Nursery Nuts v Almond Investors Ltd

Goods Act 1958 (Victoria) - s59 LEGISLATION CITED: Sale of Goods Act 1923 (NSW) - ss16,19,54 Civil Procedure Act 2005 - s58,64

Adelaide Brighton v Ostabridge [2005] NSWSC 737 Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 29 Sargent v ASL Developments Ltd (1974) 131 CLR 634 Koompahtoo Local Aboriginal Land Council & Anor v Sandpine Pty Ltd (& Anor) (2007) 233 CLR 115 Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407 CASES CITED: Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR 632 Luna Park (NSW) Ltd (1938) 61 CLR 286 Shevill v Builders Licensing Board (1982) 149 CLR 620 DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 Carr v J A Berriman Pty Ltd (1953) 89 CLR 327 Champtaloup v Thomas (1976) 2 NSWLR 264 (at 278

TEXTS CITED: Estoppel by Conduct or Election (Sweet and Maxwell) 2006 Cheshire and Fifoot 'Law of Contract' (9th Edition)

Kualitree Nursery Pty Ltd (1st Plaintiff) PARTIES: Trading Consultants Pty Ltd( 2nd Plaintiff) Almond Investors Ltd (Defendant)

COUNSEL: A Black - Plaintiffs P Newton - Defendant

SOLICITORS: Walsh Blair - Plaintiffs Herbert Geer & Rundle - Defendant

1 The First and Second Plaintiffs, trading in partnership as "Nursery Nuts", proceed against the Defendant for breach of a contract entered into between the Plaintiffs and the Defendant on or about 30 October 2006. The Plaintiffs ran a nursery business for juvenile trees, including almond trees, the Defendant grew and harvested mature almond trees. The parties purportedly entered into a contract (the 'Agreement') for the Plaintiffs to supply to the Defendant 90,000 juvenile almond trees.

2 The Plaintiffs allege against the Defendant that it repudiated the Agreement that they have accepted the Defendant's repudiation, terminated it and have suffered consequent damage. If it be found that there was a breach of the Agreement by the Plaintiffs, or there was an inability to perform, it is pleaded that the Defendant "affirmed" the Agreement, but then repudiated it. This is an amendment to the Plaintiffs' original claim, which has been pleaded by leave. The reasons for granting leave to amend are set out below. Alternatively, the Plaintiffs plead that the Defendant repudiated a "compromise agreement" with consequent damage.

3 The Defendant pleads in its Defence that whilst it admits entering into "an Agreement" partly in writing, partly oral and partly implied, which was a "contract for sale" within the meaning of the " Goods Act 1958 (Victoria)", or the " Sale of Goods Act 1923 (NSW)", it alleges that the Plaintiffs failed to satisfy a condition precedent of the agreement as to the quality of the trees on inspection and that there was an implied condition under "Sale of Goods" legislation that the trees to be delivered would be reasonably fit for the purpose for which they were supplied and that they would be of merchantable quality. In answer to the entire claim it is pleaded that the Plaintiff breached the terms of the Agreement in four material respects and breached the implied conditions. By reason of these breaches the Plaintiffs repudiated the agreement, which repudiation was accepted by the Defendant. The breach of the implied conditions 'sets up' the extinction of the amounts claimed (s 54 Sale of Goods Act (NSW), s 59 Goods Act (Vic)). The existence of a 'compromise agreement' is denied. To the amendment to the statement of claim, the subject of a grant of leave, the Defendant denies an election not to terminate the agreement, or that it lost the right to terminate. The Plaintiffs tried to renegotiate the original Agreement, this was unsuccessful, the Plaintiffs repudiated the contract, the Defendant then terminated it.

4 Further, it is pleaded that the Plaintiffs are only entitled to payment for the almond trees which were acceptable and delivered, on a "quantum meruit" or unjust enrichment basis. The Defendant cross claims for restitution for the difference between the cost of merchantable, or acceptable, almond trees delivered and moneys paid by the Defendant to the Plaintiffs as moneys over paid. The particulars of the various claims will be analysed below. If the Plaintiffs succeed in respect of their primary claim for which they bear the onus of establishing, as the case was conducted, the cross claim must be dismissed. If the Plaintiffs' claims fail, the cross claim must succeed in a practical sense.

The factual context of the claim(s) and cross claim as pleaded.

5 In 2006 an order to 'Nursery Nuts' to supply 90,000 trees for Macquarie Bank, or one of its entities, 'fell over' and the Plaintiffs, through Peter Warner, a Nursery Manager and Company Secretary of one of the Plaintiffs, sought alternative placement of the trees. The Plaintiffs' nurseries were at Wemen (in north western Victoria) and Narrandera (in southern New South Wales). The Defendant owned an orchard comprising 2,951 acres of almond trees located at Piangil, Victoria. The Defendant, as its name suggests, no doubt amongst other things, was an investment vehicle for individuals (corporate or otherwise) into the almond tree industry. The orchards at Piangil in Victoria included a small nursery. The Defendant in its demand for the supply of almond trees was dependant to some extent upon demand generated by those wishing to invest in the Defendant, or its other entities, to obtain some tax benefit in respect of income earned from other sources. Mr Warner, who gave evidence in the Plaintiffs' case, was the person who dealt directly with Graham Johns, who was the Director of the Defendant's Orchard Operations, was also a member of its Board of Directors, and gave evidence for it. There was no issue that they each had authority to act for, and bind, their respective interests.

6 Mr Johns was a very experienced orchard manager and horticulturalist, particularly in the planting and harvesting of almond trees. As the case was conducted his "expertise" in the almond trees industry, as with Mr Warner's, was not in dispute. No technical issues regarding growth and harvesting of almond trees was in dispute. Mr Johns provided in his affidavit many paragraphs of detailed evidence about the growth cycle of almond trees and other technical matters to set a context for the circumstances in which an agreement was reached between the parties and what followed upon that agreement. Mr Warner was cross-examined on the development of almond trees for commercial use assuming his knowledge of, and expertise in, relevant technical matters.

7 It was common ground between the parties that there was an agreement entered into in late October 2006 between the parties, the terms of which were to be divined by the exchange of correspondence culminating in the "order" made by the Defendant on 30 October 2006 (confirmed in early November) and related oral communication. The terms of that agreement will be referred to later when I assess the evidence in the context of the claims and submissions of the parties.

8 The evidence established in summary the following matters relating to the growth cycle of almond trees. Seeds for the growth of almond trees are purchased usually in about April. They are germinated by the supplier of the seeds (in this case an entity other than the Plaintiffs), and the germinated seeds are ready for planting in or about August. The loss rate may vary from approximately 10% of the seedlings, to 50% of them. However, the general range of loss is somewhere between 20% to 30%. After the seed is planted and begins to grow from the ground, during spring, a bud is grafted onto the rootstock when it is approximately four inches above the ground. "Budding" is the process of obtaining a bud from other trees in a source area that is true to the type of almond trees that is required. The bud stock is obtained from an environment controlled by the Almond Board of Australia (ABA) because it is "virus indexed", which I understood to mean virus free. The budding process, involves inserting a bud in an opened T-section of the rootstock seedling, the peeled back bark from the root stock is folded over the bud and the covered bud is wrapped with a type of plastic bandage called "budding tape" to prevent the bud dying. The bud that is grafted is usually purchased from the ABA. The principal rootstock is "Nemaguard". The trees inspected by the Defendant at various times and delivered in June 2007 were grown from Nemaguard rootstock.

9 The bud once grafted grows to produce the above ground part of an almond tree called the "scion". It is trained to grow straight with no branches below approximately 80cm from ground level. The bud for grafting is cut from a "bud stick", cut from ABA sourced almond trees. Each bud represents a particular variety or type of almond tree. There are a number of varieties, in this matter the varieties sought by the Defendant were described as "Non Pareil" (sic), "Carmel" and "Price". Reference is made in the evidence to a variety called "Peerless" which was similar to "Price". There are apparently about five varieties that are commercially attractive, but there are apparently many other varieties.

10 Approximately seven to ten days after "budding", if the bud is successfully joined to the rootstock, the bud is said to have "struck" and "bud strike" has occurred. Budding of rootstock occurs usually in around November (although there can be different cycle for growing seedlings and budding of rootstock). The growing shoot from where the bud strike occurs is what eventually grows into the almond tree. When the growing bud is approximately 150 mm long from the bud union, the rootstock seedling is cut off at an angle approximately 10 mm above the bud union, the scion is then forced to grow as quickly as possible to produce the one year old almond tree initially sought to be purchased. Growth in almond trees (depending upon the location of the nursery etc) slows after April with the trees entered in a "winter resting state" which reduces the ability to grow.

11 If the trees were required to be delivered in the June after bud strike, the nursery will usually force the plant in mid May into dormancy to achieve leaf drop. Subject to the vicissitudes of horticulture it would generally be expected that the subject tree would grow to 0.9m by about June after bud strike. It would generally be expected that an almond tree would grow to at least 1.2m by about June of the following year. Delivery time within the industry by nurseries to growers is usually from about the first week of June to early or mid August. It is easier to settle transplanted trees when there is no leaf growth, as is the situation in the southern winter. The trees grown at the nursery, if delivered to the orchard, are usually planted by the third week of August, preferably as early as possible after deliver in early June. A one year old tree comprising the root stock and the straight scion is commonly referred to as a "whip stick" and such plants are often "heeled in", which means planting the root stock in a trench approximately 20-30cm deep. Later in August the plant is moved to be placed in its final position in the orchard.

12 After planting in August the tree continues to grow at about 3 to 6 feet per year depending upon growing conditions. The tree produces a crop from the third year of growth. Trees below 0.9m in height by the June after bud strike are more susceptible to damage and possible death for various reasons. The production of almonds from trees with a third or greater year of growth requires the use of a mechanical clamp called a "shaker", which shakes the almond tree. For that mechanical harvesting device to work properly the almond tree must be straight, with at least eighty centimetres of straight trunk from the ground to the first primary limb. Mr Johns' evidence, as with the evidence of Mr Warner, confirmed that it was industry practice for growers to require a specified height of the nursery grown tree at the point or time of delivery. Further, it was common within the industry for plants ordered from a nursery to be "carried over", that is, one year old trees being ordered, but kept at the nursery usually for up to another 12 months at an added cost.

13 In this context the Plaintiffs allege the Agreement included the following terms: i. the Plaintiffs were to provide the Defendant with 90,000 one year old almond trees in the varieties and quantities stipulated in the order made by letter of 30 October 2006 signed by Graham Johns. ii. the agreed price was $7.40 (sic) per tree plus GST with delivery at the Defendants' cost. iii. delivery of the trees was to be for planting commencing at the Defendant's Piangil Orchard on 1 June 2007 (and continuing for an extra year), or, in other words, delivery of trees carried over to the following June (2008). iv. payment for the trees was to occur in the following instalments (given the 'price' per tree of $7.40): (a) 25% (of the total cost for 90,000 trees) after inspection (at the Wemen nursery) (b) 25% after bud strike (c) 25% of the balance on delivery and (d) an additional $1.00 per tree for trees carried over for planting to June 2008.

14 The Defendant asserts that the agreement was partly oral and partly in writing, arising from the discussions between Graham Johns and Peter Warner. Its terms are to be found in the letter from Graham Johns sent to Mr Warner on 30 October 2006, signed by Johns in early November 2006. This is not disputed by the Plaintiffs. The agreement is said by the Defendant to be a contract for sale within the meaning of the " Sale of Goods Act 1923 (NSW)". Reference was made in the pleadings also to the Victorian 'Goods' Act as various events occurred both in New South Wales and Victoria. However, the significance for contractual purpose of the location of various acts, statements or creation of documents is not an issue in the case. The Defendant's counsel submitted that the terms of the New South Wales legislation were in terms sufficient to cover the operation of the Goods Act 1958 (Victoria). The Defendant asserts that it was an "implied condition" of the Agreement (under the Sale of Goods Act ) that the almond trees would be reasonably 'fit for the purpose' for which they were supplied and of 'merchantable quality'.

15 The Defendant says in relation to the agreement that it was a term of the agreement that acceptance of the order for 90,000 almond trees by the Plaintiff was subject to inspection, the quality of the trees being satisfactory and "they had reached the minimum height of 0.9m". This was "a condition precedent", being a stipulation in the agreement the fulfilment of which the agreement was made contingent.

16 One of the factual issues in the case the subject of dispute was whether the requirement of the height of the trees was one at a particular date in 2007, when the initial agreement was expected (June 2007) or at the date of the delivery of particular trees. It is further said that it was an express term of the agreement that the Defendant would pay an additional $1.00 per tree for those trees not taken in 2007, but delivered in 2008, and "had reached the minimum height of 0.9m at the time of inspection by the Defendant". Further, it was required that the trees be "straight".

17 The amended defence pleads that it was a term of the agreement that unless advised prior to budding the Plaintiffs would, by June 2007, grow at the Wemen and Narrandera nurseries (let by the Plaintiffs for the growth of seedlings) 90,000 almond trees in the varieties and quantities stipulated in the letter from the Defendant's representative, Mr Johns (dated 30 October 2006), that the trees would be a minimum height of 0.9m by early June 2007 (and would be straight), and that the trees held over from June 2007 would be held over at the Wemen and Narrandera nurseries until 2008.

18 An inspection of the trees at the Wemen nursery occurred in November 2006 and the Defendant paid the Plaintiffs the sum of $183,150 (inclusive of GST), being the first instalment. In about February 2007 following "bud strike", the Defendant paid the Plaintiffs the next instalment (again of $183,150 (inclusive of GST)). At this point the Defendant had paid the Plaintiffs 50% of the purchase price of the 90,000 trees ordered.

19 In May 2007 the Plaintiffs allege the Defendant made a request that it deliver 27,000 trees in June, but the Plaintiffs delivered 29,515, approximately 10% more that requested. The Plaintiffs then awaited further direction from the Defendant as to whether additional trees were required that year or to be held over to the following year. The Defendant accepts that there was agreement "that the Plaintiffs would only be required to deliver 27,000" trees to the Piangil orchard on the first week of June. It alleges that eventually, of the almond trees delivered, 5,915 of the trees were not straight and that Mr Warner admitted that was so. The Plaintiffs allege an 'agreement' to allow 20% deduction of the delivered plants. Twenty percent of 29,575 is 5,915. The Plaintiffs conduct its case on the basis that the percentage was a "notional" assessment. The Defendant asserts that precisely 5,915 trees were deemed to not satisfy the specifications prescribed by the agreement, or the requirements as to 'fit for purpose etc' pursuant to the Sale of Goods Act . An issue at the hearing was whether the calculation of the number of trees accepted by the Defendant for payment by it, represented those that the Defendant rejected, or in the context of a dispute as to the quality of some of the trees a 20% reduction upon the previous invoice forwarded.

20 A tax invoice was forwarded on 11 June 2007 claiming the sum of $120,370.25 (incl GST), but an amended invoice was sent in late July 2007 for the sum of $96,296.20, purportedly being 50% of the cost of 23,660 trees at $7.40.

21 The Defendant admits the receipt of the amended invoice. But it denies those matters adverted to in paragraphs 12 to 22 of the statement of claim. The Defendant asserts that the Plaintiffs breached the agreement by failing to grow at Wemen and Narrandera nurseries 90,000 almond trees in the varieties and quantities stipulated, had breached the requirement as to the height of the trees and their condition as at June 2007, breached the agreement by failing to deliver 27,000 straight almond trees, and failed to hold over at its Wemen and Narrandera nurseries the balance of the undelivered almond trees ordered by the Defendant. The Defendant asserts breaches of implied conditions concerning those plants delivered in early June 2007, as they were not fit for the purpose they were supplied and not of merchantable quality.

22 The Defendant did not pay the Plaintiffs the amount claimed in the amended tax invoice. Further requests were made for payment by the Plaintiffs which were ignored. The Plaintiffs assert that the Defendant repudiated the agreement because: i. it had not paid the sum sought in the amended invoice, ii. the Defendant had not taken any step to complete performance of the agreement other than inspecting the trees, iii. the Defendant declined to take delivery of trees required to be supplied under the agreement, iv. the Defendant commenced proceedings, issued in the County Court of Victoria, for the payment of $173,707.60, being the sum also claimed under the cross claim and being the balance between the 50% in instalment payments less the amount claimed to be owed by reason of the amended invoice for the trees delivered.

23 The Defendant asserts that as at 3 August 2007, the last time that Mr Johns inspected almond trees being grown by the Plaintiffs at the Wemen nursery, the trees observed were not straight nor of the minimum height. Thus they were unsatisfactory having regard to the terms of the agreement. The Plaintiffs allege that they accepted the repudiation that terminated the agreement, relying upon the letter from the Plaintiffs' solicitor to the solicitor for the Defendant dated 14 May 2008. The Defendant claims that it terminated the agreement, upon the repudiation of the Plaintiffs, with a letter from its solicitor addressed to the Plaintiffs dated 31 August' when the Plaintiffs demonstrated their inability to perform the contract by 3 August. Under this head of claim the Plaintiffs alleged that they are owed the total of the costs of trees delivered, remaining trees undelivered and "consequential" loss.

24 Alternatively, the Plaintiffs alleged that there was a 'compromise agreement', in other words a variation of the agreement entered in late October, the terms of which arising from written and oral discussions between the parties, which constituted the following terms: i. cancellation of delivery of 21,340 trees due under the agreement, without penalty, in consideration of the Defendant paying the Plaintiffs progress payments. ii. The Plaintiffs delivering to the Defendant 45,000 trees in June 2008, iii. the 45,000 constituted by a combination of trees planted in 2006 together with 25,000 new plantings in 2007, iv. the Defendant would pay the Plaintiffs 'forthwith' $8,584, plus GST, to settle the amounts due, v. further payments by instalment, the first instalment of $52,875 (plus GST) to be paid by the Defendant to the Plaintiffs on 15 August 2007, the remaining instalments to be paid on 15 October 2007,. 15 January 2008 and 15 March 2008, subject to inspection by the Defendant.

25 The Plaintiffs claim that pursuant to the agreement, or in reliance of it, the Plaintiffs planted an extra 25,000 seedlings, but the Defendant failed to pay sums immediately due and instalments agreed. Thus the Defendant repudiated the compromise agreement, by not taking any steps to complete performance of it, by declining to take delivery of trees to be delivered and by failing to acknowledge the terms of the compromise agreement. The Plaintiffs claim acceptance of the repudiation and termination of the compromise agreement by email from the Plaintiffs to the Defendant dated 27 August 2007.

26 The Defendant asserts that Mr Warner's communications with Mr Johns, subsequent to 3 August inspection, did not reflect any agreement between the parties and that the Plaintiffs by their conduct and breaches of the agreement evinced an intention no longer to be bound by the agreement and repudiated the agreement, the acceptance of which occurred when the Defendant's solicitor, Herbert Geer and Rundle Lawyers, demanded a refund and thus accepted the Plaintiffs repudiation of the agreement and terminated it. Ultimately, it is submitted the Plaintiffs are only entitled to payment for those trees actually delivered. The amount outstanding was the balance owed by the Plaintiffs to the Defendant, as earlier indicated. This is represented in the cross-claim, by the claim for $173,707.60.

27 Leave was sought near the end of submissions to further amend the statement of claim to allege, in further alternative to the primary claim that, if it is found that the Plaintiffs had breached a term of the agreement, or are unable to perform a term of the agreement, and that the term was an essential term of the agreement which would otherwise have entitled the Defendant to terminate the agreement and that the Defendant was aware that the Plaintiffs had either breached, or were unable to perform such a term, the Defendant "affirmed" the Agreement by reason of the conduct of the Defendant in failing to act upon their breach, as particularised in the proposed amendment. This late application to amend the statement of claim was opposed by the Defendant. It requires a grant of leave. No specific prejudice, forensic disadvantage or other reason not to grant leave is submitted by the Defendant. The written submissions provided in relation to the proposed amendment by its counsel principally deal with the merits of the amended claim, in the context of the case conducted before the Court. The submissions in their terms underline an absence of disadvantage to the Defendant.

28 The Court has wide powers to amend pleadings "at any stage of the proceedings", including all necessary amendments to be made for the purpose of "determining the real questions raised", subject to s 58 (s 64 Civil Procedure Act 2005, "the Act"). No issue of costs 'thrown away' arises. The amendment for which leave is sought by the Plaintiffs is one that arises from the way, in part, the case was conducted by the Plaintiffs without objection from the Defendant. Alternatively, it might be viewed as having arisen from the evidence that both parties produced at the hearing concerning the conduct of the parties over the relevant time particularised in the amended pleading. The amendment overlaps with the primary claim. Noting the terms of ss 56 and 58 of the Act, I was of the view that leave should be granted for the amendment. The parties have been advised accordingly and an Amended Defence has been filed. In the absence of any identifiable prejudice or disadvantage, the amendment does not in any way prolong the proceedings (it requires no further evidence to be called), nor requires any further action to be taken having regard to the oral submissions that were made at the hearing of the matter at the Wagga Wagga District Court and the written 'submissions' made by the parties in response to the application for leave to make amendment. Both parties were given the opportunity to have the Court reconvened to hear any further submissions. Neither party indicated that it wished so to do.

29 In this amended part of the Plaintiffs' claim it is pleaded that if it be found that between October 2006 and April 2007, the Plaintiffs had breached a term of the agreement or the Plaintiffs were unable to perform a term of the agreement and that such term of the agreement was an essential term, the non performance of which would otherwise have entitled the Defendant to terminate the agreement, and if it is further found that the Defendant was aware that the Plaintiffs had either breached such term of the agreement, or alternatively were unable to perform such a term of the agreement, then it is alleged that the Defendant "affirmed" the agreement by its conduct and thereby lost the right to terminate the agreement. The conduct particularised includes: i. failing to respond to an email of 8 April 2007 from Warner to Graham Johns, setting out the then current numbers and varieties of trees being grown at that time, ii. requesting in or about May 2007 that the Plaintiffs assure the Defendant of adequate water supplies at the Plaintiffs' nurseries for 2007/2008, iii. then ordering from the Plaintiff trees to be delivered pursuant to the agreement, iv. receiving the Plaintiffs' almond trees delivered in June 2007.

30 The Defendant in reply asserts that the Plaintiffs were in breach of the agreement and unable to perform the agreement, but deny electing not to terminate the agreement or that it lost the right to terminate the agreement and in fact the Plaintiffs did not treat the Defendant as having elected not to terminate the agreement but instead engaged in negotiations in relation to how the Plaintiffs could fulfil their remaining obligations under the agreement. These negotiations were not completed and the Defendant's solicitors, by correspondence on 31 August 2007, accepted the Plaintiffs' repudiation of the agreement, by failing to hold over the balance of the trees purchased by the Defendant at the Wemen and Narrandera nurseries and terminated the agreement.

31 To summarise the submissions, the Defendant's primary submission is that the critical issue for determination is whether the agreement between the parties reached in October 2006 was in place at 3 August 2007 and whether the Defendant had agreed to vary the contract originally entered into between the parties. The Defendant submits that the agreement to supply almond trees had a number of essential terms including: i. the purchase price, ii. the number of trees, iii. the specified proportion of varieties and iv. the height of the trees.

32 The Defendant submits that as at 8 April, by the email forwarded to the Defendant, the Plaintiffs could not supply the trees agreed, as was confirmed by the concessions made by Mr Warner in his evidence. The Defendant makes the concession that in April/May 2007 it elected not to take delivery of 90,000 but to receive 27,000 trees in June and that the trees could include two year old, rather than one year old trees, exercising its "option" in the original Agreement to hold over delivery of the balance.

33 There was, however, no variation of any other term of the Agreement. But at that point the Plaintiff was only able to deliver at the most 54,000 trees, because it was only growing 81,000 trees.

34 Of the 29,575 trees delivered in early June, 5,915 were not acceptable, Mr Johns for the Defendant had "promptly" told Mr Warner he was not satisfied, Warner accepted the complaint, acknowledged the trees were not of merchantable quality and an adjustment was made as to what trees were acceptable.

35 The meeting on 3 August occurred at a time when the original Agreement, save for the elections of the Defendant, was in place, the Plaintiffs sought to vary the contract but the proposals of the Plaintiffs were not accepted by the Defendant as there was no confirmation in writing which was required even in the terms of the evidence of Mr Warner.

36 It is submitted that Mr Johns is to be preferred to Mr Warner where their evidence is in conflict. There were reasons that are acceptable for Mr Johns' failure to respond to Mr Warner's communications from 8 April. At that point, when it was apparent the Plaintiffs could not comply with the agreement in at least three respects (number of trees, ratio of varieties and not of the requisite height), the Defendant was left with three options: i. it could waive the breach and/or what was in effect an anticipatory breach; ii. it could embark on negotiations to vary the agreement; iii. it could insist on strict performance and, if not, terminate the agreement.

37 It is submitted that the email from Mr Warner of 8 April, which it is claimed admits of several breaches of contract, required a "considered response", and that considered response was sent by the Defendant's solicitor when it purported to terminate the agreement for non performance on 31 August 2007.

38 Even if it was thought that there was some failure on the part of the Defendant to deal with the email of 8 April, that did not change the contract nor relieve the Plaintiffs of their obligations under the contract and did not prejudice the Defendant's position, so far as its right to elect to terminate.

39 Returning to the Defendant's concession concerning the election to receive 27,000 trees, it was submitted that concession still meant that the Defendant required 63,000 to be delivered at a later time. It is submitted that the evidence about the fall off in the sales, tax changes were not relevant, if the contract was on foot. The Defendant submits that there was no agreement to vary the contract on 3 August 2007 when Warner and Johns met for the last time, as that required confirmation in writing and there was no such confirmation.

40 Referring to a matter raised in evidence, that is whether an email of 20 July 2007 from Mr Johns on behalf of the Defendant did not support Mr Warner's evidence, it is submitted that it merely showed that there were negotiations occurring. But the original contract was on foot. Ultimately, there was no new agreement, no waiver by the Defendant and no variation. As to the requirement of confirmation in writing, that was a condition precedent to any new agreement. The conduct of the Plaintiffs between April and August merely evidenced attempts to perform the contract.

41 As to the issue of termination and repudiation the Defendant cited the judgment of Campbell J in Adelaide Brighton v Ostabridge [2005] NSWSC 737, particularly at [128]-[132]. The Defendant submits that on its repudiation of the contract it was entitled to judgment in the sum calculated as being owed to it from the instalment payments made in November 2006 and February 2007. The cross claim succeeds if the Plaintiffs' claims fail, the Defendant only required to pay for trees delivered in June. The balance from the instalments paid being a $173,707 credit to the Defendant.

42 As to the amended claim in the statement of claim it is submitted in the Defendant's supplementary submissions that an election against rescission must be made in clear and unequivocal terms and cannot be found unless clear and unequivocal words or conduct are present ( Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 29 (at 304-5) per Priestley JA: Sargent v ASL Developments Ltd (1974) 131 CLR 634 (at 646, 656)).

43 In relation to the particulars in support of the claim for affirmation and loss of right to terminate, it is submitted there was an absence of "unequivocal conduct" on the part of the Defendant not to terminate the Agreement. Such unequivocal conduct is not reflected by "inaction alone".

44 The conduct of the Defendant, by enquiring about the availability of water in May 2007, was "mere enquiry" and then ordering of trees in May 2007 as evidence of "insistence of performance" amounting to affirmation of a contract, may result in the loss of the right to terminate, but each case must be considered on its facts. Here the facts did not support affirmation.

45 The Defendant submits that the obligations of the Plaintiffs in connection with the delivery of the trees were divisible. The Defendant was entitled to request partial delivery of the trees, but that request did not amount to an election not to terminate the Agreement for any present or future breaches. It did not convey to the Plaintiffs the right to terminate would not be exercised. It is submitted that the Plaintiffs did not regard or treat the Defendant as having made such an election. It is further submitted that the facsimile from the Plaintiffs to the Defendant dated 13 June 2007 referred to "future negotiations" determining the method of handling the deferred number and the conversations between Mr Warner and Mr Johns on 3 August 2007, compelled a finding that the Defendant did not lose or waive its right to terminate the agreement and the Plaintiffs did not regard it as having done so. Consequently the negotiations on how the Plaintiffs were to comply with their obligations were unsuccessful, the Plaintiffs did not hold over at its nurseries the trees purchased by the Defendant and the agreement was terminated by the Defendant by the Plaintiffs repudiation of the agreement.

46 The Plaintiffs' submissions in summary are that there was no breach of contract, as the matters that the Plaintiff could not perform were "warranties", not essential terms of the agreement. Alternatively, essential terms were elected to be "non essential" by the conduct of the Defendant. It was important for the Court to determine what the essential terms of the contract were, noting s 16 Sale of Goods Act 1958.

47 As to the events between 8 April and 3 August, it was submitted for the Plaintiffs that there were two alternative ways to approach the matter: (i) The email of 8 April was not evidence of a breach of contract, but rather evidenced a "non fulfilment" of a "non essential term of the contract", or either there was no breach at all, or, between 8 April and 3 August there was a variation of the agreement by the parties.

(ii) Alternatively to these arguments, it is submitted that the Defendant affirmed the agreement, notwithstanding any established breach notified by the Plaintiffs in the email of 8 April and had by its conduct lost the right to terminate the agreement.

48 The Plaintiffs submit that in relation to the issue of the essential terms, the conduct of the parties subsequently throws light upon the objective assessment of what the Agreement was. The order for 90,000 was not a "magic number" and could be interpreted as something less, the height of 0.9m was a requirement at delivery not at June 2007 (and a number of matters confirmed that including industry standards, oral representations and the like). It is submitted that the conduct of the Defendant after the email of 8 April 2007 shows that the matters raised were not of concern to the Defendant and that any "variations" reflected in the email were "trivial or unimportant". The Defendant's conduct included inquiries as to water availability in May 2007, notwithstanding the advice on 8 April and also confirmation of the delivery of a reduced number of trees. The concession made by the Defendant's counsel in submission reflects the submission by the Plaintiffs of a "waiver" of an essential term of the contract, reflecting the commercial character of the agreement, the need for flexibility to face commercial realities. It was submitted that it could not be that the Defendant could terminate the agreement if the Plaintiffs, for example, produced 89,500 (or some such figure), rather than 90,000 trees. It was submitted that the law allowed for the general proposition that once a party becomes aware of another party's inability to comply, that party evidences by his compliance a 'variation' upon the contract ( Cheshire and Fifoot (9th edition) 21.28 - 41). The events from April through to July reflect an affirmation of the variation. This is also reflected by the absence of complaint in any respect about the matters raised in the April email.

49 The Court was taken to ss 16 and 19 Sale of Goods Act 1958. In the context of the Defendant's submissions on repudiation, reference was made to Koompahtoo Local Aboriginal Land Council & Anor v Sandpine Pty Ltd (& Anor) (2007) 233 CLR 115 (at [44]-[49]).

50 It is the secondary position of the Plaintiffs that there was a variation of the agreement between 8 April and early August 2007, although it was conceded that an absence of written confirmation after the meeting on 3 August is relevant to assessing whether there had in fact been a variation of the Agreement at that time.

51 Ultimately, the Plaintiffs submit that there was no breach of the agreement on 8 April, or subsequently. If there was a breach, it was a breach of non-essential conditions of the contract, confirmed by the Defendant's subsequent conduct. Alternatively, there was confirmation of a varied agreement. If there was a breach or failure to perform by the Plaintiffs there was an "affirmation" of the agreement and a waiver of the right to terminate. As to the last matter in further written submissions, it is submitted that if the Plaintiffs have breached an otherwise essential condition of the contract, the Defendant's conduct, after becoming aware of that breach of agreement, is consistent only with the continued existence of the contract ( Cheshire and Fifoot "Law of Contract" (9th Ed.) - para 21.29). The Plaintiffs reject any submission that the letter of 13 June 2007 from Mr Warner implicitly recognised that the Plaintiffs did not consider that the Defendant had not lost the right to terminate the Agreement. That letter was concerned with further advice as to the held over trees.

52 As was apparent from the submissions in referring to the evidence I note that there are many matters about which there is no disagreement at all. In fact, matters relied upon both by the Plaintiffs and the Defendant in advance of their contentions, or pleadings, arise by and large from undisputed facts. Mr Warner and Mr Johns were the authors of most of the relevant documentation and correspondence relied upon by the parties. I shall only refer to in detail the contents of documents, or the versions of conversations, where it is necessary to do so to illuminate aspects of the matter as argued by the respective parties.

53 Before I commence my analysis of the evidence, however, I make the following observations about the two witnesses. There was nothing about the demeanour in general terms of either witness of which adverse comment could be made. Although this matter is a word against word case where real dispute exists in some respects, there are a number of contemporaneous documents and aspects of the conduct of the men that shed some light on these matters. Some of the documentation is of particular importance. Mr Warner was an elderly gentleman who gave, in my view, careful considered answers and made concessions when it seemed appropriate to do so. He gave the impression of an honest witness. Mr Johns presented as a knowledgeable and professional businessman who, like Mr Warner, had an extensive history of involvement in horticulture, particularly in the plantation growth of commercial "crops". He appeared as a man of formidable business knowledge and acumen. Although very different in their presentation there was little to distinguish between them in assessing their demeanour. However, as I will detail in my summation of the evidence, there were particular aspects of Mr Johns' evidence where he was considerably less than convincing. I found his evidence of his explanations for his failure to take issue with a crucial email of 8 April and subsequent correspondence unacceptable, as with his failure to make clear to Mr Warner what the Defendant now says was clear as to the breach of contractual arrangement as it claims to have understood it in the period of time between early April and late August. This detracts from his credibility in assessing his evidence by comparison to Mr Warner's where they are in conflict, particularly as most of their conversations face to face, or on the telephone, were when they were together alone.

54 I likewise do not accept Mr Johns' account of his reaction to the inspection of the crop at Wemen in 3 August 2007. To my mind it was tainted by, at least, gross exaggeration. I do not accept that a person with Mr Johns' obvious business acumen, with his company having already invested 50% of the purchase price of the trees as at that time, and in apparent dispute as to payment of the invoice rendered by the Plaintiffs, did not take issue or raise his concern with the situation as he claims was presented to him on that inspection. The argument put on behalf of the Defendant that the absence of his real reaction in his evidence in his affidavit reflects the lack of an 'emotional' input into the evidence lacks substance. The facts are, that in its own terms his affidavit reflects a reaction far short of the 'horror' and 'sickening' feeling he claimed he had. Nor did it reflect the 'catastrophic' situation he claims to have observed. I accept Mr Warner's evidence of a commercial negotiation on a business like basis at that time, albeit the negotiation was not 'consummated'. In my view, this exaggeration was designed to demonstrate, or emphasise, a further abject failure of performance by the Plaintiffs of the contract originally negotiated at that time.

55 On 27 October 2006 Mr Warner and Mr Johns discussed (in physical circumstances in dispute but of no moment for the purposes of this case) the supply by the Plaintiffs to the Defendant of 90,000 trees. One issue of dispute in the evidence of the two men as to this particular conversation concerns whether the order was required to be delivered in June (or any other time) the following years and what was the operable date for the minimum height to be reached. The requirements of 'merchantable quality' and 'fit for purpose' I have no difficulty with as they can be implied given the operation of the Sale of Goods Act (NSW). It is conceded by Mr Johns that he told Warner in this initial conversation that there was uncertainty as to whether sales of opportunities to invest in the company's scheme would allow for, or require, the delivery of all the trees. I accept that Mr Warner understood that whilst 90,000 trees were ordered they all may not all be required the following year.

56 Mr Warner proposed, in confirmation on 28 October by email: i. the sale of 90,000 juvenile almond trees subject to inspection,

ii. inspection at Wemen (in north eastern Victoria) in early November and Narrandera four or five hours away,

iii. 90,000 one year old trees were to be grown from a total of 120,000 "green nemaguard rootstock" growing at the two nurseries leased by Nursery Nuts,

iv. $7.45 per tree over .9m high for trees delivered in the winter of 2007 and $8.45 each for trees delivered in 2008 (the price made on an assumption of 45 cents a bud, but ultimately if was 40 cents a bud),

v. payment of 25% of the total price on inspection, 25% after "bud strike" and the balance on delivery, vi. 50% of the Nonpariel (sic) variety, 33% of the Carmel variety 17% of the Price variety.

57 The email in reply from Mr Johns of 30 October confirmed the contract for supply in writing, when he particularised the 'order' made from the Plaintiffs verbally on 27 October 2006 in the following terms: i. the purchase of 90,000 one year old almond trees subject to inspection. Inspection at Wemen being sufficient for payment of the first instalment, if assured that Narrandera trees are of the same or better quality. Inspection of Narrandera was required, to be satisfied of the quality of the trees (at some time in the future).

ii. "At (the) time" of the order, it was to be made up of trees in the following "varieties" (a) Non Pariel (sic) 45,000 trees (b) Carmel 30,000 trees

(c) Price 15,000 trees (with an option to vary the request for varieties to bud to root stock) iii. 25% of the total price payable on 90,000 'on inspection', 25% of the total cost after bud strike, 50% of the cost of each tree on delivery.

iv. an additional cost of $1.00 per tree for trees to be "carried over" for planting (by the Defendant) to June 2008,

v. the order made up of 45,000 Non Pareil trees, 30,000 Carmel trees and 15,000 Price trees,

vi. the price per tree to be $7.40 (plus GST), including the cost of ABA 'buds' of a particular type,

vii. delivery of trees for planting commencing on 1 June 2007 at the Defendant's orchard at Piangil (in Victoria), with conditions as to delivery at the Plaintiffs' costs,

viii. the trees to have a minimum height of 0.9m and not to be "headed" in the nursery, or prior to delivery. (There were other matters of no significance such as "trimming laterals").

58 This "order" was accepted by the Plaintiffs and, in terms, was the 'Agreement' of the parties. Mr Johns understood that the agreement needed to have a 'degree of flexibility' given the demands of the investment market. In fact, the Defendant could vary the proportions of varieties and the number of trees to be delivered in June 2007. There was claimed to be an expectation by Mr Johns that 90,000 trees could be delivered in June 2007, but the commercial reality was that at the time of the agreement a proportion of the trees ordered would not be required in 2007 (and held over to 2008) and that the 'order' was 'crafted' by Mr Johns to leave open the possibility that the percentages ordered of particular varieties may not be required. These concessions by Mr Johns in his evidence reflected the commercial and agricultural realities. The parties had agreed that Nursery Nuts would grow the trees at its nurseries at Wemen and Narrandera. The order was, however, for "one year old trees". Having regard to the documentation and the evidence of the conversations from both Mr Warner and Mr Johns there was a clear expectation of the possibility that trees would be delivered a year later, in a more mature condition on terms favourable financially to the Defendant. The price negotiated included a cost for trees 'carried over' to 2008 of 'an additional $1.00". The availability of trees was subject to the vicissitudes of agriculture, given an acknowledged attrition rate, some seasons from 10% up to as much as 50% of the total seedlings planted.

59 This expectation, as the evidence revealed of developments from 30 October 2006 until at the latest April 2007, was confirmed as circumstances developed which made it quite clear to both parties that the Defendant would not be requiring (and in fact did not require) the 90,000 trees to be delivered in June 2007. The ultimate delivery number sought by the Defendant in May 2007 of 27,000 trees confirms this expectation. I am satisfied that this decline in demand by the Defendant was primarily brought about because the investment schemes conducted by the Defendant were having difficulty attracting investors for a range of reasons. One possible reason for this, although the extent of its impact on the sales process is impossible to measure, was notification to investors and the industry by the Defendant, in a press release of 7 February 2007, of the potential for tax changes which would make this type of investment less attractive to investors. This threat to the Defendant's operations apparently evaporated accordingly to Mr Johns, but the evidence shows a 'slow down' or drop in sales in any event that by April indicated that the demand for almond trees had substantially dropped. The Plaintiffs understood the withering of the market as early as before approaching the Defendant in October 2006. I am mindful of the tax invoice forwarded on 1 November 2006 by the Plaintiffs, for the first 25% deposit (after inspection at Wemen) referring to "one year old almond trees … for delivery June 2007 x Narrandera and Wemen nurseries". This is to my mind a mere general description, in summary, of the agreement.

60 I am satisfied that it was not a essential term or condition that all the trees to be grown by the Plaintiffs, to fill the order, would be at least 90cm as at early June 2007, or at about that time. I accept the evidence of Mr Warner, supported by both the evidence of Mr Johns about industry practice and his expectations, that height at delivery was the critical time as is shown by the documentary evidence. This finding on the evidence needs not the support of the reply to the request for particulars provided by the Defendant's solicitors. In any event Mr Johns had an understanding of the commercial necessity to make clear what was the expectation of the Defendant for the height of the trees ordered. The Defendant did not stipulate that all trees ordered were to be of a minimum height at June 2007. The order of 30 October 2006 made no specification that the height of all the trees was to be to a minimum of 0.9m at June 2007. The minimum height of 0.9m was required on 'delivery' in respect only of one year old trees. It is Mr Johns' evidence that when it was determined, prior to attempted repudiation of the agreement or termination of the agreement by the Defendant, that trees were to be delivered in 2008, the minimum height required for those trees was designated to be 1.2m in respect of 2 year old trees.

61 As at 21 November 2006 the Defendant was aware of a shortfall in allocation of buds from the Almond Board of Australia (ABA), which ceased to be a problem shortly thereafter because of the drop in demand for buds, consistent with a drop in interest in the market to which I referred to above. 'Bud strike' was generally successful in January 2007 (confirmed in an email dated 20 January 2007 addressed to the Defendant from Mr Warner) and payment of the further 25% of the total purchase price in accordance with the agreement was made after inspection of both nurseries at Wemen and Narrandera in early February. The payment after this inspection is of some importance, as this inspection could only ascertain that all was in order at that point. Satisfaction on that inspection relieved the Plaintiffs of claimed breach of conditions precedent at a later time to inspection as to quality.

62 The inspections conducted by Mr Johns at Wemen and Narrandera on 5 and 8 February served the purpose of satisfying the Defendant that the Plaintiffs could supply what the Defendant required at that time. Mr Johns did not raise any complaint about what he saw. Out of 80,000 trees budded at Wemen, between fifty to sixty thousand had survived, an average survival rate within the industry. He was aware of this but the payment of 25% of the purchase price was still paid. He was aware by early May, at least, that the Wemen nursery was able to supply between forty to fifty thousand trees by June 2007 at a particular height if required and that Narrandera could supply him with approximately 30,000 one and two year old trees. It is common ground that more mature trees were in fact more attractive a purchase, as it assured greater guarantee of maturation for planting and subsequent harvesting purposes. Narrandera had about 30,000 available trees in May, of which perhaps a majority were 2 years old. The trees not growing straight had been staked, as was Mr Warner's usual practice. About 30% of the Wemen trees required staking, Narrandera slightly more by percentage. There was nothing in the staking that foresaw some failure to perform by the Plaintiffs. I accept that any shortfall, if a demand was made by the Defendant, could have been met, but as events unfolded, the Plaintiffs were never called upon to deliver the full number of trees ordered.

63 The correspondence from Mr Warner to Mr Johns in April and May 2007, providing progress reports, in my view, was honest and direct at all times. A feature of this matter was the fact that in his verbal reporting and his written reports Mr Warner endeavoured to be transparent and timely with advice as to progress, and/or acknowledgement of set backs.

64 An important document in this matter is an email of 8 April 2007 forwarded by Mr Warner to Mr Johns. This email advised (amongst other matters);

i. the trees in Narrandera were in good shape including many of which were two year old trees at one year old prices,

ii. there were only 27,000 of the varieties he required at Narrandera and it was suggested that these be dug and delivered first in the last week of May.

iii. Any change in this suggestion, or in the order in which various varieties were to be delivered should be advised.

iv. At Wemen there were 54,000 healthy deliverable trees of which 9,000 might not make the specified height if required to be delivered in June 2007. There were some problems in relation to the growth of these trees.

v. Of the 9,000 "smaller trees" there were alternative suggestions, they could be delivered at a discounted price, they could be kept in the ground and added to the 2008 requirements as anticipated in the agreement (at an extra $1.00 per tree) or they could be dug up and "hot house accelerated" to be planted later in the year than June on a renegotiated price.

vi. The trees available totalled 81,000 of the 90,000 ordered. Nine thousand extra trees could be acquired from other small nurseries to make up the 'total order' or the Defendant could add 9,000 to its "anticipated" 2008 order.

vii. The Defendant was asked to 'advise as to what course it would prefer regarding the anticipated undersize(d) 9,000 and the 9,000 shortfall'. viii. At that time the 81,000 were in the ratios of, (a) Nonpariel (sic) 53.5% (b) Carmel 34.5% (c) Price 12% (The shortfall in 'Price' trees could be made up with "Peerless", an apparently similar variety.) ix. There should be discussion about future requirements for delivery.

x. The Plaintiffs had 100,000 'Nemaguard' seeds on order to plant that winter.

65 The shortfall in 'maturing' trees must have been foreseen, to some extent, by Mr Johns from his February inspections.

66 This email frankly acknowledged that from the trees available, 81,000 were then capable of delivery, 9,000 would not reach a height of 0.9m by June 2007 and the percentages available did not match the percentages ordered of different varieties. Mr Warner sought Mr Johns' advice on a number of matters. Little 'advice' or comment followed in the months that followed, up until delivery in June, other than a request for a particular number of trees (27,000) from Narrandera would suffice.

67 Mr Johns did not respond to this email, claiming that he was preoccupied with other work in his affidavit and in his oral evidence also asserting that he did not want to be involved in "protracted" discussions about the matters raised in the email and making submissions about future orders. If Mr Johns had any concerns about the email he would not have delayed discussion about the matter. Nor do I accept that such discussion would have been so protracted as to divert him from his other responsibilities. The issues arising from the email, now complained of by the Defendant, were clear and capable of direct response from Mr Johns. His oral evidence conceded a lack of concern, at least "in part". What was proposed did not stand at odds with the Defendant's intention by May 2007 to 'hold over' the majority of the order until the following year. The ambitions of the original order made by the Defendant were clearly not being matched by the enthusiasm of the investor market, a trend commencing before early April 2007. In his affidavit evidence Mr Johns said that his next response to communications from Mr Warner was to contact him on 11 May 2007, he rang Mr Warner to enquire about whether Mr Warner's operation had enough water to supply requirements for any trees (the Defendant) carried over to June 2008. There was no discussion about the email of 8 April. This conversation in May was entirely consistent with the contemplation that there would not be a full delivery of trees in early June and that the proportions of varieties ordered may be subject to change. It was consistent with the email of 8 April not having contained any real surprises for Mr Johns. Mr Warner responded to this telephone call with two emails on 13 May dealing with the issue of water supply in Narrandera and Wemen, although Mr Warner's second email left open a query as to the extent to which water would be required for the "left over trees", that is the trees to be delivered in 2008, which may require some "renegotiation" for the cost of held over trees, given increased costs for water and weeding services from a third party.

68 This exchange of correspondence occurred in the context of an inquiry made by Mr Warner of Mr Johns as to precisely how many trees were required to be delivered. Mr Warner was advised in May by Mr Johns that not all of the trees would be required that year, because of what Mr Warner described as "falling investor interest", or what Mr Johns articulated as "not enough sales".

69 Mr Johns in May 2007 requested 27,000 to be delivered in early June. Mr Warner arranged for 29,575 trees to be delivered to make allowance for damaged trees or "rejects". Twenty thousand four hundred (20,400) trees were delivered on 7 June and a further 9,175 were delivered on 11 June. The plants were delivered by truck in an acceptable manner. They were apparently in the appropriate proportions of varieties.

70 In the conduct of the case there was an important issue of dispute as to what happened after delivery in terms of the acceptance by the Defendant of the quality of the trees. Mr Johns claimed that "many of the trees were crooked" and the Orchard Manager was instructed to count those that were bent, straight plants being preferable, or desirable, for future growth as earlier explained. An invoice from the Plaintiffs to the Defendant was forwarded dated 11 June 2007 requiring payment of $120,370.25 in respect of the trees delivered at the rate of $3.70 each, in accordance with the agreement.

71 On 13 June, Mr Warner, by facsimile forwarded to Mr Johns, advised, under the heading "Delivery variation, 90,000 almond tree order 30/10/06", that: "Following mutual agreement Almond Investors Limited has deferred the delivery of 60,425 almond trees (90,000 minus 29,575 delivered) to a date to be determined." Details were provided as to the deposit held and its relationship to the outstanding number of trees with reference to "Future negotiations" determining the method of handling "this deferred number".

72 Mr Johns made the assertion in his evidence that he regarded the email as "dishonest" in that it referred to "mutual agreement". He said he "lost trust" in Mr Warner. This assertion was, at least, an exaggeration. I am satisfied, even on Mr Johns' evidence, that at that point the Defendant only required such plants as had been delivered at that time, the original agreement having pointed to June 2007 as a starting point for the delivery of trees. I am satisfied that Mr Warner's facsimile to which I have referred represented a fair summary of the situation. His claimed loss of faith in Mr Warner is not reflected from his evidence in his dealings with Warner directly or by written communication up until, and including, 3 August 2007. In any event, no issue was taken by Mr Johns with Mr Warner as to this apparent, to him, 'dishonesty'. No complaint or issue was made to Warner, or taken, by Mr Johns. No objection was taken to the assertion of a mutual agreement.

73 However, when Mr Warner in late June pursued the payment for the trees delivered an issue was raised as to whether the invoice was correct, in so far as some trees were 'rejected' because of their quality. Mr Johns' version of events confirms that the first time that he raised the quality of the trees delivered was at the time of Mr Warner chasing up the payment of the invoice. Mr Johns asserts that somebody else counted the trees and by a complete miracle 5,915 trees represented the number of rejected trees, exactly 20% of the number of delivered trees. The photographic material produced by Mr Johns, does not establish the number of bent 'sticks'. The numbers shown in the photographs being barely in the hundreds, let alone the thousands claimed. I appreciate the photographs are tendered as 'representative' of the situation, but they do not establish the extent of the problem as claimed. Clearly a number were bent. Mr Warner's over supply was an acknowledgement of this anticipated development. In fact, Mr Warner, anxious for payment put the compromise position to Mr Johns, "assuming 20% as being rejects". This proposition was accepted by Mr Johns, in the equivalent number of trees 'rejected', or unacceptable.

74 Mr Warner sent an email on 20 July 2007 showing commitment to the Agreement in response to an email from Mr Johns of that date suggesting a substantially lower number of trees being required in total. Mr Warner wrote: "…AIC has ordered 90,000 trees and Nursery Nuts has firmly contracted to deliver 90,000 trees." The Plaintiffs were clearly indicating a willingness to perform at that time. The email from Mr Johns of this date expressed as a "Summary of Nursery Nuts order for 2007" suggests a contrary proposition as to the Defendant's requirements, calculating payment by 2008 for a total 63,660 trees, including 23,660 trees delivered in 2007, 40,000 trees to be delivered in 2008. This email had two significant features. Particularly, it asserts an assumption that there will be 40,000 delivered in 2008 (at $8.40 each), 26,340 less than ordered in October 2006, if one considers the number of trees "accepted" by the Defendant in June 2007. It reflected the reality of the situation at that time. The second feature of this document, is that the number regarded as "non plantable" from the June delivery was "5,915 (20% of 2007 order …)". This was, I am satisfied, a result of negotiation, to accommodate the percentage figure suggested by Mr Warner as a compromise to ensure prompt payment of the invoice that had been rendered. The reason that the precise number of plants had to be calculated was because the invoice that had been previously forwarded involved a calculation of the price per tree. A recalculation of what was required would involve numbering the trees acceptable and providing a price per tree. In fact this is what occurred on 21 July 2007 when a revised invoice was delivered by the Plaintiffs to the Defendant $96,296.20 (incl GST), rather that the $120,370.25 invoiced on 11 June. The subsequent correspondence and conversations that occurred to the "Summary", forwarded to Mr Warner on 20 July, would appear to focus upon the realisation by Mr Warner that the Defendant was now seeking to take delivery ultimately in 2008 only of 63,660 plants (in total), not the 90,000 that had been "ordered". Mr Warner's email of 20 July addressed this issue. His further email of 25 July 2007, which he sent after consultation with his partner (Vaughan Wellington), reiterated Nursery Nuts' commitment to the agreement to deliver 90,000 trees. Mr Warner raised the issue of a "penalty", to be paid by the Defendant, which might include the forfeiture of the deposit paid. This email prompted the intervention of the Financial Controller for the Defendant. Then on 3 August 2007 Mr Johns made a visit to the Wemen nursery to inspect the trees that were available and to discuss the situation with Mr Warner. That discussion confirmed, on Mr Johns' part, that the demand for 2008 would require less trees, than the order originally contemplated. The commercial reality was acceptable to Mr Warner, but on prompt payment. Mr Johns said he would confirm in writing the Defendant's agreement to a reorganised payments schedule. Both parties were confronted with a changing 'market' for almond trees, reflected by the Defendant's changed demands and, later, by the Plaintiffs' inability to sell but a minority of the trees it had grown for the Defendant.

75 This meeting at Wemen when the Wemen nursery was inspected, had, in my view, some curious features when one has regard to Mr Johns' assertion that he was quite 'horrified' and 'sickened' by what he saw on inspection. As I have earlier indicated I do not accept this evidence on this reaction. At the very least it is an exaggeration. His evidence described the situation as 'catastrophic'. Neither his affidavit evidence or his oral evidence of his discussions with Mr Warner on this day give any sense of 'catastrophe'. I am satisfied that this meeting elicited the information that the investment market was dropping and that the Defendant would only be prepared to take, or 'offered' to take the balance of trees that appeared to be mature, which was well short of the 66,000 trees that were to be provided in 2008 to fulfil the original agreement. Perhaps as few as 45,000 trees. I have noted what submissions have been made about this Mr Johns' evidence as to this meeting by the Defendant's counsel. However the facts are that in the relevant part of the affidavit of Mr Johns as to this meeting, even assuming that he wanted to avoid 'emotional' comments, betray any disquiet whatsoever about the quality of the plantings, the inadequacy of the crop or anything of the sort. His evidence refers to his observations that the plants he saw included trees that were below 90 cm, which Mr Warner conceded "some" were, and that he would (in June the following year) require trees to be at least 1.2 metres high by 2008. This did not indicate that, with his experience, it was not reasonable for the trees to grow to that amended height. Mr Johns said that the Defendant could, or might, pay for the trees in instalments. Mr Johns' version of the meeting is not unlike the account given by Mr Warner, as to negotiations to overcome the impasse which refers to payment for trees delivered and to instalments for payment for the balance of the trees (not in accordance with the agreement), subject to confirmation in writing. He did not convey then to Mr Warner any failure to perform the contract, claimed in his evidence, at that time, as to number, quality or ratio of varieties of trees.

76 The written confirmation of the negotiation did not arrive from the Defendant. Mr Warner forwarded an email to Mr Johns on 8 August after Mr Johns did not return some phone calls. The Financial Controller for the Defendant, Mr Tkalcevic, sent a reconciliation on trees delivered and a proposal for future payments, but Warner on 13 August again put the position as he understood it from the August meeting and seeking payment for trees delivered and instalment payments for trees held over to 2008. Mr Johns communicated again with Mr Warner by email dated 17 August 2006, putting the position that trees ordered were to have been of a specified height as at June 2007 and claiming that trees not to that specification at that date were not to be 'accepted'. Various proposals were put, not acceptable to the Plaintiffs by Warner's response of 21 August. Mr Warner disputed what Mr Johns then asserted as to the terms of the agreement. On 31 August 2007 solicitors for the Defendant wrote to the Plaintiffs (via Mr Warner) purporting to terminate the agreement. In the period between 3 August and this last development the Plaintiffs planted a further 25,000 seeds for future budding and development. The Defendant was advised of this. From the meeting of 3 August until the purported termination of the agreement by the Defendant, the matter was apparently taken out of Mr Johns' hands. Whilst I accept that there was a 'negotiation' occurring at this time, the commercial interests, and pressures upon, the Defendant at that time (not fully revealed by Mr Johns when pressed on this issue in evidence), failed to provide a response from him to Warner's entreaties, other than a claimed repudiation by the Plaintiffs and a 'termination' by the Defendant's solicitors for reasons not supported by the evidence in this matter. The letter, in any event, was not a 'considered' response to the email of 8 April 2007 from Mr Warner.

77 Mr Warner, on or about 12 May 2008, still thought the trees he was growing were the Defendant's trees. But Mr Johns' 'brush off' led him to speak to his solicitors. By the end of May 2008 it was apparent to Mr Warner that the Defendant did not intend to take any of the trees. Those mature trees growing were unable to be all sold. The market was 'flooded' and only 6,000 trees were sold for $22,216. The rest were apparently 'lost'. The prognostications upon the market, apparent at least a year before to Mr Johns, and at least 18 months before to Mr Warner, had more or less come to pass.

78 The "construction" of the contract, in order to establish its essential terms, requires consideration of the principle that commercial agreements should be given a 'business like' or commercial construction that does not flout business common sense. The contract is required to be construed in light of the surrounding circumstances at the time of the creation of the agreement, the nature of the commercial aims and purposes of the agreement are part of the surrounding circumstances. A written contract should be construed having regard to those facts at the time of the execution of the contract that the parties knew, or that it can reasonably be assumed they knew, that would impact upon the meaning of the words of the contract. The "underpinning legal theory in the law concerning the formation, construction and interpretation of contracts is the so called 'objective theory' of contract". ( Franklins Pty Ltd v Metcash Trading Ltd [2009] NSWCA 407, per Allsop P [4]-[5] [14] [19]-[23]: Giles JA [63]: Campbell JA [305] [309] [329], [361] - [362])

79 The critical legal issues, in the context of the factual circumstances for consideration, are; what were the essential terms (or conditions) of the contract, what terms were 'non essential', or warranties, were there breaches ultimately that permitted termination because of the "repudiation" of the contract by one of the parties and if so, did the concept of "affirmation" arise? There are, of course, other ancillary issues. The Plaintiffs assert that the Defendant repudiated the contract, which repudiation was accepted and the Plaintiffs terminated the contract thus giving rise to the claim of damages for loss, alternatively if the Plaintiffs were in breach, the Defendant affirmed the contract and then repudiated it. Otherwise the Defendant was in breach of the so called "compromise agreement". The Defendant's essential case, in response to the Plaintiffs' claim and in pursuit of its cross-claim, is that the Plaintiffs "repudiated" the contract, which repudiation was accepted and the Defendant terminated the contract. The Defendant was entitled to restitution for amounts overpaid.

80 Dealing firstly with the issue of the Plaintiffs' pleaded "compromise" agreement, this aspect of the Plaintiffs' claim must fail 'in limine'. The matters of negotiation from 20 July 2007 up until the inspection by Mr Johns of the Wemen nursery on 3 August, were clearly understood by both men to be subject to written confirmation. Putting aside the issue of whether there was then a current breach, or on inspection there was anticipated to be a breach in the future, the absence of any written confirmation of agreement shows that there was no acceptance by the Defendant of any offer that had been made by Mr Warner, or vice versa.

81 Breach of a condition of a contract entitles the other party to terminate the contract. An essential term is, when breached, one that entitles a party to immediately terminate. It must be a "promise" of such importance to the "promisee" that the promisee "would not have entered into the contract unless (he) had been assured of a strict or substantial performance of the promise … and this was apparent to the promisee" ( Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR 632 (at 641-2) - approved on this issue though otherwise reversed in Luna Park (NSW) Ltd (1938) 61 CLR 286: Shevill v Builders Licensing Board (1982) 149 CLR 620 (at 636): DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 (at 431). "Essentiality requires 'close account' of the importance the parties have attached to the provision (or term) as evidence by the contract itself as applied to the surrounding circumstances". The Court may take into account a range of matters in determining whether a term was "essential", including the effect, or consequences, of breach, the conduct of the parties in reaction to a breach, bearing in mind the judgment of the character of the 'term' focuses upon the objectively assessed intention of the parties at the time of formation of the agreement. No term was expressly stated to be essential in the written 'contract'. The 'contract' was not expressed in sophisticated or legal terms. It had elements of practicality, flexibility and options as to delivery date(s), numbers to be delivered, acceptable proportions of varieties, in its various terms. The parties clearly anticipated 'substantial' performance, but not necessarily strict performance of all terms as to what the Plaintiffs could supply the Defendant. For example, to ultimately supply 89,000 trees could not reasonably be a breach of a requirement that was essential. An adjustment of payment could be made. The schedule for payment permitted an adjustment of payment to ensure that the instalment payments by the Defendant did not result in an overpayment. Payment for trees delivered was an essential term, requiring strict compliances as the Plaintiffs had assumed the risk of capital investment.

82 In Koompahtoo Local Aboriginal Land Council & Anor v Sandpine Pty Ltd (& Anor) , earlier cited, it was noted in that judgment that 'repudiation' by one party to an agreement is one of several bases for creating a right to terminate. The majority in that judgment noted the term 'repudiation' may mean "renunciation", that is "conduct of a party which evinces an intention no longer to be bound by a contract or to fulfil it only in a manner substantially inconsistent with the parties obligation" (including an inability to render substantial performance). The test for determining this being whether the conduct of one party is such to convey to a reasonable person, in the position of the other party, renunciation either of the contract as a whole or of a fundamental part of it. Secondly, it may refer to any "breach of contract which justifies termination by the other party. There may be "failure to perform", even if not a breach of an essential term "which manifests unwillingness or inability to perform" in such circumstances that the other party is entitled to conclude "that the contract will not be performed substantially according to its requirements". The two aspects of 'repudiation' overlap. "Unwillingness or inability to perform a contract often is manifested most clearly by the conduct of a party when the time for performance arrives" [44].

83 The majority said that there were "two relevant circumstances" in which a breach of contract by one party may entitle the other party to terminate. The first is where the obligation with which there has been failure to comply has been agreed by the contracting parties to be essential (citing Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR 632 at 641-642). The second relevant circumstance is where there has been a sufficiently serious breach of a non essential term. Some breaches (not all) of such a term may warrant termination [49]. On this analysis, the Plaintiffs' case for repudiation of the contract by the Defendant might be characterised as 'renunciation' and breach of an essential condition, as well as an unwillingness to perform. The Defendant's case for repudiation characterised as breach of an essential condition of the term of the contract and an incapacity to perform.

84 As to the issue of repudiation the Defendant relied upon Adelaide Brighton Ltd v Ostabridge Pty Ltd (earlier cited) at [129] - [130], where Campbell J, citing Gibbs CJ in Shevill v Builders Licensing Board (1982) 149 CLR 620 (at 656), approved the approach that the contract may be repudiated where a party "evinces an intention no longer to be bound by the contract … or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way". He said "Repudiation can arise either from a party showing an intention not to be bound by the entire contract, or by showing that it does not intend to be bound by a term or terms which are of sufficient importance to the contract", "not by reference to that party's subjective intentions, but rather by reference to how its conduct would appear to a reasonable person in the position of the other contract party". Repudiation is "a serious matter, not to be lightly found or inferred".

85 If there is a right for a party to repudiate, a party may elect to "affirm" the contract, given that termination is itself a matter of election. Conduct of one party with a right to terminate which conveys to the other party that that right will not be exercised may result in the loss of that right. In assessing whether conduct constitutes an affirmation, one may take into account conduct of a party in performance of the contract after breach or non fulfilment of a condition ( Carr v J A Berriman Pty Ltd (1953) 89 CLR 327), in other words, acts done consistent with the continued existence of the contract may constitute affirmation of the contract and a loss of the right to terminate, although continued performance of the contract having expressly asserted a right to terminate does not constitute affirmation. An election need not by made immediately and acts in performance of the contract required by necessity pending consideration of the matter need not constitute affirmation ( Champtaloup v Thomas (1976) 2 NSWLR 264 (at 278)). No question here arises of any ignorance of a right to terminate on the part of the Defendant.

86 In Justice Handley's " Estoppel by Conduct or Election " (Sweet and Maxwell) 2006, the learned author noted that election does not arise until the party having the right of election "has sufficient knowledge of the facts", but it is not bound to act at once but may keep the choice "alive" until he makes it, or delays (citing Sargent v ASL Developments Ltd (1974) 131 CLR 634 at [641-2] per Stephen J). As to the issue of "knowledge of relevant facts" the author (at pages 234 - 237) discussed what was required to establish sufficient knowledge to be able to affirm existing rights. Here there was no issue as to 'knowledge' by the parties of relevant facts. Election not to terminate must be made by words or conduct "unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other" ( Sargent (at 646): Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 299 (at 304)). As the issue of not having to elect immediately the elector "may keep the question open" so long as the delay does not cause prejudice to the other side ( Sargent (at 656) per Mason J)

87 It is not in dispute that there was an agreement, or a contract for the sale of goods, existing between the Plaintiffs and the Defendant with the order of 30 October 2006. The relevant 'terms' of the contract to the issues in this proceeding were: i. 90,000 one year old almond trees, subject to inspection before "bud strike", were purchased by the Defendant from the Plaintiffs for delivery at the Defendant's orchard at Piangil by (or on) early June 2007 or at a later date (by or on early June 2008), such option as to delivery to be exercised by the Defendant. ii. The trees to be grown at the Wemen and Narrandera properties. iii. The cost of each 'one year old' tree was $7.40.

iv. the trees delivered to be made up in the proportions of 45,000 Nonpareil (sic) trees, 30,000 Carmel trees and 15,000 Price trees, but subject to the option to be exercised by the Defendant to vary the proportions at a later time to the agreement being reached. v. the trees to have a minimum height of 0.9m at the time of delivery,

vi. the payment for the trees was to be in accordance with the following schedule

(a) 25% of the total price for 90,000 trees payable on inspection (at Wemen), (b) 25% of the total price paid after bud strike, (c) 50% of the cost of each tree on delivery.

vii. If trees grown from August 2006 carried over for delivery in June 2008, there would be additional cost to the Defendant of $1.00 per tree, viii. the cost of delivery to be borne by the Plaintiffs.

ix. Purchase was completed on delivery of trees fit for purpose or of merchantable quality.

88 There was an implied condition to the contract as to the goods being fit for the purpose for which they had been brought and that they be of merchantable quality (s 19 Sale of Goods Act (NSW) 1923). The conditions, other than the implied conditions, were understood to be subject to the variables of agricultural enterprise and were flexible in their terms to reflect commercial demand.

89 As to the Defendant's pleaded breaches by the Plaintiffs leading to its repudiation which the Plaintiffs must establish to the requisite standard of proof did not occur, it is the case that as at 8 April 2007 the Plaintiffs did not have 90,000 one year old almond trees, in the varieties ordered, growing at its nurseries. The trees to be delivered were required by the contract to be grown at the Plaintiffs' nurseries. The issue of the number of trees to be grown I will deal with in greater detail below. The proportion of the varieties required was a 'non essential' term of the contract, as the Defendant could vary its requirement in that regard at any time. The requirement that the trees purchased were 'one year' trees was essential, although the Defendant did not regard 'one year old trees' as preferable to its needs. If two year old trees were delivered that was more advantageous to the Defendant, for which advantage it would pay a $1.00 premium in 2008, but no extra in 2007. An essential term of the contract required acceptable trees as requested by the Defendant to be available for delivery. This condition was never breached by the Plaintiffs.

90 There was not a breach of a condition of the contract by the failure by the Plaintiffs to 'hold over' the balance of the undelivered almond trees. The agreement was to deliver a certain number of one year old trees. The delivery of 'hold over' trees had not been required or demanded at the time of the purported termination by the Defendant. The Plaintiffs have not been shown on the evidence to be unable to deliver the balance of trees required by the Defendant for June 2008. The relevant essential term of the Agreement at October 2006 was the delivery of one year old trees, not two year old trees. In fact, the Plaintiffs have satisfied the Court that they were willing and could perform the agreement to deliver one year old trees when they were required by the Defendant, bearing in mind the Defendant had the option as to delivery requirements. If delivery of 90,000 one year old trees was required in June 2007 that could not be performed by April. But the Defendant never sought performance in those terms. The Plaintiffs expressed their willingness to perform this to the Defendant in July and on 3 August 2007 before the contract's purported termination. There never was, on the part of the Plaintiffs, an unwillingness to perform. The holding over of trees by the Plaintiffs, for the Defendant, was largely in respect of such one year old trees that were not required to be delivered in June 2007. The Defendant tried to renegotiate the contract in late July to receive only two year old trees in a reduced number, but no 'compromise Agreement' was created. The Plaintiffs took steps to make up the number of trees to be available as at June 2008, close to, or substantially equal to, the total ordered by the Defendant.

91 As to the issue of 'breach' of a condition of the agreement evidencing "renunciation", or inability to perform, by the Plaintiffs, as pleaded by the Defendant, the notification of the current position by the email of 8 April 2007 from the Plaintiffs, whilst reflecting the fact that they at that point could not fulfil the requirement to supply a particular number, in particular varieties, was not at that stage a breach. The Plaintiffs were clearly being transparent about progress. By this communication from Mr Warner to Mr Johns, the Plaintiffs advised the Defendant that the conditions of the agreement requiring the supply of 90,000 plants in particular proportions, could not be fulfilled at that point of time. Then the Plaintiffs were not in breach of those conditions of the agreement because the Plaintiffs had not demonstrated that they could not fulfil the terms of the agreement at the time of delivery, given there was no fixed date of delivery for all trees, and the Defendant could exercise an option as to what proportions of varieties it would accept. The delivery required by the Defendant had not occurred. The Plaintiffs' advice did not reflect a failure to perform at that time. I have considered whether the evidence of the situation revealed on 8 April constituted an 'anticipatory breach', reflecting an incapacity, or unwillingness, to perform in this regard. Certainly there was no unwillingness to perform. Given the uncertainty as to what the Defendant required delivered in June 2007 on delivery there was not an incapacity to perform at that time. The information conveyed in the email was not received by the Defendant as a repudiation of the contract (see below). The Defendant about a month later requested delivery of 27,000 trees. The contract remained at that time in existence. It left open the right of the Plaintiffs to terminate, on repudiation of the contract by the Defendant (see Cheshire and Fifoot 'Law of Contract' (9th Edition) 21.13 (fn102). The letter from Mr Warner of 13 June 2007 was merely concerned with getting advice in the future on the 'held over'; trees. It was not a recognition that the Defendant had not lost the right to terminate the Agreement.

92 The number of trees 'ordered', or purchased, for delivery was subject to the demand from the Defendant's investors and the realities of agricultural variables. The parties were aware of the vicissitudes of plant production and were also aware of the vicissitudes of demand for almond trees. Hence the condition that not all the trees would necessarily be required to be delivered in the first week of June and the option for the Defendant to vary the proportion of particular varieties.

93 As to the condition of the contract that the Plaintiffs would grow the trees ordered at the Wemen and Narrandera nurseries, that being the purpose of the inspections of those nurseries, although the Defendant was aware that 81,000 trees were growing as from 8 April, the conduct of the Defendant in the period of time from April through to August, when no complaint was made by the Defendant as to its terms, save for an attempt by the Defendant to renegotiate the number of trees to be delivered eventually, is capable of showing that the precise number ordered to be grown at those nurseries was not an 'essential term'. But even if it was, there was no breach at the time of the purported termination by the Defendant, as delivery of numbers and varieties required in 2008 had not been confirmed. I am mindful Mr Johns claimed he would not accept trees from other nurseries as performance of the contract, but that contingency did not directly arise. The importance of the timing of delivery to performance of the contract is such in this matter because the responsibility of nurturing and caring for the juvenile plants fell within the expertise of the Plaintiffs until delivery. Those trees were of no commercial use to the Defendant until they could be planted for subsequent commercial harvesting. This both parties knew. As at 8 April, or subsequently, the Plaintiffs have established there had not been a breach by them of an essential term of the contract such as to be a repudiation of the contract. Nor had the Defendant regarded there to have been such a breach, the information of 8 April being no great surprise.

94 The condition so far as the minimum height requirement was not breached because there is no evidence that trees delivered did not meet the minimum height requirement. I satisfied that the Plaintiffs could deliver plants of a relevant minimum height (0.9 m for one year old trees), or 1.2 m (for two year old trees), as required by the Defendant if given the opportunity. It was not a condition precedent to the agreement that all the trees would be of a particular minimum height at June 2007. The height requirement had to be satisfied on delivery for payment of the 50% balance of the cost of a particular tree(s). Whilst it was an implied condition of the contract that the goods were fit for purpose, those plants delivered in June 2007 were in the vast majority 'fit for purpose'. Some were not. Not because of their failure to reach the height requirement, but because they were bent. As to the implied condition that the trees were fit for purpose, whilst I am satisfied that not all the 29,575 delivered in early June were straight, I am not able to conclude one way or another that the Plaintiffs failed to deliver 27,000 straight almond trees given the character of the negotiations that led to the final figure accepted by the Defendant. In any event, if there was a breach in that less that 27,000 were straight, this was a breach of a warranty, given the acceptance of the vast majority of trees delivered, for which the appropriate response contemplated by the contract was a variation of the payment schedule, not termination. The Plaintiffs were prepared to make an allowance for a reduction of monies owed for the plants delivered requiring the Defendant to pay only for trees 'accepted' on delivery. The agreement contemplated this by its requirement of payment of 50% of the cost of each tree delivered. The Defendant kept the plants 'acceptable', did not return the 'unacceptable' plants and accepted the varied number as the number for which payment ought be made.

95 In any event, the conduct of the Defendant in accepting the vast majority of plants, rejecting the 'notional' number of trees in the context of the negotiated position of the Plaintiffs, did not demonstrate a failure or unwillingness to perform by the Plaintiffs, nor was it recognised by the Defendant as such. The suggested further supply of plants (at least provisionally) by the email of 20 July from Mr Johns to Mr Warner and the acceptance of plants delivered (as to an agreed number) makes it clear that the breach of any implied condition, in respect of those plants rejected, was thereinafter regarded by the parties as a breach of warranty and of itself not a ground for treating the contract as repudiated (s 16(3) Sale of Goods Act 1958).

96 If the advice by the Plaintiffs that they had (at 8 April) 81,000 available trees at Wemen and Narrandera in varieties not as 'ordered' were breaches of conditions of the contract, such as to constitute a repudiation of the Agreement by the Plaintiffs, or to be regarded as 'anticipatory breach(es)' giving rise to a right to terminate, there were a number of events that occurred and other factors that demonstrate that the Defendant regarded itself as bound by the Agreement, or had 'affirmed' the Agreement.

i. for commercial reasons Mr Johns was not concerned by the advice he received by the email of 8 April. I am satisfied that he had no expectation of requiring 90,000 trees to be delivered in June 2007, the holding over would be to the following year and the growth cycle of almond trees would permit satisfaction of the agreement. He knew the high risk of agricultural attrition.

ii. Subsequent to the advice of 8 April the Defendant, through Mr Johns, took no steps to indicate any concern or disquiet or even to undertake any "negotiations" or protests that might have been invited by the advice. There was expected to be a range of "wastage" or attrition of seedlings from natural events on the Defendant's own case, estimated to be between ten and fifty percent, with weather conditions, growth rates, vagaries of agricultural production taken into account. The Defendant was aware of the numbers of seeds that had been planted, the advice as to the number of progressing trees as at April was entirely consistent with the expected vicissitudes of agriculture.

iii. The Defendant in May made enquiries about ensuring that those trees that were available would be adequately watered for delivery in 2008.

iv. The Defendant then ordered, from the trees available 27,000 trees to be delivered in performance of the contract.

v. There was an 'election' exercising the 'option' of holding over the balance to be supplied until 2008. This was particular conduct that imposed continuing burden upon the Plaintiffs of nurturing established trees (and planting further seedlings) in expectation that the contract was to be performed. The conduct of the Defendant, particularly taking delivery of, and keeping, a reduced number of trees and exercising the 'option' to 'hold over' the balance was clear, unequivocal, affirmation of the Agreement. The actions of the Defendant "speak louder than words".

vi. Notwithstanding dissatisfaction with some of the trees delivered in June 2007, there was a renegotiated figure acceptable to the Defendant and the Plaintiffs for the number of plants for which payment was required under the agreement. The terms of the renegotiated agreement were advantageous to the Defendant.

vii. Mr Johns' email on behalf of the Defendant in 20 July 2007 was an attempt to renegotiate the number of trees to be delivered in 2008, in the context of the available information that no more than 54,000 were available at Wemen, possibly less with attrition.

viii. The emails of Mr Warner of 20 July and 25 July 2007 evidenced a continuing willingness to perform the contract and an expression of capacity to do so. No view was expressed by the Defendant as to the contract being in breach.

ix. Mr Johns' attendance at the Wemen nursery on 3 August for a further inspection to discuss trees available for 2008 and his indication of future needs and minimum height standards was further conduct by the Defendant affirming the contract, albeit that the Plaintiffs, through Mr Warner, were seeking to renegotiate the contract. The Defendant was making it clear at that point that it continued to want trees in 2008, subject to further negotiation to vary the number of trees required in 2008. The Plaintiffs acted to their detriment by planting more seeds. That renegotiation was unsuccessful.

97 The Plaintiffs have established that thereinafter, the failure to pay for the trees delivered in early June was a breach of an essential term of the contract by the Defendant, in the knowledge that the Plaintiffs were growing thousands of trees for it and planting seeds to grow more rootstock. The advice from the solicitors for the Defendant dated 31 August 2007 confirmed what had happened by Mr Johns' last email in August, that is that the contract was repudiated. The Defendant took no further steps to complete performance of the Agreement, declined to take delivery of further trees that it had agreed to be supplied and sought through its solicitors to terminate the Agreement, albeit by the alleged repudiation of the contract by the Plaintiffs, on 31 August 2008. By April 2008 there was still an intention, certainly no unwillingness, on the part of the Defendant to perform what had been agreed. This repudiation of the contact by the Defendant was accepted by the consequent termination by the Plaintiffs' solicitors.

98 Having regard to the foregoing findings the Court concludes that the Plaintiffs have established to the requisite standard that the Defendant repudiated the agreement, causing loss and damage to them. The defences filed are overcome by the Plaintiffs' claims. It follows from this conclusion that the cross claim of the Defendant for restitution of monies paid must fail. The way the case was conducted there was no dispute that if the primary claim succeeded, or for that matter if the cross claim succeeded, damages would need to be awarded to the successful party essentially as calculated by the respective parties. The amounts readily identifiable. The Plaintiffs submitted a schedule of monies to be paid by the Defendant, in the context of the sum of $333,000 having been paid by the Defendant already (absent any calculation of GST as with all relevant calculations). The submissions orally in relation to the issue of damages were short. Counsel for the Defendant has supplemented his submissions in the written submissions which were received in respect of the application to amend the statement of claim.

99 The parties have each produced a schedule of damages, the Plaintiffs' 'scenarios' relating to different possible outcomes. The Defendant's calculation of damages due, if it is unsuccessful in its defence, includes a calculation of a "discount of 20%" "for trees commonly rejected by customers following delivery", totalling $75,600 and a "discount of 5% for overstock" of varieties of trees, which the Plaintiffs did not order, in the sum of $27,654.20. A claim for a reduction for trees "commonly rejected … following delivery" stands at odds with the claim for breach of 'fit for purpose' conditions. Otherwise the Defendant agrees that monies paid by the Defendant and monies obtained by the sale of trees at Wemen, as particularised by the Plaintiffs, should be taken into account. Excluding GST the total due to the Plaintiffs on this calculation is $96,633.44. The Plaintiffs reject the suggestion that there would be in the course of events a "discounts" for "rejects' and that there should not be any discount for varietal variation because the varietal makeup was flexible and subject to amendment. On the available evidence I am unable to conclude what, if any, discount for "rejects" as suggested by the Defendant could be calculated. Even allowing for some flexibility in future orders, the evidence demonstrates although that there was a "varietal variation" as at April 2007, the reality of any variation at the prospective time of delivery is not capable of calculation.

100 As to the Plaintiffs' Schedule of damages, Scenarios 1 and 2 (in the 'Damages Schedule') relate to the primary case pleaded by the Plaintiffs, and arrive at the same figure. 'Scenario 2' is based upon a finding that the only trees to which the Plaintiffs were entitled for payment were those delivered, and those that were already in the ground. 'Scenario 3' concerns a "fine tuning" of 'Scenario 2', on the assumption that the trees in the ground at Wemen at the time of repudiation were 45,000 rather and 54,000 trees (having regard to the supposed "compromise agreement"). Neither claim for damages in respect of the primary claim makes reference to the cost of planting the 25,000 seedlings, which were planted after the August 3 meeting. The damages should be assessed having regard to trees delivered in 2007 and trees available for delivery in 2008 that had previously been planted in 2007, despite the acceptance of the repudiation after the plantings in August 2007, noting the "premium" of $1.00 for each tree for the extended period that the Plaintiffs were to have control of the trees. The amount calculated should subtract monies received from the sale of trees, once the contract had been repudiated, or terminated ($20,196.36), which appears to be agreed as well as of course less monies already received ($333,000). I am not provided with any details, or evidence, as to loss from further plantings after 3 August 2007. I would award damages to the successful Plaintiffs in the sum of $199,887.64, on the finding that there were 45,000 trees available as at the time of repudiation, in August 2007. Matters of interest and costs await further particulars from the parties. -- o0o --

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