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