Unauthorized uses
16 Some of the soil and rubble complained of was not removed within the 30 days. A small amount has never been removed.
The Duffy and Avoca dockets
17 Mangrove Mountain had an arrangement with Mr Duffy under which he would perform work at the quarry for it up to a work value of $20,000 and in return would take rock up to a value of $20,000. According to the evidence the dockets for this were kept on a special clip at the site office. According to the plaintiff's bookkeeper, the relevant dockets, so far as she can tell, have all been located and the correct royalties paid to the defendants on each, although under the contra arrangement no payment was made to the plaintiff for the rock. There are six such dockets. Mr Duffy was not called; the dockets he produced showed no amounts not properly accounted for in royalty payments. However, Mr Barlow, who saw the dockets on the clip in July 2006 estimated there were more than six and Mr Stevens said there could be 20. The word "contra" written on some was not written at the weighbridge. Mr Stevens said Mr Duffy did $20,000 worth of work. He drove three 25 tonne loads of material for Mr Duffy to Lovedale for which no dockets have been produced ("Lovedale journeys"). I find as a fact that not all the rock taken by Duffy has been accounted for with royalties paid on it.
18 There was another occasion when a loaded truck crossed the weighbridge and a docket was issued; the driver then picked up some material from Mr Duffy which was not re-weighed, but the weight was estimated. This is not really the fault of Mangrove Mountain, but it was a breach. A lot of time was spent on this load and one other, the Avoca complaint, the amount at issue there being about $50. The Avoca complaint was about a loaded truck the driver of which paid Mr Lord $800 but then failed to cross the weighbridge. Mr Lord completed the docket on his estimate. He did not expect the driver to pass the weighbridge instead stopping. Mr Barlow considers the load was more than payment would indicate. The response to the breach notice in paragraph 2(b) was not true: the directors made no enquiries from their employees at the quarry about Avoca. Nevertheless, it is true that no details of the breach were given.
The main complaint - royalties
19 The true complaint of Mr Barlow is that royalties were and are not being paid for all commodities taken from the quarry and that the requirements of clause 8.4 of the licence were not being met. In particular delivery dockets were not used in sequence; some identified loads (such as that for Avoca and of Duffy) were not documented; that a number of dockets did not have the required details put on them; and that about 75 dockets have not been accounted for.
20 As I have said, in August 2006 Mr Barlow sent to the plaintiffs a list of missing dockets. There were about 300 of these. Mr Lord instructed Mrs Pappalardo to endeavour to find these and to see if the royalties had been paid on them. As a result of this search, the number of missing dockets has been reduced to 78, most being found in customers' files. It is possible to understand why Mr Barlow was suspicious, as he said that some missing dockets ran in sequences so that loads had gone out for which no royalties were paid; however, he accepted in evidence that this argument as to sequence of dockets was not available now that most of them had been located. However, as he had not had the dockets they could not have been included in an invoice for royalties.
21 The evidence does establish that the plaintiff did not operate the weighbridge and docket system as required by the agreement, at least at its commencement. That is because first, old books belonging to the Barlows were used, not necessarily in sequence, and second, because when mistakes were made, particularly as to the identity of the truck or when an incorrect tare was entered, those operating the office would destroy the incorrect docket and prepare a new one, rather than amend it or keep it as was required by the agreement. The stated breach of failure to attach a computer weighout docket on each docket cannot be maintained, as there is no such requirement in the agreement. That was accepted.
Termination for failure to remedy breach
22 There are, of course, some breaches which cannot be cured. This is explained in L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235; Batson v De Carvalho (1948) 48 SR(NSW) 417; Burger King v Hungry Jacks Pty Ltd [2001] NSWCA 187; Waters Lane Pty Ltd v Sweeney [2006] NSWSC 222 and other cases as meaning that, in such cases, the obligation to "remedy" the breach becomes an obligation to put things right for the future. On that basis breaches such as destruction of dockets cannot be made good, but if it can be shown that there is no loss and if the required system is put into operation after notice is given, that is sufficient to constitute a remedy of the breach. That is the position with the weighbridge and the action taken to stop Mr Duffy cutting up on site rock which had been sold to him as uncut material. That is also the position regarding use of the site for purposes other than quarrying. The breach notice in specifying the remedy recognized this. Unless the one established event of out of hours operation on 2 September was outside the 30 day period after service, which is not proved, it appears that for the future this breach was remedied. Obviously past breaches are incapable of cure.
23 Insofar as the notice related to breaches of clause 8, the breaches of sub-clauses 8.4(b) and (e) could have been made good by provision of the missing dockets and ensuring all future dockets were made out in order. So far as the remaining 78 missing dockets are concerned that has not been done although I accept some have been destroyed.
Is failure to provide missing dockets a material breach?
24 It was put by counsel for the plaintiff that the failure to provide all dockets is not significant, as the missing dockets amount to less than three percent of the 2,600 relevant dockets and, of course, some of these are shown to have been destroyed. The originally unaccounted for dockets of which there were about 300 amounting to over 10% of the total number of dockets, is obviously significant. Had the defendants not provided that list, the simple fact is that they would not have been paid. However, they were found and agreed at a meeting with Mrs Barlow, which it seems took place within the 30 day period. I do not consider the defendants can rely on this as a separate ground for termination in light of the terms of the original letter accompanying the breach notice, but that finding only relates to those dockets which have been found not to those which have not been.
25 I consider failure to provide the 78 missing dockets, failure to provide dockets for all the Duffy contra sales and the lack of documentation for the Lovedale journeys to be material breaches. While these may seem of little significance in the total picture, that is not necessarily so. Strict compliance with record keeping is an essential part of licensing contracts where payment to the licensor is by way of royalty dependent upon loads. Experience shows that suspicion about unpaid royalties is not unusual, but should not arise if records of truck movements are properly and openly kept. There was a sound basis for the concerns of Mr Barlow. Leaving aside the good faith argument I consider these breaches were material and a justification for termination.
Requirement of good faith and reasonableness
26 Mr Barlow was cross-examined as to the amount of evidence given about the $50 Avoca Earthmoving load and the failure to give particulars of this in the notice of breach. The following then appears in the transcript at page 116:
Q. And similarly had you had a genuine concern about the incident that concerned Avoca Landscape Supplies you could have easily enough raised that in correspondence with Mangrove Mountain Quarries to ask for a reconsideration of the invoice?
A. I could have done that.