(a) Macrocom was in the business of a wholesale trunk carrier.
(b) It had previously helped Planetel equip itself with the necessary equipment so that it could sell the Planetel bulk capacity.
(c) It had now reacquired the equipment so that it could do the same again with another purchaser.
(d) It was not an internet service provider. Such a provider may well have had the technical expertise and access to equipment which may have allowed it to have used a receive only service. Macrocom had neither.
28 I turn now to the factual matters upon which the plaintiff's claim depends.
The ability of the plaintiff to arrange access to the satellite dish in Brisbane
29 The plaintiff had purchased this satellite dish from the liquidator of Planetel and all that was needed was a lease of the premises. It seems clear on the evidence that the plaintiff had reached a satisfactory stage of negotiations with the agents and had an offer of the relevant space so that if it decided to proceed and use the satellite in Brisbane it could do so. The offer of space was not proceeded with after it became apparent to the plaintiff that it was not going to get the equipment and thus the whole proposal could not proceed. However, if during the latter part of December or early January a decision was made to proceed, the occupation of the space could have occurred without delay.
The ability of the plaintiff to reconfigure the satellite in Brisbane
30 The evidence before me demonstrates that the plaintiff would have been able to reconfigure the satellite in Brisbane without any difficulty to transmit and receive at a cost of $42,500. I am satisfied that it would be likely to have been able to do so by mid January 2001.
The agreement with Verestar
31 It seems clear that if Macrocom was to be able to sell a bi-directional service to Flow Communications the infrastructure and commercial agreements to handle the USA end of the link would have to be in place. As the proposal was always considered a short term solution from a practical perspective this meant that an agreement would have to be reached with Verestar.
32 In December 2000 Mr Blundell started negotiations with Verestar to come to some mutual arrangement. In early January 2001 there were discussions on possible revenue sharing which were then reflected in an email of 8 January 2001 from Mr Blundell to Verestar in these terms:
"Re our telephone conversation on possible revenue sharing, it will probably take us several more days to put together a formal proposal. Flows current usage, on ad-hoc arrangements are apparently running at US$20,000 per month, but expanding quickly. As agreed we will put together some revenue projections to send to you along with a proposed agreement.
Essentially I would propose something along the following lines:
A formal proposal with revenue projections and the revenue sharing arrangement and the duties and responsibilities of each party. EG o USEI provides the Internet access o Flow provides the customers and customer access at the Australian end. o Revenue split 47.5% to USEI and 52.5% to Flow. (This would reflect the relative transponder cost to each party..)
We would provide Verestar with a copy of each contract as it was signed.
Grateful your comments on the above as an equitable deal?"
33 Subsequent discussions between Mr Blundell and Mr Murphy of Verestar indicated an acceptance of the principles but further implementation, including calculations of revenue projections, was not progressed until, inter alia, the equipment was obtained.
34 In my view, although not the subject of a contract, it was very probable that the companies would come to an appropriate agreement.
35 This is particularly so as both companies had an economic interest in cutting their losses as a result of the Planetel failure. Although they were both trying to rid themselves of the satellite capacity they had a joint interest in some short term arrangement until that event occurred.
The damage is too remote
36 The principles on which consequential losses are recoverable in cases of conversion were the subject of some submissions before me. The defendant in particular referred to the case of National Australia Bank Limited v Nemur Varity Pty Ltd (2002) 4VR 252. That was a case which concerned the conversion of cheques by the bank following upon fraudulent endorsements by an intermediary. The case was decided by Phillip JA and Batt JA on the question of causation. However, Batt JA also went on to decide it on the basis of remoteness in case he was wrong on causation. All members of the court dealt with the question of remoteness in respect of conversion and thus it is a useful discussion even though obiter.
37 Batt JA in a reasoned consideration of all the authorities concluded at paragraph 64:-
"Thus some more stringent test of remoteness than reasonable foreseeability is required for the strict liability tort of conversion. The obvious candidate seems to me that stated in France v Gaudet, namely, express notice or special knowledge"
38 His Honour was there referring to what he had earlier described as a considered obiter dictum of the Court of Queen's Bench in the following terms:-
"It is not necessary to determine whether notice is or is not necessary in trover, in order to enable a plaintiff to recover special damage which cannot form part of the actual present value of the things converted, as in the case of the withholding of the tools of a man's trade, in which the damage arising from the deprivation of his property is not, and apparently cannot be fixed at the time of the conversion of the tools. In that case, however, we are inclined to think that either express notice must be given, or arise out of the circumstances of the case. This point was not determined in Bodley v Reynolds ; but we think that there must have been evidence of knowledge on the part of the defendant that in the nature of things inconvenience beyond the loss of the tools must have been occasioned to the plaintiff."
39 Callaway JA did not decide the matter on the question of remoteness but he did consider it. At paragraph 9 he said the following:-
"I agree with Batt, J.A. that, putting statute and equity to one side, the duties of a bank to its customer with respect to cheques and telegraphic transfers lie in contract and not in tort. The relationship is too complex, and affected by settled commercial expectations, to be subverted by negligence. I also agree with his Honour that the measure of damages for consequential loss in conversion is not reasonable foreseeability. Liability in conversion is strict: like liability for breach of contract, which is also strict, it lies at the opposite end of the spectrum from deceit and is quite unlike negligence. The ordinary measure is the value of the chattel and consequential damages require some knowledge (or express notice) on the part of the defendant of facts whereby additional loss of the relevant kind is likely to result. To put the point another way, the consequential loss must be of a kind that should have been within the contemplation of the defendant as a likely consequence having regard to the defendant's knowledge (or express notice) of the facts. There is, to that extent, a closer analogy with damages for breach of contract than with damages for negligence. The dicta in France v. Gaudet were well founded."
40 In a footnote Callaway JA pointed out that one of the differences brought about as a result of the finding is that knowledge or notice is at the time of conversion. He indicated that the use of the expression "likely" was used in the same way as Lord Reid used it in C Czarnikow Ltd v Koufos (1969) 1AC 350 at 385F. Lord Reid's comments were in these terms:-
In cases like Hadley v Baxendale 9 Exch. 341 or the present case it is not enough that in fact the plaintiff's loss was directly caused by the defendant's breach of contract. It clearly was so caused in both. The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised that such loss was sufficiently likely to result from the breach of contact to make it proper to hold that the loss flowed naturally from the breach or that loss of that kind should have been within his contemplation."
41 See also his comments at 382-3 and 388.
42 Phillips JA referred to the question at paragraph 4 in these terms:-
"Thus, while I concur in the conclusion reached by Mr. Justice Batt and in the disposition of the appeal which he proposes, I do so because, for the reasons given by his Honour, the loss which is now under challenge was not in my opinion caused by the Bank. Certainly, as at present advised I incline generally to the views taken by Batt, J.A. with respect to remoteness of damage, and in particular his opinion that reasonable foreseeability is not the appropriate test in the case of conversion. If, however, the true test depends rather more upon notice or knowledge (as his Honour opines), it may be that the formulation of the test as propounded by Mr. Justice Callaway will turn out to be more durable than the actual words used in France v. Gaudet . But because I see no need to decide the matter of remoteness on this occasion, I say no more about it, reserving any final decision on it until a case arises in which it must be resolved."
43 I was also referred to Eagan v State Transport Authority (1982) 31 SASR 481. It was submitted that the case was authority for the proposition that a defendant's "special knowledge" that its intention or conversion of the plaintiff's goods would paralyse the plaintiff's ability to re-establish itself in business is ground for exemplary damages on top of the damages for consequential already awarded. It was submitted that such knowledge is not a pre-condition to an award of the consequential loss.
44 I do not find the case helpful as it assumes that foreseeability is the appropriate test and it contains no discussion of the principles. It does not seem to support the submissions.
45 Like Phillips JA, I prefer the formulation advanced by Callaway JA in the
National Australia Bank v Nemur Varity case. Accordingly, what I have to consider is whether the consequential loss was of a kind that should have been within the contemplation of the defendant having regard to the facts it knew as of December 2000.
46 However, before moving to these facts, I draw attention to what was said by McHugh JA (as he then was) in Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 regarding the meaning of "loss of a kind". Alexander was concerned with breach of contract arising from an audit that had been conducted negligently and did not involve conversion. However, His Honour's discussion is of considerable assistance in this case. His Honour said, at 365-366:
"...there has been a tendency to play down the distinction between reasonable foreseeability and reasonable contemplation as semantic only. However, I think that the difference is a real one which results in a significant narrowing of liability. The word "contemplation" seems to be used in koufos in the sense of "thoughtful consideration" or perhaps "having in view in the future". It emphasises that, if the parties has thought about the matter, they would really have considered that the result had at least a "serious possibility" of occurring. The actual decisions in Hadley v Baxendale bear out the proposition that the contemplation test limits the area of potential liability.
.An important matter in ascertaining whether the loss or damage is too remote is the extent to which the parties may be taken to have contemplated the events giving rise to that loss or damage. The parties need not contemplate the degree or extent of the loss or damage suffered: Wroth v Tyler [1974] Ch 30 at 61-62; H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd at 813 and South Coast Basalt Pty Ltd v R W Miller and Co Pty Ltd [1981] 1 NSWLR 356 at 364. Nor need they contemplate the precise details of the events giving rise to the loss. It is sufficient that they contemplate the kind or type of loss or damage suffered.
The most difficult question in determining the relevant kind of damage concerns the level of classification of the damage which the parties must have contemplated. Clearly the level must not be so high that the parties are required to contemplate the very loss in question or the precise manner of its occurrence. Nor must it be so low that any loss or damage, no matter how unusual in nature or occurrence, would fall within the classification.
In the field of tort a similar problem arises. The courts are required to determine whether the damage suffered is of a kind which the defendant should reasonably have foreseen. In Rowe v McCartney [1976] 2 NSWLR 72, a case of tort, Samuels JA said (at 89) that:
"... all one can do in seeking to decide whether a particular harm is of a kind that was foreseeable, is to endeavour to draw a line between the broadest of categories, on the one hand, which would reintroduce liability for direct consequences, and the narrowest, on the other, which would promote uncertainty and provide distinctions of a disreputable nicety."