Secombs v Sadler Design Pty Ltd [1999] VSC 79

Secombs v Sadler Design Pty Ltd [1999] VSC 79 - VSC 1999 case summary — Zoe

[15]

By the statement of claim in those proceedings it was alleged that in or about June 1996 the respondent agreed to sell to and Klaus Ceramic Tiling Pty Ltd (Klaus) agreed to purchase from it, ceramic tiles. By the statement of claim the respondent alleged that it had manufactured tiles to the specifications of Klaus, that it had delivered part of the tiles ordered, as requested, but that Klaus had refused to accept delivery of the remaining tiles evidencing an intention not to be bound by the agreement, that the respondent had accepted that as a repudiation of the agreement claiming the balance owed as identified on invoice No. 533 dated 25 June 1996 in the sum of $28,044. The statement of claim in those proceedings in the County Court is among a bundle of documents exhibited to the affidavit of Andrews sworn on 15 September 1998 in these proceedings and said to be documents tendered on the hearing before the Magistrate. Among that bundle of documents appears to be an amended defence and counter-claim in response to the amended statement of claim of the respondent in those proceedings. That amended statement of claim is not among the bundle of documents and appears not to have been a document tendered before the Magistrate. However, by that amended defence and counter-claim it appears that Klaus denied liability to the respondent. While admitting that the respondent had delivered part of the quantity of tiles ordered, Klaus alleged, that the respondent had failed to deliver the tiles as ordered, that it refused to accept delivery of the same, that the tiles were not fit for their intended purpose, that they did not correspond in quality and description with the sample supplied, that they were not delivered in reasonable time and in accordance with the contract and that the same were defective. By way of counter-claim Klaus sought to recover the sum of $7,011 paid by way of deposit together with costs incurred by it and associated with the delay in obtaining alternate tiles for an identified project.

[75]

As to the counter-claim the Magistrate referred to paragraph 4 of the terms of settlement in the County Court proceedings and in particular the agreement that the respondent was to make the tiles available for collection from 9.00 a.m. on 21 May 1997 until 4.00 p.m. 7 June and that in default of the tiles being available at 9.00 a.m. on 21 May the sum of $18,000 paid by Klaus was to be returned to it. He found that only a partial semi-trailer load of at least three semi-trailer loads was ready on 21 May and that Klaus had immediately invoked its rights under the terms of settlement which resulted in the $18,000 being transferred back to it. He identified the claim as that being for damages for breach of contract or negligence, and being a loss alleged to be $24,000 together with the sum of $2,721.20 being the amount paid by way of costs in the re-settlement of the County Court proceeding. He identified that the central issue to the claim on the counter-claim was whether the appellant was negligent in failing to inform the respondent on 16 May or failing to send to it terms of settlement or to describe to it until after 21 May, the necessity of the respondent to have available all tiles for delivery on 21 May. He held that such failure did amount to negligence and that the proximate cause of the failure of the settlement of the County Court proceeding was the failure of the appellant to communicate the terms of settlement to the respondent by reading them out or sending them to the respondent. The Magistrate found that Sadler believed that he had some leeway even until 6 June to organise the delivery of the tiles whereas Herskope and Berglund had believed that Sadler had agreed to the delivery of the tiles on 21 June. He held that Sadler was not adequately consulted, that he was not asked what was achievable. He found that Arnheim did not read the terms of settlement until it was too late, although he had been told by Counsel on 16 May that the proceeding had been settled and that the tiles needed to be ready by 21 May. He held that what was important was that on that day, 16 May, Arnheim had been told that the tiles needed to be ready on 21 May. He found that Sadler was not acquainted with the terms of settlement so intimately that the solicitors were excused from reading them to him or sending them to him. He referred to the fact that it was the appellant's case that they were excused because Sadler knew or understood the terms of settlement, however, he noted that in cross-examination Arnheim had agreed that Sadler did not have the terms of settlement until 23 May. He stated that Arnheim's evidence fell short of convincing him that Sadler was in the picture to the extent that there was no need to brief him on the outcome of the settlement on 16 May. He noted that the outcome of the settlement was the production of a legal document, that being the terms of settlement.

[78]

It appears that at about this point in the Magistrate delivering his reasons for decision he was subjected to a number of interruptions and submission being made relevant to the question of damages. This should not have occurred. The notes of the Magistrate's finding as comprised Exhibit NAA4 to the affidavit of Andrews and Exhibits JLP5 and JLP8 to the affidavits of Ms Penberthy make it exceedingly difficult to isolate the findings of the presiding magistrate relevant to damages. This appears to be particularly so by reason of the interruptions that the presiding Magistrate was subject to at this point when giving his reasons for decision. The presiding magistrate found that the respondent had lost the opportunity to be rid of the tiles for $25,000 to Klaus, that he did not have the money and that he had lost the opportunity to be rid of the tiles which he did not want. I gather the reference to $25,000 was a broad reference to the fact that the respondent had received some $7,000 by way of deposit on the tiles and under the terms of settlement it was to be paid a further $18,000. The Magistrate held that the respondent had lost the advantage of the settlement, that it had the tiles and that until it tried to sell them there could be no other evidence other than they were worth $35,000. That, as I understand it, is the invoice value. He found that the loss of opportunity to be rid of the tiles could be compensated for, that it could not get rid of the tiles overnight and therefore there was some ability to claim for a loss of opportunity which had been lost. The presiding Magistrate assessed the appellant's loss as being $2,031.59. That amount appears to have calculated that on a basis that what was not in dispute with respect to two files the respondent was indebted to the appellant in the sum of $4,752.79 from which sum he deducted the amount of $2,721.20 being the damages suffered by the respondent in consequences of the negligence of the appellant and being that which the respondent was liable to pay to its solicitors who took over the conduct of the County Court proceedings and effected a further settlement of the same. Having arrived at the figure when assessing the damages which the magistrate found to be the loss of opportunity suffered by the respondent to be rid of the tiles and to recover the sum of "$25,000", he stated that it was difficult to quantify the loss in an objective way "but the justice of the situation requires resort to an obvious figure which is the $2,031.59 which [the respondent] already owes". He commented that the respondent should not be compensated lavishly and that the figure was appropriate and off-set entirely the appellant's claim. The amount that was not in dispute as stated was $4,752.99, not $4,752.79.

[94]

It was submitted on behalf of the appellant that on the evidence it was not open to the Magistrate to find that the respondent could have complied with clause 4 of the agreement and to have had the tiles available for collection at 9.00 a.m on 21 May. It was submitted that the evidence of Sadler and Simper was that even had the respondent been informed of the terms of settlement and the obligation of it consequent upon the same it was not possible to comply with clause 4 and therefore as such was the case the respondent could not establish and had not established that any breach of duty or failure on the part of the appellant caused it to suffer any loss as no act of the appellant was a cause of the respondent failing to comply with the terms of settlement and being in breach of the same as at 9.00 a.m. 21 May. In his evidence Sadler had said that he was happy with the tiles being made available immediately and that immediately was two weeks. He said that the cutting was an extrinsic part of the process and that they needed notice to cut. He said also that if they had to deliver it would require warning of two to three days and he would have to alter the schedule of cutting. When he was asked, "Did Alan Herskope say 100% had to be available at 9.00 a.m. on 21 May?" he replied, "No, I would have said, 'Not possible, can't do'". Further, Simper in her evidence said had they been told on 19 May of the terms they would have re-scheduled cutting and they could have cut a semi-trailer load in a day. However, it is to be noted in his evidence Sadler further said that it would have taken 16 to 20 hours of cutting time to cut the tiles in dispute. In addition, when cross-examined and it was specifically put to him that from its conception it was not possible for the respondent to perform its obligation under the terms of settlement he said if he had received the terms on 16 May he would have made sure they were ready. It was put to him that he said it was not possible to have all the pallets in his factory. He said that was creative and he would have found a way.

[104]

There was a conflict between reasons for decision as set out in Exhibit NAA4 to the affidavit of Andrews and that set out in JLP8 to the affidavit of Ms Penberthy sworn 30 November 1998 as to what the Magistrate said concerning the question of mitigation. Some parts of the two versions are similar. Whether the Magistrate at the outset said, "Is there a mitigation of loss issue here?" or said, "I don't know that mitigation of loss is an issue here" to my view does not really seem to the point. However, when looking at both versions it appears that what the Magistrate said relevant to this issue, in concluding that mitigation was not an issue in the case, was that in substance that if on the settlement of the County Court proceedings the respondent achieved a profit, then by it being deprived of such advantage in consequence of the appellant's negligence it may have been entitled to damages for the loss of profit, but there wasn't any evidence that the respondent received a profit at settlement, therefore the question of mitigation did not arise. In other words, as I understand that which the Magistrate was saying was that the respondent had not established that it suffered a loss of profit consequent upon it being obliged to re-pay to Klaus $18,000 and pay it a further sum of $6,000 on resettlement of the County Court proceedings but while at the same time retaining the stock of tiles. Sadler had said when asked did the tiles have a dollar value to him, that they had an invoiced amount and said that they had a market value. When asked did he have a buyer for the tiles he said no and again when asked could he sell the tiles he replied, "I'll have to turn my mind to that". Consequent upon the respondent being in breach of the terms of settlement, while it was required to refund $18,000 and pay a further $6,000 to Klaus on re-settlement of the County Court proceedings the respondent retained the tiles. Notwithstanding that they were tiles of the nature described by Sadler and identified in the invoices, Sadler conceded in his evidence-in-chief that they had a market value. It was for the respondent not only to prove that it suffered economic loss and damage consequent upon the negligence of the appellant but also to prove the nature and extent of such economic loss and damage and the amount of the same. As I understand that which the Magistrate said when dealing with the question of mitigation of damages was that on the evidence it had not been established by the respondent that it suffered economic loss consequent on repaying the sum of $18,000 to Klaus and paying a sum of $6,000 to it while retaining the tiles which had a market value. It was for the respondent to establish by evidence what the market value of the tiles was and then by having regard to that fact establish what its loss was in consequence of repaying to Klaus $18,000 and on re-settlement of the County Court action the further sum of $6,000. On the basis that the Magistrate concluded that as a head of damages the respondent had not proved that it suffered economic loss while repaying to Klaus $18,000 and paying to it a further sum of $6,000 but otherwise retaining the tiles, I am of the view that the Magistrate was correct in concluding that the question of mitigation of damages did not arise. This was not a case, in my view, where the respondent had established that while retaining the tiles but being obliged to repay to Klaus $18,000 and agreeing to pay it a sum of $6,000 it had suffered damage and where in such circumstances it was contended by the appellant that the respondent had failed to mitigate its damage, for example, by selling the tiles. In such circumstances the burden of proof would have been on the appellant to establish that the respondent had failed to mitigate its loss - Watts v. Rake [1960] HCA 58; (1960) 108 CLR 158 Dixon, CJ at p.159; Metal Fabrications (Vic) Pty Ltd v. Kelcey [1986] VicRp 52; [1986] VR 507. It was the Magistrate's conclusion that on the evidence the respondent had not established on the evidence that while retaining the tiles it had suffered economic loss and damage. In my view that conclusion was open to the Magistrate on the evidence before him. Consequently no error of law arises in the decision of the Magistrate in that he put mitigation to one side.

[110]

As I understand that last matter, it raises the question whether as a matter of law the Magistrate erred in determining that in consequence of the negligence of the appellant it was deprived from recovering against the respondent its costs as claimed in the sum of $4,745. As to this matter the fees and disbursements claimed by the appellant from the respondent with respect to that amount was in respect to the County Court proceedings, being the subject of file No. 97.0234. As appears from the account tendered before the Magistrates' Court the amount claimed was for the sum of $7,255 less $2,510 paid on account. These fees and disbursements related to work apparently done by the appellant up to and including the mediation and included for example counsel's fee on appearance at the mediation and a payment of a fee to the mediator. In my view, on the evidence before the Magistrate it was open to be concluded that the work done by the appellant in instituting the proceedings in the County Court against Klaus was rendered valueless in consequence of the negligence of the appellant. Similarly, the value of the work performed by Counsel and the cost incurred in engaging the mediation had been rendered valueless. Before the proceedings were issued by the appellant on behalf of the respondent the latter held tiles as manufactured to the order of Klaus but in respect of which it had only been partially paid. The respondent in those proceedings was seeking to recover the balance of the monies due from Klaus. By the terms of settlement entered into on 16 May the respondent was to be paid $18,000, it was to retain the deposit monies paid and in addition the tiles were to be made available for Klaus to collect. In consequence of the negligence of the appellant the representative lost the benefit of the settlement of that action on the terms set out in the terms of settlement, it was obliged to re-pay $18,000 to Klaus paid under the terms of settlement and in further settlement of the proceedings it was required to pay a further sum of $6,000. The negligence of the appellant rendered the work that it had done for the respondent in respect of the County Court matter useless. That negligence also rendered the work performed by Counsel and the work of the mediator, the fees in respect of which the appellant sought to recover against the respondent, to be useless also.

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