HEARD : 16-20 SEPTEMBER 2002, 3-5 MARCH & 17-21 MAY 2004

Contract for hire of mining machinery - Termination - Action for recovery of unpaid instalments of hire and incidental services - Interest - Total failure of consideration - Set off

Counterclaim - Damages for misleading and deceptive conduct - Implied warranty of fitness - Consumer - Exclusion of warranty of fitness - Quantum of damages - Fundamental breach - Effect of exclusion clause in event of misleading or deceptive conduct - Liability of alleged accessory - Reliance damages - Claim for losses of profits to be made by mining venture for which hired machinery employed - Interest

Trade Practices Act 1974 (Cth), s 4B, s 52, s 68, s 71, s 75B

Damages of $259,570.37 plus interest awarded to defendant against plaintiff on counterclaim

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1 This case concerns a contract for the hire of crushing and ancillary equipment by the plaintiff to the defendant, Magenta Mining Pty Ltd ("Magenta"), for use at a small-scale gold recovery operation being undertaken at the Hawkins Find mining lease near Kunanaling and Ora Banda in the Coolgardie mineral field. The plaintiff's claim is for $28,040.06 for the balance of hire and set-up charges for the supply and hire of this processing plant, or alternatively, for damages in that amount, together with interest on the amount claimed from 1 December 1995 until judgment.

2 Magenta denies any liability to pay any moneys claimed by Nea Pty Ltd ("Nea") and brings its own counterclaim seeking damages of $1,954,510.37 plus interest on that sum from 26 July 1995, for losses which it alleges were caused by the plaintiff through breaches of express or implied terms in the contract for the supply of a crushing plant which was part of the equipment hired. Further and alternatively, Magenta counterclaims for losses caused by alleged misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) ("TPA") arising from express or implied representations said to have been made by Nea in the negotiations leading to the agreement for the hire. Magenta has added a second defendant to its counterclaim, Mr G F Groenenberg, a director of Nea and its manager, with whom the directors of Magenta dealt when enquiring about and negotiating for the hire of the crusher and associated plant.

3 The antecedent negotiations took place and the agreement for the hire of the crushing and associated plant was reached in July 1995. A period of about seven weeks was needed for Nea to modify and rehabilitate the crusher and to procure and adapt some of the associated treatment plant. All the plant was transported from Perth to Hawkins Find by heavy haulage vehicles and was delivered at Hawkins Find for commissioning on 18 September 1995.

4 There were some initial problems experienced in commissioning the plant but it was made operational after seven days. However, from then on it worked only for a few short periods and by mid-October 1995, after a series of breakdowns, investigations revealed that the crushing components were badly worn and that it was not able to process the ore in the volume or at the rate expected. A major re-configuration of the crushing circuit was then needed, probably involving the acquisition of a completely different crusher with a larger capacity. Magenta was not able to afford new or different plant and Nea re-took possession of the crusher and associated plant on 23 October 1995.

5 The plaintiff has formally conceded that the crusher was not capable of crushing the ore to be processed at Hawkins Find in the manner required. With the failure of the crushing plant to perform this task and its inability to purchase or hire any replacement, the defendant's gold extraction operation effectively collapsed. As a consequence, the defendant has advanced its counterclaim seeking damages for all the costs and expenses associated with the abandonment of its venture at Hawkins Find together with a large claim for the loss of the profits which, it asserts, it would have made had it been able to process the ore as proposed over an extended programme.

6 In addition to its counterclaim the defendant seeks, on one alternative, to set off so much of the counterclaim against any liability which it may be found to owe to the plaintiff under the hire agreement, notwithstanding that it denies the existence of any such liability on the basis of a total failure of consideration.

7 The vital component in the crushing and processing plant hired by the plaintiff to Magenta which proved to be unsuitable for the task, was a Hazemag-AP4B Impactor, Serial No 106420 of German design and manufacture. This was an item of old second-hand equipment which the plaintiff had available for hire and which, in circumstances the details of which are in dispute, was chosen for supply to and use at the Hawkins Find operation. The defendant makes a series of criticisms about the condition and refurbishment of the Hazemag Impactor. A major problem which, as is now clear, caused its failure at the Hawkins Find operation was its inability to crush hard and abrasive ore which had been stockpiled at that site. It could not crush this ore in any significant volume without extreme and rapid wear of its working parts and it had frequent major breakdowns. Not only were the breakdowns frequent, but the extent of the repairs and re-placement of parts needed to deal with them meant that the machine was simply not suitable for the task. In the short periods during which the machine was operating it was found that only an unacceptable proportion of the ore crushed was crushed to the degree of fineness required. The oversize crushings had to be recycled, and the volume of this recycled material was so great that it substantially reduced the throughput of the ore feed and, in addition, caused other blockages and wear within the crusher.

8 The parties are at issue over the events which took place in the initial discussions and negotiations leading to the contract for the hire and supply of this equipment. Magenta alleges that a series of oral enquiries and discussions occurred by which their directors, Mr Byron Halbert and Mr John Bandy, made it known to the plaintiff's manager, Mr Geoffrey Groenenberg, that they were looking to Nea for advice and recommendations about the selection of plant which would be suitable to perform the crushing operation of ore which they described, telling him that the ore had a Bond Work Index of about 18 kwh/tonne (an index of hardness). They say that they received assurances from Mr Groenenberg, amounting both to representations about the suitability of the Hazemag crusher for this task and warranties as to its merchantability and fitness for the purpose, upon which they relied for entering into the contract of hire.

9 Nea and Mr Groenenberg deny that any details suggesting that the ore to be processed was hard were given by either Halbert or Bandy, deny that there was any reference to a Bond Work Index of 18 kwh/tonne or at all, and maintain that Mr Groenenberg explained that the particular Hazemag crusher would only be suitable for crushing soft rock. The plaintiff and Mr Groenenberg deny that any express or implied representations, undertakings, conditions or warranties were made or given about the suitability of the Hazemag crusher for this particular task, or its merchantability or fitness in any respect. They assert that the contract of hire included express written terms that:

"Our Hire Agreement in addition to the above conditions will apply to all hire of equipment along with special terms and conditions that may be subject of negotiation from time to time."

8. That no warranty or condition expressed or implied is given by the owner as to the condition of the Plant or as to the suitability or fitness of the Plant for any purpose."

10 These written terms which exist in the plaintiff's hire documents, are said by Nea to form terms of the contract of hire agreed upon. Magenta, on the other hand, denies this and asserts that the agreement for the hire of all the plant, including the Hazemag Impactor, was concluded by oral discussions between the representatives of the parties and was complete before the standard forms, containing these terms, were later sent to its directors by the plaintiff.

11 Magenta further contends that implied undertakings as to quality and fitness of the plant arose because of the operation of s 71 of the Trade Practices Act 1974 (Cth) so that even if, contrary to its case, the express exclusion of conditions or warranties of fitness, propounded by cl 8, did constitute any part of the contract the effect of that clause is expressly excluded by virtue of the operation of s 68 of the Trade Practices Act. To this contention the plaintiff responds that Magenta was not a "consumer" within the meaning of that term in s 71 of the Trade Practices Act - see s 4B of that Act.

12 A significant further part of the plaintiff's case is that, quite apart from its denial that there were any express or implied representations made as to the suitability or fitness of the Hazemag crusher and other plant to perform the task contemplated by Magenta before or at the time of the contract of hire, that (implied terms under s 71 of the TPA aside) no such representations could be found to have been made when the significance of the written terms of the hire contract, cl 8 in particular, are taken into account. The submission in this regard is that the existence of the express term excluding any such conditions or warranties made it clear to the hirer that no assurances of any kind were being given and, accordingly, nothing that may have been said or implied about the plant during the course of negotiations could have any effect as an inducement to enter the contract or otherwise.

13 Magenta's main defence to the plaintiff's action for hire charges or damages is its claim of a total failure of consideration. The basis for this arises from its allegations about the unsuitability of the plant for the operations at Hawkins Find. So the major issues in the case are those arising from the counterclaim. In addition to the issues already described, the plaintiff submits that, if contrary to its primary position, it is at all liable to the defendant on the counterclaim then the damages sought have been claimed by reference to a wrong measure. The plaintiff submits that this is because the most that the defendant could obtain would be the additional costs, if any, of hiring other plant to perform the crushing operation intended together with the loss of profits or expenses associated with a delay in the operations for no longer than a reasonable period needed to obtain and install substitute plant.

14 The plaintiff's submission is that the defendant's counterclaim for all expenses associated with the closing down of the operation and, further, for the loss of profits which Magenta asserts it would have made had the venture been completed successfully, is quite beyond the scope of damages which may be recovered under s 82 of the Trade Practices Act. Further, at the factual level Nea maintains that the evidence does not support a conclusion that the venture would have operated profitably as claimed and that losses and damages claimed as part of shutting down the operations were not caused by the plaintiff.

15 The defendant's counterclaim is also made against Mr Geoffrey Groenenberg on the basis that he was a person knowingly involved in the contravention of s 52 of the Trade Practices Act and, therefore, is concurrently liable with the plaintiff as a result of the operation of s 75B(1)(c) of the Trade Practices Act. Apart from defending the counterclaim on all the issues already described, Mr Groenenberg also maintains that he was no more than the agent or representative of the plaintiff, acting entirely within the scope of that role and as such is not personally liable.

16 In order to identify the basis for these conflicting contentions and before attempting to resolve them it is necessary to describe the events leading to this dispute, and the nature of the disputes, in some detail.

17 This case has, unfortunately, had a very protracted and interrupted history. The plaintiff's claim (CIV 2348 of 1996) was commenced in 1996, being an action for the recovery of unpaid hire charges or damages as already described. Later, the defendant instituted another action CIV 1821 of 1998 seeking damages for alleged breach of the contract for the hire and supply of the machinery, including claims for damages for misleading and deceptive conduct. The two actions were consolidated in this Court by order of 23 September 1999 and from then on had a lengthy history of interlocutory applications involving amendments to the pleadings and disputes over discovery. The consolidated actions came on for trial for five days in September 2002 and at the commencement of the trial the defendant sought leave to make a series of amendments to its defence and counterclaim, and also to add a claim for damages for alleged negligent misrepresentation. I granted leave to the defendant to make a series of relatively minor amendments in relation to the causes of action which had already been joined in the proceedings but refused leave to introduce a claim for alleged negligent misrepresentation at that late stage. The plaintiff was granted leave to file an amended reply and defence to counterclaim and that was done.

18 It soon became evident that the listing of five days hearing for the duration of the trial was a substantial underestimate and that significant additional time would be needed. Unfortunately, due to listing commitments it was not possible to continue with the trial after the first five days of hearing. However, there had been a series of protests made during the course of those five days of hearing on behalf of the plaintiff about alleged inadequate discovery by the defendant, particularly in relation to its financial records, banking records, financial statements and tax returns for the financial years ending 30 June 1994 and following.

19 After the plaintiff's case had initially closed and Mr Halbert had begun giving evidence for the defendant, he produced and made reference to his diary for the 1995 year which contained many manuscript references to events which had occurred, together with notes of meetings and other discussions relating to the project at Hawkins Find. This diary had not previously been discovered nor had counsel for the plaintiff had any opportunity to scrutinise it for the purposes of cross-examination or taking instructions. Consequently, at the end of the first five days of the trial, when Mr Halbert was still giving evidence, it was necessary to adjourn the trial sine die to obtain another listing and to order that the diary be made available for inspection and that a further affidavit or affidavits of discovery should be served by the defendant referring to the diary and to other material documents which, by then, it seemed probable had at least at some time in the past been in the possession of the defendant. At that stage it was estimated that a further three days would be needed to complete the trial.

20 The trial resumed on 3 March 2004 and ran for a further three days without concluding. In the long interval before this resumption additional discovery had been given by the defendant. Also the defendant's accountant had prepared detailed financial statements for Magenta for each of the financial years ending 30 June 1994 to 30 June 2000 and these, and some other material documents, had been disclosed to and inspected by the plaintiff. In the light of these developments counsel for the plaintiff sought and was granted leave to re-open the plaintiff's case to adduce further evidence dealing with matters which the plaintiff had not been able to address before. Although leave was granted in this respect, further evidence for the plaintiff was not called until after Mr Halbert had completed giving evidence for the defendant.

21 In the course of his cross-examination it emerged that many other documents relating to the defendant's financial position and, in particular, in relation to cash deposits which it had with the Commonwealth Bank at the time the Hawkins Find project was being proposed and set up were missing. There had been no mention of these in the discovery or supplementary discovery which had been given by the defendant but, in evidence, Mr Halbert explained how these records had been held by his colleague Mr Bandy and had been destroyed in a fire which had burned down his office premises. The absence of these records inevitably meant that the process of cross-examination was more protracted and more far-ranging than might otherwise have been the case.

22 Even then, however, the additional three days proved insufficient and another five days of hearing became necessary and were supplemented with written submissions. The absence of many of the contemporary financial records of the defendant has made the task of dealing with the defendant's counterclaim for damages, and in particular the plaintiff's scrutiny of this, difficult and gives rise to a need for special care and some reserve in the examination of those claims.

23 In 1984 the mining lease over the land at Hawkins Find was held by Westcoast Holdings Ltd. It carried out gold extraction processes for some time but these ceased when the company experienced severe financial problems. Some time later the mining lease was acquired by Mr Robert Hoppman and, possibly, by his sister the two of whom conducted business under the name Mourillion Mining. Mr Hoppman had access to many of the geological and mining records of Hawkins Find which had been prepared or obtained by Westcoast Holdings Ltd, including the reports (Exhibits 15(1) and 15(2)). His brother was also associated, in some way, with the gold miner Croesus Mining NL and, through him, Mr Hoppman had access to geological and metallurgical sampling facilities.

24 In the early months of 1995 Messrs Halbert and Bandy of Magenta were looking for a small gold extraction project to operate as they had been involved in minor ways in projects at Lindsay's Reward near Gindalbie, north-east of Kanowna, in trucking operations for Mr Hoppman and at Yarri near Edjudina, east of Menzies. They had also been involved in a small gold operation near Paraburdoo in the Pilbara region. Magenta was looking for another small project to operate itself and Mr Hoppman offered Messrs Halbert and Bandy an opportunity to participate in an operation at Hawkins Find for gold recovery by heap leach extraction from an existing ore stockpile. Mr Halbert and Mr Bandy sought advice from a consultant, Mr David Hurley, and he advised them about the prospect of joining in a joint venture at Hawkins Find.

25 Messrs Halbert and Bandy, on behalf of Magenta, decided to go ahead and entered into an informal oral joint venture agreement with Mr Hoppman on behalf of Mourillion Mining. This joint venture agreement was not documented at the time but later, according to Mr Bandy, a letter was written containing its broad terms. This was never produced but a written memorandum containing the main terms of the agreement was later sent by fax from Mr Hoppman to Mr Bandy on 2 July 1996. This is Exhibit 31 and, I accept, sets out the principal terms of the joint venture arrangement between Mourillion Mining and Magenta.

26 Exhibit 31 states that the purpose of the joint venture is to process: existing heaped material; existing ore at (?); and existing and further ore from the pit, situated at Hawkins Find Ora Banda. The process method was to be by heap leach and gravity circuit. The two joint venturers were Mourillion Mining and Magenta Mining. The obligations of the two parties were as follows:

• commissioning of crushing plant, including all electrical;

This memorandum went on to provide that all capital expenditure items were to be submitted to the joint venturers by invoice and to be repaid pro-rata prior to distribution of profits from sale of gold. All rates for day labour and machinery were to be agreed prior to commencement. All profits from the sale of gold produced were to be distributed after mining costs had been met.

27 The plan was for Magenta and Mourillion Mining, respectively, to provide the plant and services listed and for all capital and operational expenditure, once agreed by the joint venture, to be paid from the proceeds of the sale of gold recovered. The remaining proceeds from gold sales were to be divided equally between the two joint venturers.

28 The reference to gravity circuit as one of the methods of gold extraction is a reference to the Knelson Concentrator which is a commercialised centrifuge process which separates particles of free gold from fines passed through the centrifuge.

29 There was no period fixed for the duration of the joint venture but its terms contemplated that it would involve more than merely treating the stockpile of about 178,000 tonnes of partly crushed ore on the surface. As described by Mr Bandy, and by Mr Halbert, the intention was to process the surface stockpile by the crushing circuit which they would initially establish in order to obtain a quick cash flow from the sale of gold recovered. They anticipated that a positive cash flow from gold sales would be achieved within the first few weeks of operations. Depending upon progress, Messrs Bandy and Halbert had in mind that after three months or more of successful operations Magenta may be in a position to purchase the crushing plant. It was for that reason that they raised with Mr G Groenenberg the possibility of a hire/buy arrangement for the crushing circuit and also why they enquired from him about the cost of purchasing the equipment initially taken on hire. They expected that it would take 12 months or more to crush and treat the stockpile at Hawkins Find by the heap leach process and by the associated process of gold concentration.

30 After that, depending upon performance, the directors of Magenta and Mr Hoppman had in mind that it may be possible to treat the larger run of mine (ROM) ore which was on the floor of the open pit at Hawkins Find and then, still later, perhaps to begin ore extraction operations from the pit to provide further feed for the process. In July 1995 the treatment of ROM ore from the floor of the pit and further ore extraction operations at Hawkins Find were distant prospects dependent upon progress achieved and cash flow from the heap leaching of the stockpile. But they provided further potential for continuing operations at Hawkins Find beyond the initial 12 months. Messrs Bandy and Halbert contemplated that there may have been a profitable operation from this process of development lasting two or three years.

31 A feature of this joint venture arrangement which is of particular significance for Magenta's present counterclaim is that the defendant did not acquire, nor did it have any entitlement to acquire, any interest in the mining lease over the land at Hawkins Find. This remained the property of Mourillion Mining and it was Mr Hoppman's to dispose of, as he eventually did, to Mr Photios or to any other prospective partner. Magenta and Mourillion Mining treated the arrangement as one which was to exist and endure only so long as successful gold extraction operations could be achieved from the ore treatment process. The venture was to continue unless and until the arrangement was terminated on reasonable notice by one or other of the joint venturers deciding to withdraw. Consequently, Magenta not only had no proprietary interest in the mining lease but, its continuation in the project was dependent upon profitable gold extraction operations becoming established and continuing together with maintenance of the good working relationship between it and Mr Hoppman.

32 As the parties have worked together at the Lindsay's Reward project in the past there is no reason to conclude that there was anything but a good stable working relationship between the two joint venturers or that it would not have continued for as long as profitable gold recovery operations could be maintained at Hawkins Find. In the absence of other major problems involving plant breakdown, accidents or severe deterioration in the gold price, I consider that it is probable that, if the gold recovery rates were satisfactory, the joint venture would have continued at least until the processing of the stockpile had been completed, that is, for about 12 months or so.

33 Despite their interest in mining operations and their involvement in gold mining projects at Lindsay's Reward, Gindalbie, Yarri and Paraburdoo neither Mr Halbert nor Mr Bandy had been involved directly in any ore crushing or gold recovery operations before the one at Hawkins Find. Their interest and association with gold mining had developed from, in Mr Halbert's case a farming background and familiarity with heavy plant and machinery, and in Mr Bandy's case, machinery management and transport which led them both into trucking operations involving the transport of ores on contract from various mining operations to treatment plants. It was such an ore transport operation in which they were involved with Mr Hoppman at Lindsay's Reward.

34 In 1994 Magenta had had an involvement in an open cut operation at Kunnanalling. Mr Bandy described this as a drill and blast operation followed by heap leaching but involving no crushing. I accept that neither Mr Halbert nor Mr Bandy had any significant knowledge or experience in crushing operations, or, in particular, with jaw, cone or impact crushers before they approached Nea to enquire about a crushing plant for Hawkins Find.

35 The Mining Lease M16/231 known as "Hawkins Find" lies about 50 kms north-west of Kalgoorlie. It is more to the north of Coolgardie and slightly south of Ora Banda. It is just 1½ kms west of the Grants Patch mining area and near the Dark Horse and Renown Gold Mines. Access to the area is from the north by the Broad Arrow/Ora Banda Road. The mine occurs in a very hard, dense quartz/feldspar granite porphyry instrusive in an ultramafic. In a report prepared in January 1996, a consultant described the mine and its geology as follows (Exhibit 51):

"Mining at Hawkins Find prior to May '86 excavated an open pit to minus 16m in oxidised mineralised porphyry injected into a shear system within a series of ultramafics, and an incompletely measured amount of sulphide material has been taken to the minus 24m or minus 26m level. The pit was designed and pre-stripped to minus 50m. Mineralisation is low grade Au associated with a sulphide wall rock alteration adjacent to quartz veins within the host porphyry, and the work index of the ore is 17-18 kWh/t. The material on offer at Hawkins Find includes a quantity of uncrushed broken stock of low grade porphyry both in and out of the open pit, which has been sampled and roughly mapped. Heap leach pads of sulphide material crushed to minus 40mm are also laid out near the top of the pit. Total remaining reserves have been crudely estimated from sparse previous drilling to be approximately 323,000t @ 1.37g/t."

36 In a later report prepared for the defendant in March 2001 (Exhibit 43), the operation and production history of the mine is set out. This reported the production of gold by prospectors in the area since 1897 but the recorded output from Hawkins Find before 1971 was only very small - 3.730kgs (120oz) from 638 tonnes of ore. Between 1971 and 1987 gold production was higher with 130,735 tonnes of ore yielding an average recovery of 1.16g of gold per tonne. This was recovered by heap leaching with sodium cyanide but that process stopped in March 1988. The author of this report added:

"During the period when this heap leach pad was in operation (1971-87) gold recovery suffered due to lack of proper grinding to produce optimum ore particle size for heap leaching and poor maintenance of the piles and cyanide feed solution distribution and pregnant liquor collection and carbon stripping."

37 In 1995 there were no mining operations underway or contemplated at Hawkins Find, that is, in the sense of ore recovery by open pit or underground operation. There was, however, a sizeable stockpile of mined ore on the surface which had been partially crushed to approximately 40mm dimensions or less. There was additional ore crushed to approximately 200mm to 150mm. The estimates made by Magenta, and Mr Hoppman who was associated with Magenta, were that there was approximately 178,000 tones of broken ore in this stockpile and the limited sampling which had been conducted suggested that the average grade was about 1.3g/t of Au. Their proposal was to heap leach this stockpile of ore, first by crushing it to finer dimensions (8mm or less) and then piling those fines in heap leach pads and treating them with a sodium cyanide solution.

38 These pads or ponds would be large flat shallow excavations in the surface lined with a strong impermeable plastic or polythene liner upon which would be piled the heap of crushed ore to be leached. The leaching solution, of cyanide and other chemicals, would be sprayed or poured onto the crushed aggregate and left for some days. The effect of the leaching solution on the small crushed items of aggregate would be to dissolve into solution most of the gold contained in the ore. The smaller the particles and, therefore, the greater the surface area of their content exposed to leaching, the greater would be the recovery of the gold contained in the aggregate by this process. Not all the gold would be recovered but a sufficiently high proportion to make the process economic was expected. Clearly, the smaller the particles the greater the recovery of the gold content by the leaching. 8mm in dimension or less was considered to give the best return consistent with the extra costs and efforts of crushing larger ore into smaller fines.

39 After the pile of fines had been left leaching in the cyanide solution for some days, the leaching liquor, which by then had collected in the bottom of the pans and was retained by the plastic sheeting, would be drawn off and itself subject to further treatment which would result in the precipitation and recovery of the gold from the auric solutions which had been formed by the process.

40 As a gold recovery process, this was relatively simple and could be operated by a few men comparatively easily and with little in the way of major sophisticated equipment. What was needed was some mobile machinery to move the larger ore from the stockpile to a crusher and a crusher or a series of crushers which would smash the stockpile ore down to a size suitable to be laid out in the leaching pans. As well as a crusher, a screening plant or plants were needed to sift the product from the crusher so as to separate the particles which were at, or below, the maximum size acceptable for the leaching pans. Inevitably, some proportion of the crushed product would be too large and that would be separated by the screening process and re-circulated for further crushing until it reached a size which would pass the screens. The newly screened ore would then be laid out in the various leach pads and the leaching process would be begun, continued and then be followed by the gold recovery process already described.

41 Prior to the introduction of the leaching solution onto the fines laid out in the heaps or pans the process was a dry process, that is, the crushed ore remained as aggregate ore in the form of dry fines all less than 8mm and some of which might, indeed, be very fine. It was not mixed with water or other liquids to form a slurry, such as occurs in some other different gold recovery processes. However, the crushing and screening process would also produce a small amount of very fine and almost powdery material which, it was later realised, could be readily diverted to a wet process and the resulting slurry passed through a gravity or centrifugal process for recovery of free gold by separation. The rest of the slurry could then be reticulated to the heap leach pads to go through the cyanide process mixed with the (until then) dry fines. As will emerge later, it was found convenient at Hawkins Find to add a separate wet stream to deal with some of the crushed product in this latter fashion. Obviously, however, this second wet or slurry process also depended on feed coming from the crushing process but of much finer dimensions.

42 With the ore in the stockpile being of up to 200mm in any one dimension what was needed was a crushing plant and screening system which would reduce that ore to less than 8mm in any one dimension and with the facility to separate out and recycle ore which was not reduced to that dimension by the first or any subsequent pass through the crusher. Machinery to move the ore, conveyors to move it to and from the crusher, screening plants and other conveyors were needed. A crusher was vital to this process and its capacity to crush the ore to the requisite dimensions, on a first or later pass, and to continue operating for long periods with a sufficient throughput was essential. Quite simply, if the ore could not be crushed to the requisite dimensions or smaller there would be no aggregate to be laid out in the heap leach pans, nor any fines to go through the wet process and, therefore, no gold recovered.

43 Ores vary in their hardness or abrasiveness and, consequently, require widely varying degrees of force to be crushed or fragmented. Limestone, shale, clay, bauxite and calcite are all relatively soft ores in comparison with basalt, gneiss, stone and granite/porphyry. A measure of the comparative hardness of such ores with reference to the energy per unit of time, indicates the ore to be treated has been devised and is known as the "Bond Work Index" or the "Bond Impact Crushing Work Index". This index expressed as a measure of work, that is units of energy per unit of time, is expressed as indicating the amount of work required to crush a tonne of the particular ore and hence is expressed as a figure of x Kwh/tonne for the ore being treated.

44 The expert evidence in this case indicated that the Bond Work Index, while useful, was of limited value in providing necessary information about the requirements for crushing the particular ore because, in addition to the Bond Work Index, a measure of the abrasiveness of the particular ore would also be needed in order to reach conclusions about the suitability of any particular machinery to crush that ore. Some ores can have a Bond Work Index which is not at the highest levels but, because the ore is particularly abrasive will nevertheless result in great wear and tear on crushing apparatus. The stockpiled ore at Hawkins Find comprising of granite porphyry with large elements of quartz (silica) was particularly abrasive because of its silica content.

45 The significance of a Bond Work Index for any particular ore and the additional importance of the abrasive characteristics of the ore for decisions to be made about the method and layout of a crushing circuit were not well understood by the representatives of the plaintiff or of the defendant who were involved in this case. The historical records and earlier appraisal reports of the Hawkins Find ore described it as being particularly hard with a Bond Work Index of 17-18 kwh/tonne but apart from saying that they had read and repeated that statistic in their discussions about the selection of machinery for the crushing circuit at Hawkins Find, neither Mr Halbert nor Mr Bandy had any real appreciation of what that meant or of its significance for the suitability of any crushing apparatus. Mr Groenenberg's appreciation was no better but he has always maintained that no-one on behalf of Magenta ever informed him that the Hawkins Find ore had a Bond Work Index of 17 or 18 or any other figure. His evidence was that he explained to the directors of Magenta in his discussions with him that the Hazemag Impactor would be suitable only for soft rock and that upon being told that the feed which was intended for this crushing plant was soft rock, did not pursue or develop the matter further.

46 Before they visited Mr G Groenenberg at the plaintiff's premises on 25 July 1995 Messrs Halbert and Bandy had received and read extracts from a report entitled "A Valuation of Ore Reserves Hawkins Find", which had been commissioned by West Coast Holdings Ltd in February 1984. The entire report had been obtained by Mr Hoppman of Mourillion Mining who had introduced them to the Hawkins Find joint venture. He had made copies of the summary and recommendations of the two volumes of that report and had given them to the directors of Magenta to examine. I am satisfied that Messrs Halbert and Bandy had these pages with them when they first visited Mr G Groenenberg.

47 These summaries described the geology and mineralisation at the Hawkins Find lease and gave estimates of gold reserves and extraction rates as well as detailed mineralogical data. With respect to the hardness of the ore the reports included the following passages (Exhibit 15(1) and 15(2)):

"The major difficulty with the ore is its hardness, being assigned a Bond Work Index of about 17 kWh/t. Crushing and grinding requirements will present a significant cost."

And, as part of subpar 5.6 which described a test undertaken by Mr L I Smith on a sample of Hawkins Find ore taken from the stockpile and crushed at Grant's Patch some time before February 1984:

"The ore is hard with a Bond Work Index of 17 kWh/t, requiring two stages of closed circuit crushing to produce a suitable ball or rod mill feed (minus 9.5mm).

... The ore proved to be extremely hard, yielding only 38 per cent passing the 6.25mm diameter trommel screen after a pass through the Hazemag crusher."

(It is to be noted that the Hazemag crusher referred to in this passage for the testing of the ore at the Grant's Patch mill before 1984 was not the Hazemag Impactor which is the subject of the present action.)

48 Following his visit to the site on 9 October 1995 the engineer, Mr T Kendall, wrote a report to Mr Halbert about problems which he observed with the Hazemag Impactor at Hawkins Find. The contents of this report (Exhibit 36) were largely accepted by Mr G Groenenberg in cross-examination. Within the report, after describing severe wear on its parts, Mr Kendall observed:

"The ore is hard and abrasive and the crusher needs to be set up with this in mind."

49 The defendant adduced evidence from Mr Trevor Bilney, a qualified and experienced metallurgist, who, at the date of trial was employed as a senior process metallurgist for Western Mining Resources Ltd at Mt Keith. He had been a metallurgist on the staff at Amdel in Adelaide from December 1994 to February 1999 and was subsequently manager of the laboratory at the Mineral Research Centre at the University of Queensland. Mr Bilney was a very well qualified and experienced metallurgist and I accept his evidence entirely.

50 In November 1998, while at Amdel, Mr Bilney had been engaged to prepare a report on the impact crushing work index of ore from Hawkins Find. Samples had been sent to him in Adelaide from Ammtec in Perth which had been engaged to advise Magenta on this subject. The tests which he undertook were to determine the energy required to break the sample rocks. The sample size rocks which he received were, generally, from less than 45 mm to greater than 38 mm in dimension, that is, slightly smaller than the generality of the ore in the stockpile at Hawkins Find. Consequently, his results, cannot be regarded as determinative of the hardness of the rock in the stockpile but Mr Bilney said, and I accept, that they were indicative of that hardness. In cross-examination Mr Bilney accepted that the probabilities were that had he tested samples from the stockpile of less than 76 mm to more than 51 mm, that is a typical size from the stockpile, the Bond Work Index would have been higher and possibly as high as 15, although that was only an estimate. His report (Exhibit 24) included:

" Work Index-kWh/tonne

Average 12.8

Maximum 35.6

Minimum 6.8

Standard deviation 6.5"

51 The detailed results for each sample processed are to be found in the report, together with a table showing the average crushing work indices for various forms of ore. Mr Bilney described the results as indicating a wide range of hardness. He contrasted the hardness of rock with its abrasiveness and emphasised that the Bond Work Index test did not measure abrasiveness although, it could also be regarded as being indicative of that characteristic. The Ammtec Ltd report to Mr Halbert incorporating Mr Bilney's work at Adelaide and submitted to Mr Halbert is Exhibit 25.

52 In March 2001 Mr Alan W Popp, an experienced consultant geologist, prepared a report on the Hawkins Find mine site for Mr Halbert although he never visited the site. At that time Mr Popp was operating as a consultant to the mining industry through a company which he had set up, Barrington Resources Pty Ltd. His report is Exhibit 43 and his extensive curriculum vitae is Exhibit 42. Mr Popp did not give evidence at the trial but had given evidence de bene esse before a Registrar of this Court on 6 September 2002 and, by consent and without objection, the transcript of that examination was tendered as Exhibit 41. There are several references to the hardness of the ore at Hawkins Find in Mr Popp's report, as follows:

- in par 3 -

"The mine occurs in a very hard, dense quartz/feldspar granite porphyry intrusive in an ultramafic host rock."

- in par 6 -

"The porphyry gold deposits which occur in the quartz/feldspar granite in the mineralised shear zones along the Binduli anticline are noted for their hardness and density. The oxide and sulphide mineralisation occurs in the hydro thermal quartz veins and the shear zones are generally enclosed in softer ultramafic wall rocks. This is both an advantage and a disadvantage as this softer wall rock generally exhibits low to medium Bond impact crushing Work Index test results in the range of 7 to 12 while the mineralisation vein quartz has a much higher Work Index ranging from 13 to as much as 35 and averages about 17 - 20. Results of the Bond Index work test done by Ammtec and Amdel are reported in the 12 November 1998 report. The Bond Work Index is used to determine primary and secondary crusher requirements. Test work carried out on an adjacent porphyry gold deposit just south of Hawkins Find indicates that a four stage crushing and grinding circuit is required to produce a product that can be readily leached using cyanide."

53 Mr Popp confirmed this in his evidence before the Registrar (Exhibit 41 p 30) and in the course of cross-examination went on to accept that, with an average work index of 12.8 and a standard deviation of 6.5 that the upper limit that the samples of rock extracted and tested would be the sum of those figures or approximately 19.3 (Exhibit 41 p 32 - 33).

54 This was the extent of the scientific evidence about the hardness or abrasiveness of the ore at Hawkins Find but there was other, observational, evidence on the topic of a qualitative rather than a quantitative nature. Mr Trevor Thomas, a fitter from Nea who had been sent to Hawkins Find on 27 September 1995 to install a new hydraulic pump was having a work-break at the campsite and noticed that the roadways and pathways which had been laid comprised of crushed metal causing him to remark to one of the Magenta personnel that he hoped that they (Magenta) were not crushing this rock because it was too hard. He says there was an equivocal response made to that observation. Messrs Halbert and Bandy later denied this but gave evidence that the roads and the pathways which had been laid out comprised material from a stockpile of waste rock which was not ore that had been separated and used for incidental purposes and I have no reason to doubt that explanation.

55 Similarly, Mr Joshua Groenenberg, the son of Mr Geoffrey Groenenberg who had been sent to the site with the plant to commission it and was at Hawkins Find for six or seven days between 18 and 26 September 1995 described how, after the impactor had been set up, he and Bandy and Halbert put a small load of ore through the crusher. At the time he took a sample of the ore, placed it on a tow bar hitch and struck it with a 32 ounce ballpane hammer but it did not break causing him to remark that it was pretty hard rock. He was unable to identify who else was there at the time but said that this unidentified person remarked that they thought they may have the wrong crusher for this rock. I am not able to make a finding that this was said, or was not said by either Mr Halbert or Mr Bandy. Even if it was said, however, by then the supply and equipment hire contract had been agreed upon and the plant installed and any such observation, even if made, cannot affect the outcome of any issue in this case.

56 Mr Brent Cooper, director of Hydra Plant Equipment Pty Ltd in 1995 which then shared premises with Nea, gave evidence about a conversation which he had with Mr G Groenenberg in July 1995 about the proposal to hire the Hazemag Impactor to Magenta. In the course of giving his evidence he described how impact crushers are very susceptible to wear and that he had a bad experience with such a crusher used out of Karratha and resulting in very high wear. He described using impact crushers successfully in the 1980s on gold bearing laterites at Marvel Loch.

57 The defendant called Mr Michael Photios a prospector/gold producer who has made a business of processing old tailings and stock piles in the eastern goldfields for about 25 years. After the departure of Magenta from Hawkins Find, Mr Photios entered into a joint venture arrangement with Mr Hoppman to process the existing heap leach piles at that site and to divide the proceeds of the gold recovered in equal shares. After about 12 months, Mr Photios and a colleague, Mr Max Brown purchased the lease from Mr Hoppman and worked it for three years or so. In addition to processing the stockpiled ore they extracted about 1800 tons of ore from the pit. They sent about 400 tons of that ore for crushing to the Coolgardie custom mill but, so Mr Photios related, it broke the crusher. The crusher at Coolgardie which broke after processing about 400 tons of ore from the Hawkins Find pit was an impact crusher. No dimensions were given of the ore recovered from the pit. After that the ore recovered was crushed by Barminco at a Greenfields smelting plant at Coolgardie.

58 Taken in conjunction with the evidence about the quartz content in the granite porphyry ore at Hawkins Find I consider that the evidence establishes that the stockpile of the ore to be processed was both hard and abrasive but had a varying range of hardness as described by Mr Bilney. His conclusion that the mean bond impact index for the ore which he sampled was 12.5 with the standard deviation of 6.5 is consistent with the reports in Exhibit 15 (the West Coast Holdings Evaluation Report) that the ore had a Bond Work Index of about 17 kWh/t and with the evidence of Messrs Bandy of Halbert that they told Mr Groenenberg at their first meeting that the ore had a Bond Work Index of 18.

59 While this certainly indicates that the rock was hard, an impression any person would readily gain merely from inspection of the samples (Exhibit 23), it does not suggest that they were exceptionally hard. There is also evidence which I accept that impact crushers had been used for this or comparable ore at Grants Patch and Coolgardie, although with breakdowns at the latter site. There is the evidence of Mr Cooper that impact crushers had been used in the goldfields in the 1980's although, again, that problems were experienced with them. It follows that, with suitable warnings and with the anticipation of higher rates of wear, it would be reasonable to expect that an impact crusher properly configured in good working order could crush gold bearing ore but with high rates of wear.

60 The Hazemag-AP4B Impactor was a vital component in the plant hired by the plaintiff to the defendant. It is illustrated in the photographs (Exhibit 13.1) and in further photographs and diagrams contained in the appendices in the report prepared for Magenta by Sinclair Knight Merz Pty Ltd (Exhibit 38). Essentially, the impactor comprises a large steel box-like structure with an entry port into which the material to be crushed can be fed by a conveyor or other apparatus. Inside the large steel structure is a high-powered electrically driven motor which drives a large cylindrical shaped rotor. This rotor has a series of strengthened metal arms, extending radially for the full length of the rotating cylinder, which are shaped to allow the ore feed to be drawn in and forced through the space within which the rotor and its radially extended arms are rotating. The ends of these radial arms of the rotating cylinder are designed to take removeable components known as "blow bars" which are of specially hardened steel. The edges of these "blow bars", as the apparatus rotates, trap the ore feed caught in the rotating cylinder between them and interior fixed metal plates on the walls of the cylinder, thus applying the crushing force to the ore which can only fragment under this rapidly repeated series of batterings. The small margin of space between the rotating "blow bars" on the radial arms of the rotor and the crushing walls of the cylinder in which it is operating are set at predetermined distances so as to ensure that the size of ore taken into the rotor is reduced to at least that dimension before it can escape from the crushing process.

61 Clearly, very great forces are applied to the fragments of ore inside the crusher by this smashing, compressive and grinding process which is taking place in a series of rapid sequences. The force applied to the ore results in similar forces on the "blow bars" and other crushing areas of the rotor and, more particularly, on the crushing or wear plates within the impactor against which the ore is opposed by this process. Inevitably this causes wear, particularly to the "blow bars" and to the wear plates on the inside of the crusher but, also, to most of the other components of the crusher. It is for this reason that the "blow bars" are designed to be removeable so that, as their crushing edges are worn away by this constant abrasion and compression, they can be reversed to employ their opposing sides before being discarded and replaced by new "blow bars". Similarly, the wear plates inside the crusher have to be replaced from time to time and the settings constantly checked and revised to ensure that the pre-set distances are reset from time to time to maintain the desired size of the crushed product.

62 Not all the crushed ore which emerges from the impactor from this process is of a dimension sufficiently small for the heap leaching process. It is not practical to set the clearances in the crushing rotor to exactly 8mm because that would result in the bulk of the product being much smaller and would require much greater energy (and therefore more power) for the crusher and a greatly increased rate of wear on all the components. As one piece of ore is smashed in the crushing process it will produce fragments of varying size many, but not all, smaller than 8mm. The output of the crusher is then passed over an 8mm screen so that all fragments of that size and smaller fall through and are taken by a conveyor to the next stage in the process. Fragments of ore which do not pass the 8mm screen are diverted onto another conveyor and are recycled for re-introduction to the crusher before reaching the same screen on a second or subsequent pass.

63 By this means the ore which is fed into the crusher comprises a quantity or ore from the original stockpile, that is ore of 200mm to 40mm dimensions or thereabouts, plus recycled ore which has been through the crusher at least once but is not yet small enough to pass the 8mm screen. The more ore that is recycled in this way for a second or subsequent passing through the crusher, the less capacity there is for the impactor to accommodate the larger ore direct from the stockpile. This is another way of saying that the higher the proportion of first crushings which do not pass the 8mm screen, the lower the output of the crusher for the production of aggregate of acceptable size.

64 The crusher in the circuit was expected to operate continuously, except for maintenance periods when it would have to be stopped, blow bars reversed or replaced and internal wear plates inspected, replaced and clearance settings re-adjusted. Otherwise it was expected to operate on a 10 hour per day basis and to crush to the acceptable limits 50 tonnes or more of ore per hour.

65 Once the product of the crusher had passed the first 8mm screen it would be taken by conveyor to a second screen which separated out all particles of less than 3mm in dimension. The aggregate which did not pass this second screen, that is ore greater than 3mm and less than 8mm in dimension would then be removed and stockpiled for eventual placement in a heap leach pile. The particles of 3mm or less would be diverted into the wet process to be mixed with the slurry and to be fed into the gravity/centrifuge gold recovery process. So it was that two streams of material came from the crushing circuit: the first to be placed in the heap leach process and the second to be treated through the wet process for gold recovery, before also being sent to the leaching pads.

66 Before feeding any ore into the crusher it was necessary to take precautions to prevent any iron, steel or other ferrous materials being fed into the machine. There is always a risk that fragments of iron or steel, bolts, screws, broken pieces of machinery, wire or metallic bands from containers may get caught up in the ore. Any such items had the potential to cause considerable damage and wear to the crusher if introduced to it among the ore feed. For that reason all ore fed into the crusher passed along a conveyor over which a powerful electro magnet was hung and kept charged during the operations. This magnetic field attracted and removed items of iron and steel and other ferro-magnetic materials that might inadvertently have found their way into the feed.

67 There are other quite different crushing or impacting systems for use in treating gold-bearing ores, depending upon the size, quantity and type of ore involved. Where it is necessary to crush ROM ore of large dimensions and introduce that into varying treatment plants it is often the case that a series of crushing operations takes place and that different types of crushers are used in sequence. Hence, there may be a primary, secondary or tertiary crusher in which, at the primary stage, the ROM ore is reduced to a certain size, perhaps about 200mm, as must have occurred before the accumulation of this stockpile of ore at Hawkins Find. Next, there may be a secondary crusher which reduces it from the intermediate size to a smaller size which will depend upon the requirements of the processing operation and the economics of the particular operation. There may be a third crusher which pulverises the ore to produce a far finer product and this may occur by dry crushing or by wet crushing in a ball mill or other process. So there are various kinds of crushers at various stages of the process, including jaw crushers, bell crushers and various different kinds of impact crushers.

68 Whether it is possible, practicable and economic to reduce the ore which is to be treated to the desired size by a single crusher will be a matter for judgment based on a variety of factors, not the least of which are the capital cost of acquiring and operating the crusher, the type and size of the ore and its quantity, all of which will affect the economics of the operation. For a small treatment plant, with a relatively limited quantity of ore to be treated, as was the case for this project at Hawkins Find, it would not have been economical to acquire or utilise a large capacity jaw or bell crusher or a series of crushers for the low grade gold-bearing ore to be treated. The choice of a crusher, or a series of crushers, which would perform the task required at Hawkins Find on the ore from the stockpile was, therefore, plainly a matter for careful selection and judgment.

The condition of Hazemag AP4B Impactor - Serial No 106420

69 As the more detailed examination of the evidence undertaken later will reveal, there is no doubt that the Hazemag Impactor did not perform satisfactorily at Hawkins Find. It never worked continuously for 10 hours. In the first fortnight it worked for a total of only about 17 hours. It broke down repeatedly. Its components, particularly the blow bars and the wear plates showed very severe wear and deterioration after only relatively small amounts of ore were processed. The clearances became misaligned, including clearances at the side of the rotor. These problems were confirmed on repeated inspections and led to recommendations that the existing rotor should be replaced by a "K" rotor but that, in reality, the better solution would be to obtain a completely new crusher of different design.

70 In short, it was soon realised that the Hazemag Impactor as supplied could not perform the task expected of it and, short of replacing it entirely, any efforts to deal with the problem would at best be palliative.

71 Several factors are suggested as having contributed to the problems with the machine. Those advanced are the hardness of the ore in the stockpile; lack of proper configuration of the Hazemag Impactor; the use of substitute wear plates and materials in the blow bars and wear plates other than those specified by the manufacturer; and lack of capacity to deal with the through-put in circumstances where a larger than expected proportion of the treated ore was recycled for a further pass or passes. In my view, the probabilities are that these are all manifestations of the problems which the machine, as configured, experienced in dealing with the ore at Hawkins Find.

72 This impact crusher which was supplied on hire by the plaintiff to Magenta was about 25 to 30 years old at the date of hire. It had been in Nea's Welshpool yard since sometime in 1993 when it had been taken by Mr G Groenenberg in part payment of liability owed to his company by a contractor Simpto. The machine had never been used by Simpto but had been acquired by AIS Kwinana. There were some remnants of soft limestone ore within the working parts of the machine indicating that it had been used in the past for the preparation of soft road bases.

73 Once the agreement to supply and hire the impactor and the other crushing plant to Magenta had been reached, Nea undertook the work of refurbishing and equipping the impactor to put it into a condition suitable for the operation which had been described by Messrs Halbert and Bandy. Extensive electrical rewiring was required and a report and quotation from Australian Electrical Services Pty Ltd to the plaintiff was provided for this work on 2 August 1995 (Exhibit 5). The quotation was for $25,895 and included installation of an auto transformer starter and other extensive electrical apparatus.

74 In addition, Mr G Groenenberg arranged for the impactor to be inspected by Hydraplant Equipment Pty Ltd and a report following his inspection on 2 August 1995 was prepared by Mr C Muscat (Exhibit 6). This sets out an extensive list of work to be done but, significantly, it included the replacement of missing internal wear plates in the base section; the replacement of a wear plate at the rear end above the double doors in the top section; the installation and supply of wear plates and surround steel work at the right hand side door in the top section; together with surround steel work and wear plates for the left hand side door of the top section. The rotor bearing needed to be cleaned and reassembled and its tolerances checked. There was extensive other work recommended by Hydraplant Equipment Pty Ltd but the replacement and installation of wear plates is notable in view of the problems which subsequently developed with wear of these and other internal parts.

75 When Mr Muscat gave evidence, which included a brief account of his 20 years experience as a fitter and turner, with a labour hire company, the State Electricity Commission of Victoria, as a marine engineer, experience with WMC, as a plant process operator and with CSBP as a senior maintenance supervisor which included experience with all forms of crushers, he identified a photograph of this Hazemag impact crusher and described it as a very old machine. He confirmed that all the work listed in his inspection report Exhibit 6 was in fact performed and that, indeed, additional work was done. He explained that, as the machine was dismantled for the refurbishment it became evident that it needed much more work than had been listed in the inspection report and that was authorised. In particular, a lot of casing needed replacing or replating.

76 In Mr Muscat's view the bearings on the rotor were marginal but they were not replaced. The wear plates that were missing or which were no longer suitable were replaced with Bisalloy. He was unable to say whether or not the replacements were to manufacturers' specifications. In his view the rotor was excessively worn. Mr Muscat said, that if it had been his own decision, he would not have attempted to refurbish this machine because it was too badly worn, indeed that it was beyond repair. However he maintained that the standard of workmanship in the refurbishment was good and that the machine was functional when it left his workshop. Mr Muscat's evidence has confirmed the assumptions of the engineer, Mr Kendall (Exhibit 37) that the wear plates supplied by Nea were of Bisalloy 360 or similar material. Mr Kendall, a highly qualified and experienced consulting engineer (curriculum vitae Exhibit 35), considered that Bisalloy would be suitable in mildly abrasive applications only, whereas appropriately chosen manganese would be needed for more abrasive duties.

77 It was the opinion of Mr Kendall that the reliability of the impactor was unacceptable by normal industry standards and that its maintainability was fairly poor. Although he commented adversely on the choice of the Bisalloy replacement of wear plates he emphasised that the choice of wear material was not the key issue but, rather, the essence of his comment was that the totality of the presentation of the wear liners showed an ignorance of the manufacturer's requirements (Exhibit 37). Mr Kendall's criticisms of the machine follow from his inspection of it at the site on 9 October 1995 after it had only done a limited amount of crushing since commissioning. Mr Kendall put that as five and a half hours work but that is an underestimate. It is more probable that the machine had been crushing ore for an aggregate period of 12 to 24 hours, but no more, at the time of his inspection. In the course of giving evidence Mr Kendall estimated that the impactor may have crushed somewhere between 400 to 500 tons of ore from the stockpile by the time of his inspection.

78 Mr Kendall was familiar with gold ore crushing processes in the Ora Banda area having designed and built the mill at Grants Patch used by West Coast Holdings Ltd. That had ceased operations in the early 1990s when it had been moved to Lake Grace and it was no longer available in 1995.

79 From his history of the recorded performance of the impactor at Hawkins Find, which Mr Groenenberg has accepted, Mr Kendall was of the view that the plant had not been adequately prepared or commissioned (Exhibit 36) and that this machine could not do the job (t/s 1034 and t/s 1041) and that a replacement machine was needed. Mr Kendall thought that an impactor would have been fine and that it was not essential to use a cone crusher or a jaw crusher instead (t/s 1041).

80 The history of the operation of the Hazemag Impactor at Hawkins Find which was prepared by Mr Kendall is an attachment to Exhibit 36 and is also included in the two subsequent reports prepared by Mr Kendall while at Sinclair Knight Merz Pty Ltd (Exhibits 38 and 39). This lists a total period of crushing of 14 and a half hours from Friday 22 September to Friday 6 October 1995 although, as indicated, I accept the possibility that the total period may have been slightly, but not much, longer. The summary is:

Joshua Groenenberg dry commissioned the plant and crushed 'two tonne' of stone. After about one hour, the hydraulic motor on the screen failed and Groenenberg left for Perth to attend his father's 50th birthday

Joshua Groenenberg arrived back at site and fitted a new hydraulic motor onto the screen. The plant crushed for one hour.

The plant crushed for one hour. Byron Herbert signed for commissioning complete - Dated 29/9/95. [Should be 26/9/95 - see Exhibit 8] Joshua Groenenberg left site

The plant was started, but the pump driving screen would not work.

Hire plant dispatched new hydraulic pump. Geoff Groenenberg and a hydraulic fitter 'Trevor' [Thomas] fitted the new hydraulic pump. In the event new hoses and fittings were required. The plant crushed for four hours. Geoff Groenenberg and Trevor left site.

Impact plates were adjusted to reduce the recirculating load. The plant crushed for 1½ hours and then the impact plates were readjusted to reduce the recirculating load.

Maintenance work was carried out to turn the blow bars around. The blow bar retainers were badly worn and required replacement. The retainers were badly worn and one had 175mm centres instead of the normal 165mm centres.

No work was done because engineering firms were closed for the long weekend.

The new blow bars were fitted. A fax was received from Hire Plant advising 'Charlie Muscat' was coming up to site and suggested the plant not be started until [he] arrived.

Charlie [Muscat] arrived and checked that the settings were OK. The plant crushed for three hours.

The plant crushed for two hours. The blow bars were worn and the impact plates were adjusted. Charlie, at this stage, was working on the wet plant and he inspected the crusher. He said that the wear was uneven and stone was falling preferentially to the near side of the impact crusher from the screen. Charlie welded a deflector plate into the crusher feed, but said that the result was unsatisfactory.

The plant crushed for one hour. The doors were opened and the bars were removed. Charlie have a hand but left at 2.00 pm saying that it was all 'too hard'.

81 A copy of Mr Kendall's report of 10 October 1995 (Exhibit 36) was sent by Magenta to Nea by fax that day under cover of a letter from Mr Bandy complaining about the performance of the machine and advising that Magenta's representative, Mr David Hurley, would call on Mr Groenenberg to discuss the problem. A meeting between Mr Hurley and Mr Groenenberg did take place on 16 October 1995 when the two men discussed Mr Kendall's report and a proposal, never agreed or implemented, to install a new K rotor as a substitute for the S rotor on the machine and to make other alterations.

82 This was in response to the report of Mr Kendall (Exhibit 36), which had also said:

"The capability of the plant is determined by the hardness and abrasiveness of the ore, as well as by your requirement for a size reduction from 80 per cent passing about 40 mm, to 80 per cent passing 8 mm. This is a reduction ratio of about five which is high, but not impossible. Ideally to achieve this objective the machine should be fitted with a 'grind path'. The hardness of the ore in this case should not be a problem, although harder ores do reduce throughput. The abrasiveness appears to be a problem and the Abrasion Index should be determined to confirm that the ore has highly abrasive properties. The ore is described as a granite porphyry with a stockwork of quartz veins and multiple stringers. This description indicates a high silica content which in turn indicates a high Abrasion Index.

The capability is also affected by the state of the machine which is not good. The wear plates are not of original manufacturer's specification and many of these are quite severely worn. The rotor also appears to be worn badly and the gap between the rotor and the side plates is excessive. The rotor is an S-type rotor, which is not suited to the hard abrasive rock application. A K-type rotor is required.

In summary:-

• The crusher itself should have a K-type rotor and the speed needs to be set to the application.

• The crusher is not set up to make the regular maintenance and replacement wear parts easy to achieve. In abrasive, hard rock this is not a must.

• The crusher almost certainly will require a grind path to achieve the required reduction ratio without excessive down time to adjust the impact plates.

• The ore is hard and abrasive and the crusher needs to be set up with this in mind.

• The plant as currently configured is totally unsuitable to the application and must be appropriately modified before it will be suited.

• The plant, according to the sequence of events in Attachment 1, has never been properly commissioned according to industry standard expectations, not withstanding any signature to the contrary.

A new K-type rotor and a grind path can be obtained from O'Connor Resource Engineering ... who are the Hazemag agents, or from CBR Crushing Equipment ... ."

83 In the subsequent and more detailed reports which he prepared and revised (Exhibits 38 and 39), Mr Kendall summarised the position by saying that the crusher was not fit for the purpose for the application at Hawkins Find, it was unsuitable for the application which required to achieve a high reduction ration (5:1) of crushing a hard abrasive ore. The plant achieved only 18 per cent "availability" whereas industry expectations would be for an availability of 75 per cent or better.

84 The detailed reasons for those conclusions are to be found in revision 1 of Mr Kendall's expert report and I accept them. It is not necessary to elaborate upon them, however, because the plaintiff's position, since the commencement of the trial has always been that it "concedes from the outset of these proceedings and always has that the impact crusher could not crush the ore which the defendant sought to crush. That's not in issue." - per counsel for the plaintiff in opening at t/s 98.

85 Rather, Nea's position is that it never represented, expressly or impliedly that the impactor or any part of the crushing circuit would be fit for crushing the rock on the stockpile at Hawkins Find or for any other purpose; that Mr Groenenberg told Messrs Halbert and Bandy that the crusher was not suitable for hard rock and could only crush soft rock, and that any express or implied condition or warranty about the suitability or fitness of the machinery for the purpose was expressly excluded by cl 8 of the terms and conditions of hire.

86 I accept the evidence and the opinions of Mr Kendall and I also accept that this Hazemag Impactor was not able to perform the task required at Hawkins Find. This was largely due to its poor condition and refurbishment, the absence of parts complying with manufacturer's specifications, its use of an unsuitable K-type rotor and, generally, its old and deteriorated condition. The hardness, or more correctly the abrasiveness, of the ore at Hawkins Find was an aggravating factor but it was by no means the sole cause of the problem. A properly equipped, refurbished and maintained Hazemag Impactor, with a suitable K-rotor and abrasive and wear plates of toughened steel alloy should have been capable of performing the task.

87 The opinion expressed by Mr Kendall that this machine simply was not suitable for the task and could not perform the job is supported by the actual events which happened and, also, by the reasons which he gives for that conclusion in Exhibit 39 which I also accept. I also accept Mr Kendall's opinion that it is unlikely that the modifications which he suggested in his report of 10 October 1995 (Exhibit 36), including the substitution of a K-type rotor, would have been successful in making the impactor operate to an acceptable standard.

88 The failure of the hydraulic motor on the screen on 22 September 1995 and the hydraulic pump on the screen failing on 26 September 1995 were both quite minor problems which were not associated with any defects in the impactor or other plant. These were the type of problems which could be expected to occur when commissioning such plant and they were readily and promptly fixed by Mr Joshua Groenenberg and Mr Trevor Thomas. They themselves are not indicative of any inadequacy in the impactor or the crushing plant generally.

89 Without a functioning crusher the venture for the treatment of the stockpiled ore at Hawkins Find could not be undertaken. Without a crusher there was no point in the defendant attempting to continue. It was the failure of the Hazemag which led to the closure of the operation and the losses and expenses associated with that. In that situation the question arises: whether the defendant should be regarded as being obliged to replace the Hazemag Impactor with another crusher or crushing system and, as it did not, whether its inability to do so because of its limited financial resources affects the position as a matter of causation or otherwise? Submissions by the plaintiff that there was a duty to mitigate damages in this situation, or that after sufficient time had passed to enable an alternative crusher to have been procured and installed, any further loss or damage was no longer caused by the failure of the impactor raise questions of law about the scope of an alleged duty to mitigate damages and of identifying the material cause of Magenta's subsequent losses.

90 In addition, however, they also raise important issues of fact because, even on the assumption that Magenta should not be excused by reason of want of financial resources to hire or purchase a substitute crusher, the cost of employing an adequate crushing system would have a direct impact upon the profitability of proceeding with this low grade ore treatment programme. If the cost of crushing was of a magnitude which rendered the operation unprofitable, or not economically viable, then there would be no point in proceeding, even if Magenta had the money to do so. This points up an issue which was not fully addressed at the trial, namely, that the profits which Magenta expected to make from this operation, and hence the extent of losses claimed, depend very significantly upon the assumed level of operating costs. If the level of operating costs had been greater, because of the need to employ a different and more expensive crushing plant, the whole economics of the project would change significantly.

91 The configuration of the crushing circuit discussed between the plaintiff and the defendant at the meeting in Perth on 25 July 1995 included, as already described, two screening plants - the second to separate out ore of 3mm or less which had passed the first screen and was of 8 mm or less. However, the parties did not proceed with this arrangement and some time in early September 1995, possibly on or about 4 September 1995, it was agreed to delete this second screening plant from the circuit and introduce a "wet plant" as a second or additional processing stream.

92 This meant that the dry operation would be completed with ore reduced to 8mm or less which would be used for the heap leaching. In addition, there would be a wet screen which would lead into a Knelson concentrator to deal with other ore. Quite what was to be the source of this other ore was not made clear, although it seems probable that most of it would come from the dry crushing and screening operation which produced the fines of 8mm or less. Consequently the plaintiff did not proceed with the preparation of a second dry screen plant and never delivered a second screening plant to the Hawkins Find operation. It did, instead, deliver a wet screen. The Knelson concentrator - the gravity centrifuge to separate free gold particles from the wet slurry - was supplied by Mr Hoppman of Mourillion Mining.

93 When Mr Groenenberg, on behalf of Nea Pty Ltd, arrived at Hawkins Find and repossessed the crushing plant and associated equipment and removed it on 23 October 1995 he also took the wet plant comprising the wet screen but not the Knelson concentrator. That was the only operational plant (apart from earth and ore moving machinery) left on site. In those circumstances Magenta, by its directors Mr Halbert and Mr Bandy, decided to use a new wet plant (leased from Boral for the purpose) and the Knelson concentrator but to employ them they had to bring other ore from Southern Cross. This was brought in by a trucking operation with truck loads each of about 50 tonnes of fine ore from Southern Cross to Hawkins Find for the purpose. By this means approximately 2000 tonnes of ore was trucked in during the period from 24 October 1995 until about mid November 1995.

94 This ore was put through the wet screen and the Knelson concentrator and there was some gold recovery. However, the costs of trucking the ore in from Southern Cross were significant and Mr Halbert implied that this was not particularly economic. To make matters worse the slag of free gold which had been extracted from this ore by the Knelson concentrator and which was on hand on the site was stolen by persons unknown on or about 12 November 1995. Mr Halbert initially estimated that about $35,000 worth of gold was stolen, although the financial accounts for the 1994/1995 year contain a reference to $95,000 worth of gold having been stolen. It is neither necessary nor possible to determine the approximate value of the gold which went missing but it is clear that there was a theft, that it was reported to the police but that the thieves were never detected nor was the gold or its value ever recovered.

95 Shortly after this, and partly due to this misfortune, the trucking in of ore from Southern Cross for treatment by the wet plant and Knelson concentrator at Hawkins Find was abandoned.

96 Magenta alleges that, by virtue of s 71 of the Trade Practices Act this contract for the supply and hire of the crushing plant, and particularly the impact crusher, included an implied condition that the goods supplied were of merchantable quality (s 71(1)) and a further implied condition that the plant was reasonably fit for the purpose which Magenta had made known to Mr Groenenberg during the course of negotiations, namely, the crushing of stockpiled ore at the site as an initial step in a gold extraction process by the cyanide heap leach method. If any such implied condition was contained in a contract for the supply and hire of the impactor, then the provisions of cl 8 of the terms and conditions of hire said by Nea to form part of the contract would be void insofar as they purported to exclude, restrict, modify or have the effect of excluding, restricting or modifying those implied conditions - Trade Practices Act, s 68. The position of the plaintiff, however, is that Magenta was not a "consumer" and, for that reason, no implied conditions under s 71 of the Act were included in this contract.

97 The status of "consumer" in s 71 and other parts of the Trade Practices Act is defined by s 4B of that Act. Section 4B(1) deals with both the acquisition of goods and the acquisition of services and provides that, for the purposes of the Act, and unless a contrary intention appears, a person shall only be taken to have acquired particular goods or particular services as a consumer if the price of the goods or the price of the services did not exceed the prescribed amount of $40,000; or where the price exceeded that amount the goods or services were of a kind ordinarily acquired for personal domestic or household use or consumption.

98 The question in this case is whether the price of the goods or the price of the goods and services acquired under this contract exceeded the sum of $40,000 because it is not suggested that, if the price exceeded that sum, the goods or services were of a kind ordinarily acquired for personal, domestic or household use or consumption. A crushing circuit for the extraction of gold from ore at a remote mining lease in the Coolgardie goldfields quite clearly falls outside such a character of goods or services - see, in this regard, Atkinson v Hastings Deering (Qld) Pty Ltd [1985] FCA 135; (1985) 6 FCR 331 - a large tractor; Minchillo v Ford Motor Co of Australia Ltd [1995] VicRp 78; [1995] 2 VR 594 - prime mover; Jillawarra Grazing Co v John Shearer Ltd (1984) ATPR 40-441 - large air seeder.

99 Section 4B(2)(d) specifies the amount at which the value of the goods or services being acquired should be determined in cases where they were acquired otherwise than by purchase. It provides that the price of the goods or services shall be taken to have been the price at which, at the time of acquisition, the person acquiring them could have purchased the goods or services from the supplier; in a case where the goods or services were not available for a purchaser from that supplier or were so available only together with other property or services, but at the time were available for purchase from another supplier, the value of them should be taken to have been the lowest price at which the person could at that time reasonably have purchased the goods or services of that kind from another supplier. A third alternative method of determining the price of the goods or services, when they were not available at the time of acquisition for purchase from any supplier or were not so available except together with other property or services - is that the value should be regarded as the value of the goods or services at that time.

100 Relying on these provisions, Magenta contends that the value of the Hazemag Impactor at the time of acquisition, which it alleges was on 25 July 1995, was $40,000 or less and that the process of this valuation should treat the impactor as having a separate and distinct price from the price or value of the other components then being hired, and from the value of the services associated with refurbishing the impactor before its supply on hire to the defendant.

101 It may also be noted that, by virtue of s 4B(3) of the Act, where it is alleged in any proceedings under the Act that a person was a consumer in relation to particular goods or services it shall be presumed, unless the contrary is established, that the person was a "consumer" in relation to those goods or services, thus putting the onus of establishing that Magenta was not a consumer upon the plaintiff in this action. However, there is no express allegation in the defence or counterclaim, or in any other pleadings, or in the particulars delivered in support of its pleadings by the defendant that Magenta was a "consumer". Rather, the submission that it is such an allegation was advanced at the trial on he basis of the primary facts pleaded and the evidence led for the defendant. It is unnecessary to determine whether or not a submission made on the basis of all the evidence that Magenta was a "consumer" is sufficient to give rise to this presumption, in the absence of an express allegation in a pleading, because the facts allow a finding to be made clearly on the evidence without reliance upon any such presumption.

102 There has been no evidence adduced about the price at which the impactor could be purchased elsewhere on 25 July 1995.

103 The initial negotiations between the representatives of the parties concerned the supply of the impactor and other equipment on hire to the defendant. Exhibit 2, the plaintiff's offer to hire the equipment dated 26 July 1995, showed a composite hire rate of $31,250 per calendar month for two mobile screening plants with meshes, one AP4 impact crusher on frame with drive motor electric start controls and discharge conveyor, three stockpile conveyors and one electro magnet with controls. That was later varied to delete one of the stockpile conveyors and, still later, varied again to delete the second mobile screening plant. On the sketch diagram showing the configuration of the crushing circuit in the operation (part of Exhibit 2) the seven component pieces of equipment are listed, each with a figure beside it showing a total of $307,500 of which the impactor was listed with a value of $130,000.

104 Exhibit 3, the defendant's order for the supply of the crushing and screening equipment, referred specifically to the plaintiff's offer to lease (Exhibit 2) as reference No 11673 and ordered the supply of the crushing and screening equipment so listed at an amount of $31,250 per calendar month without any reference to a purchase of all or any of the items.

105 Nevertheless, the defendant places reliance on Exhibit 18, a manuscript note by Mr Groenenberg comprising a series of calculations under the heading "Sale Price - Crushing Circuit" which appears to be a series of re-calculations of the values of the components in the crushing circuit which had the effect of reducing their value from $307,500 to $248,500 collectively but which, with an additional 7 metre conveyor of $7,000, brought the total to $255,500. That document bears the date, in Mr Groenenberg's handwriting, of 12 September 1995 but he maintained that it was added to later on or about 11 October 1995 when Mr Groenenberg was considering the letter from the defendant's engineers, Kendall Engineers, of 10 October 1995 (Exhibit 36) (see t/s 207 - 211).

106 At this point the precise date of Exhibit 18, whether on 12 September 1995 or later on about 11 October 1995, is not of significance because both dates are after the agreement for the hire of the circuit plant had been reached. It seems probable that Exhibit 18, in its original form, was first written by Mr Groenenberg on 12 September, shortly before the plant was dispatched from Welshpool to Hawkins Find when there was an agreed variation made to the equipment to be supplied.

107 When comparing the list of equipment shown on the drawing - part of Exhibit 2 - with the list of equipment on Exhibit 18, it is clear that Exhibit 18 refers only to one screen of $60,000 whereas Exhibit 2 refers to two mobile screens each of $60,000. This difference is explained by the decision to delete the second screen when Magenta had decided to introduce a wet plant leading to the Knelson concentrator to be supplied by Mr Hoppman of Mourillion Mining. Another difference between the two lists is that Exhibit 18 includes an additional 7 metre conveyor listed at $7000. A third difference is that Exhibit 18 shows, separately, the costs of two conveyors which had been listed in Exhibit 2 with an aggregate value of $25,000 as having separate values of $15,000 and $11,000 resulting in a $1000 increase. These changes allow the totals on Exhibit 2 and Exhibit 18 to be reconciled exactly.

108 Accordingly, I find that Exhibit 18, in its original form as at 12 September 1995, contained the revised list of plant to be supplied under the hiring agreement shortly before the equipment was dispatched from Welshpool and after it had been decided to delete the second major screen, add a third conveyor and make a small adjustment to the value of the two conveyors originally selected.

109 Included on the face of Exhibit 18 is a break down of the cost of $145,000 attributed to the impactor, as follows:

"Elect. $26,000

chassis $40,000

IMP $40,000

Misc Parts $39,000

$145,000"

110 This accords with the oral evidence given by Mr Groenenberg, and accepted by Messrs Bandy and Halbert, that after the Hazemag Impactor had been selected in the yard of the plaintiff at Welshpool on 25 July 1995, it was explained that extensive electrical work would be needed to be performed on the machine, that it would need to be mounted upon a moveable chassis and that a variety of refurbishment works would also need to be performed. It was for this reason that the plaintiff engaged its associated company, Hydraplant Equipment Pty Ltd, to undertake the refurbishment works and, also, why it would be four weeks or more before the machine would be available for despatch. The defendant has seized on the figure of $40,000 attributed to the impactor as indicating its value at the time of the agreement to hire and, for the further submission that the impactor should be regarded as a separate item of equipment.

111 I am satisfied that the aggregate value of the goods and services which the plaintiff agreed to supply, and the defendant agreed to take on hire, in July 1995 was $307,500 and that that figure included the cost of significant labour and parts to be supplied by the plaintiff and/or by contractors to refurbish the Hazemag Impactor and put it into working condition. Later, because of agreed changes in the configuration of the plant and equipment which was to be supplied for this crushing circuit, the most significant of which was the deletion of the second screening plant, but with the addition of a third conveyor, the aggregate value changed to $255,500.

112 Mr Groenenberg said that he gave a price of $255,000 for the sale of the entire circuit to Magenta on or about 12 September (t/s 207 and following) and that he would have been prepared to sell the equipment in the original configuration for $307,500. After it had become apparent that the impactor, as supplied to Hawkins Find, was not able to crush the ore, and when there had been complaints from Mr Halbert, a letter from Kendall Engineering and a visit to Mr Groenenberg from Mr David Hurley on 16 October 1995, the plaintiff wrote to Magenta offering a number of suggested solutions, including the sale of the impactor complete for $145,000 and the continuation of the hiring of the other equipment - Exhibit 12 (p 2).

113 The plaintiff puts forward two submissions in relation to the value of the goods and services supplied under this hiring agreement. The first is that the agreement was one composite transaction for the supply of goods and services for an aggregate value, initially at $307,500, and later $255,500, in circumstances where all the items were inter-dependent and essential for the performance of the one operation or function, namely, the crushing of the ore from the stockpile preparatory to placing it in the heap leach pads. In this respect the plaintiff submits that the supply of goods or the supply of goods and services in this particular instance included the value of services performed on the goods, and in particular the impactor, to fit it out in proper working order, to transport the equipment to the site and to commission it for the commencement of the hire. It cites a passage from the judgment of Wilson J, with whom Dawson J agreed, in Castlemaine Tooheys Ltd v Williams and Hodgson Transport Pty Ltd [1986] HCA 72; (1986) 162 CLR 395 at 402:

"The Act clearly contemplates that services may accompany the supply of goods in such a way as to constitute a single transaction properly described as a supply of goods. It follows that an act or series of acts, once characterised for the purposes of the Act as a supply of goods cannot also be a supply of services ... Thus a contract for the supply and fitting of a windscreen to a motor vehicle has been held to fall within a market in which a person supplies goods rather than services ... it may not always be easy to make the characterisation, the task being to identify, from all the circumstances of the case, the precise legal obligation undertaken by the supplier of the goods ... "

See also Australian Competition and Consumer Commission v Dell Computer Pty Ltd (2003) ATPR 41-910 at 46588 per Branson and Stone JJ.

114 On this basis the plaintiff submits that the value of the labour and the parts supplied during the refurbishment of the Hazemag Impactor before its delivery on hire became subsumed within the value of that impactor. On this view the value of the impactor was simply a component in several items of equipment which were all inter-dependent for the performance of the task for which the equipment, collectively, was hired. The plaintiff submits that the contention by Magenta that the attributed value of $40,000 (in Exhibit 18) for the impactor can be segregated from the value of the functioning apparatus after the process of refurbishment is erroneous and relies upon the decision in Grundy v Lewis (1995) 133 ALR 400.

115 In substance, what is required is an identification of the goods and/or services which were to be acquired on hire by Magenta. There was never any agreement, nor any possibility, that Magenta would take on hire the non-functional impactor in the condition which it stood in the plaintiff's yard at Welshpool when first identified on 25 July 1995. The machine, in the condition that it stood at that time, could not work at all, it certainly could not perform the task of crushing the ore as desired by Magenta, nor was it offered for sale or hire in that condition. The agreement for hire was that the defendant would take on hire the various items of equipment identified in Exhibit 2, including the Hazemag Impactor, but only after the plaintiff had undertaken the refurbishment necessary to put the impactor into proper working order, including the installation of new electrical wiring and other working parts, with delivery of the equipment to be hired being postponed until after that refurbishment work had been completed. There was never a point at which Nea offered to sell the impactor for $40,000 nor was there any interest or purpose in Magenta acquiring the impactor in its original non-working condition.

116 Accordingly, for the purposes of s 4B of the Trade Practices Act I consider that the price of the goods and services acquired by Magenta under this hiring agreement must be regarded as the price at which, in July 1995, Magenta could have purchased goods and services from Nea in the condition in which they were to be hired, that is, after the parts and labour necessary to refurbish the impactor had been installed and the plant was functional.

117 While it is true that the various items of the equipment hired by Nea were supplied and were intended to be used for the one purpose, each item in combination with the other, it does not follow that there was only one composite set of goods acquired valued at $255,500 or originally a larger set of goods valued at $307,500. The various items in the crushing circuit were separate and capable of separate use and replacement. The example of the removal of the second screen and the introduction of a wet screen is but one practical demonstration of this. The problems which developed in attempting to have the impactor operate at Hawkins Find resulted in suggestions from Mr Kendall, that another crusher, preferably a jaw crusher, should be obtained and substituted for the Hazemag Impactor but operated in conjunction with the other parts of the treatment circuit. The plaintiff itself proposed, as one possible solution, that the impactor could be sold separately but the hire of the other equipment could continue (letter of 17 October 1995, Exhibit 12).

118 Further, the plaintiff has submitted that, in the event of it being found to be in breach of duty to the defendant, large portions of the damages sought by Magenta in its counterclaim should be disallowed on the grounds that they had not been caused by the alleged breach of duty of the plaintiff but resulted from a failure by Magenta to mitigate its damages by obtaining another crusher or crushing circuit. I am satisfied that the Hazemag Impactor constituted one divisible part of the equipment which was supplied on hire - no doubt the most important part from any functional view point - and that, consequently, when considering the operation of s 4B of the Trade Practices Act it is the value of the impactor and not the value of the totality of the equipment making up the crushing circuit which must be identified.

119 All the evidence in this respect points to the value of the impactor, upon the completion of the refurbishment work, in the condition in which it was to be delivered for the commencement of the hiring being $145,000, including the specially constructed chassis which was to be built for its transportation. The details of this chassis are depicted in the diagram (Exhibit 16) and it was manufactured by Hydraplant Equipment Pty Ltd at a cost of $39,282.10 (Exhibit 7), and treated by Nea, for the purpose of calculating hiring charges, as worth $40,000.

120 While this point was not directly addressed in submissions at the trial I was left with the impression from all the evidence that the impactor could readily be demounted from the chassis and that the function of the chassis was primarily to allow the impactor to be transported and to be used as a working platform for the machine at site. The impactor itself was chosen before the chassis was designed and constructed and I see no reason why it could not be used independently of the chassis or upon some other chassis. In other words, in the absence of evidence to the contrary, I consider that the proper approach is to treat the refurbished impactor as being an item of property distinct from the chassis which was prepared for, and supplied as part of, the hiring agreement for its transportation and use. On this basis the value of the impactor alone, in the condition in which it was to be taken on hire, becomes $105,000 or thereabouts. Consequently I do not see any basis upon which the defendant's submission that, for the purposes of s 4B and s 71 of the Trade Practices Act, the price of the impactor as acquired as part of this hiring agreement can be regarded as $40,000 or less. Accordingly, I conclude that there were no conditions of merchantable quality or fitness for purpose implied by virtue of s 71 of the Act.

121 Magenta defends the plaintiff's claim for the unpaid balance of hire charges alleged to be due plus interest on the grounds that there was a total failure of consideration under the agreement for the hire of the equipment comprising the crushing circuit. The basis for this contention is that the Hazemag Impactor was entirely unsuitable for the purpose and never functioned to crush the ore in the manner required and contemplated during the course of negotiations leading to the hiring agreement in July 1995. Magenta has pleaded, by par 9 of its defence, that on this basis the plant was useless in its hands and that Magenta lost the benefit of the hire and was unable to use the equipment for the purpose made known to the plaintiff.

122 Magenta paid a deposit of $15,675 to Nea Pty Ltd by cheque dated 31 July 1995 (Exhibit 4) which was delivered to Mr Groenenberg in his yard at Welshpool by Mr Bandy and Mr Halbert. This payment had been made under the terms set out by Nea in its offer for the hire of equipment on 26 July 1995 (Exhibit 2) and comprised half the hire charges for one month and was payable before any refurbishment work on the impactor would commence. Credit for this payment is given by the plaintiff in its claim for the balance of the hire and associated charges and, accordingly, this payment is treated, at least by the plaintiff, as part of the consideration due to it under the hiring agreement.

123 By contrast, the defendant does not seek to recover this $15,675 paid on the basis of a total failure of consideration by its counterclaim but it does include this very payment as an item of loss and damage for which the counterclaim is advanced (counterclaim subpar 24(c)). Although not directly addressed in the submissions, the appearance is that a basis for including the $15,675 as part of the defendant's counterclaim is that the performance by the plaintiff of the contract entirely failed because of breaches of conditions relating to merchantability and unfitness for purpose of the impactor so that the damages recoverable include all payments made for or in connection with the supply of the unsuitable hired goods as a species of reliance damages: The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 per Mason CJ and Dawson J at 81 - 82. This formulation of the claim for damages in the counterclaim has implications for the defence of total failure of consideration because no claim is maintained for the recovery of the deposit alone otherwise than as a component of damages for breach of contract or for misleading or deceptive conduct.

124 This approach by the defendant in its counterclaim is entirely consistent with the facts which reveal that work under the hiring contract was performed by the plaintiff in relation to the attempted refurbishment of the impactor and the assembly of the chassis and the delivery of all the other equipment to Hawkins Find, its installation by Mr Joshua Groenenberg, the repair of some minor failures of motors and hydraulic lines on two occasions after the delivery to the site, and the crushing of about 400 tonnes of the ore from the stockpile through the circuit prior to repossession on 23 October 1995. Consequently, some benefits, admittedly very limited in duration and magnitude, were derived by the defendant under this hiring agreement and on this basis it is not possible to conclude that there was a total failure of consideration: Baltic Shipping Company v Dillon [1993] HCA 4; (1993) 176 CLR 344.

125 A defence of total failure of consideration is, in substance, a restitutionary claim for relief against the plaintiff's claim for the balance of unpaid hire instalments and associated charges, which can be raised as a defence against that claim in order to avoid circuity of action: McDonald v Dennys Lascelles Ltd [1933] HCA 25; (1933) 48 CLR 457 per Dixon J at 478 - 479. The former rule that for recovery of moneys paid under a contract which was set aside, either because of rescission, frustration or other cause, the terminating factor must result in the contract becoming terminated ab initio, as distinct from some later date of default or other termination, has long since been rejected: Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd [1942] UKHL 4; [1943] AC 32; David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; (1992) 175 CLR 353 at 383, but it still becomes necessary to identify what was the consideration which constituted the agreement between the parties or, in other words, the actual performance of the bargain which the opposing party had agreed to accept.

126 As has been held in David Securities Pty Ltd v Commonwealth Bank of Australia (supra):

"The notion of total failure of consideration now looks to the benefit bargained for by the plaintiff rather than any benefit which might have been received in fact." (at 382 - 383)

and see Baltic Shipping Co v Dillon (supra) per Mason CJ at 351.

127 In the present case, Magenta maintains that the benefit for which it bargained under this agreement was to have the possession and use of a functioning crushing circuit which could process the ore stockpiled at Hawkins Find to the dimensions required and at the rate discussed in the pre-contract negotiations. Its position is that was never provided. There are at least two refutations of this argument, one relating to the terms of the contract and the other relating to the actual performance under it. This was not merely a contract for the supply on hire of machinery, plant and equipment which would perform a specified operational task. Included in the terms of the contract was the agreement of Nea to refurbish and equip the Hazemag Impactor by putting it into operational condition, to manufacture and supply a chassis for the transport and operating support of the impactor, and to supply a fitter to carry out the commissioning operations on delivery to the site. Substantial repairs, refurbishment and re-equipping of the impactor was contemplated and carried out under the agreement, as well as the supply and delivery of the chassis and the commissioning of the plant. This involved the supply of services which, although they have not resulted in the delivery of the equipment on hire in a condition to perform the contemplated task, have nevertheless been performed by the plaintiff and now cannot be restored by way of counter-restitution.

128 Secondly, although the impactor and plant never produced at the operating level contemplated, there was some ore processed which could have been utilised for the heap leach process. Consequently, I am satisfied that the present is another example of a contract where it is not possible to conclude that there has been a total failure of consideration because the defendant has had, although only to a limited degree, the benefit of the hire of the goods to be supplied: O'Dea v Allstates Leasing System (WA) Pty Ltd [1983] HCA 3; (1983) 152 CLR 359 at 392 - 393 per Brennan J. This is but part of the wider principle that partially executed contracts will not produce a situation of total failure of consideration: National Carriers Ltd v Panalpina (Northern) Ltd [1980] UKHL 8; [1981] AC 675 at 687.

129 The inapplicability of relief for total failure of consideration in these circumstances is also justified by the fact that to treat this as a total failure of consideration case, would leave the plaintiff with no form of recompense for the work and labour done in refurbishing the impactor, preparing the chassis and transporting the equipment to Hawkins Find because restoration of the value of that work would not occur. A more tailored, and therefore preferable, adjustment to the rights of the parties is to leave them to their remedies for damages for breach of contract or other causes of action because then, if a breach causing damage is proved, the process of assessment of the damages will accommodate the payments which had been paid or which would have been paid had the contract been performed or, in some instances, performed up until the point of termination - see, generally, Goff & Jones, "The Law of Restitution", 5th ed (1998), ch 20, 510 - 534. This quest for "the benefit bargained for by [Magenta]" also returns the focus to the character of the payment of $15,625 made by Magenta to Nea on 31 July 1995 which was described as a deposit in Exhibit 2, referable to half one month's proposed rent for the eventual hire of the plant.

130 As already noted, the defendant has not counterclaimed for the return of this deposit on the basis of total failure of consideration or upon any other species of restitutionary claim. Its claim for this sum as a component of its damages strongly suggests that it was a payment properly made under the contract before termination. As there has been no specific counterclaim for the return of that deposit the parties, in their submissions, have not addressed the question of whether or not the payment was in truth made as a deposit which could be forfeited and retained by Nea if the contract did not proceed in the absence of a breach by Nea leading to termination: Re Continental C & G Rubber Co Pty Ltd [1919] HCA 62; (1919) 27 CLR 194 per Isaacs and Rich JJ at 204, or whether it was a deposit intended as an earnest for the performance of the contract by Magenta, or whether it was an advance payment for the services to be performed by Nea in refurbishing and fitting out the equipment and delivering it to site, a cost which was factored into the calculation of the monthly hire payments but, was payable in advance in respect of the first instalment of hire - see, generally, McDonald v Dennys Lascelles Ltd (supra) at 477 - 478 per Dixon J.

131 In the present instance I consider that the preferable characterisation of the payment of the $15,625 is that it was a payment which was to have a dual purpose of constituting a deposit which could be retained by Nea if Magenta did not perform its obligations by taking delivery of the plant at the time it was ready for hire and, also, as a part payment for undertaking the labour and other work necessary to refurbish the impactor, prepare the chassis and deliver the plant ready for operation at the mine site. These features of the agreement, the payment of the deposit, the work done on preparing the machinery for hire and delivering it to Hawkins Find all demonstrate that this is not a case of total failure of consideration, and that the payment of the deposit by Magenta is not recoverable on a restitutionary claim but, rather, in the latter's counterclaim (if that is made out) is a component of a claim of damages for wasted expenditure.

The written terms of the contract for the supply and hire of the crushing circuit

132 A major issue, as this case developed, concerns what was said between Messrs Groenenberg, Halbert and Bandy at the meeting of 25 July 1995 about the hardness of the ore that was to be processed at Hawkins Find and the suitability or otherwise of the Hazemag Impactor for such ore. Important though that issue is, it must be deferred for the moment until the written terms of the agreement between these parties have been examined because, to a degree, these form part of the matrix against which the contending versions of the parties concerning oral terms, and representations, must be evaluated.

133 By par 3(2) of its statement of claim the plaintiff alleges that the agreement for the supply and hire of the crushing circuit equipment was partly in writing and partly oral and, insofar as it was in writing, that it comprised a facsimile transmission dated 26 July 1995 (Exhibit 2) from the plaintiff and an order number 5103 dated 28 July 1995 (Exhibit 3) from the defendant. By its defence the defendant denies that there was any written agreement for the hire and supply of the machine alleging, instead, that the agreement was concluded orally by Halbert, Bandy and Groenenberg in the course of their meeting of 25 July 1995. However, the defendant departs from this allegation in its further particulars of defence where, by par 1(5)(a), in response to a request for particulars as to the source of an alleged express or implied condition as to merchantable quality, good and proper condition and fitness for purpose, the defendant responds by asserting that the express and implied conditions arose both orally and in writing and, insofar as they were in writing, they are to be found in the facsimile from the plaintiff to the defendant of 26 July 1995 (Exhibit 2).

134 I am satisfied that the agreement for the supply and hire of the equipment was indeed partly oral and partly written. Insofar as it was oral it consisted of terms agreed in the course of discussions on 25 July 1995 and subsequent non-contentious variations. Insofar it was in writing, it comprised Exhibits 2 and 3, that is the facsimile transmission of 26 July 1995 and the order of 28 July 1995. It is to those two documents that I now turn.

135 The facsimile from the plaintiff to the defendant of 26 July 1995 (Exhibit 2) consists of six pages. The first two pages are in manuscript of Mr G Groenenberg on stationery of the first defendant and addressed to Mr Halbert and Mr Bandy. The third page is a manuscript diagram of the proposed configuration of the crushing plant as discussed and explained by Mr Groenenberg at the meeting of 25 July 1995 but with more detail and elaboration including a listing of the seven items of equipment and their respective prices. That page resembles, but contains more details than, the sketch of the proposed layout which Mr Halbert copied into his diary at the meeting of 25 July 1995 (Exhibit 27) but without the more elaborate identification of components, nor a list of their descriptions and prices. The fourth page of the exhibit is a standard list of the plaintiff's hire rates for mobile screening conveying and stockpiling equipment, together with certain standard hiring conditions. The fifth and sixth pages consist of the plaintiff's standard form hire agreement, with the hirer's address, particulars, the details of the agreement and the plant description all left blank, followed by a series of printed terms and condition of hire consisting of 15 clauses in small print.

136 The plaintiff's fax of 27 July 1995 refers to the enclosed "rough sketch of proposed layout", and continued:

PLANT - 2 x mobile screening plants

1 x 8ft x 4ft, 1 x 8ft x 3ft fitted with appropriate meshes. Primary screen to have 200mm APT grizzly bar settings;

1 x AP4 IMPACT CRUSHER on frame with drive motor, electric start controls and discharge conveyor;

2 3 x stockpile conveyors 11m to 15m

1 x electro magnet with controls

Hire Rate - $31,250 per calendar month.

Mobilisation & Demob - arranged by you - craneage to load (max 5 tonne) in our yard no charge. On site craneage to your account.

COMMISSIONING - Our fitter to travel to site to assist with assembly and instruct on operation & servicing of equipment $350 per day including travel and accommodation.

CONDITIONS - As per our standard hire terms & conditions and our Hire Agreement to apply

EXCLUSIONS - Operators, wear parts, additional meshes, dust suppression, electrical connecting on site, Power supply, excavations etc, fuel, oils, consumables, servicing & maintenance etc, modifications to standard units other than quoted.

PAYMENT -

(a) $15,625 (1/2 month) deposit with order prior to preparation commencing;

(b) (other services if required) 14 days from date of service;

(c) hire invoices payable by 30th day of following months;

I trust this covers most of your requirements. If not please call at your convenience.

Best regards.

Geoff G.

PS Estimated preparation 4 weeks from date of order with a deposit."

Exhibit 2, as tendered, showed manuscript alterations to the terms just set out which had also been made in Mr Groenenberg's handwriting. The number "3" for the stockpile conveyors had been crossed out and changed to "2" in the list of plant. The hire rate showed a calculation deducting $1630 from the monthly rental of $31,250, reducing that figure to $29,620 with words added in brackets "allowance for one less stockpiler". Those alterations must have been made after the document of 26 July 1995 was faxed to the defendant because Magenta's acceptance (Exhibit 4) specifically refers to $31,250 as being the calendar monthly hire charge. When those particular changes were made does not emerge but nothing turns on that lack of certainty.

138 The fourth page of Exhibit 2, namely the list of hire rates and certain terms of hire, list the following terms:

"1(a) hire rate is based on maximum 10 hour day or part thereof;

(b) double shift 1½ x normal rate;

(c) weekly and monthly rate is for 10 hour day six day week;

(d) part month in excess of full month is charged at 1/25th of monthly rate for each day;

(e) minimum hire period screens etc two (2) days, Crushers one (1) week.

(f) credit terms available to approved clients on application.

2. State Government Rental Duty of 1.8% is not included in the hire rates and applicable to all hire charges.

3. We reserve the right to alter rates without notice.

4. Mobilisation, demobilisation and commissioning is not included in the hire rates.

5. Modifications to standard units to Hirer's account.

6. Service, maintenance and damage is the responsibility of the Hirer.

7. Hire charges begin when plant leaves our yard and concludes on return unless otherwise agreed and subject to damage repair time on return.

8. Wear parts including cone and jaw manganese, screen meshes etc to Hirer's account.

9. Cleaning at conclusion of hire if required to Hirer's account at $50 per hour.

Our Hire agreement in addition to the above conditions will apply to all hire of equipment along with special terms and conditions that may be subject of negotiation from time to time."

139 The fifth and sixth pages of Exhibit 2, containing the standard terms and conditions of hire stipulates that the hirer agrees:

"1. To pay hire charges and all other charges and at the agreed rate and at the agreed time or in such instance as no agreed time exists, payment is to be made within 30 days of invoice date.

2. To insure the Plant against, or pay the owner, for any loss due to theft or damage of the Plant whether caused by act of God or otherwise. Care, responsibility, and liability by the hirer commences upon Plant leaving the owner's premises and concludes on return in good working order whether transport is arranged by owner or by hirer. If Plant is damaged and unsuitable for rehire on return, hire charges remain payable until repairs are carried out.

3. To ensure the safekeeping of the Plant and to operate it within its specifications and ability and by the Owner's instructions.

4. Damage caused by undue wear and tear should be repaired at the hirer's expense. This includes, but is not limited to damaged conveyor belts, damage due to rough loading or handling, neglect by hirer of maintenance and servicing, dust related electrical failure, engine damage due to dust ingestion. In the event of these circumstances, hire charges remain payable until Plant is made suitable for continuation of operation or for rehire.

5. Hire begins upon the Plant leaving the owner's premises and ends upon return to owner's premises unless otherwise agreed or as provided for in items 2 and 4.

6. Hirer is responsible for all maintenance, including lubrication, day to day mechanical repairs and servicing. Owner accepts responsibility and cost for major mechanical repairs necessary due to elements out of the hirer's control. Repairs in these circumstances will be at hirer's expense unless owner is notified in writing and agrees to accept costs prior to work commencing.

7. The owner has the right to terminate the hire and recover the hired Plant at any time.

8. That no warranty or condition expressed or implied is given by the owner as to the condition of the plant or as to the suitability or fitness of the plant for any purpose.

9. That the owner is not accept [?] responsible for any injuries to persons or third parties or damage to property or equipment arising out of the use of the owner's Plant.

10(a) To indemnify and hold the owner harmless against all claims, action, suit[o]s, demands, costs, expenses including legal costs, and expenses in any way arising out of the use of the Plant by the hirer during the period of the hire whether caused by negligence of the hirer, his employees or agents or by negligence of any other persons whatsoever arsing out of the condition of the Plant or the use to which it is put.

(b) To indemnify the owner against any union action, claims or suits or demands and shall have no claim whatsoever against the owner resulting from such union actions, claims, suits and demands or any interference or protests that affect the Plant or property on which the Plant may from time to time, be situated.

(c) To indemnify the owner against any consequential damage or claim howsoever arising as a result of hiring the Plant.

11. To pay the owner for repairs carried out at the hirer's request or repairs necessary as a result of damage or neglect by the hirer. Travel and accommodation expenses to be payable by hirer to owner if location of Plant is beyond 50km from the owner's premises.

12. If a fixed hire period is terminated early, hire charges remain payable until agreed final hire date or until Plant is rehired.

13. If the owner arranges transport of Plant at hirer's request all endeavours will be made to deliver by the specified time but in any event the owner will not be liable to the hirer for late delivery or non-delivery or any loss or damage occasioned to the hirer as a result of such late or non-delivery.

14. Stand down will only be applicable where agreed to in writing prior to this agreement being endorsed by owner and hirer. Otherwise any request by hirer to the owner will be in the first instance verbally and confirmed in writing for consideration by owner. Adjustments to hire charges will be made on the merit of the request and only in the above instances.

15. To reimburse the owner for any costs incurred in pursuing the hirer for monies owed under this hire contract that are outstanding beyond the trading terms described herein. Interest on outstanding accounts accrues at current National Australia Bank standard customer overdraft rates calculated at weekly rests."

140 I find that this document, Exhibit 2, taken in conjunction with the discussions which had taken place on 25 July 1995, constituted an offer by the defendant to let on hire the itemised equipment on those terms. It did not specify any duration for the hire but the oral discussions on 25 July 1995 had made it clear that it was to be a long term hire for up to about 12 months, but with the possibility that the defendant may purchase the equipment at a price or prices to be agreed later after about three months if the gold extraction process proved to be successful. That offer to hire was then accepted by Magenta by the dispatch of order No 5103 signed by Mr Bandy on 28 July 1995 (Exhibit 3). This was an order for the lease supply of crushing and screening equipment as per schedule reference No 11673 (an explicit reference to Exhibit 2) at $3125 per calendar month. It specified, contrary to the terms of the offer, that the hire was to commence as from the date of commissioning by Hydraplant. That involved a variation of the terms proffered by the plaintiff and there is no evidence of any express approval of that variation by the plaintiff, whether written or oral. Nevertheless, the acceptance by the plaintiff of the cheque for the deposit of $15,625 (Exhibit 4) on 31 July 1995 delivered by Messrs Bandy and Halbert, plainly signifies a tacit acceptance by Nea of that variation and that is confirmed by Nea's subsequent conduct in proceeding with the preparation of the equipment and its delivery to Hawkins Find and commissioning.

141 Clause 8 which purports to exclude any warranty or condition as to the condition of the plant or its suitability or fitness for any purpose is to be found in the plaintiff's standard terms and conditions of hire which were supplied to Magenta by fax on 26 July 1995 as part of Exhibit 2. These set out the terms upon which the plaintiff was willing to prepare and supply the equipment to be hired. It was that document which was addressed by Magenta's faxed order for the supply of the goods on lease as set out in Exhibit 3 of 28 July 1995 and the payment of the $15,625 deposit by the cheque of 31 July 1995 followed.

142 I am satisfied that Exhibits 2 and 3 constitute the written components of this contract for the supply and hire of plant, notwithstanding that they were subsequently varied by subsequent oral agreements to reconfigure the screens and conveyors which were to be supplied. Exhibit 2 was the formal offer to supply the goods on hire made by the plaintiff and Exhibit 3 was the written acceptance of that offer by the defendant which acceptance was also evidenced by the payment of the deposit. The dispatch of Exhibit 2 (including the standard terms and conditions of hire) preceded the formal acceptance of the contract for the supply of the plant on hire and therefore afforded Magenta an opportunity to scrutinise those terms and conditions before acceptance.

143 The same terms and conditions are to be found in Exhibit 8, which is another copy of the standard terms and conditions but completed in manuscript with the particulars of this hire enumerating the plant supplied, addressed to Magenta dated 20 September 1995, and referring specifically to order No 5103 (Exhibit 2). This document, Exhibit 8, was signed as agreed by Magenta by Mr Halbert and countersigned for the plaintiff by Mr Joshua Groenenberg and was dated 26 September 1995, that is, the date upon which the commissioning operations at Hawkins Find were completed after the delivery to the site of the plant before it was set up by Mr Joshua Groenenberg. In fact it was actually signed late on the afternoon of 25 September 1995 after work for that day had ended. The same clause purporting to exclude conditions or warranties of condition, suitability or fitness was included in that document. I do not consider that to be a contractual document as it was delivered and signed after the supply and hiring of the equipment had all been agreed upon. It was, in this case, no more than a receipt and an acknowledgement by Magenta of the delivery of the hired plant on completion of its commissioning.

144 However, the contract for the supply and hire of the crushing circuit was also partly oral and the oral component included certain terms agreed in the course of oral negotiations at the plaintiff's Welshpool plant on 25 July 1995 and, of course, the subsequent oral variations agreed upon on or about 12 September 1995 for the removal of the second screen, its substitution by a wet screen and the addition of the third conveyor. The oral terms agreed upon at the discussions on 25 July 1995 included, speaking generally:

• that the impactor and plant were to be used for the crushing of stockpiled ore at the lease at Hawkins Find which was of a general size and nature as then described (that description being a major point of controversy in this action);

• that the plant to be provided on hire would be the individual items of plant identified in the sketch plan made by Mr Groenenberg during the course of the discussion and configured in the manner so displayed (a copy of that diagram identifying the plant and its configuration was there and then copied by Mr Halbert into his diary - Exhibit 27 for 26 July 1995 - and the original sketch was retained by Mr G Groenenberg and, with additions and elaborations, was later dispatched to Magenta as part of Exhibit 2);

• that the ore which was to be fed into the crushing circuit had a major dimension of approximately 200mm to 120mm and that it was intended to be crushed to a dimension of 8mm or less, with a recycling circuit for ore emerging from the crusher greater than 8mm in dimension;

• that the crushing circuit would include two screening plants which would separate out fines of 3mm or less and then collect crushings of less than 8mm but greater than 3mm in dimension;

• that the second-hand Hazemag-AP4B Impactor inspected by Groenenberg, Halbert and Bandy in the yard at Welshpool, once it had been refurbished and put in proper working order would be the crushing machine for the circuit;

• that the hiring of the equipment would be from month to month but that the expected duration of the hire would be of the order of about 12 months or longer;

• that Nea would send a fitter with the equipment to Hawkins Find to supervise the assembly of the plant and to oversee its commissioning and operation and a fitter would also be available for subsequent servicing of the equipment as required at a rate of $350 per day;

• that the plant and equipment comprising the crushing circuit would be available for delivery on the completion of the refurbishment of the impactor and other preparatory work after an interval of about four weeks;

• that the transport of the equipment comprising the crushing circuit, once it became available for hire, would be arranged by and at the expense of Magenta (this was later varied orally so that delivery was to be arranged by Nea but at the expense of Magenta).

145 I am satisfied that at the meeting on 25 July 1995 there were also detailed discussions about hire rates, times of delivery, fit out and the opportunity for Magenta, if it chose to do so, to purchase some or all of the items of plant in the crushing circuit after about three months or so of successful gold extraction operations at Hawkins Find.

146 The case for Magenta was that final agreement on all the terms of the contract for the supply on hire of the crushing circuit was reached orally at the end of the discussions with Mr Groenenberg at the plaintiff's yard at Welshpool on 25 July 1995 and, importantly, the standard terms and conditions of the plaintiff had not been produced or discussed at that meeting so, consequently, did not form any part of the contract which had then been concluded. In the words of Mr Halbert, he shook hands on the deal with Mr Groenenberg, at the end of the meeting and from then on always believed that the agreement had been concluded on the terms then discussed.

147 Mr Groenenberg's evidence was to the contrary. He said that while the parties had largely agreed upon the basis of the equipment hire contract which was under discussion by the end of the meeting on 25 July 1995 it was never contemplated that there would be a formal binding contract unless and until there had been written acceptance of the principal terms which he was to reduce to writing after the meeting.

148 The plaintiff's case, therefore, is that the contract for the supply of the crushing circuit equipment on hire was not concluded until the written acceptance by Magenta of the offer of hire was delivered by the faxed order form of 28 July (Exhibit 3) and, that even then, no work would commence unless and until the stipulated deposit was paid, as it was by cheque on 31 July 1995. In essence, the plaintiff contends that this contract for the supply and hire of the designated crushing circuit was of the third species of agreement referred to in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 360, namely, an instance in which the intention of the parties is not to make a concluded bargain at all unless and until they execute a formal contract. Despite Mr Halbert's stalwart assertion that the contract was concluded by a handshake at the completion of discussions at the Welshpool yard on 25 July 1995 there are, I am satisfied, convincing indications that no formal contract eventuated until the terms agreed had been reduced to writing and accepted by the parties.

149 First, it was the standard practice of the plaintiff to supply equipment on hire only upon acceptance of the formal details of the agreement set out on the forms used by Nea for that purpose which, as already described, included the standard terms and conditions of hire.

150 Second, this was a somewhat complicated hiring involving the supply of seven major items of plant including the impactor, which needed special work and attention, and a transportable chassis for the impactor which would have to be constructed. It was simply a matter of natural routine and prudence that the identification of these items, arrangements for their mobilisation and de-mobilisation and the supply of a tradesman for their commissioning and service together with other agreed terms relating to the amounts and frequency of instalments should be documented. The duration of the proposed hire agreement was expected to be of the order of about 12 months and the overall value of the equipment to be supplied was considerable. These features also point to the desirability of recording in a precise and permanent manner the details of the substantial commitments which the parties were undertaking to each other.

151 Third, the documents comprising Exhibit 2 were dispatched under an oral request by Mr Groenenberg for written acceptance or confirmation which eventuated by the defendant's order (Exhibit 3).

152 Fourth, the defendant itself has asserted, by the further and better particulars of its counterclaim delivered on 18 December 1996, that the facsimile from the plaintiff to the defendant dated 26 July 1995 (Exhibit 2) constituted a writing containing an express or implied condition of the hiring agreement that the plant was of merchantable quality, was in good and proper condition and was reasonably fit for the purpose as alleged by Magenta in par 5 of its defence (see Answer 1(5)(a) in the defendant's further and better particulars).

153 It also follows from these findings that the standard terms and conditions of hire forming part of Exhibit 2 were in the possession of the defendant before the order form (Exhibit 3) was prepared and the order placed by being left with the plaintiff on 28 July 1995. It is also the case that Exhibit 3 specifically addresses the plaintiff's hire proposal by including on its face the words: "Reference No 11673" - a reference to Mr Groenenberg's hiring proposal of 26 July 1995.

Discussions between the parties - oral terms and representations

154 Mr Bandy had known Mr Geoff Groenenberg for many years as a result of an acquaintanceship which they had when they were both young through an involvement with football. While these two knew each other, they were not on close social terms. Mr Halbert had no prior association with Mr Groenenberg and had no dealings with him until 1995.

155 On 7 January 1995 Mr Halbert telephoned Mr Groenenberg at Nea enquiring about the possibility of hiring a crushing plant. At that stage Magenta was giving consideration to the possibility of establishing a gold extraction process at Gindalbie or at its lease near Robe River and Pannawonica. This enquiry did not relate to any proposed operations at Hawkins Find and no such development was then in contemplation by Magenta. Mr Halbert made a note of this conversation in his diary (Exhibit 27) and his records show that the quotes which he was given by Mr Groenenberg were $80,000 per month for one to three months hire; $75,000 per month for four to six months hire; and $70,000 per month for seven to 12 months hire. He also noted that the quoted cost for a generator set was $9000 per month and that the purchase price for the crushing circuit was $1,200,000. This related to a jaw crusher and none of the quotes involved an impact crusher.

156 The proposal to commence an ore extraction process at Gindalbie or Pannawonica was not pursued by Magenta and, instead, Messrs Halbert and Bandy elected to join with Mr Hoppman in a joint venture for Hawkins Find. The first reference to a Hawkins Find or Ora Banda operation contained in Mr Halbert's diary appears to be an entry on 4 July 1995 and the entries in the following days include references to various estimates of reserves, a meeting with Mr Hurley on 9 July 1995, a reference to the existence of a crushing plant at Yalgoo on 11 July, a diagram of the ore stockpile and approximations of its size on 12 July, some gold reserve calculations on 13 July, some references to a carbon and pulp treatment process on 14 July, a reference to the heap leach method on 15 July, a visit to the Golden Grove site on 19 July and to other enquiries about crushers and crushing circuits, including one with an impactor crusher on 22 July.

157 Mr Halbert and Mr Bandy said in evidence that before 25 July they had made enquiries from five or six other sources about the availability and cost of components in a crushing circuit for the project at Hawkins Find, including a visit to Yalgoo. I accept their evidence in this respect.

158 On the morning of 25 July 1995 one of them telephoned Mr Groenenberg at Nea and asked if they could come and enquire about the availability of a crushing circuit for a proposed treatment operation which they had in mind for Hawkins Find. An arrangement to meet at Nea's Welshpool yard later in the day was made.

159 What occurred at the meeting at Nea's premises between Mr G Groenenberg and Messrs Halbert and Bandy on 25 July 1995 is the major factual matter in dispute in this trial. The accounts given by Mr G Groenenberg for the plaintiff and by Messrs Halbert and Bandy for the defendant cannot be reconciled. In order for me to decide, on the probabilities, what in fact occurred it is necessary to outline the different versions given of this meeting by the parties.

160 Mr G Groenenberg became a director of Nea in 1987 and at that time the business of the plaintiff was to hire mobile screening and conveying equipment but it did not then deal in crushers. Before then Mr Groenenberg had been employed by several companies dealing with commercial and industrial supplies, had run a newsagency business for four or five years, had been a manager of a fleet motor vehicle dealership for four or five years, and had a brief term in the furniture business. He had no formal trade or tertiary qualifications and until his association with Nea had not worked in or in connection with the mining industry.

161 In late 1990 or early 1991 Nea began hiring crushers. There were various types of crushers, jaw crushers and cone crushers available for ROM ore, primary jaw crushers and secondary cone crushers. In 1995, at the plaintiff's Welshpool yard, it had, among its stock, the Hazemag Impact crusher which is the subject of this action.

162 According to Mr Groenenberg, Mr Bandy telephoned in July 1995 to say that he had another project that Magenta was looking at and needed crushing plant. Groenenberg repeated the quotation with the rates given in January for this new project which was to be at Ora Banda. According to him, Mr Bandy said this was too expensive and was wanting a cheaper option. Some days later Mr Bandy telephoned again saying that he and Mr Halbert wanted to come and see Mr Groenenberg and that they arranged to meet.

163 On their arrival at Nea's yard Mr Bandy and Mr Halbert went into Mr Groenenberg's office and discussed the crushers which were the subject of the January 1995 quote and enquired whether it would be possible to cross-source equipment from other hirers. Mr Groenenberg repeated his recommendation that a jaw crusher appeared to be needed for this project which was to crush about 180,000 tonnes of stockpiled ore of size 120mm or less down to 8mm or less with a second screening plant to 3mm or less for heap leach treatment at Hawkins Find.

164 Mr Groenenberg says that he asked his two visitors what type of rock they intended to put through the crusher and that one of them replied that it was soft rock. In the course of this discussion Mr Bandy said words to the effect that: "You can hit the ore with a hammer and it breaks readily". At this stage all three men left Mr Groenenberg's office to go out into the yard to have a smoke. As they were standing there, looking at the various items of machinery stacked about, Mr Groenenberg says that Mr Bandy pointed to the Hazemag impact crusher which was nearby and said: "What about this one?". Mr Groenenberg says that he replied by saying that it was a soft rock crusher and that that was all that it was for. Mr Groenenberg also said that it was not then in working order, that it needed a frame and conveyor to be built for it and funds would be needed to refurbish it through the workshop. Mr Groenenberg says that Mr Bandy replied by saying that this is what Magenta wanted, that he knew that an impact crusher had previously been used at Ora Banda and that the Hawkins Find ore was soft. Groenenberg estimated that about $100,000 of expenditure would be needed to make this impactor good.

165 Mr Groenenberg said that neither Mr Halbert nor Mr Bandy mentioned that the Bond Work Index for the Hawkins Find ore was 18 kWh/T or made any other mention whatever about a Bond Work Index for the ore. He said that he was not then aware of the significance of a Bond Work Index or familiar with the implications which any particular index might have for the hardness or abrasiveness of ore. He also stated that neither Mr Bandy nor Mr Halbert had with them at that meeting any papers or extracts from a mining report for the Hawkins Find operation and that they did not show him extracts containing references to Bond Work Index or the hardness of the ore.

166 According to Mr Groenenberg, Mr Bandy and Mr Halbert then indicated that they desired to hire that impactor but before taking the matter any further Mr Groenenberg thought that he should discuss the proposal with his co-director and colleague, Mr Brent Cooper, who was the Managing Director of Hydraplant Equipment Pty Ltd, the major shareholder in the plaintiff. Mr Cooper had more experience with crushers so Mr Groenenberg went and spoke to him while Halbert and Bandy waited.

167 Mr Brent Cooper was called and gave evidence for the plaintiff. He confirmed that he was a director of Hydraplant Equipment Pty Ltd and of the plaintiff in 1995 and that the Hazemag Impactor was held by the plaintiff in stock in January that year. He went on to say that Mr Groenenberg approached him during 1995 to say that there was a customer interested in hiring the Hazemag impact crusher. Mr Cooper could not say when in 1995 he had this discussion with Mr Groenenberg. The meeting was in Mr Cooper's office at the yard at 99 Dowd Street, Welshpool. Mr Groenenberg told Mr Cooper that he had a customer interested in hiring the Hazemag Impactor, whereupon Mr Cooper asked: "What are they going to feed it with? What are they going to put into it?". Mr Groenenberg responded by saying that they said that the ore is relatively soft. Mr Cooper attributed the reason for Mr Groenenberg's visit to the fact that Mr Groenenberg was aware of Mr Cooper's dislike of impact crushers and also knew that Hydraplant Equipment Pty Ltd had had some disastrous experiences in the past with impact crushers on the wrong type of material. The only other recollection which Mr Cooper had of the details of this conversation with Mr Groenenberg was that Mr Groenenberg said that he had been told that the ore breaks very easily.

168 This evidence from Mr Cooper was taken despite objection by counsel for the defendant on the basis that it was both hearsay and irrelevant because the facts to be decided involved actual exchanges between Mr Groenenberg and Messrs Halbert and Bandy at which Mr Cooper was not present. I ruled that Mr Cooper's evidence was not admissible to establish what had occurred in the discussions between Mr Groenenberg and Magenta's two directors but that it was admissible to corroborate Mr Groenenberg's evidence that, in the midst of discussions he had broken off to discuss with his colleague, and to provide evidence showing that Mr Groenenberg's description of the suitability of the impactor only for soft rock was consistent with his actions in seeking advice about the proposed hiring from his business colleague.

169 Apart from confirming that this had been a fairly brief discussion without any detailed consideration of the proposed use of the Hazemag Impactor Mr Cooper did not say anything further about the discussion. He did, however, explain that impact crushers are very susceptible to wear, very susceptible to tramp iron and are very expensive to rebuild. He said that they can crush materials satisfactorily but they had a very high rate of wear depending upon what is put into them. Mr Cooper explained that he was not involved in making any decisions about the configuration of this crushing circuit.

170 Mr Groenenberg then said that, immediately after his discussion with Mr Cooper, he returned to speak to Messrs Halbert and Bandy who had been waiting and said words to the effect that: "If you say the ore is soft then this may do for you." The three then discussed other incidental equipment to make up the circuit, including two screens to separate out the material of less than 8mm in dimension and then less than 3mm in dimension into two separate stockpiles. Mr Groenenberg was quite emphatic that he was not shown or invited to inspect any rock samples of the ore to be crushed at Hawkins Find and that he did not ask for any. He sketched out a plan of the proposed circuit showing the various items of equipment and discussed prices generally. He says that Messrs Bandy and Halbert asked him to put together some prices and to follow up the next day with prices, rates and conditions and so forth. According to him, no agreement to take any equipment was made in the course of the meeting on 25 July 1995.

171 The next day Mr Groenenberg prepared a written proposal for the hire of the equipment which had been discussed and sent that by fax to Mr Bandy. That is Exhibit 2, the details of which have already been described. This was followed by an order from Magenta accepting the proposal (Exhibit 3) and then Mr Bandy and Mr Halbert called in on 31 July 1995 with the cheque for $15,625 deposit. Mr Groenenberg described how the plaintiff then proceeded to go ahead to build the frame, do the electrics and oversee the refurbishment of the equipment as arranged. All the work done on the Hazemag Impactor took place at the Nea workshop at Welshpool, including the work performed by the electrical subcontractor and by Hydraplant Equipment Pty Ltd.

172 There were other discussions between Mr G Groenenberg and Mr Halbert or Mr Bandy between 31 July and 18 September 1995 which, except in immaterial detail, are not contentious. As described elsewhere in these reasons, these related to an initial variation of the order to remove one of the three stockpile conveyors and then later to delete a second screen but add a 7 metre conveyor and then, still later, to supply on hire a wet screen. Another oral variation subsequently made was that, in lieu of Magenta being responsible to arrange for transport of the equipment from Welshpool to Ora Banda, this would be organised by Nea and the costs would be payable by Magenta.

173 On or about 12 September 1995 when one of these or an associated subject was being discussed with him by telephone, Mr Bandy asked Mr Groenenberg for a price for the purchase of all the equipment and was given a figure of $255,500 or $307,500 depending upon whether or not the second screen was included. Although the purpose for which the crushing circuit was required was made known to Mr Groenenberg on 25 July 1995, that is to be used to crush stockpiled ore at Hawkins Find from approximately 120mm dimension to 8mm or less at the rate of about 50 tonnes per hour, Mr Groenenberg said that he never gave any assurances that the crusher or the equipment could do this work and that he did not offer to advise or advise in any way the two men about the suitability of the equipment for the project.

174 Leaving aside the conflict in the evidence between this version and that given by Messrs Halbert and Bandy, I am unable to accept that no assurance of any kind was given by Mr Groenenberg about the suitability of the equipment for the task in hand in the circumstances which he described. Plainly, Messrs Halbert and Bandy were looking for equipment which could undertake the proposed crushing arrangement at Hawkins Find for a year or more and in circumstances where there was to be only one crusher in the circuit. The identification of the impactor, the selection of the other equipment, the sketching of the diagram and the discussion about the hire arrangements could only, in my view, give rise to a representation that the plant under discussion, and the impactor itself, was suitable for the task which had been disclosed and would be reasonably fit to perform that task. Indeed, a warranty to that effect would be implied by law in the absence of a contractual provision or other clear disclaimer, excluding any such assurance. There was no evidence from Mr Groenenberg that any express statement was made by him, or by anyone else on behalf of the plaintiff, that no implied warranty or condition was being given about the suitability of the equipment or its fitness for purpose, or that, in agreeing to take this equipment, the defendant was acting entirely on its own responsibility.

175 The account of the meeting of 25 July 1995 by Messrs Halbert and Bandy is quite different. According to Mr Halbert he and Mr Bandy went to Mr Groenenberg's yard in their utility and in the back there were two milk crate-sized boxes containing samples of the ore from the stockpile at Hawkins Find which they had been taking with them whenever they had been making enquiries about the selection of plant for the operation. Mr Halbert says that they took one of these rock samples with them when they went inside and met Mr Groenenberg in his office and placed this on the desk. The size of the samples, indicated by those produced in evidence as Exhibit 23, suggests that this sample rock was of a size roughly between that of a golf ball and a tennis ball, although squarer and more angular. It could conveniently be held in one hand and was too large to be overlooked.

176 After introductory remarks, the two men explained to Mr Groenenberg that they were looking for crushing plant and a circuit for Hawkins Find and that they had not been involved in a ore crushing venture before. They were talking about crushing a stock pile of ore already crushed to about minus 120mm in dimension to minus 8mm or minus 3mm and were wanting to enter into a hire/buy arrangement for equipment as they expected to be at the site for two years or so. Extracts from Exhibits 51(1) and 15(2) each reporting that the ore had a Bond Work Index of about 17 kWh/T were produced and shown to Mr Groenenberg and he was told that the Bond Index was about 17 or 18. Mr Halbert freely confessed that he did not know what that meant. Mr Halbert said that Mr Groenenberg then responded by saying words to the effect: "I think I have the ideal machine for you out in the yard - it is an impactor", and that the only other crusher available would be a large jaw crusher which could process about 200 tonnes per hour. The three men then went out into the yard to inspect the Hazemag Impactor which was standing nearby and, as Mr Halbert said, it looked all right to him.

177 According to Mr Halbert, Mr Groenenberg then started to draw up a sketch of how the proposed crushing circuit would be configured which included the impactor, where the ore would go, the recirculating feed to the impactor and how the ore would come down to less than 8mm. Mr Halbert stated that Mr Groenenberg "basically said that he had an impactor which would be ideal for the work and that he would build a frame/trailer and put a machine on it". Mr Halbert claims that he and Mr Bandy made it known to Mr Groenenberg that they had never done crushing before and were relying on his knowledge. They then went through a whole negotiation in the course of which Mr Groenenberg told them they would need a magnet to separate out any tramp iron and that they accepted this.

178 According to Mr Halbert, Mr Groenenberg said that he would just have to supply the electrics to the impactor and check it all out and see that it was 100 per cent right. He, Mr Halbert, copied into his diary the basic elements of the sketch diagram that Mr Groenenberg drew in the course of that meeting. In Mr Halbert's words, they then shook hands on the deal and said that they would be in with a cheque on the Monday.

179 In elaborating upon the details of the meeting, Mr Halbert said that he and Mr Bandy told Mr Groenenberg that the ore was porphyry granite and that they were aware that Hawkins Find ore had, in the past, been crushed by Littles Contractors for Westcoast Holdings Ltd by an impact crusher. The meeting concluded and, apart from coming in with Mr Bandy with a cheque on 31 July, Mr Halbert left to go back to Ora Banda to start preparing the site in order to set up roads, dams, water supplies and other facilities.

180 Mr Halbert maintained that there was no discussion about a jaw crusher at the meeting of 25 July 1995 and that, after making their requirements known, it was Mr Groenenberg who suggested that the impact crusher which he had in the yard would be suitable for their project. He was emphatic that Mr Groenenberg had not mentioned at any stage of the discussions that the impactor would be suitable only for soft rock of any kind or that they were told that it had been used for crushing limestone. According to him, Mr Groenenberg said that the machine could definitely crush 50 tonnes of ore an hour and may go up to 70 tonnes per hour. Mr Halbert did not remember any occasion when Mr Groenenberg left him and Mr Bandy during the conversations in order to go and speak to Mr Cooper or to some other person within the Nea organisation, but conceded that it is possible that he could have spoken to someone else briefly. He denied reading cl 8 in the standard terms and conditions of hire, either before the payment of the deposit on 31 July 1995, on acknowledging the commissioning of the plant on 25 September or at any other time before receiving Mr Groenenberg's letter of 17 October 1995 (Exhibit 12).

181 Mr Halbert accepted that Mr Groenenberg did indicate to him and to Mr Bandy in the course of the discussion that he would have go and speak with a third party regarding the suitability of the impact crusher for the application. At first he was emphatic that Mr Groenenberg did not leave their presence during the course of the discussion and therefore could not have spoken about the subject to Mr Cooper while they were there. He maintained that position, saying that it is possible that Mr Groenenberg spoke to Mr Cooper after they left and on being pressed about the matter again, said that it is possible that Groenenberg might have spoken to Cooper while the two Magenta directors remained at the yard. He was quite sure that he had taken a rock sample in and placed it on Mr Groenenberg's desk.

182 It was Mr Bandy who had the earlier acquaintance with Mr Groenenberg and, in my view, was more closely involved in receiving and approving the documentation for a contract for the supply and hire of the crushing circuit and in the subsequent discussions with Mr Groenenberg which led to the agreed variations concerning the equipment that was to be delivered, the delivery arrangements and the addition of a wet screen. He ceased being a director and shareholder of Magenta in 1999.

183 In his evidence Mr Bandy said that he and Mr Halbert took rock samples from Hawkins Find to the meeting with Mr Groenenberg on 25 July 1995, that he said that the Bond Work Index for the ore was about 17 or 18 and showed Mr Groenenberg extracts from the Westcoast Holdings Ltd reports containing reference to the Bond Work Index figure (Exhibit 15(1) and 15(2)). He also said that at this meeting there was no discussion about hiring a jaw crusher but that Mr Groenenberg said that the ideal machine for the purpose was an impactor and that he had one which would do the job. According to Mr Bandy, Mr Groenenberg said that the impactor would crush ore of 120mm or less to a 8mm or less size at the rate of about 50 tonnes per hour and after doing some calculations quoted a hire charge of $31,250 per month and was willing to sell the equipment after about three months hire. He maintained that neither he nor Mr Halbert were looking for an impact crusher when they first saw Mr Groenenberg on 25 July 1995 and added that they had approached about six suppliers of crushers over the days before then, only to discover that crushers were then hard to come by. He repeated that he had taken in a sample of the Hawkins Find ore to his discussions with Mr Groenenberg and said that the Bond Work Index was 17 or 18, although he disclaimed any knowledge at that time about the significance of that statistic.

184 Mr Halbert stated that Mr Groenenberg did not at any time during the meeting say that the impactor was suitable only for soft ore or for non-abrasive rock. As noted, Mr Bandy agreed that he did say to Mr Groenenberg, presumably in response to a question about the ore, words to the effect that: "You could hit it with a hammer and it would break into pieces". He also said that he explained to Mr Groenenberg that neither he nor Mr Halbert had been directly involved in crushing before and that they were looking to Mr Groenenberg for his advice and expertise. The men went out into the yard to have a smoke and Mr Groenenberg pointed out a number of crushers of different configurations, some of which were jaw crushers but which were too expensive. When walking outside in the yard Mr Bandy says that he and Mr Halbert showed Mr Groenenberg the two milk crates full of rock in the back of the utility and then went back to his office to continue the discussion.

185 According to Mr Bandy's witness statement (Exhibit 33) it was then that Mr Groenenberg remarked that he thought that he had the ideal machine for them in the yard and that it was an impactor. There was then some discussion about the size of the rocks in the stockpile and, on Mr Bandy remarking that there were a few rocks the size of shoe boxes, Mr Groenenberg said that he did not think that the impactor would crush rocks of that size but that the maximum size would be about 200mm. According to Mr Bandy, he then indicated that they had 150,000 tonnes of two inch to three inch rock and Mr Groenenberg said that with rock of that size the impactor could crush more than 50 tonnes per hour. The meeting continued for several hours, during which Mr Groenenberg gave an explanation about the screens and conveyors which would also be needed and drew up a sketch plan of a crushing configuration and said that he had 20 years experience in the crushing business.

186 In the course of the discussions about the setting up and configuration of the circuit, Mr Groenenberg told the two visitors that they would need a magnet to pick up any steel or bolts from the ore before it entered the impactor because of the damage that such metal could do to the apparatus. There was discussion about the likely wear and tear on the crusher and Mr Groenenberg told the two men that they would have to replace the blow bars every month or so. The meeting concluded late in the afternoon on the basis that Magenta would hire/buy the crushing plant for use at Ora Banda, crush ore at the rate of about 50 tonnes per hour and that Hire Plant would transport the crushing plant to the site and provide a fitter to commission it.

187 According to Mr Bandy, Mr Groenenberg did not talk at all about whether or not there was any warranty or condition about the suitability of the equipment being given, but he did tell them that the crusher would do the job exactly as needed. He was quite specific that Mr Groenenberg did not say anything about the impactor being suitable only for soft non-abrasive rock, adding, in re-examination, that if anything to that effect had been said he would have concluded that if the impactor could not do the job it would be necessary to consider another option but that this possibility was never broached. He denied ever describing the rock as soft, explaining "I haven't come across any soft granite in my time" (t/s 910). Mr Bandy was asked in cross-examination whether or not Mr Groenenberg had said that he needed to go and speak to Mr Brent Cooper at Hydraplant about the equipment and responded that that was possible (t/s 818), but he had no recollection of this occurring.

188 The resolution of these conflicting versions of what took place at the meeting on 25 July 1995 presents many difficulties. In the context of this case where Magenta is relying on the Halbert/Bandy version of the episode to resist the plaintiff's claim and also to make out its counterclaim, it is clear that the onus is upon the defendant to prove its version of the meeting upon the balance of probabilities. I have not found it possible to resolve this controversy by any conclusions reached from my observations or impressions of demeanour of the three major witnesses who gave evidence about it. My observations of their demeanour when giving evidence do not enable me to reject any part of the evidence of those witnesses because of the manner in which the evidence was given. I considered each of the witnesses to be trying to give evidence to the best of his recollection and sincerely in the belief that the evidence as he recalled events many years later was accurate. I am therefore driven to a closer examination of the objective facts and the inherent probabilities, as I consider them to be.

189 While it is evident that Messrs Halbert and Bandy conducted their planning and preparations for their venture at Hawkins Find in a somewhat informal manner, they were by no means heedless of the importance of the project, its financial demands and the need for prior planning. They approached their task with the assistance and co-operation of Mr R Hoppman of Mourillion Mining who had already undertaken a series of small scale similar extraction processes. Mr Hoppman assembled the available Mines Department and other records, including the reports from Westcoast Holdings Ltd about the historical goldmining activities in the area. These included some assay results of the stockpiled ore. The heap leach process was a conventional gold recovery process which had been well established and which I am satisfied was within the competence of Magenta to undertake. The activity upon which they were embarking involved the crushing of ore which had already been stockpiled and the shifting of the ore, before and after crushing, to various parts of the site. This was well within the experience of the Magenta directors arising from their previous activities of carting ore and other materials. Admittedly, they had no prior experience in crushing and their absence of direct knowledge of this activity points towards a disposition to seek advice from a person or persons who could be expected to be familiar with crushing equipment.

190 The Magenta directors made enquiries of about six potential suppliers of crushing plant before approaching Nea. This was during the period April to July 1995 when they were still considering whether to commence operations at Gindalbie, Pannawonica or Hawkins Find. Those approached included Eastman, BGC, Cookes Industrials, Irvine Rapid Screens and Boral, as well as inspection of the crushing plant at Yalgoo. They had received a quotation from Nea back in January 1995 for the lease of a crushing plant involving a jaw crusher, but this had a far greater capacity than they needed and was too expensive. They were, therefore, focused on a small scale plant suited to the limited reserves which they had available. I have no doubt that they wanted and expected a crushing plant which would be suitable for the Hawkins Find operation and were looking for recommendations for something smaller and more suitable than a jaw crusher plant for the proposed operation.

191 Although they had no direct experience of designing or using a crusher system they did know that an impactor had been used in the past at Ora Banda for crushing ore from Hawkins Find which had been transported by Westcoast Holdings Ltd. It was also the case, as is evident from Mr Halbert's diary (Exhibit 427), that earlier in July (21 and 22 July), some attention had been given to the use of an impactor but for a proposed circuit at Gindalbie which was not pursued. I also accept their evidence that they had rock samples from the stockpile at Hawkins Find in crates in the back of their utility which were still with them when they visited Nea on 25 July 1995.

192 Being in possession of the extracts from the Westcoast Holdings Ltd report (Exhibits 15(1) and 15(2)), containing references to the Bond Work Index for the ore at Hawkins Find of 17 kWt/h and having rock samples with them, I consider that it is most improbable that these were not shown to Mr Groenenberg when Mr Halbert and Mr Bandy met with him. There was plainly some discussion about the hardness of the ore which was to be crushed from Hawkins Find because it is common ground between the parties that Mr Bandy made the remark to the effect, that if you hit it with a hammer it will break readily, in response to a question of Mr Groenenberg about the ore which was to be crushed. So the subject of the hardness of the ore did come up for discussion in some way at that meeting.

193 Because Mr Groenenberg also impressed me as a conscientious man, very practically oriented and willing to provide and service machinery for a particular task when required (as demonstrated by his very prompt responses to the minor initial problems that occurred during the commissioning at Hawkins Find), I consider that it is most unlikely that he would have overlooked or neglected to attend to any factor or consideration which, at the time, he believed would be critical to the suitability of any machinery that he was supplying. Consequently, if at the time he had believed that the Hazemag Impactor could not crush a granite ore from the eastern goldfields he would have almost certainly have voiced that opinion and, if that had been done, I cannot accept that the warning would have been ignored or overlooked by either Mr Bandy or Mr Halbert. Had Mr Groenenberg mentioned that the machine could not process hard rock, or was suitable only for soft rock, I am satisfied that Messrs Halbert and Bandy would then immediately have turned to look for alternative solutions.

194 Does this of itself justify the rejection of Mr Groenenberg's evidence that he expressly told his visitors that the impactor would only be suitable for soft rock and repeated that in various ways during the discussion? Possibly not, but there is an added element. Impact crushers had been used, in practice, in the past to crush ore at Ora Banda and had been suggested to Mr Halbert for use in a crushing plant at Gindalbie. According to the evidence of Mr Kendall (Exhibits 10 and 37), the suitability of an impact crusher, or indeed a Hazemag impact crusher, for the project at Hawkins Find was not the key concern. Rather, it was the very poor condition and the inadequate refurbishment of this particular impactor which were the main causes of the problems.

195 It is my view that in July 1995 Mr Groenenberg held a reasonable degree of confidence that a Hazemag Impactor would be suitable to crush the ore at Hawkins Find and, for that reason, did not give great attention to the information that he had been given about the ore to be crushed or its hardness at that meeting. In the light of the practical businesslike manner which he demonstrated, I do not believe that he would have overlooked such a factor had he believed it to be crucial or that he would have accepted the kind of general assurances that he describes his two visitors had given about the rock being soft. If it had emerged from the discussions that the hardness of the rock was crucial to the suitability of the Hazemag Impactor, then the probabilities are that detailed hardness or abrasiveness testing of the rock would have been called for or, more likely, that there would have been a call for the machine to be tested on a sample load of the ore to be brought to the yard for the purpose. That this was never suggested or done by men who were embarking upon a serious project of importance to them all suggests that, for whatever reason, none of them believed at the time that the hardness of the ore was a crucial factor when selecting the crushing equipment.

196 It was known that the ore was of a granite base, that it had already mostly been crushed to minus 120mm dimension and that it needed to be crushed to minus 8mm by this process. That can only mean that the primary crushing which had taken place in the past did not itself pulverise the ore into small fragments, and the merest physical inspection of the sample which I am satisfied was taken into Mr Groenenberg's office, would be enough to reveal that the ore was not of a soft or friable nature comparable with limestone. Nor is it likely that Mr Groenenberg would have committed his company to an expenditure of about $60,000 for refurbishment and a further $40,000 for the fabrication of a custom-built chassis if he had doubts about the suitability of this impactor for crushing ore in the eastern goldfields.

197 The conclusion which I reach is that Mr Groenenberg did believe at the time that the Hazemag Impactor would be suitable for the task which had been disclosed to him and did not have any concerns that the ore to be processed may have been too hard. If that was, as I consider it to be, his probable belief at the time, then it explains and is consistent with all that subsequently happened, namely the extensive preparation of the impact crusher, its testing at Welshpool a day or so before 18 September 1995 without any ore samples being put through the crusher, its delivery to Hawkins Find and commissioning over a seven day period when the ore to be processed was in plain view.

198 It is also consistent with the evidence of Mr Kendall and of Mr Muscat that in the refitting and refurbishment of the Hazemag Impactor inadequate Bisalloy wear plates were installed, an S rotor rather than a K rotor was supplied, and that the bearings were only marginal.

199 I consider that, unfortunately for all concerned, this particular Hazemag Impactor was a very old, badly worn machine, that it was not fitted out in conformity with its manufacturer's recommendations and, unlike other impactors which had been in use in gold ore crushing plants, was simply not up to the task required.

200 What then of the evidence of Mr Groenenberg that, during the course of the meeting on 25 July 1995 he broke off dealings with the Magenta directors and went to speak to his colleague Mr Brent Cooper about the proposal to lease the Hazemag Impactor for the Hawkins Find project? First, Mr Cooper was unable to say when that discussion took place and there is no evidence that he saw or spoke to Messrs Halbert and Bandy at the time, as might have been expected in view of the evidence that he was more familiar with impactors and had an aversion to them. Second, if Mr Groenenberg had repeated to Messrs Bandy and Halbert Mr Cooper's misgivings about impactors generally and his view that they were only suitable for soft ores, I cannot accept that Mr Bandy or Mr Halbert would have pursued the matter without, at the very least, conducting further investigations. I have no reason to doubt Mr Groenenberg's evidence that he did have a discussion of the general nature described with Mr Cooper, but I consider that this must have been some time after the meeting of 25 July 1995 and, probably, after the supply and hiring contract had been concluded. This does not fully explain why, even then, Mr Groenenberg did not raise with Messrs Halbert and Bandy what he had been told about the impactor being unsuitable for anything but soft rock. There again, I consider the explanation to lie in Mr Groenenberg's belief that the impactor was suitable for the job in question even if heavy wear might be experienced. That view also seems to have been shared by Mr Kendall, at least in relation to a properly prepared impactor in reasonable condition.

201 When the major problems later experienced with the impactor at Hawkins Find occurred they probably enlivened any minor doubts which Mr Groenenberg might previously have harboured about the suitability of the machine and caused him to believe that he had fully explained them to Mr Halbert and to Mr Bandy at the original meeting. In this I think he was mistaken but, in the process, it is an honest and perhaps understandable mistake.

202 Consequently, I find that at the meeting of 25 July 1995 Messrs Halbert and Bandy did produce the extracts from the Westcoast Holdings Ltd report referring to the Bond Index of 17 kWh/T and did say that the Bond Work Index for the ore was about 17 or 18. Nothing turns on whether they said it was 17 rather than 18 or whether they said 17 or 18. Neither of them had any real understanding of what that meant. Nor did Mr Groenenberg. I am also satisfied that Messrs Bandy and Halbert had samples of the Hawkins Find ore in a crate or crates in the back of the utility at the Welshpool yard, took one of those samples into their meeting with Mr Groenenberg and produced it to him. Again, however, it seems that very little attention was given to that sample and this, also, illustrates that the particular characteristics of the ore were not regarded at that time as being crucial to the choice of plant.

203 I accept that the defendant's directors were looking for advice and recommendation from Nea about the choice of plant which would be suitable for the proposed small scale operation at Hawkins Find involving further crushing of pre-crushed ROM ore of approximately 120mm granite to 8mm or less for use in a cyanide heap leach gold extraction process. I find that by his words and actions in suggesting the Hazemag Impactor in his yard was suitable, Mr Groenenberg represented, on behalf of Nea, that on the completion of the refurbishment processes which he described as necessary, the impactor would be in reasonably good condition and fit for the purpose required. This was a continuing representation about the condition and suitability of the impactor at the point when it would be available for delivery for hire and, from the time when the refurbishment work was completed and the machine became ready for delivery, it was a representation as to its existing condition and suitability. No warning was given to Mr Halbert or to Mr Bandy at the meeting of 25 July 1995 or at any other time before trouble developed with the machine after its commissioning at Hawkins Find, that the Hazemag Impactor was, or might be, unsuitable for the treatment of hard rock, or was only suitable for the treatment of soft rock.

204 When the standard terms and conditions, part of Exhibit 2, were dispatched by facsimile to Mr Bandy on 26 July 1995 no warning was given about the existence or significance of cl 8 which excluded any express or implied warranties or conditions as to fitness or suitability, nor was anything done then or later to dispel the effect of the representations made on 25 July 1995 that the Hazemag Impactor would be suitable for the task which had been made known to the plaintiff. It was in reliance upon Mr Groenenberg's recommendation about the suitability of the Hazemag Impactor for this job, and the representation arising from his statements and conduct on 25 July that Messrs Bandy and Halbert entered into the supply and hire contract. The decision to take this equipment on hire was, in a practical sense, taken as Mr Halbert says, at the end of a meeting on 25 July 1995 but I do accept that it was not until the exchange of the documents Exhibits 2 and 3 had occurred that either party accepted that binding contractual obligations had been incurred.

Visits by Halbert and Bandy to the hire plant yard at Welshpool

205 After the cheque for the deposit of $15,325 was delivered to Nea by Mr Halbert and Mr Bandy on 31 July 1995 the two directors of Magenta made several other visits to the plaintiff's premises to view progress. Mr G Groenenberg recalled a visit on 28 August 1995 when both Mr Bandy and Mr Halbert visited the Welshpool yard. The crusher was in two pieces and its internal parts were on view. Mr Halbert confirmed that he and Mr Bandy went to the yard at Welshpool to inspect progress on the preparation of the crushing circuit in August 1995 when they saw the machine in a dismantled condition and inspected hoppers and screens. Mr Joshua Groenenberg, who by then had been deputed to work with Mr Muscat on the refurbishment of the impactor, described visits to Nea's yard by Mr Bandy and Mr Halbert and being introduced to them. This was probably the August visit already mentioned.

206 Mr Joshua Groenenberg said that he spoke to Mr Bandy or to Mr Halbert on this occasion and discussed the ore that was to be put through the crusher. Either Mr Bandy or Mr Halbert said to him that the ore was to be soft ore and that there would be no trouble in treating their ore. Mr Bandy and Mr Halbert each denied ever describing Hawkins Find ore as soft ore and each said that there were no discussions about the hardness or quality of the ore after the initial meeting with Mr G Groenenberg on 25 July 1995. Any discussion with Mr Joshua Groenenberg in mid August about the Hazemag Impactor did not form any part of the negotiations leading to the agreement for the supply and hire of equipment and the plaintiff does not allege that they did. I am not able to accept that the conversation as described by Mr Joshua Groenenberg on the occasion of a meeting of the yard at Welshpool included any mention of the hardness of the ore or any intimation by Mr Bandy or Mr Halbert that the ore at Hawkins Find was only soft. The conversation was not noted or recorded in any way by Mr Joshua Groenenberg and in evidence he was describing his impressions of a conversation which had occurred more than six years before. While Mr Joshua Groenenberg also impressed me as a witness who was endeavouring to give truthful evidence of his recollection of events and did not in any way appear to be evasive, obstructive or less than frank, I am unable to accept that this is an accurate recollection of what took place, having regard to the specific denials of Messrs Halbert and Bandy. It is the inherently improbable that either of them would describe the ore at Hawkins Find as "soft" in the light of the physical characteristics of the samples produced in evidence and their knowledge of the Westcoast Holdings' reports (Exhibit 15(1) and 15(2)) which recorded that a major difficulty with the ore was its hardness, having a Bond Work Index of about 17 kWh/T as already described. Insofar as there is a controversy about whether there was any discussion over the hardness of the rock during a meeting or meetings between Magenta's directors and Mr Joshua Groenenberg at Welshpool in August 1995, I prefer the evidence of Mr Halbert and of Mr Bandy.

207 On or about 12 September 1995 Mr Bandy telephoned Mr G Groenenberg and asked for a price for the purchase of all the equipment in the crushing circuit that was to be taken by Magenta on hire. In giving evidence Mr Groenenberg said that he had quoted a price of around $280,000, but on being shown his note (Exhibit 18), he reconsidered and said that the price may have been $307,500 including the second screen or $255,500 without the second screen but with an additional conveyor. Again, nothing turns on the precise amount of the price or prices quoted by Mr G Groenenberg to Mr Bandy on this occasion. The the only significance of this discussion is to establish that nothing was said on either side about the fitness of the impactor or other equipment for the task which the defendant had made known it was to perform at Hawkins Find or about the hardness or other characteristics of the ore to be processed.

208 Mr G Groenenberg also described a meeting at Nea's Welshpool yard when the equipment, and in particular, the Hazemag Impactor was set up ready for a test run before its delivery to the site near Ora Banda. He said that he, Joshua Groenenberg, another of the plaintiff's fitters and Messrs Bandy and Halbert were present when this test run was conducted and that the machine ran for 15 to 20 minutes without any ore in it but performed well. I accept that such a test was conducted at the plaintiff's premises a day or so before the equipment was dispatched on a loader, trucks and trailer to Hawkins Find. This must have occurred some time before 18 September 1995 because the equipment arrived at Hawkins Find on that day and Mr Halbert was there to meet it. It is most unlikely that a test run could have been conducted at Welshpool on the morning of 18 September with sufficient time left for the heavy equipment to make the long journey to Ora Banda and for Mr Halbert to be there to meet it on the same day. It is for that reason that I conclude that the test must have occurred before 18 September. A test which did not involve the impactor crushing any ore, let alone ore from Hawkins Find, does not reveal very much about its operating capacity and this test result cannot be regarded as indicative of the capacity or performance of the machine under working conditions.

Visits by Nea's representatives to Hawkins Find

209 The crushing circuit, including the Hazemag Impactor, was dispatched by Nea from its Welshpool yard to Hawkins Find on 18 September 1995 and arrived there that day when Mr Halbert was waiting to help in its commissioning. A large crane had been hired for the unloading and the set up started that day. The set up continued on 19, 20, 21 September and the crusher was tested with a first run of two tonnes of ore on Friday 22 September. During that operation a hydraulic pump blew a seal and Joshua Groenenberg left for Perth for the weekend to attend a family function. He returned on the morning of Sunday 24 September, fitted a new hydraulic motor and the crushing plant ran for an hour. On Monday 25 September further commissioning work was undertaken by Joshua Groenenberg and completed at about 4 pm. It was then that Exhibit 8, dated the next day 26 September 1995, acknowledging commissioning of the project, was signed by Mr Halbert and then Joshua Groenenberg left for Perth.

210 The next day, 26 September 1995, the plant was started but a fault developed on a pump driving the screen and this was reported by telephone to Mr Groenenberg in Perth. Mr Geoff Groenenberg and Trevor Thomas arrived early the following morning, 27 September, and replaced the hydraulic motor. It was on this occasion that, when the men were having coffee after completing the task, that the alleged conversation about the hardness of rock in the roadways and pathways in the camp occurred. Mr Halbert and Mr Bandy each deny that there was any such conversation but point out that there was a separate stockpile of waste rock at the camp site that was used for roadways and other utilities.

211 The wet screen, which was a late addition to the circuit in substitution for the second screen, was not ready for dispatch when the plant was sent to Hawkins Find on 18 September. However, it was brought up by Mr Charlie Muscat on 4 October, who may have been accompanied on this visit by Mr Joshua Groenenberg, as described by Mr Halbert, although his presence on that occasion was not raised with Mr J Groenenberg when he gave evidence. Because of problems which had been experienced during the days before Mr Bandy had been telephoning Nea with requests for assistance and had received a reply by fax that Mr Muscat was due at the site and would check the settings. On 5 October Mr Muscat was setting up the wet plant and screens but he also checked the impactor and tried to alleviate the problems of uneven wear by welding a deflector plate into the crusher feed but without success. Mr Muscat left the site on 6 October and there was no further visit by any Nea personnel until Mr G Groenenberg effected the repossession on 23 October 1995.

Attempt to rectify the problems experienced at Hawkins Find

212 In early October 1995 Mr Bandy had raised the problems of the continual break downs of the impactor and, in particular, the excessive wear on the blow bars with Mr G Groenenberg. As a result, Groenenberg offered to look for harder blow bars and contacted Australasia Foundries Pty Ltd which advised that it could cast harder blow bars. Groenenberg obtained prices for harder blow bars and placed an order with Australian Foundries for their supply. That was done on 11 October 1995 (Exhibit 9) and they were then ready for dispatch to Ora Banda. Mr Groenenberg had asked Mr Bandy for money to cover the costs of the purchase of these new blow bars and Mr Bandy promised to bring $5000 to the plaintiff's office the next day but did not do so. By then it was too late for Mr Groenenberg to cancel the order but he did not dispatch the blow bars to Ora Banda.

213 Following Mr G Groenenberg's receipt of Magenta's letter of complaint of 11 October 1995 (Exhibit 10) and his meeting with Mr Hurley on 16 October, Mr Groenenberg sent a letter by facsimile to Magenta on 17 October. In this Mr Groenenberg stated that the plaintiff did not at any stage give any metallurgical or technical advice about the suitability of the equipment offered for hire and that references to the ore at the meeting of 25 July were to ore that was soft and non-abrasive, stating that under no circumstances would the plaintiff offer an impactor unless the user was aware of the high wear nature, particularly under hard and abrasive ore conditions. He asserted that no sample of ore was offered by Magenta or requested by Nea and that no material analysis or other information regarding the ore was considered necessary for hiring discussions. He also drew attention to the exclusion set out in cl 8 of the standard terms and conditions of hire. He went on to state that the plaintiff's position was:

1. All equipment provided by the plaintiff at Hawkins Find remained on hire and, apart from a negotiated allowance for a short period for mechanical failure, would be charged at the agreed rate until return to the yard.

2. Magenta could purchase a "K" type rotor, rotor bars, and internal wear parts to suit the impactor and continue the hire under new conditions. The cost of the rotor would be deducted from hire charges on an agreed monthly basis and become the property of the plaintiff.

3. Magenta could purchase the impactor complete for $145,000 and continue hiring other equipment.

4. The present hire arrangement could be terminated forthwith and all equipment returned not later than 19 October. In that case no further hire charges would be made. The plaintiff would retain the deposit paid to cover the expenses to date.

214 No solution or resolution followed the meeting between Mr G Groenenberg and Mr Hurley on 16 October 1995 or in response to the plaintiff's letter to Magenta on 17 October (Exhibit 12). At the meeting Mr Groenenberg had told Mr Hurley that he believed that a cone crusher should be used at Hawkins Find and that the impactor was not suitable for the harder ore which existed at the site. Some days passed during which Mr Groenenberg tried unsuccessfully to contact Mr Hurley but when he eventually spoke to him he was told that Mr Hurley was no longer representing Magenta and that he should contact Mr Bandy or Mr Halbert directly. Efforts to contact them were unsuccessful and as there had been no developments for a week Mr Groenenberg decided to make arrangements to remove the equipment from the site. He arranged for transport and cranes and drove to the site with Mr Puglia arriving at about 5 am on 23 October 1995. Despite protests from Mr Bandy, Mr Groenenberg and Mr Puglia loaded all the hired equipment, including the wet screen, onto the transporter and removed it from the site.

215 Invoices were prepared on 31 October 1995 and dispatched by post to Magenta at its Post Office Box in Kalgoorlie. They were apparently not received by the defendant and copies were then dispatched by facsimile to Mr John Bandy on 10 January 1996 (Exhibit 14). Additional copies were sent to Mr Bandy's North Beach address that day by post. The total amount sought by Nea by these invoices was $28,040.06 made up, as explained by counsel for the plaintiff when opening the case, by charges for 25 days rent of the equipment from 26 September to 20 October 1995 at the reduced rental rate of $29,620 per calendar month plus tax; charges for the fitter commissioning the plant; new wear plates and protective components; delivery charges and removal charges less the deposit paid. A calculation of the amount sought, as presented at the trial was is follows:

Hire Fees (26/9/95 to 20/10/95) $24,046.06

Tax $432.83

Charges for fitter to commission plant $3,500.00

Wear plates and protective components $2,385.00

Delivery charges $5,445.00

Return delivery charges to hirer (after repossession) $7,855.00

$43,665.06

Less deposit paid $15,625.00

Balance due $28,040.08

216 These are the figures presented by the plaintiff, the details of which are set out in subpar 2(2) of its Reply and Defence to Counterclaim. There is a small arithmetical error in the total of the charges and in the balance claimed which overstates the final sum by $1.19 but as this is such a small figure and as no objection has been taken to the figures advanced or the quantum of the invoices, I consider I should accept the figure of $28,040.06 as constituting the plaintiff's claim.

217 In addition, the plaintiff claims interest on that outstanding balance at the prevailing current National Australia Bank standard customer overdraft rates. However, no evidence was offered by the plaintiff to establish what the NAB interest rates were at any material time. It is therefore, not possible to calculate interest under the contract terms. I therefore turn to whether or not I should consider an award of interest in accordance with the discretion of the court under s 32 of the Supreme Court Act. By virtue of s 32(2)(b) of that Act the possibility of a discretionary award of interest does not arise in relation to any debt upon which interest is payable as of right by virtue of any agreement. As this appears to be no more than an omission on a non-contentious area in the case, I have considered whether I should grant liberty to the parties to make further submissions about whether or not Nea should be entitled to any component of interest on its claim and, if so, upon what basis. However, having regard to my ultimate conclusions, set out below, about the counterclaim any inclusion of a component of interest will not materially affect the final position between the parties.

218 The plaintiff's claim is for a liquidated sum due under a contract for the supply and hire of equipment on specified terms together with interest. The terms of hire, in relation to payment, are set out in cl 1 of the standard terms and conditions which provide that the defendant should pay the hire charges and all other charges and at the agreed rate and at the agreed time or in such instance as no agreed time exists, payment to be made within 30 days of invoice date. In the manuscript terms which form part of Exhibit 2 there is specific provision made for payment of the initial deposit, for payment of other services if required within 14 days from the date of service (which in this case would include commissioning and delivery charges) and for hire invoices to be paid by the 30th day of the following month.

219 There is no evidence of any invoice, whether for hire charges or for other services, being rendered by the plaintiff to the defendant before repossession on 23 October 1995 and, therefore, the defendant could not have been aware of the amount of the commissioning or other charges raised in the absence of such an invoice.

220 I conclude, therefore, that there was no demand for payment of any kind made by the plaintiff before repossession and, therefore, the repossession cannot be justified on the basis of a refusal to pay hire or other charges. But cl 7 of the standard terms provided that the owner had the right to terminate the hire and recover the hired plant at any time. From 11 October 1995 onwards it became apparent that Magenta was maintaining that the plaintiff was under an obligation to fix the problems which had developed with the impactor by, at least, providing a new K rotor, replacement blow bars and other parts. In short, Magenta was adopting the position that it was the obligation of Nea to put the machine into effective working order. Magenta had not, at least expressly, threatened to decline payments of hire or otherwise to refuse to perform the contract, notwithstanding that Mr Bandy had failed to meet his promise to pay $5000 to the plaintiff to contribute to the cost of acquiring harder blow bars which had been ordered on 11 October 1995. Nevertheless, it was apparent that Magenta was insisting upon a performance of obligations by Nea to put the impactor into effective working order which Nea regarded were outside the scope of its obligations under the contract. From Nea's viewpoint this constituted an anticipatory breach of the hiring contract which it purported to accept by repossessing the goods notwithstanding that a full month's hire from the date of commissioning on 26 September 1995 had not then passed.

221 Apart from its plea of a total failure of consideration, the defendant has not made any submission that the plaintiff was disentitled to hire charges calculated on a daily basis, plus associated costs and expenses incurred, in the event that it is held that there was no obligation by the plaintiff to ensure that the equipment was in effective working order for the operation at Hawkins Find. Nor, despite some initial apprehensions about possible defences by Magenta, raised by counsel for the plaintiff when opening, has there been any challenge to the amounts claimed for commissioning expenses, delivery and removal charges.

222 I therefore accept that the various components of the plaintiff's claim, as already described. This means that I accept that the plaintiff has proved that it is entitled to an amount of $28,040.06 plus interest (if it could be computed), owing to it by the defendant if the plaintiff's case about the enforceability of its claim is accepted. I shall return to that basic issue later.

223 The position of Magenta, however, is that the plaintiff was in breach of the terms of contract for the supply and hire of the crushing equipment in failing to supply an impactor which was of merchantable quality, fit for the purpose of crushing the ore at the Hawkins Find lease and in good or proper condition as a result of which Magenta suffered damaged by being unable to crush the ore and then proceed to extract the gold through the heap leach process as was always contemplated by both parties at the time the contract was made.

224 The defendant's counterclaim also proceeds on the basis that Nea wrongly terminated the contract by repossessing the plant on 23 October 1995 and that that termination added a further dimension to the damages which the defendant suffered. Although not expressly stated in its pleadings or in its submissions, it is evident that Magenta accepted the termination of the contract for the supply and hire of the crushing equipment, even though it maintains that Nea was in breach of the contract before termination and that the act of termination itself was a further breach of the contract. Again, apart from its submission that there was a total failure of consideration, Magenta does not allege any other reasons to justify non-payment of the plaintiff's claim although, as will be seen, it includes all of that claim as items of alleged wasted expenditure in its counterclaim for damages. Magenta then claims a set off for so much of its counterclaim as would be sufficient to extinguish any liability it may be found to have to the plaintiff (defence par 15). On this basis, as the defendant fails in its defence of total failure of consideration there is no answer to the plaintiff's claim other than the set off just described.

225 The removal by Nea Pty Ltd on 23 October 1995 of all the hired equipment, including the wet screen left Magenta without any equipment to crush the ore from the stockpile or to treat it by the heap leach process. Mr Halbert was away in Queensland from 12 October until 31 October 1995 so it was Mr Bandy who had to deal with the initial brunt of the removal of the hired equipment by the plaintiff on 23 October and its immediate aftermath. Magenta still, however, had the other earth moving machinery, plant and accommodation which had been acquired to establish the camp, including the Knelson Concentrator which had been provided by Mr Hoppman as part of his obligations under the joint venture. Mr Bandy immediately began to make enquiries about the availability of another crusher by telephoning suppliers and other contractors in the Goldfields region and by following advertisements in mining and trade journals. Mr Halbert returned from Queensland on 31 October 1995 and then made similar attempts. This continued for several weeks without any success.

226 In the meantime, however, as an immediate expedient, Magenta hired another wet plant from Boral and this arrived on the site on 28 October 1995. With the newly hired wet plant and the Knelson Concentrator Magenta personnel were able to treat the small amount of ore which had by then been crushed by the plaintiff's equipment but, of course, they were unable to crush other ore from the stockpile or use the heap leach process. This meant a very large reduction in the scale of the gold recovery operation.

227 Throughout November 1995 the defendant advertised in the Saturday West Australian for alternative crushing plant and continued to make enquiries in the Goldfields area. A Mr Stewart was found who had plant at Meekatharra which may have been suitable but this would not become available until the end of March 1996. By November 1995 it was costing Magenta about $12,000 per week simply to stay on site to maintain the camp, the other machinery and the wet plant which was on hire.

228 There was insufficient ore at Hawkins Find suitable for processing by the wet screen and Knelson Concentrator so Magenta arranged to bring in other ore from Southern Cross by truck to utilise the wet plant. The Southern Cross ore had already been crushed and its use was a departure from the original plan which had only been to crush the Hawkins Find ore. Magenta began trucking in ore from Southern Cross only a day or so after the removal of the crushing plant by the plaintiff.

229 The enquiries made by Mr Halbert and Mr Bandy did not identify any alternative equipment which was suitable for the scale of the operation at Hawkins Find. There were jaw crushers and other large capacity crushers available which could crush ore at the rate of about 500 tonnes per hour but they were too large and uneconomical for the Hawkins Find operation with its comparatively small low grade ore reserve.

230 By late October early November 1995 Magenta's cash reserves had been severely depleted and a cash flow of about $9000 per day which had been anticipated to occur from shortly after the commencement of the crushing operations never materialised. None of the ore processed after October 1995 was treated by the heap leach process because, as Mr Halbert explained, at least 5000 tonnes of crushed ore were needed to heap leach economically. There was about 2000 tonnes of ore trucked in to Hawkins Find from Southern Cross at about 50 tonnes a load. In addition to the wet plant Magenta was able to obtain a ball mill which allowed fines brought in from Southern Cross to be treated.

231 This did not prove to be economical and the cost of maintaining the campsite at Hawkins Find and all the other plant became unsustainable. It was necessary to sell off the other machinery and equipment and large losses were incurred as a result of those forced sales leading, eventually, to Magenta closing down the site and leaving Hawkins Find in mid February 1996. To make matters worse, thieves broke into the plant at Hawkins Find on the evening of 10 and 11 November and stole the slag produced by the Knelson Concentrator which contained gold recovered to that point. The thieves were never identified nor any gold recovered. The exact value of the gold stolen was not precisely identified but was thought to be in the region of $40,000.

232 That was the end of Magenta's operations at Hawkins Find and the end of the joint venture with Mourillion Mining. Magenta received no payments from Mourillion Mining and, as already noted, Mr Hoppman later disposed of the mining lease to Mr Photios and his partner Mr Max Brown. The losses sustained by Magenta rendered it unable to continue business of any kind and it went into administration.

233 Mr Photios' involvement with Hawkins Find began in 1998 when he was approached by Mr Hoppman and invited to participate in a joint venture to process the existing stockpiles of ore on the site by the heap leach process. This was done for about 12 months but the treatment was confined to a small area of the stockpile and only about 8,000 to 10,000 tonnes of ore was treated. It was at that stage in 1999 that Mr Photios and Mr Brown purchased the Hawkins Find lease from Mr Hoppman. In the new ownership Photios and Brown treated the whole of the stockpiled ore and then proceeded to extract ore from the pit and send that to Coolgardie for processing.

234 Mr Photios was at Hawkins Find operating this prospect for over three years. The ore which he trucked to Coolgardie was crushed and ground down to particles of 0.7mm or less and then treated by a cyanide process followed by carbon recovery. This was crushing to a much finer degree than ever contemplated by Magenta at Hawkins Find and probably resulted in a much higher efficiency rate of gold recovery. By contrast, however, the heap leach processing method followed by Photios and Brown at Hawkins Find involved the heap leaching of particles up to 50mm in size (much larger than ever contemplated by Magenta) and with a correspondingly less efficient rate of gold recovery. No evidence could be offered by Mr Photios about the grades of ore or the amounts of gold recovered from his treatment of the stockpile or other ores at Hawkins Find, but it is evident that his operation continued for about three years.

The significance of cl 8 - excluding conditions or warranties of fitness for purpose

235 The defendant's submission is that if cl 8, excluding implied conditions or warranties as to the condition of plant or its suitability or fitness for any purpose, does form part of the contract of hire, it is not effective in this case because of the complete unsuitability of the Hazemag Impactor for the task required so amounting to a serious, even a "fundamental", breach of the contract of hire by the plaintiff. One of the assumptions of this submission is that it implies that the contract of hire otherwise contains a condition or warranty of merchantability, suitability or fitness for a purpose of the very kind which the exclusion clause seeks to avoid. But it also involves more far-reaching considerations which require some examination of the current law with respect to such exclusion clauses.

236 Both Mr Halbert and Mr Bandy maintain that they did not become aware of the existence or potential significance of cl 8 of the standard terms and conditions until it was specifically drawn to their attention, after the current dispute had arisen, by the plaintiff's letter of 17 October 1995 (Exhibit 12, par 4). However, Mr Bandy acknowledged in cross-examination that he had seen the standard form forming part of Exhibit 2 after it had been faxed to Magenta on 26 July 1995 and had read it, perhaps only in a glancing fashion, without noticing or absorbing the significance of cl 8. This does not prevent the clause becoming a term of the contract because it is well settled that if a contracting party signs a document, or otherwise accepts it as containing terms governing a contract which he is entering upon, without reading it, or reading it thoroughly, or simply by taking a chance that it contains terms which are acceptable to him, he will be bound by his signature or adoption of the document: Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 79 ALJR 129 at [45], [47], [54] and [57]. In this case the dispatch of the defendant's order dated 28 July 1995 expressly accepting the offer contained in Exhibit 2 necessarily involves an acceptance of all the plaintiff's terms, including cl 8 of its general terms and conditions.

237 The defendant begins with the well-established and basic proposition that when a hirer of goods or chattels makes known to the supplier the purpose for which the goods or chattels are to be used and shows reliance upon the supplier's skill and judgment, there will be an implied promise that the goods or chattels are reasonably fit for the purpose identified. This is taken from the judgment of Hodgson J in Frank Davies Pty Ltd v Container Haulage Group Pty Ltd (No 1) (1989) 98 FLR 289, a case involving the lease of a forklift truck. At the time of the leasing it was made known to the supplier that the machine was required to stack large containers. At 309 Hodgson J said:

"The general rule of the common law in regard to the hire of chattels, as stated by Priestley JA, at 12 of his judgment in Pearson & Bridge Pty Ltd v Australian National Industries Ltd (unreported, Court of Appeal NSW, 29 September 1986) is:

'When one person for value supplies a chattel to another to be used for an agreed or stated purpose or for a purpose indicated by the nature of the chattel, he impliedly promises, in the absence of some provision to the contrary, that it is reasonably fit for such use.' "

238 Pearson & Bridge Pty Ltd v Australian National Industries Ltd, unreported; CA of NSW; No 16 of 1985; 29 September 1986 was a decision of the Court of Appeal of New South Wales comprising Samuels, Priestley and McHugh JJA. Following the passage in the judgment of Priestley JA, already cited, his Honour went on to say:

"That statement of the law was adopted by McTiernan J in Derbyshire Building Company Pty Ltd v Becker [1962] HCA 14; (1962) 107 CLR 633 at 645, from what was said by Sir Frederick Jordan in Gemmell Power Farming Company Ltd v Nies (1935) 35 SR 469 at 475, a decision of the Full Court of this Court. The case was also referred to with approval by Kitto J at p 649 of Derbyshire. In addition, the Full Court decision of this Court, from which the Derbyshire appeal was taken to the High Court, adopted the law as stated by Sir Frederick in similar terms."

In a separate judgment, McHugh JA adopted the same proposition saying:

"But I also inclined to the view that the defendant, by way of cross-claim, could sue for damages for a breach of an implied term that the plant was reasonably fit for the purpose for which it was hired and was in good order and condition. That term was implied by law (cf Liverpool City Council v Irwin [1977] AC 237 at 253-255; Beaton v Moore Acceptance Corporation Ltd [1959] HCA 59; (1959) 104 CLR 107 at 122; Derbyshire Building Company v Becker [1962] HCA 14; (1962) 107 CLR 633 at 649) and also arose by implication from the terms of cl 8(b) and cl 6 to which Priestley JA has referred."

239 Of particular significance for the present case Pearson & Bridge Pty Ltd v Australian National Industries Ltd (supra) dealt with an exclusion clause in a contract for the lease of a multi-wheeled rubber tyred roller to be used to compact soil for road building operations which provided:

"6. The owner gives no warranty as to the capacity or performance of its plant and in the event of any failing or breakdown of the plant for whatever cause, the Owner shall be under no liability to the Hirer whatsoever in respect of loss of time, wages, work materials or otherwise extra cost to the Hirer arising in any way therefrom or otherwise."

In that case, this exclusion clause, did not avoid liability by the owner of the machinery hired for damages caused as a result of the breach of the implied promise of fitness. Priestley JA reached that conclusion on the basis that, as a matter of construction, the terms of cl 8 "proceed on the footing that the plant spoken of is in good substantial repair and condition at the time of its delivery to the hirer". Samuels JA agreed with Priestley JA on that point. McHugh JA, on the other hand, said:

"On reflection I have come to the conclusion that cl 8(e) is not to be read literally as though it was divorced from the rest of the document; it must be read subject to the implied term of which I have spoken. That is to say, a claim under cl 8(e) cannot be maintained in respect of loss or damage to plant which is the result of a breach of the owner's obligation to provide plant which is reasonably fit for the purpose for which it was hired and which is in good order and condition."

As authorities discussed later reveal, this strict approach to such exemption clauses is in accordance with a long line of established authority.

240 In Derbyshire Building Co Pty Ltd v Becker [1962] HCA 14; (1962) 107 CLR 633 Kitto J observed, when dealing with the implied term in a contract for the hire of a portable electric saw which proved to be dangerous because the moveable guard was in a defective condition (at 649):

"The authorities concerning the nature of an implied term in a contract of bailment, the more important of which are reviewed by Sir George Paton in his book Bailment in the Common Law (1952) pp 289 et seq, are not uniform. But the weight of judicial opinion is, I think, in favour of applying to all contracts for the supply of chattels, including contracts of bailment, the principles laid down with respect to sales in s 14 of the Sale of Goods Act 1893 (UK). In particular, the better view appears to be that where an implication as to the fitness of a chattel arises under such a contract it is not limited to fitness so far as the supplier knew or ought to have known: ... "

241 Breach of the implied condition as to the fitness for the purpose indicated was also for the basis of the recovery in TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57; (1963) 180 CLR 130 where the implied condition arose between vendor and purchaser in a contract for the sale of a stone crushing machine which turned out to be unable to crush stone at the rate discussed in the pre-contract negotiations. In that case the implied warranty, in a qualified but still effective form, was extended to the hire purchase company which financed, by way of hire purchase, the contract entered into between the purchaser and the supplier: see also Cullinane v British "Rema" Manufacturing Co Ltd [1954] 1 QB 292, a case involving a clay pulverizing machine unable to pulverize clay at the rate of 6 tons per hour as required.

242 Similarly, a contractor who had engaged a supplier to install security doors at its premises as a protection against theft succeeded in a claim for damages, which included the value of goods stolen from the premises, because of the inadequacy of the door installed on the basis that, while the installation of the door was not in breach of the express terms of the contract, it did not provide reasonable protection against breaking and entering as required by a warranty implied by common law to supply, fit and hang a door which would provide reasonable means to prevent breaking and entering: Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd [1968] HCA 64; (1968) 120 CLR 516. A provision such as cl 8 in the present terms and conditions of hire will not exclude liability in respect of goods or items agreed to be supplied which do not, in fact, exist: McRae v Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377 per Dixon and Fullagar JJ at 398.

243 Decisions such as Robert A Monroe & Co Ltd v Meyer [1930] 2 KB 312 and Wallis, Son and Wells v Pratt and Haynes [1911] AC 394, to an extent, depend on a view that where the breach relied upon is so serious as to negate the substantial performance of the contract, the implied condition or warranty does not apply. They, therefore, require careful re-evaluation in the light of the modern decisions of Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500; Photo Productions Ltd v Securicor Transport Ltd [1980] UKHL 2; [1980] AC 827 and Nissho Iwai Australia Ltd v Malaysian International Shipping Corporation Berhad [1989] HCA 32; (1989) 167 CLR 219. Indeed, use of the approach to construction of contra proferentem is now regarded as a matter of last resort - see per Callinan J in Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28; 206 ALR 387 at [122] - [124] - now having been consigned to occasions where there is an actual ambiguity - per Kirby J in Insurance Commission of Western Australia v Container Handlers Pty Ltd [2004] HCA 24; 206 ALR 335 at [97]. These authorities demonstrate why the defendant's submission that cl 8 of this contract cannot be relied upon by the plaintiff because of the alleged fundamental breach of the implied terms of the contract for the supply of the impactor must be rejected.

244 Nevertheless, for such an exclusion clause to be accepted as a term of the contract there must be adequate notice given prior to the formation of the contract: Oceanic Sun Lines Special Shipping Co Inc v Fay [1988] HCA 32; (1988) 165 CLR 197 at 227 - 228; [1988] HCA 32; 79 ALR 9. But if there is such an opportunity the fact that it was not read or fully appreciated by the opposing contracting party will not deprive it of effect: China Ocean Shipping Co Ltd v Pearse Chellaram & Co Ltd (1990) 28 NSWLR 354 at 394. Following the decision in Darlington Futures Ltd v Delco Australia Pty Ltd (supra) the restrictive approach to the construction of exclusion clauses will be limited as described by Owen J in Mouritz v Ramona Hegedus [1999] WASCA 1061 (unreported; FCt per Kennedy, Ipp and Owen JJ) and by Malcolm CJ in Gregory & Bradshaw v MAB Pty Ltd (1989) 1 WAR 1 at 14.

245 That the approach in Australia is to construe the contract without applying the doctrine of fundamental breach is made clear expressly in the judgment of Mason, Wilson, Brennan, Dean and Dawson JJ in Darlington Futures Ltd (supra) where their Honours said:

"Subsequently in Thomas National Transport (Melbourne) Pty Ltd v May & Baker (Australia) Pty Ltd [1966] HCA 46; (1966) 115 CLR 353, Windeyer J, though dissenting in result, stated (at 376) that the effect of an exclusion clause must be 'resolved by construing the language that the parties used, read in its context and with any necessary implications based upon their presumed intention'. And later, in H & E Van Der Sterrem v Cibernetics (Holdings) Pty Ltd (1970) 44 ALJR 157, Walsh J, with whom Barwick CJ and Kitto J agreed, said (at 158):

'The terms of exception clauses must sometimes be read down if they cannot be applied literally without creating an absurdity or defeating the main object of the contract ... But such a modification by implication of the language which the parties have used in an exception clause is not to be made unless it is necessary to give effect to what the parties must be understood to have intended.' (See also Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Aust) Pty Ltd [1978] HCA 8; (1978) 139 CLR 231 at 238.

These decisions clearly establish that the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity. Notwithstanding the comments of Lord Fraser in Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd [1983] 1 WLR 964 at 970), the same principle applies to the construction of limitation clauses. As King CJ noted in his judgment in the Supreme Court, a limitation clause may be so severe in its operation as to make its effect virtually indistinguishable from that of an exclusion clause. And the principle, in the form in which we have expressed it, does no more than express the general approach to the interpretation of contracts and it is of sufficient generality to accommodate the different considerations that may arise in the interpretation of a wide variety of exclusion and limitation clauses in formal commercial contracts between business people where no question of the reasonableness or fairness of the clause arises."

246 The degree to which legislative protection in modern times has broadened for contracting parties who are considered, in the public interest, to require protection on the grounds of public policy, reasonableness or fairness, by protective provisions of which s 52 and s 72 of the Trade Practices Act and s 14 of the Sale of Goods Act 1896 are examples, is another reason why the courts should not press to give any strained meaning to such exclusion clauses.

247 The provisions of this contract for the supply on hire of the crushing circuit, including the Hazemag Impactor, which contained the exclusion clause were part of a standard form evidently used for the supply of items of equipment on hire which were available from the plaintiff's stock on hand. The contract form is not particularly apposite for a contract, such as the present, which required not merely the hire of the impactor but a process of refurbishment and reconditioning of the appliance from the condition in which it stood when inspected by the parties, to a final working condition expected to be adequate for the crushing of ore at Hawkins Find. That involved a process of re-wiring, re-conditioning and improvement of the machine which was needed to put it into a condition suitable to be let on hire for the project in hand.

248 The question therefore arises as to whether or not the exclusion of any warranty or condition about the condition of the plant or its suitability or fitness for any purpose applies in the present case where the contract went beyond the hiring of an appliance held in stock in the condition in which it was expected to be hired but extends to work to be performed on a machine to put it into a condition which will be suitable for the purpose made known to the plaintiff. In other words, it is necessary to consider whether or not the limitation of express or implied conditions or warranties specified by cl 8 applies in a case where Nea accepts a contract to modify or improve an item of plant in order to put it into a condition which will be suitable for the purpose or use which the hirer has made known. Put another way, the question becomes whether or not the exclusion of the implied conditions or warranties about the fitness of the plant hired extends to the exclusion of any implied conditions or warranties about the quality of the work undertaken by the plaintiff to adapt the particular item of plant for the use made known by the hirer at an anterior stage of the contract before the delivery of the plant for hire.

249 While it is possible to dissect this contract for the supply and hire of the impactor in this way in order to contrast it with a more routine contract for the supply of an item of machinery or equipment for which no modification is necessary or requested, that is not a distinction which affects the reach of this exclusion clause. The natural meaning is plain enough, namely that no warranty or condition expressed or implied is given in relation to any plant let on hire by the plaintiff. There seems to be no reason or ambiguity to exclude from the scope of that term machinery or plant which involves a degree of preparation, refurbishment or manufacture by Nea before delivery on hire, as occurred with the impactor in this case or, for that matter, as also occurred with the construction and supply of the transportable chassis. Accordingly, I consider that the exclusion clause, was incorporated into the terms of this contract, and was effective to exclude any condition or warranty, or other contractual promise of fitness for purpose, merchantability or suitability.

250 Different considerations apply where the hirer or vendor of equipment represents that the equipment will be suitable for a particular purpose. So a statement inconsistent with the application of the exclusion clause to the particular breach complained about may prevent reliance by the supplier on the exclusion of liability regardless of whether the statement is a representation or a promise - Mendelssohn v Normand Ltd [1970] 1 QB 177 at 186. The basis for this doctrine appears to be that the express representation remains effective so long as the contract is still executory; and in certain cases will be treated as an express or collateral warranty in the contract itself which, will prevail over an inconsistent exclusion clause incorporated into the same contract - compare the approach taken by McHugh JA in Pearson Bridge Pty Ltd v Australian National Industries Ltd (supra). Even so, an exclusion clause which has the effect of negativing any pre-contractual representations will, at common law, as distinct from the position in proceedings in which a statutory remedy such as relief for contravention of s 52 of the TPA is sought, negative the effect of any such representation as long as it is not fraudulent - Dorotea Pty Ltd v Christos Doufas Nominees Pty Ltd [1986] 2 Qd R 91 per Carter J applied by Pincus J in Byers v Dorotea Pty Ltd (supra).

251 So, if in the present case there had been any express assurance or representation by the plaintiff that this impactor would crush the ore at Hawkins Find at the rate of 50 tonnes per hour or more to 8mm or finer the question which arises is whether or not there was a term of the contract to that effect incorporated which, being inconsistent, would prevail over the exclusion in cl 8.

252 An alternative approach is to consider whether or not there was a representation made by Nea expressly or impliedly, to that effect which concerned the capacity of the impactor and crushing plant at the point of delivery but which never became a term of the contract as distinct from an inducing representation. This case presents a particular difficulty in discerning whether the pre-contractual discussions between the representatives of the parties led only to a representation about the suitability of the machine or whether it constituted an agreed term in, or collateral to, the contract of hire.

253 The intermediate position of an implied term is, in my view, excluded for the reasons already given together with the fact that such an implication would be inconsistent with cl 8 an express term in the contract - BP Refinery (Westernport) Pty Ltd v Hastings Shire Council [1977] HCA 40; (1977) 52 ALJR 20 at 26. Although this prevents the defendant from having any right to relief under the terms of the contract for the supply and hire of the impactor and the other crushing plant, because of the absence of any express or implied, term in the contract to the effect that the impactor, or other items of equipment, were of merchantable quality or fit for the purpose made known, it opens up the significance of any such misrepresentation both at common law but, more significantly, under the provisions of the TPA.

254 It is appropriate to pass directly to the significance of such an alleged misrepresentation under the TPA because, as here where there is no suggestion that the misrepresentation was fraudulent, the entitlement at common law would be rescission, if the contract remained executory, or in the present case where the equipment was taken on hire, rescission once the defect had become known or within a reasonable period thereafter in which case there would need to be restitutio in integrum involving the return of the equipment and a refund of all hiring charges paid.

255 Magenta's case is more extensive, seeking damages. For that, I conclude that there is no right of action at common law in the present circumstances.

Misleading and deceptive conduct - exclusion clauses

256 Where damage has been caused by misleading and deceptive conduct contrary to the provisions of s 52 of the TPA an aggrieved person who has relied on the misleading or deceptive conduct may recover damages under s 82, notwithstanding the existence of an exclusion or exemption clause as a term of the contract that he was so induced to enter so long as the misleading and deceptive conduct continued to be a material cause of the damage which he eventually suffered. It is on the basis that the misleading and deceptive conduct remained a material cause of the damage suffered that observations to the effect that terms of a contract including disclaimers or exemption clauses are irrelevant must be understood: Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367 at 371 per Sheppard J; and Petera Pty Ltd v EAJ Pty Ltd [1985] FCA 277; (1984) 7 FCR 375 per Wilcox J; and Oraka Pty Ltd v Leda Holdings Ltd [1997] FCA 297; (1997) ATPR 41-558 at 43,717 per Burchett J. So it has been held that once a misrepresentation has been shown, the TPA prevails over a formal disclaimer. If such a clause is to be effective, it must be by enabling the conduct as a whole to be seen as not misleading - see per Burchett J in Lezam Pty Ltd v Seabridge Australia Pty Ltd [1992] FCA 206; (1992) 107 ALR 291 at 312 - 313. This means that misleading or deceptive conduct, express or implied, may cause a party to enter a contract and give rise to a right to damages under s 82 notwithstanding an exculpatory clause in the terms of the contract itself: IOOF Australia Trustees (NSW) Ltd v Tantipech [1998] FCA 924; (1998) 156 ALR 470 per Lee, Nicholson and Sundberg JJ at 479 - 480.

257 So it may be that, by subsequent full disclosure, or because of absence of reliance on the misleading or deceptive conduct, a clause excluding or limiting liability may be effective because, being understood by the party, it erased or avoided whatever may have been misleading - Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR 41-043. It is always necessary to recognise this when dealing with a claim for relief in respect of an alleged contravention of s 52. A court must have regard both to the contractual obligations of the parties as established by the terms of their agreement and the obligations imposed by statute which require that in the process of setting those contractual obligations, there should be no misleading or deceptive conduct inducing a contracting party to assume an obligation by reason of an induced misunderstanding. As Gummow J said in Demogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31 at 37:

"It is well to bear in mind that whilst contractual rights subsisted between the parties their relationship is not governed simply by the general law as to vendor and purchaser. The legislation regulates the existence in the exercise of what would otherwise be the rights at general law and, in addition, itself creates new rights and remedies."

258 The very issue of the significance of an innocent misrepresentation contained in promotional material leading to an eventual contract for the sale of land, where there was a printed provision disclaiming any guarantee of authenticity in the information supplied, was examined recently in Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 212 ALR 357. In that case, a majority of the court, Gleeson CJ, McHugh, Hayne and Heydon JJ, held that inaccurate survey information, contained in a promotional sales brochure distributed by a selling agent, did not amount to misleading or deceptive conduct because the terms of the brochure and all the surrounding circumstances demonstrated that the selling agent did not adopt or endorse the truth or falsity of the survey information and did no more than state a belief in the reliability of the sources (see [50] - [51]). McHugh J (at [139]) and Kirby J (at [211] - [221]) in dissent, adopted a view that the alleged misleading and deceptive conduct was more extensive merely than the inaccurate survey information contained in the brochure and, Kirby J in particular, expressed views about the inability of exemption or exclusion clauses to prevent conduct from being misleading or deceptive.

259 The essential question, therefore, must be whether or not the conduct complained of is misleading or deceptive in causing the party seeking relief from the court, to suffer damage. Is it misleading or deceptive to induce a party to enter a contract believing that it conferred upon him the benefit of a promise or assurance implied from the negotiations between the parties that equipment supplied would be of merchantable quality or fit for the purpose made known when, in reality, a disclaimer or exclusion clause in the contract documents prevented any such contractual obligation arising? No answer of general application can be given to this question because whether an individual contracting party was misled or deceived will depend on the facts of the particular case. There may have been misleading or deceptive conduct but the contracting party was aware of this or did not rely upon it because of making his or her own inquiries. Or there may be no misleading or deceptive conduct but the contracting party may have misled himself through misconstruing, entirely on his or her own account, the obligations which were being accepted. The decision in Butcher v Lachlan Elder Realty Pty Ltd (supra) is readily explained by the conclusion of the majority that it was not the selling agent (who had merely distributed a brochure containing erroneous survey information prepared from other disclosed sources) who was engaged in misleading or deceptive conduct. In different circumstances, a rejection of a purchaser's claim could equally be justified by concluding that, despite the existence of erroneous and potentially misleading and deceptive information, this had not caused the purchaser to enter the contract. Other possibilities consistent with that result can also be readily supposed.

Misleading and deceptive conduct - the discussions of 25 July 1995

260 In the present case the circumstances were that Messrs Halbert and Bandy went to the plaintiff's premises in the quest for a crushing circuit which would be suitable for the treatment of ore at Hawkins Find. In the course of a lengthy discussion with Mr G Groenenberg a number of circumstances led them to the conclusion that the Hazemag Impactor, which Mr Groenenberg pointed out to them, would be suitable for the crushing of the ore stockpile. They had made known to Mr Groenenberg that the circuit was needed to crush a stockpile of gold-bearing ore containing approximately 178,000 tonnes. They indicated that they required a crusher which would process approximately 50 tonnes of ore per hour, crushing to a dimension of less than 8 mm and that they expected that the equipment would be needed for 12 months. They had no experience and very limited knowledge about the suitability of particular crushers for the task and, consequently, their enquiries of Mr Groenenberg ranged over different types of crushers. Messrs Halbert and Bandy said that the availability and suitability of the Hazemag Impactor was first raised and suggested by Mr Groenenberg by words to the effect: "I've got just what you want in the yard", leading to them going to inspect the impactor which was lying in its unworkable condition nearby in the yard at Welshpool.

261 Mr Groenenberg's version of events is different, as he says that he repeated a suggestion, first made in January 2005, that a jaw crusher would be suitable for use but that Halbert and Bandy rejected his suggestion of the incorporation of a jaw crusher in the circuit. He says that then the three men went out into the yard for a smoke and, while there, Mr Bandy saw the impactor, enquired about that and said that that would be suitable for the defendant's purpose.

262 For reasons which I have already described, where there are differences about what was discussed at the meeting on 25 July 1995, I prefer the evidence of Messrs Bandy and Halbert to that of Mr Groenenberg and I therefore conclude that it was Mr Groenenberg who identified and suggested the Hazemag Impactor as a machine potentially suitable for the task under discussion. This in itself constitutes a representation about the suitability of the impactor for the purpose which had, by then, been fully made known. However, further discussions and agreement for the Hazemag Impactor to be refurbished, for new electrical wiring to be installed and for it to be worked upon by the plaintiff's staff or contractors in order to be able to crush the ore which had been discussed were further steps in the continuing representation that the machine would be suitable for the task proposed at Hawkins Find.

263 It was against this background that the agreement for the hire of the crushing circuit, including the Hazemag Impactor, was reached, an agreement which specifically contemplated the use of the machine for the crushing of the stockpile described at Hawkins Find. I accept the evidence of Mr Halbert and Mr Bandy that Mr Groenenberg indicated that the Hazemag Impactor would be suitable for the purpose which they had discussed, once it had been properly refurbished and re-equipped. No conclusions other than that a representation was made as a result of the express statements of Mr Groenenberg and the implications arising from his responses to the request for the hire of equipment suitable for the purpose made known, can be reached other than that the components of the crushing circuit to be supplied on hire, including the impactor, would be suitable for the purpose discussed. That is the footing upon which the negotiations occurred, it was repeated and reinforced by the discussions during the course of the meeting including the statement which I find was made by Mr Groenenberg that the machine would be suitable for the task described. That is which was implied from the mutual dealings between the parties and the agreement which was concluded.

264 Accepting, as I do, that these negotiations involved a representation that the circuit, including the impactor, would be suitable to crush the ore at Hawkins Find to the dimensions and at the rates desired by the defendant, the question becomes how that representation and its effects in inducing the agreement to take the equipment on hire stands together with cl 8 which excludes any contractual condition or warranty about the fitness for purpose of any of the equipment.

265 The representation, both express and implied on the one hand, and cl 8 excluding any implied condition or warranty on the other are antithetical. Because of the exclusion clause the representation and the implications arising from the disclosure of the purpose for which the crushing circuit was required are unable to give rise to an implied term of merchantability or fitness for purpose. The absence of such an implied term significantly cuts down the effect of the assurance conveyed by the representation that the crushing circuit would be fit for the purpose required. In effect it means that the plaintiff is saying that, although we are telling you that this crushing circuit and the Hazemag Impactor will adequately perform the crushing of the ore stockpile at Hawkins Find which you have described, we are not giving any legal warranty or condition that this is so, and therefore, you take this impactor and the other equipment entirely at your own risk as to its suitability for the purpose which you have made known. No doubt parties, in commercial dealings may, and often do, contract on such a footing resulting in valid and enforceable contracts arising without misleading or deceptive conduct of any kind. However, for that result to occur it is necessary that the party taking the equipment, whether by hire or purchase, fully appreciates that he does so at his own risk and, despite anything which the supplier may have said about the machine, the supplier accepts no responsibility whatsoever regarding its suitability for the purpose disclosed.

266 On the other hand, if in pre-contract dealings a supplier represents, expressly or impliedly, that equipment is suitable for a disclosed purpose, and that representation induces the other party to agree to take the equipment by purchase or hire, then the result will be misleading and deceptive unless it is made clear that, despite the representation, no responsibility for the suitability of the equipment is indeed accepted by the supplier. The absence of the acceptance of any responsibility for the suitability of the equipment supplied can, of course, be made known either by express notice, by disclosure in the course of pre-contract negotiations, or by the terms of the proposed contract if brought to the notice of the hirer or purchaser.

267 It is one thing to remain silent about the suitability of equipment proffered for hire for any particular purpose and then to rely upon an exclusion clause such as cl 8, on the basis that it is the responsibility of the hirer to read the terms of the proposed contract or, should he or she fail to do so, because the hirer accepts the consequence of contracting on specified terms. It is another thing to induce, by representation, a belief that equipment supplied will be suitable for a particular purpose and then, without expressly qualifying that representation or drawing attention to limiting terms of the proposed contract which are inconsistent with it, enter into a contract which accepts no responsibility for the suitability of the equipment. Put another way, it will be misleading and deceptive conduct to induce a party to enter into a contract for the hire of equipment on the faith of a representation about the suitability of the equipment for the purpose disclosed when the detailed terms of the contract, expressly exclude any responsibility for that representation, unless the exclusion is clearly made known to the hirer or the hirer himself or herself appreciates the qualification of the obligation and, for that or any other reason, is not induced to enter into or to complete the contract because of the earlier representation.

268 When the contract for the supply and hire of the crushing circuit equipment was concluded, on 28 July 1995 the defendant, by Messrs Halbert and Bandy, believed that they had received an assurance from Mr G Groenenberg on behalf of the plaintiff that the equipment to be hired would be suitable for performing the crushing task at Hawkins Find as had been disclosed to Mr Groenenberg during the course of their meeting of 25 July 1995. I also find that they did not then appreciate that despite the assurances which had been given expressly and implicitly in this respect, that the plaintiff was accepting no contractual obligation that the equipment would be suitable for that purpose and that any warranty or condition expressly or impliedly arising to that effect was specifically excluded.

269 Had that been made known to them it is improbable that they would have proceeded with the hiring of the equipment on the terms stipulated by the plaintiff. In my view the probabilities are that had this limitation on the plaintiff's contractual liability been made clear, renewed attention would have been given to the suitability of the machine for the task desired and if, as Mr Groenenberg contends, the hardness of the rock was revealed to be a material limiting factor for the suitability of the Hazemag Impactor, that further enquiries would have been made to determine whether the impactor was suitable for this task and, if it was not, that arrangements for another suitable crusher to be hired would have been pursued.

270 Although I have rejected parts of his evidence in preference for the different version of the events which transpired at the meeting on 25 July 1995, given by Messrs Halbert and Bandy, I was impressed by Mr G Groenenberg as a person who was striving to give accurate evidence of what had occurred and who had made very substantial efforts to provide an impactor in a condition which he hoped would crush the Hawkins Find ore satisfactorily. My preference for the evidence of Messrs Halbert and Bandy on these particular issues, does not imply any dishonesty or lack of candour by Mr G Groenenberg, rather I am satisfied that he is personally convinced that the account of events which he described is correct and that this, in turn, derives from a mistaken, but honest, reconstruction of the events of 25 July 1995 when, for reasons associated with his lack of appreciation of the significance of the hardness of the ore, he did not accord close attention to what had been said about the ore by Mr Bandy and by Mr Halbert or to the sample of the ore produced to him at that meeting and others available in the defendant's utility outside in the yard.

271 Equally, I am satisfied that Mr Groenenberg, believing that, because of the existence of cl 8 in the standard terms and conditions of hire by the plaintiff, his company was not accepting any contractual obligation regarding the suitability of any of the equipment for the task disclosed, he did not appreciate that his statements about the Hazemag Impactor and its suitability for the purpose, together with the implications arising from his agreement to refurbish the machine and supply it on hire for the task described at Hawkins Find, conveyed a representation which was at variance with the limited contractual obligations stipulated by cl 8. I find that Mr Groenenberg unwittingly conveyed a representation that the equipment was, or would at the time of delivery for hire be, of reasonable condition and fit for the purpose disclosed. To avoid misleading and deceptive conduct, this representation should have been dispelled if the plaintiff was to rely on cl 8, but Mr Groenenberg was quite oblivious to this.

272 It is this lack of appreciation of the obligations which arose from the mutual dealings which, I am satisfied, led Mr Groenenberg to assert so confidently in evidence that the plaintiff had no obligation in connection with the suitability of the equipment. This means that I am satisfied that Mr G Groenenberg had no intention to mislead or to deceive the defendant and at all times honestly believed that he was acting in accordance with proper business practice. What he failed to appreciate was that what he had stated and implied about the suitability of the impactor for this purpose had resulted in the representation about its suitability for the Hawkins Find project which Messrs Bandy and Halbert had relied upon and which had not been dispelled.

273 Many criticisms were proffered by the plaintiff in the course of cross-examination of Mr Halbert and Mr Bandy, along the lines that they had each failed to make prudent enquiries about the characteristics of the ore at Hawkins Find and the characteristics of any crusher or crushers which could be expected to process it satisfactorily. Some of these criticisms, in a general sense, may be justified for I am satisfied that neither Mr Bandy nor Mr Halbert had any great appreciation of the need to test the suitability of the Hazemag Impactor for this ore any more than Mr Groenenberg did. Their lack of experience and knowledge were undoubtedly factors which led them to rely on the representation, both express and implied, made by Mr Groenenberg about the suitability of this crusher, but they did accept and did rely upon them in the belief, that as Mr Groenenberg had suggested, the Hazemag Impactor would be suitable for the task at Hawkins Find.

Claim against Mr G F Groenenberg by virtue of s 75B of the Trade Practices Act

274 As well as counterclaiming damages against Nea under s 82 of the TPA, Magenta also seeks damages under that Act against Mr G F Groenenberg in reliance upon s 75B as it alleges that he was directly or indirectly knowingly concerned in the contravention of s 52. The basis for this claim is that all representations, express or implied about the suitability of the crushing circuit, and in particular the Hazemag Impactor, for the task at Hawkins Find which the defendant made known were made by Mr Groenenberg in his role as director and agent of Nea. There is nothing to distinguish between the role of Mr G Groenenberg in this respect and that of Nea or any of its other representatives. It was Mr Groenenberg who spoke and acted for Nea in all material respects.

275 This aspect of the case requires close attention to be given to the precise nature of the misleading and deceptive conduct for which Nea is itself liable and also in respect of which it is alleged that Mr Groenenberg is also liable. The allegation against Nea is that by words and conduct it represented that the crushing circuit which it supplied and hired to Magenta was of reasonably good condition and fit for the purpose of crushing the ore at Hawkins Find. The fact of the matter is that it proved to be entirely inadequate for that purpose and the investigations have demonstrated that its inadequacy existed from before the very moment it was delivered for use.

276 That such a representation may constitute misleading and deceptive conduct, if it was made, has not been contested. That case, however, includes a narrower component. In supplying goods on hire for a purpose for which they were never reasonably fit, but under terms of a contract of hire which excluded any contractual warranty or condition express or implied as to fitness for purpose, in circumstances where there had been representations as to the suitability of the plant for the disclosed purpose, such as would have created a contractual condition or warranty in the absence of an exclusion clause, is itself misleading and deceptive conduct unless the significance of the exclusion clause is adequately disclosed or the representations as to the suitability of the plant for the purpose are effectively withdrawn or dispelled.

277 While it is clear that Mr Groenenberg, on behalf of Nea, made the express and implied representations about the supply of the hired equipment in reasonable condition and fit for the purpose which the defendant had disclosed, I am satisfied that this was an innocent misrepresentation on his behalf. Similarly, the misleading conduct arising from the antithesis between the express and implied representations arising from what was said and done on 25 July 1995 about the suitability of the impactor for the task disclosed, and the limiting effect upon contractual obligations due to cl 8 of the standard terms and conditions of hire, was not appreciated by him and also amounted to an innocent misrepresentation.

278 While a principal may be liable for damages under s 82 of the TPA for misleading and deceptive conduct contravening s 52, although that principal made only an innocent representation without any intent to deceive, the accessorial liability imposed on other persons by s 75B involves other considerations because it arises only if the accessory has taken an active role in the contravention by aiding, abetting, counselling or procuring the contravention (s 75B(1)(a)), by inducing the contravention (s 75B(1)(b)) or, as in this case, by being in any way directly or indirectly, knowingly concerned in or a party to the contravention (s 75B(1)(c)). This element of active participation in the contravention connotes a degree of knowledge, the extent of which has attracted close judicial analysis and exposition. So, in dealing with the role of an alleged accessory for aiding and abetting a contravention under s 75B(1)(a), it was held in Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661 that it must be shown that the accessory intentionally aided, abetted, counselled or procured a contravention and to form the necessary intent he must have had knowledge of the essential matters which make up the contravention whether or not he knew that those matters amounted to a contravention. An analysis of the requirement for the accessory to have knowledge of the contravention can be found at Yorke v Lucas (supra) at 668 - 669. In extending the analysis to deal with an accessory who is in any way directly or indirectly knowingly concerned in or a party to the contravention (s 75B(1)(c)), their Honours said at 669 - 670:

"There can be no question that a person cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting a contravention."

"In our view, the proper construction of par (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention."

The knowledge required to implicate a person as an accessory by virtue of s 78B(1)(c) does not require knowledge that the conduct constitutes a contravention of the Act but it does require knowledge of the essential facts which make the conduct a contravention of the provision of the Act, in the present case, of s 52.

279 In dealing with a case of alleged misleading and deceptive conduct in relation to a representation with respect to a future matter in a situation where it was sought to impose accessorial liability on a person for knowing participation in the alleged contravention, Dowsett J explained the distinctions which arose in Australian Competition and Consumer Commission v Michigan Group Pty Ltd [2002] FCA 1439 at [303] in the following way:

"It is quite possible that the act of a natural person respondent on behalf of a corporation will constitute a contravention of the Act by that corporation, and yet the natural person respondent will be found not to have been knowingly concerned in that contravention. In the case of representations as to existing facts, this is because it is not necessary to show that the respondent corporation knew of the misleading nature of the statement in question, but knowing involvement predicates such knowledge on the part of the relevant natural person. The matter is even more complex in the case of representations as to future matters. A representation on behalf of a corporation will constitute a contravention if the corporation fails to show reasonable grounds for it. However a natural person respondent has no onus of proof. It will be necessary for ACCC to demonstrate that such a person:

• knew that the representation was made; and either:

• knew that the corporation had no reasonable ground for it."

280 The requirements of s 75B(1) of the Act have also recently been examined in Rural Press Ltd v Australian Competition and Consumer Commission [2003] HCA 75; (2003) 216 CLR 53 in relation to proceedings commenced by the ACCC alleging breaches of s 45 and s 46 of the Act by engagement in an exclusionary provision which had the purpose of preventing, restricting or limiting the supply of goods or services and where there was a further allegation that one of the respondents was knowingly involved in the contraventions within the meaning of s 75B(1). At [48] Gummow, Hayne and Heydon JJ addressed this contention and their Honours' observations were accepted in a separate judgment of Gleeson CJ and Callinan J and by the judgment of Kirby J. Their Honours said:

"The trial judge rightly held that it was necessary to find that McAuliffe and Law participated in, or assented to, the companies' contraventions with actual knowledge of the essential elements constituting the contraventions. The Rural Press parties complained that he failed to make particular findings, but they are in fact inherent in his reasoning. In the end the argument was only that McAuliffe and Law 'did not know that the principal's conduct was engaged in for the purpose or had the likely effect of substantially lessening competition ... in the market as defined'. It is wholly unrealistic to seek to characterise knowledge of circumstances in that way. Only a handful of lawyers think or speak in that fashion, and then only at a late stage of an analysis of any particular problem. In order to know the essential facts, and thus satisfy s 75B(1) of the Act and like provisions, it is not necessary to know that those facts are capable of characterisation in the language of the statute."

281 Applying these principles to the present case, it is clearly unnecessary for Magenta to prove that Mr Groenenberg knew that his statements or conduct constituted misleading or deceptive conduct contrary to s 52 of the Act. However, for the defendant to succeed in its counterclaim against Mr Groenenberg it must prove that Mr Groenenberg knew that his express and implied representation that the Hazemag Impactor was in reasonable condition and fit for the purpose of crushing the ore at Hawkins Find was false. I am satisfied that this has not been established. Indeed, I am satisfied that Mr Groenenberg believed honestly that, once the refurbishment was carried out, the Hazemag Impactor would be suitable to perform the crushing tasks at Hawkins Find and, at the point of delivery that it was fit for that purpose.

282 In relation to the narrower component of the accessorial liability alleged against Mr Groenenberg, I am satisfied that Mr Groenenberg simply had no realisation or appreciation of the fact that a false and misleading impression could be, or had been, created by his express and implied representations about the suitability of the Hazemag Impactor for the project which Magenta was enquiring about when taken in conjunction with the contractual effect of cl 8 of the standard terms and conditions of hire which excluded any express or implied condition or warranty of fitness for purpose. The antithesis between the representations which he had made and the limiting effect of the exclusion clause was simply something which Mr Groenenberg did not appreciate or understand and, accordingly, I am satisfied that he was not knowingly involved in this aspect of Nea's misleading and deceptive conduct.

283 It follows that the defendant's counterclaim against Mr Geoffrey Groenenberg must be dismissed.

284 At the time when Messrs Halbert and Bandy were contemplating entering into the heap leach processing of the stockpiled ore at Hawkins Find, Magenta had cash reserves, or access to cash, of about $600,000. Messrs Halbert and Bandy considered that this was more than sufficient to allow the company to embark on the Hawkins Find project and the conclusions which they had reached, after their initial appraisal of the project with Mr Hoppman and with the advice of Mr Hurley, was that positive cash flow from gold recoveries could be expected within a few weeks of the commencement of operations and that this would be more than sufficient to meet operational expenses and to allow repayments of set up costs to be commenced leading, before long, to the realisation of actual profits.

285 The establishment of the operation entailed more financial contributions from Magenta than merely meeting the hiring and maintenance costs of the crushing circuit. As the terms of the joint venture with Mourillion Mining reveal, Magenta also had to provide earth moving machinery and operators, fuel, site facilities and labour. This additional equipment was obtained on hire or hire purchase and, excluding the cost of the crushing plant, the weekly operating expenses were running at somewhere between $10,000 and $12,000. By the time Magenta actually started operations at Hawkins Find these reserves had reduced to less than $300,000.

286 An attempt was made by the plaintiff to establish that Magenta was under capitalised for this venture and that significant financial restraints meant that: first, Messrs Halbert and Bandy were not willing to hire a jaw crusher or other crushing plant more suitable for the task at Hawkins Find and, in their dealings with Mr G Groenenberg, rejected warnings which he gave about the unsuitability of the Hazemag Impactor for hard rock crushing choosing to select that item because of lack of financial resources. The second aspect of the plaintiff's argument in this respect was that, after the problem with the inadequacy of the crusher developed in October 1995, Magenta was not able or willing to pay for replacement blow bars, or for a K rotor or to substitute a jaw crusher.

287 Both the plaintiff and the defendant had formally admitted that this Hazemag Impactor was capable of being fitted with a K rotor of the type described by Mr Kendall, the engineer, as described in his evidence and as recommended by him in his letter of 10 October 1995 (Exhibit 36). They also admit that such a K rotor was readily available for installation on the Hazemag Impactor in 1995 (see formal admission - Exhibit 55).]

288 This argument extends to the contention that any loss or damage suffered by Magenta due to its inability to carry on ore treatment at Hawkins Find was due to its lack of financial resources rather than to a breach of duty, if any, by the plaintiff. This latter contention relating, as it does to issues of causation and mitigation of damage is examined separately in these reasons. However, I reject the plaintiff's submissions that Magenta was inadequately capitalised when it embarked upon the Hawkins Find venture or when it entered into the agreement for the supply and hire of the crushing circuit from Nea. There is no reason to conclude that, had the ore at Hawkins Find been crushed to the dimensions and in the volumes planned for the heap leach process, that Magenta would not have been able to recover gold, establish a cash flow and meet its setting up expenses. Whether the project would have been profitable in the medium to long term is another matter which is addressed later.

289 Other difficulties may have been experienced with other machinery or the workforce but it seems improbable that, with a crusher adequate for the task, gold recovery operations would not have commenced and some financial return achieved. If the economic returns had been less than had been expected, that may have resulted in a slow and orderly demobilisation which would have allowed the machinery and other equipment which had been assembled to be disposed of in an orderly fashion. It is unlikely that, had problems of that nature developed, that an abrupt termination of the venture would have been forced upon the defendant, or that they would have suffered from an absence of any income at all from the outset.

290 In addition to Magenta's reserves of cash in early 1995, the company also had bank finance available. Until January 1996 it had an overdraft limit with the Commonwealth Bank of Australia at Karrinyup for $25,000 secured over term deposits for bonds for other mining leases which the company held, and by guarantee given by Messrs Bandy and Halbert and by an equitable mortgage over the company's assets and undertaking. This was extended to $45,000 at the company's request in January 1996 (Exhibit 29) and further extended in February 1996 to $105,000 (Exhibit 30). An additional security for that extension was required by the Bank over Mr Bandy's home in Karrinyup.

291 Mr Bandy acknowledged, and I accept, that Magenta was beginning to run short of funds by November 1995 and, no doubt, this was the reason for the extension of the CBA overdraft facility. I accept that this deterioration in the financial position of Magenta was due to the failure of the operations at Hawkins Find with the accompanying forced sales of equipment, on disadvantageous terms, and of other plant and stores which had been acquired for the venture. These financial difficulties no doubt constrained the manner in which Magenta could respond to the problem posed by the failure and removal of the hired crushing circuit, but they did not cause or contribute to Magenta's decision to hire that equipment or its failure to perform the task made known to the plaintiff when it was ordered or while it was being prepared and commissioned.

292 Magenta has presented an extensive counterclaim for damages formulated in a way which includes many components. It can be summarised as including the following headings:

a. expenditure incurred in setting up the operation at Hawkins Find for mining involving the installation of plant equipment, accommodation and other supplies none of which was sourced from Nea,

b. all amounts paid or payable by Nea for the supply and hire of the crushing circuit, its commissioning and transport to and from the site including any moneys payable to Nea arising from its claim in the principal action,

c. expenses incurred by Magenta in investigating and assessing the problems with the Hazemag Impacter including the cost of repairs and consultant's fees,

d. the loss of the profit which Magenta expected to derive by carrying out its joint venture project with Mourillion Mining for the processing of gold bearing ore at Hawkins Find comprising not only the stock pile of pre-crushed ore but treatment and excavation of other ore available at the lease,

e. the loss and expenses associated with the forced sale of plant and equipment assembled by Magenta at Hawkins Find to carry out the joint venture.

293 The components of these various heads of claim are themselves extensive. The plaintiff submitted that these claims do not come within any established criteria for the proper quantification of damages under s 82 for misleading and deceptive conduct.

294 Nea further submits that the losses alleged have not been caused by misleading or deceptive conduct or are too remote to come within the measures of damages recognised by s 82. The first way in which the plaintiff puts this submission is that the defendant failed to take any steps, or any reasonable steps, to mitigate its damages once it became obvious that the impactor could not perform the task required. Once a reasonable time within which to obtain a replacement crusher had passed, any further or continuing loss was not caused by the alleged breaches of s 52 of the Act. Second, in combination with that first submission, Nea contends that the failure of Magenta to obtain substitute crushing plant was due to its lack of financial resources rather than to any actions or continued effect of the plaintiff's conduct and that losses or damage resulting from impecuniosity or straitened financial circumstances are not recoverable. Third, the plaintiff submits that the appropriate measure of damages in the present case should be the cost of obtaining, installing and operating replacement crushing equipment over the likely duration of the original hire period less the cost which would have been payable for the crushing equipment actually hired for that duration.

295 Neither party submitted that the difference between the costs paid or payable for the hire of the equipment actually supplied and the value, if any, derived from the hire of that equipment was a proper measure of loss or damage. It is necessary, therefore, to consider how damages should be assessed in these circumstances.

296 A submission that an exclusion clause in the ensuing contract, or some other contractual provision acknowledging that the contracting party did not rely upon any representations made when entering into the contract, will not be effective to dispel any misleading or deceptive conduct which in fact induced the conduct, if it is shown that it did not have that effect, gives rise to an issue of fact: 100F Australia Trustees (NSW) Ltd v Tantipech [1998] FCA 924; (1998) 156 ALR 470 (Full Court Federal Court) at 475 and 478 - 480 per Lee, Nicholson and Sundberg JJ; Lezam Pty Ltd v Seabridge Australia Pty Ltd [1992] FCA 206; (1992) 107 ALR 291 (Full Court Federal Court). In that case Burchett J, although dissenting on the outcome made observations which appeared to be consistent with the decision of Sheppard and Hill JJ at 312 - 313:

"A disclaimer or qualification will frequently have little or no effect on the impact of a misrepresentation. A man may tell a lie loudly, while murmuring the truth inaudibly, unconvincingly, or so blandly that it is unlikely to receive any hearing. Much the same may be true of a disclaimer which is inconspicuous, or very general, or apparently merely formal. This court has, on a number of occasions rejected defences based on clauses of the present kind in actions for contraventions of s 52. Once misrepresentation has been shown, the statute prevails over a formal disclaimer. If such a clause is to be effective, it must be by enabling the conduct as a whole (including in it the provision to the complainant of the document containing the clause) to be seen as not misleading. In the present case, the misleading conduct complained of was not rendered blameless by the words in small print at the bottom of a page otherwise reiterating a misrepresentation."

297 Although it could not be said that cl 8 in the present case was contained in a document which repeated the misleading or deceptive conduct arising from the earlier oral and implied representation about the suitability of the Hazemag Impactor, that difference does not distinguish the present case from the principle which Burchett J has so clearly explained.

298 In the present case, I am satisfied that cl 8 had no impact whatever either on Mr Halbert or Mr Bandy when, on behalf of Magenta, they agreed to enter into this contract to take the crushing circuit equipment on hire. The standard terms and conditions were not presented at the meeting of 25 July 1995, they were among the materials faxed to Mr Bandy, but not to Mr Halbert on 26 July. Mr Halbert did not see or read them until they were brought to his attention by Mr Groenenberg in October 1995. Mr Bandy read the enclosures with Exhibit 2, as he said but did not pay any regard to cl 8 if he noticed it at all. The existence of cl 8 was not specifically mentioned by Mr Groenenberg nor did the latter say or do anything to bring to the attention of Messrs Bandy or Halbert that no warranties or conditions of any kind were being given by Nea for this transaction.

299 I have no doubt that cl 8 did not have any effect in dispelling the express and implied representation which had arisen from Mr Groenenberg's discussions and conduct at the meeting of 25 July 1995 that this crushing circuit, and in particular the Hazemag Impactor, was fit for the purpose proposed at Hawkins Find and that it and the other equipment to be leased would be in reasonable condition at the time they were delivered for hire.

300 The measure of damages recoverable under s 82(1) of the TPA is specified by the statute to be "the amount of the loss or damage" suffered "by conduct of the person that was done in contravention of a provision" of the Act. In the past this has led to analogies with the measure of damages for actions in deceit to be applied in certain cases to the recovery of damages for misleading and deceptive conduct under the TPA: see Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 13 and Kizbeau Pty Ltd v W G & B Pty Ltd [1995] HCA 4; (1995) 184 CLR 281. But the analogy has not been complete or exhaustive. In Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514 Mason CJ, Dawson, Gaudron and McHugh JJ said at 526:

" ... it would not be right to conclude that the measure of damages recoverable under [s 82(1)] necessarily coincides with the measure of damages applicable in an action for deceit or in an action for negligent misrepresentation. The measure of damages recoverable under s 82(1) can only be fully ascertained after a thorough analysis of those provisions in Pts IV and V of the Act for contravention of which the statutory cause of action may be maintained."

301 In a case of misleading and deceptive conduct arising from losses by a valuer negligently overvaluing a property used for security for borrowings but which proved inadequate after an enforced sale following default, and a loss occurred, the claimant was entitled to recover notwithstanding that there may have been other contributing causes - I & L Securities v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109. In that case Gleeson CJ said at [16]:

"The section [82] has nothing explicit to say about the conduct of a plaintiff, except that the plaintiff has suffered loss or damage by contravening conduct of another person. And it has nothing to say, except in one pregnant preposition, 'by', about the significance, in measuring the extent of the defendants' liability, of factors other than the contravening conduct which may have contributed to a plaintiff's loss or damage. Such factors, of course, could include the plaintiff's own conduct, the conduct of third parties, or events or circumstances outside the control of anyone."

"Even so, the possible existence, in different circumstances, of those and other complications directs attention to the kinds of problem inherent in the word 'by' in s 82. Where the kind of contravention of s 52 of the Act that is involved is a misrepresentation, including the expression of an erroneous opinion, which induces a person to enter into a transaction which results in financial loss then, depending upon the way in which a claim for loss or damage under s 82 is formulated, it will be common for the amount of the loss or damage as claimed to be affected by factors in addition to the particular factor that was the subject of the misrepresentation. The misrepresentation will rarely be the sole cause of the loss. In statements of principle concerning the common law of contract or tort, additional factors which affect loss or damage are often discussed under the rubrics of remoteness, mitigation, or contributory negligence. Here we are concerned, not with common law principles, but with statutory rights and liabilities."

See also Gleeson CJ at [33] and Gaudron, Gummow and Hayne JJ at [57].

302 This approach has been confirmed by the decision in Murphy v Overton Investments Pty Ltd [2004] HCA 3; (2004) 216 CLR 388. That involved misleading and deceptive conduct which resulted in an underestimation being given by a lessor of future maintenance and service costs payable by lessees under a long term lease of a unit in a retirement village. There was no evidence of any difference between the price paid under the agreement and the value of the property at the date of the agreement but this did not preclude the lessees recovering damages because of having assumed greater financial liabilities than they had been led to believe. In the result, the case was remitted for further consideration of the assessment of damages by the trial Judge. At 407 in a joint judgment the Court said at [45]:

"The Act's reference to 'loss or damage' can be given no narrow meaning. Section 4K of the Act provides that loss or damage includes a reference to injury. It follows that the loss or damage spoken of in ss 82 and 87 is not confined to economic loss: Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 at 513 and 526- 527. What kinds of detriment constitute loss or damage, when a detriment is to be identified as occurring or likely to occur, and what remedies are to be awarded, may all raise further difficult questions. Especially is that so when it is recalled that remedies may be awarded to compensate, prevent or reduce loss of damage that has been or is likely to be suffered by conduct and contravention of the Act."

And, at 408 in [49] and [50] their Honours said:

"It should not be assumed that the loss or damage which a person suffers as a result of contravention of Pt V is necessarily singular. Nor should it be assumed that loss or damage is occurred either as a loss on capital account or as a loss on revenue account which, if to be compensated by an award of damages, must be translated into a single capital sum. These assumptions find no support in the language of the relevant provisions.

Loss or damage may be a loss of capital. But there may also be a loss on revenue account which, unless some other remedy is granted which will prevent it continuing into the future, will, or may, continue into the future. And the losses on capital account may be sustained at a time different from any loss on revenue account. The latter form of loss may, in many cases, be sustained after the loss on capital account has been suffered. In some cases the loss on capital account may overlap with a loss on revenue account. If that is so, it is necessary to mould relief in a way which will avoid double compensation."

And, for reasons set out in [52] the Court explained that it will not always be the case that a remedy to be awarded for contravention of Pt V of the Act must be, or ordinarily will be, a lump sum of damages as this will be affected by the particular circumstances of the case and what other or further remedies may be appropriate.

303 These developments render decisions confining the measure of damages for breach of s 82 of the TPA involving the sale of goods whose qualities or suitability had been misrepresented, to the difference in value between the amount paid and the true value of the item acquired, in need of careful reconsideration. Such a case, where those observations were only obiter is Atkinson v Hastings Deering (Queensland) Pty Ltd (1985) 8 FCR 481 especially at 492 - 495.

304 By contrast, an example of a limiting approach to the recovery of damages for breach of an implied term that a forklift truck would be reasonably fit for the purpose, and excluding any claim for damages under s 82 of the TPA on the basis that there was no representation of an existing fact, see Frank Davies Pty Ltd v Container Haulage Group Pty Ltd (No 1) (1989) 98 FLR 289. Insofar as this case held that a representation as to the fitness of the machinery for the intended use should be regarded as a representation with respect to a future matter (made at a time before s 51A of the TPA was added to the statute in 1986) I say, with respect, is not a conclusion with which I agree. Insofar as the decision held that the measure of damages for any breach of s 52 of the TPA in these circumstances is confined to the measure of damages for the tort of deceit I again, consider, that that view has been overtaken and replaced by subsequent binding authority. However, Hodgson J held that there was cause of action for breach of an implied term that the truck was reasonably fit for the purpose identified. The damages recoverable for breach of this term were limited to the period up to the termination of the lease and were associated with the inadequacy of the performance of the truck during that period.

Damages for supplying equipment unfit for purpose

305 Turning then to more general principles governing the recovery of damages for breach of contract it is necessary, in the present case, to address the distinction between the claims for "wasted expenditure" or "reliance damages" as species of recoverable damages and to consider whether either may be recovered in addition to claims for loss of profit on a venture which has failed or which has been prevented by the breach which has occurred. The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 emphasises that the primary rule is that where damages are being awarded for breach of contract, the damages are to be that amount which would place the claimant, as far as practically possible, in the situation he would have enjoyed had the contract been performed. However, as that case demonstrates there may be many reasons why an estimation of the value to the claimant if the contract had been fully performed may not be possible or, if possible, may not be entirely appropriate.

306 In a case such as the present where the breach complained of results in the contractor suffering a variety of wasted expenditure, either from paying for services which produced no tangible benefit, or as a result of fruitless attempts to remedy the consequences of the breach, it may be right to award the recovery of that wasted expenditure, but only to the extent that that expenditure would have been recouped by revenue earned if the contract had been properly performed or, where performance had been prevented, where the components of wasted expenditure have not been duplicated by any additional award of damages under the heading of loss of profits.

307 Equally, it is established that, where the breach complained of caused a direct or foreseeable loss of profits then, subject to doctrines of remoteness and mitigation, the damages should include an allowance for the profits lost, or for the opportunity of making them if they were uncertain, so long as this does not duplicate any other component of the damages award such as expenses which would necessarily have been incurred in earning the profit.

308 In a case where, had the contract been properly performed, it is improbable that a profit would have in fact been derived, or where it appears probable that a loss would have occurred, then the starting point is that the damages for breach of contract will include items of wasted expenditure with the onus then being cast upon the defendant to prove that if the contract had been performed the benefits derived by the claimant would have been less than the value of the wasted expenditure sought to be recovered.

309 To these principles must be added the further observation that, where there is uncertainty whether or not a claimant contractor would have derived a profit under the contract which was rescinded or prevented by the breach complained of, it is appropriate to award damages for the loss of the opportunity of deriving the profit but, in doing so, the prospects of achieving that profit must be evaluated. It must be evaluated although it need not necessarily be more than 50 per cent. In Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 , these principles were recognised as extending to claims for damages under s 82 of the TPA.

310 In the present case where there is a claim for damages for moneys paid under the contract of hire for services which turned out to be virtually worthless; for the recovery of expenditure outlaid in an attempt to repair the plant; for other wasted expenditure; and for losses occasioned by shutting down the Hawkins Find operation and disposing of other plant and equipment at forced and premature sales, one must have regard to these principles. Equally they are applicable in relation to Magenta's claim for loss of profits expected to be derived from profitable gold recoveries from the stockpile of ore from further extractive operations once that had been fully treated.

311 Before proceeding further it is necessary to examine authorities cited by the parties dealing with claims for damages for breach of express or implied warranties of fitness for purpose of machinery or other equipment taken on hire in actions for breach of contract. T C Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd [1963] HCA 57; (1963) 180 CLR 130; 37 ALJR 289 is case involving the sale of a stone crushing machine which proved unfit for its purpose where the purchaser suffered losses in using the machine in an attempt to fulfil a construction contract. The purchaser was awarded damages for expenditure and liabilities incurred in the course, and for the purposes of, carrying out the construction contract less moneys paid by the contractor together with an additional sum for the loss of the profits it would have made if it had been able to carry out the contract. This approach to the assessment of damages was upheld as the court decided that the purchaser was not bound to elect between claiming damages for expenditure uselessly incurred and claiming for loss of profits which would have been earned had the crusher been fit for its purpose. It could recover both, so long as the allowance for useless expenditure was for payments which would not have been incurred in the ordinary event in the performance of the contract in earning the profit. In the result the case was remitted for a reassessment of damages because of inadequacies in the evidence supporting the amount awarded for the actual loss of profits.

312 Reg Glass Pty Ltd v Rivers Locking Systems Pty Ltd [1968] HCA 64; (1998) 120 CLR 516 is a case where a contractor supplied inadequate locks and burglar-proof protection for business premises in breach of the common law implied warranty to provide reasonable means to prevent breaking and entering. There the measure of damages for the breach of warranty was the loss resulting from the breach namely, the value of goods stolen. This was on the basis that the loss suffered resulted from the breach and was reasonably foreseeable, at the time the contract was made, as being likely to result from such a breach (see 523).

313 Burns v MAN Automotive (Aust) Pty Ltd [1986] HCA 81; (1986) 161 CLR 653 is the case involving the sale to a road haulier of a prime mover under a warranty that its engine had been fully reconditioned. It had not and engine faults substantially disrupted the haulier's business, prevented him from engaging in interstate haulage but allowed the use of the vehicle for less profitable operations on intrastate routes. The owner driver was not able to have the vehicle's engine fully reconditioned to overcome the problems arising from the breach of warranty because of lack of financial resources. The damages awarded at first instance included a component for loss of earning for a period of four years after the date of purchase on the basis that this was the period during which the engine should have operated efficiently if it had been fully reconditioned. That was set aside by an appeal to the Full Court which held that the driver could not recover for loss of profits after the true extent of the condition of the engine had been discovered about 12 months after the purchase. Essentially this was because the Full Court considered that it would not have been foreseeable that a purchaser, with full knowledge of the extent of the defective motor, would have persisted in attempting to operate the vehicle once he realised it needed a full reconditioning and, consequently, profits lost after that date were too remote. That approach was upheld by a majority, Gibbs CJ, Wilson, Deane and Dawson JJ, but with Brennan J dissenting. Significantly however, both Gibbs CJ and Brennan J expressed the view that a plaintiff who is under a duty to mitigate his loss is not obliged, to reduce the damage, to do what he cannot afford to do where his financial difficulties had arisen as a consequence of the defendant's wrongdoing.

314 In the present case, Nea submits that the measure of damages, if any, to be awarded to Magenta should only be the cost of expenditure thrown away plus the additional cost, if any, to hire or acquire other crushing equipment once it became apparent that this impactor was not suitable for the task at Hawkins Find or until a reasonable time to obtain suitable replacement equipment had elapsed.

315 The bases for these submissions are that the conventional measure for damages for breach of a contract for the hire or supply of a chattel is the additional cost, if any, of obtaining a replacement chattel assuming one is readily available. The second submission is that Magenta's failure to take the course of securing a substitute crushing circuit to deal with the problem was the real cause of the loss and that Magenta's lack of financial resources did not provide any justification for a different view.

316 It can be said immediately that the impecuniosity of Magenta which constrained its opportunities to deal with the situation which arisen at Hawkins Find after 23 October 1995 cannot be regarded as breaking any chain in causation or relieving Nea from the consequences Magenta suffered as a result of the misleading or deceptive conduct. This is explained in Burns v MAN Automotive (Aust) Pty Ltd (supra) and in particular, by the passages in that case which explain why the decision of the House of Lords in the Owners of Liesboch Dredger v Owners of Steamship Edison [1933] AC 49 - see per Gibbs CJ at 658, 659, 660 and per Brennan J at 674 - no longer applies in its full rigour. Furthermore, the principle that losses which have been aggravated, or contributed to by a plaintiff's impecuniosity cannot be recovered, for which the decision in the Liesboch is regarded as standing, has now been authoritatively rejected by the House of Lords in Lagden v O'Connor [2003] UKHL 64; [2004] 1 All ER 277 per Lord Hope at [45] - [62]. This disapproval of the decision in Liesboch was expressly endorsed by Lord Nicholls at [8], by Lord Slynn at [12], by Lord Scott at [82] and by Lord Walker [102] who, incidentally, expressly approved of the approach taken by Gibbs CJ in Burns v MAN Automotive (Aust) (supra) at [97].

317 As earlier noted the evidence of Messrs Bandy and Halbert was that immediately after 23 October 1995 Magenta made a series of enquiries from machinery suppliers and other operators in the eastern goldfields about the availability of a substitute crushing plant but they met with no success. They were looking for another impactor or small crusher and apart from a crushing plant at Meekatharra which would not become available before March 1996 there was nothing on offer. They were not interested in seeking or using a jaw crusher for the same reasons that the use of a jaw crusher was rejected in early 1995, namely that it was too large and expensive for such a project. As well as making these enquiries they placed advertisements in the "West Australian" newspaper over several weekends during November 1995 and closely scrutinised published mining magazines which carried advertisements for machinery available on hire. Again, nothing suitable was found.

318 In addition to these enquiries Magenta immediately brought in a small rotating ball crushing plant to use in conjunction with the newly hired wet plant from Boral and began trucking in ore from Southern Cross. These are reasonable efforts to deal with the situation and to derive as much benefit as could be achieved while the graver problem caused by the absence of an impact crushing plant was considered. About 2,000 tons of ore were processed under these substitute arrangements before it became apparent that is was simply uneconomic to proceed further.

319 Nevertheless, Nea has established that there were some substitute crushing plants available for hire and purchase which Magenta might have used had it enquired more extensively. Mr Roger Cook, the manager of Cook Industrial Minerals Pty Ltd gave evidence that his company conducted business for the supply of machinery including crushers, on hire to the public. He said that in 1995 there were about six dealers supplying crushers on hire in Perth but none in Kalgoorlie. He also said that the ore could have been crushed by a cone crusher or by a jaw crusher and that such crushers were then available, including a Humbolt four foot cone crusher available for hire at approximately $15,000 to $20,000 per month which would have been suitable for this task. Mr Cook explained that he probably could have sourced an impact crusher for the Hawkins Find project if one was suitable. The Humbolt crusher could reduce ore from 150mm - 30mm and for - 8mm may have required some additional component or modification. He was of the view that a cone crusher, perhaps with a second stage crusher. would be a better solution. He was not aware of any approach to his business by Messrs Bandy or Halbert in late 1995. The cost of a cone crusher was approximately 10 to 15 per cent greater than the cost of an impact crusher.

320 There was no evidence from Mr Cook about the hire cost of a complete crushing circuit which he might be able to provide, whether consisting of a cone crusher or another type of crusher, which would allow direct comparison with the hire cost for the complete circuit supplied by Nea at $29,620 per month.

321 Mr Neil Irvine, the managing director of Rapid Crushing Screens, a business which supplies for hire screens and crushers also gave evidence. He had approximately five crushers on hand in 1995. He dealt with jaw crushers, cone crushers and impact crushers. His evidence (including Exhibit 32) was to the effect that his business could have supplied on hire a cone crusher in October 1995 which could have been relocated from Geraldton at a cost of about $20,000. He said that the capital cost for the purchase of a cone crusher would be about twice that of an impact crusher and that the hiring cost of a cone crusher was also significantly greater. The Geraldton cone crusher could then crush only to - 20mm but could have been further adapted by the addition of a fine head crusher upper assembly. However, Mr Irvine did not say that he had an impact crusher which could have been supplied on hire or purchase for the work at Hawkins Find, nor did he give any evidence about the actual hire cost of operating, on a monthly basis, a cone crusher, either alone or in combination with the other screens and conveyors which would have been needed to replace the crushing circuit originally supplied by Nea.

322 The defendant's own witness, the engineer Mr Kendall, also said that equipment similar to that hired by Magenta from Nea was available in the goldfields and on the Perth market in October 1995 but gave no specific examples of this or of the cost of hire or purchase.

323 This evidence establishes to my satisfaction that there were sources in Perth, but not in Kalgoorlie, from which at least jaw and cone crushers might have been obtained on hire by Magenta for use at Hawkins Find but there is no evidence which would allow a finding to be made that either they, or, more importantly, a complete crushing circuit including screens and conveyors as originally hired from Nea, could have been hired at a cost comparable to the $29,620 per month which the defendant was to pay to the plaintiff. Furthermore, I am satisfied that having regard to all the circumstances, and particularly to its deteriorating financial position which was caused by the absence of cash flow from gold production at Hawkins Find, Magenta acted reasonably in the efforts which it took to cope with the problem which had emerged. Its decision to close down the operation in about November 1995, to dismantle and dispose of the remaining equipment and leave the site by February 1996 cannot be regarded as unreasonable. I am certainly not satisfied that Nea has discharged its onus of proving a failure to mitigate damages even if it were to be accepted that this would be an answer in whole or in part to a claim for damages under s 82 of the TPA - see TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd (supra) at 138.

324 The better view is that concepts of mitigation of damage and remoteness do not prevent or interrupt recovery of losses caused by misleading or deceptive conduct: I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109 - see per Gleeson CJ at 121 - 122 and per McHugh J at 136 and Kirby J at 155. In that case their Honours endorsed the view that notions analogous to contributory negligence and mitigation at common law could prevent the recovery of damage for misleading or deceptive conduct only in instances where those concepts showed that the loss had not been caused by the offending conduct.

325 Magenta's counterclaim includes a component of $1,643,750 for loss of profits. This assumes the treatment of 150,000 tonnes of ore in the stockpile with a gold content of 1.5 to 1.8 grams per tonne, that is 225,000 grams, at a recovery rate of 80 per cent, less treatment and recovery costs and then for the proceeds to be shared 50 per cent with Mourillion Mining. In addition, the claim includes the proposed treatment of 50,000 tonnes of ore of 50mm or less with a gold content of 3 grams per tonne but with different treatment and recovery costs. Finally, it includes a projected open pit operation to mine 150,000 tonnes averaging 2.5 grams of gold per tonne with other different recovery, costs and wastage rates. All this assumes profitable gold processing and mining operations over three years or more, progressing in magnitude and method, far beyond the treatment of the pre-crushed stockpile which Messrs Halbert and Bandy discussed with Mr Groenenberg. It involves mining and crushing operations far more complicated than the impact crushing circuit which had been obtained on hire. The details of this were not canvassed in evidence. There is no basis to conclude that the Hazemag Impactor would have been suitable to crush ore of a larger dimension than that contained in the stockpile, or that it could treat ROM ore.

326 The case for Magenta is that as a profitable cash flow developed from gold recovered from the stockpile this would allow it to acquire larger crushers and to embark on a bigger operation. Nea was never asked to supply equipment for such an expanded operation and never agreed to do so.

327 Whether the original operation involving the treatment of the stockpile would have been profitable or capable of financing a larger scale mining activity at Hawkins Find depends greatly on the nature and extent of the ore reserves and the probable profitability of such an operation. On these issues the evidence is far from encouraging for Magenta.

328 The stockpile of pre-crushed ore which was to be treated by the crushing circuit supplied by Nea was estimated to contain about 178,000 tonnes of ore. The measurements leading to estimates of the size of the stockpile involved marking out the linear dimensions of the stockpile, its shape and height, calculating the volume of the rock in the stockpile and multiplying that by the specific gravity of the ore determined from sampling. Various attempts to determine the quantity/mass of this ore had been made over the years.

329 In reports from J F Mort & Co (Surveyors) Pty Ltd to Westcoast Holdings Ltd in June and July of 1986, which had been obtained by Mr Hoppman of Mourillion Mining, the volume of the stockpile was finally given as 74,165 cubic metres. These reports, Exhibits 44 and 45, also referred to another smaller oversize stockpile on the surface; to 338,854 cubic metres of ore in the pit; and to 6672 cubic metres of coarse ore. The project discussed with Nea and for which the Hazemag Impactor crusher and other equipment was hired was solely for the treatment of the stockpile ore.

330 Mr Popp's report of March 2001, prepared for Mr Halbert (Exhibit 43), refers to 126,306 tonnes of ore in the stockpile at an assumed grade of 1.6 grams per tonne of gold and mentions another oversized stockpile of 7894 tonnes of the same grade. Mr Popp did not visit the site or conduct his own sampling. He adopted the J F Mort & Co (Surveyors) Pty Ltd reports of 1986 which referred to 74,165 cubic metres of ore in the fine ore stockpile and 4784 cubic metres in the oversized stockpile.

331 A report from Mr Scott Dunham (Exhibit 50) estimated that the tonnage in the fine ore stockpile was 122,371 tonnes and that there was a further 11,009 tonnes of ore in the coarse ore stockpile based on a bulk density of 1.65 tonnes per cubic metre. This figure had not been verified by testing but he accepted it as reasonable. Mr Dunham also reported that between 1986 and 1994 about 50,000 tonnes of ore crushed to less than 150mm had been added to the stockpile leading to his estimate of 178,288 tonnes, made up as follows:

Stockpile Volume-cubic metres Tonnage (at 1.65 t/m3)

Fine ore

(by survey) 74,164 122,371

Coarse ore

(by survey) 6,672 11,009

Additional sub

150mm No survey 45,000 - 55,000

Total 178,000 - 188,000

332 The diagram in Exhibit 2, sketched by Mr Groenenberg at the meeting of 25 July 1995, contemplated the feed ore including rocks greater than 200mm in dimension. However, the first step in the circuit was a Grizzly set to pass ore of less than 200mm, so I conclude that only ore of less than 200mm was to be fed into the circuit. Accordingly, it is appropriate to select Mr Dunham's lower estimate of 178,000 tonnes as comprising the size of the stockpile which Magenta proposed to treat by the crushing circuit hired from Nea. Mr Dunham also took the grade in the stockpile as being between 1.09 and 1.8 g/t for Au. This was significantly lower than the estimates provided by Mr Halbert of ore ranging between 2.4 g/t and 3.0 g/t Au but, having regard to the history of the operation, I consider that there is every reason to adopt the cautious approach preferred by Mr Dunham. The mid point of this range of grades is 1.45 g/t and this is also significantly less than the average figure adopted by Mr Popp of 1.6 g/t in his report (Exhibit 43).

333 According to Mr Dunham the net indicative value of the stockpiles after taking into account treatments costs, assumed recovery rates and a range of gold prices from $480/oz to $513/oz was between - $709,000 to + $1,492,000. He selected a value based on midpoints of the several variables to put his preferred indicative value on the stockpiles (all three) of $103,000 at $480/oz price. This shows that the post treatment value of the gold resource was only very modest and extremely sensitive to the assumptions made about the average grade of the ore, recovery rates and treatments costs. Even then the 50 per cent share of the surplus that Magenta would take from its joint venture with Mourillion would only be $51,500 - for an average grade at the lower end of the Dunham estimate and for anything less than 1.09 g/tonne Au the indicative value for all the stockpiles will be negative on these figures. All in all this suggests that the economic viability of the project was extremely precarious.

334 Caution in adopting optimistic grades of gold in this ore is also indicated by Mr Schiemer's report prepared in January 1996 (Exhibit 51). This report, evidently carried out for Mr Hoffman after Magenta left Hawkins Find, included a sampling process of ores in the pit and in the pit walls, as well as estimating the grades of the stockpiles. Mr Schiemer's estimate of the grade of all available ore after drilling was 323,000 tonnes averaging 1.37 g/t and with samples taken from the pit floor averaging 1.21 g/t. His samples listed in Table 1 of the report are generally low grade. There was no sample of any crushed ore from the stockpile in question on the leach pads greater than 0.93 g/t, the samples from the coarse ore truck dump were generally less than 1 g/t with two exceptions, the first being 3.16 g/t and the second 1.08 g/t. The average of 74 samples taken from the sides of the heap leach pads was 0.99 g/t.

335 Samples assayed for Mr Halbert by ALS Chemex in April 2000 (Exhibit 49) were of samples taken from various sides of the stockpiles, or possibly of the pit, and were generally much less than 1.00 g/t but with a few exceptions going as high as 4.21 g/t. These could not support any conclusion that the average grade was 1.6 g/t as postulated by Mr Popp. It must be added, however, that Mr Popp interpreted this data as justifying an average grade for all the reserve ore of 1.37 g/t.

336 The operating history of the Hawkins Find site since 1897 is summarised in Mr Popp's report (Exhibit 43) at page 5 and 6 and in par 1.2 of the Westcoast Holdings Ltd evaluation report (Exhibit 15(1)). This latter document reported that only sporadic work in the area was done between 1913 and the mid-1970's, that mining between 1975 and 1980 gave only a small yield of 6802 tonnes with an average bullion yield of 3 g/t. But since then 289 tonnes was treated at the Coolgardie State Battery for a return of 2.3 g/t. An investigation conducted by the company Swiss Aluminium Mining Australia Pty Ltd in 1994 using surface mapping and diamond drilling, estimated grates of 1.34 g/t. Further diamond drilling investigations on the lease were conducted in 1982 on behalf of BHP Minerals Ltd leading to an estimated grade of 1.5 g/t within the porphyry leading to the option to BHP being allowed to lapse. West Coast Holdings Ltd exercised an option to take up the lease in 1983, but there is no evidence in any successful operation of the area by that company. Mr Photios, who took over the lease from Mourillion Mining, did not provide any details which would allow an optimistic valuation to be reached, nor did his limited evidence in any way corroborate or confirm the estimates made by Mr Popp.

337 When one adds to this history the fact that neither Mr Halbert nor Mr Bandy had ever been involved in a crushing or gold recovery operation themselves, and the fact that there is no objective evidence of the rate of gold recovery from the cyanide process which they intended to employ, it is very difficult to conclude that any particular rate of gold recoveries would have been achieved or that the operation would have been profitable. There was a history of lower than expected rates of recovery from cyanide leaching on this lease in the past due to a variety of problems. Mr Popp has made a series of estimates about the profit which could have been derived from the Hawkins Find operation but, as indicated, they assume far more extensive operations than just treating the fine ore stockpile. They also assume grades and rates of recovery which have not been demonstrated.

338 Its past history, and its evaluation and rejection by major mining companies, leaves very little scope for a finding that a gold production operation at Hawkins Find would have been profitable. I accept that small-scale, low cost gold recovery operations such as contemplated by Magenta and Mourillion Mining can, by selective treatment of old areas, make profits but there is very little to support such a conclusion in the present case. There are many hazards in gold mining operations, not least of which are the breakdown of machinery, unexpected repair and treatment costs and other vicissitudes. To assume a high overall degree of gold mineralisation, on the basis of comparatively few assay results, and high recovery rates for a company's first excursion into gold mining is very hopeful. The very limited evidence about gold recovery operations at Hawkins Find after February 1996 does not provide any basis for concluding that the expectations of Mr Popp, or of Magenta would have been fulfilled. I am simply not persuaded that this would have been a profitable gold recovery/mining operation. At best, it seems to me that it would have been marginal and even then prone to higher than expected treatment costs because of the abrasiveness of the ore.

339 I am certainly not satisfied that, had the Hazemag Impactor been able to crush the stockpile ore, the Hawkins Find operation would then have developed and expanded to treat other stockpiles of uncrushed ore on the surface, on the floor of the pit, and then would have extended further to excavation from the pit walls and floor. Even if it had, such a venture was not proposed or contemplated as a task for the equipment which was taken on hire from Nea and I do not see any basis upon which the failure of the impactor can be regarded as causing a loss of an ability to treat profitably more ore than was contained in the identified stockpile.

340 The nature of the joint venture agreement which Magenta had with Mourillion Mining permitted the crushing proposal to continue for as long as was mutually advantageous, but equally permitted the venture to be abandoned at any stage. Mr Hoppman's subsequent attempts to treat the stockpiles by heap leaching in conjunction with Mr Photios do not appear to have been very successful and were not continued for long. I do not consider that there is any basis upon which I could conclude, as a matter of probability, that even if the Hazemag Impactor had operated successfully the venture would have continued beyond the treatment of the stockpile, if it lasted that long.

341 For these reasons, therefore, I am not satisfied that Magenta has shown that it has lost profits from the operation at Hawkins Find or that it has been deprived of an opportunity which had any realistic chance of making an overall profit in the medium or long term. I conclude that Magenta has failed to make out a case that it has lost the opportunity to make any profit from continued operations at Hawkins Find or that it has lost the opportunity of engaging in a chance which might lead to the realisation of a profit over the projected duration of the 12 months or so expected to process the stockpile. Accordingly, the counterclaim for loss of profits must be rejected.

342 In view of Magenta's failure to prove that any loss of profits was caused by the plaintiff's misleading and deceptive conduct arising from the supply of this crushing circuit equipment on hire, I consider that Magenta must be confined to "wasted expenditure" damages as recognised in The Commonwealth v Amann Aviation Pty Ltd (supra). These are a species of damages recoverable by reason of a contravention of s 52 of the TPA - Sellars v Adelaide Petroleum NL (supra).

343 Had it not been for the misleading and deceptive conduct which led Magenta to enter into this agreement to take the crushing circuit on hire from Nea, Magenta would either have not proceeded with the venture or would have sought and obtained on hire other alternative equipment of such a nature and cost which would have provided a basis for believing that the gold extraction process would have been profitable. As I have already concluded that Magenta has failed to prove that the operation would have been profitable if this Hazemag Impactor had been reasonably fit for crushing the stockpiled ore, it seems unlikely that another crushing circuit, including a more powerful crusher or series of crushers, would have been profitable either, or that Magenta would have been prepared to proceed with significantly higher operating expenses. This conclusion provides another reason for selecting the approach of identifying wasted expenditure as the proper measure of damages.

344 Nea has certainly not made out a case that any wasted expenditure should be reduced by losses which could be shown to have been probable. Even if Nea could establish that the performance of the venture would probably have involved losses of a quantifiable amount that would not provide a reason for reducing claims for wasted expenditure arising from the early abandonment of the venture, such as occurred in November 1995.

345 In this case I accept that, where Magenta has been unable to prove that its overall operations at Hawkins Find would have been profitable, there is nevertheless and onus upon Nea to show that the revenue derived from the operation would have been insufficient to cover the establishment expenses - The Commonwealth v Amann Aviation (supra) per Mason CJ and Dawson J at 86 - 87. In the absence of such proof, I must proceed on the footing that the setting up expenses would have been recovered by Magenta or, alternatively, would never have been incurred. Either way the amounts paid or payable in respect of the hire of the crushing circuit will be part of the wasted expenses and recoverable as damages. This comprises:

(a) the deposit paid on 31 July 1995 $15,625.00

(b) the amount claimed for the balance $28,040.06

346 On this basis, therefore, I conclude that Magenta is entitled to succeed on this aspect of its counterclaim and may set portion of that component of damages off against the plaintiff's claim. This will entirely eliminate the plaintiff's claim for unpaid hire and associated expenses.

347 At this point it is necessary to return to the plaintiff's claim for interest at bank rates on the outstanding hire from time to time. No evidence of the relevant interest rates having been proved or agreed, I raised earlier in these reasons the prospect of inviting the parties to make further submissions about this claim for interest or giving leave to allow the plaintiff to re-open to prove the relevant rates. However, if that were to be done and a component for interest was to be added to the plaintiff's claim, a corresponding addition would result in the counterclaim with each of these adjustments cancelling the other out. Therefore, to avoid circuity of action, I consider that the best course to follow is to let matters stand without including any interest on the plaintiff's claim and without making any corresponding addition to the counterclaim: see Eastern Extension Australasia and China Telegraph Co Ltd v Federal Commissioner Taxation [1923] HCA 62; (1923) 33 CLR 426 at 438, 441 and 447; Healing (Sales) Pty Ltd v Inglis Electrix Pty Ltd [1968] HCA 60; (1968) 121 CLR 584 per Windyer J at 614 and Rich v CGU Insurance Ltd [2005] HCA 16; (2005) 79 ALJR 856 at [20]. The net result will not differ whichever alternative is chosen.

348 The remaining items of damage claimed for wasted expenditure by Magenta relate to expenditure for services and equipment in setting up and operating the camp at Hawkins Find with ancillary earthmoving equipment from late July 1995 until it was closed down. The list of items below was verified by the evidence of Mr Halbert who said that he had taken the details from the records of Magenta and other records of his own, but many of these could not be produced because they had been lost or destroyed. Consequently, the extent to which they could be challenged by cross-examination or otherwise was very limited, but in the end it was accepted that expenditure or liabilities of the amounts claimed had in fact been made or incurred by Magenta in relation to the Hawkins Find operations. Nea, through its counsel accepted that the amounts which Mr Halbert said were paid had been paid and that, accordingly, the question which arose was what connection the various items of expenditure had with the Hawkins Find operation (see t/s 409 - 410). Even so, there were some items which, for additional reasons, were challenged and which I shall address separately.

349 Those items of expenditure or liability which were established as resulting from the collapse of the Hawkins Find venture are:

1. Penn's Crane Hire $1,815.00

2. Rainfill Waterlanks Water tanks $515.00

3. Site Masters $9,938.65

4. Kenlow Dam liners $6,580.00

5. JR Engineering $1,362.02

6. Power West Hire of 650 KVA

7. West Brothers $2,497.77

8. Glenn Haulage $1,060.00

9. True Blue Hire $309.58

10. Goldfields Electrical $13,223.60

11. Brambles Manford $1,987.71

12. Hampton Transport $2,897.00

13. Power West $6,506.68

14. M Electrical $413.25

15. Kalgoorlie Auto Electrical $1,945.58

16. Motive Travel $1,300.00

17. Miller Hince Fuel $21,177.29

18. G V Luke Refrigeration $497.11

19. Hannan Food Mart $1,261.00

20. Pump Care $157.75

21. CIG $3,583.40

22. Elders $453.00

23. Handy Hire Ute $370.16

24. Truck Power $92.50

25. Universal Tyres $420.00

26. Coyles $90.80

27. Challenge Batteries $130.00

28. Kalgoorlie Secretarial $52.50

29. Boral Engineering $6,250.00

30. Caltex Fuel $4,247.50

31. Shell Fuel $779.10

32. BP Fuel $854.22

33. Jaylon Dam Lines $7,000.00

34. Onga Water Pump $420.00

35. David Hurley Consultancy Fees (unpaid) $2,500.00

36. Monodelphus - new wear plates

37. F J Sweetmans bolts for Impactor $758.00

38. Report by Kendall Engineers $961.70

39. Accommodation:

350 The claim for Boral Engineering (29) was for the hire of the wet plant which was introduced after the repossession of the plant hired by Nea on 23 October 1995. I am satisfied that it forms part of the wasted expenditure on the basis that it was acquired in order to attempt to preserve the viability of the operation at Hawkins Find after the repossession, although, in the end, unsuccessfully.

351 The following items were also claimed by Magenta as components of damages in its counterclaim but, as a result of cross-examination of Mr Halbert, give rise to additional issues. They are:

6. Wages payable to Byron Halbert $25,000

7. Wages payable to John Bandy $25,000

352 The Komatsu 470 Front End Loader (1) and the TCM 850 Front End Loader (2) were items of equipment which had been taken by Magenta on hire purchase from the finance company AGC. The Tandem Tipper Truck (3) and the Magenta plant and equipment (4) were items of equipment or machinery owned by Magenta which were employed in connection with the Hawkins Find operation and were charged in effect for their value, during the period employed on this project.

353 The claims of wages of $25,000 each for Messrs Halbert and Bandy are for payments in lieu of wages because neither man was paid wages for any of the time working on the site.

354 The TCM Front End Loader was eventually returned to Perth and sold and the amount of $1500 per week was an allocation by Magenta to this venture as a charge. The same applies to the tipper truck and to the excavator (5) and the front end loader (see t/s 437 - 439). There was more than a little uncertainty at the trial about the basis of Magenta's counterclaim for these items especially, as at that stage, Magenta was simultaneously pursuing a claim for loss of profits which, upon a correct formulation, could only relate to anticipated profits after normal operating expenses, such as the costs of this other machinery, had been met.

355 In the light of my conclusion to reject Magenta's claim for loss of profits, the consideration of these aspects of the counterclaim becomes simpler because it is only necessary to ascertain whether or not there was expenditure of the amounts claimed incurred but wasted. Had the joint venture with Mourillion proceeded successfully with a positive net cash flow then, under the terms of the joint venture agreement, the operating costs of each joint venturer would have been reimbursed in amounts which were approved by the joint venturers, before a surplus from the sale of gold was divided between the two venturers. By this means each co-venturer would be reimbursed for the value of its contributions by the provision of machinery or otherwise to the operation. The reimbursement would either come in the form of repayment for agreed levels of expenditure, or if the expenditure was higher than the rates agreed and therefore had to be borne by the co-venturer which had incurred it, the reimbursement would come from its share of the surplus. Whichever way the treatment of expenses within the joint venture is viewed, it follows that, on the assumption that the revenues were sufficient to cover set up and establishment expenses, those expenses would be reimbursed.

356 There was no direct evidence that the nominated charges for the weekly hire of the Komatsu 470 Front End Loader, the TCM 850 Front End Loader, the Tandem Tipper Truck or other plant and equipment, including the 974 Excavator were agreed or approved by Mourillion Mining. However, there was no suggestion or submission made by the plaintiff that these were other than reasonable commercial rates of hire for equipment of that nature used for these purposes and, therefore, on the basis of Mr Halbert's uncontradicted evidence that these rates represented the value of the contribution made by Magenta for the provision of this equipment, I consider that I should accept them.

357 The claims for wages for Mr Halbert and Mr Bandy, however, are of a different nature. No wages were actually paid and there was no evidence that either Mr Bandy or Mr Halbert was treated as an employee by having tax deducted or charged for his wages or in any other manner. There is no doubt that they were working directors of the company, but there is no evidence to show that any form of remuneration would have been paid to them under the terms of the joint venture. It was not suggested that there was any remuneration payable to Mr Hoppman of Mourillion Mining under that agreement. I consider that the preferable view is that, in the absence of clear evidence establishing that the Magenta directors were to be paid wages as part of the operating expenses of the joint venture, I should regard Messrs Bandy and Halbert as deriving their advantage from the share of the surplus which it was expected that Magenta would receive and which, in turn, would be distributed to them as shareholders. For that reason I do not accept the components in the counterclaim totalling $50,000 for wages due to Mr Halbert or to Mr Bandy.

358 The result is that the total of the counterclaim, including the $43,665.06 paid or payable to Nea, comes to $287,610.43. This sum is made up by:

359 I am satisfied that Magenta is entitled to judgment on its counterclaim in this sum. After setting off the balance of the plaintiff's claim of $28,040.06 this reduces the amount due to Magenta to:

$287,610.43

• $ 28,040.06

Sub total $259,570.37

360 In addition, Magenta claims interest on its counterclaim at the rate of 14 per cent per annum as from 26 July 1995 until judgment. There was no basis submitted for the selection of the 14 per cent rate claimed and the only interest rate approximating that is the 13 per cent per annum charged on Magenta's overdraft at the Commonwealth Bank from January 1996 onwards, as shown in Exhibits 29 and 30. There was nothing to establish how long it took to have that overdraft liquidated or what was the aggregate of interest paid to the bank. In any event such amount was not put forward as an item of special damages.

361 In the circumstances, I consider that Magenta should be entitled to a discretionary award of damages under s 32 of the Supreme Court Act upon the net balance of the counterclaim after the plaintiff's claim has been set off.

362 Magenta claims interest from 25 July 1995 notwithstanding that this various expenditure was accrued progressively from then until late 1995. A large component of the expenditure would, no doubt, have been incurred before crushing operations at Hawkins Find were first attempted on 26 October 1995, but the major costs for the hire and use of machinery ran from then on and accumulated to the aggregate of the amount assessed as damages on this counterclaim. It is necessary to take into account the time effect of how this expenditure was progressively incurred, and I consider that the best way of doing this is to allow interest on the total amount from 18 September 1995, which is the date when the plaintiff's equipment was delivered to the Hawkins Find site and from when Magenta required all its ancillary equipment in operational order.

363 The rate of interest should be the rate or rates applicable at all material times until judgment which have been gazetted as rates for interest on judgment under s 142 of the Supreme Court Ac (1935) and now under s 8 of the Civil Judgments Enforcement Act (2004) which vary over this period from 8.5 per cent per annum to 6 per cent. I direct the solicitors for the defendant to prepare a minute showing the calculation of interest claimed in accordance with this calculation and endeavour to reach agreement as to the aggregate amount of interest with the solicitors for the plaintiff, in which event the additional amount of interest can be added to the counterclaim. In the event that agreement cannot be reached on the aggregate amount of interest payable, I will hear further submissions from the parties.

364 In summary, the conclusions reached in these reasons are that the plaintiff has established that, as a result of the invoices delivered to Magenta in January 1996, the defendant is indebted to it for a balance of hire charges and installation costs totalling $28,040.06. There may, in addition to this sum, be a component of interest on that balance payable but, for the reasons given, it is presently not possible nor is it eventually necessary to compute this. The plaintiff's claim in this regard, however, is satisfied and discharged by the set off of an equivalent amount of the defendant's counterclaim. Magenta succeeds on its counterclaim and I have assessed that at a total sum of $287,610.43 (before set off) which, after the set off, reduces to $259,570.37.

365 Magenta is entitled to judgment for that sum of $259,570.37, together with interest from 18 September 1995 at the rates applicable from time to time prescribed for judgments under s 142 of the Supreme Court Act (1935) and since 1 May 2005 at the rates prescribed under s 8 of the Civil Judgments Act 2004.

366 Magenta's concurrent counterclaim against Mr G F Groenenberg under s 75B(1) of the TPA is dismissed.

367 The defendant is to bring in a minute of an agreed amount of interest calculated in accordance with these reasons or, failing agreement, I will hear further submissions from the parties as to the amount of interest.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : NEA PTY LTD -v- MAGENTA MINING PTY LTD [2005] WASC 106 (S)

HEARD : 16-20 SEPTEMBER 2002, 3-5 MARCH, 17-21 MAY 2004 & 16 JUNE 2005

Consolidated with CIV 1821 of 1998 by order dated 23 September 1999

Costs - Special orders - Security for costs - Payment out - Costs of separate actions before consolidation

Counterclaiming defendant pay second defendant's costs of counterclaim

1 EM HEENAN J: In this litigation I published reasons for judgment and entered judgment for the counterclaiming defendant, Magenta, on 1 June 2005. Questions of costs and the calculation interest on the damages were stood over for later consideration. Written submissions have been received and I have heard counsel and these points today.

2 The first matter which needs to be addressed is the interest component of the successful defendant's counterclaim. The parties are agreed that calculation of interest in conformity with the conclusions which I reached in the reasons for decision produces a figure of $161,388.21 which should be added to the damages awarded of $259,570.37, resulting in an award of damages to the defendant Magenta on the counterclaim of $420,958.58. I direct that judgment for that aggregate amount be entered in substitution for the earlier reference to $259,570.37 plus interest. That one finite sum will be the quantum of the judgment on the counterclaim.

3 In relation to the costs of the litigation, it is necessary first to take into account that originally two actions were commenced, one by Nea against Magenta for what I will call the unpaid hire charges and incidental expenses. That was defended, so I am told, without a specific set-off defence being pleaded at the early stage. Later Magenta commenced another action against both Nea and Mr Groenenberg for damages. That ultimately became the counterclaim in these proceedings. The two actions were consolidated on 23 September 1999 but it is necessary to deal with the costs of the two actions separately up to the point of consolidation.

4 Because Nea was successful in demonstrating its claim to unpaid hire charges in the proceedings but did not recover any judgment because of the set-off arising from the counterclaim, I consider that Nea is entitled to its costs of the original action for the recovery of unpaid hire charges and incidental expense up to the date of consolidation or until the first time that a defence of set-off in that particular action was pleaded. Accordingly, I order that Magenta pay Nea's costs of those proceedings to be taxed up to the point of consolidation or, as I have said, the first occasion when the defence of set-off in that action was pleaded, whichever is earlier.

5 In relation to the second action commenced by Magenta against Nea and Mr Groenenberg, Magenta has succeeded against Nea but not against Mr Groenenberg. In that action Magenta should have the costs against Nea to be taxed up to the point of consolidation. However, Mr Groenenberg should have his costs of that action against Magenta up to the point of consolidation, such costs to be those costs which in the opinion of the taxing officer were reasonably incurred by Mr Groenenberg in the defence of the action beyond costs incurred by Nea in doing so.

6 That brings me to the position where both actions were consolidated and proceeded in parallel from 23 September 1999 onwards. The difficulty here is to deal with two problems which emerged and significantly affected the trial. In general terms they are that discovery by Magenta was very significantly inadequate. At the trial this inadequacy became patent and necessitated an adjournment and supplementary discovery, on a significant scale, which itself gave rise to additional interlocutory applications arising from disputes in that process. The second major difficulty is that, in the defence of the plaintiff's action and in its own counterclaim, Magenta raised issues: concerning the alleged existence of implied terms by virtue of s 71 of the Trade Practices Act; the inability of Nea to rely on express exclusionary terms in the contract of hire because of the alleged magnitude of the breach of contract or the implied warranty said to have occurred; and, perhaps, most of all, because of the magnitude of Magenta's counterclaim arising from its component for alleged loss of profits which ultimately failed.

7 In relation to the questions of discovery, I consider that special orders as to costs are warranted. While Magenta should be entitled to the costs of giving discovery and allowing inspection of the documents it initially discovered in the action, it should not be entitled to additional costs for supplementary discovery, for supplementary inspection, or for the costs of dealing with Nea's interlocutory applications for additional or supplementary discovery. Similarly, I consider that the adjournment which resulted following 20 September 2002 was largely caused by problems with the inadequacy of Magenta's discovery and, accordingly, Magenta should pay the costs thrown away by reason of that adjournment.

8 To allow these conclusions to be implemented in a practical way upon the taxation of costs, I will, therefore, direct that Magenta shall not be entitled to any costs associated with giving discovery or allowing inspection after its initial discovery and provision of inspection in the action, and that Magenta must pay Nea's costs associated with seeking and obtaining supplementary discovery and inspection.

9 There is another pre-trail issue which requires special attention and that is the costs of the de bene esse hearing to take the evidence of the witness Mr Popp whose deposition was tendered without objection at the trial without him being called. Mr Popp's evidence related largely, if not entirely, to the possible yield of gold from the Hawkins Find operation conducted as Magenta had hoped to conduct it with a view to quantifying the net profits for the Mourillion joint venture through which Magenta could have expected revenue through the operation of the venture.

10 I concluded, for reasons set out in my decision, that that claim for loss of profits failed. Consequently, I consider that Magenta should not be entitled to recover any of the costs of the de bene esse hearing to take the evidence of Mr Popp, and that rather Nea should be awarded the costs of that application and its conduct.

11 I have also been informed that during the course of the litigation Magenta was ordered to pay, and did pay, money into court for security for Nea's costs and additional security for Mr Groenenberg's costs. In relation to the moneys paid into court for the security of Nea's costs, I direct that that money shall now forthwith be paid out of court to Magenta's solicitors whose receipt shall be a sufficient discharge for payment. In relation to the money paid into court for Mr Groenenberg's costs, I direct that that money shall remain in court until the completion of the taxation of Mr Groenenberg's costs and then, after the time fixed for filing objections to the taxing officer's certificate or dealing with any appeal that may be instituted from the decision on taxation, so much of the money in court as would be necessary to satisfy Mr Groenenberg's costs shall be paid out of court to the solicitors for Mr Groenenberg whose receipt shall be sufficient discharge for payment. Any surplus moneys after payment to Mr Groenenberg shall be paid out to the solicitors for Magenta, whose receipt again will be sufficient discharge for that payment. In the event that the money paid into court is insufficient to satisfy Mr Groenenberg's costs, there will be liberty to enforce the amount allowed on taxation after credit has been given for the payment out of court. In each case, where I have referred to payments out of court, this is to include interest, if any, which may have accrued on the moneys while under the control of the court or any other authority.

12 Coming now to the question of the costs of the consolidated actions and the trial, I make the following orders subject to the directions which I have already given: first, that Nea shall pay to Magenta the costs of the consolidated actions from the point of consolidation onwards, such costs to be taxed. However, in relation to the costs of the trial, Magenta shall be limited to recovering costs for eight days of trial including the first, rather than the 13 days occupied, because of the issues upon which Magenta failed in the proceedings.

13 In relation to allowances to be made for various items on applicable scales of costs, I direct that the taxing officer shall be at liberty to allow what he or she may regard as reasonable costs having regard to the work necessarily done and its responsibility, notwithstanding that that allowance may exceed the maximum prescribed by any item in any applicable scale of costs for the following subheadings:

(a) provision of particulars;

(b) giving discovery;

(c) getting up a case for trial;

(d) counsel fees, and

(e) the transcript.

14 Magenta's costs on taxation are also to include as a disbursement the costs for the reasonable travel and accommodation expenses of the witness, Mr Bilney, for attending to give evidence at trial, in addition to any qualification fees or other expenses associated with him providing his reports.

15 That deals with all the costs of the consolidated proceedings with the exception of those of Mr Groenenberg who was successful in having the counterclaim against him dismissed entirely. I have already directed that he should recover his costs of that action up to the point of consolidation. I now order that he should be entitled to recover his costs of the consolidated proceedings to be taxed from that point onwards but that those costs should be limited to the additional components, if any, incurred in the defence of his claim going beyond the defence which was necessary to be made by Nea itself.

16 I anticipate that there may be some difficulties in making that separation and, accordingly, I reserve liberty to apply on summons on notice for further directions in that respect should that be necessary. Otherwise all reserved costs in the consolidated actions shall be paid by Nea to Magenta except for costs reserved in connection with supplementary discovery, the adjournment of the trial and the de bene esse hearing, in which case those costs, if any, that have been reserved are to be paid by Magenta to Nea.