavit - 10/08/01 - pars 31-36). 437 Yates replied in writing on 17 February 2004 saying: Frost's account of the move in paragraphs 31 - 36 of his 10 August 2001 affidavit was significantly qualified by him in his oral evidence. At [T6189] he agreed that the statements in paragraphs 34, 35, 36 and 37 were incorrect [T6184 - 6192]. There were no empty spaces in the reserve racks during the move of the Stage 2 pallets. 438 Linfox responded in writing on 5 May 2004 saying, and saying only: Yates claim that Frost agreed that paragraphs 34, 35, 36 and 37 of his affidavit sworn 10 August 2001 were incorrect. It is Yates submission which is incorrect. Frost conceded that only paragraphs 35 and 36 of his affidavit sworn 10 August 2001 were incorrect ( T6184 to T6192). 439 The New South Wales Barristers' Rules provide: 21. A barrister must not knowingly make a misleading statement to a court on any matter. 22. A barrister must take all necessary steps to correct any misleading statement made by the barrister to a court as soon as possible after the barrister becomes aware that the statement was misleading. 440 Even if one treats the statement in Linfox's submissions of 5 May 2004 as the correction of a misleading statement made on 16 January 2004 concerning the effect of paragraphs 35 and 36 of Mr Frost's affidavit, there is still an assertion of the correctness of what had been said on 16 January 2004 concerning the balance of the passage in paragraphs 31 to 36 - "only paragraphs 35 and 36 … were incorrect" - and a reference to some nine pages of transcript, leading to the need to look at those pages; and there is an assertion that it is Yates' submission that were incorrect, without specifying the error. 441 Commencing at T6183, there was cross-examination directed to the statement contained in paragraph 28 of the affidavit, that the move had been delayed by reason of the conduct of the council. Mr Frost said that that was what he had believed at the time he swore his affidavit, but he was not prepared now to say that it was true. He was cross-examined then about the contents of paragraph 29, and he effectively withdrew the last sentence of that: only about 800 out of about 2,000 pallets were stored in the racking at Mt Druitt, instead of almost all of 1,750 pallets. (There was not sufficient racking erected for more than about 800 of the pallets to be stored in the racks.) He could not explain how his affidavit had said what it did say. 442 The cross-examination then moved to the question of what planning was appropriate in respect of stock coming into the Mt Druitt warehouse from the Mt Druitt and other manufacturing facilities, and concerning paragraph 30 of the affidavit, and the record of this cross-examination extends from T6184.52 to 6189.40. There follows this passage:

A. Yes. 443 There was then cross-examination directed to paragraphs 35 and 36, and as Linfox accepts, Mr Frost conceded that these paragraphs were incorrect in some not insignificant respects. I am concerned with a factual enquiry, and with a question as to what weight I should attach to Mr Frost's evidence, and the estimates he gave about the number of pallets at Mt Druitt from time to time. This excursion into the details of the written submissions and the evidence that is capable of supporting them is a wholly unwelcome and unnecessary distraction, but I cannot just ignore it. Perhaps it needs to be said that in a case such as this one, some mistakes are unavoidable, and exhaustion and emotional overload are altogether too likely to take a toll upon all concerned, but it is not easy to see how this circumstance can answer for what has happened, for I drew attention to the rules on 19 February 2004 (T8503), before the making of the submission of 5 May 2004. It is not clear at this stage who drafted the submissions. Also, there are other matters apparently calling for some explanation. 444 I consider that the credit of Mr Frost must be regarded as significantly damaged, but that the estimates that he gave as to pallet numbers, that I have referred to at [422] to [429] were given in cross-examination, without anything resembling enthusiasm on his part, and then in re-examination. So far as I could tell (and recalling what I recorded at [216]), he was putting his best foot forward, so far as he perceived Linfox's case to be, and I conclude that these figures are more likely to be reliable and accurate than any other set of figures propounded in the evidence. I do not regard this method of fact finding as attractive, but it is preferable to any other conclusion available on the evidence, or by reference to the submissions advanced on behalf of Linfox. 445 I find that Linfox, through Messrs Frost and Morrow, planned the move on the basis that there would be a rack-to-rack transfer effected, and that it was only during the last week in July that they came to appreciate that this was not achievable. This was not achievable because of the failure of Linfox to procure the racking parts in good time. Neither Mr Pearce nor anyone else at Linfox told either of Messrs Frost and Morrow of this at a time sufficiently early to enable a plan to be prepared on the basis that block stacking would be necessary. This finding means that the "impossible to plan" theory must be rejected, and reinforces the finding recorded at [227], as to what was said and not said at the meeting of 21 July, concerning moving on a rack-to-rack basis. 446 The result was that at about the time of the move there were some thousands of pallets on the floor of the Mt Druitt warehouse, or on the ground outside; and these constituted a significant physical hindrance to the efficient conduct of the warehouse. Mr Trevarthen said, and I find that in about August 1999 either Mr Pearce or Mr Frost told him that stock had been piled in random fashion about the warehouse, "shoved anywhere". 447 Yates' submission about these matters, about which Linfox complained, was that "Linfox was both contractually obliged and owed a tortious duty to exercise reasonable care to properly plan and implement the block stacks which were erected, so as to permit staff at Mt Druitt responsible for replenishment operations, ready access to the contents of block stacks". Linfox's complaint may be summarised by saying that Yates had not pleaded any relevant specific contractual term, but rather had raised the matter as part of an attack based upon Linfox's general duty of care. Whereas Yates had submitted that, if necessary, I should direct an amendment to the pleadings, citing High Court and Court of Appeal authorities, Linfox submitted that those cases referred to claims in negligence, and not claims for breach of contract: Mummery v Irvings Pty Ltd (1956) 96 CLR 99, 110; Maloney v Commissioner for Railways NSW) (1978) 52 ALJR 292, 294; Leotta v Public Transport Commission NSW (1976) 50 ALJR 666; Water Board v Moustakas (1988) 180 CLR 491, 497; Sabag v Health Care Complaints Commission [2001] NSWCA 411 at 20-22 and Babcock International Ltd v Babcock Australia Ltd [2003] NSWCA 6, 152-154 (this case is reported, on other points, at 56 NSWLR 51). In this case Yates has established the existence of a contractual term that Linfox would exercise reasonable care in the exercise of its management functions, and it is difficult to see any reason why it might be said that, although Yates might be permitted, if necessary, to amend its pleading or its particulars in so far as Yates sues in negligence, it might not be permitted to do so to the extent that it is also suing in contract. Linfox did not suggest any reason. Rather, it simply pointed out that all these other cases were cases in negligence. In any event, the particulars given so far as concerns the need for careful planning and the need for the careful implementation of the plan devised, seem to me to be apt for the occasion. Paragraphs (c) to (g) of the particulars set out the background facts relied upon, and paragraphs (h) to (k) gave particulars of the alleged breaches. Other Breaches 448 Linfox is on stronger ground concerning another allegation of breach of contract made by Yates in address, that Linfox agreed to manage the relocation on the express basis that normal operations and customer service (as those expressions were understood by the parties) would continue, in effect at Clyde until the move occurred, and then at Mt Druitt after the move had taken place, except for a break in service of one day. Linfox says and I accept that this allegation was not made in Yates' pleading, or in its particulars. Nevertheless, there was extensive evidence given about these matters. 449 As noted at [76] each of Messrs Bennett, Jacob, Frost and Morrow accepted as factual the proposition that Linfox had accepted responsibility to ensure that orders for goods would ordinarily be fulfilled within 48 hours of the receipt of the customer's order. See also Linfox's offer, extracted at [43] under the heading "Inventory Control", and [46], extracting part of the draft contract. Notwithstanding all this, Linfox argued that there was no such requirement in respect of the period immediately after the move. The evidence cited in support of this (submissions 29 January 2004) demonstrates the industry of the Linfox lawyers, but no more than that. All that seems helpful is the unexplained statement of Mr Prince (a former Yates employee, called by Linfox): "Those were the guidelines". Viewing the evidence as a whole, it seems obvious that the central purpose of many of the details of the overall arrangement was to enable Yates to meet its commercial need to honour the so-called 48 hours rule. 450 In my view, the evidence does not establish an express term in the contract, nor justify a finding that there was an implied term such as that now under consideration. In the language of cases such as BP, it is not necessary to give efficacy to the contract, nor is it so obvious that it goes without saying. On this basis I see no point in directing Yates to amend its pleadings or its particulars, to assert this breach of contract. 451 On the other hand, the matter does seem to me to go to the question of negligence, and it is convenient to deal with this question now. From the outset of the negotiations between the parties, each proceeded on the basis that Yates had a commercial need to conduct its business activities in accordance with the so-called 48 hour rule, and each party planned accordingly. Essentially, but for Linfox's failure to procure the racking parts in a timely manner, the parties would have proceeded in the expectation that the move would be conducted in such a way that the rule would be met, and Yates would have been able to conduct its normal commercial operations accordingly. Paragraphs (d) and (h) particularly of the particulars of breach, quoted at [19], put Linfox on notice, not of an allegation of a contract containing a reference to the 48 hour rule, but of an allegation of breach of contract, resulting in an inability on the part of the Yates to efficiently locate and handle stock, of sales orders not being properly fulfilled, and of other consequences. That is, the 48 hour rule was not mentioned in the particulars, but difficulty in fulfilling orders, and resultant losses, were mentioned. There was no allegation of the contractual term now sought to be relied upon, but there was notice given of a claim having a practical effect which can only be distinguished by focusing on questions of form rather than of substance. The question was in fact thoroughly investigated during the course of the trial. Given the evidence of Linfox's officers and the contents of its documents, I do not see how the trial might have been conducted differently, nor any actual prejudice to Linfox, if Yates is now directed to amend its pleading. 452 Linfox also contends that Yates went beyond its pleadings, in so far as it relied upon the proposition that Linfox failed to procure the racking in sufficient time to enable the move to proceed on a rack-to-rack basis, so as to enable the Clyde warehouse to be vacated and made good by 16 August. I agree that the pleading did not assert a contractual obligation to act, so as to enable the move to be completed by 16 August, that there was no express term in the contract to this effect, and that such a term ought not to be implied, for the same reasons, but, once again, the matter was thoroughly debated in evidence, and it goes to the question of negligence. I think it is accurate to say that every witness, concerned with the timing of the move and its implementation, spoke of knowledge that the Clyde warehouse had to be vacated by a fixed date. Linfox did not suggest any actual, as distinct from theoretical prejudice, if Yates amends its pleading, so as to assert a breach of contract and/or negligence in this regard. 453 I find that Linfox breached the contract, in respect of each of the matters set out at [19] at (a), (c), the first sentence of (d), and (f) to (k). WMS Pricing 454 I have dealt earlier with disputes as to what was said at the meetings of 21 and 30 July. In part, my findings have been based upon my view about the credibility of various witnesses. Each party vigorously attacked the credit of some of the opposing party's witnesses, and one of the principal battlegrounds concerned the minutes of the BOR meeting of 21 July, as to the costs of the then proposed WMS and as to what had been said and not said on that topic at that meeting. One part of those minutes is set out at [211]. Another section of those minutes is in these terms: 2. Warehouse Management System 2.1 Revised Implementation Timetable

Notes 1. This is at no margin to Linfox. 2. Linfox will confirm each of the cost areas to Yates as they are confirmed to Linfox. 455 The costs item "Exceed 4000 Software $483,500" included the sum of $208,500, representing a licence fee of $6,950, for licences at 30 Yates sites. Yates emphasises note 1 "no margin to Linfox" and Linfox emphasises note 2: Linfox was to confirm each of the cost areas to Yates, as they were confirmed to Linfox. Yates attacked the credit of each of Messrs Pearce, Jacob and Bennett in relation to the statement recorded in the minutes about the cost of the Exceed software, and as to what had been said on that topic at the BOR meeting. Linfox replied, in part by calling Mr Worth of EXE, and it used Mr Worth's evidence as a basis for attacking the credit of Mr Ho, a Yates witness who gave evidence mostly in relation to questions about damages, rather than liability. The various written submissions of the parties set out some unrestrained statements, and invite findings upon questions that I need not decide, and that I consider I ought not to attempt to decide. They go beyond any issue raised by the pleadings. The matters debated, going to the price that Linfox might have charged Yates for the software licences, are relevant mostly only to the extent that they enable a more informed finding to be made about the credibility of particular witnesses, and in my view what is significant is not so much what the underlying facts might have been, but how these various witnesses responded when asked about the facts. Largely, but not entirely, this goes to the question whether the evidence of Mr Ballantyne should be accepted, or that of Messrs Pearce, Jacob and Bennett, largely, but again not entirely, in relation to what was said at the meetings on 21 and 30 July. Nevertheless, I will need to set out, at least in a relatively short form, the effect of some labyrinthine negotiations, and to start by recording some background facts. 456 EXE Technologies, Inc is an American corporation. In a way not made clear by the evidence it apparently succeeded to the affairs of two other corporations, identified as Dallas Systems Corporation (Dallas) and "Neptune". Dallas supplied computer systems, including warehouse management systems, and in 1992 it had dealt with Linfox. At that time Mr Worth was a director and an employee of Linfox, and in that capacity he dealt with Dallas. There were some dealings between the two companies, and the results were unsatisfactory to Linfox and its then customer, "Unilever". Mr Worth said that at about this time he said to the then President of Dallas that if Linfox proceeded further to utilise Dallas' system in Australia or New Zealand, Linfox would expect discounts or set-offs in relation to any future implementations of a Dallas system. So far as the evidence shows, Linfox made no other claim upon Dallas until, it seems, April 1999. 457 Mr Worth left the Linfox organisation in 1996, and joined EXE in November 1998. He was styled the Managing Director of the company within Australia and New Zealand, and he reported to a superior, who worked in Singapore. In his new role, he and Mr McDonald (the Sales Manager of EXE) met Mr Brockhoff (the managing director of Linfox), and he then wrote to Linfox on 19 November 1998, offering to provide Exceed Series 4000 Software to Linfox. The price quoted at this stage was $6,250 per licence fee for the first one hundred users, and a fee of $3,500 per licence user in respect of sales made after the first hundred. As Mr Worth explained it, EXE was offering to sell the product to Linfox at a reduced rate, because EXE regarded Linfox as a potential bulk buyer, and it wanted Linfox's custom. The price which EXE ordinarily asked for varied with the dollar exchange rate, but at that time it was about $6,950 or $7,000. Both these figures were used as a starting point for calculations or negotiations as between EXE and Linfox, without either of these parties appearing to have regarded the difference as significant. 458 On 23 December 1998, Mr Pearce sent an email to Mr Bennett and others at Linfox saying: The following is the summary I have been given this afternoon by Gary McDonald of EXE. This is how it relates to the Yates Contract. Clyde Laverton Wyee Total User Licenses 16 8 4 28 28 Licenses @ $4500 per user =$126,000 First System Installation =$125,000 Customisation (Still to be confirmed) =~$30,000 Total $281,000 This compares with Paperless $197,950 plus additional considerable cost to Yates in order to achieve the Invoicing, cross docking and split load requirements from the Host system (PRMS) and the WMS interface. However I believe there is still money on the table with EXE as they are very, very hungry and NEED the sales. Gary also mentioned that Linfox are negotiating with EXE for a 33 user License system with Unilever. 459 Mr Worth said that by this time EXE's offer was to sell the licences to Linfox for $4,500 each, that is, giving Linfox a discount for bulk purchasing, and that the discounted price was given on the basis that Linfox was to commit itself to buying at least 50 licences (to be resold by Linfox, the expectation at that time being that 28 of them would be sold to Yates). On 11 January 1999, EXE recorded the proposal, as it had been formulated to that date, in writing. 460 There were further negotiations between Mr Worth and Mr Brockhoff between 10 and 16 February, in which draft documents were prepared, putting the same commercial terms in more detail and with more precision, and adding these new factors: Linfox was to commit itself to buying 100 licences by 31 December 1999; there were to be two agreements between Linfox and Yates, namely a Master Software Licence Agreement to cover the licensing of the software, and a Professional Services Agreement to cover the services relating to implementation; the Master Software Licence Agreement was to provide that Linfox committed itself to buying 30 licences by 31 December 1999, containing provisions about the timing of the payments to be made in this connection; and there were other provisions that I need not mention. 461 EXE perceived a difficulty concerning the timing of the payments to be made. It was about to make an Initial Public Offering, and therefore needed to have regard to the (American) Accounting Income Recognition Rules which evidently provided that money expected to be received was not to be regarded as income, unless it was payable by a fixed date, and EXE wanted to be able to treat as income the money it hoped to receive from Linfox. On the other hand, Linfox did not want to irrevocably commit itself to making the relevant payment by a fixed date. There was therefore a proposal made that the Master Software Licence Agreement would provide for payment of the money in question by a specified date, but that there would be called into existence a side letter, having the effect of exonerating Linfox from making that payment by that date in certain circumstances. On 19 March Mr Worth wrote to Mr Brockhoff, in substance confirming what was intended to be put into the side letter, and saying: "I thank you for the confidence that you have in EXE and would certainly appreciate [it] if this letter could be destroyed subsequent to payment of the outstanding licence fee". 462 It was not certain at this stage that Linfox was going to purchase the EXE product. I will for the moment focus on questions about pricing, rather than the implementation of the proposed Exceed WMS, but I note that on 22 March an internal memorandum of Linfox described elements of EXE's product and training scheme in quite uncomplimentary terms 463 On 22 April there was a meeting between Messrs Bennett, Pearce and Southwell of Linfox at which the proposed EXE contract was discussed. Mr Bennett's note appears to record that there was a discussion about the potential assignability of such a contract, in the event of a "Yates termination". Perhaps this reflects Linfox's perception then that its relationship with Yates was souring and might be terminated, and forethought by Linfox personnel as to the consequences of the relationship between Linfox and Yates souring, so far as concerned the financial consequences of the proposed agreements between EXE and Linfox, and Linfox and Yates, relating to the Exceed WMS 464 On 26 April there was a meeting between Mr Worth, Mr Hood (the President of EXE) and Mr Peter Fox (the Chairman of Linfox). Mr Worth said that Mr Fox then said: "As a result of the [1992] implementation you owe Linfox $1 million and we expect a much better deal". Mr Hood asked Mr Worth whether there was any pre-existing liability, and Mr Worth said that he thought not, but that there was "some pre-existing obligation that should be taken into account", whereupon Mr Hood instructed him to "honour the obligation and take it into account". Perhaps this was said in the absence of Mr Fox, but in any event Mr Worth agreed in cross-examination that he had not given any consideration to the rights and wrongs of the suggested claim by Linfox upon Dallas, but had agreed to give Linfox a further discount, to get its business. 465 Mr Worth then wrote to Mr Vary (Linfox's Secretary, a lawyer) enclosing a draft of a letter that Mr Worth proposed to send to Mr Fox. In that draft letter, Mr Worth proposed that there be a meeting held between Messrs Hood and Fox on 4 May, to sign the agreements. The draft letter spoke of EXE providing 30 licences to Linfox at no cost, this being "considered as full satisfaction of any outstanding obligation in respect of the licence agreement dated June 1992"; of Linfox committing to buying an additional 20 licences at $4,500 each by 31 December 1999; and of the price in respect of future sales being $4,500 for the first one hundred (including the 30 to go to Yates), and $3,500 for additional sales. It also dealt with certain implementation costs, and offered a further reduction (on what had been mentioned earlier) of $40,000 in this connection. 466 Mr Worth sent a further copy of his draft letter addressed to Mr Fox, to Mr Dixon, another Linfox director. He spoke of hoping to speak to Mr Dixon again on the same day or the next day, and observed that the offer now made by EXE represented a total reduction of $175,000 upon its earlier offer: $40,000 in reduced implementation costs, plus $135,000, being 30 licence fees reduced from $4,500 each to nil. He said: "This now allows Linfox to get an upfront benefit on the Yates installation and satisfies past obligation". Later, he said: "As we discussed, unfortunately given my past association with Linfox and the delays that have occurred, this account has now achieved very high profile in the USA, with the result that I am under pressure to stop the job if we cannot get final agreement". 467 Yates points forcibly to the failure of Linfox to call Mr Fox or Mr Vary as witnesses, or to call any other evidence substantiating the proposition that Linfox had any genuine claim against Dallas, or EXE, arising out of the 1992 events. I do not accept that Linfox had any obligation to call any evidence about these matters. No issue arose on the pleadings, nor did any evidentiary onus arise. All what happened was that witnesses were cross-examined about questions concerning credit, and then Mr Worth was called, and various documents were tendered as going to these credit questions: see the Evidence Act 1997, s 55(2)(a). In these circumstances Linfox was not required to explain or contradict anything. It may be that its witnesses would have preferred their credit and their reputations to have been better defended, if that was forensically possible for Linfox, but that does not mean, in the context of this case, that Linfox bore any onus or had any obligation, nor in the absence of such evidence that the situation has arisen where a court is entitled to be bold in drawing inferences adverse to Linfox, because of the lack of such evidence. Compare the Insurance Commissioner v Joyce (1948) 77 CLR 39, 49 and SS Pharmaceutical Company Ltd v Qantas Airways Ltd [1991] 1 Lloyd's Rep 288, 293 and 305-306. Perhaps the position would be different if the credit of a party, as distinct from a witness who is not a party, is attacked, but I do not need to decide this question. 468 Another complexity then arose. Probably it arose just after 28 April, since there was no mention of it in the letters of that date. It seems likely that Linfox raised a question about what would happen if its relationship with Yates was terminated (Linfox does not appear to accept this, but presumably it was Linfox that raised the matter, rather than EXE, since EXE is not shown to have any knowledge at the time of the strained relationship between Linfox and Yates, but I do not need to decide who raised the question), and to have suggested that the proposed licences be somehow assignable. EXE then took the commercial position that it had offered to sell the licences to Linfox at a price which was less than the price for which it would have been prepared to sell them to Yates; if affairs progressed so that its customer became Yates rather than Linfox, it needed to be compensated, in part because of the periodic maintenance fees that it proposed to charge its customer being calculated by reference to a percentage of the licence fee to be charged; and it requested that Linfox pay it $100,000 in the event that the licence fees were assigned to Yates. Mr Worth said this: Q. So the effect of the price for the assignment was that, whereas Linfox got the 30 licences at no cost? A. Yes. Q. If there was to be an assignment, then the no cost became $100,000? A. Yes. Q. And the reason why the no cost became $100,000 was because you wanted to, obviously enough, and part of the ordinary commercial negotiations, try and in effect get something back in return for the agreement to assign? A. Yes. 469 In submissions, the parties differed as to what should be drawn from this passage. This was part of a wider debate as to whether it was accurate to say that Linfox and EXE negotiated as to whether the sum of $100,000 should be shared between them. I do not need to decide this question. 470 From EXE's point of view, it was desirable, if not necessary, that EXE improve its position vis a vis Yates, in the event that there was an assignment of the licences: if there was a Master Software Licence Agreement between EXE and Linfox, as had been proposed, and that agreement became the basis upon which EXE might, upon assignment, charge Yates fees, then EXE might be disadvantaged: it would only be able to charge Yates fees calculated by reference to that agreement. EXE wished to be able to charge Yates fees calculated by reference to a licence sale price of $6,950 each. All this was, of course, a matter for the future as at late April, but EXE and Linfox were engaged in some hard bargaining about the money that Yates might have to pay later on. 471 The next event for which there is a documentary record is a fax from Mr Worth to Mr Bennett and others at Linfox dated 31 April (sic - probably an error for 30 April). It recorded the fact, or at least the statement that the figure of $100,000 had been determined "as being the difference between a Single Customer Price, after allowing 25% off a current list price and Linfox's ongoing multi-site/volume based pricing, including special discount". The arithmetic supporting this statement is obscure. 472 Within Linfox there was still dissatisfaction with the technical aspects of EXE's proposal, but this was not communicated to Yates. There was a meeting on 4 May between Messrs Worth, Hood and Fox, but nothing presently relevant appears to have come from that. There was then a meeting, or a series of meetings, held at Melbourne on 6 May, attended by Messrs Bennett, Worth, Pearce and Southwell (of Linfox). Yates pointed to this as showing that Mr Pearce, contrary to his evidence, had been involved in the process whereby Linfox negotiated with EXE, concerning the price that Linfox quoted to Yates on 21 July. Mr Pearce denied that he had been involved, and said that he had no significant knowledge about the negotiations, and Yates contended that this was untrue. 473 Mr Worth said that he did not really recall the meeting. Before he made his statement, tendered in his evidence in chief, he had been shown a copy of Mr Bennett's notes made on 6 May, and he seems to have used these notes, coupled with a letter that he sent to Mr Pearce on 14 May, and perhaps other documents as a basis for trying to recall or reconstruct what had happened. However, he accepted that there was a meeting in early May, and that there were negotiations relating to the reduction of the figure of $100,000; and he accepted, on reference to the records shown to him, that the meeting took place on 6 May. He also accepted that, until that time, the negotiating position reached had been that Linfox was to receive from EXE the first 30 licences at no cost, and the next 20 at $3,500 each; and that if there was to be an assignment of the licences to Yates, then EXE wanted Linfox to pay it $100,000. At the meeting this figure was negotiated down to $75,000 or $73,500 (once again, as between Linfox and EXE, the difference between these two figures was evidently not regarded as significant, and both figures were used at different times; $75,000 represents the difference in relation to 30 licence fees reduced from $7,000 to $4,500 each, and $73,500 represents the difference in relation to 30 licence fees reduced from $6,950 to $4,500 each). There was then discussion about the "amortisation" of this sum ($75,000 or $73,500) over a period of five years, in substance to compensate EXE for the loss of the commercial opportunity to deal with Yates over this period, the value of that loss diminishing over time, as the software aged, and the profit that might come from ongoing maintenance fees lessened. 474 Mr Worth said he could not recall the detail about this, but he did agree that there was a discussion about this reduction, and that the price of $6,950, EXE's ordinary "retail price", had been reduced for Linfox. This was "a special price". He did not recall any discussion about "a notional price", nor any discussion as to what Linfox proposed to charge Yates. 475 On 14 May Mr Worth sent an email to Mr Pearce reading: Please find attached draft letter to Paul [Bennett] regarding proposal to go forward. As you will see, the costs of customisations have increased as a significant number were identified as being required to manage the Linfox/Yates operations. If there are any issues please let me know asap. I would appreciate if we could get acknowledgement in writing that Linfox wishes to proceed and we can then get the legals out of the way. You may need one on EXE letterhead. Please let Gary McDonald or myself know to arrange. Mark, like yourself I want this to work. 476 The attached draft letter bears the date 20 April, but this was an error: the letter referred to events of 13 May, seemingly "yesterday". The letter was a revision of an earlier draft. It is quite lengthy. It referred amongst other things to a technical demonstration held on 13 May, and set out the terms of the proposed agreement between EXE and Linfox, in greater detail than before. I do not think there is any need to set out most of this detail, but the following passages are in a different category: 6) Assignment of License from Linfox to Yates. On payment of an amount by Linfox to EXE as determined below, EXE will grant to Yates the use of the Licensed Product, as defined in the MSLA [Master Software Licence Agreement]. (Based on 30 Concurrent users)

… 9) Recognition of Prior License Arrangements Without prejudice, EXE wishes to recognise certain obligations under a prior license agreement Linfox entered into with Dallas Systems EXE has discounted the license fees as follows: a) On a single User basis the first 100 Users have been discounted by approx $2,450 ($6,950 - $4,500) b) On Users past 101 an additional $1,000 discount has been provided. c) To further demonstrate our commitment to Linfox, we have agreed to provide the licenses for the 30 Users for the Yates site at no cost. This is a $135,000 benefit. 477 The immediate enquiry concerns what was or was not said on 6 May, particularly in the presence of Mr Pearce, and whether he had any involvement on that or on any other occasion with the price negotiations between EXE and Linfox, or whether he had real knowledge acquired otherwise about those price negotiations, and if so how his credit is affected. That is important in relation to the question whether his evidence should be accepted as to what occurred on the occasion of the BOR meeting of 21 July, particularly as to what is recorded in the minutes, quoted at [454], and as to what was said or not said in that connection. 478 Mr Pearce said that he attended one meeting at Melbourne with Mr Bennett and Mr Worth, and the date of that, 6 May, can be fixed by reference to Mr Bennett's note. He said that he had no recollection of the particular meeting. He said that he knew in early May that the cost per licence that EXE had proposed to charge had been negotiated down from $6,950 to $4,500, but denied that at the meeting of 6 May it had been drawn to his attention that EXE had agreed to make no charge for the first 30 licences: that was not said in his presence. He knew of the company Dallas, but not of the Dallas settlement, and he did not know that EXE was not going to charge Linfox a fee for the 30 Yates licences. Although he visited Melbourne infrequently, he in substance said that he had no recollection of what had happened on the occasion of this Melbourne meeting, except to the extent that it was recorded in Mr Bennett's notes. 479 It is clear that Mr Pearce was directly concerned with some of the price negotiations, but he said that his involvement was limited to the pricing of the relevant implementation costs, and not on a more general basis. On 12 May he sent an email to Mr Bennett, in which he said: Subject: Functional Review with David Worth As a result of the functional review undertaken of the EXE EXceed 4000 product I am confident (as are all who participated) and comfortable to proceed from an operations, functionality view point. In discussion with David Worth after the evaluation, we discussed the packaging of the additional mods into the price parameters that we discussed last week in Melbourne. ie Mt Druitt set up fixed fee of $125,000 Initial Customisations $35,000 Further mods, customisations $20,000 Total $180,000 This would be a good commercial outcome for Linfox, and is achievable by David. He did emphasise that the agreement, by Linfox to pay $30,000 on signing would greatly assist his case for obtaining this outcome for us. David is under a lot of pressure to show some upside for EXE out of all this as I gather from some of David's remarks there are some people making life very difficult for him at the moment within EXE. We (Linfox) need to execute the contracts with EXE as a priority as nothing is going to happen on the Yates project now until this is achieved. We need it finalised as a priority to ensure we make our deadline commitment to Yates. 480 There are in evidence the minutes of a meeting of 11 May titled "Functional Review", and those minutes deal with questions concerning the functionality of the computer programme. 481 Yates refers to the notes taken by Mr Pearce at the meeting, fixed as the 6 May meeting, and compares them with the notes taken by Mr Bennett, bearing that date. Each of these documents contains only notes, in manuscript, they are decidedly informal, and they are quite incomplete, but as Yates submitted (11 December 2003) and Linfox did not challenge (submissions 21 January 2004), a comparison between the two documents points to the conclusion that they are notes taken of the one meeting. Mr Pearce's note contains a number of figures that relate, not to the pricing of the implementation of the WMS, but to the more general pricing concerning the WMS, including the expression "transferral 75", meaning $75,000. Mr Bennett's note, seemingly on this point, recorded a calculation ($7,000 reduced to $4,500 equals $2,500, multiplied by 30 equals $75,000) and then: Recovery - Differential between what Linfox are charged, and what Yates should be charged. Approach to Yates - Bundled cost, Linfox sourced product $4,500, maintenance cost … 482 In short, the thrust of the Yates proposition was that one could see, from the reading of these two sets of notes, as well as from the content of Mr Pearce's emails of 23 December 1998 [458], and 12 May 1999 and the tenor of Mr Worth's email to him of 14 May that he was at least aware of, if not directly active in relation to the overall pricing negotiations. The pursuit of that question led to the cross-examination of Mr Bennett as to what had happened on 6 May, and to criticism of his evidence. 483 In his statement of 20 October 2003, part of his evidence in chief, he referred to his three pages of notes, which by then had been tendered by Yates. He described his practice in relation to his notebook, and said that, looking at his notes, it was probable that the first of the three pages represented an agenda, written in advance of a meeting, recording matters to be discussed at that meeting between himself and Messrs Pearce and Southwell; that the second page and the first two lines of the third page represented notes he had made during his separate meeting with Mr Worth, conducted in the absence of Messrs Pearce and Southwell; and that the balance of the third page represented notes he made later, in discussions with Mr Southwell. Mr Pearce had been present at the first of these three meetings to provide input into functional analysis and the aspects of the WMS that constituted the working system. In essence, he supported the proposition that Mr Pearce was not present during his discussions with Mr Worth, and was not involved in the general pricing negotiations. 484 I have previously quoted from Mr Bennett's notes. On his account or reconstruction of them, the dividing line between his notes as to what had occurred at his meeting with Mr Worth, and his subsequent meeting with Mr Southwell commences with the words "Approach to Yates". 485 In submissions, Yates described Mr Bennett's evidence in chief about the events of 6 May as confused and contradictory. Linfox accepted that it was confused and somewhat contradictory, but submitted that what he had said in chief should be accepted, and that he had consistently said that Mr Pearce was not present during his discussions with Mr Worth. 486 On page 2 of Mr Bennett's notes, there appears this passage: "Notional licence fee - rebate association - for repayment of the Dallas implementation in Unilever", a reference to the events of 1992. At one point Mr Bennett said that he thought Messrs Pearce and Southwell were both present when something was said about "the notional licence fee", and when he made this note; he said that the reference to the notional licence fee was a reference to the sum of $6,950, and later he said, inconsistently with what he had said in chief, that he was certain that page 2 of his notes did not refer to a discussion with Mr Worth on 6 May; and there was further cross-examination, which I need not describe. The parties debated just what it was that it was involved so far as concerned the proposed reduction of the figure of $100,000 to $75,000 or $73,500, and whether it represented some sharing or attempted sharing of the sum of $100,000 as between EXE and Linfox. There is no occasion for me to decide this question, for it does not arise as between Yates and Linfox. 487 What I do have to decide are questions raised about credit, and the questions raised about the events of 6 May constitute only one piece of a large mosaic. Mr Pearce's notes, linked to this date, appear to point to his having then had at least sufficient interest to record matters about pricing that went considerably beyond the question of prices concerning the implementation of the WMS. His protestation of a lack of memory about the events of that day is, by itself, problematic, and the other emails by and to him (29 December, 12 and 14 May) tend to point to his having a real interest in the price negotiations. Judging the matter by his evidence as a whole, and his conduct in the witness box, I would be surprised if he had sat passively through a meeting discussing these matters, contributing nothing, but making apparently pointless notes in his notebook. He was the Project Manager, or one of the project managers, and he thought that the project needed to be firmly propelled forwards. 488 I consider that he did take some part in the discussion of 6 May. Perhaps his role was minor, and it may well be that his primary role, and his primary interest, lay in relation to the costs of the implementation, but I consider that he also took an active interest in Linfox's attempt to negotiate as favourable an agreement with EXE as the circumstances permitted. I do not accept his assertion that he knew little or nothing about this matter. I also consider that Mr Bennett's evidence about the events of 6 May cannot be accepted. Perhaps, as Yates submitted, he was trying to bolster Mr Pearce's credit. It is difficult to see another reason for his advancing the unacceptable evidence he gave, and none was suggested. Rather, Linfox invited me to accept his evidence in chief. I do not do that, and I regard what he said on this topic as impacting upon his credit generally. 489 On 24 May Mr Pearce sent an email to Mr Bennett saying:

TOTAL $1,075,680 490 There were some pages of costings attached. Both in the email and at the summary of these costings, at the end, one finds the expression "implementation" used - "the price build for the implementation of the Yates WMS" and "summary of Exceed implementation costs for Yates project". These expressions might be regarded as using the word "implementation" in a wider sense than Mr Pearce would appear to have had me wish to consider that he used it, limited to costs other than those associated with the provision of the software. 491 The figures of $505,100 and of $28,080 assumed importance during the hearing. To look ahead for the moment, they are derived from the assumption that the price to be paid by Yates to Linfox was $6,950 per licence. Mr Pearce said that it had not occurred to him that this was inconsistent with the offer made by EXE to Linfox in the email that Mr Worth sent to Mr Pearce dated 14 May, a proposition that considered by itself, I have difficulty accepting, given his apparent talent for detail and his apparent focusing upon a profit to Linfox; and he said that Mr Bennett had told him of the figure of $6,950. 492 On 27 May there was a meeting between Messrs Bennett, Pearce, Worth and Ho, and on 28 May Mr Bennett wrote to Mr Worth recording that Linfox had agreed to commit to purchasing the Exceed WMS, subject to various concerns of a technical nature being satisfied; and Linfox agreed to pay EXE $30,000, so as to persuade EXE to progress the implementation work. Linfox involved its internal and external lawyers in the drafting of documents. On 9 June Mr Bennett wrote to Mr Rich, saying: WAREHOUSE MANAGEMENT SYSTEM Linfox are pleased to confirm our previous discussions, relating to Linfox's undertaking to install the Exceed 4000 Warheouse Management System ("WMS") to support Yates' warehousing operations at Mt Druitt, Laverton and Wyee ("the Sites"). The cost of this implementation to Yates for the installation of the associated hardware and software for the operation of the WMS at the Sites will be approximately $1,100,000. The exact figure being dependent upon confirmation of the final hardware configuration costs. A summary of the EXE Exceed 4000 software implementation costs for the Yates Project is attached. Linfox will agree to make the investment required to supply, install, commission and operate the WMS at the Sites on the basis that Yates acknowledges and agrees to the following: 1. Linfox will licence the WMS software from EXE Technologies Inc; 2. In addition to other charges payable by Yates pursuant to a pre-existing arrangement between Linfox and Yates, Yates will pay for the WMS on an amortised basis over 5 years (straight line with no residual) paid weekly in advance; 3. To avoid any doubt, Yates agrees that once the WMS is operational, Yates will continue to pay any other charges payable pursuant to a pre-existing arrangement with Linfox and Yates; 4. Linfox will own all hardware required to operate the WMS software; 5. Subject to Linfox obtaining EXE's written consent and Yates complying with its payment obligations in paragraph 6 below, if; a) Linfox and Yates do not enter into a written agreement with regard to the installation and operation of the WMS (the "Agreement") prior to 1st August 1999; or b) Linfox forms the view that Yates evidences an intention not to negotiate the Agreement; (each a "Termination Event") Linfox will assign its licence to use the WMS software for the Sites to Yates and Linfox will transfer ownership of the hardware installed to operate the WMS software to Yates; 6. If a Termination Event occurs, regardless of the reason for it, Yates will immediately pay Linfox: a) if the Termination Event occurs prior to the WMS being fully operational, the substantiated amount expended by Linfox up to the date of the termination and any amount Linfox is required to pay to any other party including, without limitation, as a result of previous commitments or penalties; or b) if the Termination Event occurs after the WMS is fully operational, the full unamortised portion of the WMS that would have been amortised and due to Linfox over the remaining 5 year term. 7. Immediately upon Linfox successfully implementing the WMS on the Sites, Linfox and Yates will enter into good faith negotiations to conclude the Agreement. The initial period of the Agreement will be in line with the 5 year amortisation period, which is expected to commence on 1st August 1999. 8. Yates agrees that to the extent lawful, Linfox excludes all liability arising from the installation or operation of the WMS or otherwise except where any liability arises from Linfox's negligent act or omission. In any event, Linfox will not be liable for any indirect losses, loss of profits, consequential loss or loss of goodwill. 9. Yates agrees to indemnify Linfox in respect of any third party claim arising from the installation or operation of the WMS or otherwise where such claim does not arise from any negligent act or omission of Linfox. Please sign, date and return the attached copy of this letter to indicate Yates' acceptance of the above terms 493 Mr Rich signed the letter and returned it, and on 10 June Mr Bennett wrote to Mr Ballantyne. I have quoted part of this letter at [107]. Another part of it reads: 3. Warehouse Management System. I received today a signed copy of the Heads of Agreement and I understand that the Business Narrative is being reviewed next week. We are still confident of the system going live prior to the spring business surge. The reduction of labour in Melbourne and Sydney by six people from our base labour compliment will mean that the WMS implementation is cost neutral before other benefits such as the improvement in inventory management is felt by Yates. Obviously the Wyee warehouse will also be able to run with less labour than otherwise would have been the case. 494 There were then further drafting exercises carried out by Linfox's solicitors, including a revision of a draft Master Software Licence Agreement (amongst other things increasing the stated licence fee from $4,500 to $6,950), and a Professional Services Agreement, and a side letter was drafted. It reads: With reference to the Master Software Licence Agreement between Linfox and EXE ("MSLA") and the Professional Services Agreement between Linfox and EXE ("PSA") and by signing a copy of this letter, both parties are acknowledging that they have agreed on the following ancillary matters: 1. EXE agrees in respect of the licence of the EXceed 4000 product for the first 30 users for the Linfox/Yates operation in Australia. EXE will rebate the full amount of license fees paid by Linfox. 2. EXE agrees that in relation to any subsequent users of EXceed 4000: (a) Up to the 100th user - the licence fee will be rebated by $2,450 per user. Therefore the actual cost to Linfox will be $4,500 per user. (b) Beyond the 100th user - the licence fee will be rebated by $3,450 per user. Therefore, the actual cost to Linfox will be $3,500 per user. 3. EXE agrees that the licence fees will remain the same until 31 December 2000. 4. After 31 December 2000 any increase in the licence fees will be negotiated between the parties. If the licence fees are increased there will also be a corresponding increase in the rebate to Linfox. 5. EXE agrees that, if requested at any time by Linfox, EXE will consent to a novation of the agreement made pursuant to the MSLA in relation to Yates (Order Form 1) and/or the PSA, so that Yates and Yates' related bodies corporate become parties to the agreement made pursuant to the MSLA and/or the PSA in lieu of Linfox. From their effective date, Linfox will have no further obligations under those agreements. 6. If such a novation occurs within six years from the date of the Master Software Licence Agreement, Linfox will pay EXE: (a) if the agreement is assigned in the first year after the date of the contract - $75,000 (b) if the agreement is assigned in the second year after the date of the contract - $60,000 (c) if the agreement is assigned in the third year after the date of the contract - $45,000 (d) if the agreement is assigned in the fourth year after the date of the contract - $30,000 (e) if the agreement is assigned in the fifth year after the date of the contract - $15,000. 7. EXE and Linfox agree that this letter is binding on both parties notwithstanding anything in the MSLA or the Professional Services Agreement to the contrary. EXE and Linfox agree that this letter operates so that the parties are not stopped from relying on the heads of agreement set out above. 495 On 28 June there was a further meeting attended by Messrs Bennett, Jacob, Southwell and Worth. The notes of the first two of these men are in evidence. There were discussed in detail the terms of the three documents. The commercial terms did not change between that date and 21 July. Mr Worth said, about the drafting of the Master Software Licence Agreement: Q. Price is an important feature of agreement as you understand it, such has the Master Software Licence Agreement; do you agree? A. Yes. Q. It is one of the fundamental terms of such an agreement; correct? A. Correct. Q. So far as price was concerned, this agreement does not record the true arrangement in respect of the price of the licences, does it? A. No. Q. That was done deliberately; do you agree? A. Yes, we agreed to document it that way, yes. Q. That deliberate step was taken, do you agree, on your understanding to ensure that if an assignment occurred at some future point in time after Linfox and EXE had entered into a licence agreement, that the documentation which was shown to Yates would record a price of 6,950 per licence; do you agree? A. Yes. Q. And you knew at the time you agreed to this arrangement that that price, 6,950 was not the true price being charged by EXE to Linfox in respect of the 50 licences referred to in this agreement, didn't you? A. Yes. Q. So that what you did was enter into or proposed entering into a formal document recording terms, important terms as to price, which did not reflect the true agreement; correct? A. Because knowing that there was another letter that was prepared at the same time which had been reviewed and drafted subsequently by solicitors. … SMITH: Q. At the time you in effect knew that this draft had the licence fee of $4,500 struck through and 6,950 substituted, you knew or believed, can I suggest, that if an assignment occurred as between Linfox and Yates, Yates would be entitled to see these documents; do you agree? A. Yes. Q. At the time you agreed to the substitution of the 6,950 figure in this document, you believed that if an assignment occurred at some future point in time after EXE and Linfox had entered into the licences, that Yates would see in this agreement the figure of 6,950 as the price of the relevant licences; do you agree? A. Yes, I do. Q. At the time you agreed to the 6,950 being recorded in this agreement, you believed, didn't you, that the 6,950 price was not the true price payable by Linfox for the Yates licences; do you agree? A. Yes, Linfox was going to be paying less. … A. I would work on the basis that Yates would assume that Linfox would have got a lower price, and that relationship would be between Linfox and Yates. As to what - we wouldn't in the normal course of events disclose what the final price would be. But I would work on the basis that Yates would assume, being a much smaller organisation to Linfox, that there would have been a lower price. Q. Come back to my question. So far as EXE and you on its behalf was concerned, the purpose of this side letter was to ensure that Yates did not find out that the licences which Linfox had obtained for them were not being licensed at a cost of 6,950 to EXE; do you agree? A. I would say the purpose of that was to achieve that. Q. Your purpose. This side letter was to achieve that? A. No, we certainly would not want Yates to know the price that we had given to them. 496 Mr Worth (who had been a director of Linfox for 18 years) appeared to be anything but unsympathetic to Linfox's cause. I see no reason for doubting that the changes to the documents were made deliberately, and generally for the purpose he described: this accords with the documentary history of the negotiations, and the drafting of the various agreements. I am not so confident about his statement that he assumed that Yates would not be so naïve as to take the documents at face value. 497 It is quite clear that Mr Bennett, on a number of occasions, gave close attention to both the commercial and the legal aspects of the transaction. Yates challenged why it was that he had not disclosed to Yates the fact that Linfox was not going to actually pay EXE $6,950 per licence, in circumstances where, on a straight forward reading of section 2 of the minutes of the BOR meeting of 21 July, a reader might well conclude that that was the sum that Linfox was to pay to EXE. Mr Bennett said a number of things: he was waiting for an agreement with Yates, so that Linfox could then negotiate with EXE on a firm basis, he expecting that he would have to reveal the ultimate outcome to Yates; he was reluctant to tell Yates that the price was only $4,500 and might be less, until he had a signed agreement from Yates; it would have been imprudent to tell Yates because there were still uncertainties to be resolved, and, at the BOR meeting there were other things to be discussed and more difficult issues to be resolved at the time; Yates was being difficult, and if he could not absolutely deliver something, Linfox was better off telling Yates nothing; he had adopted a safe position to enable Linfox to complete its arrangements with EXE; it was a sound position for him to adopt; and because of the strained relationship between Linfox and Yates: "If you do not have all your ducks in a row, it was better to tell them nothing, and we did not have all our ducks in a row at that stage". 498 Pressed to say whether what the minutes of the BOR meeting recorded was true or untrue, he said that it was "true enough at that stage", and "suitable for the negotiating position that we were in", although he said, often, that Linfox would have told Yates the actual position, when it had been negotiated with EXE. A difficulty about the last proposition is that the decision to tell Yates about this would not have been his, but the decision of someone superior to him in the Linfox organisation, and no-one superior to him gave evidence. 499 In cross-examination and again in re-examination he spoke of the possibility that Linfox might have to pay EXE for the cost of 50 licences, when it had only resold 30 of them to Yates. This is hardly an answer to the proposition that Linfox was not telling Yates the truth: if Linfox had said words to the effect that it was paying EXE a maximum of $6,950, but might be able to negotiate a lower price, that statement would appear to have adequately protected Linfox against its supposed risk. 500 In re-examination he also referred to other fees yet to be incurred, but as Yates submitted, each of these fees had already been provided for in the calculation of the price quoted in the BOR meeting minutes. Linfox's response to this submission (that the fee had not been charged to Yates, but may have been charged to Linfox if the terms had not been finalised) seems to be beside the point. Linfox's representation to Yates as to the price to be paid included these sums, and Mr Bennett's explanation that these fees might be incurred does not answer the criticism made of him. 501 Linfox now submits that the position is that there was no true or untrue position as at July 1999: Linfox was still negotiating with EXE. So it was, but there is no claim made, for example, of misleading or deceptive conduct in relation to what was said at about the time of the BOR meeting. I am concerned only with questions about credit. At times Mr Bennett seemed surprised and hurt at suggestions made that he had acted other than honourably, but I regard his evidence about the pricing of the WMS, and what was said on the occasion of the BOR meeting as quite untrustworthy and unreliable. 502 Yates also mounted an attack upon Mr Pearce's credit, concerning what had been said about the WMS pricing. It was he who had prepared the figures recorded in the minutes, and the figures of $505,100 and $28,080 had been calculated by reference to 30 licences at a licence fee of $6,950. He said that he did not know that Linfox was not going to pay that sum to EXE in respect of each such licence. I dealt earlier with the role that he played at the 6 May meeting: [488]. However, Yates also points to an email that Mr Worth sent to Mr Pearce on 14 May: [475]. Part of the attached draft letter is quoted at [476]. Another part of it reads: This proposal is put forward on the basis that both parties can move forward and all past obligations that may exist are extinguished as a result of this agreement. We have structured this proposal into two parts: a) To cover the normal commercial arrangements between our two companies b) To provide recognition of the past license agreement dated June 92 The Linfox/Yates project will be used as the initial site and both companies enter into this agreement on the basis that EXE becomes the preferred supplier. We believe the following summarises the main issues that have been outstanding. 1) EXceed 4000 Functionality: After the demonstrations and discussions held in Sydney on May 13, 1999 Linfox advised EXE that with the customisations identified, the system would be suitable for the Linfox/Yates operation and that both parties could proceed subject to finalisation of commercial arrangements. 2) EXE agrees to license the EXceed 4000 CS core product for 30 concurrent users for the Linfox/Yates operation in Australia at A$6,590 per user. · EXE will rebate to Linfox $2,450 per user as a special discount. This will be documented in a separate agreement. · As required to meet peak periods within Yates operation, EXE will provide to Linfox temporary licenses on the basis of payment of A$135 per user per month. Periods will be in blocks of one month. Any additional costs associated with installation or setting up the operations will be borne by Linfox. 503 I consider that his evidence on this point is not acceptable. 504 Yates also criticised the evidence of Mr Jacob. He was the business development manager of Linfox's industrial division, and was responsible for developing Linfox's relationship with Yates. In early 1999 he knew of a proposal that EXE would become Linfox's preferred supplier of WMS software, to be installed for Yates and for others. He knew that the EXE product was a leading one, so that if Linfox could conclude an appropriate arrangement with EXE, Linfox would obtain an edge over its competitors and become a leading logistics provider. It was an important commercial objective of Linfox that it conclude this arrangement with EXE, and an aspect of that was to ensure that Yates took up the EXE product. 505 It is really quite clear that, in general terms, Mr Jacob knew of a proposal that Linfox would not pay EXE as much as $6,950 per licence, but that nevertheless he participated in the drafting of the minutes of the BOR meeting of 21 July, and that he said nothing to anyone from Yates to draw attention to the possibility that Linfox would not pay as much as $6,950. All that is disputed is the detail, and this only goes to questions about credit. 506 On 28 June Mr Bennett told Mr Jacob that Linfox was not to enter into a contract with EXE, without there being a long term contract between Linfox and Yates: as Mr Jacob's note recorded, there was to be a "parallel signing". On that day there was a meeting between Messrs Bennett, Jacob and Worth. Mr Jacob said that he attended the meeting for purposes that included the purpose of negotiating a sufficiency of the terms of the then proposed Master Software Licence Agreement, Professional Services Agreement and the side letter (although, later, he in substance withdrew this). He agreed that the notes he had made of the meeting suggested that as at 29 June he had a detailed and intimate understanding of the proposed arrangements discussed on 28 June. In cross-examination, he was taken through his notes about the events of May and June, and this material, coupled with the nature of the position that he held, seems to make it very likely that he knew more about the progress of the negotiations concerning Yates than he was content to admit. One document which makes it clear that he was actively engaged in the development of the relationship involving the three companies, EXE, Linfox and Yates, if not about the pricing of the WMS, is to be found in his email to Mr Pearce of 27 May, in these terms: I'm going to call you later on today to cover some of the issues that I will mention here and find out how the meeting of the WMS executive went. Firstly I must say that yesterday afternoon's meeting was a waste of time and, in fact, counterproductive. Specifically; · You were nothing but antagonistic to John Ballantyne. · You asked what questions he had when it was obvious from the BOR that his questions could not going to be asked [sic] until he has read the detail of the Exceed Business Plan. · The only valid question that Ballantyne could ask was when he was going to get a copy of that key document. He didn't receive a specific reply from you or Peter Robilliard. · Upon your insistence, Ballantyne eventually did ask a question relating to the running of the MRP [a software system] and whether PRMS would have accurate stock balances on record when the MRP is run. This is a valid question. However I interpreted (and certainly Ballantyne interpreted) your answer as dismissive and equating to "not my problem". This IS your problem. As the Project Manager you are not there to push the EXE product. You have to balance the requirement of the customer (Ballantyne), Linfox, EXE and Yates IT (Garland). Yesterday it appeared that you were doing EXE's bidding and totally dismissive of the requirements of the customer. I am still not satisfied that Ballantyne's question was answered. Will the systems align stock balances before the MRP is run? How is Peter Garland going to demonstrate this is so? At the risk of completely giving you the shits I reiterate that you need to walk Ballantyne through the Business Plan by firstly covering his key issues: the four basic criteria and the types of transactions (x8) and then other aspects and rules. When is this Business Plan going to be delivered? Secondly Ballantyne does not want a stocktake to be conducted at the time of the move. He would love to do a rack-to-rack move but I have pointed out that this may not be possible given the tight time window. Hopefully today I will send a document which lists the main tasks for the move and options on the staffing of the project. At this stage I see you as the Project Manager of the move due to the intimate relationship between the layout at Mt Druitt, WMS and the relocation. Please tell me now if you see a problem with this. Thirdly you should let your mates in EXE know that Kirby Refrigeration (Ballantyne's old haunt) has put their WMS procurement project on hold until they hear how the implementation of EXE at Yates goes. Kirby are also on PRMS and have 29 distribution points around Australia. Do EXE need any more motivating to get Yates right? Lastly please get in the habit of reassuring Ballantyne whenever you see him. The best way you can do this is express progress in the WMS project relative to his key concerns. He really does want it to work and does not want it delayed. He does feel very vulnerable, however, and he will not accept failure if the failure is due to his basic requirements being ignored or treated in a cursory manner. I'll call you. 507 His diary notes also record his knowledge of the "heads of agreement" letter of 9 June: [492]; and he agreed that he knew of the proposal that Linfox agreed to pay EXE $30,000, so that EXE would do further development work in connection with the WMS system, there being a difficulty about this at that time, because EXE was unwilling to do further work developing the system, without payment from Linfox. 508 Perhaps the central point here is that he denied having appreciated that the 21 July BOR minutes, speaking of a figure of $6,950 per licence, were inaccurate, in that he knew that there might very well be, if there would not actually be some discount given. I accept that he was aware of at least a good deal of the detail of the price negotiations. None of the qualifications to which Linfox points, such as a lack of a concluded agreement between Linfox and EXE, the possibility that Linfox might not resell 50 EXE licences, and the supposed existence of some claim by Linfox against Dallas or EXE, detracts from the thrust of Yates' point, that the terms of the BOR minutes were apt to mislead a reader, that Mr Jacob knew in substance of the true position, that he was one of those responsible for the drafting of the minutes, and that he said nothing to correct the wrong impression that someone reading the minutes would find conveyed by those minutes. 509 Yates' submissions of 11 December 2003 record at paragraphs 568-587 a good deal more of the detail of its criticisms of Mr Jacob, and Linfox's submissions of 21 January 2004, at the same paragraph numbers, respond. Independently of this, Linfox made submissions (16 January 2004, section N), to which Yates replied on 17 February 2004, and in relation to which Linfox responded on 12 May 2004. Without going into any of that detail, I record my view that Mr Jacob's evidence upon this topic is just not credible. In particular, his attempt to justify the statement that the price of $6,950 was at no margin to Linfox was quite unconvincing. Whilst he defended his position with spirit, he did not seem comfortable. 510 It is convenient to record here other observations about his credit generally. Notwithstanding his concern that Mr Pearce was being evasive with him, and his enquiries in that connection: [174], he did nothing to disclose his concern, so that he effectively contributed to the representations made by Mr Pearce on 6 July concerning costs savings, without mentioning the lead time problem. On 7 July he became further aware that what Mr Pearce had said the day before was wrong, but he did nothing to correct the position: [171] and [234]. See too the findings at [199], [203], [207] and [255]-[256]. Further, his account of what was said at the meeting of 30 July is inconsistent with his own diary entry, whilst the evidence of Mr Ballantyne is consistent with that entry: [253] - [254]. His evidence is inconsistent with that of Mr Ahearn at two points. First, Mr Jacob said that either Mr Ahearn or Mr Wilkinson of Yates told him that the whole of the warehouse would be available for the racking contractor as at 5 July. Mr Ahearn denied saying this, and I accept his evidence. That leaves the possibility that Mr Wilkinson said the words in question, but see generally [349]. Secondly, what Mr Jacob said about the state of the warehouse on about 22 July is not accurate: [360] and following. 511 At a number of points Mr Jacob appears to have subordinated other considerations to the interests of Linfox. I consider that it is necessary to look carefully and doubtfully, if not sceptically, at anything he says. Other Questions Concerning the Implementation of the WMS 512 A variety of questions were raised concerning what had to be done and what was done to implement the WMS, why it was delayed, and what the consequences of the delay were. One matter that assumed greater importance as the trial progressed concerned the work that had to be done, predominantly by EXE, but in collaboration with Linfox and Yates, to "customise" EXE's generic software programme to the particular needs of Yates. Significant delays occurred. Linfox attributed to Yates a cause, if not the cause, saying that Mr Ballantyne had not produced certain product master data. I have dealt with this issue, commencing at [269]. This question is intertwined with the question whether delay was caused by negotiations about price, just dealt with, and with other questions, concerning what might be described as the technical work to be done customising the existing EXE programme. 513 There was a meeting held on 4 March 1999 between various Linfox and EXE personnel, described as a Kick-off meeting. Mr Pearce's record of the same day noted that all requests for input from Yates were to be channelled through himself to start with, and then noted: 7. We discussed the draft project plan and the timing. We can realistically achieve a mid June '99 site commissioning at CLYDE and Laverton. This will give us time to have a well-trained workforce prior to the spring workload. The commissioning of the system at the Mt Druitt site would follow. Wyee site would follow Mt Druitt. 8. These timings whilst indicative at this time have been set as targets and both EXE and Linfox are confident that we will come close. Much will depend on the allocation of resources by Yates, specifically Peter Garlands time to coordinate the interface already written between PRMS and Paperless to EXE. 9. The documentation that EXE provide is minimal and "Vanilla". Site specific documentation covering site specific requirements will need to be produced by Linfox. … 11. During the third week of March EXE will be conducting a training course in Melbourne. At this stage the following people have been identified as requiring training at some stage. It is important that those people involved in the 'Business Review' phase of the project have had this training prior to the review. [There followed a list of Linfox personnel] … 14. At the conclusion of the EXE meeting the Linfox team then met and set and agreed the distribution of workload required to complete the first Information Gathering phase of the project. The Client Profile Analysis. This is due to be completed for Yates three sites Clyde, Laverton and Wyee by Friday 12th March '99. Please refer attached Project Plan. 514 EXE provided a "Statement of Work" dated 15 March outlining what work was then contemplated. There were nine phases: 1. Project Initiation 2. Information Gathering 3. Education 4. Business Review Summit 5. Design & Development 6. Deployment 7. Go Live 8. Post Implementation Audit 9. Project Closure 515 Phases 2 to 4 were called the Business Review Process, and phases 5 to 7 were called the Execution Process. Matters did not proceed smoothly. Mr Toomey attended a training course conducted by EXE, and on 22 March he forwarded to Mr Pearce a memorandum, some nine pages of single spaced typing long, containing scathing criticism of many aspects of the training course, of the quality of the EXE product, and of EXE's commitment to doing anything beyond selling its product. This criticism was not communicated to Yates. Instead, there were various meetings and discussions. None of this is suggested to have had any enduring significance. By 16 April, the position then reached was set out in a document titled "Project Tasks and Issues". I have quoted from an edited version of this at [280], the edited version being sent to Yates on 29 April. The unedited version listed 63 tasks to be performed, the second one being for EXE to produce a Business Review Plan, and that was to have been completed by 14 April. This work, which formed an important prerequisite to the practical implementation of the WMS was not done by that date. Indeed, it was only half done by the middle of August, a circumstance which mocks most if not all of Linfox's contentions, based upon the absence of a WMS at the time of the move from Clyde to Mt Druitt. 516 I am not confident that the evidence establishes precisely why EXE delayed in this work, but it seems likely that it was because, or largely or primarily because EXE reached a point where it was unwilling to commit further resources to its project to deal with Linfox, unless and until Linfox had committed itself to deal with EXE. At the same time, Linfox was unwilling to commit itself to deal with EXE until it had secured a binding commitment from Yates. If so, Linfox does not appear to have communicated this to Yates. This impasse was only resolved in late May, when Linfox agreed to pay $30,000 to EXE on account of the further work then to be performed by EXE: [492], but even then matters did not proceed as quickly as had been forecast earlier. In the meantime, on 3 May, Mr Pearce sent the email quoted at [282]. Notwithstanding his views, Linfox appears to have chosen to try to continue with the EXE proposal, although the evidence is incomplete as to what went on within the Linfox organisation. Negotiations about the commercial aspects of the transaction continued, but little or nothing productive, concerning the technical work needed, was done before a Business Narrative Meeting held on 15 and 16 June. I have set out the more significant aspects about this work at [283] and following. There is really little more to add: Linfox worked towards having Yates commit itself to acquiring the EXE WMS package; by 28 May it was evidently sufficiently confident about this to commit itself to paying $30,000 to EXE, in order to prompt EXE to resume the technical work needed; and from about 15 June that work proceeded; but EXE had not done what had to be done, in order to enable the WMS to be installed before the move commenced. 517 During the trial I criticised the credit of Mr Pearce. In final submissions, Linfox invited me to review this view, and I have done so, thereby adding to the length of these reasons. I have dealt above with various factual disputes, but I should record some more general observations. He gave extensive oral evidence in chief, speaking quickly and confidently. As soon as the cross-examination commenced, there was a pronounced change: he paused before answering questions, and answered them slowly, and carefully. However, after a time, he grew more confident and thereafter, he alternated between the two styles of giving evidence - on some topics he was quickly spoken and confident, occasionally appearing to enjoy scoring what he regarded as points against the cross-examiner, but in relation to other topics he paused before answering, and then answered slowly. He claimed not to be able to recall many things: Yates provided a 14 page list of such matters. His evidence conflicts with the evidence of many other witnesses, including a number of Linfox witnesses, at many points. 518 Early in his cross-examination, he said of Linfox: "I take the moral high ground. We don't - we're ethical". The next day, he claimed privilege against self incrimination. 519 I think it is quite clear that he has lied, deliberately and often, both in and out of court. I do not think it would be safe or prudent to rely upon anything he has said, in or out of court, about which there is any dispute, except to the extent that his account is corroborated by other acceptable evidence. 520 Nor do I consider that it would be safe to assume, without evidence, that his work, or Linfox's work, was done efficiently or with the best interests of Yates in mind. Mr Toomey sent to Messrs Jacob, Bennett and others at Linfox an email dated 19 May 1999 reading: Subject: Yates Project Management I wish to bring to your attention once again the lack of professionalism and commitment to the project management of the Yates WMS rollout and associated projects (Shift of Site, Multi Warehousing). Along with this is the use of myself as a resource. May I make it very clear, I am not the Project Manager of the Yates Implimentation [sic] nor the project sponsor for Multi Warehousing. I was brought into the contract to facilitate the WMS rollout. I am extremely concerned about the progress made to date on the WMS project and the level of professionalism, commitment, delegation and communication that is occurring across the project. Deadlines are not being met and people are drifting off in their own tangent. Yates have little commitment to the project, nor do EXE truly understand the Yates business and I chiefly blame Linfox's mis-management of the project process for this. Linfox have to be the drivers of this project and show some credibility and professionalism in the progress. Objectives, outcomes, results, responsibility and accountability. I beg the question "The project kick-off began on March 1. What have we achieved? Why" Their [sic] is no clear direction in the project, allocation of task or communication between parties. There is now [sic] clear project plan across the 3 parties of what has to be achived [sic] and how we are ging [sic] to achieve it in the set timeframe. Everything I witnessed in the project management to date has been a disaster. From the system spec, communication, Business Review Summitt [sic], Business Rules, Plans, task allocation to all parties singing out of the same hymn book. I feel I have offered ample support and suggestions to manage this process, as well as address my concerns to the appropriate people but to no avail. I must be blunt in saying the only reason the project has progressed and points been addressed is due to my input in the process. I am sick and tired of doing someone else's work and not being credited for it or having the say to drive my suggestions to fruition. I do not want my name or pofessionalism and standards tarnished due to someone else's lack of management. I draw you to this point by John Ballantyne today "You don't listen". I do listen and very clearly, but I am not the person managing this process. No longer do I wish to justify my exitstance [sic] or have to justify Linfox's lack of professionalism and communication. In regards to Multi Warehousing I am disappointed firstly in the way I was hand-balled the project and I am now seen as the process owner in Yates eyes. Secondly, I am disappointed that the memo I sent to you addressing Multi warehousing was not given the due attention at last weeks meeting. I feel extremely undermined and feel little support. I have completed extensive work on this project, somewhat even outside the scope of Multi warehousing, to bring value added results to the Yates operation. Along with these points is the continual allocation of myself to tasks. Their [sic] needs to be clear definition of my role in both the Yates and Smiths projects and what is required and who the communication of utilising me lies with. No longer do I want to be pushed and pulled. It is with the above points in mind, I must ask you to address the Yates Project Management issue and severely scrutinise it. In regards to myself as a resource, I wish not to be associated with the Yates project until the concerns are addressed and we start to take a professional approach. I am becoming frustrated and stressed and spreading myself too thin for the role I am currently employed for. It is this frustration that has caused me recently to look at employment options outside the Linfox organisation. I don't want to go down this path as I feel I have a lot to offer, however the environment I work in must be comfortable. In my time in the Linfox organisation I feel I have grown extensively and if anything have brought a professionalism and standard to the processes I have been involved in. It is a shame that this cannot be diligently followed elsewhere. If Linfox is too [sic] grow we must all stand accountable and be active change agents in the all [sic] processes. At the end of the day, the key differentiator between Linfox and other organisations is going to be our professionalism and process of being leaders in our fields (Driving process change) for better bottom line results. 521 Similarly, he sent an email dated 29 June to Messrs Bennett and Jacob, reading: Subject: Re: Master Data Collation - Yates task Brief. As discussed, the Yates project continues to have problems on information distribution from project management to the project team. (See email from John Ballantyne below. This brief has been around for 4 weeks. Why did the document not get communicated and audited?) I have managed to speak to John and we have planned a meeting this week to discuss master data and related issues in detail so the project is fully aligned. Information not being communicated is both verbal and written. Upon speaking to John Ballantyne, he is extremely frustrated of this continually happening. It may be worthwhile Linfox management to take up this issue with John directly. This lack of communication is also frustrating the Linfox Project team in their endeavours to align the project and fulfil the clients requests. It makes Linfox look unprofessional and to put it bluntly stupid. The first project status meeting was only held last week and that was only due to my endeavours to arrange it. To date, I am still yet to see a project status report as a result of the meeting. On other issues, I am concerned about the following and the lack of progress that has taken place: · Hardware procurement - Nothing has happened nor have I received any written advice on the full hardware specification. Hardware can take up to 4 weeks or more for delivery alone. I am also concerned that the full system architecture and network topology has not been detailed. System architecture incorporates more than just the servers and workstations. · Racking configurations for Wyee and Mt Druitt - Linfox project resources can not begin location mapping until a final racking layout is supplied from Mark/Gary and Yates. This has not been completed and I believe the racking tender was only issued last week. What are they tendering? · Resources within the project are not being managed and have no clear deliverables. It is to this point that both Tracey, Rohan and myself have become so disheartened with the project and its progress to date. · EXE are not being held to tasks and managed professionally. Their delivery has been woeful. Who is holding these guys [accountable] for professional delivery and how? · Project dates - The time has come where we can not hide behind smoke and mirrors. Linfox are playing a dangerous game in not advising Yates of the realistic date and we could be setting ourselves up for a fall. The project can not be run professionally without a clear project plan which encompasses all facets of the project and all resources involved. Lets stop blaming each other for delays and get on with the job. · The reason the project is so twisted is that nothing has been put on paper and signed off, hence the project scope continually changes. Their needs to be 1 driver of this project with driver being the key word. If Linfox are to be held in [high] esteem and gain credibility for this implementation, my advise is a clear and precise project structure be created, with clear responsibilities. My personal concern is that I do not want my name tarnished by this project due to other peoples lack of professionalism or drive to ensure the project is delivered on time and successfully. I also do not want to be made a fool of or my creditbility shot through lack of communication within our own organisation. Lets be professional and set the standard with this project so Yates can sell us to the market place as a professional unit, not a bunch of misfits who don't communicate and have no plan. (sic) 522 It might be that Mr Toomey had some agenda of his own, not established by the evidence, but that does not mean that his contemporary complaints should be overlooked. Estoppel and Waiver 523 The defence founded upon "the commonly assumed facts" quoted at [25] turns upon Mr Ballantyne's decision made and communicated on 30 July to proceed with the move to Mt Druitt. Yates submitted that, for Linfox to succeed in this defence, Linfox had to establish, not just the factual propositions pleaded, but also that Mr Jacob told Mr Ballantyne these things, that Mr Jacob reported his conversation with Mr Ballantyne to Mr Bennett, that Mr Bennett formed a belief consequent upon this report to him, and that Mr Bennett acted in reliance upon that belief. In substance Linfox accepted these propositions, subject to two qualifications: first, Linfox was not restricted to what had been said by Mr Jacob to Mr Ballantyne on 30 July, but might otherwise establish knowledge by Yates of the facts pleaded; and secondly, that it would be sufficient for Linfox to prove its case by reference to any one or more of the 15 facts pleaded. 524 I accept the first of these qualifications as theoretically correct, although there are some practical problems to be then confronted, but the second is surprising. Linfox advanced 15 propositions of fact, some of them involving more than one single idea; in some cases the underlying facts alleged had not been proved, either in whole or in part; in some cases the underlying facts alleged have been established, but they are the results of Linfox's breaches of contract; and some of the underlying facts alleged - propositions (f), (g) and (h) - seem to be irrelevant to the suggestion that it would therefore be unconscientious for Yates to enforce the contract. Further, Mr Bennett's evidence as to how he would have acted, and how he would have permitted Linfox's other employees to act, does not discriminate in any realistic way between all these 15 topics. A significant part of the defence is not established, and it is not possible to disentangle what is left from what has fallen away. 525 As to proposition (a), it is I think correct that not all of the necessary racking parts had been procured as at 30 July, but this was the result of Linfox's breach of contract, and as at that date it was concealing that breach from Yates. It cannot be right therefore to say that any estoppel arises from this circumstance. Further, Linfox had not made known to Yates that 2,000 pallets were to be stored on the floor at Mt Druitt. 526 As to proposition (aa), it is accurate to say that the spring season had arrived early, so that there would be an increased number of orders received by Yates, but the proposition pleaded is really quite imprecise, in a way which I discuss below. Further, Mr Bennett said that he learned of the early onset of the spring season when he received a copy of an email from Mr Frost to Mr Ballantyne dated 4 August, which was in these terms: Subject: Sth Australia Delivery Judging by the number and size of orders processed at Clyde over the last few days, spring volumes have hit a few weeks earlier than anticipated. As a result of this early and unexpected increase, yesterdays South Australian orders were not completed and were carried over into today. THIS WILL NOT AFFECT THE EXPECTED DELIVERY DATE TO SOUTH AUSTRALIAN CUSTOMERS. These orders will be picked and despatched from Clyde by midday today and delivered to Blackburns in SA at the usual time of 6am Thursday. To ensure this outcome, I have arranged for a second driver to ride with the vehicle and take over driving when the first driver's legal hours have expired. There will be no additional cost to Yates for this service. Meanwhile, I have made arrangements for additional staff and am changing the start-finish times/shift structure to suit the spring peak. Please contact me if you have any questions. 527 One is left to wonder what, precisely, the effect of this email would have been upon Mr Bennett's thinking if this circumstance had stood alone, or in conjunction with some one or more of the 14 other propositions pleaded, and what he would have done about the situation, on receipt of the email of 4 August in other circumstances. By that time, I think the evidence shows, Linfox was committed to the move. But if Mr Bennett chose then to give instructions that Linfox not proceed further with the move, what would have been the consequences? Linfox was then in breach of its contractual obligations, and Yates had to vacate the Clyde premises by the end of the following week. Linfox did not take the matter further, and I venture to think that it could not have done so effectively. 528 Propositions (b), (c), (d) and (e) are factually correct, as at 30 July, with the rider that this was so as a matter of prediction so far as concerned future events, but to the extent that these matters had happened late, or had not happened, that was the result of Linfox's breach of contractual obligation, so that it is very difficult, if not impossible, to tease out of Mr Bennett's evidence what it was that he believed, consistently with my findings of breach of contract, that he or Linfox would have done had he accepted the facts as I have found them to be, and how any question arises as to the supposed unconscientiousness of Yates enforcing the contract. 529 I assume that propositions (f), (g) and (h) were intended to be considered together. Yates does not challenge the proposition that it agreed to accept responsibility for the consequences of the lack of an occupation certificate (but not otherwise). Given this agreement by Yates, and the findings as to what Mr Jacob and Mr Ballantyne said on 30 July, no estoppel arises. In passing, I observe that the contention that there was a lack of insurance cover does not pay regard to the provisions of s 54 of the Insurance Contracts Act 1984 (Cth). 530 Proposition (ff) founders, if for no other reason, on the evidence of Mr Frost, that he (relevantly, Linfox's planner) knew that there would not be a WMS installed, but it made no difference. 531 Proposition (i) is factually correct, but does not give rise to an estoppel. Considered by itself, it seems to help Yates rather than Linfox. The parties had known for months that Yates had to vacate Clyde, and that circumstance informed the thinking and the conduct of both parties. 532 I do not consider that Linfox has shown that Mr Ballantyne knew of the facts pleaded as proposition (j). I deal with this below; commencing at [594]. I take proposition (k) to be confined to proposition (j), and I find that Mr Jacob did not discuss any of propositions (k), (l) or (m) with Mr Ballantyne on 30 July. Proposition (m) is also dealt with below, commencing at [542]. 533 To a large extent, Linfox's contentions about estoppel raise issues dealt with above, and I will not repeat the detail about that. Apart from the factual difficulties mentioned, Linfox faces three other difficulties. First, as already noted, Mr Bennett discussed what it was that he believed, and what it was that he thought Mr Ballantyne believed, in a global fashion, so that when part of this matrix falls away, it is not clear what is left. 534 Secondly, I have a real difficulty in accepting Mr Bennett's statements as to what was his state of mind, unless and except to the extent that this was communicated to someone else at the time. Yates challenged Mr Bennett's evidence in a number of respects, and particularly his evidence as to his belief (that is, in this part of these reasons, his belief, relevant to the estoppel issue); and it categorised that part of his evidence as a fabrication. Whilst I do not make that finding, I do regard some parts of his evidence, including his evidence about his belief as disquieting and unreliable, so that, in the end, I am dubious about his evidence generally. 535 He presented as a calm, competent businessman, quick thinking, quietly spoken and experienced in his work, and it seems that, subject to the direction and control of his superiors, he was effectively solely in charge of carrying out the work done by Linfox in relation to Operation Leapfrog. He seemed to be motivated by considerations of loyalty to Linfox and its employees, and at some points to have assumed the role of advocate, rather than witness. At times, when in cross-examination his evidence was challenged, or the conduct of Linfox was criticised, he displayed indignation as well as irritation, but did not seem particularly perturbed, much less embarrassed by suggestions of dishonesty. To the contrary, so far as I could tell, he regarded this as an incident of the conduct of business. I have already mentioned his concession that certain conduct of Mr Parnell was disgraceful. He said that he would have spoken, or had someone else speak to Mr Parnell about this, but could not remember any further detail. At the time that Mr Pearce was negotiating with Mr Wiener and Yates about the sale of the Clyde racking parts, he had the means of knowledge that Mr Pearce was altering the figures as to the proportions of the racking parts that were owned by Linfox and by Yates respectively, and by the time he gave evidence it can hardly have escaped his close attention that Mr Pearce's conduct as to this was reprehensible, but he seemed unruffled. I have already dealt with the question concerning the implementation of the WMS, but, again, he defended himself, and Linfox's staff generally, without evident embarrassment. 536 Against this background, his statement, made perhaps for the first time in July 2003, setting out what he believed is unpersuasive. He explained the absence of a prior statement by blaming an unidentified lawyer. Yates queried this, but I consider that Linfox remains entitled to protect whatever privilege attached to the communication. However, that leaves me with Mr Bennett's account, and nothing else that is presently significant. There is no contemporary record. This might be natural enough: there is no obvious reason why he should have created some record as to his state of mind, although I note there were copious emails passing back and forth between Linfox and Yates. 537 The statement of his belief was described by Yates as "too good to be true", viewing the matter from Linfox's perspective. It reads more like a lawyer's document than Mr Bennett's statement, but the principal difficulty about it is that it presents in global form a statement as to what he believed, encompassing 15 separate matters, some of them compound expressions, without discriminating between them, either as to how he came to believe in these matters, or whether or to what extent his belief might have been affected if his belief as to the primary facts, or one or more of them, had been misplaced. 538 In addition, his proposition just does not seem to accord with the situation, viewed objectively. There can be no doubt but that by 30 July the relationship between Linfox and Yates was stressed. On Mr Bennett's own account, the proposed move had been discussed at some length at a BOR meeting on 21 July, when it was apparent that Yates wished the move to go ahead, pursuant to the arrangement that Mr Bennett had initially made with Mr Rich. Yet, Mr Bennett says, he believed that on 30 July, when little or nothing new had occurred, Mr Ballantyne on behalf of Yates undertook to accept responsibility, practically speaking, for almost anything that might go wrong if the move were carried out, and this statement of belief is at least partially founded upon the rather nebulous information that he received on 4 August concerning the early onset of the spring season. It seems reasonable to proceed on the basis that Mr Bennett, as at 30 July, did not have any particular expectation that anything particularly adverse would occur in the course of the move (see [250]), but on Mr Bennett's account, he was sufficiently troubled by the possibilities to seek an "indemnity" from Yates, at least in respect of the lack of an occupation certificate, and he says that he believed he obtained it. 539 The conjunction of his wanting an indemnity and Linfox's having failed to disclose to Yates its breach of contract leads to unattractive considerations, but that really goes to a different issue, and for the moment I am concerned with whether I accept his evidence about his belief. I am not persuaded that I should accept it. 540 Thirdly, there is a conceptual difficulty in the Linfox case: why should it be said that it would be unconscientious for Yates to rely upon the contract, when Linfox breached its terms, and concealed its breaches from Yates, so that as at 30 July, the position was that Yates was attempting itself to adhere to the contract, and to have Linfox adhere to the contract? 541 Linfox also pleaded a separate estoppel: see [29]. This overlaps with the first estoppel pleaded, and it was not suggested that a separate consideration was needed. I consider that both estoppel defences therefore fail, as does the defence of waiver, and the defence of lack of duty of care mentioned at [28]. Additionally, I find it difficult to see how, as a mater of theory, it might be said that Yates waived any breach of contract that Linfox might have committed in relation to the relocation, or, for that matter, how the doctrine of waiver might help Linfox in some more general way. Smithfield 542 I need to say more about the offer said to have been made by Linfox to Yates, that Yates might have the use of certain premises at Smithfield. To state matters shortly, Yates said that the Smithfield premises were offered to it for use, if needed, and that Yates accepted that the premises might be used, for a limited time, and for the limited purpose of the temporary storage of items not required for immediate use. Linfox said that the Smithfield premises were offered on a more general basis and that it should have been obvious, or was actually obvious, to Yates, no later than July, that since a rack-to-rack transfer from Clyde to Mt Druitt could not be achieved, Yates could and should have elected to move its entire operation from Clyde to Smithfield, until Mt Druitt was ready for occupation. The occupation certificate was not in fact issued until 21 October 1999. 543 There is no dispute but that some offer was made, or that some offers were made, but there are disputes about the details of these offers. 544 The 7 June plan put it this way: Linfox Smithfield (formerly Kmart) is available as a transit warehouse, if required, from 1 July to 31 August. The transit warehouse may be used for non-essential stock from Clyde and/or for stock from Revesby, Rouse Hill and Tamworth that would normally have been booked into the warehouse. 545 The references to Revesby, Rouse Hill and Tamworth are references to manufacturing facilities of Yates, located at those places. At and about 7 June, product manufactured at these facilities was delivered to the Clyde warehouse, for distribution to other places, and the long term plan was that product from these facilities would in future be delivered to the Mt Druitt distribution centre, for distribution from there. 546 When Mr Ballantyne read the 7 June plan, he wrote, saying that it "looks good", and he told Mr Jacob that the assumptions recorded in the plan were "fine". On 10 June Mr Bennett wrote to Mr Ballantyne saying, amongst other things: I have already indicated that additional resources of Linfox (eg. Smithfield warehouse, transport) will be at the disposal of the Project Manager if they are required throughout the tight relocation schedule. 547 Virtually everything else is in dispute. I have previously said that I prefer the account of Mr Ballantyne to that Mr Jacob, concerning what was said on 26 May: [103]. I have also found that Linfox did not say to Yates that rack-to-rack move could not be achieved, and that Mr Ballantyne did not know, or appreciate this, as at 21 July: [229]. I have also rejected so much of Linfox's case as asserts that Mr Jacob told Mr Ballantyne anything to this effect on 30 July: [255]. On these findings, part of the submissions advanced by Linfox in relation to Smithfield fall away, but I should add some further findings, in deference to the submissions made. Linfox submitted that Mr Ballantyne knew, and that if he did not know he ought to have known by no later than 30 July, that a rack-to-rack transfer from Clyde to Mt Druitt could not be achieved, and it said that the 7 June plan and the 10 June letter both made it plain that Smithfield was on offer, and it characterised Mr Ballantyne's evidence as unbelievable, by reference to these and other pieces of evidence. 548 In cross-examination, Mr Ballantyne said that in May he did not have any formal plan, as to what Yates might do if something went wrong with the proposed move, and if a rack-to-rack transfer could not be achieved. At that stage, he had no cause for concern, but he agreed that if the need had arisen, he would have turned to Linfox for assistance. He agreed that Smithfield had been ("often") offered on a limited basis, but denied that it had been offered on the basis that the move should be, not from Clyde to Mt Druitt, but from Clyde to Smithfield. 549 Linfox's submissions seem to blur this evidence, as to Mr Ballantyne's state of mind in May, with his state of mind on 30 July and thereabouts. It asked rhetorically why Mr Jacob would be concerned about the use of Smithfield in the context of a concern about the lack of an occupation certificate, suggesting that Mr Jacob must therefore have been offering Yates the use of Smithfield, as an alternative to Mt Druitt - that is, an offer to use Smithfield, not as a temporary storage facility, but as an alternative to the use of the whole of the Mt Druitt premises, treating the Mt Druitt premises as being unavailable. However, Mr Jacob's concern about this only arose in late July, and I accept the evidence of Mr Ballantyne that the discussions before 30 July were on the basis that he described, that is, on the basis that the Smithfield premises might be used on a temporary basis only, for the storage of non-essential materials. 550 Linfox also emphasised Mr Ballantyne's statement, recorded in Mr Jacob's diary note, that Mr Rich might dismiss Mr Ballantyne, but I accept Mr Ballantyne's evidence that this should not have been taken literally: it was in the nature of a remark that a man might make that his wife would divorce him if he were late for dinner again. 551 Linfox also relied on the evidence of Mr Frost that, from the beginning of his involvement as project manager (about May 1999), he approached the task on the basis that it might not be possible to achieve a rack-to-rack move, and therefore that it might be necessary to move initially from Clyde to an interim or transit warehouse. So far as it goes, this is reasonably persuasive, but it does not touch on the knowledge or belief of the Yates personnel, or what they should have known or believed. 552 Linfox stressed the contents of the 7 June plan and the 10 June letter, but as Yates pointed out, the submission tended to convert "may" to "will" in the plan, and to gloss over the expression "if required" in the letter. 553 Yates also relied upon a conversation between Mr Bennett and Mr Rich on some unspecified date, when the former said: "if the worst comes to the worst then we could move you into the Smithfield warehouse until Mt Druitt is ready", and upon this passage in the minutes of the BOR meeting of 21 July: The racking of Mt Druitt will not be complete until late August and, as a result, the storage capacity of Mt Druitt will be diminished. As Clyde has to be vacated by 13/8/99 there may be a requirement to temporarily store product offsite. 554 With the benefit of hindsight, one can see that Yates' personnel might have concluded, from these various communications, that it would be prudent to have considered using Smithfield (or some other premises) as a transit facility, but they say that they did not, and I accept this evidence. 555 Linfox submitted that Yates was determined to go ahead with the move, "come hell or high water". When Mr. Ballantyne was being cross-examined about the timing of the move he gave this evidence: Q. All right. I suggest to you that you don't. You simply say you can't recall the discussion but you acknowledge that views to that effect, in effect, were given to you by Jacob at some stage? A. Views related to the unfortunate timing of the move, yes. Q. Well, it would be consistent if he had a view about the unfortunate timing, wouldn't it, that he would have said to you, "Why don't you think about delaying until after the spring peak"? A. May I ask, you are referring to the period in June? Q. I am referring to a period in or about early June, yes, 1999. A. I believe that at that time we were aware our tenure at Clyde was finishing, and my feeling and everybody's feeling was that the option of delaying the move any further was now gone. Q. So, you simply say you had no choice. You had to move? A. I didn't, I don't remember saying that but I remember that that was my feeling. Q. Your sentiment? A. My sentiment. And I believe it was shared by everybody. Q. So the position was that because of the circumstances of the termination of the lease at Clyde, Yates' attitude was, as relayed to you from Mr. Rich and others and from you through to Linfox, that really, and excuse the colloquial, come hell or high water this move had to go ahead? A. That was the general feeling. How it was related to me, I'm - I don't remember, but that was the feeling that we all shared. 556 He was speaking of early June, but the submission, repeatedly advanced, assumed that the attitude of which he spoke continued throughout June and July, and that each decision that was made was informed by this "overweening" attitude. The evidence does not justify this unstated assumption, nor Linfox's submission that Mr Rich gave Mr Ballantyne a "come hell or high water direction". It was not put to Mr Rich that he had done so, and the general tenor of his evidence was inconsistent with this. Further, the submissions quote the colloquialism, and treat this as if it was Yates' motivation, rather than the result of the perceived need to move out of the Clyde premises. 557 To the extent that there are conflicts between the witnesses, and it is necessary to form judgments about credit, there is an overlap between three disputed topics: what was said about the possible move to Smithfield, what was said about the reason for reusing Clyde beams at Mt Druitt, and what was said about the acquisition of a WMS (dealt with above). In a long trial, where witnesses speak about a number of different topics, this is inevitable. Linfox criticised Mr Ballantyne, in the most robust and vigorous of terms, in the opening address, but the cross-examination of him left me with the impression at the time that this attack had been largely (and I thought at the time, properly) abandoned. However, the attack was renewed in final address: it was said that he had been "lying to hide his dishonesty", and that he was guilty of hypocrisy. I do not think the cross-examination of him justifies these submissions. In any event, he impressed me as an honest, careful, and generally reliable witness. Perhaps he had been appointed to perform a task for which he was not thoroughly qualified, but that does not affect a view about his qualities as a witness. One group of criticisms made of him started with the proposition that in 1999 he wanted to terminate Linfox's services, and it was said that he acted deceitfully so as to conceal this. I do not find this persuasive but in any event, the decision to do this was not one for him to make. 558 Linfox submitted that it had not been left to it to decide whether or not to move, or to what destination to move, or when to move, or how many pallets were to be block stacked - it was merely directed to move the entire contents of the Clyde warehouse to Mt. Druitt within a specified time frame. This submission, made in reply, was not accompanied by references to the evidence, except by way of repetition of earlier submissions going to overlapping topics. Perhaps the short answer now is that Linfox entered into a contract on the terms found above. 559 Linfox also argued that the facts concerning the debate about the proposition that there were either 2,000 pallets to be stacked on the floor at Mt Druitt, or 2,000 pallets already stacked on the floor at Clyde, favoured the adoption of this part of its case; that the BOR meeting minutes of 21 July should have made it clear to Yates that a rack-to-rack transfer could not be achieved; that various internal communications of Linfox corroborated the proposition that the possibility had been foreseen, long before 30 July, that a rack-to-rack transfer could not be achieved, and therefore that there might be a need to use Smithfield (or other similar facilities) whether as a transit facility or as an alternative to Mt Druitt temporarily; and there were other, relatively minor matters pressed. I repeat: with the benefit of hindsight, Yates' personnel might have thought differently, and might have acted differently, but they did not, and Linfox did nothing effective to cause Yates to act or think differently. A significant part of Linfox's difficulty now arises from the fact that it did not tell Yates at the time that it had encountered problems procuring the necessary racking parts. 560 However, Yates' case, on this topic, is stronger than that. On Linfox's case, the offer was made on Friday, 30 July. At that stage, the move, already delayed, was to commence the next morning, and Clyde had to be vacated some two weeks later. Nobody from Linfox said anything to anybody from Yates as to the details of the proposed move to Smithfield. 561 If, as appears to be the fact, Linfox had made careful detailed plans to move Yates from Clyde to Mt Druitt, it seems likely that it should have made careful detailed plans to move Yates from Clyde to Smithfield. I am content to assume that some of the planning for the move to Mt Druitt could be promptly converted into planning for the move to Smithfield, but not all of it. Further, there seems to be real significance in Yates' point that, as at 30 July, little or nothing was known, much less communicated to Yates, as to the suitability of the Smithfield premises, in terms of such matters as adequate telephone lines, computer lines, racking sizes, racking lay out, and transport arrangements. Indeed, so far as the evidence goes, it might be that (apart from some general observations made by Mr Bennett) nobody from Linfox gave any real consideration to what would necessarily be involved in a move of the entire Clyde operation to Smithfield, until well into the trial. It is one thing to contemplate using a warehouse, such as that at Smithfield, for the temporary storage of materials that are not immediately required, but it is another thing altogether to move a significant part of one's entire operation to such a site, without careful planning and consideration. Linfox now points to evidence about the prior use of the premises, and to evidence that there were some telephone and computer lines installed, and invited me to find that these would have been sufficient for Yates' purposes. This seems to be more of an invitation to leap into the dark than an opportunity to hold that further proof was not required, because of the operation of s 144 of the Evidence Act 1997, and what evidence there is on the point is not persuasive. 562 I should add a brief observation about the evidence of Mr Toomey, although what he said on this topic is of no more than marginal significance. He presented as someone expert in his field, and accustomed to getting his way, but unaccustomed to the discipline of cross-examination, and willing to venture opinions on matters outside his area of expertise. I do not think his opinions about the proposed move to Smithfield should be considered to be within his area of expertise. 563 In short, the idea that, on 30 July, on the suggestion of Mr Jacob, Yates should have abandoned the existing detailed plans to move to Mt Druitt, and instead make an unplanned move to Smithfield, has an air of unreality about it. One needs to consider the proposal in terms of the huge task that was involved, and remember that the question is not whether Linfox might actually have successfully managed such a move, had Yates agreed to it, but whether Yates should have accepted the proposal. The proposal seems even more unreal, when considered in the light of the finding that the only reasons put forward by Mr Jacob to Mr Ballantyne on 30 July were those recorded in Mr Jacob's diary note, that there was no occupation certificate for Mr Druitt, and the council inspector might be angered if he saw that the premises were being occupied, without this certificate. 564 Yates also submitted that, on the evidence, it cannot be said that the Smithfield premises were in truth available for use by Yates. The evidence as to this is unsatisfactory, and there seems to be a great deal of merit in Yates' submission that Linfox has failed to call or to explain the reason why it did not call some officer of Linfox, or of an associated company, who could have cleared up the doubt that surrounds the position. 565 A company called Keeto Pty Limited ("Keeto") is apparently associated in some undisclosed way with Linfox. Keeto was evidently the owner of premises known as 149 McCreedie Street, Smithfield, upon which there was erected a large warehouse. The present debate concerns the availability of part of the ground floor of those premises. I viewed the premises at the commencement of the trial. Broadly speaking, the ground floor is about 46,000m² in area. Vehicular access is gained by a large driveway, along which vehicles drive from south to north along the eastern side of the premises. There are a series of loading docks on the eastern side of the ground floor of the building, that is, on the western side of the driveway. There is an office area situated on the western side of the ground floor, approximately half way between the northern and the southern ends of the building. 566 There is in evidence a document apparently recording an agreement of 28 October 1998 made between Keeto and Coca-Cola Amatil (Aust) Pty Limited ("CCA"). Keeto agreed to grant to CCA a lease of four separate parts of the building, for a term of five years commencing on 1 August 1999. The first area (of approximately 25,000m²), identified by hatching on a plan, represented, broadly, the northern half of the ground floor of the building. The second area represented (I think - the evidence is not entirely clear) a further area of about 11,000m², generally to the south of the first area mentioned. The third area was "the office area". The fourth area is presently irrelevant. 567 The agreement was unconditional as to the first area, but it appears that CCA had an option to take up the lease in respect of the second, third and fourth areas, turning upon events peculiar to CCA, and irrelevant to the present litigation. 568 Yates submitted that, on the face of this evidence, CCA had an agreement to lease a significant part of the ground floor of the premises, for five years commencing 1 August 1999 - all of the ground floor area, except an area just under 10,000m² in size, at the southern end of the ground floor. It might be that there was no boundary wall or any similar device separating the area the subject of the agreement for lease to CCA and the area that was not the subject of this agreement for lease. The occupants of the two areas, to the north and south respectively of this boundary line, both had access to the driveway, and, perhaps, to the various loading docks. 569 The last mentioned area (the southern most part of the ground floor, almost 10,000m² in size) seems to have been the subject of a lease from Keeto to Kmart Australia Limited ("Kmart"), also commencing 1 August 1999, and ending on 31 March 2000. (There was also a lease to Kmart of part of the basement, or undercroft. This is not directly relevant to this litigation.) The evidence also includes a letter which is undated, but bears a fax header dated 26 July 1999, from Kmart to Linfox Property Group Pty Limited dealing with what appear to be details required to be sorted out before Kmart actually occupied the site, including such matters as questions about security, and the common use of different parts of the premises by different tenants. 570 Mr Bennett gave evidence that at some stage in July 1999, he visited the premises, and he said that the northern most part of the ground floor was then unoccupied and unused, or mostly so. 571 Yates submitted that Linfox had not shown that the Smithfield premises were in truth available for use by Yates in the period in question. This appears to be so. I put the conclusion tentatively, because the evidence is surprisingly sparse. On the face of the documentary evidence, there was an agreement to lease most of the ground floor to CCA, and a lease of the balance of it to Kmart, in each case, for a term commencing on 1 August 1999. There is really no evidence one way or the other as to whether the conditions set out in the agreement to lease from Keeto to CCA were or were not satisfied. If they were not, then it may be that part of the ground floor area was not in fact the subject of either a lease or an agreement to lease, as from 1 August 1999 - very roughly, an area bounded on the south by the area leased to Kmart, and bounded on the north by what I earlier called "the first area", the subject of the unconditional agreement for lease from Keeto to CCA. 572 I should have thought that if the fact was that in truth CCA did not occupy this central part of the ground floor area, this would have been a very simple matter for Linfox to prove, and that in the context of this case, the costs to be incurred in proving it trivial. I do not overlook the distinction between Linfox, Linfox Property Group Pty Limited, and Keeto, although I observe that the lease from Keeto to Kmart appears to have been executed in the presence of "LS Vary", Keeto's secretary. This appears to be the same person who is the secretary of Linfox. 573 Given the absence of this evidence, and the absence of an explanation for the lack of it, I infer that the persons concerned are unlikely to have been able to assist Linfox's case on this topic. 574 I am not satisfied that the Smithfield premises were in fact available for use by Yates, from 1 August 1999 onwards. 575 There is one further aspect which I ought mention. The 7 June plan spoke of the Smithfield premises being available from 1 July to 31 August. As Linfox asserted, on a different point, Yates did not obtain an occupation certificate in respect of the Mt Druitt premises until 21 October 1999. The Linfox case does not grapple with the period from 1 September onwards. Rhetorically, what was Yates to do then? If on 30 July Mr Ballantyne had been told of the facts, as I find them, what was he, or Yates to do? 576 In submissions, prompted by my asking this, Linfox suggested that there were four courses that Yates might have taken: it could have moved to Smithfield, and then on to some other (any other) warehouse; it could have moved, not to Smithfield, but to another Linfox warehouse, such as one at Homebush; it could itself have arranged for the use of some temporary warehouse; or it could have negotiated the right to continue to use the Clyde warehouse. 577 The last suggestion seems unrealistic, given the way Mr Wiener had been treated, and that Zandean had arranged to lease the premises to Academy, and the fact that by early June 1999 all concerned had agreed that Yates would vacate the Clyde premises by 14 August, and the other three pay no heed to the facts that the question arose on 30 July, when the move to Mt Druitt was about to commence, the magnitude of the task involved in moving, and the lack of information available as to the suitability of the alternative warehouse. If one focuses on what Mr Ballantyne might reasonably have done on 30 July, and thereafter, the answers given are not satisfying. Defence of Illegality 578 At [32] I summarised the defence pleaded, taken in respect of all causes of action. Section 109M(1) of the Environmental Planning and Assessment Act 1979 provided: (1) A person must not commence occupation or use of the whole or any part of a new building (within the meaning of section 109H(4)) unless an occupation certificate has been issued in relation to the building or part. Maximum penalty: 25 penalty units. 579 The council did not issue an occupation certificate until 21 October 1999. The essence of the defence now taken appears to be that, in breach of the section, Yates occupied and used the Mt Druitt warehouse, and its claim for damages amounts to a claim that its illegal occupation and use of the building was impaired - it earned less in profits and incurred more in costs than would otherwise have been the case, but the diminished earnings and the increased expenses were earnings and expenses arising solely from activities forbidden by the statute. (Neither the pleading nor the submissions dealt with the position after 21 October 1999.) 580 It was Maincon, the builder, that dealt with the council in connection with the application for an occupation certificate. Mr Ahearn arranged for a council building inspector to conduct an inspection on 29 July 1999. The inspector issued a document titled "Inspection Result", dated that day, which listed nine numbered matters in respect of which work was to be done, "reinspected and approved by Council". The ninth matter mentioned was: "Install racking and line marking to approved stamped plans and council satisfaction". Mr Ahearn said and I find that by 10 August, when he wrote to the council again, the other eight matters had been dealt with. In his letter to the council Mr Ahearn said: Notwithstanding that the racking layout was shown on the Development Application and Construction Certificate drawings, this work and associated linemarking, are the responsibility of the tenant, Arthur Yates & Co. Limited and hence outside Maincon's scope of responsibility as both builder and owner of the property. Racking installation is proceeding and an inspection will show that linemarking is progressing as areas of racking are completed. Unfortunately delays in completion of this work are the result of shortages of the necessary materials. We request Council take these matters into consideration and not withhold the issue of an Interim Occupation Certificate. We would welcome an opportunity to clarify with you the exact details of Council's requirements and standards prior to the issue of a final Occupation Certificate. 581 Other evidence shows that Mr Ahearn did not have personal knowledge about the "shortages of materials". However, in substance, by 10 August the relevant building work had been completed, so as to permit the issue of an occupation certificate subject to the council inspector being satisfied (a qualification that does not appear to be significant), except for the racking erection work, and the associated line marking work. If it is relevant to the present issue, this work remained unperformed as a result of Linfox's breach of contract. So far as the evidence shows, nobody has taken any step to prosecute anyone in respect of any breach of the provisions of the statute. 582 It will be remembered that the contract pursuant to which Linfox agreed to work was initially formed in the Rich/Bennett conversation recorded at [82]. At that stage, presumably, the parties thought in terms of the contract being performed, and not breached. Proceeding on the basis that the contract contained the first, second and fifth terms mentioned at [16], there was no provision in the contract, express or implied, to the effect that either party would do anything illegal. There is no evidence that either party, at the time of the formation of the contract or for some months afterwards gave any thought to the possibility that the Mt Druitt warehouse might be occupied or used, without there being an occupation certificate in place. 583 However, by late July 1999, the position had changed. Linfox had breached the contract, in such a way as to delay the progress of the racking erection, but it had not disclosed to Yates the fact of this breach. On 30 July Mr Jacob suggested to Mr Ballantyne that Linfox might move Yates, not from Clyde to Mt Druitt, but from Clyde to Smithfield. He gave as a reason the lack of an occupation certificate at Mt Druitt. Mr Ballantyne declined to vary the terms of the existing contract, and on behalf of Yates he accepted the risks flowing from the absence of the certificate. 584 It is quite wrong to say, as Linfox does, in various ways, that "the contract" was to do something illegal. The correct categorisation is that, during the period when the contact was to have been performed, the parties became aware that the future performance of the contract would involve what can now be recognised as a breach of the provisions of s 109M(1). At the time of the making of the contract, no breach of that provision was contemplated, nor was one likely to occur. I find that at the time of its formation the contract was capable of being performed lawfully, and that the parties should be taken to have intended that it be performed lawfully, and for a lawful purpose. 585 In Nelson v Nelson (1995) 184 CLR 538, McHugh J reviewed the law. At 604-605 he identified four exceptions to the dictum of Lord Mansfield in Holman v Johnson (1775) 1 Cowp 341, 343; 98 ER 1120, 1121: "No court would lend its aid to a man who founds his cause of action upon an immoral or illegal act". None of those exceptions is presently relevant. At 612-613, his Honour said, omitting citations: If courts withhold relief because of an illegal transaction, they necessarily impose a sanction on one of the parties to that transaction, a sanction that will deprive one party of his or her property rights and effectively vest them in another person who will almost always be a willing participant in the illegality. Leaving aside cases where the statute makes rights arising out of the transaction unenforceable in all circumstances, such a sanction can only be justified if two conditions are met. First, the sanction imposed should be proportionate to the seriousness of the illegality involved. It is not in accord with contemporaneous notions of justice that the penalty for breaching a law or frustrating its policy should be disproportionate to the seriousness of the breach. The seriousness of the illegality must be judged by reference to the statute whose terms or policy is contravened. It cannot be assessed in a vacuum. The statute must always be the reference point for determining the seriousness of the illegality; otherwise the courts would embark on an assessment of moral turpitude independently of and potentially in conflict with the assessment made by the legislature. Second, the imposition of the civil sanction must further the purpose of the statute and must not impose a further sanction for the unlawful conduct if Parliament has indicated that the sanctions imposed by the statute are sufficient to deal with conduct that breaches or evades the operation of the statute and its policies. In most cases, the statute will provide some guidance, express or inferred, as to the policy of the legislature in respect of a transaction that contravenes the statute or its purpose. It is this policy that must guide the courts in determining, consistent with their duty not to condone or encourage breaches of the statute, what the consequences of the illegality will be. Thus, the statute may disclose an intention, explicitly or implicitly, that a transaction contrary to its terms or its policy should be unenforceable. On the other hand, the statute may inferentially disclose an intention that the only sanctions for breach of the statute or its policy are to be those specifically provided for in the legislation. Accordingly, in my opinion, even if a case does not come within one of the four exceptions to the Holman dictum to which I have referred, courts should not refuse to enforce legal or equitable rights simply because they arose out of or were associated with an unlawful purpose unless: (a) the statute discloses an intention that those rights should be unenforceable in all circumstances; or (b)(i) the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct; (ii) the imposition of the sanction is necessary, having regard to the terms of the statute, to protect its objects or policies; and (iii) the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies. 586 See too Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215, 229 and 248-250. 587 The terms of s 109M(1) are set out above. In 1999, a penalty unit was a fine of $110. Section 109M falls within Part 4A, which was inserted into the Act in 1997, commencing on 1 July 1998. It deals generally with the certification of development and for the obtaining of various certificates in that connection. The Mt Druitt warehouse was a "new building", as defined. 588 Yates described the purpose of s 109M as being to prevent injuries to persons caused by unsafe, hazardous or fire prone buildings. Linfox described it as being to protect the health and safety of "other people who do not have the ability to protect themselves", in relation to unfinished and unsafe premises, and to prevent the occupation of the building before completion. I will assume that Linfox's description is correct. 589 Yates described its claim as being not loss caused by injuries to occupants of the building (or, I would add, people in the vicinity of the building), but economic loss caused by the inability to trade properly by reason of the disordered state of the stock in the warehouse. Linfox described Yates' claim as being one for the doing of work that could not lawfully be done, that is operating (occupying and using) the warehouse, without an occupation certificate. Linfox said that it was an illegal enterprise, so that no damages were recoverable. 590 The parties agreed that the starting point is a consideration of the statute, and they accented various aspects of it. In its 1999 form, s 126 provided: (1) A person guilty of an offence against this Act shall, for every such offence, be liable to the penalty expressly imposed and if no penalty is so imposed to a penalty not exceeding 1,000 penalty units and to a further daily penalty not exceeding 100 penalty units. (2) A person guilty of an offence against the regulations is liable to a penalty not exceeding 100 penalty units. (3) Where a person is guilty of an offence involving the destruction of or damage to a tree or vegetation, the court dealing with the offence may, in addition to or in substitution for any pecuniary penalty imposed or liable to be imposed, direct that person: (a) to plant new trees and vegetation and maintain those trees and vegetation to a mature growth, and (b) to provide security for the performance of any obligation imposed under paragraph (a). 591 Linfox pointed to subsequent amendments, increasing the penalties imposed, but I do not think that this can be a legitimate consideration. Section 121B provided that a council or other "consent authority" might make certain orders, directed to various people, requiring the doing of various things, including in extreme cases the demolition or removal of buildings. That is, relatively speaking, a maximum penalty of 25 penalty units that might be imposed for a breach of s 109M was well removed from the most significant penalty or disadvantage that might flow from a breach of the provisions of the statute, by force of its terms 592 The sanction that would be imposed, if the defence of illegality is to be upheld, would be disproportionate to the seriousness of the illegality involved, and the result of the sanction would not further the purpose of the statute. It appears from the statute that the intention of the Parliament was that the penalties that might be imposed for breach were to be the only legal consequences of breach, or of the frustration of the policies of the statute. 593 Linfox also suggested that Yates' claim failed, because Yates was in breach of a provision in its lease from Maincon Holdings, this amounting to some further illegality. This was not pleaded, and it cannot possibly give rise to a defence on the part of Linfox. MHE and Power Supply 594 It was thought desirable to use electrically powered machinery handling equipment exclusively within the Mt Druitt warehouse, and three different types of this equipment were used: counterbalance (or "ordinary") forklifts, reach trucks and pallet movers. Broadly speaking, reach trucks are used to lift pallets up to and down from large heights, and pallet movers are used for picking orders, and for transporting pallets away from the staging area. Otherwise counterbalance forklifts are generally used. 595 Linfox asserts that inadequacies in the supply of electrically powered MHE, and in the supply of electrical power to the Mt Druitt warehouse (used for recharging the MHE batteries) were an effective cause or one of the effective causes of Yates' various losses; and it also relies upon these matters, as constituting a head of contributory negligence. In final submissions, Yates contended amongst other things that it was part of Linfox's duty to take reasonable care in the managing of the relocation to manage the timely procurement of adequate MHE, with regard to the power supply. Linfox responded that this allegation had not been pleaded and that Yates should not be permitted to make it now, and I agree. 596 However, that is not the end of the matter. The evidence makes it plain that, assuming Linfox had no contractual obligation to do anything in relation to the MHE or the power supply, it was, mostly through Mr Pearce, deeply involved in the decisions that were made. That is not to say that a duty of care arose, or that such a duty was breached. Rather, the questions to be considered are whether, in the events that happened, Yates' claim is somehow defeated or diminished, by reason of some question about causation, or contributory negligence. 597 Regrettably, the submissions of Linfox misstate the evidence at a number of points, meaning that I need to say more than would otherwise be appropriate. 598 The electricity supplier to the Mt Druitt warehouse and the adjacent manufacturing facility was, it seems, Integral Energy. Evidently, that organisation had built a substation, which was complete before start of the construction of the warehouse. The plans for the construction of the warehouse included the provision of electrical cabling running from the substation to a mains power board, to be installed in the warehouse, or somewhere nearby. 599 On 21 July 1998, Mr Jacob wrote to Maincon, providing data "which impacts on your design criteria", including a statement that the floor space requirements for the battery charging area would be 300 square metres. At a meeting the next day, attended by Mr Pearce and not Mr Jacob, this matter was discussed and, it seems, it was agreed that the battery charging area would be located on the northern wall of the reserve stock area, running along the line of grid 4, near grid F. There was a further meeting on 15 October 1998. The minutes, prepared by Maincon, record in part: Battery Charging Area · Mark [Pearce] advised that allowance needs to be made for 5 reach trucks (20 amp three phase) and 8 pallet pickers (15 amp single phase). This will require a sub-board for power supply. Maincon to provide the sub-board and cabling to outlets. · Additional space required for battery charging area - allow full length of bay between column grids E1 and G. Linfox will provide racking over the top of chargers if extra storage needed. · Floor to receive suitable (epoxy?) surface treatment. · Floor Drainage to be provided. 600 Mr Pearce did not quibble with these minutes at the time, and indeed in his 2001 affidavit, he effectively said that the minutes were accurate. It was not until November 2002 (during the hearing) that he recanted. I think it is plain that the minutes should be regarded as accurate, and the recantation false. Linfox points out that Mr Ahearn agreed in cross-examination that he did not recall what had been said, and was relying upon the minutes, which he said he had prepared. This does not constitute "corroboration" of the evidence of Mr Pearce. 601 The minutes of a Maincon project meeting held on 13 April 1999 record this: ARCHITECTURAL · Linfox to provide marked up drawing showing additional power requirements as well as comms details. 602 That was noted to be a matter for action by Mr Pearce. Mr Ahearn said of this, that "comms" meant "communications". He continued: Q. Does that indicate that it was clear by this date, in April 1999, that there were to be additional power requirements to those otherwise planned for originally? A. Yes. Q. If it was something that Linfox was going to provide drawings about, it seems likely, doesn't it, that it would relate to the materials handling equipment or the power supplies for that equipment? A. It didn't. Q. It didn't? A. No. Q. What do you say it related to? A. It related to the - in front of the office and the distribution area, where they wanted power supplies for their packing equipment, all the stuff that goes in in front of the store there, it was purely to find out the locations and the power requirements for wrapping equipment and that sort of stuff. That's all it was related to and communications for that sort of thing, too. 603 The submissions of Linfox proceed on the basis that the first question and answer just quoted relate to additional power requirements so far as concerned the MHE, and ignored the other questions and answers quoted. The passage does not make Mr Pearce's statement of October 1998, recorded in the minutes "irrelevant", and it is not correct to say that "the issue had been reopened in plenty of time for the needed power to be installed". The issue discussed on 13 April did not relate to the provision of additional power requirements in relation to battery charging facilities, and it was not the same "issue" as is now under discussion. 604 The minutes of a Maincon project meeting held on 4 May record: DESIGN · … · Linfox to provide marked up drawings showing additional power requirements as well as comms details to be submitted 4/5/99. 605 Again, this item was marked as requiring action by Mr Pearce. The minutes of a meeting of 25 May contain the same words, with the additional words: "given verbally only at this stage". (I note that the minutes of these meetings often contain statements, repeating what had been recorded at earlier meetings, and perhaps not accurately recording when the statements were made. Nobody took any point about this.) 606 There was a meeting held on 8 June, at which Mr Ballantyne attended. He made a note, reading in part: "identify power & data responsibility", but he could not recall the significance of this. 607 On 9 June Mr Ahearn sent a fax to Mr Ballantyne: Subject Warehouse - Mt Druitt Battery Charging Area Mark Pearce advised previously of the need for ventilation of the Battery Charging Area. I need some parameters to ensure your needs are met. (1) Is mechanical ventilation required? (2) If yes, what form/size? is a canopy required? if so at what height? Please note the attached extract of plan and elevation. We already have a fixed (open) louvres vent at this location. Is this sufficient to ventilate the Battery Charging Area? Please advise ASAP 608 The minutes of a Maincon project meeting held on 22 June recorded that the electrical works were "ahead of schedule, 50% complete", and Mr. Ahearn said that at this meeting Mr. Pearce said that the size of the battery recharging area needed to be increased by two bays. 609 On 28 June Mr Ahearn sent to Mr Ballantyne a draft of a letter that he proposed to send to Mr Pagacs of Yates (once an issue of costing had been resolved, as between Maincon and its contractor), reading: Re: WAREHOUSE - MT DRUITT - Battery Charging Area You will recall that towards the end of our site meeting on 22 June 1999, Mark Pearce requested that the area allocated for the battery chargers be increased in size to include an additional two (2) bays between columns between Grid lines G & J. This will more than double the area of concrete floor to be treated with acid resistant epoxy coating. However the request to increase the area was made after the concrete floor had been poured, finished with the smooth burnished finish and a curing compound applied. As a consequence, the floor will need to be scraped to ensure satisfactory adherence of the coating. Since the extent of the battery charging area had been defined on drawings since the preliminary design phase of the project and accepted by Yates, we believe the cost of creating the extra areas should be to Yates account. The additional cost to prepare the additional areas and apply the epoxy coating is $5,600.00. We would appreciate: · your confirmation of Mark's request for the additional battery charging areas, and · your acceptance of the additional cost. It should be noted that the additional areas will not contain sumps or bunding nor will the floor be graded to contain any spillage. Would you please confirm that this will be satisfactory to your operational requirements. As landlord, Maincon Holdings Pty Ltd will be concerned that any acid spillage does not encroach on and hence damage unprotected floor areas. 610 There were further faxes of 30 June and 1 July, the detail of which does not seem important. Mr Ahearn was seeking instructions, particularly having regard to the additional costs to be incurred concerning the epoxy floor coating, as well as Yates' "confirmation of Mark's request for additional battery charging orders". 611 Linfox submits that Mr Pearce made his request before 22 June, but it provided no reference to any evidence to this effect. Mr Ahearn's documents appear to be to the contrary, but if the request was made earlier than 22 June, it was made on some occasion on or after 9 June. Mr Ballantyne agreed in cross-examination that, by 22 June, Mr Pearce had raised an issue concerning the need to extend the number of bays of battery charging equipment. 612 At about this time there was a question, at least in the mind of Mr Ahearn, about what battery charging facilities were to be installed. On 2 July he sent a fax to Mr Ballantyne, noting that Mr Pearce's recollection had cleared things up for him. He went on to say, by reference to some plans, that a battery charging area had been provided "between grids E1 and G", but that he understood that Mr Pearce was "now requesting a different number between grids E1 and J". 613 The minutes of a Maincon project meeting held on 6 July record this: 5.8 Linfox advises 26 off Power Outlets for Battery chargers. 24 off on north wall, 2 off on south wall. R.A. [Mr Ahearn] to advise costs for approval to Yates. 5.9 Epoxy coating to flooring for battery charger area additional area variation. Approved by JP. [Mr Pagacs of Yates] 614 On the same day Mr Ahearn sent an email to Mr Ballantyne, reading in part: SUMMARY OF MATTERS REQUIRING RESPONSES FROM YATES I present the following to assist you with the many matters I have been firing at you recently. Maincon Fax 9 June 1999 Battery Charging Area - Mechanical Ventilation · Preliminary discussions indicate that ventilation is needed. Mark Pearce has arranged for David Brandson to inspect the site and advise requirements. He is due to visit on Wednesday 7 July. · In response to your query, we would be pleased to organise the installation of mechanical ventilation. It is within our area of expertise and we are happy to assist. The only stumbling block is not knowing what is needed and I expect David Brandson will provide the answers. When requirements are identified I will arrange for quotations and submit them to Yates for acceptance. If requirements are available soon enough I see no problems with completing installation by the end of July. · I am not sure if details on the number of forklifts to be charged at once would be sufficient. Lets wait till we find out what David Brandson comes up with. Maincon Fax 30 June 1999 Battery Charging Area - Power Outlet Locations · We need to know how power outlets for battery charging are to be located especially with requirement for increased area for charging. · Yes. Thursday will be early enough for answers regarding power supply to battery chargers. Maincon Letter 1 July 1990 Battery charging Area - Increased Area · We require confirmation of your requirement to increase the area, and · acceptance of additional cost of $4,115.00 for epoxy flooring coating. … 615 At some stage Mr Ballantyne endorsed this email with a note recording that he had approved of the variation requested. Linfox now submits "that this email shows that there was still sufficient opportunity for the requisite power supplies to be fitted to Mt Druitt prior to the commencement of operations". The submission was not developed, and it is not persuasive. So far as the evidence goes, the position as at 6 July was that both Yates and Maincon had been asking Mr Pearce for advice about, and had been relying largely upon what he said as to the number and the desired location of the battery charger power outlets. Mr Pearce said that in making the statements he made about this, he relied upon what Mr Frost had said about MHE requirements in the 23 June plan: [127]. 616 On 7 July Mr Pearce sent a fax to Mr Ahearn: Yates require 12 x 20 amp/3 phase/415 Volt and 14 x 15 amp/3 phase/415 Volt outlets. Spaced 2 per Racking bay as detailed on accompanying sketch. 617 Mr. Ballantyne said in an affidavit that the reason why this recommendation was not adopted was that the requirements suggested exceeded the power supply that had been designed and implemented for the warehouse, in accordance with Linfox's recommendations in 1998. Linfox submitted that this assertion was false, without referring to any cross-examination of Mr. Ballantyne; and I have not found any cross-examination where it was put to him that this was false. The submission was to the effect that as at 7 July the parties were contemplating an increase in the total power supply to the warehouse. That had been suggested originally, and that it could be done subject to Yates agreeing to meet the costs. However, it seems that the first recorded suggestion about this was made on 16 July. 618 Mr Ahearn referred to the instructions or advice he had been given in October 1998 as to the number of power outlets needed for the battery charging and to the number now mentioned to him. He checked with Maincon's electrical consultant, who carried out tests on the electrical load to be carried, and advised that if Yates insisted on installing extra battery chargers, further enquiries needed to be made, but further work would be necessary, and Mr Ahearn passed this information on to Mr Ballantyne on 13 July. 619 Mr Ahearn explained that if there were to be 26 3-phase outlets, this could not be provided by the existing cabling, sub-boards and substation, all of which had been provided for in the then existing plans. If he had known earlier of the requirement that there be 26 power outlets, this requirement could have been met, but at this stage, either the number of outlets needed to be reduced, or something else needed to be done to rectify the position that had arisen. Also on 13 July Mr Ahearn sent an email to Mr Ballantyne saying: Subject: Yates Warehouse Mt Druitt - BATTERY CHARGING POWER OUTLETS I am getting conflicting information on the power requirements for the above. The story so far. Originally we were advised the requirements were: * 5 No. 20 amps 3 phase outlets * 8 No. 15 amps 1 phase outlets * Total 13 Previous advice from Mark Pearce was that we needed: * 12 No. 20 amps 3 phase outlets * 14 No. 15 amps 3 phase outlets * Total 26 On site last Thursday, I pointed out to Mark the location of the emergency shower and hence the lack of space to fit in the twelve outlets. We resolved to locate two of these on the south wall with the remainder distributed on the northern wall thus: * between Grids F and G: 10 No. 20 amps 3 phase outlets * between Grids G and H: 7 No. 15 amps 3 phase outlets * between Grids H and J: 7 No. 15 amps 3 phase outlets I have drawn to your attention our electrical subcontractors' concern that the supply cable to Distribution Board No. 7 would have insufficient capacity for all of the above. To avoid increasing the cable sizes unnecessarily, I have endeavoured to find out the actual load demand characteristics of the battery chargers. Mark Pearce put me in touch with David Brandson of GNG Technologies manufacturers of battery chargers. This morning he advised that his enquiries to Crown reveal that the proposed units at Mt Druitt will require: * 5 No. 20 amps 3 phase * 8 No. 12 amps 3 phase * 10 No. 15 amps 1 phase * Total 25

5.7 Racking to commence Monday 12/7/99 625 Reading the series of minutes as a whole, it is clear that the future tense, used in each of the three paragraphs quoted, should be treated with caution. However, Linfox submits that by 22 July there was "already a month in delays in giving effect to the new advice". The submission was not developed, but appears to be a reference back to the events of 22 June. If so, the submission appears to be that Yates should have acted immediately (to avoid "delay"), as soon as Mr Pearce said to Mr Ahearn that the battery charging area needed to be increased, a proposition that cannot be reconciled with other submissions made by Linfox concerning the limited role of Linfox and of Mr. Pearce, but in any case the events of 22 and even 28 June go only to the question of the provision of a larger battery charging area. 626 Mr Ahearn was asked what would be involved in upgrading the existing substation, and he said that in his experience, allowing for the need to obtain various approvals, it would be hard to see the work being done in under three months, and that would be a rushed job. I accept this, and regard it as the death knell for this fragment of this section of Linfox's case: I find it difficult to see when, acting reasonably, it might be said that Yates ought to have decided to do this work. Linfox did not suggest any particular date, except, perhaps and by inference, 16 July, and on its case, by mid-September the problem involving providing power to the MHE had been largely if not completely resolved. That is, the suggested failure of Yates to provide for a new or upgraded substation does not go to any question of causation. In addition, I do not see how it can be said that the supposed failure constituted contributory negligence: the suggestion that, as at 16 July, Yates was not acting reasonably in failing then and there to make this decision is not persuasive; and if one does not proceed by reference to a decision on or about 16 July, Linfox has left entirely at large the question when the decision should have been made, and according to what (if any) changed criteria. 627 Linfox submitted that Yates had been "on notice of the problem since April 1999". This is not the evidence, and the submission does not identify "the problem". 628 In any event, Mr Ballantyne said that he decided to seek further information: he had only the unsubstantiated opinion of Mr Pearce, and the opinion of Mr Ahearn, who was evidently relying upon Maincon's electrical sub-contractor. Mr Ballantyne "was not sure what Mr Pearce was after at the time". It is instructive now to remember that Linfox says that Mr Pearce had no relevant expertise. The minutes of the Maincon project meeting of 5 August record:

4.6 Linfox advises 26 off Power Outlets for Battery chargers. 24 off on north wall, 2 off on south wall. RA has advised costs for approval to Yates. Nil action at this stage. DDI to measure power loads on system to find location for additional. 629 Once again, I am not confident that these minutes should be regarded as accurate, in respect of the tenses used, but the matter was not explored in evidence. The minutes do suggest, although the weight of the suggestion is slight, that nobody was concerned or alarmed at the time. 630 However, Linfox is prima facie on stronger ground in relation to the non-acquisition by Yates of additional MHE and/or batteries than in respect of the non-acquisition of a new or upgraded substation. 631 From 16 July onwards, there was a suggestion that "exchange batteries" be used. On 22 July Mr Ballantyne refused to authorise a new or upgraded substation. At least with the benefit of hindsight, that seems to have meant that, from 22 July, all concerned should have been giving attention to how otherwise the problem might be met, but on the evidence it is by no means clear that anyone concerned recognised, before the move to Mt Druitt actually commenced, the true dimensions of the problem that then emerged. On Yates' case, what happened then was the result of Linfox's failure to properly plan the move, so that there were many pallets block stacked on the floor, in a disorganised way, with the consequence that the various pallets had to be moved much more often than was originally to have been expected, so that the drain on the batteries of the MHE was greater than had been planned for. On Linfox's case, the cause, or at least a significant cause of the power shortage was that there were insufficient items of MHE and/or batteries, and this was the result of Yates' failure to procure these items in good time. 632 Mr Ahearn said that at some stage there was a suggestion made in his presence that a second set of batteries be bought. Mr Frost said that on an occasion in late July he told Mr Ballantyne that the only solution was to get five additional batteries, and that Mr Ballantyne then asked him to obtain a price for these, and later failed to obtain them. 633 There was a good deal of other oral evidence, and much said in submissions, directed to the question what MHE and/or batteries Yates procured, and when they were procured. Some of this evidence was couched in generalities, and some seemed to be based on hazy recollections or reconstructions, and some of the documents referred to contain only oblique or indirect references to the topic, but two things are established. 634 First, on 12 August Mr Frost sent and email to Mr Ballantyne reading: Subject: Battery Requirements In order to implement a three shift operation at Mt Druitt DC, I will need the following spare batteries: Machine Type: Crown PE Battery Make: GNB Battery Model: 12PLE Qty: 4 Machine Type: Crown PE Battery Make: GNB Battery Model: 12GPE Qty: 2 Machine Type: Crown RD Battery Make: Century Yuasa Battery Model: 18VCJ21 Qty: 1 Machine Type: Crown RR Battery Make: Century Yuasa Battery Model: 18VCJ17 Qty: 1 Ken Wilkinson has advised that you will endeavour to source these batteries. Let me know how you go. 635 Secondly, Yates produced two invoices. The first, dated 14 September, records the rental of certain batteries to Yates. This invoice is not at all clear in some respects. It purports to record two charges, each of $4,800, each in respect of the rent to Yates of four batteries, in each case for "01" days. The invoice seems to contain some error, but it is not clear what it was. The second invoice, dated 22 September, records the hire of a reach truck from 28 August to 24 September at $331 per week, and the hire of four batteries each identified by a serial number, for the period 3 September to 24 September at $85 per week. 636 Mr Ballantyne said that he had not seen these invoices in 1999, but they reminded him that he had hired eight batteries, and it seems that this was a response to Mr Frost's email of 12 August, although I note that Mr Ballantyne said that he thought he had sought to hire them in late August. On the face of the second invoice, "Crown", which hired the equipment to Yates, had itself hired the four batteries from "Century". 637 Linfox submitted that it was extraordinary that Yates could not obtain batteries between June and the end of August, but that when Linfox left Mt Druitt (at the end of August), they appeared within days. The submission does not take into account the date of hiring recorded in the second invoice, or the evidence of Mr Ballantyne, who spoke of Yates then engaging in changing its contractual arrangements concerning MHE from "Brambles" to Crown. He continued: All I remember is that Crown were being very helpful to us in every way that they could, and if additional machinery would have become available I know that Crown would have offered it and I know that I would have taken it, but I don't recall specifically that happening, machine by machine. 638 Linfox also pointed to various passages in the evidence, to the effect that at times there were empty spaces in the racks in the reserve racking section, the suggestion being that this was caused by the lack of MHE and/or batteries - there was no MHE capacity available to fill up the racks. Some of the evidence of Mr Frost to this effect was withdrawn by him, as being erroneous, and the balance does not seem to me to be really persuasive: the racking contractor was erecting the racks progressively, and it is not to be wondered at that it would take a little time to fill up each newly erected rack, particularly if those charged with moving the pallets from the floor into the racks had difficulty finding a particular product, intended to be placed in a particular part of the newly erected racks. 639 Moreover, and more important for the moment, the documents mentioned point to the fact that, at the time, Linfox, through Mr Frost, asked that eight batteries be hired; and Yates hired them, as well as hiring the reach truck, and some unpowered pallet movers (the evidence about these being quite sparse). Mr Frost's evidence on this subject cannot be reconciled with the documentary evidence, and I reject his evidence. 640 Focusing for the moment upon what Yates did in relation to batteries, and the relationship of this to either questions of causation or contributory negligence, it is difficult to see any real merit in the Linfox case. 641 Nor do I see anything different when it comes to considering the hire of one reach truck, at this time, rather than some greater number. The Linfox submissions assume that these vehicles were readily obtainable, and promptly obtainable, but what evidence there is on the subject points in the opposite direction. Further, it would not be right to overlook the procuring of the unpowered pallet movers. 642 Gas powered forklifts were used outside the warehouse. In final submissions a question was raised about their possibly having used on occasions inside the warehouse. The question was not explored in evidence, and I put it aside. 643 On an overall view of the evidence, I find that the overwhelming cause of the disorder in the warehouse was that, without adequate planning, thousands of pallets were block stacked on the floor, and on the ground outside the warehouse. Theoretically, Yates might have done better, attempting to cure this problem, in a variety of ways, including hiring more powered MHE, but the evidence suggests that this was not readily or promptly available, and Yates hired the equipment that Linfox recommended. 644 I do not doubt that Mr Ballantyne was concerned about the costs being incurred: Linfox does not seem to have been averse to suggesting that Yates spend money, and Yates seems to have become less trusting about this as time went by. But this is not to say that Mr Ballantyne made decisions, based solely or inappropriately upon considerations of costs. I accept that he expressed his concerns on a number of occasions, although I am inclined to think that the story has improved with retelling, over time. 645 After the move, Yates caused extra battery charging power outlets to be put into place. I do not think that this helps Linfox. It seems to have been a sensible thing to do, but the evidence does not establish what, if any disadvantage flowed from the failure to do so earlier. As Mr Ballantyne acknowledged, the presence of extra power outlets might have assisted in battery recharging operations, but it might also have resulted in "blown fuses", or their modern equivalent. This evidence hardly justifies the criticisms of him and of Yates set out in Linfox's submissions of 16 January 2004 at pages 255-257. 646 Linfox also referred to the evidence of Messrs Carroll and Prince, but it has not been shown that either of them knew anything significant about the availability of MHE and/or batteries, as distinct from the quantities used. It is one thing to say that more equipment would have helped, and that at later times Yates used more equipment than it used in 1999, but that is only the first step along the journey that Linfox seeks to take. I reject the submission that Mr Ballantyne "was prepared to put the operations at risk because he would not authorise the additional expenditure". That proposition was not put to him in cross-examination, and it goes well beyond the evidence. 647 Linfox also submitted that the evidence of Mr Ballantyne that one of the biggest problems concerned reach trucks, rather than forklifts or pallet movers. However, this argument was not put to Mr Ballantyne, and the submissions do not refer to any other evidence. If the point was a good one, it needed to be made through some witness or witnesses, for it depends upon the characteristics of the items of equipment in question. A Suggested Interruption to the Movement of Stock after 26 July 648 Linfox submitted that the movement of stock from Clyde to Mt Druitt had been interrupted on or about 26 July. At [249] I referred to some of what Mr Frost said. The minutes of a Yates customer services meeting held on Monday 26 July recorded: Move starting today. Council visit Friday okay for stock. Racking half completed … Need to be operational by August 2nd. Clyde vacated by 14 August. 649 Linfox submitted that this showed that Mr Ballantyne could no longer have thought that the transfer could proceed on a rack-to-rack basis. Mr Ballantyne rejected the proposition when it was put to him, and the submission, which was not developed, is not persuasive. Linfox also submitted that by 26 July Yates was approaching the point where it would have barely two weeks to move instead of the planned three weeks, but this submission needs to be considered in the light of the 23 June plan, set out at [127], which spoke of the move commencing on 26 July, and Clyde being vacated by 13 August. 650 Then Linfox submitted that the movement of stock from Clyde to Mt Druitt had been interrupted, on or after 26 July, by reason of some action by the Council, linked to the absence of an occupation certificate. 651 At the time Mr Frost seems to have thought that there was some Council intervention, and some delay, and he spoke to others of his perception. However, apart from what he said and did, and what others said, based upon what he said, there is little or no evidence that there was an interruption to the movement of stock, or that the Council actually did intervene. 652 It seems clear enough that in some respects the Mt Druitt warehouse building was incomplete until about 5 August. Some louvres constituting part of the southern wall of the building had not been completed, and a Council inspector's note of 29 July recorded a requirement: "Instal exit doors to all doors"; and the 23 June plan appears to indicate that the building may have been unattended from 10pm to 6am daily. 653 I have already rejected the submission that Maincon was generally in arrears with its building work: [372], but there were some matters that were outstanding at late July and early August. The question to be resolved is whether these outstanding matters had any relevant effect, and, immediately, whether they resulted in some interruption to the movement of stock at or about this time. 654 Mr Ballantyne acknowledged that "one of the planners" had reported to him at the time that there had been an interruption in the week commencing 26 July, but then he said: "I do not believe that I established that it [the move] had stopped". 655 If in truth the movement of stock from Clyde to Mt Druitt was stopped at or about this time, it is surprising that no Linfox witness spoke about the interruption, or described its consequences in detail. To look again at the 23 June plan is to see how detailed the planning for the move had been, and how little room there was for interruption. The idea that there was an interruption, either of three or four days, or of a week, as submitted, but that no Linfox witness was able to describe it and its consequences, seems far fetched. Linfox was then in a position of embarrassment, brought about by its failure to order the racking parts in good time, and by its concealment of that failure, so that if there was an interruption, brought about without Council intervention, it is likely that that would have been viewed as something of a disaster, whereas if there was an interruption brought about by a Council intervention, following from some delay not caused by Linfox, that would have been an opportunity to be seized upon. 656 There is no contemporary record in evidence indicating that the Council actually did intervene, except for a memo of Mr Frost's, and the conduct at the time of Linfox personnel suggests that there was no Council intervention and no interruption to the move. In particular, neither Mr Bennett nor Mr Jacob told Mr Ballantyne of such an intervention or interruption. On 30 July Mr Jacob told Mr Ballantyne, not that there had been an intervention, or an interruption, but that there was a possibility that the Council inspector might become angry. The conduct of Mr Jacob and of Mr Bennett on 30 July and thereabouts, and their evidence about the events of that day, appears to be inconsistent with the proposition now contended for. 657 I reject this part of the evidence of Mr Frost, and find that there was no interruption to the move in the week commencing 26 July, and no interruption then to the transfer of stock from Clyde to Mt Druitt. The Level of Congestion in the Warehouse, and the Period during which the Congestion lasted 658 At [446] I found that there were some thousands of pallets of stock stacked on the floor of the warehouse or on the ground outside, at about the time of the completion of the move. As vehicles arrived at Mt Druitt, from Clyde, during the move, pallets were unloaded and they had to be placed somewhere. The reserve racking was incomplete. Some pallets were placed outside, some were block stacked on the floor of what later became the reserve area, and some were placed in the staging area. It seems likely that those placed in the staging area were moved away from there fairly promptly, because Yates needed to use the staging area (or at least most of it) to marshal incoming and outgoing goods. The evidence does not establish just where particular goods were placed at this time. Given the state of confusion that existed, it seems that whilst all concerned did their best to place stock somewhere suitable, nobody kept records of where things were placed, and in the circumstances this is understandable. 659 As the racking contractor erected the remaining reserve racks, the block stacked pallets had to be moved out of the contractor's way, to permit the erection work. Then, when the racks had been erected, pallets of stock were moved into the racks. Again, nobody kept records as to just what happened. 660 As pickers picked product from the pickface racks, to fulfil orders placed upon Yates by its customers, the pickface racks had to be replenished. It seems certain that there was considerable difficulty encountered in doing this efficiently, for large numbers of pallets were block stacked, either inside or outside the warehouse. Whatever else might be said, it is not as efficient to locate block stacked goods, compared to goods stacked in racks. It is more difficult, and more time consuming to find what product is wanted, and there were times when, in order to locate and then move one product, it was necessary to first move other products out of the way, and then to reconstitute the block. It was a large warehouse, and there were thousands of places where a particular pallet might be found, if for any reason it had been placed in an unexpected or unrecorded position. 661 According to the Linfox witnesses, Linfox had virtually cured this problem by the time Yates terminated its services, about the end of August, whereas according to the Yates witnesses the problem persisted for much longer. It is not possible to reconcile all the evidence, and the few contemporary records that are in evidence do not paint a clear picture. 662 Linfox pointed to the minutes of a Yates customer services meeting held on 23 August, where there appears this passage: Problems last week were due to pallet congestion. This has been cleared over week-end. Product in racking. 663 However, the same minutes go on to record: No information when backlog will be cleared … Racking completed - lots of empty spaces. 664 I do not regard the minutes of the customer services meetings as being particularly accurate or helpful, to the extent that they record things that happened at Mt Druitt. It may be that the author or authors of this series of minutes had little or no personal knowledge of or interest in the events that happened at Mt Druitt, except to the extent that they impacted elsewhere, and what the minutes say is sometimes so brief as to be cryptic. 665 Nor do I regard an email sent by Mr Brabant, a Yates officer located in New Zealand, to Mr Prince and other Yates personnel dated 1 September as a reliable source of information, when Mr Brabant spoke of there being 6,500 pallets of reserve stock randomly located. I do not know the source of Mr Brabant's information, although presumably he was recounting information given to him by someone in Australia. 666 On the other hand, I do feel confident that the stock had not been placed so that it was readily able to be located by those who had to handle it. Whatever the precise chain of events was, there was not in place a plan that was followed when Linfox effected the move, for the accurate location of the stock that had been moved, so that those who unloaded the incoming pallets of stock, and those who handled those pallets immediately thereafter did not know where to locate the stock. The plan was that the stock be located in the reserve racking, but that racking had not been completely erected, so that there was a need to improvise, and then, when each pallet of stock was placed somewhere, in an improvised position, there was no record or no adequate record kept of where any particular item of stock was. 667 Mr Carmody said that the racking erection work was completed on 24 August (except in presently irrelevant minor respects, attended to later). I think that his evidence is the most reliable evidence as to the date of the completion of this work, and I prefer it to the evidence of Mr Ballantyne, who gave an estimate, and who was hesitant on this topic. Mr Carmody was in the relatively fortunate position of being able to say, in substance, that he and his crew, having done other work at Clyde, started work at Mt Druitt on one day, 19 August, and finished it on another day, 24 August. I note that, notwithstanding everything else that Linfox has put forward on this topic, Mr Carmody said in chief that he had started on 19 August: see [361]. 668 If then the racking erection work was not completed until 24 August, it seems quite unlikely that by about a week later Linfox would have recovered the position, as its witnesses say, particularly if the position concerning the lack of MHE was as bad as Linfox would have me believe; and the Maincon correspondence reviewed below provides at least a measure of support for the proposition that there was physical congestion both in the warehouse and in the driveway. Focusing on the driveway for the moment, if Linfox or Yates had restored the position inside the warehouse, one is left to wonder why Yates felt it appropriate to fob off Maincon or Maincon Holdings about the position in the driveway. 669 It is not easy to say when it was that the congestion in the warehouse came to an end, for once again it is impossible to reconcile all of the evidence, and much of it was expressed in terms of generalities. However, I think it is quite safe to conclude that there was still a significant problem as at 10 September, the day when Mr Higgins (of Linfox) left the Mt Druitt warehouse. He conceded that the warehouse was then "a mess". I do not think it is possible to make any more precise finding than that the warehouse was still a mess as at 10 September, and that the congestion was probably progressively reduced thereafter. A letter from Maincon of 5 October spoke of it still being "a massive job to bring the site up to an acceptable level", of an intended Council inspection, of the need for Yates to move stock indoors, and of the need to move "stock blocking travel paths to exits", within the warehouse. I find that there was still some stock block stacked on the floor of the warehouse at about that date, located so as to block travel paths to fire exits, as well as some stock still stored outside. 670 Mr Bennett said in chief that any disorder in the reserve area could have been reorganised in a matter of days, but in cross-examination he said that this could not have been done during the spring season. In addition, suggestions made by Linfox as to what Yates might have done after Yates terminated Linfox's services need to be viewed in context. Linfox protests, in summary, that it did little or nothing wrong, and that the warehouse was in a good state when it left. Those of its personnel who gave evidence all said something to this effect in chief, but in cross-examination made many concessions. It seems clear that all was not well in the warehouse. 671 Linfox places great store on a set of photos of the warehouse taken by Mr Prince on about 27 or 28 August, and upon what various witnesses said about these photos. They show a number of pallets block stacked on the floor, rather than in racks, at times stacked three pallets high (contrary to other evidence), and sometimes beside empty or almost empty racks. On the other hand, the staging area was reasonably clear. Linfox's point seemed to be that the photos did not paint as bad a picture as did some of the Yates witnesses, but it is also the fact that they paint a picture that is worse than that painted by some Linfox witnesses. To my mind, the photos undermine Linfox's contention that the relocation stock had been put away by 24 August, or within a day or so of then, and also its contention that the problems about pallet congestion had been cleared away by then. (I note in passing that, in chief, Mr Prince said that there was "chaos" in the warehouse from the time of the move.) 672 I referred earlier to the evidence of Mr Higgins, in chief and in cross-examination. In re-examination, he was taken to the photos of the staging area. He said that by the time he left Mt Druitt, on 10 September, the position was far superior to the position shown in the photos taken on 27 or 28 August. That does not seem to me to cut down significantly the effect of his concession that the warehouse was a mess as at 10 September. 673 Next, there is a dispute as to the extent to which stock was stored randomly in the racks in the reserve area. Linfox attributed to Mr Ballantyne the proposition that it was stored "completely randomly", and submitted that this was clearly incorrect, because some products would not fit into some racks - particular products occupied a greater height than was available in some areas of the racking. However, Mr Ballantyne said only that the products were stored randomly, and described how pallets were put into the first available vacant space. If some pallets of product did not physically fit into some space, presumably it was not an "available" space. 674 I accept that Linfox planned to store like products together, but the evidence that the plan to achieve this end failed is overwhelming. At another point, Linfox referred to a diary entry made by Mr Jacob of 24 August: "only 3 people know the location of stock: potential problem". This is hardly indicative of a well ordered warehouse. The Driveway 675 There were competing versions of the extent to which, and for how long, the driveway running from the northern wall of the warehouse towards the street (Kurrajong Avenue) was congested by stacked pallets of stock. As a generality, the Yates personnel described the position as being much more severe than did the Linfox personnel. Since the congestion in the driveway, as distinct from the congestion inside the warehouse, is really only of peripheral importance, except perhaps to the extent that it reflects upon questions of credit, I do not propose to say much on the subject. The most reliable evidence appears to come from the Maincon personnel. No doubt they were principally interested in the advancement of the interests of Maincon, but they appear to have taken a neutral stance as between Yates and Linfox. Their contemporary documents record the following. 676 On 11 August the solicitor for Maincon Holdings wrote to the solicitors for Yates, saying in part: We are instructed that your client is in serious breach of both Leases, as it has dumped, or permitted to be dumped, substantial items of stock all over the property common areas. There are serious safety and insurance considerations involved, especially due to the nature of the materials left unattended outside the leased premises. The Landlord hereby demands and directs that all such material must IMMEDIATELY be removed. Please confirm that your client will comply. 677 On 18 August Mr Wise of Maincon Holdings wrote to Mr Ho of Yates, saying amongst other things: From my site visit today the complete area of driveway and truck manoeuvring area i.e. 300 m2 except room for access no wider than a car, is covered in stock. There appears to be more stock stored outside the warehouse than within its walls. Maincon's request for this stock to be removed for very legitimate reasons has been totally ignored. The major concerns over the dumping of the stock are:- 1. We were given no indication this was going to happen. 2. The site is now not safe for vehicular and/or pedestrian traffic in particular emergency vehicle access … 7. Fire Egress passages within the building are blocked with pallets of stock. 8. Stock is stacked too high in some parts of the warehouse i.e. closer than 1200 from a sprinkler head which is not permitted with an ESFR sprinkler system. Any pallet that conflicts must be immediately removed. 9. Landscaping work along the eastern boundary cannot be completed as there is a 200 metre long blockade of pallets. 10. Vehicles are parked and stock is stacked within the 6m wide emergency vehicle access to the perimeter of the building … 678 Mr Ho replied on 19 August. Only two pages of a three page letter are in evidence, the middle page having evidently been lost. He challenged what Mr Wise had said in his paragraph numbered 2., saying: Trucks and semi trailers have been reversing right up to the loading dock area for picking up and delivering pallets. I do not believe that access to the building is restricted. In so far as pedestrian traffic is concerned, this is managed by Linfox who have a tough regime regarding safety. Obviously an unauthorised pedestrian … [the second page of the letter is not in evidence] 679 In oral evidence Mr Ho said in substance that this was not correct. 680 Later in his letter, Mr Ho said: Based on information available, Linfox have advised that we should be able to have all pallets fully stored within the warehouse no later than Saturday 28th August 1999. On a daily basis, pallets are moved progressively from the concrete apron into the warehouse … It is in our interest, as much as yours, to store all pallets in the appropriate racking … 681 On 6 September Mr Wise wrote again, referring to his visit to the site on 3 September. He said: 1. There are more pallets than ever dumped on the driveway. 2. The pallets of stock on the driveway are stacked higher than ever before. 3. Even the Entrance gate has been closed so pallets can be stacked right up to the gate. 4. The pallets are now stacked more dangerously - mostly 3 high - some have fallen over because they are stacked too high, some have fallen over from what appears could have been "truck rage" - some have fallen and damaged the chain wire fence along eastern boundary …

Trucks are entering and leaving the site in a highly dangerous fashion i.e. either reversing out of the driveway and across Kurrajong Ave. or doing a 3 point turn across Kurrajong Ave and reversing down the driveway … Maincon Holdings demand that all of the above items are remedied immediately … 682 On 20 September Mr Wise wrote again. He said in part: Maincon expressed out concerns regarding the apparent slow progress by Yates in removing stored materials from the entrance driveway and emergency vehicle access around the building. Whilst there had been some improvement in the driveway since our previous correspondence, this may have been achieved partly at the expense of reduced access around the building and the loss of car parking adjacent the building. Maincon acknowledged that Yates are similarly dissatisfied with the current situation and are endeavouring to rectify matters. 683 Even if some degree of hyperbole is assumed, there is no sound reason to think other than that all this was generally accurate. I do not accept the submission of Linfox that there was no impediment to trucks using the driveway "during the August period and certainly by the end of August", and I reject the submission that "immediately after Linfox's termination, Yates arranged for the product on the driveway to be cleared away". Disorganisation in the Warehouse 684 So far I have dealt with the physical congestion in and around the warehouse. I turn to the disorganisation of Yates' affairs concerning the warehouse. It is clear that there was a significant disorganisation of Yates' business, but there are numerous disputed questions as to the causes of that disorganisation, its extent, and for how long it lasted. These matters are said to go to questions of causation, contributory negligence, and the measure of the disorganisation. 685 The debated question concerns the relationship between the physical congestion in the warehouse, and what Yates says was the result that there was difficulty and delay encountered in picking stock to meet orders placed upon Yates. Linfox says, in brief, that even if there was a disorganisation in the reserve stock area it has not been shown that there was any significant disorganisation in the pickface area. 686 However, Mr Frost spoke of "very difficult operating conditions" that existed just after the move, meaning that picking staff and replenishment staff could not find a product within the warehouse to meet orders, a matter of great concern to him; and this produced the result that orders were not supplied on time, and the further result that the backlog of orders was increasing (somewhat inconsistently, he also said that he had observed the pickers and replenishment staff have this difficulty in accessing stock to fill orders "from time to time"). 687 Mr Jacob conceded that block stacking slowed down the work of those replenishing the pickface, and also that the absence of records as to what was in the block stacks created a logistical nightmare in attempting to find stock to fill orders. He also said that picking staff had to hunt around through the block stacks to find products, a time consuming process that resulted in delay, and had an effect upon the ability to pick orders for which they were responsible. 688 Mr Morrow did not formally address this distinction at all, but did agree with a general proposition that had there been a different plan adopted this would have avoided the difficulties encountered by the pickers and replenishment staff. Similarly, Mr Higgins spoke generally, but also spoke particularly of the difficulties in the reserve area. He said in substance that he had planned for the pickface area, but had had no time to plan properly for the reserve racking area. He did however speak of the difficulties of replenishing the pickface area from the reserve racking area, so as to allow the 48 hour rule to be complied with. 689 More generally, there is a volume of evidence attributing the delays in the processing of orders to the state of the warehouse. Mr Prince, who was employed by Yates in 1999 in the position of General Manager, Customer Support Services/Technical Development, but who was called as a witness by Linfox, gave such evidence. Other witnesses spoke generally of the state of disorganisation of the warehouse as a whole. 690 When Yates received an order for goods, the details of the order were entered into its PRMS computer programme. That programme contained inventory records, and the programme checked the order against the inventory records to see whether there were goods on hand in the warehouse in question from which the order might be fulfilled. If so, the programme prepared a pick slip. When printed, the pick slip constituted an instruction to a picker to pick the goods in question from the pickface racks, and to take them to the staging area. It identified the goods to be picked by a product code, and by colour, size and quantity. 691 The picker had to record on the pick slip whether or not all of the goods mentioned there had been picked. If the picker could not find the goods in question in the pickface, or some of them, the picker marked the pick slip N/A, meaning not available. If the picker could not find the whole of the quantity of some item of product mentioned on the pick slip, he recorded the quantity picked, and marked the pick slip N/A as to the balance. 692 When the goods had been taken to the staging area, the picker delivered the pick slip to a clerk, who embarked upon a confirmation procedure. The clerk took the data now recorded on the pick slip, and manipulated the computer programme so that a confirmation screen was shown, and then the clerk keyed in, as was appropriate, confirmation of the quantities of the products that had been picked, and were then in the staging area awaiting loading onto a vehicle for delivery. Upon confirmation, the programme caused an invoice to be printed, and the invoice was taken to the staging area, and attached to the goods, so that the goods and the invoice travelled together to the customer's premises. 693 There was a possibility of human error at various points, including the keying in of data at the confirmation stage. Not long before Yates left the Clyde warehouse, Linfox suggested and Yates adopted a modification of the computer programme, with a view to reducing the possibility of human error at this stage. In short, the confirmation screen that the clerk saw automatically reproduced, as a draft, the original order, so that the clerk had only to modify the figures shown in the draft to the extent that the picker's notations on the pick slip recorded some need for change. 694 When the order was confirmed, the programme automatically arranged for the printing of the invoice, and at the same time it updated the inventory records, so as to reduce the stock quantity there recorded by the quantity just taken to the staging area for delivery to the customer. (One advantage of the WMS, when introduced, was that this recording of inventory changes occurred slightly earlier, when the picker reported by a hand-held radio frequency device the picking of the quantity of stock picked. Nothing turns upon this, for the purposes of the present litigation.) 695 One of the areas of contention concerns the reasons why a picker might not have been able to locate stock. Linfox contends that a major reason was that, in relation to various stocks, and at various times, Yates was "out of stock". I will return to the detail of these disputes later, when dealing with questions about the measure of damages. For the moment, it is sufficient to note that all that the notation N/A, written on a pick slip, meant was that the picker had not been able to find the whole of the relevant product mentioned on the pick slip, at the time. 696 Another contention of Linfox was that there were sometimes problems concerning the printing of pick slips. The procedure was that there were pick slip runs generated, that is, a large number of pick slips were printed together, in one run, and then the pick slips were divided up amongst the various pickers on duty at the time. This process recurred frequently. Sometimes, a picker might have to wait to receive a pick slip or slips, for example, if the printer was printing something else at the time, but delays of this kind were to be measured in minutes at the most, and they can be put aside now. At other times there were problems when a printer was not functioning, but Mr Trevarthen of Yates said, and I accept, that alternative or replenishment printers could normally be organised pretty quickly. There are records of delays or of problems caused by printers malfunctioning or not functioning, and it is easy to visualise how irritating it must have been in busy or stressful times to have problems like this occur, but the high water mark of Linfox's case concerning printing difficulties is that Mr Jacob said that, whilst he did not know, he thought there was a delay of a day or days. I do not accept even this much: if in truth there were significant printer problems at Mt Druitt, so that pick slips could not be printed generally, as distinct from for very short intervals of time, then Linfox submits and it seems to follow that, there being no pick slips, there could not have been any picking carried out. That is, deliveries to customers would have ceased or at least have been significantly interrupted. Given all the close attention that was paid during the hearing to the activities of the Mt Druitt warehouse in the period from August onwards, it is almost unimaginable that there would not have been much more evidence of such stoppages, if they had occurred. 697 Linfox referred in submissions to the evidence of Mr Ballantyne, but his evidence does not really help Linfox on this point. He said that "printer connectivity was giving a problem" as at about 9 August. He agreed that the printers "had been up for a period of time", but had "then gone down", and said that this was "an intermittent problem". As at about 16 August the printers were "still a little unreliable", and a week later that the inability to print pick slips when needed "occasionally impeded customer deliveries". All this emerged in cross-examination, by reference to the minutes of Yates' customer service meetings of 9, 16 and 23 August. 698 The minutes of 9 August record: Pick slips not printing out, late deliveries for NSW, SA and Vic. customers. Communication must improve if there are problems and action taken to ensure it does not happen again. Incomplete order report must be checked each day. 699 This meeting was held at 8am on 9 August, so that the problem mentioned was one that had been encountered at Clyde, and not at Mt Druitt. In any event, a memorandum of Mr Morrow of 11 August records: Picking has commenced in the new pick face and is running smoothly with encouraging feed-back from the pickers. Pick slips are now printing out with new locations directing the pickers to the product. 700 The minutes of the customer services meeting of 16 August contain no record of any difficulty about printing, although they recorded that certain pick slips could be "printed in advance". The minutes of the meeting of 23 August refer, not to printing problems, but to the Mt Druitt warehouse not having received various reports since the relocation; and the minutes said "B Tam to fix". This was done, and the matter was not mentioned in the minutes of the meeting of 30 August. 701 I find that there was some intermittent problem with the printing of pick slips that occasionally caused some delays, but that the delays were minor in duration, and not significant in relation to any issue in the litigation. 702 Linfox advanced a generally similar case in relation to the printing of invoices, as distinct from pick slips. Sometimes, goods were dispatched to customers without an invoice. In the end, there is no practical point of distinction between the two topics. 703 Linfox also made submissions concerning "negative stock balances", as recorded by the PRMS This is a reference to occasions when the electronic record purporting to show that the quantity of a particular item of stock located at a particular warehouse, or at a particular location within a warehouse, was less than zero. Needless to say, this was caused by some error in recording. It undoubtedly caused problems for Yates' production planners, but it seems irrelevant to any question concerning delays in filling orders. 704 Linfox also referred to a different problem. It said that there were times when the PRMS recorded that there was significant stock available at Mt Druitt, but the pickers could not find it. Given the overwhelming evidence of the disorganisation of the warehouse, and the difficulties of finding stock, it seems more likely than not that the pickers could not find stock that was there than that the stock was not there. No witness propounded any theory explaining how it had come about that the computer would record the presence of stock that was not there, nor did Linfox propound such a theory in submissions, except in the most general and unspecific terms I do not doubt that matters such as the entry of incorrect data might have led to some incorrect inventory records from time to time, but what Linfox appears to be suggesting is some general systemic inaccuracy in the inventory data, resulting in the pickers wasting time looking for products, and then marking pick slips N/A, because it was the electronic record that was faulty, and not the state of the warehouse. The evidence establishes only that pickers could not find products, and marked the pick slips N/A, and it is a matter for inference as to why this was done; and the state of the disorganisation in the warehouse points unmistakably to the view that Yates contends for. 705 The PRMS was so programmed that, if desired, it would itself record N/A when a pick slip was to be printed and the electronic inventory recorded that there was none, or an insufficient quantity of the product in question held in the warehouse. The evidence does not establish whether this facility was used or not, but if it was, there is no evidence justifying the view that, except perhaps on isolated occasions, the result of some assumed error in loading data into the system, the electronic inventory was defective; and once again, the state of the warehouse points to the inference that it is more likely that the product was there, but could not be found, or could not be found readily. 706 Mr Wilkinson was a retired Yates employee, who came back to work temporarily, from 9 August. In short, he did work assigning priorities amongst the orders received from Yates' customers. He regarded Linfox as the Mt Druitt warehouse manager, and his job as being to assist Linfox; and he gave priority to Yates' larger customers, although also having regard to the dates upon which orders had been placed. At one stage I understood Linfox to be saying that this was somehow to its forensic advantage, since the greater number of complaints came from Yates' smaller customers, but, if so, this contention was not put in the end, and rightly so: if in spring 1999 Yates had not given its larger customers priority, its loss would have been greater. 707 However, Linfox did advance a case that Mr Wilkinson's efforts produced some small level of disruption in the warehouse. Linfox's case on this point was put at its highest by Mr Morrow, who spoke of papers being displaced, resulting in some delay. No doubt this was irritating, but as Mr Morrow agreed, to the extent that Mr Wilkinson's conduct caused him some grief, that was "a pimple compared to a mountain". The Backlog of Orders 708 There were a series of questions debated as to whether there was a backlog of orders, placed upon Yates by its customers, during and after August 1999, for how long that backlog existed, what was the size of the backlog, and what its causes were. 709 The PRMS system automatically produced various reports after the end of each working day, including a sales report, an incomplete order report (IOR), and a lost sales report. These were printed out at Yates' head office in Homebush, and were available on computer screens at each of the Clyde and Mt Druitt warehouses, if they were not actually printed there automatically. On the following day, staff at the relevant warehouses caused pick slips to be printed out concerning particular orders. After the picking operations had been carried out, and the marked pick slips returned by the pickers to the clerks, and the confirmation process described above had been completed, invoices were printed out in respect of batches of picked goods. Once all this had been done, the system recorded the data relating to each transaction automatically, but IORs and lost sales reports were automatically deleted from the system after four weeks, as part of the system's house keeping. It was possible to cancel an order at any time before the pick slip was printed. 710 An IOR was a list of all orders that, at the end of the day, had been entered into the system, but had been neither invoiced nor cancelled. The report said nothing as to why the order was incomplete. A lost sales report was a record of all orders in respect of which an invoice had been issued that day, but where the quantity mentioned on the invoice was less than the quantity ordered. This report did not include cancelled orders. 711 If for some reason an order was not fulfilled, the system did not automatically produce a "back order", or replacement order. In respect of some small number of customers, Yates' Customer Service Division operated a manual system, whereby staff keyed in fresh orders, replacing the original order completely if it had not been filled at all, or replacing it to the extent that it had been partially fulfilled. These new orders were given separate identification numbers by Yates, although they preserved the original reference numbers of the customers. 712 Mr Moore said and I find that when he was working at Clyde, and later at Mt Druitt, the system automatically printed an IOR and a lost sales report. Each morning, he analysed the IOR to ascertain why the orders were incomplete and prepared a report, recording why each order mentioned had not been completed; and he delivered these reports to either Mr Frost or Mr Pearce, so that they could respond to questions that might be asked at the next Yates weekly customer services meeting. 713 Some IORs were "saved" and are now in evidence. To try to summarise the contents of some eight lever arch files in one sentence, they show that the level of incomplete orders, so recorded, increased progressively from 10 August to about 3,000 by the end of that month, and that the number then progressively declined. Other evidence corroborates this general picture and shows that the arrears were not brought up to date until November. 714 Other contemporary records paint a picture, generally, of a substantial backlog in orders. Thus, the minutes of a customer services meeting of 20 September records that at that time, Yates was picking an average 2,000 lines of orders per day, and that the backlog was then 11,000 lines of orders; and the minutes of the meeting of 11 October record that the backlog then was 9,000 lines of orders. There are also records of complaints by customers, and a wealth of evidence about oral complaints made by customers. 715 Linfox submitted that IORs are "a very poor measure of performance in the warehouse", and that they are of "no assistance in determining the efficiency or operational capacity" of the warehouse. There were a number of strands to this. First, it was said, principally by reference to the evidence of Mr Frost, that the reports were not available at Mt Druitt in August, and that when at Clyde Mr Frost had delegated the review of the reports to Mr Moore, with instructions to Mr Moore to report back if there were orders that were not delivered for reasons other than that the product in question was out of stock; and Linfox submitted that there was "no evidence" that Mr Moore had made such a report. However, Mr Moore said, and I accept, that he reported each morning, and Mr Trevarthen said, and I accept, that he discussed the contents of the IORs with Mr Frost on several occasions, that is, that Mr Frost commonly had copies of them. 716 Then it was said that "by all accounts", an attempt to determine what products had not been delivered was "large exercise". The only evidence cited in support of the submission was that of Mr Frost, but I reject this evidence, preferring the evidence of Mr Moore, who said that it was part of his daily routine work to attend to this. Apart from the evidence itself, the idea that the reports were used appears to accord with common sense: why have a system that automatically produces reports, if the reports are not acted upon? Similarly, and by reference to the evidence of Mr Moore, I reject the submission that the reports were "useless to the warehouse operator". 717 Mr Morrow said that he considered that checking the pick slips was "the best reference point" for determining how far the orders were behind, although it is not clear to me how one would know which pick slips to look at. Linfox submitted that this methodology had been confirmed by Mr Wilkinson, but all that Mr Wilkinson said was that when he first started work at Mt Druitt, he went through the pick slips that were then in certain pigeon holes in order to familiarise himself with the position as to whether the warehouse was up to date in relation to orders. He also said that he saw the reports from time to time. This evidence does not justify Linfox's submission that the most appropriate way to determine the position was by checking the pick slips rather than the IORs. 718 Linfox then submitted that the IORs were inaccurate, advancing a number of propositions to support this general statement. Assuming that the system had been programmed correctly, and there is no sound basis in the evidence for thinking it had not been, it ought to have functioned correctly, unless incorrect data was entered. No doubt this could have happened and it probably did happen from time to time, but in the absence of evidence I do not think I am justified in thinking that it was other than on isolated occasions, whereas Linfox submits that because (amongst other things) of this possibility the IORs were of no assistance, a proposition that is difficult to reconcile completely with the evidence of Mr Jacob, that they constituted a tool that assisted in the management of the warehouse. 719 Mr Wilkinson prioritised the orders, and it may well have been a consequence of his giving Yates' larger customers priority over Yates' smaller customers that the number of outstanding orders increased in that the result of this action might have had the result that there were a relatively large number of small orders deferred, in favour of a relatively small number of orders for a large number of items On the other hand, Mr Wilkinson said and I accept that when arranging priorities, he took into account the period since orders had been placed, so that this circumstance should not be elevated too much. Besides, at another point, Linfox submitted that a high proportion of the outstanding orders were orders from Kmart, alone. 720 Linfox also submitted that the reports did not recognise when the warehouse was out of stock. It is true that the reports did not give any reasons, but the system was designed so that the IORs recorded occasions when orders had been entered, but not invoiced or cancelled. It was then the task of someone, at the relevant time Mr Moore, to ascertain why this was so. Additionally, the submission appears to gloss over the existence of the separate system of lost sales reports, recording instances where, when a picker could not find some part of the stock items ordered, for example because the warehouse was out of stock, he marked the pick slip accordingly. When this happened the lost sales report recorded it, and there is no occasion to think that for this reason the IOR was inaccurate. 721 Once again, Linfox referred to the printing problems encountered, but they seem to be an irrelevancy at this point, as does the suggestion that certain EDI [Electronic Data Interface] orders were duplicated in the ordering system: if they were duplicated, presumably the orders were made up and delivered, perhaps producing a different problem when the customer reacted, or the duplicated order was cancelled; and in either event the matter would not have been recorded in the IOR. 722 In re-examination Mr Jacob referred to the position when Yates missed a specified time for delivery to a major retailer, so that the retailer's order was re-entered in the computer system, thereby duplicating the record of the order. In submission Linfox suggested that this might have affected the accuracy of the IORs, but Mr Jacob did not say that. Rather, he said that the Yates operator had to cancel the earlier order. The evidence about the practice generally, coupled with the evidence of Mr Moore as to the events of mid August to late September, shows that, at least as a matter of practice, the duplicated orders were cancelled. In short, the submission is not based upon the evidence. 723 I pass over some of the other submissions made (16 January 2004). I do not think that the IORs provide a precise or perfect record, but they did constitute a part of Yates' system, in use before the events in litigation as well as during the course of those events; and the criticisms of the system now proffered by Linfox are quite unpersuasive. 724 On 31 August 1999 Mr Webb made a note in his diary: Spoken to John Ballantyne … Required completion of works at Mt Druitt site. Congestion of stock is now greatly reduced. 725 When Mr Ballantyne was being cross-examined, it was put to him that he had told Mr Webb: The congestion at the site has been greatly reduced and things are back on track.

Mr Ballantyne said that he could not recall saying that, but would not dispute it. However, Mr Webb did not say that Mr Ballantyne had said that things were back on track, so that it is difficult to see any proper basis upon which Linfox can now submit, as it does, that Mr Ballantyne had said the words in question, or that they proved that things were back on track as at 31 August. In any event, that is not the fact: see [669]. 726 I find that at the time that Yates terminated the services of Linfox there was a backlog of about 3,000 orders, that this was thereafter progressively reduced, but not eliminated until November; and that this backlog resulted from the disorganisation of the Mt Druitt warehouse, itself the result of Linfox's conduct described above. As Mr Prince said, a backlog of that size was extraordinary, and the chaotic condition of the warehouse affected the picking of products. The Onset of the spring Season 727 Yates' business was seasonal, and spring was its busiest season. The effect of the seasonal changes upon Yates' business varied, since its business covered each State in Australia, and the onset of spring conditions is not uniform. However, it is clear that, in terms of an effect upon Yates' business, the spring of 1999 commenced earlier than usual, so that Yates' commercial activities increased in intensity commencing earlier that year than was usual. I doubt that one can be at all precise about the level of the increase. 728 As it usually did, Yates employed a number of extra people, on a casual basis, in its warehouse in the spring of 1999. It seems correct to say that, since it moved away from its warehouse at Clyde to its new warehouse at Mt Druitt, it is likely that some people who had worked for it in the spring season in previous years at Clyde did not follow it to Mt Druitt, so that the corps of casual warehouse employees in the spring of 1999 included a greater proportion than usual who had no relevant prior experience, and who therefore needed to be trained, and who might have been more prone to make mistakes than "experienced" casual employees, for example in mixing up products that had similar packaging, and the like. 729 It is also the fact that, as a matter of timing, the onset of the spring seasonal business peak coincided approximately with the happening of the move, so that the difficulties expected to be encountered when moving a large organisation from one warehouse to another were accentuated by the onset of the spring seasonal peak, as well as by the imperfections of the move. 730 Linfox makes a great deal of this. At a number of points witnesses were asked whether it would have been better to have moved at some other time of the year, and they all said it would have been. This is of course obvious, but it is no answer to Yates' claim. The early onset of spring is not to be treated as an intervening cause, breaking the chain of causation between Linfox's conduct and the resultant loss, because it was the very kind of thing likely to happen in the ordinary course of things, if Linfox acted as it did: March v E & M H Stramare Pty Limited (1991) 171 CLR 506, 518. It had been known to both Yates and Linfox from the beginning of their relationship that Yates' business was seasonal, peaking in spring, and either that the move be completed before the onset of spring 1999, or it would be necessary to defer it until 2000, and the contractual relationship was brought into existence with this in mind. 731 Further, the witnesses who were asked whether it would have been better to move at another time were not asked about, and mostly were not in a position to know anything of the detail of the overall parameters of the move, or of Operation Leapfrog, or the details of the need to move out of Clyde by a given time, or of the difficulties that would have been encountered if, after it was agreed to vacate Clyde, it became necessary to consider moving elsewhere, or of the myriad of other details necessarily involved. Their expressions of opinion, as it were in the abstract, that it would have been better to move at a different time of the year, do not take one anywhere. In particular, it seems necessary to focus one's attention upon the questions when, precisely, Linfox says Yates should have decided to abandon its plan to move to Mt Druitt in 1999, and what, precisely, Yates was to do if it delayed its move to Mt Druitt. The witnesses were not asked to, and did not express any opinion about these matters, nor did Linfox venture any submission dealing with the questions. 732 Nor does it seem to me to be to Linfox's advantage now to review the evidence showing that Yates expected in advance of the move to have completed the move before the onset of spring, and that it assured various customers including Woolworths that it had affairs under control. At the time, Yates did expect that affairs were under control. Since Linfox was assuring Yates that all was well, Linfox can hardly be heard to complain now that Yates took the same view. 733 Various witnesses gave different estimates of the extent to which Yates' business increased, in a normal spring season. Mostly they were estimates of a global nature, but the fact appears to be that there was a pronounced and significant increase in orders for some, but not all lines of stock sold. 734 The parties made different submissions as to when the spring seasonal peak commenced, in 1999. The first record of anything suggesting this is in an affidavit of Mr Higgins: 19. Up until around 21 July 1999, Clyde was coping with the rate of incoming orders for Yates' product, such that all orders were picked and despatched on time. However it was then that Clyde received orders for the Victorian cross-docking facility for around 150 pallets of stock for Victoria, and over 100 pallets for South Australia. The warehouse staff needed a full day at full capacity to complete these orders, and to commence normal local runs. 20. On [Friday] 23 July 1999, another order of comparable size came in. The Clyde warehouse was able to clear it by the end of the day, and all local runs over the week-end. I recall that Gary Frost said to me: I will speak to a local employment agency and [arrange] for additional staff for the morning of the following Monday. From then on, the warehouse will utilise two shifts every day - the day shift will handle the interstate runs, whilst the night shift will handle local runs. 21. As far as I can recall, almost all orders were met and new staff did arrive to assist at Clyde. 735 Cross-docking was a new procedure. Typically, Yates arranged for a vehicle to deliver a load of various products to a warehouse of one of its customers, and the customer then arranged for the various products to be unloaded onto its dock, and then to distribute the products into other vehicles, to be taken by those various vehicles to various stores of the customer, as the customer required. The procedure enabled Yates to make single rather than multiple deliveries to the customer in question. 736 A fuller and, I think, probably more reliable account was set out by Mr Higgins in his memorandum of 2 November 1999: The falling behind in unpacking of orders commenced at Clyde. The main movement of goods to Mt Druitt commenced 31 July 1999. Picking was continued at Clyde until Friday 6 August 1999. During the weeks leading up to the main move, we were attempting to split our staff between two areas, prepare to conduct the move and ensure that all orders were going out in time. We coped with all of the above until approx. 21 July 1999 when the Victorian X-Dock kicked in proper. Up until this stage we had completed all orders on time, with the Vic X-Dock taking 2 staff members about 6 hours to complete. On this day we received orders for approx. 150 pallets of product for Vic in addition to over 100 for SA. We required a full day with all our available staff to complete these orders and to commence on the local runs. All of this was completed and we again managed to complete all orders until the 23 July 1999 when another order of comparable size was received. We were able to clear it in time on the day and all local runs over that weekend. Gary immediately spoke to employment agencies and procured additional staff for the Monday morning and on this day we went into two shifts. For every day from there on we were receiving large orders from all states and both shifts were constantly on the go to complete them. The day shift was primarily involved in supplying the interstate runs and the afternoon shift was doing the local runs. We were able to keep up all orders until the weekend of the move. At this time the afternoon shift were able to clear the last of the local runs and they were able to be provided on time but from the Monday 2nd Aug 1999 we were unable to cope with the workload. Half of the stock required to fill the orders for this week was located at Mt Druitt and it got away from us. Even working nearly 24 hrs per day we were unable to make up for the lost ground. When we commenced operations at Mt Druitt the conditions got worse. We were granted two days by Yates to get the warehouse into order but again the orders were backing up. Until the time I left, even going into three shifts we were unable to conduct all of the operations that were required of us. To make matters worse, the racking was not complete, Revesby and Mt Druitt factories were working 24 hrs to aid in production and the standard of new staff employed by the local employment agency were of a much lower standard, requiring careful training and guidance prior to being considered productive. On top of all of this, we were unable to locate the required products much of the time, and when we did, there was nowhere to place completed orders. Frankly, I believe it was the wrong time to conduct the move at all. 737 It seems likely that the increase in orders reflected by this evidence represented the first indication of the oncoming seasonal peak of work. It also seems that at the time Linfox and Yates regarded this first seasonal increase in orders as nothing unusual, although it was not accurate to say that Linfox kept up with all orders until the weekend of the move. 738 On 4 August Mr Frost sent the email quoted at [526] to a number of people. Mr. Frost's expectation as to the extent of the likely spring volumes may have been based upon hearsay rather than personal knowledge or experience, but in any event, on 5 August Mr Prince sent an email to Mr Frost and others reading: Subject: Order Delivery ex Clyde I realise that we are in the middle of a shift but we are very concerned at the drop of in service levels to our NSW customers. Order 201018 was rec'd on Monday and the customer (Bishops, Nowra) phoned on Wednesday looking for the goods. Today we see order is still at pickslip/print stage. We also appear to be getting a sudden increase in N/a's or lines in the warehouse but not being replenished. I have reviewed the outstanding/incomplete order report for Clyde as at 5.30 last night and there are over 300 orders that are past the schedule delivery date. The report indicates these are still at pickslip print stage. This means many customers in NSW and Vic will not get orders they expected for the weekend. At the customer service meeting on Monday we were informed every thing was fine. Can you please confirm what is the situation ASAP. The forward order report shows a higher level of promo activity in the next weeks. If you are struggling now we need to respond very quickly, as this may appear to be an "early spring" but you ain't seen nothing yet! 739 Mr Prince said that he did not recall receiving any response to that email. Mr Ben Moore (a Yates employee who allocated deliveries from the Mt Druitt warehouse into "runs" for delivery purposes - to be distinguished from Ms Helen Moore, Yates' NSW Sales Manager) said that whilst the volumes of spring orders had increased earlier, it was not until about a fortnight after the move (he arrived at Mt Druitt in "mid-August") that "the volumes really reflected a Yates spring". This seems to be the most precise estimate of time given by any witness, and I accept it as the fact. There was some increase in the volume of business before the move, but that increase does not seem to have been treated at the time by anyone as unexpected, or exceptionally or unusually large. Temporary employees were engaged, but that was a commonplace. 740 This means that a substantial part of Linfox's argument on this point became academic. If Linfox had procured the racking parts in good time, the reserve racking would probably have been erected in good time, and the 23 June plan: [127] would have been fulfilled with the result that the increase in the volume of incoming orders for spring would have had no greater impact in 1999 than it had in other years, except perhaps for the apparently unimportant rider that some of the corps of casual staff at Mt Druitt might very well have been less experienced, and therefore more prone to make errors, than the corps of casual staff employed at Clyde in previous years. Other Defences Pleaded 741 Linfox said that Yates had failed to mitigate its loss. In the main, this defence represented a restatement of matters said to go to breaking the chain of causation, or to contributory negligence. I have found in favour of Yates on these points. In addition, Linfox asserted that after 1 September 1999 Yates operated the Mt Druitt warehouse without appropriately qualified or experienced staff, and without due care and skill, and that it damaged and lost stock in the warehouse. No separate submissions were advanced in support of these matters, each of which is dealt with elsewhere. 742 Linfox also pleaded a defence of voluntary assumption of risk. This defence fails at the first point to be considered: I do not accept that in the period 21 to 30 July 1999 Yates knew of the factual matters that underpin the defence, and I do not accept that, at the meeting of 30 July between Mr Jacob and Mr Ballantyne, Mr Ballantyne on behalf of Yates accepted any risk, other than the risks associated with the lack of an occupation certificate. Yates took other answers to this defence, recorded in the written submissions, but there is no need to consider them. 743 I deal below, at [1122] with the defence noted at [33], asserting an agreement that Linfox would not be liable for any stock deficiency. Negligence and Contributory Negligence 744 So far, I have dealt with the matter primarily in terms of Yates' claim in contract, but at [453] I found that, in breach of the fifth alleged term of the contract, Yates had failed to exercise reasonable care. These findings justify a judgment in favour of Yates in negligence, as well as in contract. In addition, Yates pleaded that Linfox owed Yates a duty to take reasonable care in the management of the fit-out of the Mt Druitt Distribution Centre and the relocation from Clyde to Mt Druitt, and that this duty had been breached. I find that this was so, for the reasons given generally above. 745 The particulars of contributory negligence are set out at [34]. I have dealt with most but not all of these matters when considering the contentions of the parties concerning other topics. Allegation (i) concerns the failure of Yates, from about 1 September 1999, to install and have operational a WMS I dealt with part of this at [512] - [516]. By 22 July, the position had been reached where, on the program then proposed by EXE, the WMS was to "go live" at Clyde on 10 November, and the project was to be completed by 6 December. A view of the evidence about EXE's performance in the months leading up to 22 July (see [282], [520] and [521] particularly), coupled with the fact that EXE was still speaking of an installation at Clyde, does not inspire great confidence in this program, to the reliability or accuracy of which no witness deposed. As Yates submitted, the program was dependent on the Business Review Packet being signed off by 30 July, a process that involved work to be done by Linfox, and it had not been signed off as at 30 August, when Linfox's services were terminated. Indeed, as at 22 July, Linfox was still withholding information from Yates, perhaps as an incident to the negotiations that were being conducted between Linfox and EXE concerning the WMS pricing: see [454] and following. 746 Nevertheless Linfox says that Yates was guilty of contributory negligence in failing, promptly after 30 August, to take steps to have a WMS, and specifically the Exceed brand WMS installed. Mr Ho, Yates' Chief Financial Officer, was cross-examined in July 2003 about the termination by Yates of the services of Linfox, and Yates' wish to retain the services of some Linfox personnel after that termination. He said: Q. Are you able to offer any explanation as to why Yates did not take up the offer to have the two men who'd been working on the implementation of WMS at Linfox come in and assist you to complete the implementation of WMS after Linfox had been terminated? A. What happened was, after the termination of Linfox I had a discussion with the General Manager of EXE. I can't recall his name now, I think - his name escapes me at the moment. The gist of the conversation was that he wasn't certain whether EXE could continue to deal directly with us because he believes that the contractual arrangement for the implementation of the Yates WMS was through Linfox, and that he need [sic] to seek legal advice and to consult with Linfox as to whether - who owns the intellectual profit on all the negotiation of project implementation up to then. So the project was halted for about two or three months while we resolved that. Q. Prior to this Yates had signed an agreement, had they not, with Linfox exclusively relating to the implementation of the WMS? A. I believe there was some arrangement, yeah. Q. In that context it is clear, isn't it, from Mr Bennett's letter, that Linfox was simply offering the services of two of the personnel who had been involved up to that stage simply on a pro rata basis; that is, an agreed rate per person per day. So there was nothing in that that was inferring that Linfox were holding you to any contractual obligation beyond the time of their termination? A. I'm not suggesting that. What I am saying is that the software vendor was very cautious to deal with Yates directly until EXE had sought legal advice as to whether they are able to deal with us directly. Q. Yates went on with the project using EXE? A. We did, or Yates did anyway. Q. Are you able to recall how much longer after you terminated Linfox it was clear to you that the project could proceed with EXE that there weren't any obstacles caused by the previous contractual arrangements with Linfox? A. About two or three months. 747 Mr Ho was then cross examined by reference to entries in the minutes of a series of customer service meetings, which referred to work being done during September concerning the WMS At the end, he said: At all times Yates wanted to have the WMS installed. The termination of Linfox has halted it, or may have slowed it, but nevertheless the general manager of Exceed said that they could not officially deal with us until they sought clearance from Linfox. 748 Matters were allowed to rest there, until October 2003, when Mr Worth made a witness statement and then gave evidence. He said that in or about late August 1999 he became aware of the termination of Linfox's services, and spoke to Mr Rich, proposing that EXE deal directly with Yates. Later he spoke to Mr Bennett, and obtained his consent to this course. 749 Linfox, which had made no application to recall Mr Ho, now submits that the evidence of Mr Worth demonstrated that the evidence of Mr Ho was false. I do not accept this. The submission apparently assumes that Mr Ho said that he spoke to Mr Worth, but this is not clearly established; Mr Ho's interest was in financial matters and he was not intimately involved in the project. 750 The submission that the evidence of Mr Ho was false was linked to a further submission to the effect that since Yates, particularly through Mr Ballantyne, wished to terminate the services of Linfox in any event in about early August, a deliberate delay in installing a WMS would have assisted, in that Mr Ballantyne knew that Linfox would not enter into a long term agreement with Yates unless and until there was a WMS in place. This seems a surprising submission, if only because, once Yates had terminated Linfox's services on the 30 August, the non-installation then of a WMS would not have furthered this supposed plan, but the submission lacks any proper foundation in the evidence in any event. 751 However, the allegation of contributory negligence fails for more fundamental reasons. The evidence does not establish that if a WMS had been installed in, say November 1999, its advantages over the PRMS would in fact have resulted in anything being done or omitted that would have changed any circumstance that is relevant to any of the claims for damages. Assuming a WMS to have been installed, and to have been functioning correctly, its fields would have had to be populated with data, and even on the most optimistic view, this could hardly to have been expected to commence before mid November; and it would have been necessary in substance to put the disorganised warehouse into order before this could be done. 752 Additionally, as Mr Frost conceded, not withstanding that a WMS would have been better in some respects than the PRMS, the PRMS functioned adequately for the picking of products: its supposed deficiencies had no effect upon the picking of stock, provided that there was stock present, and provided that it could be found. 753 In addition, I am not satisfied that, even if Yates had decided by about 30 August that it would deal directly with EXE, satisfactory commercial terms could have been arranged and the necessary implementation work carried out successfully, so that the program would have been operational by mid November or thereabouts. 754 Allegation (ia) concerns the proposition that Yates did not use a plan of the reserve stock area said to have been left behind by Mr Higgins of Linfox when he left the Mt Druitt warehouse on 10 September, or some substitute for that. Linfox said that the evidence of Mr Higgins demonstrated this. Yates pointed to his evidence in cross-examination, that he had prepared a plan showing where the stock was for the pickface area, but not for the reserve stock area. He said that he never saw such a plan for the reserve stock area. Given the disordered state of the warehouse in August and September, and Yates' termination of the services of Linfox, I do not think one would be justified in saying, as it were in the abstract, that it follows that Yates could and should have done better at reorganising the warehouse. The evidence shows that its staff were working in conditions of stress, and there is no basis for thinking that they were doing other than their best; and the same may be said about allegation (ii). I do not doubt that the systems, generally, could have been improved, but the question now is whether anything done or omitted amounts to contributory negligence, and whether these imperfections had any relationship to the loss suffered. 755 Each of the other matters particularised is dealt with, at least in part, elsewhere: allegation (iii) at [691]; allegation (v) at [594]; allegation (vi) at [707]; allegations (vii) and (ix) at [248] and [542]; allegation (viii) at [727]; allegation (x) at [201]; allegation (xi) at [325]; and allegations (xii) to (xv) at various places including [392], [413], [422], [426] and [545]. Allegations (xvi) and (xvii) also dealt with in various places and are generally akin to allegation (ii). Also, one is left to wonder. Linfox says that it had cured whatever problems there were by the time it left Mt Druitt about 30 August. This is plainly untrue. How likely is it then that its assertion that Yates acted without appropriate experience and skill are accurate, particularly as the assertion fails to recognise the actual state of the warehouse as at about 30 August? Allegation (xviii) is dealt with below, concerning the claim for damages for lost or damaged stock, and allegation (xviiii) is dealt with at [523] and following. 756 However, I should say more about allegation (xii). It starts by asserting contributory negligence in failing to implement a stock reduction program, and couples this with the proposition that, within about two weeks of the move, the stock held at the Mt Druitt warehouse exceeded the capacity of that warehouse. The latter contention is not established. See generally [391] to [447]. Before the move, Mr Ballantyne spoke of a plan to reduce the quantity of stock held, but that circumstance does not mean that Yates was guilty of contributory negligence, if this plan was not carried into action. Mr Frost, entrusted by Linfox with the relevant part of the planning, accepted that he would have to move about 8,000 pallets of stock from Clyde to Mr Druitt, appreciating that a move at that time of the year involved a movement of stock that would have been built up in anticipation of the approaching spring seasonal peak, and he planned accordingly. That plan seems to have been appropriate. What went wrong was that there was insufficient racking erected. 757 As to allegation (xiii) it was always the plan that the stock be delivered to the Mt Druitt warehouse, and the evidence does not establish that any product was sent there, beyond that planned for. As to allegations (xiii) and (xv), I find that from time to time product was delivered to the Mt Druitt warehouse without accompanying paperwork, such as followed the normal routine. However, the problem seems to have been a slight one. In evidence in chief, Mr Jacob described what happened on these occasions. In respect of product delivered from manufacturing plants other than the one at Mt Druitt, the receipt administration clerk telephoned the manufacturing facility to sort the matter out, noted any anomalies, and when any necessary papers had been received, he arranged for the product to be put away. If there was a delay with the paper work, the stock was retained in the staging area until the papers were received. The only possible real problem lay in the receipt of product manufactured at the Mt Druitt manufacturing facility, and delivered directly from there to the Mt Druitt warehouse. This might happen from time to time throughout a day. However, Mr Jacob described how he and Mr Frost "just hatched a simple system" of putting identification stickers onto the products. It is not easy to reconcile this evidence, presumably led in the hope that I would accept it, but with the submissions now made that there was a "very real and serious problem". 758 One of Linfox's real difficulties now is that, just as the boy who cried "wolf" too often came to be disbelieved, I find myself faced with a chorus of complaints by Linfox's personnel (at least in chief), attributing all difficulties to Yates' conduct and asserting that Linfox was blameless. After a time, a level of doubt surrounds all that these witnesses said in chief, when they conceded so much in cross-examination. Trade Practices Act 759 Yates also pleaded that in or about May 1999 Linfox represented to Yates: (a) Linfox would arrange the timely procurement of all necessary racking for the Mt Druitt DC; (b) Linfox would ensure that the relocation from Clyde to Mt Druitt was carried out with a "rack to rack" transfer of stock; (c) Linfox would commence the installation of racking at Mt Druitt on 5 July 1999 and complete the installation by 26 July 1999; and (d) Linfox would commence the transfer of stock and equipment from Clyde to Mt Druitt on 26 July 1999 and complete the transfer by 2 August 1999. 760 Yates went on to plead that these representations were made in trade or commerce, that Linfox did not have reasonable grounds for making them, that they were misleading, that Yates relied upon them (generally, by not making alternative arrangements), and that it suffered loss. 761 The pleading was confined to May, but the particulars referred to events in May and June, and the evidence and Yates' submissions referred extensively to events as late as July, and Linfox responded, dealing with the matter on a factual basis. If the case were to turn upon the fact that the pleading referred only to May, or May and June, so that if the claim had to be dismissed on this basis, I would be troubled - some people might well consider that upon the above findings of fact such a result would be an affront to justice. However Linfox did not take this pleading point, although its submissions indirectly drew attention to it. Since Yates succeeds otherwise, I think that the better course is to now direct Yates to amend its pleadings so as to conform to its submissions and to these reasons for judgment, and to proceed on the assumption that the pleading will extend to the events of July. 762 I have found that in May and June Linfox made the representations pleaded: [104] and following. The representations were admittedly made in trade or commerce. I have also found that on 6 July Linfox represented that there were no lead time problems in procuring new beams, or in substance that the timetable proposed earlier could be met: [194]; and that on 21 July Linfox represented to Yates, in effect, that the move could still proceed on a rack to rack basis: [227]. Whatever the position was earlier, by 6 July at the latest, Linfox had no reasonable grounds for failing to disclose to Yates that there was a lead time problem. Indeed, it is Linfox's case that it disclosed the problem on that day, but I have rejected this, at [194]. I find that Yates relied upon these representations and that it suffered loss by Linfox's conduct. Ownership of the Clyde Racking 763 Yates pleaded that on 12 July 1999 Linfox contracted with Mr Wiener of Zandean that Linfox would sell and Mr Wiener would buy certain racking then at the Clyde warehouse for $117,580; that Linfox and Yates agreed to apportion this sum between them on the basis that Yates would be entitled to receive $72,220 and Linfox $45,360; that Linfox received $117,580 from Mr Wiener in about January 2000, but that Linfox had not accounted to Yates for the agreed sum of $72,220. Linfox denied each of these allegations. 764 I reviewed some of this evidence at [132] to [137], [155] to [161] and [236] to [246], whilst dealing with other topics. On 12 July Mr Pearce sent a fax to Mr Wiener confirming that Linfox and Yates had made an offer to sell the racking in question for $117,580 and confirming Mr Wiener's acceptance of this offer. On the same day Mr Jacob sent a memo to Mr Ballantyne and others, confirming that Yates owned all of the drive-in racking at Clyde, as well as 292 frames and 2,460 beams: compare [241] and [242]. Mr Ballantyne replied later that day, saying in response: This doesn't really answer the question of ownership, or eventual ownership, of the racking items and installation that we have been paying for since September last year. Your itemisation of these costs included the terms "over 5 years", "over 8 years" etc., leading me to believe that Yates would own this racking at the end of those periods. Your colleagues disagree and I need to have this clear. 765 On 15 July Academy wrote to Mr Pearce confirming that it and Zandean were buying the racking in question from Linfox and Yates, and that as between themselves they were to pay $58,790 each. On 29 July Mr Jacob wrote to Messrs Rich, Ho and Ballantyne saying: The cost of the racking at Mt Druitt totals $618,727.00. This is made up of the following: Original Quotation amount $461,146.79 Sales Tax $ 58,630.21 Additional Beams $ 86,996.21 Sales Tax on additional beams $ 11,953.79 Total $618,727.00 [The letter went on to deal with the payment of the last mentioned sum over a period of years, and to ask whether Yates wanted to pay PRS directly, or have Linfox pay PRS.] 766 Mr Ballantyne made a manuscript note on this letter: "$72,000 to be credited to Yates for sale of standing racking to building owner". Mr Jacob was cross-examined about this document, and other internal Linfox material generally recording matters about the second hand racking held by Linfox. Neither party made any submissions about this detail, and during the hearing it was said to go to questions of credit only. 767 On about 20 January 2000 Academy wrote to Linfox enclosing two cheques for $51,246 and $51,245, a total of $102,491, representing payment for the racking, less an amount deducted in respect of supposed damage to the Clyde premises. The details of this deduction are not in evidence, and there is no evidence enabling a decision to be made about the propriety of the deduction, nor as to how any deduction which was appropriate should be apportioned between Linfox and Yates. 768 I find that there was an agreement made between Linfox and Yates to sell the racking at Clyde to Mr Wiener, and to divide the proceeds of sale, expected to be $117,580, between the parties in the proportions Yates $72,220 and Linfox $45,360. It may be that the agreement should be treated as having been made by Mr Wiener on behalf of Zandean and/or Academy, but no point was argued about this. If Linfox had taken the point, I would have directed Yates to amend its pleadings to cure the difficulty. 769 I find that Linfox received, not $117,580, but $102,491. In the absence of further evidence, or submissions on the point, I consider that Yates has not discharged the onus of proving that it should not bear the short-fall. I therefore propose to give judgment for Yates on this issue in the sum of $57,131, representing the sum of $102,491 received by Linfox from Zandean and Academy, less $45,360 which originally ought to have been payable to Linfox. The Claims for Damages 770 Yates' claims damages under various heads. First, there is a claim for loss of profits, resulting from loss of sales in the period to 30 June 2000 (sometimes expressed in the case as 'F 2000' or 'FY 2000'), dubbed the First Loss Period. In short, this is a claim that, by reason of the disorganisation of the Mt Druitt warehouse, Yates was unable to sell to its customers, in general, as much as it would otherwise have done. 771 Secondly, there is a claim for loss of profits, resulting from lost sales in the Second Loss Period, F 2001. This claim is restricted to losses in respect of three specified customers or groups of customers: Woolworths, the GreenGold group and the Flower Power Group. 772 Thirdly, there are a group of claims for expenses incurred: for travel and accommodation, for outside storage, for additional labour costs, and for a sum paid to Big W in compromise of a claim made by that body against Yates. 773 Finally, there is a claim for lost stock, and a claim to recover what are said to have been price increases, which Yates could not pass on to Coles, by reason of Linfox's conduct. 774 I will start by considering Yates' claims for lost sales, and various matters argued in this context.

Lost Sales: The Principles to be Applied 775 Where someone sustains a loss by reason of a breach of contract, that person is, so far as money can do it, to be placed in the same position, with respect to damages, as if the contract had been performed: Robinson v Harman (1848) 1 Ex 850, 855, 154 ER 363, 365, the Commonwealth of Australia v Amann Aviation Pty Limited (1991) 174 CLR 64. However, the parties are at odds as to the way in which this general principle is to be applied. 776 Yates submitted that, as a consequence of Linfox's breach of contract, it had lost sales, and therefore profits, and it said that, conceptually, its claim for lost sales fell into four categories. Adopting for ease of reference Yates' terminology, category 1 related to the effect upon Yates' business where Yates received an order from a customer for the supply of goods, but delay occurred in supplying the goods ordered, with the result that Yates made fewer sales to that customer of goods of the description in question than would otherwise have been the case; category 2 related to cases where Yates did not supply goods ordered at all; category 3 related to cases where Yates fulfilled an order for goods, but only in part; and category 4 related to cases where, by reason of a customer's dissatisfaction with Yates' performance, the customer did not order goods from Yates at all. 777 Yates submitted that, conceptually, the assessment of its damages in category 1 and category 4 cases required the application of different legal rules to the category 2 and category 3 cases; and that category 1 and category 4 cases required an assessment on a hypothetical basis. Linfox submitted that this was incorrect. It said that what was involved was a series of questions about past events and that Yates bore the onus of proof in relation to each such event, and that Yates had to prove the happening or non-happening in question, on the balance of probabilities. 778 In Malec v J C Hutton Pty Limited (1990) 169 CLR 638, 642-643 Deane, Gaudron and McHugh JJ said (omitting citations): When liability has been established and a common law court has to assess damages, its approach to events that allegedly would have occurred, but cannot now occur, or that allegedly might occur, is different from its approach to events which allegedly have occurred. A common law court determines on the balance of probabilities whether an event has occurred. If the probability of the event having occurred is greater than it not having occurred, the occurrence of the event is treated as certain; if the probability of it having occurred is less than it not having occurred, it is treated as not having occurred. Hence, in respect of events which have or have not occurred, damages are assessed on an all or nothing approach. But in the case of an event which it is alleged would or would not have occurred, or might or might not yet occur, the approach of the court is different. The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high - 99.9 per cent - or very low - 0.1 per cent. But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded. See … . The approach is the same whether it is alleged that the event would have occurred before or might occur after the assessment of damages takes place. 779 In Poseidon Limited & Sellars v Adelaide Petroleum NL (1994) 179 CLR 332, 349-350 Mason CJ, Dawson, Toohey and Gaudron JJ said (omitting citations): In the realm of contract law, the loss of a chance to win a prize in a competition resulting from breach of a contract to provide the chance is compensable, notwithstanding that, on the balance of probabilities, it is more likely than not that the plaintiff would not win the competition. As the contract contained a promise to provide the chance, the breach of the contract resulted in the loss of the chance and that loss was for relevant purposes an actual loss, in the sense in which Dixon and McTiernan JJ used that expression in Fink v Fink . And, where there has been an actual loss of some sort, the common law does not permit difficulties of estimating the loss in money to defeat an award of damages. The damages will then be ascertained by reference to the degree of probabilities, or possibilities, inherent in the plaintiff's succeeding had the plaintiff been given the chance which the contract promised. This approach is not confined to contracts relating to games of chance, sporting contests or other competitions. Fink v Fink concerned a contract to provide an opportunity for a reconciliation, breach of which was held to entitle the wife to damages. And there can be no doubt that a contract to provide a commercial advantage or opportunity, if breached, enables the innocent party to bring an action for damages for the loss of that advantage or opportunity. So, in The Commonwealth v Amann Aviation Pty Ltd, Mason CJ and Dawson J, Brennan J, and Deane J concluded that a lost commercial advantage or opportunity was a compensable loss, even though there was a less than 50 per cent likelihood that the commercial advantage would be realized. Damages for breach of contract were assessed by reference to the probabilities or possibilities of what would have happened. Damages in tort have also been assessed by reference to the probabilities or possibilities of what will happen or what would have happened. That approach has been frequently adopted in the assessment of damages for personal injuries where a court has been called upon to assess future possibilities and past hypothetical situations. In Malec v J. C. Hutton Pty Ltd , this Court drew a distinction between, on the one hand, proof of historical facts - what has happened - and, on the other hand, proof of future possibilities and past hypothetical situations. The civil standard of proof applies to the first category but not to the second, particularly when it is necessary to determine future possibilities and past hypothetical situations for the purpose of assessing damages. 780 Their Honours quoted from Malec, and continued: The same approach has been adopted in England and Canada. Neither in logic nor in the nature of things is there any reason for confining the approach taken in Malec concerning the proof of future possibilities and past hypothetical situations to the assessment of damages for personal injuries. The reasons which commended the adoption of that approach in assessments of that kind apply with equal force to the assessment of damages for loss of a commercial opportunity, as the judgments in Amann acknowledge. 781 Later, at 355, their Honours continued: Notwithstanding the observations of this Court in Northwest , we consider that acceptance of the principle enunciated in Malec requires that damages for deprivation of a commercial opportunity, whether the deprivation occurred by reason of breach of contract, tort or contravention of s.52(1), should be ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. The principle recognized in Malec was based on a consideration of the peculiar difficulties associated with the proof and evaluation of future possibilities and past hypothetical fact situations, as contrasted with proof of historical facts. Once that is accepted, there is no secure foundation for confining the principle to cases of any particular kind. On the other hand, the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant, shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable. 782 I accept as correct the theoretical proposition for which Yates contends. When one comes to consider category 1 and category 4 situations, what Yates asks for is an assessment of damages by reference to the chance that it says it had of making more sales to its customers than in fact it did make. To cite an expression used in Malec, its possible sales were events that allegedly would have occurred, but cannot now occur, and in that sense they are hypothetical. To cite other expressions used in Sellars, Yates' claim requires a consideration of past hypothetical situations, or a claim for damages for deprivation of a commercial opportunity. 783 The law in Australia must be regarded as settled by these authorities, but it is also helpful to consider the decision in Allied Maples Group Limited v Simmons & Simmons [1995] 1 WLR 1602. At 1609-1611, Stuart-Smith LJ discussed the need to distinguish between proof of causation of loss, and the assessment of damages, when a plaintiff's loss depends upon the action of a third party. Questions about causation, being matters of historical fact, must be proved on the balance of probabilities. Similarly, if the defendant's conduct consists of an omission, for example to provide some equipment, or some instruction or advice, the question of causation sometimes involves proof of another historical fact, namely the plaintiff's reliance upon the defendant's conduct, and that also must be proved on the balance of probabilities. If, however, the plaintiff's loss depends upon the hypothetical conduct of a third party, then the court proceeds, not on the basis that the plaintiff must prove on the balance of probabilities what the third party would or would not have done, but by evaluating the chance as to what the plaintiff has lost, provided that the chance is a substantial and not merely a speculative one. 784 Having discussed various authorities including Davies v Taylor [1974] AC 207, his Lordship continued at 1614: In that case the court was not concerned to distinguish between causation and quantification of loss. But, in my judgment, the plaintiff must prove as a matter of causation that he has a real or substantial chance as opposed to a speculative one. If he succeeds in doing so, the evaluation of the chance is part of the assessment of the quantum of damage, the range lying somewhere between something that just qualifies as real or substantial on the one hand and near certainty on the other. I do not think that it is helpful to seek to lay down in percentage terms what the lower and upper ends of the bracket should be. 785 Linfox cited a passage in the judgment of Mason CJ and Dawson J in Amann at 80, as supporting the proposition that Yates had to prove, on the balance of probabilities, that its expectations as to a certain outcome as a result of performance of the contract had a likelihood of attainment rather than being a mere expectation. Their Honours said: The award of damages for breach of contract protects a plaintiff's expectation of receiving the defendant's performance. That expectation arises out of or is created by the contract. Hence, damages for breach of contract are often described as "expectation damages". The onus of proving damages sustained lies on a plaintiff and the amount of damages awarded will be commensurate with the plaintiff's expectation, objectively determined, rather than subjectively ascertained. That is to say, a plaintiff must prove, on the balance of probabilities, that his or her expectation of a certain outcome, as a result of performance of the contract, had a likelihood of attainment rather than being mere expectation. 786 However, this passage and particularly the last sentence must be considered in context. Their Honours discussed the expressions "expectation damages", "damages for loss of profits", "reliance damages" and "damages for wasted expenditure", all of which they said (at 82) were "simply manifestations of the central principle enunciated in Robinson v Harman". Further, it is plain that, at 90, their Honours went on to assess the damages that should have been awarded for "the loss of a chance or an opportunity to secure a benefit", and the particular submissions then advanced concerning that issue. That case differed from this case in that there, what had to be considered was the conduct of the defendant, rather than the conduct of third parties, as here, and their Honours considered how the defendant in that case would have acted. 787 At 94 their Honours said:

This being so, the value of the prospect of a renewal of the contract was a matter to be taken into account in determining whether Amann would or would not have recouped its expenditure. As in a case such as Richardson v Mellish where the value of the legal obligation to the plaintiff depends upon the occurrence of an event extraneous to the contract, the probability of the occurrence is relevant to the estimate. 788 See too the summary of the effect of the decision in Amann, expressed by Mason CJ, Deane, Toohey and Gaudron JJ in Sellars, quoted above. 789 Both parties accepted, as a theoretical proposition, another well established principle: a party claiming damages must prove its case with as much precision as the subject matter reasonably permits, and in this context mere difficulty in estimating damages does not relieve a court from the responsibility for estimating the damages as best it can: Ratcliffe v Evans [1892] 2 QB 524, 532-533, Amann, and Placer (Granny Smith) Pty Limited v Thiess Contractors Pty Limited (2003) 77 ALJR 768, 37. 790 Linfox founded a series of submissions upon the distinction between cases where a plaintiff cannot adduce precise evidence of what has been lost, and cases where, although apparently able to do so, the plaintiff does not adduce such evidence: Placer at 38, and the cases cited there, State of New South Wales v Moss (2000) 54 NSWLR 536, 555, Nilon v Bezzina [1988] 2 Qd R 420, 424 and Biggin & Co Limited v Permanite Limited [1951] 1 KB 422, 438. 791 The debate was, essentially, whether or not it was reasonably possible for Yates to have led a volume of evidence that Linfox said Yates could and should have led. Yates emphasised the word "reasonably". Linfox accepted this as a theoretical position, although its submissions tended to ignore or gloss over the word. For example, it spoke of "strict proof" and of the need for Yates to demonstrate that it "could not" adduce "precise evidence". I proceed on the basis that Yates needs to prove this part of its case with as much certainty and particularity as is reasonable having regard to the circumstances, and to the nature of the events in question, and that the degree of precision required for the proof of the damages is proportionate to the proof reasonably available (see Nilon at 955 and Moss at 424). 792 It is not in dispute that Yates must demonstrate "substantial" loss before this principle applies. 793 Yates submitted that a person claiming damages for breach of contract needs to show only that the breach was a cause of the loss, and that it does not matter that there may have been other concurrent causes; similarly, in relation to the tort of negligence, it is sufficient if the defendant's negligence is a material cause of the plaintiff's loss: Alexander v Cambridge Credit Corporation Limited (1987) 9 NSWLR 310, 357-358; and similarly again, a party claiming damages under s. 82 of the Trade Practices Act for a contravention of a (presently relevant) provision of the Act need only prove that the contravention was a cause of the loss or damage: Henville v Walker (2001) 206 CLR 459, 468 and I & L Securities Pty Limited v H T W Valuers (Brisbane) Limited (2002) 210 CLR 109, 121, 128. Yates also submitted that, where a plaintiff establishes some loss resulting from a defendant's conduct, whether in contract, in tort or in relation to a claim for damages under s.82, it is for the defendant to prove the effect and the precise impact of causes other than the defendant's conduct - it is for the defendant to disentangle irrelevant events and exclude the operation of the defendant's conduct as a cause of the loss: Watts v Rake (1960) 108 CLR 158, 160, Shorey v P T Limited (2003) 197 ALR 410 at 41-49, Commercial Union Assurance Company of Australia Limited v Ferrcom Pty Limited & Anor (1991) 22 NSWLR 389, 422 (on appeal 176 CLR 280), Henville at 483 and Placer at 83.

794 In response Linfox said only that this was a matter for Yates to prove, saying nothing about principle or authority, or by way of reasoned argument. On the other hand it made lengthy submissions concerning other suggested causes of the lost sales, and as to the measure of the loss resulting from those causes. I will proceed on the basis that the implicit concession was correctly made. 795 Linfox did not respond at all to Yates' submissions that a plaintiff, suing for breach of contract, is entitled to such damages as arise naturally, that is according to the usual course of things from the breach, or such as might reasonably be supposed to have been in the contemplation of both parties at the time they made the contract as the probable result of the breach. Yates submitted that this was an exclusionary rule concerned with remoteness of damage, and not with causation of loss, and that it did not detract from the principle stated in Robinson v Harman: Amann at 174-176; and I assume that Linfox accepts this. 796 Yates submitted that as a matter of legal principle, a person claiming damages might prove its loss by a variety of methods, citing Placer at 39 and 72; and Linfox apparently accepted this, whilst vigorously contending that in the circumstances of this case Yates could and should have attempted to prove its case by reference to various particular matters. In part, but not in whole, this debate appears to turn upon the distinction between the principle that a person claiming damages needs to prove the loss with as much precision as the subject matter reasonably permits, and the principle that hypothetical matters are to be estimated, rather than proved on the balance of probabilities. I will proceed on this basis. 797 Another part of the debate turned upon the proposition, advanced by Yates, that where the conduct of a wrongdoer makes it difficult to measure the loss of the innocent party, the court might (Yates said it should) draw inferences in favour of the innocent party and adverse to the wrongdoer: Murphy v Overton Investments Pty Limited (2004) 78 ALJR 324, 74. Linfox in response referred to Armory v Delamirie (1722) 1 Stra 505, 93 ER 664, L J P Investments Pty Limited v Howard Chia Investments Pty Limited (No 2) (1990) 24 NSW LR 499, 508 and Houghton v Immer (No 155) Pty Limited (1997) 44 NSWLR 46, 59. As I understand the submissions, they were to the effect that the principle exists, but the facts do not justify the application of the principle. Linfox said that it had done nothing that made it difficult to quantify Yates' claim. Yates' Records 798 Yates kept records of many kinds, most of them electronically, but some only on paper. Some records were routinely kept electronically, but paper records were printed out from the electronic record either routinely, or when somebody chose to require this on an individual occasion. Some of the electronic records are kept indefinitely, and some are routinely deleted after a fixed period of time. Some electronic records are fixed, in the sense that once data is entered, it remains unchanged unless by deliberate human action, but other records are dynamic, in the sense that as further entries are made, the records are automatically adjusted. Thus, for example, records of sales achieved in various categories are constantly adjusted. Some dynamic records change from minute to minute during the course of a day. Some paper records are diligently kept, others are routinely kept, although sometimes without much thought or organisation, and others are routinely discarded. 799 Various people routinely reported to their superiors, and those superiors in turn reported to others, or another. Each month, there was prepared an Operations Report which went to the company's Executive Committee for consideration. It commonly ran to 100 pages or more, and it contained several reports by various officers of the company. One segment of the monthly Operations Report was a report prepared by Mr Trevarthen, the General Manager of the National Sales and Marketing Division. He compiled this report, in large part, based upon the reports submitted to him by a series of other officers, including Major Account Managers and Regional (or State) Sales Managers. 800 Linfox made repeated complaints about the adequacy of Yates' discovery. Before trial, there were orders made that Yates discover documents in various categories. I understand that there were a number of disputed hearings about this. At one stage, I heard a debate about it, and ruled against Linfox at that stage. From time to time afterwards Linfox renewed the complaint, without ever pressing for any order. It emerged later that some, at least, of those concerned did not appreciate that Part 32 of the Rules does not now permit general discovery, as it did in the past, whilst (I was told) Linfox had given general discovery, and expected Yates to do the same. It was not explained how this was consistent with the conduct of the earlier disputed interlocutory proceedings. Nevertheless, Linfox persists in complaining that Yates has not produced documents, or that it produced some documents "late". 801 On the material before me, the complaint is impossible to evaluate accurately, but it does not seem to have much merit. Linfox does not ask me to make any ruling on the point. It merely complains, suggesting, as I understand it, that I should draw some inference adverse to Yates from the lack of documentation. 802 It may be that the early complaints had merit. Without objection by Yates, Linfox obtained an adjournment from 25 February 2003 to 12 March 2003, and then until 31 March 2003 in order to enable it to master the material that had then been recently produced to it; and it later demonstrated a mastery of the contents of these documents. All that seems to be possibly relevant now is to enquire whether, in respect of particular documents or groups of documents, some inference should be drawn in favour of Linfox. 803 The first series of documents about which Linfox offered criticisms and complaints are the monthly reports of the various State Sales Managers to Mr Trevarthen. These were paper records. After Mr Trevarthen had used them for the purpose of preparing his segment of the Operations Reports, he discarded his copies of the reports of the State Sales Managers. They sometimes kept their copies, and sometimes did not. It seems to have been a matter of chance in the long run, although various people with secretarial responsibilities to the State Sales Managers routinely kept the reports, at least for a time. During the hearing I ruled, upon an objection to evidence, that these reports were financial records that the Corporations Act required to be kept. Nevertheless, some of them were not kept. Whatever else might flow from this, I am concerned with findings of fact as between Yates and Linfox. 804 Linfox cited Allen v Tobias (1958) 98 CLR 367, 375, where the Court quoted from The Ophelia [1916] 2 AC 206, 229-230:

If anyone by a deliberate act destroys a document which, according to what its contents may have been, would have told strongly either for him or against him, the strongest possible presumption arises that if it had been produced it would have told against him; and even if the document is destroyed by his own act, but under circumstances in which the intention to destroy evidence may fairly be considered rebutted, still has to suffer. He is in the position that he is without the corroboration which might have been expected in his case. 805 I do not think it can fairly be said that the destroyed State Sales Managers' reports answer the description of documents that would have told strongly either for or against Yates, or that they were "destroyed" in the sense discussed in either The Ophelia or in Allen v Tobias. They were routine reports, prepared in (at least) duplicate, and mostly kept at least for a time. When they were not kept, it seems, this was because those concerned thought that they lacked any continuing practical utility. Their contents were routinely extracted by Mr Trevarthen, and set out in his report, part of the Operations Report. 806 However, Linfox then submitted that it was appropriate to infer that the destroyed documents would not have helped Yates. I assume that this is correct. Linfox went on to submit that by reason of the absence of these reports, it had not been able to properly test the opinions expressed by that State Sales Managers in their monthly reports. The theory is sound, but as a matter of practicality, the point does not take one anywhere. Many opinions expressed were the subject of extensive cross-examination, and they were fully tested. It is evident from the cross-examination of these witnesses, and from Linfox's case more generally, that a central part of its defence to Yates' claim rested upon the proposition that there were many causes for Yates' losses; every record of Yates that had been produced had been examined for any reference to any possible cause, and that subject matter was then the subject of cross-examination of as many witnesses as might possibly be able to speak about it, and often the subject of considerable exegesis, either through Linfox's accounting expert, Mr Ross, or submissions, or both. There are so many of Yates' records in evidence, so many possible causes of Yates' loss identified by Linfox, so much cross-examination upon them, and so much by way of opinion or submissions, that it is all but inconceivable that anything that was of any possible real significance has escaped all this attention. One cannot forget that the system of records that Yates devised and routinely used was devised and used, amongst other reasons, to enable it to identify potential and actual problems, so as to enable remedial action to be taken. To a large extent Linfox's complaint now seems to boil down the proposition that there might have been some circumstance, recorded in the reports of the State Sales Managers, which otherwise escaped attention at the time, but which, by dint of Linfox's forensic exercise, might have been able now to be identified as significant, so as to provide it with some defence, or measure of defence. 807 Linfox submitted that it had lost the opportunity to cross-examine the State Sales Managers about certain opinions they had expressed, by reference to figures contained in the reports which have now been lost. In a sense this is correct, but Linfox did not suggest that the figures extracted from the destroyed reports were not accurately quoted elsewhere, and this point seems to be of theoretical consequence only. Perhaps it is no more than a prop for the more general argument that Yates has not proved its case to the extent that Linfox says Yates could and should have proved it, by ensuring that all records were preserved. 808 In its submissions of 6 February 2004 Linfox suggested that the State Sales Managers had not given truthful evidence about certain matters. Yates replied, pointing out that this suggestion had not been put to the witnesses in question in cross-examination, and although Linfox responded generally, it said nothing in response to this. I take it that the submission is withdrawn, but in any event I record my finding that the four witnesses in question, Ms Jackson, Ms Moore, Mr Malloch and Mr Humphreys, were honest witnesses. I also find that, to use Linfox's expression, Ms Moore, Mr Malloch and Mr Humphreys were non-partisan. Ms Jackson appeared to be convinced that many of the difficulties that she described were the fault of Linfox (a matter about which she had little if any direct personal knowledge, so that her opinion should be put aside), and I think that this coloured her attitude and her views, but notwithstanding that I also think that her evidence was generally reliable. Apart from any other consideration, it was generally consistent with the great mass of the evidence. 809 Next for consideration are Yates' National Budgets and Records of Sales. Linfox suggested and I understood Yates to accept that these were all recorded in the PRMS. Linfox made a general attack upon the reliability of the PRMS, considered separately below, but referred particularly to the fact that, when paper reports were printed, at different times, certain figures representing the total value of certain sales to certain customers, were different. Six such figures were identified (out of a very large number). In the context, the numbers are small, and apart from the general submission that Yates' records were unreliable, these six particular figures seem to go only to one issue, namely the accuracy of certain calculations made by Mr McClintock, Yates' accounting expert. 810 The only witness through whose evidence the matter was explored was Mr Hansen, who was at the relevant time a marketing analyst employed by Yates who, for the purposes of the trial, assembled various pieces of information. He explained that when sales figures were entered into the computer, the programme arranged those figures into various categories. As marketing conditions changed, it was necessary to reclassify or re-categorise some of the information from time to time, either by reference to the type of product, or the identification of the customer (one of the three customers in question was Franklins, and its business was effectively divided up amongst others). When this happened, the computer automatically reclassified the data that had previously been entered, and this had the effect that various totals would then change, but not the overall total. 811 When Mr Hansen was cross-examined about the details of the six figures mentioned, he could not recall what had happened with any precision, but his explanation seems to be sound in theory, no witness contradicted him, and his explanation is distinctly more persuasive than Linfox's derisory submission that the system was like a calculator which added two and two, and gave a total of three in one year, but a total of five in another year. If in truth the PRMS had any deficiencies faintly resembling this fundamental deficiency, it is surprising indeed that Mr Morrow, if not others, did not give extensive evidence about it. 812 These submissions were linked to a reference to a part of Mr Trevarthen's report for March 1999, expressing his "sheer frustration at once again monthly reports [to him] being incorrect (as well as late)", and explaining why this was a real problem. The parties debated whether this had or had not been satisfactorily explained in cross-examination. I am inclined to think it was, but I do not think it matters. Whatever the problem had been in March 1999, the evidence suggests that it had been resolved before spring 1999. 813 Then Linfox submitted that no documents had been produced recording the budget, or its underlying assumptions. Yates responded, referring to a body of evidence, and although Linfox responded generally, it said nothing more about this topic. I take it that the submission is not pressed. 814 Next, Linfox referred to the Operations Reports. As I understand it, the submission was that although they referred to some of the matters that Linfox says were causes of Yates' loss, they did not refer to all of the matters that Linfox says were causes of Yates' loss. The contention was that the reports should have explained all variations in performance. Within reasonable limits, this seems to be correct, in that Yates' Executive Committee probably expected to be told about any significant variation. 815 I have already referred to the IORs: see [709]. There were no IORs produced in respect of the 1998 or 2000 spring seasons, leading to the submission that Linfox was deprived of the opportunity to compare the volumes of incomplete orders recorded in 1999 with the volumes recorded in the preceding and succeeding years. This is true, although there was ample evidence, including evidence from Linfox's witnesses, comparing the position more generally in 1999 with the position in 1998, and it is not easy to see why Yates should be criticised now for not having printed out or otherwise saved the 1998 IORs. 816 Early on the morning 19 October 1999, a forklift collided with a rising water main at the Mt Druitt warehouse. Water gushed out onto the floor for about 45 minutes and at one stage it was said to be about six inches deep. Yates held some insurance policy, the detail of which is not in evidence. Yates notified its insurance broker, and the broker pointed out that the policy provided for a deductible of $10,000. Mr Ho asked that all expenses relating to the incident be recorded, to assist with the contemplated insurance claim, but within a short time it was appreciated that Yates' loss, including the salary and wages of those concerned with the clean-up operations, were less than the deductible, and no claim was made. 817 Linfox now submits that Yates produced the documents concerning the "flood" "at the heel of the hunt". They were certainly produced late in the trial, but I do not know when they were sought, nor whether it can be said they ought to have been discovered. They were also produced after Mr Ho had completed his evidence and had been excused, but Linfox made no application to have him or any other witness recalled. I do not accept that the evidence justifies drawing the inference sought, that the late production of the documents is demonstrative of a desire to produce only documents that assist Yates and not those that hinder it. 818 Linfox also pointed to the fact that the contemplated insurance claim was calculated in a different manner to the present claim for damages. However, I venture to think that a consequential loss insurance claim might have had to have been framed in terms of the relevant insurance policy, which might well have called for a different approach to a claim for damages. 819 The more meritorious submission was based upon the proposition mentioned in two emails of 15 November 1999, that no sales were lost in consequence of the incident, although "invoicing was down for the day", but no orders were lost and Yates was able to catch up over the next few days in relation to the orders that had been delayed. I do not accept that this evidence justifies the finding contended for, that Yates was not suffering delays (as at 19 October) due to late orders or the state of the warehouse: the evidence to the contrary is too great, and these emails are expressed in unclear terms. They do constitute evidence pointing towards the view that by 19 October, the position had been substantially retrieved, and this is an element to be considered. 820 On balance Linfox's submissions appear to overstate the position. I do not read the bundle of documents contained in Exhibit BA as showing that the event resulted in the warehouse being "shutdown for an entire day", and I am not confident that "no orders" were picked on that day: one statement made was that invoicing was down for the day, suggesting a reduction in and not an elimination of invoicing, and therefore of picking. 821 Linfox submitted that there was a host of other documents that Yates had not produced: out of stock reports for various products, query reports, orders, IORs for various periods, one annual return for Dynamic Lifter Pty Limited, and the national and state sales budgets for F2000 and documents concerning a tender that was sought for the replacement of Linfox as Yates' logistical services provider. The submission starts with an unfounded assumption that there was an order for the discovery of these documents, and Linfox repeatedly baulked at exploring the question what documents it was that Yates had been ordered to discover. Furthermore, in submissions, it did not deny Yates' statement that particular documents had not been ordered to be discovered. The evidence does not establish that the documents were discoverable. 822 Nevertheless, I should say something about these documents, for there is a wider question to be considered, concerning Linfox's assertion that Yates has not proved its case to the appropriate standard; and this general argument has significance in relation to arguments about particular topics. 823 The minutes of a customer services meeting of 21 June 1999, recorded a proposal "to send out of stock reports to Lotus Notes for sales and operations staff to view them". The minutes of the meeting of 5 July 1999 said, cryptically: "presented to sales managers. [Mr Tam] to produce directions for circulation". Mr Trevarthen said that he did not recall whether Yates ever got to the stage where these reports were distributed on a regular basis. 824 Linfox served upon Yates a notice to produce out of stock reports. Yates' solicitors wrote to Linfox's solicitors, proffering a detailed statement as to what had been done as to way of compliance, searching for records. Earlier, Mr Smith, SC, said, in respect of these documents and the call upon the notice to produce: They did exist, they no longer do and no electronic copies have been saved. They were stored apparently in Lotus Notes. Mr Tam advises that the reporting database was rolling or dynamic and it is not possible to recreate, extract or run a report for spring 1999. There are no hard copies of the reports unless people printed them out. 825 I doubt that this material justifies a finding that the out of stock reports were prepared on any systematic or regular basis; but even if they were, there is no basis for a finding that Yates still has them, but has not produced them, so that all is left is the point taken by Linfox that there were other records that Yates once had, or had access to, that it has not preserved and produced. 826 The PRMS recorded stock balances, but this was a dynamic record that changed, sometimes from minute to minute, but these were not out of stock reports. 827 Query reports are reports that planners were able to obtain from the PRMS concerning the availability of stock. The evidence of Mr Bill Thompson and of Ms Marks of Yates' Planning Department, whilst it might have been more explicit, appears to record that whilst these reports were available on a computer screen, the information they contained was constantly changing and they were not printed out automatically. For a time, Ms Marks caused query reports to be printed out each week, and she maintained a file of these. She said that the file had been mislaid during the course of two moves of office, and she had not been able to find it. There is no sound basis in the evidence for saying that the reports were discoverable, or that the computer could now recapture the information recorded from time to time in 1999, or that the paper records have been improperly not produced. 828 Linfox also complained that Yates did not tender the pick slips, and it said that Yates could and should have proved its case by starting from the pick slips themselves. I will deal later with the substance of this contention, but for the moment I am concerned with questions about documents. The evidence shows that there was more than 27,000 pick slips generated during the second half of 1999. During the trial Yates offered them to Linfox. I do not know what action, if any, Linfox took pursuant to that offer. 829 There was also a debate as to whether Linfox had failed to discover documents concerning its calling for tenders for logistical services. The evidence is silent on the point, so that I cannot make the finding sought that Yates has failed to do something it should have done. 830 Linfox says that Yates cannot use the absence of the documents as an invitation to the Court to estimate rather than calculate its damages. This is correct, but the submission denies a proposition that Yates did not advance. The PRMS 831 Linfox contends that the PRMS was inaccurate and unreliable, and therefore that the reports it produced were inaccurate and unreliable, and therefore that Yates' proof of its loss is deficient. This is a different question as to whether in 1999 a WMS would have been better than a PRMS, but the Linfox submissions often failed to distinguish between the two. I will concentrate at this stage upon the former question, and "the problems" that Linfox identified in the PRMS 832 It was said that the PRMS was not a real time system: there was a delay between the time when a picker picked goods from the pickface and the time when the picking was confirmed: see [689]. This is true, but irrelevant. There is nothing in the evidence suggesting more than a theoretical superiority in this respect, if there had been a WMS installed. 833 The same is true of the submission that the PRMS did not tell a picker where particular products might be stored in racks, so that the picker had to physically locate the goods for himself, in order to make up an order. Perhaps it is also accurate to say that if there had been a WMS installed, if its fields had been correctly populated with data, and if the move had been carried out as it should have been carried out, the pickers' work could have been carried out more quickly and efficiently, but these assumptions have not been made good. 834 It was then submitted that the PRMS was more prone to error than a WMS, because there was a greater number of points at which human error in loading data was possible. This is also true, although it needs to be remembered that before the move that Linfox and Yates had worked together, apparently successfully, to reduce that possibility: see [688]. However, the evidence does not provide any basis for concluding that there was more human error in this connection in the spring of 1999 than was otherwise the norm. 835 Linfox then referred to printing problems. I dealt with this generally at [696], but at this point Linfox added a reference to IORs not printing automatically. This does not lead anywhere. Linfox also referred to some evidence that had been rejected, and I leave it out of consideration now. 836 Then it was said that there was a long standing problem, in that pick slips would indicate that there was stock in the warehouse, when there was not stock there. Mr Frost said that this was so, and that in some cases the picking staff assumed that what the PRMS reported was wrong, so that they marked the pick slips N/A without doing more to investigate. Also, Mr Tam said that it had been reported to him on some occasions that the pick slips were inaccurate and Ms Marks said that the inventory record was often inaccurate in August 1999. She went on to say, that for planning purposes it was important that the inventory record be 99% accurate, and if it was not, this would have a huge impact. However, this is a different topic. I find that the inventory record kept by the PRMS in respect of the Mt Druitt warehouse was inaccurate at times, and particularly during the spring of 1999, but that leaves for decision why it was inaccurate, and the Linfox theory that it was inaccurate and unreliable remains just a theory. 837 In its submissions of 6 February 2004, Linfox referred at paras 4.31(a) to (e), 4.32 - 4.34 and 4.35(b) to a series of documents that are not in evidence. However, there was oral evidence given by both Mr Morrow of Linfox and Mr Tam of Yates, concerning the same topics, and there are other documents in evidence. I do not think that the point taken by Linfox has any weight. Mr Morrow referred to difficulties that arose, and Mr Tam (the Yates officer responsible for dealing with computer hardware and software issues) then investigated them. A protocol was developed, using forms called "document incident reports". Mr Tam said, Mr Ballantyne recorded on 19 July and I find that the problems identified were caused by human error, in that there were entries of incorrect data into the PRMS, and that led to the development of a procedure intended to eliminate so far as possible the entry of incorrect data; and this effort appears to have been successful. To the extent that there was anything left to talk about by the time of the trial, the topic left Mr Morrow looking rather foolish. On this general topic, I prefer the evidence of Mr Tam to that of Mr Morrow. 838 In any event, this was a debate about how the PRMS functioned at Clyde, before the move to Mt Druitt, and before steps were taken to remedy the problem; and although Yates took the question seriously at the time, as of course it might very well have done, it never seems to have been anything other than a quite minor problem, compared to what happened at and after the time of the move. 839 In February 2000, at the request of a financier, Mr Fraser prepared a report about distribution and transport costs and processes of Yates, with particular emphasis on the Mt Druitt warehouse, and Linfox tendered this report. Mr Fraser recommended that Yates define the services that the company offered, pointing to an inconsistency between the marketing staff offering a 48 hour delivery service, and the inability of the transport arrangements then in place to meet that timetable without hiring additional trucks. In response, Yates said that this report dealt with the position in February 2000, and referred to a late delivery report generated by the PRMS, showing the position month by month, from January 1998 to April 2001. 840 It is not clear what this shows. According to Mr Fraser's report, the quality of Yates' customer services and the promptness of the deliveries it made, compared to what he apparently assumed to be delivery times forecast if not promised, could have been improved, but putting Linfox's case at its highest, this piece of evidence does not tell one anything significant about the efficiency of the PRMS, or for that matter of any other of Yates' records; and the evidence speaks only of the position in February 2000. Further, it does not speak directly about the measure of Yates' damages. On the other hand, the late delivery reports showed that the position recorded in August 1999 was roughly seven times as bad (depending on how one measures it) as the position had been a month earlier, and it became worse still in September 1999. This evidence, coupled with the voluminous evidence about the complaints made by Yates' customers, appears to point to the fact that something dramatic happened in or about August. 841 The point taken by Linfox has weight, in that it provides further evidence that Yates' systems were imperfect or worse, but the evidence does not really link up with other evidence that takes one to any definite conclusion favourable to Linfox. 842 Then Linfox referred to a passage in the Yates stocktaking report for November 1999. The paragraph in question reads: The result of the November 1999 stocktake was a financial Inventory loss of $737,709 (= to 3.86% of total inventory value). This compares with a Perpetual Inventory loss (stock on PRMS inventory files versus stocktake count) of $614,850 (3.22% of inventory value). The difference in the results might be explained by the timing and accuracy of some paperwork transactions around this and last stocktake and the fact there was a gain last stocktake. 843 However, the same report went on to ascribe the loss associated with the stocktake at the Mt Druitt warehouse to a variety of factors: the introduction of the cross-docking project, the operationally difficult period during and after the move from Clyde to Mt Druitt creating "near impossible conditions for good inventory record control", and a variation in stocktaking procedures. I will deal separately below with the claim made by Yates for loss of stock, but for the moment, the citation of this document does not seem to me to advance in any significant way Linfox's case that Yates' records were deficient, and so deficient that it is not proper to rely on them. 844 Linfox also submitted that the deficiencies in the PRMS resulted in inaccuracies in the IORs. I have dealt with this above, commencing at [704]. However, Linfox made a further submission, to the effect that the date of the pick slip recorded in the IORs was sometimes either the day before or the day after the order was due, so that, it was said, Linfox could not be held responsible, the suggestion apparently being that Yates had not given picking instructions as quickly as it should have done. The proposition was not put to any witness, it seems to represent some late thinking, and it seems to be founded on the premise, not established by the evidence, that any "delay" in printing out pick slips demonstrates some failure on the part of Yates, rather than the fact that the work at the Mt Druitt warehouse was generally running late. 845 At several points, Linfox referred to material that is not in evidence, including references to documents produced upon subpoena by strangers to the litigation, and to facts said to have been deemed to have been omitted, by reference to a notice to admit facts, but since there is no evidence of these matters, I put the submissions aside. How Linfox says Yates could and should have proved its claims for lost profits 846 Although Linfox submitted that the PRMS was inaccurate and unreliable, it also submitted that Yates could and should have relied upon it, in proving its case now by having had many more records printed out at the time. Linfox accepts that some of these records cannot now be reproduced but says that Yates could and should have had the records printed out in the latter part of 1999. Linfox relies on a memorandum sent to many officers of Yates on 30 August 1999, in these terms: Subject: Linfox Deliveries & Resultant Costs arising from errors

The executive committee have asked that we gather details of all "costs" associated with the poor product delivery performance of Linfox in recent weeks. Basically our costs can be broken into two categories: 1. Direct Costs Damage to stock from deliveries ex Clyde/Mt Druitt or Laverton resulting in Yates having to raise credits to customers, or Credits having to be raised to Yates customers for under/over/incorrect delivery plus any resultant freight costs for return and/or redelivery of product. The above categories are relatively easy to quantify and value. Pleas either e'mail me on a case by case basis, or if there are too many to e'mail create a spreadsheet (or memo) and send to me here at Homebush. 2. Consequential Damage This category is very subjective but we need to know of all occasions where Yates will (or has) suffered damage i.e. loss of business from customers due to late or non-delivery of product. I know that to stop, think, go back and record instances of the above is both tedious and a distraction from work, but the executive are desperately keen to ascertain the extent to which the recent performance of Linfox has impacted on our total business. I would appreciate feedback as soon as possible. Please e'mail Geoff Turnbull at Yates Homebush as soon as you can gather some facts and figures. 847 No doubt, if Yates personnel had caused the computer to print out records that the computer routinely recorded, these printed documents would be admissible now, but to the extent that Linfox says that Yates could and should have called further documents into existence, by force of this instruction, suggesting that Yates ought then to have tendered these additional documents in evidence, there is a problem to be confronted in the form of Section 69(3) of the Evidence Act. There were no such reports tendered, but to the extent that Linfox suggests that Yates' proof is deficient because Yates did not call into existence and later tender such reports, I consider that Linfox's submission should be rejected. 848 However, even in relation to the possible printout of the PRMS records there is something of an air of unreality of some of the Linfox submissions. Linfox says only that Yates should have printed out "all relevant reports", without specifying what was relevant, or reasonable: compare [791]. If one contemplates the records that were dynamic, how often is it said that reports should have been printed out? 849 The essence of Linfox's case, at this point, was that Yates had to identify each event for which it said Linfox was responsible, that is each event such as the non-availability of a particular product required to satisfy a particular order placed upon Yates by a customer. It said that Yates had then to show, by evidence from Yates' customers, that the future non-purchase of particular goods by that customer from Yates resulted from the customer's dissatisfaction with some earlier non-supply by a particular product by Yates to that customer; and it said that there had to be evidence from the customer as to what the customer's intention would have been in spring 1999 but for the dissatisfaction of the customer. It did not shrink from submitting that if in spring 1999 Yates knew of each of its customers it could have called "each and every one" of them to give evidence as to any occasion when the customer chose not to place orders with Yates, because of the customer's dissatisfaction with Yates. 850 Yates responded, pointing out that in 1999 it had about 4,300 customers to its consumer division (the relevant division, for most purposes in the litigation). If what Linfox had contended for was correct, the trial - already absurdly long - would have been much more prolonged. The proper preparation of Yates' case for trial might have involved someone interviewing and possibly taking statements from a large number of these customers. Presumably in unstated recognition of the unreasonableness of what it had submitted earlier, Linfox then submitted that Yates' records ought to have told Yates, or ought to have been capable of telling Yates, which of its customers were significantly affected in the spring of 1999, so that Yates could have identified from its records which of its customers might reasonably be supposed to have been affected, the suggestion being that Yates ought to have analysed its records, so as to be able to narrow down the field of 4,300 customers, to some smaller but unspecified number. Linfox submitted that this was a matter that Yates ought to have been capable of handling. 851 The submission was not supported by a cross-examination of any Yates witness, but even the modified submission seems to be unreasonable. Would 100 customers have been a reasonable number to call? If the law is that a litigant such as Yates must call each customer, to give evidence of the kind that Linfox describes, if the litigant is to obtain damages in respect of sales lost in respect of that customer, is the litigant to forfeit some part of its damages in respect of every relevant customer not called? 852 Linfox submitted that Yates had to start by examining each of the pick slips, and by then linking up any pick slip marked N/A with evidence as to why the product mentioned on the pick slip had been so marked. I accept that it was possible to examine all the pick slips, but not that it was reasonable to require Yates to do this. It might be that, by examining each of the pick slips (which were not recorded in the PRMS) and comparing them with each of the orders (which were so recorded), it would be possible to link up each pick slip marked N/A with a particular order, but this is not established. Assuming one could do this, one would then need to identify and to interrogate the picker concerned. There were about 50 pickers, some only employed casually, through employment agencies, and Yates kept no relevant records about these casual employees. Pick slips were commonly completed with only a given name for the picker, and occasionally even that much was not recorded. Mr Moore said that between 9 August and mid October, 80% of the pick slips had been marked N/A, as to one or more of the products listed or a given pick slip. 853 The Linfox submission assumes that a picker, if asked, would have been able to say why he had not been able to find the goods mentioned in the pick slip. The work of pickers is not intellectually demanding, it is very repetitive, there is little to distinguish one picking instruction from another, and there were thousands of N/A markings. In the absence of evidence, I do not think it would be right to assume that a picker would be able to remember individual orders, so as to be able to answer the assumed questions, unless he did so on the occasion of marking the pick slips or within a short time afterwards - certainly not a week or a month or a year later. Similarly, I do not think that there is any real merit in the Linfox submissions that some inference adverse to Yates should be drawn, because Yates did not call any of the pickers or replenishers as witnesses: I doubt that any of them had any particular recollection that would have been truly informative. 854 Linfox argues that, after the sending of the memorandum of 30 August, Yates "chose" or "elected" not to keep proper records. It is not in issue that more records might have been prepared and/or kept, but the two verbs used do not seem appropriate. Individual Yates personnel, most of them (or at least those of them who gave evidence) working in conditions of stress, resulting it might be noted from Linfox's conduct and the resultant disorder in the warehouse, neglected to print out a large number of documents then recorded in the computer, but that is about as far as the Linfox submission takes one. The records in question were of a routine nature, and it is not difficult to visualise that those concerned did not regard them as having enduring importance. 855 I accept that an analysis of the pick slips, and a matching of those pick slips bearing the marking N/A against the orders placed upon Yates would disclose precisely what orders were the subject of the N/A markings on the pick slips, but to do this would not have proved Yates' case in the way in which Linfox says it must be proved: there would still be a need, Linfox says, to identify, through the evidence of the customers, the particular causes of the dissatisfaction of the customers, identifying each subsequent order for goods that the customers placed with suppliers other than Yates, and identifying what the particular customers would have done but for the dissatisfaction with Yates. There is also, Linfox says, a need to identify precisely the unavailability of the particular goods marked N/A with particular conduct of Linfox. 856 Yates submits that there are other reasons why this part of Linfox's case should be rejected. In respect of Yates' claims for damages arising from delays in delivering goods to its customers, leading to the loss of an opportunity to sell more, it points to evidence showing that, when the backlog of orders increased to about 3,000, the time taken to pick orders increased substantially, as staff had to search for products; but there was no record made as to when a picker started to try to pick the goods for an order, or what was then the (dynamic) record held in the PRMS as to the availability of the relevant stock. The system was not designed to capture this type of information. 857 Yates points to the evidence of Mr Moore, that from mid-August until the end of September, he had been instructed to do what could be done to "close down" orders, that is, remove them from the system, when some only of the products ordered could be found. The pickers marked the pick slips N/A, but that meant that the products could not be found in the warehouse at the time, and not that they were out of stock. 858 Additionally, Yates points to the plainly established fact that its interstate warehouses were sometimes out of stock in respect of various products, because replenishment orders that they had placed upon the Mt Druitt warehouse had not been met; to the fact that if one of its customers did not place an order, there never would have been created a record of this non-order; and to the circumstance that some customers would not be able to say that they might have done, but for the perceived supply difficulties. 859 I do not accept that the only way in which Yates might reasonably prove its case is by following this path, but that leaves for consideration the question whether Yates has reasonably proved its case following the path that it actually took. It relied in part upon the principle mentioned at [797], and submitted that the conduct of Linfox had made it difficult for Yates to prove the measure of its loss. I do not think that this is a significant matter. It is true that in August 1999 Linfox did not disclose the true position to Yates, but even if it had done so, Yates would be in much the same position now. If Yates had to prove its case in the way that Linfox contends for, Yates would have had to interview many of its 4,300 customers, and to call some significant proportion of them; and the evidence of Mr Sherwood and Ms Gocher points towards the lack of likely utility in the pursuit of that course. The reliability of Yates' budgets 860 Yates set out to prove one measure of its lost sales during the First Loss Period by reference to its budget for F2000. In simplistic terms Yates compared the sales it actually made during that period, and in particular during spring 1999, with the sales it said it had budgeted to make and would have made but for Linfox's conduct, and various witnesses spoke about the figures set out in the budget, as expected sales; Linfox responded to this, in part, by asserting that the F2000 budget was inaccurate and unreliable, and this led to an examination, not only of the F2000 budgets but of other budgets. 861 It was the practice of Yates to prepare a budget for each financial year, more or less concurrently with work done preparing for various forthcoming spring promotions, and this work was done, in the main, between February and May. Yates divided up the products that it sold into product groups, and then within those product groups, into categories, and the budget was developed not just by reference to product groups and categories, but also by reference by individual products sold, also referred to as lines, or SKUs (stock keeping units). In 1999 Yates dealt in approximately 2,000 lines. A dollar value was assigned in the budget to each line by reference to the number of units of that line expected to be sold, multiplied by an average price expected to be received, the average price being adjusted for expected events, such as reduced prices connected to planned promotions, and the like. 862 Two different computer software programmes were used, each of which interfaced with the PRMS One, called Mercier, used historical data to provide forecasts in relation to sales of particular lines, and the other, called DataTracker, analysed sales that had been made of particular products to particular customers. These programmes were used to produce an initial projection of future sales, and these projections, based as they were solely upon the analysis of historical data, were then examined by experienced people and adjusted as they thought appropriate to allow for a variety of factors, including such matters as a consciousness of emerging trends, increasing consumer sensitivity to the protection of the environment, changes that had been made or were expected to be made by Yates' competitors and customers, expected advertising campaigns by Yates or its competitors or customers, Yates' competitors launching products in competition with Yates' products, possible changes in sales volumes resulting from packaging changes, whether made by Yates or by others, and "market intelligence" generally. 863 Mr Trevarthen and Yates' Marketing Manager then analysed and reviewed the forecasts, in respect of each product, discussing the forecast figures with individual product group or category managers, as they thought appropriate. When the budget had been settled at this level, it was sent to the Managing Director for review by him, and then sent to the Board of Directors for further review. 864 Upon the budget being settled, at a national level, a series of further budgets were prepared. For sales purposes, Yates divided Australia into four regions, called the Northern, Southern, New South Wales and Western Australia regions. In respect of each of these regions there was a Regional or State Sales Manager. In 1999, Ms Jackson was the Sales Manager of the Northern Region, which territory included Queensland, the Australian Capital Territory and some parts of New South Wales. The Sales Manager of the Southern Region was Mr Malloch. The Southern Region embraced Victoria and Tasmania and, at times, South Australia, although in spring 1999 the South Australian sales personnel reported directly to the company's head office in Homebush. Ms Moore was the Sales Manager of the New South Wales region and Mr Humphreys was the Sales Manager for Western Australia. 865 Each of the four state Sales Managers received a budget, appropriate to his or her region, at about the beginning of July each year. Each of the four persons just mentioned had the right to advise Mr Trevarthen if he or she thought that the budget was in any way inappropriate. None of them did so in July 1999. Each of them said that he or she thought at the time that the budget was realistic and that the budgeted sales were achievable. 866 Once the National and State budgets had been settled in this manner, each of Mr Trevarthen and the four State Sales Managers reviewed the position each working day. There was available to each of them, using the PRMS, a sales report that recorded, either nationally or for the region in question, sales figures on a daily basis, comparing the sales actually achieved against the budget, and against the previous year's actual sales. Each of them set out to ascertain and to understand, in respect of each individual product, whether the budget had been met, and if the sales achieved were appreciably more or less than the sales figure mentioned in the budget, why this was so, so as to be able to accurately forecast future sales. This task required the person concerned to combine his or her experience with whatever enquiries seemed appropriate, and each of them had then to produce a forecast for future sales. The forecast was different to the budget, and it seems clear that the five persons mentioned were conscientious in continually checking the budget against the sales achieved and then attempting to forecast future sales. 867 Each of them said that he or she knew each working day what sales had been achieved, what the budget required, and what sales were needed to achieve for that month the budgeted figure. Each of them was familiar with the various factors that affected sales in his or her territory. 868 The practical importance of the forecasts was that they were used by Yates to plan for the manufacture or purchasing of goods which Yates wished to sell; and the forecasts combined the quantities of products expected to be sold with the dates upon which they were expected to be sold, and the places from which they were to be sold, so that the relevant Yates personnel could arrange to have the products manufactured or purchased in sufficient time for them to be delivered to the relevant warehouses at appropriate times. It was important that the forecasts be accurate. 869 The updated forecasts were routinely communicated to a Mr Iwaskiewicz, who was in 1999 Yates' Demand Manager. He compared the forecasts with the information already recorded in the Mercier programme, and discussed any differences with the relevant Marketing Manager, before entering a final version of the forecasts into the PRMS Then, twice a week, production planners, using the PRMS, produced a series of reports, the object of which was to enable planning to take place for the manufacture or purchase of whatever was considered appropriate, having regard to the forecasts, as well as to data recording stock currently on hand, manufacturing capacity data, the level of orders that had then been placed upon Yates by its customers but not yet filled, the level of replenishment orders (that is, orders from, say, Yates' Perth warehouse upon its Mt Druitt warehouse for the replenishment of stocks in the Perth warehouse), and other matters. 870 One important consideration was to plan for the spring seasonal peak, when demand was "huge and erratic", varying with different weather conditions in different parts of Australia: stocks had to be built up in anticipation of this. Otherwise, generally speaking, calculations were made as to expected demand, and plans made to achieve the position, where in respect of each individual product, there was on hand not less than one week and not more than four weeks of supply. Particular attention was paid to certain products, designated as key lines. 871 Digressing a little for the moment, in order to avoid to having to return to this topic later, one range of products that had to be planned for was called Tuscan Pots. These were plastic pots manufactured in different sizes and different colours, which were newly manufactured in 1997 and which became very popular, to the extent that Yates' manufacturing plants could not meet the demand for them. They were manufactured by plastic injection moulding machines, each machine being dedicated to pots of a particular size. The capacity of each machine was limited, so that shortages of these pots could not be remedied, as could shortages of other products, by simply employing more staff. 872 One of the tasks that the planners performed routinely was to check various reports provided by the PRMS, including lost sales reports and IORs so as to ascertain why these reports had been generated, that is, why sales were recorded as lost, or why orders had not been fulfilled. One of the planners, Ms Marks described how, in spring 1999, she found herself investigating what was, in her seven years experience, an unprecedented level of occasions when a picker had made an N/A marking. 873 It was the responsibility of each planner to ensure that the particular products for which he or she was responsible were in fact available, and therefore to investigate why a picker had said the product was not available. The enquiry was initially made by interrogating the PRMS in various ways, and then if it was thought necessary by telephoning the warehouse to make enquiries. If that failed, the planner visited the warehouse to make personal enquiries. During spring 1999, Ms Marks visited the Mt Druitt warehouse twice a week; and she gave evidence as to the state of the warehouse, and about the steps she took to remedy the problems she perceived. 874 Yates also had in place a system whereby, each month, each State Sales Manager reported to Mr Trevarthen, who in turn provided to Yates' Executive Committee a segment of the Operations Report. The practice was that in these various monthly reports, each noteworthy circumstance was stated, including instances where sales were above or below budget, and the supposed reasons for that variation were set out. Indeed, a very large part of Linfox's case now depends upon these reports. Events noted in the various reports were the subject of extensive cross-examination and explanation, commonly producing a submission made now that there was some event noted that was the cause or a cause of some loss or some unanticipated gain that demonstrated the unreliability of the budget, so as to excuse Linfox from liability or to limit the extent of its liability. 875 Linfox seeks a finding that the national sales budget and the individual state sales budgets covering spring 1999 were inaccurate and unreliable. In submissions, it referred to them as woeful, as containing colossal errors, as being haphazard, appalling and speculative, as being aggressive and optimistic budgets, as projecting a massive expected growth rate, as being plagued by the error of optimism and over estimation, and as having abysmal accuracy. This colourful, forceful language is to be found in the submissions, but not in the evidence. None of these epithets was put to any Yates witness. 876 The case advanced was that if a projection was made, and the sales did not reach the projected figure, an error had been made in the budget, a proposition that I do not find persuasive, if nothing more is shown that the projection did not coincide with the subsequent event. There is also an unattractive and even hubristic quality about the unstated assumption that mere lawyers and accountants, with little or no demonstrated relevant experience, and using the benefit of hindsight, should have their views and submissions about these matters preferred to the views of people who had spent years, analysing results, seeking explanations for variations from projected results, making forecasts, and then repeating the process as often as the occasion arises. The field in which they work is complex, there are many variables involved, some of them unknown and perhaps unknowable, and the progressive judgments that must be formed have of necessity to be based upon experience, intuition and "market intelligence", which expression includes what sometimes might be described as gossip. As a group, these witnesses were uncommonly convincing, and apparently competent, and there is no direct evidence from any witness of demonstrated expertise or experience in the field that directly contradicts them. There are, of course, the detailed opinions of Mr Ross, and some concessions made by the Yates witnesses, dealt with below, but the starting point here is that Yates, using what appear to be sophisticated methods, and competent experienced staff, set out to make precise and accurate forecasts, not so as to set goals for its sales staff, but so as to be able to properly plan its manufacturing and buying activities with the object of having sufficient stock on hand to meet anticipated orders, but not so much stock as to be too much in the circumstances. It was anything but the merely speculative exercise repeatedly asserted by Linfox. 877 The budgets at state level were later the subject of further refinements, so as to relate, for example, to particular groups of sales staff, or individual sales people. These "budgets" were, I take it, used as goals for the sales people in question. 878 There were further refinements made, in respect of versions of the national budget concerned with some segments of the products hoped to be sold. Yates divided the products it sold up into product groups, and within those groups categories, as well as referring to individual lines. Sometimes there was a change in categorisations made, so as to affect the budget figures for components within the national budget, but not so as to affect the overall figures. Some of the evidence and some of the submissions failed to recognise this; and there is also some blurring of the distinction between the budget and reports made about the budget. That is, some of the supposed discrepancies and inconsistencies are upon examination illusory. 879 This part of the case is concerned about sales said to have been lost by Yates' Consumer Division, one only of the company's divisions. The Consumer Division sold products arranged by Yates into product groups of which only four are directly relevant to the litigation: plant food, merchandise, plant protection and growing media. Other product groups mentioned in the evidence include seeds and bulbs, and nursery products. 880 As at spring 1999, there were two trends in Yates' business that are now relevant. First, whereas formerly Yates had sold its products mostly to customers such as garden centres, hardware stores and small businesses generally, there was a marked trend towards selling more and more products to big chains, such as Coles, Woolworths and Big W (a letterhead in evidence describes Big W as a division of Woolworths, but throughout the case the two entities were treated as if they were separate organisations). By 1999 "the top 10" customers purchased more than 80% by value of the products sold by Yates' Consumer Division. Secondly, the sales of products that Yates categorised as merchandise were increasing at a marked rate. 881 In its submissions of 6 February 2004, Linfox set out a table, said to contain "figures for budget and actual sales according to the Operations Reports", and it made submissions based upon the contents of that table. Yates replied, contesting the accuracy of the contents of the table, and saying that the figures had not come from the Operation Reports. Linfox responded on 24 May 2004, saying that the figures in the table were not based on the Operations Reports, after all, but were a distillation of figures extracted from the monthly reports and affidavits of the State Sales Managers, and they excluded figures for seeds and bulbs. The submissions referred to an Annexure B, said to set out all these figures by month and state and product line. There was in fact no such annexure, but one was provided later at the request of my Associate. 882 Neither the submissions nor the table provided any real cross reference, and Yates challenged the figures set out in Annexure B. This new table sets out various figures, although not by product line. It may be that the copy of the table provided to me (consisting of two pages) was different to the copy provided to Yates since Yates' submissions refer to page 3 of the table. 883 This is a wholly unsatisfactory basis upon which to found what are presumably intended to be serious considered submissions. Having commenced by making the inaccurate statement that the table came from the Operations Reports, Linfox then gave, in vague terms, a different source, and when that was challenged by Yates, Linfox made no attempt to explain where the figures came from. However, the immediate question is whether the budgets were reliable. 884 Linfox submitted that, if one looked at Yates' budgets for the years F1997, F1998 and F1999, one could see a history of budget inaccuracy. For those three years, the budget figures and the actual sales achieved were, respectively, $104.6 million against $96.6 million, a shortfall of 7.6%, $97.7 million against $94.7 million, a shortfall of 3.1% and $101.3 million against $97.6 million, a shortfall of 3.7%. Yates submitted that the real question was why the budget figures were not met, and by how much, and it drew attention to a different set of figures relating to the four product groups in question. For the same three years, the figures were respectively $62.8 million against $60.1 million, a shortfall of 4%, $63.3 million against $62.5 million, a shortfall of 1%, and $68.8 million against $67.4 million, a shortfall of 2%. 885 There was a good deal of evidence and much submitted concerning the reasons why various budget figures were not met or were exceeded. It seems appropriate to begin by noting that Linfox quoted five expressions used by Yates witnesses, in support of the general proposition that Yates' budgets were inaccurate, or optimistic, or the like, without condescending to give any references to where any of this evidence might be found. In reply, Yates referred to what it evidently took to be the details of the five snippets of evidence mentioned, putting each into its context. Linfox apparently accepted that Yates had found the appropriate references, and said nothing further on the subject. 886 I see no advantage to anyone in going into the detail of all of this. Assuming that Yates has put each of these pieces of evidence into the correct context, all that is relevant is that the Yates witnesses offered quite muted criticisms of particular points in the budgets, but each of them said in substance that he or she thought that the overall budgets had been reasonable and achievable. 887 Ms Jackson spoke critically of the timing or "phasing" of one item in relation to the Northern region budget. Her criticism was not of the budgeted sales figures for the year but of one segment of the overall sales figure for the year being placed into a particular month within the year: she considered that the phasing was wrong in respect of this item and this month. Phasing problems seem to have been a minor irritation, suffered occasionally. If for example, a group of customers routinely placed orders on Monday and there were five rather than four Mondays in a month, that circumstance tended to distort the monthly sales figures, but not the annual sales figures. I gather that the problem was recognised and routinely allowed for, when actual sales were measured against budgeted sales. 888 Various budgets and reports prepared by Yates included "inter-company sales" and export sales, whilst others did not, and it is necessary to consider each document in this light. In the main, it seems appropriate for present purposes to consider those documents which excluded intercompany sales and export sales, remembering that Yates' claim in respect of the First Loss Period is for lost profits resulting from lost sales, in respect of four product categories sold by its Consumer Division. 889 At several points in the evidence and the submissions, there were references to the early onset of the spring 1999 season, and the effect that that early onset had on Yates' sales. Sometimes this is compared, in general terms, with the onset of the spring season in other years. The briefest and most accurate way of describing this position seems to be to append to these reasons a copy of a chart recording the sales of Yates' Consumer and Commercial Divisions, and excluding inter-company sales, month by month for the period July 1998 to January 2001. 890 This chart appears to confirm the picture painted by the non-accounting evidence generally, that the early onset of spring in 1999 was only relatively early, and that its effect upon sales activity was relatively modest. 891 The results for F1998 were adversely affected by a strike at Laverton (Melbourne) warehouse during the spring of 1997. The evidence does not enable any sensible attempt to be made to measure in dollar terms the effect of that strike, but those concerned treated it as a significant event. 892 I find it difficult to say just what significance can properly be attached to the F1997, F1998 and F1999 budgets. The conclusion for which Linfox contends, replete with epithets that seem unjustified, may perhaps be restated as that this history justifies the view that Yates' F2000 budget was drawn too optimistically. I am inclined to think that it is right to put out of consideration, or at least largely out of consideration, the difference between the F1998 budget and the sales results achieved that year, having regard to the strike. If the spring season is as important to Yates as the parties accepted it is, a shortfall of 3.1% in budgeted sales, in a year where there was a significant strike occurring during the spring season hardly justifies the exuberant terms now used by Linfox, to criticise Yates' budgets on some global basis, such as would justify the downgrading of any reliance upon the F2000 budget. 893 The budgets for F1997 and F1999 stand in a different light. One must give weight to the fact that the budgeted sales exceeded the actual sales, and approach the case with a clear recognition that the F2000 budget was a projection about future events, remembering that in F1997 and F1999 the budgeted sales had not been achieved, but I do not accept that Yates' budgets generally were, or that its F2000 budget in particular was anywhere near as inaccurate as Linfox would have it. There is no sound reason, based on the evidence, for overlooking and giving weight to the evidence of Mr Trevarthen, Ms Jackson, Mr Malloch, Ms Moore and Mr Humphreys, that but for the events encountered at the Mt Druitt warehouse in the spring of 1999, the sales achieved in F2000 would have met the F2000 budget, or would at least have been equal to the sales achieved in F1999. The evidence of these five witnesses to this effect consisted not only of estimates or projections about future events, but also of opinions about past events. 894 I find that the F2000 budget was generally realistic. It is, of course, the fact that at the time it was brought into existence it contained a series of projections about future events, and, critically for present purposes, projections about future sales. These projections were made in an intensely competitive environment, where there was a constant ferment of change, so that any precise correlation between a prediction made covering the period of a year ahead and what was actually achieved would be particularly fortunate; and it seems important to note that it was Yates' practice to continually update its budget by reference to the forecasts made by its staff. 895 The competitiveness of the environment is striking. There were a number of entities that were competing directly with Yates, supplying products to retailers, for those retailers to sell to consumers. There was active competition amongst the various manufacturers and wholesalers (Yates' competitors) and there was also active competition amongst the retailers. Each of these actors was evidently seeking individual financial advantage, using a variety of techniques, each of which was directed to the sale of a greater number of units of products, or kinds of products, to the ultimate consumers. 896 The evidence shows only Yates' proposals, and Yates' responses to the stratagems of others, and the views of members of Yates' staff about these matters, but it is clear that, to those involved in this complicated, constantly changing battle for profit, there were a variety of factors that needed to be considered, and frequently reconsidered: how prices for a large number of lines were to be fixed, sometimes flexibly; what promotional or advertising campaigns might be launched, involving considerations about the detail of any such campaign and the cost/benefit ratio of that campaign; what changes might be made to the existing forecasts by reference to the campaigns of competitors or of retailers; what arrangements might be profitably made with retailers concerning techniques calculated to persuade consumers to buy the products of Yates or its competitors (for example, point of sale material, positioning products within stores and the like); what consequences might follow from decisions about changing the packaging of individual products or categories of products, or concerning such matters as the sizes in which products might be marketed; and other factors. Each individual forecast was necessarily rather subjective or speculative in nature, but it was repeatedly checked and revised. It was not a field for the faint-hearted, nor a topic upon which the voices of the inexperienced can properly carry much real weight. Those whose daily work required them to compare existing budgets or forecasts against results achieved, and to make amended forecasts, and then to routinely compare actual results against amended forecasts, and to re-amend the forecasts, should properly have considerably more weight attached to their opinions than those, without particular experience in this field, who come upon the scene later, and express opinions, sometimes in only general terms. 897 In this context the five witnesses I just mentioned gave evidence that I found persuasive: Mr Trevarthen, speaking about the position across Australia generally, Ms Jackson, speaking about the position in the Northern region, Mr Malloch, speaking about the position in the Southern region, Ms Moore speaking about the position in New South Wales, and Mr Humphreys speaking about the position in Western Australia. In each case, their experience gave them an insight that seems to me to have been valuable, exceeding any general experience enjoyed by, say, Mr Ross, Linfox's accounting expert. 898 These five witnesses spoke about the events that occurred, each of them speaking, either in terms of the position across Australia or in a particular region. Each of them opined that, but for various events, that I will for brevity and ease of reference describe as the first set of events - in short, the disorganisation in the Mt Druitt warehouse in spring 1999 and the resultant inability of Yates to supply orders from that warehouse in good time - Yates' Consumer Division would have achieved sales during F2000 equal to the sales budgeted for, or at least equal to the sales actually achieved in F1999 (the budgeted sales for F2000 exceeded by a small proportion the sales actually achieved in F1999). Yates focused upon the two stages involved: achieving budget, and achieving parity with the previous year. In a generally inflationary era, and given not just that Yates was a surviving business enterprise, but that its business was expanding in some respects, the prospect of a modest increase in sales seems unremarkable, considered even without reference to the evidence about settling the budget. 899 In fact, Yates' sales in spring 1999 were less than the sales it had achieved in spring 1998, and in a practical sense, there is an apparent correlation between the disorganisation in the Mt Druitt warehouse and this diminution in sales achieved; and if one thinks only of the large volume of aggressive complaints from Yates' customers, this superficial impression becomes harder to displace. 900 Each of the five witnesses spoke about a series of other events, which for brevity and ease of reference I will describe as the second set of events - dozens of them, events that unfolded during F2000 and that impacted either positively or negatively upon Yates' budgets and forecasts about sales. I think it is accurate to say that each of the events comprised within the second set of events came to be the subject of evidence, because its happening had been recorded in Yates' contemporary records, concerning Yates' systematic attempt to recognise and then to deal with things that might affect its budgets and forecasts. Some of these events, within what I have called the second set of events, were reasonably significant, whilst others were relatively trifling in their impact upon sales achieved. 901 Linfox did not directly challenge by cross-examination the evidence of the five witnesses expressing the opinion that, but for the happening of the first set of events, Yates' sales during F2000 would have equalled the amount recorded in its F2000 budget or at least the amount of the sales achieved in F1999. Instead, there was protracted cross-examination about the second set of events, said to have undermined the opinion expressed. When this trend became clear, during the trial, Yates effectively protested, saying in substance that if Linfox wanted to challenge the proposition advanced by Yates, through these five witnesses, either Linfox should cross-examine the witnesses on the point or Yates might develop its case in re-examination. I then gave leave to Linfox to further cross-examine Ms Jackson on the topic. 902 What limited cross-examination there was on this topic was quite ineffective, and at the end, the opinions of the five witnesses, summarised above, stand for practical purposes almost unchallenged: but for the first set of events, and notwithstanding the happening of the second set of events, the predicted sales would have been achieved, or the previous year's sales equalled. There is no direct evidence to the contrary although there is a mass of evidence about the second set of events, and their economic consequence, there is the opinion evidence of Mr Ross, there is the contention that Yates' F2000 budget was unreliable, and there is a great deal put by way of submissions. I find it difficult, if not impossible to see how I can properly put aside the evidence of these five witnesses. They presented as competent people, experienced in their field, and not inclined to exaggerate; and they were all extensively cross-examined. Whilst Mr Ross is a very experienced accountant, he has little or no demonstrated experience in relation to this particular industry. 903 In addition, I accept Yates' submission that Mr Ross adopted the role of an advocate. Earlier, Linfox retained Mr Ross, or his firm, to carry out the work of an investigating accountant, and Yates gave Mr McClintock, or his firm, similar instructions. Each of the two accountants prepared reports which I was asked to read. I indicated a view that they were inadmissible, as being the product of investigative work, and not the opinions of expert witnesses: see Makita (Australia) Pty Limited v Sprowles (2001) 52 NSWLR 705, 59 and following. Neither party pressed the tender of the reports that I was then referring to. Fresh reports were prepared and tendered. However, whilst Mr McClintock apparently accepted, at least in the main, the limitations upon which he might properly give opinion evidence, as distinct from a report of an investigator, Mr Ross appeared to merely attempt, not very successfully, to do so, and seemed unable to shrug off what may have been no more than a sense of loyalty to the results of his, or his firm's investigative work. 904 Both accountants also seemed rather wedded to the idea that what was necessarily involved at each step in the measure of Yates' claim for damages was a matter for calculation, rather than at times an estimation. Perhaps this is the way accountants are trained, but it does tend to make their opinion evidence less persuasive in the circumstances of this case than it might otherwise have been. 905 There are many issues as to why it was in F2000, and in particular during spring 1999, that Yates' Consumer Division did not achieve the budgeted sales, or sales equal to those achieved in F1999. The issues ranged from the macroscopic to the microscopic, from sweeping generalisations to debates about individual lines. I will start with the evidence of representatives of some of Yates' customers. The GreenGold group 906 There is a body called the GreenGold buying group. The details of this organisation are unimportant for present purposes, but the group represents more than 50 garden centres in New South Wales and the Australian Capital Territory, and is affiliated with another group of garden centres in Queensland, called Garden Lovers. On behalf of its members, in such a way as to give them the opportunity to deal with wholesalers such as Yates, but not to bind them to do so, it negotiates possible terms of purchase (that is, to purchase at a more favourable rate than would otherwise be available to individual members), and it arranges sales promotions for the group. 907 In about 1994 the group negotiated an arrangement with Yates for the supply to its members of five "in house" brands of fertilizers. These were similar to but not identical with fertilizers sold and branded by Yates. A member of the group was able to buy these brands of in house fertilizer, but only from Yates. However, the price at which Yates made them available to group members was attractive. Members were able to stock these in house brands as well as other brands, including those of Yates. Yates' brands were, it seems, marketed at a higher price. 908 Each year the group arranged various promotions, including a spring promotion. This was a considerable exercise. In 1999 there were six hundred thousand copies of the spring catalogue. Yates contributed towards the cost of the catalogue, in consideration for two free advertisements within the catalogue. 909 Yates was also a "sponsor" of GreenGold, and a "preferred supplier" to the group. Group members purchased considerable quantities of products from Yates, each of them purchasing individually, directly from Yates. The group received a rebate, which presumably it distributed directly or indirectly to its members, if the total purchases by the group exceeded particular levels. 910 Mr Carty, the managing director of a company called GreenGold Nurseries Pty Limited, the trustee of the relevant trust, said in chief: From July 1986 to spring 1999 my business dealings with Yates were characterised by prompt delivery of stock. I cannot now recall any difficulties with Yates relating to failure to deliver product on time or in the correct quantities. 911 In a subsequent affidavit, sworn some two years later, he expanded upon this, saying: Since entering the nursery industry in 1986, I did not encounter notable supply problems with Yates' product until spring 1999. Prior to then, delivery of product was generally prompt and the correct quantity of stock ordered was delivered. I do not recall members contacting me before spring 1999 to make complaints about the supply of Yates' products, except for one instance [where a member complained about the attitude of a particular Yates employee]. 912 He also described in chief a different state of affairs in spring 1999. He received an average of two or three telephone calls a week from group members complaining about the non-delivery of goods ordered, and he took these complaints up with Yates, generally through Mr Trevarthen or Ms Moore. 913 There was a further problem in spring 1999 in that a large quantity of spring catalogues was misdirected by (or on behalf of) Yates, and either mislaid or delayed in reaching the intended recipients. 914 At a meeting of group members held on 27 September 1999 there was a resolution passed referring to the spring catalogue and the effects of "a number of unsatisfactory problems including out-of-stocks and delivery efficiencies"; and the group was to write to Yates expressing its dissatisfaction, and a concern that the group members might lose their rebate for bulk purchases, because of these matters 915 On 26 October 1999 the group wrote to Yates complaining of "the standard of service" from Yates during spring 1999, and stating a concern about "the so important rebate" not being able to be achieved. It sought assurances as to the future, and referred to "out-of-stocks and non-delivery of orders" in spring 1999, and it sought advance notice of future "problems with orders and service". 916 Mr Carty went on to describe how in spring 1999 group members purchased products from suppliers other than Yates, in substance because they could not obtain supplies from Yates, and they had to have products on their shelves to sell to consumers. He said that the period from the end of August to the end of November was the busiest trading period of the year for group members and that it was "vital" for them to have stock to sell, so that they could continue trading; and he himself observed the products of Yates' competitors on the shelves in the stores of group members. 917 In November 1999 the group terminated its existing arrangement with Yates for the supply of in-house brands of fertilizers, but the relationship was reinstated in February 2000. The termination came about because of dissatisfaction felt by group members with various aspects of the packaging of the fertilizers, not related to anything done or omitted by Linfox. 918 A note made by Mr Carty concerning a February 2000 meeting between representatives of GreenGold and Yates records the statement that Yates had failed to supply orders to GreenGold members during the period 1 July 1999 to 31 December 1999, having a total wholesale value of $127,963. Mr Carty said of this: I believe this was largely due to the supply problems encountered at Mt Druitt during spring 1999. I am not aware of any other issues which would have impacted on the supply of Yates' product between July and December 1999. 919 At a further meeting between the group and Yates, held in February 2001, Yates presented figures showing a down-turn in sales during the spring of 2000. In an affidavit Mr Carty fixed the measure of this at $57,600. Mr Carty said, of that spring 2000 season: I am not aware of any other factors that would have contributed to this down-turn other than the supply problems encountered by Yates. 920 He expanded upon this later, saying that the decline in GreenGold purchases was due to the unavailability of products in the stores from September 1999 onwards. Orders were placed, but the products were not delivered. 921 He said that group members ordinarily placed large orders for the supply of stock with suppliers such as Yates about a week before the spring season commenced, and that they routinely placed orders on a weekly basis throughout the year, otherwise. 922 The cross-examination of Mr Carty was cautious, but the submissions now made based upon his cross-examination are bold. Linfox submits that during 1999 GreenGold members were affected by a series of issues and events entirely unrelated to Linfox's conduct, "each of which by themselves was clearly capable of causing GreenGold to change suppliers". Ten such matters were then listed (submissions 6 February 2004, pages 339-341). If Linfox wanted to have the Court not accept Mr Carty's statements in chief that the down-turn in orders placed upon Yates by GreenGold members during the spring of 1999 and the spring of 2000 was not largely the result of Yates' "supply problems", it was incumbent upon its counsel to put this to Mr Carty. 923 Instead, the cross-examination established that GreenGold members were most dissatisfied with Yates in late 1999; that a significant component of that level of dissatisfaction related to the in-house brands of fertilizer, and particularly its packaging; that "out-of-stocks" generally, and in relation to some identified products, had been a problem in spring 1999; that a significant proportion of the undelivered stock in the spring of 1999 had been in respect of seeds (that is, not the result of Linfox's conduct); that some members had been dissatisfied with some new Yates packaging for some products; that the promotional materials for the 1999 spring promotion had been mishandled, resulting in some members having to delay the start of the spring promotion (Linfox also submitted that this had happened in September, but the point does not appear to have been raised in evidence, and looking at the proposed timetable for the promotion overall, it seems curious that the delay would not have occurred until September); and that some group members obtained some "very little" quantity of Yates' products, not directly from Yates, but from others. 924 Even if one assumes (Mr Carty not having been asked whether it was the fact) that these various matters were capable of causing GreenGold to change suppliers, that does not mean that there should be a finding made that GreenGold did change suppliers for one or more of these reasons. Further, the Linfox submissions do not address the circumstance that the group members continued to have a financial incentive to deal with Yates, and that they apparently continued to do so, at least in the main, until 2001, and perhaps longer. 925 In any event, I accept the evidence of Mr Carty that the reason for the down-turn in the purchase of product from Yates by the group members in spring 1999 and spring 2000 was the "supply problems" of Yates at Mt Druitt. I do not understand Mr Carty to have been identifying these problems as being associated with anything Linfox did or did not do, so much as associated with the Mt Druitt warehouse. I also accept that the "supply problems" of spring 1999, noted by Mr Carty, were significantly different to problems experienced in earlier years. 926 Mr Whitehead is one of the partners in Rast Bros, which conducts a nursery business at Turramurra. In 1999 he was the Chairman of a cooperative associated with the GreenGold group. In the main, he gave evidence about the affairs of Rast Bros. 927 He said that (on behalf of Rast Bros) he had dealt with Yates from April 1984, and he described the process of ordering stock. Because Rast Bros had limited storage facilities, it was dependent upon the frequent and regular deliveries of stock. Prior to spring 1999, deliveries made by Yates were "acceptable", and in chief he said that he could not recall any difficulties with Yates relating either to the timely delivery of stock, or the delivery of the correct amount of stock, apart from isolated instances. Rast Bros did not like to receive orders on Fridays, because they were busy then preparing for the weekend trading. He said that Yates generally supplied orders within 48 hours of the placement of the orders. 928 Rast Bros participated in the GreenGold spring 1999 catalogue promotion, and arranged for distribution of about 27,000 catalogues in the area near Turramurra. 929 During spring 1999 he began to experience problems in the delivery of goods from Yates. Goods sometimes took weeks to be delivered, and sometimes deliveries were incomplete. He described it as a hit and miss affair. He complained to Yates orally about two or three times a week. When the problem continued, he ceased ordering goods from Yates wherever possible. He was able to obtain some Yates products, not from Yates, but indirectly through a Canberra supplier, and he purchased fertilizers from Rich-gro, a competitor of Yates. (The obtaining of products by Rast Bros, otherwise than from Yates is independent of the figure of $57,600 for the GreenGold group generally, mentioned at [919]). 930 Yates points to some contemporary records. An order from Rast Bros upon Yates dated 5 August 1999, marked for delivery in the week commencing 31 August, was only partially fulfilled. On a date which is not clear, but evidently in the first few days of September 1999, Mr Whitehead wrote to Mr Rich of Yates saying in part: No amount of platitudes, promises and apologies will compensate for the appalling service that my business has been subjected to over the last few weeks. Sadly, this continual abdication of support by a major supplier to us is nothing new. Indeed it has become the norm for the "weekly apology after yet another stuff up" from your company. 931 On the other hand Linfox points to some other matters. It says that some of the products not delivered are not shown to have been associated or directly associated with its conduct; that sales from Yates to Rast Bros returned to normal in the Second Loss Period, after Rast Bros resumed dealing with Yates in August 2000; that the particular delivery evidenced by the one invoice produced by Rast Bros was made (on 2 September, it seems) after Yates had terminated Linfox's services; and it suggests that the matters about which Mr Whitehead complained were not connected with its conduct. 932 However, Mr Whitehead's letter referred to matters commencing a good deal earlier than the beginning of September. Further, Mr Whitehead said, and I find, that although there had been minor problems with Yates' deliveries to Rast Bros in the spring seasons in previous years, both problems had been "nowhere near as dramatic" as the 1999 problems, which were "far worse"; and that the problems encountered in spring 1999 were unique in Mr Whitehead's experience with Yates, over a period of 18 years. The Flower Power Group 933 This group operates eight garden stores in the Sydney area. Since 1996 its purchasing officer has been Ms Bryant, who previously owned a nursery. She purchases all stock on behalf of the group. She routinely places orders on Mondays, after liaising with the individual store managers, and the group requires deliveries to be made by Thursday of any week, and refuses to accept deliveries on Fridays, since its staff are then preparing for the busy week-end trading. The group has conducted a spring promotion each year since 1996, and publishes a catalogue in connection with that promotion. Yates contributes to the cost of these catalogues, and its products are featured in the catalogues. During the promotions the prices of Yates' products are discounted, as part of the overall promotion. 934 Ms Bryant said that she had dealt with Yates since 1977, although not continuously. Until spring 1999 she had always found Yates to be a very good and reliable supplier, and that, as a result, it was one of Flower Power's major preferred suppliers. However, in spring 1999 (the busiest period of the year for the nursery industry), she started to receive "regular complaints" from the Flower Power store managers: stock had not been delivered; deliveries had been attempted on Fridays, and refused; deliveries had been made late; and the wrong products had been delivered. She contacted Ms Moore and Mr Trevarthen and others at Yates, and complained. She recalled Ms Moore personally making some deliveries from the back of her car, but otherwise Ms Bryant does not seem to have obtained much satisfaction. 935 Ms Bryant described a decision that she made as purchasing officer for Flower Power. She considered that obtaining the supply of product for sale was critical to Flower Power, and it was imperative that Flower Power have in its stores the products that it had advertised in the spring catalogue. The catalogue served to bring consumers into the Flower Power stores, and if the advertised stock was not available for sale, the consumers could not buy what had been advertised, and were unlikely to be able to be enticed to buy other things. She said that Flower Power could not afford not to have the stock on its shelves. 936 She considered that Flower Power was too heavily reliant on Yates and that Flower Power needed to find an alternative source of supply, first, in order to meet a shortage of stock being experienced in spring 1999, and secondly, since she wanted to be never again in the position in which she then found herself. 937 She therefore purchased considerable quantities of product in spring 1999 from two of Yates' competitors, Brunnings and Garden King, neither of which was then a preferred or a major supplier of stock to Flower Power. In the event, Flower Power continued to buy large quantities of stock from Brunnings and came to treat it as one of Flower Power's preferred suppliers; and it has continued to do so since then. In particular, Flower Power bought stock from Brunnings during the spring 2000 season, that it would otherwise have purchased from Yates. 938 Linfox points out that Ms Bryant said that the supply difficulties commenced in July 1999 and continued until December 1999, and it links this with submissions to the effect that several of the products, about which there were supply difficulties, were not products emanating from the Mt Druitt warehouse, or that particular products were out of stock; and that certain other products purchased from suppliers other than Yates were priced more cheaply. 939 The principal area of contention concerning the evidence of Ms Bryant related to Yates' claim for loss of Flower Power's business during the Second Loss Period. I think that the evidence and the arguments on this point can be reduced to relatively few words. Mrs. Bryant said, by reference to the records of Flower Power, that during the spring of 2000 Flower Power purchased some $200,000 worth of product from Brunnings, and that but for the supply difficulties Flower Power had encountered with Yates in spring of 1999 and the decision then made to change the Flower Power buying policy, Flower Power would have bought these products from Yates. Linfox pointed to various figures recorded in the Flower Power records, and said that these showed that Flower Power purchased more product from Yates in spring 2000 than it had purchased in spring 1999. This is true, but Flower Power's business was growing throughout the period, and the evidence shows that, but for Flower Power buying some product from Brunnings rather than Yates during spring 2000, Flower Power would have purchased an additional $200,000 worth of stock from Yates then. (Part of the cross-examination of Ms Bryant was based upon Exhibit S, which appears to contain some arithmetic errors. These do not affect the position overall.) 940 Linfox submitted that an inference should be drawn against Yates, because Yates had served a subpoena upon Brunnings to produce documents, and Brunnings had done so, but Yates had not called anyone from Brunnings to give evidence. Given what I have just said, this point is of little or no significance, but in any event I reject the submission. The subpoena is not in evidence; its contents are not in evidence; and the evidence does not establish what it was, if anything, that Brunnings produced. Further, Brunnings was a competitor of Yates. In these circumstances none of the considerations listed by Glass JA in Payne v Parker [1976] 1 NSWLR 191, 201-202 apply. In short, it was no more to be expected that Yates would call some witness from Brunnings than that Linfox might do so. 941 Further, whilst some of the points taken by Linfox about the connection between Linfox's conduct and the supply difficulties encountered by Yates concerning particular products need to be examined, I accept the evidence of Ms Bryant comparing her experience of Yates prior to spring 1999 and her experience during that spring. She was quite an impressive witness, but independently of that, the decision she made to reduce Yates' role as a supplier to Flower Power contradicts the submission made by Linfox that Yates' supply difficulties in the spring of 1999 were "much the same" as in other years. Seeds 942 Linfox puts this topic at the forefront of its submissions that there were many causes for Yates losing sales in F2000, not related in any way to Linfox's conduct. The sale of seeds and bulbs represented about 18-20% of Yates' Australian sales. Linfox suggested that it should be inferred that these sales represented 18-20% of the sales to each of Yates' customers. I doubt that the evidence justifies this view, but I do not think it matters one way or the other. The sale of seeds and bulbs represented a major part of the company's overall sales, and it is probably safe enough to assume that the majority of the 4,300 customers of Yates' Consumer Division purchased some seeds, and in many of those cases, what they regarded as a significant quantity of seeds. Seeds were not distributed from the Mt Druitt warehouse, but there were problems with the supply of seeds by Yates to its customers during spring 1999. Therefore, Linfox says, any problems arising in this connection, and any customer dissatisfaction arising from these problems, cannot be attributed to it. That much is not in contention, but Linfox goes on to submit that there were significant problems with seeds during spring 1999, leading to a high level of customer dissatisfaction, and that this is sufficient to explain why "all" of Yates' customers were upset, so that some sought alternative suppliers; and that was described as the biggest single problem of product supply that affected Yates' relationship with its customers. The rhetoric of the submissions does not match the evidence. 943 There is no question but that there were difficulties experienced in the spring of 1999 regarding the supply of seeds, but those problems appear to have been quite overwhelmed by the problems resulting from the Mt Druitt warehouse difficulties. There are references to the seeds questions in various contemporary reports, and these matters were explored in the cross-examination of the Yates witnesses. 944 Mr Humphreys said that for a period of some years leading up to spring 1999 and continuing thereafter, there was a continuing problem concerning the delivery of seeds to the Western Australian warehouse: it was "a continuing battle", evidently because of some difficulty getting the seeds cleared through the Australian Quarantine and Inspection Service, but he said that the customers were not aware of the problem. 945 There was a volume of other evidence as to this last point. In contrast to the position concerning the sale of other products by Yates' Consumer Division, seed packets (to be distinguished from lawn seed) were sold by Yates' staff "managing" the packet seeds stands in its customers' stores, and customers routinely kept a larger quantities of packet seeds than they did of Yates' other products (at least in part because they took up very little space). Typically, a Yates representative checked the customers' seeds stands, kept them stocked at predetermined levels, and removed seeds that were becoming obsolescent, all without bothering the customers (except no doubt for payment). Some entries made in Yates' contemporary records refer, not to actual problems about seeds, but to potential problems which Yates recognised and then proceeded to remedy; and I accept that, more likely than not, this was remedied without the customers (or most of the customers) becoming aware of the existence of the problem. The position in this respect is to be contrasted with the position in respect of other products sold by Yates' Consumer Division where the customers ordered the products, when the individual customer thought it necessary, and received deliveries. In those circumstances, the customers were conscious of deficiencies, and could and did complain when the occasion arose. 946 In her contemporary reports, Ms Jackson referred in general terms to difficulties concerning seeds, but in cross-examination gave evidence concerning one product only (beans in foil) being out of stock. Mr Malloch had also reported contemporaneously about difficulties, but was unable to clearly recall anything about it, when giving evidence; and Ms Moore's evidence was scarcely an improvement on that from Linfox's point of view. Mr Trevarthen took the matter further, recalling that there had been difficulties encountered in relation to the printing of packets, but maintained that the customers would not have been aware of the problem. 947 All of this must be viewed in context. If one compares the difficulties about seeds with the difficulties said to have resulted from the situation at Mt Druitt, whether in the contemporary reports that Linfox now relies upon, or in the evidence of the five witnesses mentioned, or by reference to the complaints made by Yates' customers, one is struck by the relative triviality of the position about seeds. 948 Further, the sales of seeds exceeded both budgeted sales and the sales achieved in the previous year, both in respect of the period July to November 1999 and for the whole of the year F2000. Yates pointed this out, referring to paragraph 103 of Exhibit 20, a statement of Mr Trevarthen. Linfox (submissions 24 May, 2004, paragraph 106) denied that this was so, saying that in his paragraph 103 Mr Trevarthen had been referring only to the period to 30 November 1999. However, in that paragraph, Mr Trevarthen referred quite explicitly to both the position up until 30 November 1999, and the position for the whole financial year. 949 There is a further difficulty in relation to the Linfox submissions, concerning the dissatisfaction of Yates' customers. Linfox referred to the evidence of Mr Carty of GreenGold. There is nothing about seeds in the contemporary GreenGold documents that he wrote, and he did not refer to them at all in chief. In cross-examination, he said that GreenGold members purchased enormous quantities of seeds, but did not remember any complaint about them in spring 1999. Mr Whitehead of Rast Bros and Ms Bryant of Flower Power said they could not recall the problem. 950 Linfox said that two of the three customers called by Yates had specific recollections of seeds problems "of great concern" during spring 1999. In truth, Yates called representatives of four customers (the other one was Woolworths) and only the Woolworths' representatives spoke of any clear recollection of any problem. 951 In summary, whilst there was difficulty with seeds during the spring of 1999, the Linfox submissions misstate the position. The back order system 952 For some of its customers Yates had a back order system, that is, a system pursuant to which, if an order was not fulfilled within the time that a customer had stipulated, the order was replicated so that the customer received the goods later. It may be that other customers had their own systems whereby they themselves replicated orders that were not fulfilled within a stipulated time. Linfox submits that the appropriate conclusion is that just because an order was delayed, it does not follow that the intended sale, the subject of the delayed order, was lost. To the contrary, it says that the sale was made later, and, in general terms, Linfox submits that Yates has not provided satisfactory proof as to what orders where delayed, but replicated. 953 Yates submits that, since in any given year the spring season only lasts for a finite time, a delayed sale may result in a lost sale, and there is the loss of a commercial opportunity to be assessed. Yates sold garden products to its customers, retailers, who resold them to consumers. If in spring 1999 a consumer could not buy Yates' products from some retailer or retailers, the consumer might delay the intended purchase for some time, or might not purchase any products of the kind in question that spring, or might purchase products emanating from Yates' competitors, but I accept the general proposition that, considering the position of the sale of a garden product, intended to be sold during the spring season of one year, a delayed sale might result in a lost sale.

Other general arguments about loss of sales 954 As already mentioned, Yates presented a case, essentially through the five sales managers already mentioned, that in F2000, but for the first set of events, it would have sold more than it actually did. Mr Trevarthen said as much, in respect of sales over the whole of Australia but Ms Jackson, Mr Malloch, Ms Moore and Mr Humphreys only said as much in respect of the months August to December 1999, or in the case of Mr Humphreys August to November. Linfox now says that the evidence of the last four mentioned witnesses should be put aside, because in 1999 spring came early, there were increased sales in July, and when one compares Yates' actual sales, month by month from July 1999 onwards with its budgeted sales and the sales made in F1999, sales in July 1999 exceeded both budgeted sales and the previous year's, and there was not a loss recorded, by this method, until the end of October, 1999. 955 This is the significance of the table mentioned at [881]. There are two surprising aspects to this. First, when Yates challenged the accuracy of the figures in the table, Linfox gave no practical information as to where it had taken the figures there recorded; and the figures there recorded do not accord with other tables in evidence (for example, Exhibit 38 sets out quite different figures). Secondly, the central proposition underlying the argument is that the sales recorded in July 1999 were more than $1 million over the budgeted sales figures, and therefore one should assume that the additional sales made were the result of spring having come early, and that the level of the sales in the succeeding months of 1999 should be regarded as the result or at least a result of the spring season having commenced earlier than usual. However this proposition may be regarded as a matter of theory, it does not accord with the contemporary records, and the proposition was not put to the witnesses. 956 In Mr Trevarthen's monthly consumer sales report, included as part of the August 1999 Operations Report, the following appears: A month in which sales demand far out-stripped our ability to supply. At month's end we were unable to supply/invoice approximately $2.0m outstanding orders, many of which were promotional commitments which were firmed earlier and factored into forecasts… Regrettably our distribution problems threw the detailed planning and execution of very large in-store promotional commitments into total chaos. Our Sales team did an excellent job making the best of what product and support material was available. A huge amount of resource time and effort has, and continues to be expended, in placating customers and following up delivery/supply related issues. 957 His September sales report included the following: A month which can best be described as frustrating in the extreme and confirmed that Mt Druitt in its current configuration and systems simply could not process the volume required to meet the month's budget. At month's end we had overdue orders at Mt Druitt for approximately $1.7 million plus severely depleted warehouses in Perth and Brisbane due to replenishment delays ex Mt Druitt. Towards month's end delays were exacerbated by increasing level of out of stocks of key lines… Consequently we were unable to achieve the level of well planned and co-ordinated additional in-store exposure we had planned. Getting P.O.S. [point of sale material] delivered had to take second preference to getting stock picked, so in many instances it just didn't happen…. Our customers are understandably very critical of our performance and our competitors have gained considerable ranging at our expense. Once the warehousing issues have been sorted out it will be imperative we implement a strategy to re-build the confidence of our own staff and our customers. 958 He went on to make comments about major accounts, saying in relation to Kmart, that many store deliveries were weeks behind schedule; about Woolworths, that growth had been severely impacted by supply problems; that supply was an issue concerning each of Mitre 10, Big W and Bunnings; that Coles was particularly affected by Coles' reliance on daily deliveries using the cross-docking system; and that the supply rate to Danks was totally unacceptable. 959 His October report gives some support to the Linfox theory now under consideration. It said: Another disappointing month service-wise with the problems moving from delivery delays more to stock availability of key lines. For a combination of reasons we are clearly not on top of this, including packet seeds, and need to re-think our basic systems and methodology. The early start to spring, particularly in Victoria, seems to have resulted in an earlier finish to the traditional "demand" period. The following sales profile for our products through Woolworths' registers reinforces the demand pattern nationally and how we are so reliant on stock being available for sale during September/October: June July August September October Nov (2wks) 353.9 433.7 1,163.0 2,300.2 1,666.3 568.8

A huge number and value of credits relating to September/October transactions currently being processed, depreciating this month's net sales. Apart from the obvious picking errors, a significant number also relate to late deliveries, etc. not being accepted by major warehouses. 960 The figures quoted are expressed in thousands of dollars. There are many other records to much the same general effect, recording supply difficulties and customers' complaints, and attributing the loss of sales to supply difficulties. 961 Linfox now submits that none of the five Yates Managers included in his or her opinion an analysis of the effect of the increased sales in July 1999. I think that this is correct (it is altogether too easy to overlook some pieces of evidence in a case such as this one), but I also think that, if Linfox wanted to have the Court reject the opinions of the five witnesses on the basis that they had overlooked this factor, Linfox had a practical, if no other obligation, to put this proposition to the witnesses for their response. Linfox did not do so, and it says that it had no obligation to do so. Looking at the matter now, and limiting myself to a consideration of whether Linfox's argument is persuasive, when the proposition it urges was not put to any of the five witnesses, I conclude that Linfox's argument should fail. 962 It is no light matter for a court to reject the evidence of a witness, particularly as this must almost always be done in public, and considerations of justice and fairness, both to the witness whose evidence it is said should be rejected, as well as to the litigant who called the witness, point towards the desirability, that before the evidence of the witness be rejected, the witness should be given the opportunity to respond to any criticism of his or her evidence. 963 It is not in issue that, in some parts of Australia at least, the spring seasonal business peak came early in 1999, but I do not accept that this had the effect of increasing Yates' sales figures for July by about $1million, nor that there was a flow on effect, in bringing forward the sales figures for the rest of spring, so as to explain why sales figures were reduced later in the year. 964 Furthermore, the proposition that Linfox advances does not give anything resembling a satisfactory rebuttal to what can only be described as the mass of contemporary records and other evidence, speaking of supply difficulties, of the complaints made by Yates' customers, and of sales lost because of the supply difficulties. 965 Mr Ross described what he though was the proper approach to measuring the lost sales, and referred to one step in this process as the macro approach. Linfox now attributes to the five Yates managers an approach not relevantly distinguishable from the macro approach, and by reference to the opinions of Mr Ross and Mr McClintock, Linfox says that the evidence of the five Yates witnesses should not be accepted, because the macro approach is deficient. Yates submits that the witnesses did not use the macro approach, as described by Mr Ross. 966 As I read the reports of Mr Ross, he was speaking of how someone such as himself, an accountant, who was a relative stranger to the business in question, should measure what sales were lost, and he spoke about the various assumptions that such a witness should make in adopting the macro approach, assessing the likelihood that sales were lost by reviewing the records of the business, looking for patterns and looking for evidence that the events in question (what I have been calling the first set of events) had an impact on the sales of the business; and he pointed to various difficulties inherent in this approach, saying that whilst it was a starting point, one needed to then take a series of other steps. 967 However, none of the five witnesses in question were in this position, and none approached the task in this way. Instead, applying their knowledge and experience of the business, they expressed opinions as distinct from making assumptions; and they opined that but for the first set of events and notwithstanding the second set of events, certain sales would have been achieved. 968 The label macro approach may constitute a useful form of verbal shorthand, but it is really no more than a label, and I accept Yates' submission, that the application of this label to the evidence of these witnesses is inappropriate. That is not to say that the opinions they expressed should necessarily be accepted, but they are not to be rejected by reference to the use of this label. 969 Another general criticism made by Linfox of the evidence of the Yates managers, was that they had not referred to, or made any allowance in respect of matters mentioned in the report of Mr McClintock. Yates responded that the methodology of Mr McClintock was quite different to their methodology, and this is correct. They said that, but for the first set of events, certain sales would have been achieved, whereas he set out to measure what the loss of sales had been, having regard to events that he identified, that had been mentioned in the Operation Reports; and he made adjustments to the budget so as to reflect these events. It was open to Linfox to cross-examine each of the five managers, to suggest that his or her opinion as to what the sales would have been but for the happening of the second set of events, or one or more of the events comprised within that set, but it did not do so, apparently a deliberate forensic decision. Linfox having embarked upon that course, it is difficult now to justify the proposition that the evidence of the five witnesses should be rejected on this basis. 970 Linfox also submitted that the witnesses had been "confronted" with the matters to which Mr McClintock had referred, that is certain of the second set of events. This does not seem to me to be correct. What cross-examination there was of these witnesses on the topic was glancing rather than confrontational; and it can hardly be correct to say that a witness, as distinct from a party, must confront every element in the evidence of every other witness who gives evidence of a relevant kind. 971 Much the same argument was raised as against the four state sales managers concerning certain matters described as having been conceded by Mr Trevarthen. There were certain items treated as sales in F1999, generally not mentioned in the F2000 budget - that is, the budget did not provide for any expected revenue or sales in respect of these items, since the business of dealing with these items was ending. In fact certain income was recorded (as "sales") in F2000. Linfox's point is that since the five managers gave opinions based, in part, upon a comparison between actual sales in F1999 and actual sales in F2000, they should have dealt with this. 972 Mr Trevarthen was cross-examined about this matter, but the other four witnesses were not. I do not think it would be right to reject their evidence because of these circumstances, coupled with the assertion that Yates did not raise the various matters with the other four witnesses. 973 Another general criticism made by Linfox was that the five witnesses had attributed Yates' lost sales to Linfox's conduct. They did not. They said that but for the first set of events certain sales would have been achieved, but as Yates points out, this is a different question. To the extent that they were asked to do so, they also spoke about the impact of the second set of events, but not so as to affect their opinions about the effect of the first set of events. 974 Other general criticisms were made, essentially repetitive of other points dealt with elsewhere. There were also a number of individual criticisms, of individual witnesses, dealt with below.

977 Linfox submitted that Yates' submissions demonstrated that it had entirely abandoned the evidence of Mr McClintock, relying instead on the evidence of the five sales managers, a matter which is said to go to costs and to demonstrate that "at the last minute" Yates changed its case, as recorded in some "quasi particulars", namely a series of reports of Mr McClintock that are not in evidence, although the evidence does include some prolix correspondence seeking "particulars", and the replies. I have not detected any abandonment of the opinion of Mr McClintock, but as the hearing progressed and the cross-examination of the Yates witnesses continued, their evidence seemed to become more persuasive, and the opinions of Mr McClintock and Mr Ross tended to seem less attractive: the voices of experience seemed to prevail over the theories of accounting generalists. One of the principal matters relied upon as an additional cause of lost sales in spring 1999 concerned "out of stocks", or situations in which a customer placed an order upon Yates for some product which was out of stock at the time. Yates said that, as Linfox had itself submitted, there were always some products out of stock in a spring season, and spring 1999 was no different. Therefore, Yates said, it does not follow that in spring 1999 the sales lost by reason of out of stocks were any greater than in spring 1998, or that out of stocks in spring 1999 resulted in a failure to meet the F2000 budget, since that budget had been prepared having regard to the sales actually achieved in F1999, sales achieved in the context that there were some out of stocks; and it does not follow that in F2000 the out of stock position resulted in a failure to meet budget, or to equal the sales made in the previous year. 978 Linfox points to many entries in Yates' records, demonstrating that various products were out of stock from time to time. Putting aside some relatively minor points about these entries, Yates' point seems unassailable. There is ample and persuasive evidence that the position concerning out of stocks in spring 1999 was generally unremarkable. Mr Bill Thompson, Yates' planning manager, who checked the position each working day, said that demand in spring was high and erratic, that the number of out of stocks in spring 1999 was small, and less than in spring 2000. Mr Trevarthen said that the level of out of stocks in spring 1999 was typical of any spring season, and insignificant when compared to the total range of consumer products; and he also spoke of Yates' Western Australia and Queensland warehouses being depleted, because of the difficulties associated with their being replenished with stock delivered from the Mt Druitt warehouse. 979 This is not in contest: Linfox submitted that "The spring of 1999 was no different". Nevertheless, Linfox submitted that some of Yates' witnesses suggested that in F2000 Yates "suddenly and miraculously" resolved its supply issues. They did not. They said that the position was much the same as it had been in the previous year. 980 A minor theme here concerns the position in the Mt Druitt warehouse in and after August 1999. It seems clear that, because of the disorder in the warehouse, pickers from time to time marked pick slips N/A as if the product in question was out of stock, but in truth there was stock of the product in the warehouse, but the picker had merely failed to find it. That is, some of the markings were wrong. To the extent that this happened, it was the result of Linfox's conduct, but it is not significant at this point. 981 Nor does Linfox's repeated complaint that notwithstanding the memorandum of 30 August 1999, mentioned at [846], Yates did not keep proper records, seem significant in this context. The level of stocks in spring 1999 was unremarkable; and if there had been printed out contemporary records from the PMRS showing the precise levels of out of stocks from day to day, in respect of particular products, for the period commencing at the end of August 1999, it is difficult to see how those records might usefully have been compared with anything else, for there had been no permanent record kept of figures such as this in the past. If one looks at the records to which Linfox now points in isolation, or considers the pieces of evidence to which Linfox now refers, there is an impression gained that there were many products out of stock from time to time, and that the position was serious and significant. However, as Linfox said, the position was no worse in 1999 than it had been in the previous year. In these circumstances, it does not seem to be helpful to examine the detail, but I do need to say something about one aspect of the submissions. Towards the end of the hearing Linfox tendered a large number of documents. An objection was taken to all of the documents on the ground of relevance, and before there was a ruling on this objection, there was a separate objection taken to "most if not all" of the documents on the basis of unfairness pursuant to section 135 of the Evidence Act, since the people who were the authors of the documents had not been cross-examined about them, and they had all completed their evidence and had been excused. The next day, the parties agreed that certain documents were to be marked for identification, and that the parties were to make submissions about their admissibility later on. I was told that it was not clear then (day 134) what use might be made of the documents. Linfox now submits that some of the documents were not objected to. The agreement of the parties recorded in the transcript seems to make it clear that the documents were marked for identification at that stage, as a means of avoiding a debate then about admissibility, objection having been taken to the tender of the documents. 982 As it happened, there never was a debate as to the admissibility of the documents. At this stage, I observe only that it is difficult to see any real utility in any of them. If it had seemed likely that the result of the litigation might have been affected, depending on whether they were admitted into evidence or rejected, I would have had the matter re-listed so that the question of the admissibility of the documents could be debated. 983 Linfox referred to the evidence of Mr Prince, who spoke of products being out of stock in spring 1999. In cross-examination he said that, without records he did not have, he could not speak of the extent of the problem, or of its effect upon sales. In re-examination, he was asked about a part of the November 1999 Operations Report entitled "Key Brand Contribution". As I read it, this document referred to various key products and gave progressive totals for the sale of the products mentioned, product by product, comparing the sales achieved with the budgeted sales for that product. The highest that the evidence rises is that Mr Prince was asked what document he would look at to provide him with information as to the impact of the lack of stock upon sales, and he referred to the report mentioned. Mr Prince had himself prepared reports of this kind until July 1999, but he was not the author of the November 1999 report. On its face, it does not refer to the out of stock question at all. 984 I do not think that the evidence takes one as far as Linfox would like to go. It shows that, at the end of November 1999, Yates' sales of key brands were down by about $2.1 million compared to the budget, but not that the cause of this was any lack of stock. Although more likely than not this was a factor, the extent of it cannot be assessed, even approximately, on the evidence. 985 Another strand to the argument about out of stocks arises from the manufacturing facility that Yates established at Wyee, as part of Operation Leapfrog. The plan was, that upon the establishment of the Wyee plant, other plants at Tamworth and Revesby would be closed down. Difficulties and delays occurred in commissioning the Wyee plant and having it commence to operate successfully, and it seems that the Tamworth and Revesby plants continued to operate until at least November 1999, although the Wyee plant commenced operations in early September. This undoubtedly led to Yates' costs being greater than had been budgeted for, but the question that I am concerned with now is whether Yates lost sales in the spring of 1999, and particularly whether any and if so what sales were lost, where the cause of that loss was something connected with the problems encountered with Wyee. 986 Given Linfox's acceptance and my finding that the out of stock position was no worse in spring 1999 than it had been in spring 1998, I accept Yates' contention that the point, if established, does not take Linfox forward. 987 Yates did not call as a witness its Production and Manufacturing Manager, Mr Pagacs, and Linfox submitted that I should infer that he would not have been able to give evidence favourable to Yates. I think this is correct, but that the drawing of the inference does not help Linfox appreciably. Mr Pagacs' reports are in evidence and generally there is a good deal of evidence pointing to the fact that there were difficulties encountered at Wyee, but the problem is the establishment of a link between these problems, about which Mr Pagacs could I take it have given evidence, and the effect of those problems in contributing to or causing out of stocks and therefore lost sales. Perhaps he may have been able to speak about a comparison between stock levels (and therefore out of stocks) from year to year, but so could other witnesses, who were called. Perhaps, too, he could have given evidence of increased operating costs, but I am concerned about a claim for lost sales. 988 Linfox pointed to reports from two investigating accounts, appointed by a creditor of Yates, recording "admissions" made to them by Yates management personnel. These show that the out of stock position (and its relationship to the Wyee plant) was a factor in the variance between actual sales and budgeted sales, but, whether considered by itself or in conjunction with other evidence, it does not seem to lead to anything significant. 989 In the light of the general rulings mentioned above, I propose to deal relatively briefly with the other suggested causes of lost sales. The first of these relates to "pipeline fills", a colloquialism apparently recording a situation where a customer of Yates placed a particularly large order, so as to fill a supply "pipeline" for the customer. This might occur at or just before the commencement of a spring seasonal peak, when a new product was placed on the market, or in circumstances relating to the customer's individual position. There were such orders placed each year, and I cannot see any pattern, established by the evidence, distinguishing between one year and another. When it occurs, a pipeline fill increases the sales recorded for a particular week, month or year; but it is followed by a corresponding drop later on. It distorts the phasing of sales, and the otherwise relatively smooth stream of income, but the evidence does not establish more than that and it does not establish that the pipeline fills in F1999 were greater than the pipeline fills in F2000. The evidence goes no further than to identify some pipeline fills, and some purchases that might be so described. 990 At [895] I referred to the competitive environment in which Yates trades. One aspect of this competitiveness, that Linfox now relies upon, is that some of Yates' customers either ceased to deal with garden products, or substantially reduced their dealings in those products. There are disputes about the details, but the essence of the debate is concerned with the question whether, when a retailer (a Yates customer) ceases dealing in garden products, Yates loses net sales. Yates contends that the consumers to whom the retailer ultimately resold its products probably buy those products elsewhere. There is no direct evidence, and in the nature of things there probably could not be direct evidence as to what the general body of consumers did in these circumstances. 991 One such customer of Yates, Target, ceased dealing in garden products during F1999 so that, Linfox says, Yates suffered a loss of $2.2 million in sales, comparing sales in F1999 with sales in F2000. (Yates says that the measure of any such loss was only about $1.5 million. There are documents mentioning both figures.) 992 Linfox characterises evidence as to what the consumers did when particular retailers ceased dealing with garden products as speculative. Yates says it is not, and furthermore that it accords with commonsense. Mr Trevarthen, Ms Jackson and Mr Boehm all said that, if some retailer ceased doing business, this did not mean that Yates lost the sales altogether: other retailers would step in. This much is I think quite plain, but that leads on to the question what the general body of consumers did once this had happened. The point is a fine one, but I think that Yates' proposition is correct, and that even if the evidence was inadmissible, it would be right to infer that the great majority of consumers would buy garden products from another retailer or retailers. It seems unlikely that they would cease buying garden products generally just because a retailer ceased dealing with them, and likely enough that they would then buy much the same products from whatever retailers they then patronised. 993 No doubt, when a retailer which had been buying a significant quantity of products from Yates ceased to do so, Yates' sales personnel regarded that as a loss for some purposes. It was such a loss, but that does not mean that there was a loss of sales in an absolute or overall sense. 994 Mr Boehm also referred to a general increase in business as another retailer, Bunnings, increased its sales, perhaps coinciding at least in time with Target ceasing to do this kind of business. 995 There is also a question about the extent to which Coles and Bi-Lo continued dealing with gardening products. Linfox initiated the debate upon this in submissions, and Yates pointed to the figures for sales to Coles, recorded in Annexure B to Exhibit 20. Linfox replied that no witness gave evidence to this effect. However, Exhibit 20 is a statement made by Mr Trevarthen. There was no challenge made to the figures he quoted and it seems rather pointless to consider whether and to what extent Coles was changing any of the details of its practice. The fact is that sales by Yates to Coles remained almost constant over a period of years. 996 Next, a question was raised in debate about the effect on Yates' sales of the introduction of the cross-docking system. When this system was introduced there was a change in the way that Yates recorded and categorised its sales. The only present significance of the matter appears to be an implied attack upon the opinion of Mr Humphreys, who said that the effect of the change in accounting method meant that certain sales that had formerly been credited to the Western Australian region were now credited elsewhere, for Yates' internal purposes. It was suggested that this meant that his opinion had been undermined. This change in practice might be described as within the second set of events, and it does not seem to have been put to Mr Humphreys that it affected his opinion that, but for the first set of events, certain sales would have been made. 997 A rather similar question arose from the way in which Yates categorised sales made to Big W. Until some time in F2000, Yates delivered products to individual stores in South Australia and the sales were treated as having been made by the Southern region. Thereafter they were delivered to a Big W warehouse and Big W distributed the products from that warehouse into its stores itself. Yates then no longer treated these sales as having been made by the Southern region, and this meant that about $600,000 in sales, made by Yates to Big W, was not credited to the Southern region in F2000. A similar change in accounting similarly affected the sales credited to the Northern region, and in Western Australia. Once again, there is no suggestion that Yates' sales overall were affected - there is just an attack upon the opinions of Mr Malloch, Ms Jackson and Mr Humphreys that, but for the first set of events, certain sales would have been achieved. 998 In cross-examination Mr Malloch said that the effect of the reduction in the sales for which he reported ("Victoria" then, excluding South Australia) was that the Big W sales came out of the relevant sales figures, but this was effectively off-set by the opening of three new Bunnings stores, the opening of these having been forecast 12 months in advance. Linfox points to some cross-examination of Mr Malloch where he was asked whether various things were possible, and he agreed, going on to say: "Sure. Anything is possible". 999 In the further cross-examination of Ms Jackson mentioned at [901], she said that the change in question did not affect her opinion that, but for the first set of events, the sales in question would have been achieved; and she gave what seemed to be sensible reasons in support of this proposition. Mr Humphreys was not cross-examined so as to suggest that the matter was significant from his point of view. 1000 Once again, Linfox complained that Yates had not produced all relevant documents, in this case some reports concerning sales made in South Australia, after it had become separated from the Southern region for administrative purposes. Mr Trevarthen said that some of these reports had been lost. It is not clear to me what documents were in existence or what happened in relation to them, but if Linfox's submissions are intended to suggest that there was something sinister about what happened, I do not accept that suggestion. (Yates took it that dishonesty was suggested: submissions 1 April 2004, para 255; and Linfox did not disavow the suggestion: submissions 24 May 2004, para 249. Given the evidence cited, the suggestion can hardly be justified.) 1001 Next, Linfox says that Yates has not allowed for credits given by it in respect of damaged or faulty products that were returned. Yates says, and I gather that Linfox accepts, that Linfox has made no attempt to compare the level of these credits in F2000 with the position in other years, and the amounts involved are either small, or not identified, so that it does not seem appropriate to linger for long on this topic. 1002 There was a problem concerning a product called Aqua Timers, credits for about $3,000 having been issued in respect of the return of these items Mr Trevarthen said that this had no material effect on the budget overall, and that in effect this debit was more than offset by increased sales of other products within the general category of Merchandise. Linfox referred to a report not in evidence (part of MFI 22) of, it seems, John Aitchson, a sales person employed by Yates in Western Australia (not Sharon or Shanelle Aitchson). Yates submitted that the document referred, not to damage to Yates' products, but to damage to the products of a competitor of Yates. I do not understand Linfox to contest this now. The taking of this point by Linfox earlier demonstrates how much industry went into the conduct of the case and the drafting of the submissions but leads to a sense of discomfort now. If the original point was good, why has Linfox not responded to Yates' submissions? If it is now conceded that the point was not a good one, ought it not now to have been withdrawn? See [439]. 1003 I dealt with the position about damage to the packaging of fertilisers sold to the GreenGold group at [906] and following. 1004 Linfox also relies upon some allowance made by Mr McClintock in respect of the return of certain products. His methodology was different to the methodology of the five Yates sales manager and the present debate is concerned essentially with their methodology. If one examines their methodology, the steps taken by Mr McClintock following his methodology do not assist. They are of course directly relevant when one examines his methodology. 1005 Next, Linfox refers to certain lines of business being discontinued. Yates ceased to sell products called Chias, Garden Claw and Lawn Tamer, and ceased to do business described as Toll Manufacturing (where material was sold by Yates to Bayer, subjected to a manufacturing process, and then resold by Bayer to Yates). 1006 When Yates prepared its budget for F2000, it anticipated these developments, providing for no expected income in respect of Chias, Garden Claw and Toll Manufacturing, and only $38,979 in respect of Lawn Tamer, the figure for Lawn Tamer in F1999 having been $465,145. That is, the total budgeted sales in the F2000 budget, aggregating to a figure greater than the actual sales in F1999, necessarily included greater sales of other products. I do not think that the evidence enables me to find precisely where in the overall budget the short fall in respect of these four items was made up, but it was made up somewhere. 1007 Nevertheless, Linfox submitted that, for reasons not connected with its conduct, Yates "lost" sales of about $2.1 million in F2000, compared with F1999, because sales under these four heads diminished by that amount. Yates disputed Linfox's calculation, and Linfox did not respond to that. Whatever the true figure was, it seems irrelevant to the question posed concerning the opinions of the five Yates sales managers. 1008 This debate appears to be further demonstrative of the nature of the environment in which Yates did business: there were new products frequently coming onto the market and other products were from time to time no longer marketed, and similarly, retailers "ranged" or stocked products that were new to them, and "de-ranged" or ceased stocking other products. This had nothing to do with Linfox's conduct, but the task is to assess Yates' loss resulting from Linfox's conduct. One part of Yates' case turns upon the opinions of the five Yates sales managers that, but for the first set of events, certain sales would have been achieved, and the present debate passes by those opinions without touching them. Linfox referred to various other matters, covered by this general observation. 1009 The next matter debated concerns promotional and advertising campaigns. In F2000 Yates changed its approach in some respects. It reduced its spending on "voice" advertising, that is, radio and television advertising as contrasted with "print". This led to a submission by Linfox that Yates had slashed its advertising expenditure by 50%, which is not the fact. Rather, Yates made "a tactical decision" to change the thrust of its advertising, also described as "a strategic decision…to cut back some of the main stream advertising support for the trade", replacing that with "hard hitting trade support"; and there was also print advertising. 1010 Everyone agrees that reduced advertising is likely to lead to reduced sales, but, stripping away some of the details, the position here is that Yates changed its approach. No witnesses said that this was wrong, or unwise, or unskilled, or otherwise not a good thing. Instead, Yates contends for a finding that, because expenditure for voice advertising (or as Linfox puts it, advertising generally) was reduced it follows that sales were therefore reduced. 1011 I do not think one could draw this inference without further evidence. Linfox pointed to two of Yates' documents, Exhibits AB and BR, but these do not seem to be to support the critical proposition, namely whether the change in mix of advertising expenditure resulted in lost sales. 1012 Linfox also relied upon what Yates described as snippets of evidence, to the effect that since in F2000 Yates did not repeat particular promotions that it had made in F1999, the sales of certain products had been reduced in F2000, but as Yates submitted, there was other evidence showing that in F2000 Yates embarked upon different promotional activities. Mr Trevarthen said, without challenge, that for the spring 1999 season, Yates had arranged the strongest ever promotion, so far as concerned Kmart, Franklins and Woolworths; and he spoke of other promotional activities. It is one thing to point to comments by Yates' sales personnel, pointing to reduced sales of some products in these changed circumstances, but one must also have regard to the products in respect of which the changes produced increased sales. Linfox does not do this. 1013 Another strand to this debate concerned a promotional campaign that had been arranged with Coles. Mr Boehm said that the order that Kmart had placed with Yates, through him, in connection with this campaign scheduled for spring 1999 was the biggest single order that he had taken in his career, by several hundred thousand dollars. However, the campaign largely or partly failed, in part because those employed at the Mt Druitt warehouse failed to do things that the campaign required them to do and in part because there was a concurrent Woolworths promotion, so that, as Ms Moore put it, Yates' sales staff were expected to be in two places at the one time. The evidence about these matters is rather thin, but for the reasons given at [975], the topic is not worth pursuing. 1014 Another set of issues concerns ranging decisions made by Yates' customers, that is decisions whether to range or stock a product, or to de-range or cease stocking it, or concerning the extent to which the customer would range the product. Linfox said that in F2000 Yates suffered significantly more loss than it gained by reference to the totality of these ranging decisions, and it said that this was not the result of its conduct. This debate apparently started with the investigative work of Messrs. Ross and McClintock or their respective firms. Linfox now says that Mr McClintock's opinion is deficient in that he made adjustments in respect of ranging decisions of which he was aware, but that there were some other ranging decisions made, in respect of which he did not make adjustments. I deal with this commencing at [1081]. 1015 As the trial developed, a significant issue emerged concerning lost sales to Woolworths in spring 1999. I deal with this matter, commencing at […]. Of immediate concern, there is a submission by Linfox that ranging decisions made by Woolworths resulted in lost sales, which loss exceeded gains made when ranging decisions were made so as to increase sales, and Yates' response to this. This turns mostly upon the evidence of Ms Burles, one of Yates' major account managers. She provided an analysis of the position comparing ranging losses with ranging gains so far as concerned customers of Yates for whose business she was responsible, namely Woolworths, Big W, Davids and BBC. 1016 Generally speaking, ranging decisions of any present significance were made by Yates' large customers rather than its small customers, and it seems clear that the customers made these decisions with a view to their own financial advantage. Mr Trevarthen described how the relevant Woolworths manager continually considered replacing non-performing products with other products that would generate a better return for Woolworths in respect of the space in the stores allocated to the products. 1017 The analysis of Ms Burles listed ranging gains and ranging losses, that is from the perspective of Yates, but she explained that there is a presently important distinction between the two. If a particular product was ranged by a particular customer in F1999, but not in F2000, that was labelled a ranging loss. The deranging of the product produced a readily measurable loss in sales, comparing the position in the two years and no question arose as to any possible adjustment to the figure thrown up, so as to reflect anything that had happened during spring 1999 - since the product was not ranged by that customer at that time, the first set of events did not affect the loss of sales that resulted from the ranging loss. 1018 On the other hand, where a particular product was the subject of a ranging gain in respect of a particular customer, whilst one can readily enough identify some additional sales made, attributable to the sale of that product to that customer after the ranging decision, there is a further question to be considered now: would Yates have sold more units of that product to that customer during spring 1999, but for the first set of events? 1019 In submissions Linfox added up the ranging gains identified by Ms Burles and set that off against the total of the ranging losses she identified, and said that this demonstrated a net loss of sales, the product of the ranging decisions she mentioned, of $2,092,600. Yates pointed out the deficiency in this approach, and Linfox said nothing in response. The Linfox submissions ignore the evidence of Ms Burles on this point, that I have just described. 1020 Linfox says that Ms Burles' opinion should be rejected, because she has not been shown to have been relevantly qualified: she was only appointed as a National Accounts Manager in April 1999. For six months before that she was State Sales Supervisor for New South Wales, and before that she was a sales representative stationed in Perth. She remained in her position of Major Accounts Manager until April 2003, when she was appointed Regional Sales Manager for New South Wales and the Australian Capital Territory. 1021 She had not been a Major Accounts Manager in spring 1998, leading to the submission that she was therefore unqualified to compare the events of spring 1998 and spring 1999. This is correct, but it is not the end of the matter. Most of the steps she took in producing the analysis in question have nothing to do with that comparison. The one exception appears to be that, having obtained by reference to Yates' records a great deal of information, and having set that out, she compared the trends in the sales recorded and then applied her knowledge of what I have called the first set of events, and she called Distribution Difficulties. I do not consider that her opinion was weakened by her referring to the trends: by the time she gave evidence, even if not in spring 1999, she was qualified to do that; and she set out, at length and by reference to particular contemporary records what she knew about the Distribution Difficulties. The rest of that part of her opinion that is challenged seems to amount to little more than putting together a series of compilations. 1022 Yates also criticised Linfox's submissions as once again blurring together as if they were identical the different methodologies of Mr McClintock and of other witnesses called by Yates, such as Ms Burles; and I accept that this criticism is valid. The matters mentioned at [975] dispose of the other points made in this context. 1023 Next, Yates referred to a change in Yates' policy. Until 1999 it accepted the return of unsold seeds and bulbs, at the start of a new season, and gave credit for the items that were returned. It then ceased this practice. Linfox points to two sentences in one of Ms Burles' documents, referring to "a huge effect" so far as concerned Big W. Linfox says that that would have affected Yates' total sales. For the reasons mentioned at [975], this submission fails. 1024 A not very different question was raised about "packaging issues". Linfox pointed to extracts from three documents and then in "reply" to a fourth document, recording deficiencies in the packaging in identified products. Linfox described these matters as "a major cause of loss of sales". Yates pointed to evidence of Mr Trevarthen that the impact of the one of these matters apparently taken up with him in cross-examination was "minor", and to evidence from Ms Moore suggesting that no loss of sales resulted in relation to another identified product. Linfox responded that the former matters were "bound to have caused significant lost sales". I prefer the evidence of Mr Trevarathen and Ms Moore to the combination of submissions and the documents mentioned. 1025 Linfox also relied upon the impact of unfavourable and unseasonable weather conditions, extracting some 45 statements from various Yates' documents covering the period July 1999 to May 2000. Yates said that Linfox had not attempted any comparison between F2000 and other years, and pointed to evidence of Mr Trevarthen that the weather in spring 1999 was favourable to the garden product business, relative to prior spring seasons, particularly because of the absence of extended rainy periods at weekends. 1026 Linfox also submitted that Ms Jackson had confirmed that adverse weather conditions during spring 1999 affected her ability to achieve her budget. As Yates submits, the transcript reference provided by Linfox demonstrates that she said only that this might be so. Yates also pointed to other evidence by Ms Jackson, and to some cross-referenced documents, showing that in respect of one particular product, weather conditions in the Northern region had led to sales above budget. 1027 Next, Linfox referred to Mr McClintock having excluded from his consideration six specified products and said that the other Yates witnesses had not done so. This appears to be merely another example of the differences that flow from the different methodologies adopted by Mr McClintock and the other Yates witnesses. 1028 Finally, Linfox relies upon the impact of the introduction of the GST on 1 July 2000. Prior to that date some of the products that Yates sold were subject to a 22% tax, but thereafter those products were subject only to a 10% tax. This had the result that some of Yates' customers deferred certain purchases until the new tax regime commenced, in anticipation in a fall in price. Apparently the result of this was a shortfall of $603,000 in relation to the sale of these products towards the end of F2000. 1029 The parties debated who should have asked Mr Trevarthen about this, but see [900]. 1030 If one accepted everything that Linfox contended for, in relation to what it says were other causes of lost sales in F2000, it seems that, but for the second set of events, and notwithstanding the first set of events, Yates would have achieved an extra $12 million in sales in F2000. Viewed in its context, and in the absence of offsetting circumstances, this is very unlikely, and the proposition was not put to any Yates witness. 1031 I turn next to criticisms made by Linfox of three particular witnesses called by Yates, namely Mr Trevarthen, Mr Boehm and Ms Burles. To a significant extent these criticisms made by Linfox, and Yates' responses to the criticisms involve arguments about particular topics, debated by the parties and dealt with by me when considering those topics, and I will try to avoid repetition. Mr Trevarthen 1032 So far I have generally grouped Mr Trevarthen together with the four Regional Sales Managers, Ms Jackson, Mr Malloch, Ms Moore and Mr Humphreys, describing them collectively as the five Sales Managers. However, Mr Trevarthen's position was in some ways different to the position of the four Regional Sales Managers, his level of involvement with the budgeting process greater, his experience different in nature and degree and his opinions were expressed in relation to broader issues, so that it is necessary to distinguish between some of what he says and what the four Regional Sales Managers said. 1033 He said that he had been employed by Yates for about 26 years, in various senior sales or marketing positions, and had been General Manager of the National Sales and Marketing Division or General Manager of Consumer Sales for about 15 years. Various Major Accounts Managers and Regional Sales Managers reported to him. He participated in the presentation of promotions that Yates makes to its major account customers, including promotions directed to sales in the spring season, each year, and in the distribution of materials to his subordinates to enable them to engage in other promotional activities. He is closely involved in the production of each year's budget, so far as concerns his division. On a daily basis he analyses sales figures, by product category, by State, and nationally, comparing actual sales achieved to date with the previous year's sales and with the budget, and he investigates any material variances he finds, and the causes for those variances, including discussing these matters regularly with the Major Account and Regional Sales Managers, who are expected to liaise with their individual customers, so as to be able to understand trends in sales, and so as to be able to forecast future sales. On a quarterly basis he met representatives of Yates' major customers and discussed with them sales figures, trends, and the reasons for changes. He received monthly reports from the Major Accounts and Regional Sales Managers, and he himself reported monthly to the executive committee. He said that he had obtained a detailed knowledge about a number of attributes of the garden product market, which he listed. 1034 In a witness statement he referred to various schedules, setting out a great deal of information, and then expressed three opinions that are now in contention. 1035 First, he said that Yates' sales to its top ten customers would have increased in F2000 by at least the same rate as those sales had increased in F1999, namely 6.4%, and most probably at the higher rate of 7.5% to 8%. The sales made to the top ten customers in F1999 had been $61.408 million; and if that figure is increased by 6.4%, 7.5% or 8%, the expected sales to the top ten customers become $65.338 million, $66.014 million and $66.321 million respectively, representing increases of $3.930 million, $4.606 million and $4.913 million respectively. 1036 Secondly, Yates' sales to its other customers would have been at least as great as they had been in F1999, namely $20.591 million. 1037 Thirdly, Yates' consumer sales, excluding sales of seeds and bulbs, would have exceeded the equivalent sales made in F1999, namely $67.454 million, and would have at least equalled the budgeted figure of $70.599 million. 1038 In fact, actual sales to the top ten customers in F2000 were $63.368 million, and sales to the other customers $15.767 million. Actual sales by the consumer division, excluding sales of seeds and bulbs, were $64.866 million. That is, these sales were respectively $2.588 million and $5.733 million less than the figure for the previous year, or the figure budgeted for F2000. 1039 Mr Trevarthen was cross-examined for an extravagant 13 days, and in large measure the cross-examination was directed to listing a number of matters falling within what I have called the second set of events, some but not all of them having been mentioned by him in his evidence in chief, and generally expanding upon and explaining matters that appeared in various of Yates' records. Towards the end of the cross-examination, Linfox disavowed any attack upon his credit generally. In re-examination he said that none of these matters affected his opinions, and he explained why this was so. He presented as a very impressive witness, thoroughly in command of his field. There was nothing about his demeanour or manner of giving evidence that leads me to form any view adverse to him or his evidence - quite the reverse, so that, I consider, the only legitimate basis for not accepting his evidence seems to lie in some demonstrated error or misconception in his reasoning process, or in some other body of evidence being more persuasive. 1040 Linfox now makes submissions about him that attract a good deal of vigourous criticism from Yates. A large number of matters, said now to demonstrate deficiencies in his evidence or opinions, were said by Yates not to have been the subject of cross-examination, and in the main Linfox appears to accept that this is so, whilst maintaining its criticism of him. 1041 Linfox sometimes recognises Mr Trevarthen's estimates as being estimates, but more commonly refers to them as calculations, and it describes them by reference to various tags: conservative, likely, low, mid and high calculations. Sometimes Linfox describes his opinions as assumptions or as speculation, and it juggles figures together in a way which is sometimes inappropriate. It sometimes expresses assertions in general terms, without providing reference points for those assertions. It also asserts that Mr Trevarthen used the "macro approach", although he plainly did not do so. 1042 Further, as Yates submits (submissions 1 April 2004 paragraph 305, to which Linfox made no response) whilst the cross-examination of Mr Trevarthen proceeded to identify and to discuss various matters, generally within the second set of events, and to record that Mr Trevarthen had not taken these matters individually into account in forming his opinions, Linfox did not attempt generally speaking to prove that he should have taken these matters into account in forming his opinions, or that his opinions would have been different had he taken them into account. Instead, Linfox chose to make most of these points solely by way of submissions. 1043 Some of Yates' products were not distributed or were not wholly distributed through the Mt Druitt warehouse, so that the deficiencies of that warehouse did not affect Yates' sales of these products in F2000, and Mr Trevarthen agreed that he had not taken this matter into account in forming his opinions. He said that the position in respect of these products was that the manufacturing points and the distribution chains were relevantly the same from year to year, so that the topic was irrelevant when comparing sales in F2000 with sales in F1999. This seems unexceptional, but Linfox takes the point that Mr Trevarthen's third opinion (comparing overall sales achieved not just with the previous year's sales, but also with budget) requires proof, with Yates bearing the onus of proof. Linfox says that where the sales of a product that was produced both in New South Wales and in other States failed to achieve budget, Yates has to prove that the short fall was caused by Linfox's conduct, that is that it was related to the events at the Mt Druitt warehouse. I am inclined to think that Mr Trevarthen's explanation covers this point also, but in any event, Linfox has to disentangle matters such as this: see [793]. 1044 Other particular matters were debated, but they are really no more than particular instances of more general questions dealt with elsewhere. If one goes to the opinions expressed, and remembers the environment in which Yates traded, there is really no merit in going through a list of matters relating to the increase or decrease in sales of some product or products, or matters about commonly recurring difficulties, for example concerning supplies or packaging, and saying of these matters that Mr Trevarthen did not explicitly and individually consider them when forming his opinions. 1045 Linfox described what Mr Trevarthen said in re-examination as "evidence altering explanations". This description seems to me to be quite wrong. However, I will deal with some of the topics. 1046 In cross-examination he said that in forming his opinions he did not take into account the effect on the sales figures of a product called Gro Plus Garden Lime. Asked in re-examination why not, he said that this product was a very small contributor in the overall scheme of things. Linfox says that, when this and similar matters are added together, they demonstrate the unreliability of his opinions: all these various matters, when added together "would necessarily, by sheer volume, result in the matters being material". The theory seems sound, but the application of it to the facts, by reference to the evidence of Mr Trevarthen, is not demonstrated. It does not seem to be to the point that Mr McClintock, approaching the case from a different direction, treated the topic differently. 1047 The parties also debated what conclusion should be drawn from the fact that a particular customer of Yates deranged some particular product at some time. Typically this occurred when the customer wanted to make better use of its shelf space. Mr Trevarthen said and I accept that this did not necessarily mean that Yates suffered a loss in sales, for it typically gained additional shelf space for others of its products, that the customer (correctly) thought would sell better; and he referred to the trend of actual sales. Linfox referred to this as being Mr Trevarthen's expectation. I do not think that this categorisation does justice to his evidence, but in any event I think that I should regard his expectation as a manifestation of his opinion, and as being soundly based. 1048 Linfox also criticises Mr Trevarthen by reference to the topics of toll manufacturing, and the deranging of Chias, Garden Claw, and Lawn Tamer, mentioned at [1005]. In substance, Linfox said that the F2000 budget contained no, or only a limited provision for the receipt of any expected income under these four heads, and Mr Trevarthen explained that he had expected these "losses" to be off set by other increased income. 1049 At one stage Mr Trevarthen agreed in cross-examination that in his witness statement he had not referred to the fact that income from toll manufacturing had been $914,000 less in F2000 than in F1999, and agreed that he had not turned his mind to this question, as an individual question, when formulating his witness statement. At the beginning of the next day he volunteered that $379,000 had in fact been received in F2000 for toll manufacturing, $575,000 less than had been received in F1999. He said that he maintained the opinions expressed in his witness statement, but that it could be said that he overstated Yates' income for F2000 by $575,000 by reference to the way in which the toll manufacturing income had been treated. 1050 Linfox does not seem to really dispute this, and it does not submit that any award of damages based upon his evidence should be adjusted by reason of this circumstance. Rather, it points to the four matters (toll manufacturing, Chias, Garden Claw and Lawn Tamer) as demonstrating the unreliability of Mr Trevarthen's evidence generally. It says that his failure and Yates' failure to recognise these matters shows the unreliability of Yates' budgets. This is substantially repetitive of arguments dealt with elsewhere, and I do not find them persuasive. 1051 Linfox referred to some two dozen other matters of detail. Yates replied in copious detail, and then Linfox responded, again in copious detail. I do not feel justified in further prolonging this judgment by even summarising all this material. The debate is marked by Yates pointing to the defects in principle which it says are attendant on the Linfox submissions, and by Linfox indulging in what seems to be inappropriate hyperbole, for example saying that Mr Trevarthen's assertions are no more than uncorroborated expectation, and that no weight should be attached to them. 1052 Linfox then advanced a series of criticisms of the figures mentioned in Mr Trevarthen's opinions. It said that his methodology implicitly assumed that Yates' consumer division would have made the same total sales in F2000 as it had made in F1999. I do not think that one can read his evidence as saying that he made these assumptions, and it was not suggested to him that he had done so. His evidence seems to me to point to the contrary. He opined that the sales achieved would have been at least as great as in F1999, but that is as far as one can properly go. 1053 It is equally inaccurate to say that he made no attempt to assess the effect of the first set of events, and when one considers the whole of his evidence it is plain that he did not regard the second set of events as affecting his opinions. 1054 Much the same submissions were made, more or less repetitively about other aspects of his opinions, describing them as methodologies. Yates replied at length, and then Yates responded again at length. A significant part of the matters now advanced by Linfox by way of argument are not supported by cross-examination of Mr Trevarthen. Mr Boehm 1055 I need now to say something about two other witnesses, Mr Boehm and Ms Burles, employees of Yates called Major Accounts Managers. Mr Boehm was responsible for customers that included Kmart, Coles, Mitre 10 and Danks, whilst Ms Burles' accounts included Woolworths, Big W, BBC Hardware, Davids Holdings and AIW. The evidence in chief of Mr Boehm and Ms Burles did not include any material that went directly to the proposition that, but for the first set of events, a certain level of sales would have been achieved, but the cross-examination of the two witnesses opened up these topics and there followed re-examination, and questions debated now. 1056 Amongst the submissions about this, Linfox said dismissively that "Yates could not decide, amongst themselves, who the top ten customers were". It may be that in the context of this case the topic first arose by reference to a chart attached to a statement of Mr Trevarthen, where he set out detailed figures showing sales to the top ten customers over a period of six years, customer by customer and arranged by product categories. Mr McClintock then used that table, or another version of it, as the basis for certain calculations. However, the label "top ten" also appears to have been used by other people at other times. Sometimes it is used to refer to different periods of time, that is different to the six year period specified by Mr Trevarthen; and it may be that it is sometimes used differently in relation to different territories. It is clear that sometimes names were added to or taken off top ten lists as Yates' customers were sometimes taking over or being taken over by others. The point does not lead one anywhere, except to remind one of the need for precision. 1057 In re-examination Mr Boehm expressed some opinions about what sales would have been achieved in spring 1999 and Linfox now submits that his opinions should not be accepted. 1058 As to Coles (which needs to be considered together with an associated organisation called Bi-Lo) he said that but for Yates' inability to get product out of the Mt Druitt warehouse (a topic about which he had given evidence, as to his understanding, he being based in Melbourne) he would have expected to achieve sales of $3.5 million, or at least $3.35 million. He volunteered an explanatory remark about an aggressive marketing campaign that had been mounted (and about which he had given some evidence earlier), and expressed his opinion notwithstanding the fact that "Coles Bi-Lo was not performing that well in the market place". Linfox submits that he had assumed a direct relationship between the marketing campaign and the increased sales, but I think that this reads more into the evidence than is justified; and it is submitted that he had not taken into account the fact that Coles and Bi-Lo were actively deranging gardening products in spring 1999, a circumstance that, Linfox submits, should lead to the finding that that was a complete explanation for the shortfall in expected sales. Remembering how the question arose, I am not persuaded that I should substitute my view that this deranging might wholly explain the shortfall in expected sales for the view of Mr Boehm, who had held senior positions with Yates since 1984, and whose daily work involved analyses generally similar to those carried out by the five Sales Managers. 1059 Nor do I think it would be right to say that Mr Boehm did not consider the fact that the Coles and Bi-Lo gardening businesses were being allowed to run down, just because he did not mention the matter in re-examination. He had been cross-examined about it. 1060 As to Kmart, Mr Boehm said in re-examination that "we" had expected a substantial increase in the sales to it, based at least in part upon the fact another customer, Target, was quitting the business, and upon a "service desk promotion" that he had given evidence about earlier, which he said "we" thought "would give us a quantum leap"; and he spoke of being disappointed not to reach a target of $6.5 million to $7 million in sales, but saying of these figures: "we would only be guessing". Linfox says that no documents were produced as to the last figures, but I am in no position to tell what should have been produced, if anything. Linfox also points out that sales to Kmart in fact increased, but the question really is whether they would have increased to the amount mentioned by Mr Boehm. 1061 As to Mitre 10, he gave generally similar but rather more detailed evidence, saying that the 5% increase in sales that had been obtained was particularly disappointing having regard to a very strong promotional campaign that had been mounted, and the fact that orders received had been consistent with the budgeted increase in sales (the orders could not be met, by reason of the supply difficulties). As Linfox points out, the budget about which Mr Boehm spoke is not in evidence, but that is hardly a basis for not attaching some weight to his evidence. 1062 The evidence as to Danks was not significantly dissimilar. 1063 Linfox listed a series of topics that Mr Boehm had given evidence about, that affected sales either generally or to one or more of the four customers about whom he spoke, and that he did not mention in his re-examination. None of this seems to me to be telling in relation to the question now under consideration, namely the opinions he expressed in re-examination about expected sales, and how they were affected by what he describes as the difficulties of obtaining products for sale in spring 1999. 1064 The evidence of Mr Boehm about expected sales to these four customers is not powerful, but the reasons suggested by Linfox as to why his evidence should be discarded from consideration, whilst varying in persuasiveness, do not seem to me to mean that I would be justified in completely discarding the evidence from consideration. What he said is generally consistent with the evidence of the five Sales Managers, and particularly the evidence of Mr Trevarthen as to sales to four of the top ten customers. I do not mean to say that one can marry his figures up concerning his particular customers with the figures mentioned by Mr Trevarthen of the position overall. Rather, the general picture that he painted is consistent with the general picture painted by Mr Trevarthen. Ms Burles 1065 One segment of Yates' claim for damages is that, during spring 1999, Yates was unable to make timely deliveries to its customers. Woolworths was one of those customers and in spring 2000, a reason for its dissatisfaction was the level of the service that Yates had provided to it in spring 1999. It therefore purchased less product from Yates than otherwise would have been the case. That is, the events of spring 1999 led to the events of a year later, and the making of the claim now made in respect of the Second Loss Period. There is no claim made, as such, for lost sales to Woolworths in respect of the First Loss Period. Any loss suffered in this regard is subsumed within the more general claim for lost profits resulting from lost sales during this period. 1066 Ms Burles gave evidence to support the claim made, and in the course of her evidence in chief expressed no view as to the measure of diminished sales of spring 1999. She provided a good deal of information but did not speak about these matters. In cross examination she said this: Whilst you may be able to say that in your opinion supply difficulties were a cause of some of the problems you had in spring of 1999, that for the period of approximately July to December 1999 it would be for you almost impossible to estimate precisely what lost sales you suffered as a result of supply difficulties as opposed to what lost sales you had as a result of ranging decisions, competitive pricing effects, lack of promotion and so forth?

A. I wouldn't say it was almost impossible, or virtually impossible. I would say that it would be possible with a fair bit of work. Certainly there's some things that you could never measure, such as if we had have run promotions on dynamic lifter would the sales have been all that much great; who knows, crystal ball stuff. Same if we didn't supply a product for six weeks, how do we know how many bottles of that particular product could have been sold within that six weeks. That is very, very hard to figure out, but the raw facts that I have in my monthly reports and on those delivery manifest sheets do tell me the approximate value of orders that we missed during that period. 1067 After the completion of the cross-examination Yates sought to have her answer this attack. Linfox objected and I permitted it on terms that Linfox have leave to further cross-examiner her. That led to the tender of a further statement and of a lever arch file of records said to support the analysis contained in the statement. In short, she expressed the view that in the spring of 1999 the distribution difficulties of which she spoke caused Yates to lose sales to Woolworths of $1.041 million, to Davids of $218,000, to BBC of $185,000, and to BigW of $225,000. 1068 Linfox attacks these opinions, her qualifications to give opinion evidence, the choice of records and her conclusions, and it compares her opinions and the records she relies upon with the opinions expressed and the assumptions made by Mr McClintock. If one pauses now to put all this into context, it appears to highlight the unreasonableness of Linfox's general submissions about the way in which Yates could and should have proved its case. It appears that Ms Burles is as well qualified as anyone at Yates to give evidence about its dealing with the customers mentioned, and she referred directly or indirectly to a great mass of documents, yet Linfox says that there is still insufficient proof. 1069 The function of courts is to provide just remedies, when some litigant's rights have been infringed, and the delivery of justice does not require a claimant for damages to do more than is reasonable in the circumstances. The approach of Linfox, perhaps seen most clearly in relation to the evidence of Ms Burles, is to say that the case could only have been proved by a trial which, including proper preparation, would have taken an extraordinary amount of time, and the funding of which would be excessive if not ruinous. 1070 There are many points in the case, including this one, at which Linfox now asks me to reject the opinion evidence of some witness, on grounds that were not put to the witness. To my mind the considerations mentioned at [962] point to the undesirability of that approach. If a litigant in the position of Linfox does not have the courage of its convictions, to suggest to the witness in cross-examination that the witness' opinion should be rejected for some specified reason, it can hardly be right for a judge to say, without more, that the judge rejects the witness' opinion for that reason. The principle is somewhat similar to that often referred to as the rule in Browne v Dunn (1893) 6 R 67. 1071 In any event I do not find submissions of this type persuasive in the context of this case. The opinions of Ms Burles, like the opinions of the five sales managers, were given in relation to a field in which I have no experience or specialised knowledge, and where these witnesses did have experience and specialised knowledge. It was not suggested that any of them did not genuinely hold the opinions that they expressed, or anything of the kind. The substance of a large part of Linfox's case appears to be that I should look at various records for myself and form a view different to the views of the witnesses. I do not accept that this is a proper judicial function, but even if it was, I am not persuaded that I should do so in this case, and particularly in relation to the opinions expressed by Ms Burles. 1072 Linfox attacked her evidence, amongst other reasons, by reference to difference between her approach and the approach of Mr McClintock, and the fact that they relied upon different factual matters. 1073 To reduce matters to simplistic statements, Ms Burles identified products that Yates sold in F1999 and F2000, where the sales achieved diminished significantly. She treated as ranging losses cases where sales in F1999 were not made in F2000, and treated as ranging gains cases where products were not sold in F1999, but were sold in F2000, and she then excluded these products (those the subject of either ranging loss or ranging gain) from her analysis of what had been the result of the distribution difficulties. 1074 In contrast, Mr McClintock started with the budgeted sales figures for F2000 and adjusted the sales figures recorded there by reference to events he took (that is, assumed) to be events unrelated to Linfox. He did not directly concern himself with the sales made in F1999, except to the extent that these sales were reflected in the assumptions upon which the F2000 budget had been prepared, and the assumptions reflected had proved incorrect because of ranging losses. He identified the various matters that he assumed to be unrelated to Linfox's conduct, and in respect of each such product eliminated the entire variance. Thus, for example, if sales of one product were diminished, he eliminated all sales in respect of that product from his assessment, whether the diminution in sales was wholly or only partly the result of Linfox's conduct. 1075 In submissions Linfox pointed out that Ms Burles and Mr McClintock treated the ranging decisions differently, and it submitted that, therefore, Ms Burles' opinions should be discarded from consideration. One wonders why it should be hers rather than his, but in any event the differences in approach mean that differences of this kind are inevitable, and the fact that there are differences does not necessarily affect the reliability of either opinion. Further, the Linfox arguments do not, or do not always recognise the distinction mentioned at [1017] between ranging losses and ranging gains, and the assessment of the possible economic consequences of those ranging changes. 1076 If one puzzles one's way through Ms Burles' statement and the supporting documents, one sees that a lot of hard work went into her attempt to work out, accurately, what had happened. The nature of the task involved trying to assess what would have happened, or what is now hypothetical: see [777] and following. I do not think there is any need to decide whether Yates' sales figures to the four customers she mentioned, in the amounts that she mentioned were accurately stated, for Yates makes no claim directly based upon them. The point arose, not by way of proof of such a claim, but to answer the challenge made by Linfox as to how Yates could and should have proved its case. 1077 However, my impression is that what Ms Burles did represents a reasonable approach to the task, and a more attractive one than the approaches that the two accountants embarked upon. The assessment of loss in a case like this one is quintessentially difficult, and any conclusion reached is likely to be one upon which informed minds might very reasonably differ after careful consideration of a large quantity of information. Ms Burles' attempt shows that, with a great deal of effort, more might have been done to isolate particular factual ingredients in the claim, but also that to make this attempt in respect of any significant proportion of Yates 4,300 customers would have been counter productive, having regard to the costs to be incurred. 1078 Linfox submitted Ms Burles' evidence to some 40 pages of criticisms; Yates replied at length, and then Linfox responded. There seems to be real force in Yates' point, that many of the criticisms now made were not tested in cross-examination. It may be that they are after thoughts, based upon propositions advanced through Mr Ross after Ms Burles had completed her evidence, but whether this is so or not, she had no opportunity to respond, and Yates had no opportunity to respond through her evidence. 1079 One of Linfox's submissions appears to be quite fanciful. It seems to have been suggested that Linfox, by its efficient conduct of the warehouses, somehow acted in such a way as to produce some ranging gains for which it should now be given credit. One looks in vain for any reference to any evidence supporting the proposition that any ranging decision was based upon such a consideration, and in any event, Linfox's proper or even superlative performance of its obligations under one contract can hardly give it some credit, when damages for breach of a second contract have to be assessed. 1080 Overall, the picture painted is of an attempt made to meet Linfox's initial criticism. So far as it goes, Ms Burles' evidence appears to be reasonable, but several of the matters about which she spoke are incapable of the kind of proof that Linfox says is essential. I regard her evidence as generally supportive of the case advanced through the five sales managers concerning the first loss period, and as providing part of the basis for Yates' claim in respect of the second loss period, but I do not think it really takes one much further. It serves to highlight what might or might not reasonably have been done by way of proof of the claim made. The accountants

1082 Each accountant spoke about how one might assess the profits that Yates lost, arising from lost sales during the First Loss Period. Stated shortly, Mr McClintock approached the task by starting with Yates' budget for F 2000, adjusting it by reference to things recorded in the Operations Reports as adversely affecting sales figures, and by comparing these adjusted sales with the figures for actual sales achieved. Mr Ross and Linfox criticised this approach upon a number of grounds. They did not suggest any other figure. Instead, they said that Yates had not established any case. 1083 One of the curiosities of this case is that, although Linfox did not at any stage submit that the reasoning of Heydon JA (as he then was) in Makita was in any way wrong, and whilst Linfox relied upon that reasoning from time to time when objecting to evidence adduced on behalf of Yates, each of the report of Mr Ross, the joint report of Messrs Ross and McClintock and Linfox's submissions proceeds on a basis that is inconsistent with that reasoning, contending in substance that it is appropriate for Mr Ross (and for that matter Mr McClintock) to report on what he considers the primary facts to be, and for the Court to accept that finding; and they say Yates has not established any loss. In particular, they say that Yates can only prove a loss of profits during the First Loss Period if it proves how particular individual incidents affected particular orders placed by particular customers, and that those customers failed to place particular orders later on, by reason of the dissatisfaction felt by those customers arising from the earlier incidents. I reject this proposition: [859]. 1084 Linfox makes other criticisms of Mr McClintock's approach, but I do not consider that I need to deal with them all, because I think that the approach of Mr Trevarthen is likely to be more accurate and more reliable. As it happens, Mr McClintock's assessment of the value of the lost sales in the First Loss Period, $5.069 million, is not very different to Mr Trevarthan's assessment, $5.733 million, and the difference is possibly explained by Mr McClintock having adopted a "conservative" approach, sometimes making adjustments to the budget that were larger than need be. 1085 If I had not preferred Mr Trevarthen's approach, I would have accepted Mr McClintock's approach, as representing a reasonable attempt to make an assessment that was as accurate as the circumstances permitted. I do not accept that Yates must prove its case in the way that Linfox contends for; and even if Yates had done all the things mentioned in the email quoted at [846] Linfox would still have it that Yates has not proved its case. 1086 In chief, Mr McClintock said that whilst he would have preferred to assess Yates' loss by a method that, broadly speaking, corresponds with the way in which Linfox says that Yates must prove its case, that could not be done, for reason that he set out; and therefore he adopted a different methodology. In cross-examination, he agreed that he had assumed the facts, said to constitute the reasons mentioned, and Linfox now says that those facts have not been established. 1087 In my judgment this is a mater for the Court, and not for any expert witness. In the circumstances of this case the accountants might provide useful information going to the question what was or was not reasonable, but ultimately that is a matter that does not turn upon the opinions of accountants. I consider that Mr McClintock's methodology was a reasonable one, not least because if what Linfox contends for is correct, a very large number of Yates' customers would have had to give evidence, explaining what orders each of them did not place with Yates in spring 1999, why this was so, and how that reason was linked to Linfox's conduct. During that spring there was a period when about 80% of all orders that were filled included a short delivery of at least one item, and since Yates was favouring its larger customers, its likely that most of its smaller customers were disadvantaged. 1088 Linfox also said that Mr McClintock had not identified any particular period during which there was a non-supply of goods ordered. This is correct, but his role was to assume facts, and not to investigate them. Further, the Linfox submissions assume, contrary to my findings, that all was well in the Mt Druitt warehouse by the end of August 1999. 1089 There are other criticisms, recorded in the written submissions. I do not find any of them persuasive. Some of them seem to be permeated by the idea that Mr McClintock still had an investigative role to play, and others to be of little or no practical significance. Overall, his approach seems to me to be reasonable. 1090 Drawing these matters together, I accept the evidence of Mr Trevarthen that the probable value of the lost sales (resulting from the first set of events) during the First Loss Period was $5.733 million. However, I do not accept that damages should be awarded on this basis. Some of the lost sales fell into the categories described at [777] as category 1 and category 4, and in respect of these lost sales, damages should be awarded, not on the basis that the sales were probably lost, but by reference to an assessment of the degree of probability. A difficulty that arises is that one cannot tell with any precision what proportions of the lost sales fell into each of the categories. 1091 I consider that it is much more likely than not, that in category 1 and category 4 cases, Yates' customers would have purchased the additional products in question: they were retailers, who had ordered the products probably in the expectation that they would be able to resell them at a profit, and there is a considerable volume of evidence about their complaining, often vigorously, when Yates failed to deliver what had been ordered. Additionally, later on, Yates succeeded, it seems, in effectively recapturing most if not all of the market that it lost during the First Loss Period. 1092 Doing the best I can with the evidence, I think that I should award damages on the basis that the figure of $5.733 million be discounted by 12.5 percent, to $5.016 million. It is now agreed that the profit margin during the First Loss Period was 32.3 percent, so that I award damages in respect of lost sales and lost profits during the First Loss Period of $1,620, 168.

Travel and Accommodation Expenses 1093 Yates claims that, commencing in late August 1999, it incurred travel and accommodation expenses in having various personnel who normally worked at its New Zealand warehouse or at one of its other Australian warehouses, work at Mt Druitt. $28,544 was claimed. Linfox challenged various components in this total claim, and Yates withdrew its claim in respect of some items, thereby reducing its claim to $25,871. The persons concerned were Mr Brabant, the manager of the New Zealand warehouse, Mr Taylor, the manager of the Victorian warehouse and his assistant, Ms Daley, Mr Probert of the Queensland warehouse, and Messrs Johnson, Piper and Williams of the Western Australian warehouse. 1094 Upon the termination of Linfox's services, Mr Ballantyne became the person in charge of the Mt Druitt warehouse. A Yates body identified by Mr Ho as the Executive Team, of which he was a member, decided that the managers and some of their support staff from the New Zealand and Australian interstate warehouses should be seconded to the Mt Druitt warehouse "to assist in sorting out the situation", and the Executive Team instructed Mr Ballantyne to arrange this. Mr Ho said that he recalled that the Executive Team had specified Messrs Brabant, Taylor, Probert and Johnson. 1095 Mr Ballantyne said that as at about 1 September it was clear that Yates needed additional distribution assistance and expertise to deal with the emergency situation then present at Mt Druitt due to the state of the warehouse and the backlog of customers' orders, and he spoke of co-ordinating the calling of staff from other warehouses; and he said that those that he had called upon included Mr Taylor and Ms Daley, and Messrs Johnson, Piper, Williams, Probert and Brabant. He said that they had advised him on issues pertaining to Yates' customers and products, and that they had acted as supervisors on shifts: for some time Yates operated for 22 hours a day; and in addition Mr Brabant acted in relation to the implementation of the WMS. He went on to describe some of the detail, not of what these particular people did, but of the work done generally at that time. 1096 At [741] I referred to an allegation of contributory negligence, in failing to have appropriately qualified or experienced staff operate the Mt Druitt warehouse. The people just mentioned were so employed, and there is no sensible basis for thinking they were not appropriately qualified or experienced. Similarly, there is no proper basis for finding any connection between the employment of these people, or the failure to employ others, and the loss of or damage to stock. 1097 I have found that the situation in the warehouse from late August onwards was thoroughly unsatisfactory. Many of the Linfox submissions proceed on the basis that this was not so, and the submissions fail for that reason alone. I accept the evidence of Mr Ballantyne and of Mr Ho as to why the personnel in question were brought to Mt Druitt to work, and therefore why, generally speaking, the travel and accommodation expenses now in issue were incurred. I reject the submission that the expenses were incurred because Yates had lost the experienced Linfox staff and/or to make up for the inexperience of Mr Ballantyne: the submissions overlook the chaotic conditions in the warehouse, and the evidence of Mr Ballantyne and Mr Ho. Linfox submitted that the evidence of Mr Ballantyne and Mr Ho was contradictory as to the identity of the persons concerned, but the submissions do not accurately summarise their evidence. It was then submitted that the evidence adduced by Yates was deficient in that it did not establish a causal connection between Linfox's conduct and the incurring of the expenses. 1098 One claim was for $547 for the accommodation of Mr Taylor, between 31 August and 3 September. This, it was said, was too early, in that Mr Ballantyne spoke of matters after 1 September. The submission extrapolates from one sentence in an affidavit of Mr Ballantyne and overlooks the evidence of Mr Ho, but in any event I consider that the evidence adduced by Yates, couched as it is in general terms, ought not to be put aside in the absence of a challenge to it in cross-examination, on a consideration of a submission of this kind, first made in address at the end of a long trial. 1099 $963 was claimed in respect of the accommodation of Ms Daley, in December. This, it was submitted, was too late: affairs at Mt Druitt were in order by then, and Linfox said that there was "nothing" to connect this claim with its conduct. There was, however, the evidence of Mr Ballantyne and of Ms Payne, as to how the expense was treated by Yates at the time. In the absence of cross-examination on this topic, this seems sufficient to constitute a case that might have been rebutted by half a dozen questions, had they been asked in cross-examination; but there was no attempt made to do this. 1100 $2,371 was claimed in respect of what appears to have been Mr Brabant's airfares, and I accept this claim. $2,475 was claimed for costs incurred in providing lunches to warehouse staff to induce them to work ten and twelve hour shifts having regard to the state of the warehouse. Mr Ballantyne's evidence about this was not the subject of any challenge. 1101 I allow $25,871 under this general heading.

Outside storage costs 1102 Yates claimed $9,700, later reduced to $8,494, for the costs incurred in storing certain slow moving stock to outside premises. Now that there is only the reduced claim to consider, the question for decision is whether Yates has proved a causal connection between the incurring of these costs and Linfox's conduct. I consider that Yates has done this. 1103 Mr Ballantyne spoke of attempting to alleviate some of the congestion at Mt Druitt and also of Yates being under considerable pressure from Maincon to move stock that had been stored in the driveway. The Linfox submissions focus mainly on the latter matter, but that does not help it, because stock was only stored in the driveway (so as to lead to Maincon exerting pressure on Yates) as a consequence of Linfox's conduct. Additional labour 1104 Although Linfox disputes it, there is really no question but that in consequence of its conduct, Yates incurred some extra labour costs in spring 1999. However, there are questions about causation and about the measure of the loss sustained. 1105 The state of the warehouse from the time of the move onwards meant that a great deal of work was required, that would not otherwise have been necessary: thousands of pallets of product were block stacked, in such a way that products could not be found without the expenditure of greater time and effort than would otherwise would have been appropriate, and in addition it was often necessary to move pallets around. 1106 For Linfox, Mr Frost had planned on the basis that two shifts per day would be worked. From about 12 August until about mid September three shifts per day were worked. He said that this was done in an attempt to put product that had been blocked stack into the reserve racking, where it should have been. This was the result of the Linfox's conduct, and it had the further result that the MHE was used to a greater extent than had been planned, leading in turn to a greater drain upon the MHE batteries than he planned. 1107 There is some question about the date when this commenced. Mr Moore said that it commenced after 1 September, but Messrs Frost and Higgins said that it was about 12 August, and given all of the surrounding circumstances, their evidence about this date appears to be accurate. Mr Moore was in no position to know why the change occurred. 1108 In addition, I consider that it is established that some additional casual workers were employed. Mr Ballantyne spoke of the number employed (57) as being more than twice the size of the normal workforce. Linfox submitted that because of his limited experience he was not qualified to say this, as well as criticising his evidence more generally. However, the real difficulty lies in coming to a view about what was "normal", or, more to the point, what expenses Yates would have incurred under this heading in spring 1999 but for Linfox's conduct. 1109 Everyone agrees that it would be inappropriate to compare spring 1999 with spring 1998 for this purpose, because the warehouse at Mt Druitt was significantly different to the warehouse at Clyde. Through Mr McClintock, Yates therefore looked at the position in spring 2000, treating that as "normal", or as a means of assessing what additional labour costs were incurred in spring 1999. Linfox criticised that approach on various bases. 1110 First, it said that there were other causes for Yates increasing the number of persons employed. Yates commonly employed additional people in the spring season. However, it is Linfox that bears the onus of disentanglement of the causes: [793]. 1111 The second criticism involves some analysis of Mr McClintock's approach. He started with Yates' records about labour and associated costs for the years F2000, F2001 and F2002, and the sales achieved in respect of the relevant product groups in those years, and he then expressed the labour and related costs as a percentage of these achieved sales: 3.13% for F2000, 2.995% for F2001 and 1.64% for F2002. He noted the marked reduction in labour and related costs for F2002, but expressed the view that, comparing F2000 with F2001, the labour costs for the latter year were lower, and he opined that upon an examination of all this material, the increased labour costs in F2000 were $71,105. 1112 Linfox now says that this figure should be disregarded because, in F2001, Yates had a WMS operating and one of the effects of using a WMS is to reduce labour costs. Therefore, it said, Yates has not proved any loss because it has not, and Mr McClintock has not made any allowance for the costs so saved. Yates implicitly conceded that Mr McClintock had made no such allowance. 1113 Linfox also criticised Mr McClintock's approach on the basis that the labour costs in spring 1999 included the "one-off costs" incurred in moving to Mt Druitt. On both these points, Linfox fails, because it bore the onus of disentanglement of the issues. 1114 Then Linfox submitted that the costs variance (0.135%) was insignificant. It is a small number, but even in the context of this case the figure thrown up, $71,105, is not insignificant. 1115 I accept this claim as established. I note that, in a memorandum of 1 September 1999 Mr Ballantyne gave an estimate of costs that he then thought would be likely to be incurred. If one goes through his figures, a slightly higher figure is reached. The submissions of Linfox to the contrary, I do not understand Yates to have put this forward as an alternative claim, so much as a piece of evidence to be considered. Stock losses 1116 Yates claims that, as a result of the chaos in the warehouse, there was a risk that eventuated of stock being lost, either through damage or theft or by being incorrectly dispatched; and it says that its losses in this regard should be assessed by reference to its stocktaking records. 1117 I proceed on the basis that there was such a risk, and that there is no direct evidence of loss by theft. There is evidence that, because products were block stacked rather than stacked on shelves, as they should have been, and also because some stock that was not weather proof was stacked for a time in the open air, certain stock was damaged, but the measure of this damage appears to have been modest. The evidence does not permit any separate measurement to be made of this loss. 1118 The significant loss in this connection appears to have come from the incorrect dispatching of goods. For example, Mr Trevarthen, cross-examined about entries in his Operation Report of December 1999, spoke of "whole containers of stock" going astray. Sometimes short deliveries were made and Yates' customers then complained. On other occasions there were deliveries made of more product than had been ordered, and whereas some customers volunteered information to this effect, sometimes in respect of $15,000 or $20,000 worth of stock, others did not. 1119 All this seems beyond sensible dispute, but the measure of the loss is another question altogether. Yates conducted a stocktake each May and November. In short, it compared the stock on hand found upon a physical counting against the stock recorded in the PRMS as being on hand. From May 1996 to May 2002 those stocktaking exercises threw up the following results: VARIANCE IN INVENTORY VARIANCE DATE $ IN $000 % May 96 +39,684 18,466 +0.215 November 96 -86,768 18,755 -0.463 May 97 -128,291 14,112 -0.909 November 97 -172,780 15,588 -1.108 May 98 -189,834 15,783 -1.203 November 98 -233,056 19,090 -1.221 May 99 +103,116 17,924 +0.575 November 99 -737,709 19,768 -3.732 May 00 -118,820 18,472 -0.643 November 00 -30,333 18,370 -0.165 May 01 -156,218 14,625 -1.068 November 01 +51,746 11,946 +0.443 May 02 +65,048 11,558 +0.563

The very operationally difficult period, during, and well after the move of the Clyde warehouse to Mt Druitt, created near impossible conditions for good inventory record control. For instance, there was no way that stock could be checked credibly for possible IT or order pick operation problems, as the overcrowding made stock location control impossible. Exacerbating the situation was many inexperienced stock pickers picking with poor pick locations signage and product code definition. There were anecdotal reports of many short and over-picks [especially relating to product unit-of-measure errors] for Customer and Replenishment Orders during this time, culminating no doubt in a considerable number of credit requests and returns. 1124 Yates acknowledged that the stocktakes recorded the position company-wide and not just at Mt Druitt, but stressed that its claim was not for all losses found on the stocktake, but for those that should be regarded as flowing from Linfox's conduct, that is, those losses over and above "normal" losses found on stocktake. This approach seems conceptually sound, and I would include in the category "normal" losses answering this general description such matters as counting errors, errors made in relation to inventory records (that is, errors recorded in the PRMS), departures from proper procedures, errors made by inexperienced staff employed during the spring season in different years, and the like, listed by Linfox as matters that, it said, Yates had not singled out for separate attention. 1125 One circumstance to be considered is the fact that Yates moved from Clyde to Mt Druitt, but Yates pointed out that the May 1998 stocktake, conducted after Linfox moved from Milperra to Mt Druitt, did not result in any abnormal loss. 1126 To my mind the amount claimed seems high but I do not see any sound basis in the evidence for rejecting this assessment of the loss, or preferring any other figure. The result of the November 1999 stocktake was significantly out of line with the results of other stocktakes, and when one steps back and considers the chaotic condition of the warehouse in and after August 1999, it is impossible to avoid the conclusion that the way in which Linfox conducted the move was the likely cause of the sharp increase above the "normal" variance to be found on stocktaking. 1127 Linfox did not suggest any other figure. Its approach was to submit that Yates had not made out any loss. I consider that it has done so. The task is one of assessment not of calculation, and the seeming precision of the figures should not be allowed to distract attention from this. The figures represent an attempt to assess the loss accurately, and I accept them on this basis. Once again, it was Linfox that bore the onus of disentangling the causes of the loss. 1128 Linfox raises a separate ground of defence. It says that it had always been accepted as between itself and Yates that, unless and until Yates had installed a WMS, Linfox was not to be liable for stock losses. There is no doubt that, when the parties were negotiating with a view to entering into a long term agreement, for the management by Linfox of Yates' warehouses, Yates insisted that it would not be responsible for any unexplained stock loss, except in limited circumstances, and I proceed on the assumption that such a term might be implied in relation to the temporary arrangements that the parties entered into for Linfox to manage the Clyde and Mt Druitt warehouses on a day to day basis. Such a term may be found, for example, in clause 10 of the eight draft of the proposed long-term agreement. I forebear from setting all this out, but the clause provided that, subject to various qualifications, Linfox was to be exempt from liability for loss or damage "arising out of or in connection with this Agreement or the performance of Logistics Services under this Agreement." 1129 However, Yates now sues for breach of the contract formed in the Rich/Bennett conversation recorded at [82]. That contract contained no such express term, and there is no basis upon which such a term might properly be implied. In any event, the subject of the present claim is not some unexplained stock discrepancy, but the consequence of Linfox's conduct (that is, its breach of contract, negligence and misleading and deceptive conduct) in relation to the contract to move from Clyde to Mt Druitt. 1130 In these circumstances there is no need to consider the submissions made concerning the effect of the term for which Linfox contends. Big W 1131 Yates seeks to recover $100,000 which it paid to Big W by way of compromise of a claim made against it by Big W. 1132 On 19 October 1999, Big W wrote to Yates in these terms:

It does note make any note of the numerous store queries that we had concerning Yates out of stocks an the level of customer dissatisfaction that was experienced by our staff in not being able to provide stock for customers during our spring promotions. 1136 Subsequently Big W sent two forms of "purchase agreement" to Yates, seeking payment of $100,000 and Yates paid that sum, or gave credit for it. Some of the submissions made now refer to the details of the diary notes, as well as to the purchase agreements and to a document signed by Mr Ho authorising the payment of or the giving of credit for $100,000. 1137 However, it is convenient to set out what Mr Trevarthen said in the balance of his affidavit evidence, some of that being admitted as evidence only on the basis that it explained what he thought and why he acted as he did. I omit some of the detail because, whilst there were three components to the offer made by Yates to compromise the claim of Big W, the claim now made by Yates concerns only the first of these three components. The components were the payment of $100,000, an adjustment made in respect of a long-term incentive allowance, and the provision by Yates to Big W of certain services, free of charge. 1138 Mr Trevarthen considered the claim made, and made recommendations to Mr Rich which were accepted and which led to the Big W claim being compromised on this basis. Mr Trevarthen said, as to his reasons, that he thought that if Yates rejected the claim of Big W, Big W would deduct $200,000 from its next monthly payment to Yates and he thought it best to try and compromise the claim and to maintain Yates' relationship with Big W. He listed the matters that he had taken into account. 1139 First, he thought that Yates was unable to refute the claim for $200,000. He thought that there was no doubt that Big W had suffered a loss of sales due to the inability of Yates to supply Big W during spring 1999. Whilst Yates had no real way of quantifying just how much Big W had lost, he thought the claim was understated, rather than overstated. 1140 Secondly, he had no doubt that there had been large problems encountered by Yates in spring 1999 in making deliveries to Big W. He knew this from his involvement with Big W, and he referred to various documents. 1141 Thirdly, the decision that he recommended and which was made was a commercial one. He simply halved the amount that had been claimed and added other inducements, in an attempt to persuade Big W to accept the compromise offered. His overriding concern was not just to settle the claim made but also to protect the long-term relationship of Yates with Big W. He did not consider that Yates was in a position to prolong the negotiations with Big W or to make no offer for payment, having regard to Yates failure to supply Big W during spring 1999. 1142 Linfox seeks findings inconsistent with this evidence, principally by reference to the copies of the diary notes sent with the letter of 17 November, the purchase agreements, and the authority for payment signed by Mr Ho. The diary notes are sometimes rather cryptic and need to be considered together with the oral evidence. 1143 The diary notes refer to some products being out of stock, but reading them as whole, coupled with the other evidence, it cannot be said that Big W's complaint was based wholly or even mainly upon Yates being out of stock in respect of certain products, so as to effectively destroy the basis for this claim now made by Yates. To the contrary, some of the diary entries refer to Big W stores being out of stock in respect of certain products. 1144 Nor does it seem significant that the complaints made by Big W arose after Linfox's services had been terminated by Yates: the problems encountered by Yates resulting from Linfox's conduct persisted well after the date of termination: [708] and following. 1145 Next, Linfox focused mainly upon Big W's purchase agreement forms, and the authorisation for payment, and contended that these documents show that Big W's complaint related to the non-supply of seeds and bulbs, and therefore that the problem that concerned Big W was not connected with Linfox's conduct. The purchase agreements referred to Big W's departments numbered 72 and 73, apparently describing them as "garden seeds and bulb-ads" and "garden and allied lines". It was suggested to Mr Trevarthen in cross-examination that Big W's claim was limited to the provision of seeds and bulbs, and this suggestion was repeated in submissions, but he denied this, saying that it had been made very clear in discussions that the claim made by Big W related to other products. I accept that this is so. 1146 Mr Ho's manuscript note on the authorisation form reads "debit bulb provision". I do not overlook this evidence but I do not think that this fragment of evidence, whether considered alone or in conjunction with any other evidence, enables me to reject the evidence of Mr Trevarthen, particularly when it is considered in the context of all of the other evidence in the case showing the extent of the disruption of Yates' business. Apart from any other consideration, it was Mr Trevarthen that made the recommendation for payment. Coles 1147 Yates claims $41,372, as representing money that it lost in these circumstances. As a result of Linfox's conduct, Yates was unable to make timely deliveries of products to Coles. Later, Yates attempted to increase the price at which it sold its products generally, and Coles refused to pay the increased prices, generally from 1 February 2000 until 17 April 2000. This refusal was said to be based upon Yates' failures to make timely deliveries in spring 1999. 1148 Linfox disputes the claim, saying that certain evidence was admitted on a limited basis only, and that when regard is had to this, the evidence establishes only that Yates proposed to make price increases; that it has not been established that there was a delay in Coles accepting the price increases; that if there was a delay, it has not been established why Coles delayed; that if there was a delay, the causes of the delay are not related to Linfox's conduct, Linfox pointing to other reasons; and there is a question raised about the amount claimed. 1149 Mr Boehm was the Yates officer most directly concerned in the communications with Coles. He dealt with various Coles officers including Mr Johns, the senior buyer for Coles. Coles operated about 650 stores throughout Australia. It typically placed orders with Yates each day, electronically, and the ordinary arrangement was that Yates deliver the goods in question to one of two Coles facilities, from where Coles distributed those goods to its stores. It was important that Yates deliver the goods ordered to the Coles facilities at particular times each day: if the goods had not been delivered by then, Coles required Yates to deliver them, not to the Coles facility in question, but to a large number of Coles' stores, a procedure which cost Yates considerable trouble and expense. 1150 Putting aside for the moment the evidence of Mr Boehm, admitted on the basis that it was evidence of the fact of communications being made and not as to the truth of what was then said, I will attempt to summarise some contemporary documents, admitted into evidence without restriction, but note that Mr Boehm said without objection, that in November 1999 Yates had attempted to put in place a price increase with effect from 1 December, and that he had fortnightly meetings with Mr Johns from November onwards. 1151 On 12 December 1999 Mr Boehm wrote to Mr Johns:

Comment: Stock deliveries are still a major issue with Coles and still preventing any meaningful discussions with the buyer. · I have still been unable to obtain acceptance for the price increases. Geoff still refuses point blank, when pushed he says he will discuss with Bruce Viney, but nothing seems to happen. · Packed seed and Bulb prices were accepted from 6th March. 1158 I do not think it is accurate to say, as Linfox does, that the evidence establishes only that Yates proposed to make price increases, effective from 1 February 2000: Mr Boehm went further than that, the three letters mentioned all go further than that, and the reports provide some further evidence that Yates requested Coles to accept the increases and that Coles resisted the application. 1159 Nor do I accept that it has not been established that there was a delay in Coles accepting the price increases: the contemporary documents point to there having been a delay, and there is no evidence to the contrary. It was not suggested to any witness in cross-examination that there had not been a delay. 1160 The documents I have extracted also point to the likelihood that the reason that Coles gave at the time for resisting the price increases was dissatisfaction with Yates' performance in making timely deliveries. The evidence admitted on a limited basis was to the same effect: that Mr Johns told Mr Boehm that that was the reason. Proceeding however on the basis that Yates needs to prove, not that Mr Johns told Mr Boehm this, but that it was the fact, the documents extracted generally point in that direction. 1161 However, Linfox points to the statement in the January 2000 report of Mr Boehm, that Coles would accept the price increase if Yates would "guarantee service levels". It says that Yates did not do so, and that there should be a finding that the reason why Coles refused to accept the proposed price increases was that Yates refused to give that guarantee. This proposition was not put to any Yates witness, and I do not regard the submission as persuasive. Apart from any other consideration, the passage in the January report immediately following the passage that Linfox relies upon seems to cast a measure of doubt on the proposition now urged, as does the passage in the February report. 1162 I accept that Coles raised objections, not just about deliveries generally, but also about the delivery of seeds, a matter not causally related to Linfox's conduct and that Coles said that there were delivery problems every spring, but the general picture, clearly painted by the contemporary documents, is one of dissatisfaction about delivery during spring 1999. 1163 As to the measure of the loss, Mr Boehm calculated that the difference between what Yates actually charged Coles for the products sold, and what it would have charged Coles if the prince increases had been effected as from 1 February 2000, was $41,372. Linfox contends that, if anything is payable, it should be, not this sum, but $22,961. That figure is derived from the report of Mr McClintock. When he assessed Yates' profit in respect of lost sales during the First Loss Period, he made a calculation based, amongst other things, upon the assumption that the increased costs (that justified the price increases) had been provided for in Yates' F 2000 budget, and he therefore deducted these costs, so as to reduce the gross figure of $41,372 to a net figure of $22,961. However, preferring as I do the approach of Mr Trevarthen, it is not appropriate to make this reduction. If the approach of Mr McClintock was preferred to the approach of Mr Trevarthen on this general topic, it would be appropriate to make this reduction. The Second Loss Period 1164 As a matter of history, it seems that Yates' claims for lost profits arising from lost sales were divided into two periods, titled the First Loss Period and the Second Loss Period, in consequence of the investigative work carried out by Mr McClintock or by his firm. In respect of the First Loss Period, for lost profits in F 2000, Mr McClintock's assessment of loss started with Yates' budget for F 2000. However, the budget for F 2001 (which includes the Second Loss Period) was drafted with knowledge of the problems resulting from Linfox's conduct, so that a different approach was required. None of this seems to matter now, except as background information. Yates' claim in respect to the Second Loss Period is now limited to profits said to have been lost in respect of sales not made to three of its customers, or groups of customers: the GreenGold group, the Flower Power Group, and Woolworths. 1165 Commencing at [906], I dealt with the evidence about GreenGold. I find that during the Second Loss Period the measure of the reduced sales to the GreenGold group resulting from Linfox's conduct, was $57,600. It is now agreed that the profit margin during the Second Loss Period was 33.25 percent, so that Yates' loss in this connection was $19,152. 1166 Similarly, I dealt with the position concerning Flower Power commencing at [933]. I find that the products sold to Flower Power during the Second Loss Period were $200,000 less than would have been the case, had it not been for Linfox's conduct. Taking the profits on the loss at 33.25 percent, Yates' loss is $66,500. 1167 At [1065] and following, I referred to some of the evidence concerning Woolworths and the events of spring 1999, but I need to deal with the claim made concerning the events of spring 2000. 1168 Woolworths was a significant customer of Yates. Sales to it constituted more than 12 percent of the sales reported through Yates' consumer division. Yates says that during spring 1999 Woolworths was dissatisfied with the way Yates was unable to deliver ordered goods on time, with the consequence that in spring 2000 Woolworths placed orders for goods worth $2 million with other suppliers; and Yates claims the profit lost upon those sales, $665,000. 1169 Before trial, there were directions given for the exchange of witness statements or affidavits, but the Woolworths personnel declined to co-operate with Yates, evidently in consequence of some decision by or advice given to them through Woolworths. That led to Yates calling as a witness Mr Sherwood, Woolworths' merchandise manager, to whom various buyers and others reported, and later Ms Gocher, a buyer responsible for buying garden products nationally, who reported to Mr Sherwood, and to their evidence in chief being given orally. It seemed that Yates did not know in advance what evidence they would give. Each of them was accompanied to court by a person I took to be a Woolworths in house lawyer. Each of them presented (as one would expect, having regard to the positions they held) as intelligent and competent, of a forceful personality, but surprisingly unable or unwilling to remember many things, although Ms Gocher improved as she went along. 1170 It has been amply proved that in spring 1999 Woolworths was grossly dissatisfied with Yates' inability to deliver ordered products on time. Apart from the contemporary documentation, and the evidence of Ms Burles, which I accept, Mr Sherwood said that Yates' performance during spring 1999 was "terrible", that Yates' non-deliveries were a major issue, and a significant problem, that led to his meeting Yates personnel, although he would not be drawn about the detail of those meetings. There had been some delivery problems in 1998 and earlier years, and some problems after 1999, but the thrust of his evidence was that the delivery problems in spring 1999 were far worse than in other years. Ms Gocher said that the problem was serious, unsatisfactory and unacceptable, and she gave evidence about a protocol developed concerning her communicating complaints about deliveries to Ms Burles. 1171 I accept also that during spring 1999 someone from Woolworths said something to Yates personnel to the effect that Woolworth had lost sales, by reason of these delivery problems: each of Mr Sherwood and Ms Gocher said in substance that this was probable, although without any specificity. 1172 The important question now is whether Woolworths' dissatisfaction about the position in spring 1999 resulted in Woolworths purchasing some product from other suppliers in spring 2000 rather than from Yates. Mr Trevarthan said that in or about May 2000 Mr Sherwood requested a meeting with Mr Fraser, who was then the newly appointed CEO of Yates, and with himself, and he said that during this meeting Mr Sherwood said:

"We've given preference to other suppliers for the spring 2000 season with some of our ranging decisions because we can't trust Yates' ability to supply the product for that season. I would say it has probably cost Yates about $2 million … I want to stress how important it is for Yates to deliver much improved service levels this coming spring season." 1173 Yates did not call Mr Fraser as a witness, nor explain his absence, and I infer that he would not have given evidence helpful to Yates. Mr Sherwood said that he could not remember such a conversation, although he did not deny that it had taken place. The parties pointed to various pieces of evidence said to point one way or the other as to the likely truth. 1174 Linfox submitted that it was objectively improbable that the conversation occurred. If I follow the submission correctly, the primary point taken here is that the conversation would not have occurred in May, because Mr Sherwood described a pattern of conduct where, if such a conversation occurred, it would have occurred at some other time of the year. This submission glosses over the fact that Mr Trevarthen dated the conversation as being in or about May, and that Mr Sherwood spoke with equal generality, and that there was no cross-examination of either witness referring specifically to the date, or to this argument. 1175 Mr Trevarthen evidently made no note of the conversation at the time, but he does not appear to have been a great creator of records (he impressed me as having an exceptionally good recall about many matters of detail). Linfox now submits that Yates was obliged to disclose to the share market information about this conversation, if it occurred. The submission might have been more persuasive if it had been raised with some witness, but in any event it is not clear that the matter was not disclosed. 1176 Mr Sherwood said that it was not his practice to involve himself with details as to the quantities of goods to be ordered (he left it, in this case, to Ms Gocher), but that circumstance does not seem to me to mean that Mr Trevarthan's account should be regarded as unreliable. Mr Sherwood said that in the first half of 2000 he had negative feelings about Yates' delivery performance during the second half of 1999, and Ms Gocher said that it was her practice to consider such matters as delivery performance when deciding from whom goods should be purchased. The parties also referred to various statistical material showing what quantities had been purchased by Woolworths by Yates. 1177 It was not suggested to Mr Trevarthan in cross-examination that his account of the conversation was wrong, and I accept him as a truthful and reliable witness. There is a considerable bulk of other material, set out in the written submissions of the parties, that seems to me to generally support his evidence. Woolworths was dissatisfied with Yates' delivery performance, it was its practice to consider these matters, neither Mr Sherwood nor Ms Gocher said anything inconsistent with Mr Trevarthan's evidence about this, and the general trend of Woolworths' business with Yates seems to provide, if not some measure of corroboration for his evidence, at least nothing substantially inconsistent with his evidence. I find that, more probably than not, the conversation took place as he described it. 1178 Yates says that it lost the commercial opportunity to sell $2 million worth of products to Woolworths. Inconsistently with its submissions at other points in the case: [775] and following, Linfox, citing the decision in Sellars at 355 submits that this is a "category 4" claim; that if any damages are to be awarded there needs to be an assessment of the degree of the probabilities or possibilities; and it submits that the lost opportunity had negligible value. This submission leads one into some of the detail of the statistical material just mentioned. 1179 There are two sets of (relevant) figures in evidence, showing the total sales made by Yates to Woolworths in successive years, and with those sales figures divided up into the categories of bulbs, plant food, seeds, merchandise, plant protection and growing media. For the years F 1997 to F 2000 one set of statistics gives total sales figures of $11.215 million, $12.153 million, $12.787 million and $12.264 million, whilst the other set gives figures of $11.215 million, $12.153 million, $12.777 million and $12.213 million. The first set also gives figures for F 2001 and F 2002: $12.697 million and $16.366 million. The second set does not give any figures for these years. 1180 The differences between these two sets of figures ($10,000 in F 1999 and $51,000 in F 2000, out of sales figures exceeding $12 million) do not seem to me to be such as to justify discarding the figures as unreliable. At [809] I referred to the limited evidence that there is exploring differences of this type. 1181 Yates submitted that one could see from the figures a general upwards trend in the sales made to Woolworths, interrupted in F 2000, followed by a relatively modest increase in F 2001, and then a significant increase in F 2002; and it linked this with other evidence pointing generally to its sales to its top ten customers generally increasing at the expense of its sales to its smaller customers (I do not understand it to be suggested that this trend is peculiar to Yates, rather than a general trend towards members of the public who buy garden products buying them from chain stores rather than from nurseries and other small businesses), and to the evidence showing Woolworth's dissatisfaction with Yates, resulting from the spring 1999 delivery difficulties in particular. 1182 Linfox referred to the figures showing a relative decline in the sales of seeds and bulbs, and to an increase in the sale of merchandise, but, as a reason for not accepting the claim now under consideration, this does not appear to have been raised with any witness. 1183 Linfox referred again to the evidence of Ms Burles about ranging decisions, and to the failure of Yates to tender documents produced upon subpoena, but see [1017] and [845]. 1184 One of the group of products the subject of complaints was "Tuscan pots", mentioned at [871]. There were particular difficulties concerning these, arising in part from the fact that Woolworths ordered a larger quantity of them than it had earlier foreshadowed, and Yates was unable to manufacture sufficient of them in time to meet the orders placed for them. This was a continuing problem for some time, and it was not connected with anything done or omitted by Linfox, but the debate about it does not affect the overall position in any significant way. 1185 I am quite comfortably satisfied that Yates lost a valuable commercial opportunity to sell to Woolworths in spring 2000 more product than it in fact sold, and that Woolworths purchased a smaller quantity of goods from Yates than it would have done, but for the delivery difficulties which Yates encountered in spring 1999 (that is, what I have called the first set of events). The only real difficulty in the end appears to lie in the assessment of the value of that lost opportunity. Finding as I do that Mr Sherwood put the figure of $2 million on the value of the lost sales, I conclude that I should resist any temptation to settle upon any other figure; and I award $665,000 in damages in respect of this claim. 1186 The total amount for damages for lost profits resulting from lost sales during the Second Loss Period is therefore $750,652. Dynamic Lifter 1187 Yates' claim for damages for lost profits resulting from lost sales includes claims made in respect of the sales of products consisting of palletised chicken manure, sold under the brand name of Dynamic Lifter. A company called Dynamic Lifter Pty Limited originally dealt with these products, and at some time before 1 July 1998 it became a wholly owned subsidiary of Yates. 1188 Then Mr Ho (Yates' Chief Financial Officer, and at relevant times a Director and the Secretary of Dynamic Lifter Pty Limited) gave advice to Mr Rich (Yates' Managing Director) that Mr Rich accepted - that Yates take over from Dynamic Lifter Pty Limited a variety of functions. Thereafter, in the ordinary course of events, Yates rather than Dynamic Lifter Pty Limited purchased all raw materials, employed all personnel, apparently paid for all other outgoings, made all sales of finished products, issued invoices in respect of those sales, and received the proceeds of sale. In the books of both companies, Yates and not Dynamic Lifter Pty Limited was treated as the company doing all these things. 1189 However, at the end of the financial year, by book entries, Yates transferred back to Dynamic Lifter Pty Limited the sales and the gross margin "to justify the carrying of the brand values of $6.6 million in the books of Dynamic Lifter Brands Pty Limited", another Yates subsidiary. In its income tax returns, Dynamic Lifter Pty Limited treated the sales and resultant profits as its. 1190 Linfox now says that only Dynamic Lifter Pty Limited might sue for any lost profits. It says that only Dynamic Lifter Pty Limited had a legal or beneficial interest in the products sold. It relies upon a report of Mr Ross, in which he referred to various records he had seen, and continued: I conclude that, although the information provided is not unequivocal, in the Coudert Brothers' letter the description of the process involved in the production and sale of Dynamic Lifter products, and the recording of that production and those sales, does not confirm with the financial records of DLPL. Rather, those records suggest that it was DLPL, not Yates, which manufactured and sold Dynamic Lifter products. 1191 Coudert Brothers are the solicitors for Yates. "DLPL" refers to Dynamic Lifter Pty Limited. 1192 Mr Ross's statement is plainly the product of investigative work, and not properly the subject of expert opinion evidence. This statement, made as late as 20 November 2003, demonstrates the unwillingness or inability of Mr Ross, and for that matter of Linfox, to accept the reasoning in Makita or my decision accepting that reasoning, but in any event neither the report nor the submissions notice the fact that it was Yates and not Dynamic Lifter Pty Limited that contracted to sell the Dynamic Lifter brand products, issued invoices for them and received payment for them. 1193 As between Yates and Linfox, it is no defence to Linfox that Yates did not have a legal or beneficial interest or the whole of the beneficial interest in the goods; it was Yates that had bought the ingredients for them and had carried out all manufacturing work on them, Yates that enjoyed possession of them, Yates that sold them, Yates that was entitled to be paid, and Yates that would have been entitled to any profit that came from the transactions; and whether and if so how Yates accounted for the proceeds of sale, whether to Dynamic Lifter Pty Limited or anyone else, is not a matter of defence. Linfox advanced no legal proposition in support of this line of defence, except that Dynamic Lifter Pty Limited owned the goods. 1194 If that view be wrong, Yates advanced a further argument, that it was the undisclosed principal for Dynamic Lifter Pty Limited; and Dynamic Lifter Pty Limited brought a separate action, by way of an alternative claim to Yates' claim. I need not consider either of these matters, but I should record my view that the failure of Linfox to raise this defensive argument much earlier than it did constituted a breach of the provisions of Part 15, Rule 13 (1) (b), particularly when that rule is read together with Part 1, Rule 3. See also White v Overland [2001] FCA 1333, 4. The result

1196 On the cross-claim I give judgment for the cross-claimant for $3,244,869 and interest, assessed pursuant to the same provisions. I calculate that interest as from 1 October 1999, being the approximate mid point in the range of dates when the damages were incurred, with two exceptions. As to the damages sustained in the Second Loss Period, interest will run from 1 October , 2000, being once again the approximate mid point of the period during which those damages were sustained. As to the money payable in respect of the Clyde racking, interest will run from 21 January 2000. The amount of $3,244,869 is made up as follows: Clyde Racking $ 57,131 First Loss Period $1,620,168 Second Loss Period $ 750,652 Travel and Accommodation $ 25,871 Outside Storage $ 8,494 Additional Labour $ 71,105 Stock Loss $ 570,076 Big W $ 100,000 Coles $ 41,372 Total: $3,244,869 Other matters 1197 It might be that I ought to refer to the Legal Services Commission for consideration by him the question whether one or more of Mr Simon K Wilson QC, Mr Gerard Meehan of counsel or Ms Janet Whiting of Corrs Chambers Westgarth, Solicitors, Melbourne has been guilty of professional misconduct or unsatisfactory professional conduct in relation to the conduct of the proceedings generally, and in particular in relation to the undue prolongation of the trial, the incurring of unnecessary or inappropriate costs, the drafting of affidavits, or the making of submissions not justified by the evidence or by other circumstances. 1198 It might also be that I ought to make an order disallowing some parts of the costs of one or more of these three people, pursuant to the provisions of Part 52A rule 43 or 43A. 1199 I do not express any view at this stage, and without seeking to distinguish now between these two topics, which may overlap, I draw attention to what I have set out above, particularly at paras 102, 185, 186, 191, 193, 216, 229, 337, 349, 364 to 366, 372, 418, 434 to 443, 557, 597, 617, 645 to 647, 715, 716, 808, 813, 817, 883, 922, 950, 981, 995, 1019, 1026, 1039, 1040, 1070 and 1079. 1200 Without going through them, I also refer to the submissions made by Yates criticising submissions made by Linfox as not being appropriately based, and concerning Yates' foreshadowed application for indemnity costs. 1201 It might be that the principal point of concern will relate not to particular aspects of the conduct of the lawyers in question, but whether there is some general pattern of conduct to be discerned. 1202 I take it that it goes without saying that lawyers are not only entitled, but often obliged to put their clients' cases forcefully and if appropriate pungently; and that courts are entitled to reject the evidence of a witness in appropriate circumstances, notwithstanding that the witness has not been cross-examined, either in whole or in part about matters referred to in address. The question might be whether, in relation to the first topic, the lawyers I have mentioned went too far. Judgments and orders 1203 In proceeding No 50125/2000 I give judgment for the plaintiff against the defendant for $706,917 and judgment for the cross-claimant against the cross-defendant for $4,983,218. I grant liberty to either party to apply if any question arises about the calculation of interest. 1204 In proceeding No.50112/2003 I give judgment for the defendant. 1205 In each case I direct Yates and Dynamic Lifter Pty Limited to amend their pleadings, so as to conform with these reasons for judgment, and I invite submissions as to costs. A good deal has already been foreshadowed about costs, but it might be more helpful if the parties now make submissions based upon the above findings of fact and/or specific references to the evidence. 1206 I direct Mr Simon K Wilson QC, Mr Gerard L Meehan of Counsel and Ms Janet Whiting of Corrs Chambers Westgarth, Solicitors, Melbourne to show cause why I should not refer to the Legal Services Commissioner for his consideration the question whether one or more of them have been guilty of professional misconduct or unsatisfactory legal conduct, and the further question whether I should make an order disallowing some part of the costs charged by them. When I deliver these reasons for judgment will fix a date for a directions hearing in respect of these matters.

Linfox Transport (Aust) Pty Ltd v Arthur Yates & Co Ltd; Dynamic Lifter Pty Ltd v Linfox Transport

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