Loading...
Queensland Judgments

beta

Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  •   Notable Unreported Decision

Wade Sawmill Pty Ltd v Colenden Pty Ltd

 

[2007] QCA 455

 

SUPREME COURT OF QUEENSLAND

PARTIES:

WADE SAWMILL PTY LTD ACN 011 062 034

(plaintiff/applicant/appellant/cross-respondent)
v
COLENDEN PTY LIMITED trading as PILKS PINE

ACN 003 669 136
(defendant/respondent/cross-appellant)

FILE NO/S:

DC No 4174 of 2005

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

DELIVERED ON:

21 December 2007

DELIVERED AT:

Brisbane 

HEARING DATE:

15 November 2007

JUDGES:

McMurdo P, Keane JA and Daubney J

Separate reasons for judgment of each member of the Court, each concurring as to the orders made

ORDER:

1. Appeal allowed

2. Orders below set aside

3. In lieu of those orders, upon the plaintiff paying to the defendant the sum of $3,593.15, the defendant shall, at the defendant's premises, deliver up to the plaintiff the Bezner log sizer

4. Application for leave to cross-appeal granted

5. Cross-appeal allowed

6.Plaintiff to pay defendant's costs of the trial on the standard basis

CATCHWORDS:

TORTS – TROVER AND DETINUE – REMEDIES – ACTION OF DETINUE – where agreement between defendant and third party provided that defendant would hire and repair chattel of third party – where agreement terminated by defendant upon repudiation by third party – where defendant retained possession of chattel – where plaintiff purchased third party's business including chattel – where defendant failed to comply with demand for delivery up of chattel – whether plaintiff entitled to return of chattel or assessed value and damages for detention – whether defendant entitled to lien over chattel for its expenditure on repair – whether plaintiff entitled to return only upon payment of amount of lien

PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – OTHER CASES – SUBSTANTIAL SUCCESS – where defendant offered to settle on terms more favourable to plaintiff than judgment– where defendant enjoyed substantial success at trial – whether plaintiff should pay defendant's costs

Supreme Court Act 1995 (Qld), s 24, s 25

Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd & Anor (1991) 32 NSWLR 175, distinguished

General and Finance Facilities Ltd v Cooks Cars (Romford) Ltd [1963] 1 WLR 644, applied

Gollan v Nugent (1988) 166 CLR 18, applied

Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598, applied

COUNSEL:

W Sofronoff QC SG, with R A I Myers RFD, for the appellant

J K Bond SC, with S McConnel, for the respondent

SOLICITORS:

Carswell & Company for the appellant

MBT Lawyers for the respondent

[1]  McMURDO P:  The appeal should be allowed, leave to cross-appeal granted and the cross-appeal allowed.  I agree with Keane JA's reasons and proposed orders.  I add the following brief observations.

[2] The plaintiff appellant did not plead nor litigate at trial the issue of whether the defendant respondent waived its lien over the Bezner log sizer by continuing to use it in its business until February 2005.  The appellant's contract with Karastar Pty Ltd in respect of the log sizer had terminated in April 2004 and the appellant demanded the return of the log sizer from the respondent in July 2004.  The appellant has not demonstrated that, had this point been taken at trial, the respondent could not possibly have met it by further evidence.  In these circumstances, the appellant should not be entitled to raise that argument for the first time on appeal: Whisprun Pty Ltd v Dixon.[1]

[3] It is common ground that the value of the cost of repairs relating to the respondent's lien over the log sizer at the date of judgment was $3,593.15.  The respondent claimed interest in its counterclaim and the primary judge awarded it under s 47 Supreme Court Act 1995 (Qld) on that item in the orders made.  Because the respondent continued to use the log sizer in its business after the contract with Karastar Pty Ltd terminated and until February 2005, despite the appellant's demand for the return of the log sizer in July 2004, an award of interest on the cost of repairs which remained outstanding at the date of the trial judge's order is not warranted.

[4]  KEANE JA:  In January 2003, the defendant and Karastar Pty Ltd ("Karastar") reduced to writing an earlier oral agreement in relation to the hire by the defendant from Karastar of a Bezner log sizer.  As the agreement contemplated, the defendant incurred expense in putting the log sizer into working order.  Karastar went into receivership on 18 March 2004.  It was common ground between the parties that the agreement between the defendant and Karastar was terminated in April 2004 by the defendant upon repudiation by Karastar.  The log sizer remained in the defendant's possession.

[5] On 12 July 2004, Karastar, its receiver and another company entered into an agreement with the plaintiff whereby the plaintiff purchased Karastar's business and certain other assets including the log sizer in the defendant's possession.

[6] By letter dated 16 July 2004, the plaintiff demanded the return of the log sizer from the defendant.  The defendant did not return the chattel, and on 1 November 2004 the plaintiff commenced an action in detinue in the District Court.

The plaintiff's action

[7] The plaintiff's statement of claim asserted that the defendant had "wrongfully failed to deliver [the log sizer] up" and thereby caused the plaintiff loss and damage by depriving it of the use of the log sizer.  The plaintiff alleged loss of profits of $500 per day and that the replacement cost of the log sizer was $50,000.  The plaintiff claimed:

 

"A. Delivery up of the said chattel or the value thereof;

B. Damages for the detention calculated at $500 per day from 12 October 2004 until the chattel is returned.

…"

[8] The defendant contended that it was entitled to a lien over the log sizer for its expenditure on repairing the chattel, and that the plaintiff was not entitled to the return of the chattel because it had not paid or agreed to pay the amount of the lien.  The defendant also contended that the plaintiff had not proved that it had suffered any loss by reason of the detention of the log sizer.

The decision at trial

[9] The learned trial judge held that the defendant was entitled to be paid the amount of its repairs, but rejected the defendant's claim for a lien over the log sizer.  The learned trial judge concluded that the provisions of the original contract between the defendant and Karastar were inconsistent with any entitlement in the defendant to a lien over the log sizer.[2]  Her Honour accepted that the plaintiff was entitled to the return of the log sizer, and made an order for its return.  Her Honour ordered that the plaintiff pay the defendant the amount expended on the machine by the defendant, namely $31,483.93[3] plus interest; and that, within 14 days of payment being made, the defendant deliver the log sizer up to the plaintiff at the defendant's premises.  Her Honour ordered that the plaintiff collect the log sizer at its own expense.

[10]  Her Honour held that the plaintiff had failed to prove that it suffered any actual loss by reason of the defendant's detention of the chattel, and, on this basis, rejected its claim for damages for the detention of the chattel.

[11]  Her Honour ordered that the defendant pay half of the plaintiff's costs of the action to be assessed on the standard basis.

The issues in the appeal to this Court

[12]  The plaintiff appeals against these orders, claiming that it was entitled to judgment for the return of the chattel or the amount of its assessed value, and damages for its detention.  The plaintiff contends that her Honour erred in failing to make an order that the plaintiff recover possession of the chattel or its value.  Further, the plaintiff contends that her Honour erred in failing to conclude that the plaintiff had suffered an actual loss of profits of the order of $148,000 as a result of the detention of the machine by the defendant.

[13]  The defendant seeks to maintain the spirit of orders made by the learned trial judge; and contends in this regard that her Honour should have concluded that the defendant was entitled to a lien over the log sizer.  The defendant does not contend that, if it was truly entitled to a lien, then the plaintiff's action should have been dismissed; rather, the defendant contends that, in those circumstances, the plaintiff had no entitlement to an order for the return of the chattel or its assessed value.  The defendant argues that an order for the return of the chattel conditional on the payment of an appropriate amount for the repairs made to the log sizer by the defendant would give effect to the rights of both parties.

[14]  The defendant also seeks leave, pursuant to s 118(3) of the District Court of Queensland Act 1967 (Qld), to cross-appeal against the orders for costs made by the learned trial judge on the footing that the order for costs made by her Honour did not reflect the circumstances that the defendant had been substantially successful in the action, and that the defendant had, on 2 November 2005, offered to settle the action on terms more favourable to the plaintiff than her Honour's judgment.

[15]  It was common ground between the parties on the appeal that the orders made by the learned trial judge were erroneous and should be corrected in two respects:  first, that, rather than a free-standing order for the payment of money by the plaintiff, there should be an order for return of the chattel on condition as to payment; and, secondly, that the amount of the payment should reflect an agreed depreciation of the repairs over time.

The plaintiff's claim for return of the chattel or its assessed value

[16]  The principal contention advanced by the plaintiff on the appeal was that, having regard to her Honour's conclusion that the defendant had no lien over the machine, there was no basis on which the plaintiff could be denied an order for the return of the chattel or its value to be assessed.

[17]  In its written submissions, the plaintiff argued that there was no finding, and, indeed, no evidence, that the repairs to the machine actually enhanced its value.  Accordingly, so it was said, there was no sufficient basis for quantifying the amount of any payment on which the return of the machine to the plaintiff might be conditioned.   On the hearing of the appeal, the plaintiff accepted that allowance for the value of the repairs could be made a condition of the order for the return of the machine or deducted from its assessed value.  The learned trial judge found that the value of the machine at the date of trial was $120,000.[4]

[18]  The plaintiff contends that the success of its action in detinue means that it was entitled to choose the form of relief appropriate to vindicate its right of action.  It relies upon the statement of Diplock LJ in General and Finance Facilities Ltd v Cook's Cars (Romford) Ltd:

 

"… the action in detinue partakes of the nature of an action in rem in which the plaintiff seeks specific restitution of his chattel. At common law it resulted in a judgment for delivery up of the chattel or payment of its value as assessed, and for payment of damages for its detention. This, in effect, gave the defendant an option whether to return the chattel or to pay its value, and if the plaintiff wished to insist on specific restitution of the chattel he had to have recourse to Chancery. (See In re Scarth, ((1874) 10 Ch App 234) per Mellish LJ (Ibid, 235)). The Common Law Procedure Act, 1854, s 78, gave the court power to order delivery up of the chattel by the defendant without giving him the option to pay its value as assessed. Such an order was enforceable by execution, and if the chattel could not be found distraint could be had upon the defendant's lands and goods until he delivered up the specific chattel, or at the option of the plaintiff distraint could be had of the defendant's goods for the assessed value of the chattel. This, in effect, where the court thought fit to make such an order, gave the plaintiff an option to insist upon specific restitution of his chattel if the defendant did not deliver it up voluntarily; but this remedy was not available unless and until the value of the chattel had been assessed. (See Chilton v Carrington ((1855) 15 CB 730)) This remedy continues to exist under the modern law, but if the plaintiff does not wish to exercise his option to recover the assessed value of the chattel the assessment of its value is no longer a condition precedent to an order for specific restitution. (See Hymas v Ogden ([1905] 1 KB 246; 21 TLR 85, CA; 21 TLR 18, DC); RSC, Ord 48, r 1.) In addition to an order for specific restitution of the chattel or for payment of its value as assessed, the plaintiff was always entitled to damages for wrongful detention of the chattel.

     In the result an action in detinue today may result in a judgment in one of three different forms: (1) for the value of the chattel as assessed and damages for its detention; or (2) for return of the chattel or recovery of its value as assessed and damages for its detention; or (3) for return of the chattel and damages for its detention.

     A judgment in the first form is appropriate where the chattel is an ordinary article in commerce, for the court will not normally order specific restitution in such a case, where damages are an adequate remedy. (See Whiteley Ltd v Hilt ([1918] 2 KB 808, 819, 824))
A judgment in this form deprives the defendant of the option which he had under the old common law form of judgment of returning the chattel; but if he has failed to do so by the time of the judgment the plaintiff, if he so elects, is entitled to a judgment in this form as of right (cf RSC, Ord 13, r 6). In substance this is the same as the remedy in conversion, although the sum recoverable, as I have indicated, may not be the same as damages for conversion, for the cause of action in detinue is a continuing one up to the date of judgment and the value of the chattel is assessed as at that date. (See Rosenthal v Alderton & Sons Ltd ([1946] 1 KB 374)) A final judgment in such a form is for a single sum of money.

     A judgment in the second form gives to the defendant the option of returning the chattel, but it also gives to the plaintiff the right to apply to the court to enforce specific restitution of the chattel by writ of delivery, or attachment or sequestration as well as recovering damages for its detention by writ of fieri facias. (RSC, Ord 42, r 6) This is an important right and it is essential to its exercise that the judgment should specify separate amounts for the assessed value of the chattel and for the damages for its detention, for if the plaintiff wishes to proceed by writ of delivery for which he can apply ex parte (RSC, Ord 48, r 1) he has the option of distraining for the assessed value of the chattel if the chattel itself is not recovered by the sheriff. He would be deprived of this option if the value of the chattel were not separately assessed.

     A judgment in the third form is unusual, but can be given. (See Hymas v Ogden ([1905] 1 KB 246)) Under it the only pecuniary sum recoverable is damages for detention of the chattel. Its value need not be assessed and the plaintiff can only obtain specific restitution of the chattel by writ of delivery, attachment or sequestration. He has no option under the writ of delivery to distrain for the value of the chattel.

     In the ordinary way where an action goes to trial the issues of liability, assessment of value of the chattel, and damages for its detention, are dealt with at the hearing, and final judgment in one or other of the above forms is entered."[5]

[19]  The plaintiff argues that if it has a good claim in detinue, as her Honour found to be the case, her Honour could not deny its entitlement to recover the monetary value of the chattel as at the date of judgment by limiting relief to the return of the chattel in specie.  The plaintiff argues that it is entitled to choose to recover the assessed value of the chattel in accordance with the second form of order referred to by Diplock LJ.

[20]  The defendant argues that the plaintiff's rights to relief were subject to regulation by discretionary considerations even if her Honour was correct in holding that the defendant had no lien over the chattel.  In this regard, the defendant emphasises the provisions of s 24 and s 25 of the Supreme Court Act 1995 (Qld). 

[21]  These sections provided as follows:

 

"24 Procedure after verdict for recovery of specific goods

When the action shall have been brought to recover specific goods and the plaintiff shall have claimed a return of such goods or their value and damages for their detention and shall have recovered a verdict and judgment in such action it shall be lawful for the sheriff if so required by the plaintiff to demand and seize the specific goods claimed if they can be found by the sheriff and to deliver them to the plaintiff and if the sheriff shall not find and seize the said goods it shall be lawful for the court or a judge if the said court or judge shall see fit on the application of the plaintiff to order the actual return thereof and to enforce such order by process of attachment and if such application be refused or if such order be not obeyed the plaintiff may by leave of a judge procure a separate writ of fieri-facias to be issued for the value of the goods without prejudice to the plaintiff's right to issue execution either before or after or concurrently therewith for the plaintiff's costs of suit and the damages awarded for the detention of the goods.

25 Specific delivery of chattels

(1) The court or a judge shall have power if they or the judge see fit to do so upon the application of the plaintiff in any action for the detention of any chattel to order that execution shall issue for the return of the chattel detained without giving the defendant the option of retaining such chattel upon paying the value assessed and if the said chattel can not be found and unless the court or a judge shall otherwise order the sheriff shall distrain the defendant by all the defendant's lands and chattels in the said sheriff's bailiwick till the defendant render such chattel or at the option of the plaintiff that the defendant cause to be made of the defendant's goods the assessed value of such chattel.

(2) However, the plaintiff shall either by the same or a separate writ of execution be entitled to have made of the defendant's goods the damages costs and interest in such action.

(3) Also, the plaintiff may proceed under section 24 anything this section contained notwithstanding."

[22]  Section 25 of the Supreme Court Act empowered the learned trial judge to make an order for the specific restitution of a chattel on terms as to payment.  But this power arises, it should be noted, "upon the application of the plaintiff". 

[23]  The exercise of discretionary power conferred upon a judge by these statutory provisions and their analogues is, as was explained by Brennan J in Gollan v Nugent,[6] informed by considerations akin to the equitable principles which enable an order to be moulded to achieve a fair and just result in the circumstances of a particular case.  Brennan J said:   

 

"… the plaintiffs seek an order for specific restitution of the goods. This is now a statutory remedy, available in New South Wales by force of s 93 of the Supreme Court Act 1970. That section provides:

'(1) In proceedings for the detention of goods judgment may be given for delivery of the goods, without giving the defendant the option of retaining the goods upon paying the value assessed, if any.

(2) In proceedings for the detention of goods, where judgment has been given for delivery of goods or payment of the value assessed, the Court may make an order for delivery of the goods, without giving the defendant the option of retaining the goods upon paying the value assessed.

(3) Subsections (1) and (2) apply whether or not the value of the goods has been assessed.'

     This provision can be traced back to the Common Law Procedure Act 1854 (UK) (17 & 18 Vict c 125, s 78) which reformed the practice when a verdict for the plaintiff in detinue was returned. The effect of the 1854 Act was stated by Lord Macnaghten in the first appeal in Peruvian Guano Co v Dreyfus Bros & Co ([1892] AC 166 at p 176). His Lordship pointed out that, under the old practice, a writ of execution gave a defendant the choice to give up the goods or pay their assessed value and that a plaintiff could obtain an order for specific restitution only by going to equity and showing the goods to be of special value. His Lordship said:

'The Common Law Procedure Act 1854 enabled courts of common law to make an order for the return of the goods, if they saw fit to do so. The effect of that provision, as pointed out by Maule J, in Chilton v Carrington ((1855) 15 CB 730 [139 ER 612]) is not to take away the option in all cases, but it enables 'the Court or Judge to make an order for delivery, where it would be unjust to allow the defendant to have the option, and where he can, and in the opinion of the Court or Judge ought to, restore the chattel in specie'.'

     If authority be needed to manifest what is clear enough in the words of the statute, Lord Macnaghten's speech is authority for two propositions: first, that an order for specific restitution can be made only if the plaintiff is entitled to a verdict in detinue (and is therefore a person entitled to possession of the goods) and, secondly, that the making of an order for specific restitution is discretionary. True it is that the equitable discretion fell to be exercised by reference to the special value of the goods and the plaintiff's willingness to do equity (as, for example, by making an allowance for money or labour expended on the improvement of the goods). But if the equitable discretion excluded considerations other than matters of value or financial adjustment, the statutory discretion does not — though it must, of course, be judicially exercised."[7]

[24]  It is, therefore, apparent that, if a plaintiff applies for specific restitution of a chattel, a judge is empowered to make an order for the specific return of the chattel, and to condition that order upon the payment of an amount of money which reflects a just allowance for the improvement of the chattel.[8]  That having been said, the authorities to which reference has been made proceed on the clear assumption that it is a matter of choice for a successful plaintiff in an action in detinue to seek to recover the chattel in specie or its assessed value.  Neither the statutory provisions to which reference has been made, nor any decided case, contemplate that a plaintiff who has a good cause of action in detinue can be limited to an order for the specific restitution of the chattel if the plaintiff does not apply for that relief but chooses instead to seek different relief to vindicate its cause of action. 

[25]  In my respectful opinion, if, as the learned trial judge concluded, the plaintiff had a good cause of action in detinue, the plaintiff was entitled to choose to recover the machine or its assessed value.  The plaintiff at no stage suggested to her Honour that it did not seek an order for the return of the chattel or its assessed value.  But the plaintiff is entitled to choose to recover the assessed value of the chattel, only if its claim in detinue is established.  The question which must be addressed is whether the plaintiff's cause of action was apt to be defeated by the defendant's entitlement to a lien over the machine.

The defendant's claim to a lien

[26]  As has been seen, the learned trial judge held that the existence of a lien in favour of the defendant was inconsistent with the terms of the original agreement between the defendant and Karastar.  In order to consider the defendant's argument that her Honour erred in this regard, it is necessary to turn to a consideration of the operation of that agreement in this case. 

[27]  The written agreement between the defendant and Karastar contained the following material provisions:

 

"As per previous discussions [Karastar] is prepared [to] enter into a joint venture to operate our Bezner parallel log peeler at [the defendant's business] on the following basis:

1.This arrangement commences on January 2 2003.

2.The Bezner log peeler and associated electrical box and control panel always remain the property of [Karastar] regardless of location.

3.[The defendant] is to pay a lease cost for the machine of $1 per year.

4.It is recognised that there was some work to be done on the machine itself prior to reinstallation at your site.  This is to be done at [the defendant's] expense and becomes the property of [Karastar] after five years (January 2008).  Infeed decks and associated equipment remain the property of [the defendant].

5.All peeled logs produced are to be sold to [Karastar] at the initial rate of $160.00 per m3 on monthly account.  This price is to be reviewed in January of each year in light of real costs and current market conditions.  Should agreement on price not be reached then this arrangement will terminate with the rounding machine being returned to [Karastar] at pro-rata value attached as related to clause 4 above.

7.[Karastar] will provide one set of knives for commissioning, after which all consumables and maintenance are the responsibility of [the defendant].

8.[The defendant] is responsible to operator training, machine setup and placement, and the safe operation of the machine and its surrounds.

9.The machine is to be maintained in working condition by [the defendant].

10.All logs are to be produced to [Karastar] specification."

[28]  At the outset of this discussion, it should be noted that the agreement between Karastar and the defendant came to an end, not because those parties could not reach agreement on the rate of payment for peeled logs at the beginning of the year in question, but because of the defendant's acceptance of Karastar's repudiation.  In consequence, both of those parties were discharged from further performance of the agreement, but "rights and obligations which arise from the partial execution of the contract and causes of action which have accrued from its breach alike continue unaffected."[9] 

[29]  That it was the parties' intention that the machine should remain the property of Karastar is pellucidly clear.  On the other hand, the terms of cl 4 and cl 5 are awkwardly expressed.  Nevertheless, it is tolerably clear that the parties' intention was that, if their "joint venture" survived until January 2008, the defendant's expenditure on the repair of the machine would be treated as having been recovered by the defendant.  If the joint venture arrangement came to an end because of an inability to agree upon price in January of any year subsequent to 2003, then the defendant would be obliged to return the machine to Karastar for payment by Karastar of the, as yet, unamortised amount of the cost of repairs.  These obligations of the parties to return the machine for payment of the unamortised portion of the repair costs appear to have been intended to be concurrent obligations, in the sense that performance of the defendant's obligation to return the machine was dependent on performance of the plaintiff's obligation to pay the unamortised cost of the repairs.[10]  Certainly, there is no reason to think that the parties intended that the defendant should return the chattel without being reimbursed for its unrecovered expenditure.  These concurrent obligations were to be performed upon a termination of the joint venture arrangement by reason of a failure to agree on the price payable by Karastar to the defendant for rounded logs.  In this regard, the provisions in the last sentence of cl 5 did not purport to apply where the agreement was brought to an end by, as here, one party as a result of a repudiation by the other.  In such a case, the provisions of cl 5 did not purport to alter the operation of cl 4.  It is necessary then to consider more closely the operation of this clause.

[30]  Clause 4 manifests an agreement between Karastar and the defendant that, for the purposes of their joint venture arrangement, the repair costs incurred by the defendant were to be treated as an item of property associated with the machine, and that this item of property should be regarded as vesting in Karastar only at the end of the agreed five year term of the arrangement.  Until that time, the property associated with the repairs of the machine would, by necessary implication, remain in the defendant.  Karastar would remain the owner of the machine, but its entitlements as owner would be affected by the right of property which accrued in favour of the defendant by virtue of cl 4 of the agreement.  If the agreement were to be terminated for the future by one party by reason of the repudiation of the agreement by the other, then the property which the parties agreed was associated with the repair of the machine would remain in the defendant. 

[31]  The defendant was treated by the agreement as having a proprietary interest associated with the machine, or, as cl 5 puts it, "attached as related to clause 4".  As I have said, the effect of cl 5 was that the defendant's obligation to return the chattel was concurrent with an obligation in Karastar to pay that "attached value" in an event which did not happen.  In the event which happened, cl 5 did not operate so as to make performance of the defendant's obligation concurrent upon the readiness, willingness and ability of Karastar to pay the "attached value".  But to say this is merely to acknowledge that the parties had not made comprehensive provision for the transfer of the defendant's property to Karastar:  it is distinctly not to accept that the property interest associated with the repair of the machine recognised by the agreement was to disappear, or was apt to be subordinated to Karastar's entitlement upon the unilateral insistence of Karastar that the chattel be returned to it.  By its contract, Karastar had bargained away its ability to assert its title to the machine without recognising the defendant's property attached to the machine.  A court of equity has the means to give effect to the parties' bargain.[11]  The District Court of Queensland is relevantly a court of equitable jurisdiction.[12]

[32]  It follows, in my opinion, from this analysis of the agreement between the defendant and Karastar that this case is not properly understood as one in which the defendant's claim to a lien is to be resolved under the general law independently of the agreement of the parties.  This is not merely a case "where the owner of the property has invited or expressly encouraged the expenditure of money" on its property so as to give rise to a lien under the general law;[13] rather, it is a case where there is an agreement which provides for the creation of rights in the defendant in respect of the machine, and the parties have agreed that these rights should be recognised as proprietary in nature. 

[33]  The terms of a contract may be such as to exclude the existence of a lien under the general law,[14] but, equally, they may serve to create a right of property or in respect of property having the same, or even superior, operation in favour of the party on whom that right is conferred.[15]  In this case, the effect of the agreement between Karastar and the defendant was to create by agreement a right over the machine in favour of the defendant which is enforceable in equity and is at least as significant as that which is described as a lien under the general law.  The defendant had, by virtue of its contract with Karastar, an equitable interest in the machine, and not a mere contractual right to payment of the unamortised cost of repairs.  The interest which the plaintiff acquired from Karastar was, to the plaintiff's knowledge, subject to the defendant's interest.[16]  The plaintiff could not have compelled Karastar to complete the contract between them except on terms that the defendant's interest in respect of the machine should be protected.  Without such terms Karastar would have been in breach of its agreement with the defendant in respect of the machine.  In these circumstances it would be inequitable to allow the plaintiff to take the machine free of the defendant's equitable interest.[17]

[34]  The plaintiff had ample notice of the agreement between Karastar and the defendant and of the rights which arose thereunder in favour of the defendant in respect of the machine.  Under the agreement between Karastar, its receivers and the plaintiff, the log sizer was identified as an item of plant and equipment described as being "located at [the defendant's] and pursuant to agreement with [the defendant] dated 13/01/2003".  The plaintiff acknowledged that neither the receivers nor Karastar made any warranty or representation concerning their ability to give a clear title to the plant and equipment sold under their agreement.  In cross-examination, Mr Wade, a director of the plaintiff, acknowledged that he obtained a copy of the agreement between Karastar and the defendant before completion.  In these circumstances, the plaintiff neither paid for, nor could have expected to obtain, an entitlement to the machine unaffected by the defendant's property rights.  I emphasise here that no party has sought to suggest that any statutory regime regulating the creation and enforcement of interests in chattels by corporations had any relevant operation in the present case. 

[35]  It follows that I am respectfully of the opinion that the learned trial judge erred in concluding that the right in the nature of a lien asserted by the defendant was inconsistent with the terms of the agreement between Karastar and the defendant.  Indeed, in my view, that agreement served expressly to create in the defendant an entitlement of a proprietary nature which meant that the defendant could not be obliged to return the log sizer save upon tender of satisfaction of the unamortised cost of the repairs. 

[36]  As I have said, I do not accept the defendant's contention that the mere fact that the plaintiff sought, inter alia, an order for the restitution of the machine could warrant the court's refusal of an order for payment of its assessed value if a plaintiff with a good cause of action in detinue were to seek that relief.  If the plaintiff were entitled to succeed with its claim in detinue, it would be entitled to an order in the second form discussed by Diplock LJ.  Nevertheless, I consider an order that the machine be returned to the plaintiff only upon payment of the unamortised cost of repair was, indeed, justified in this case.  That is because the defendant's lien over the machine entitled it to defeat the plaintiff's claim for the recovery of the chattel without satisfaction of that right.  On that basis, the plaintiff's claim to relief in detinue at common law must fail.  An order for conditional return of the chattel on payment of the unamortised cost of repair gives effect to both the plaintiff's right to the return of the chattel and the defendant's right to payment of the value of its property in respect of the chattel.  The source of the power to make that order was not s 25 of the Supreme Court Act, but the power of a court of equitable jurisdiction to make an order giving effect to the equitable rights of the defendant in respect of the machine.

Was the lien lost?

[37]  On the plaintiff's behalf, it is argued that the defendant's use of the machine after the plaintiff demanded its return demonstrated the defendant's abandonment of its right to the security conferred by the lien.   

[38]  To the extent that this argument is based on the defendant's refusal to return the machine upon demand, that conduct was not, in my view, inconsistent with the defendant's insistence on its rights.  The plaintiff at no stage tendered to the defendant the amount of the unamortised value of the repairs.  Indeed, the plaintiff never indicated a willingness or readiness to recognise the defendant's rights in respect of the machine at all.  In these circumstances, the plaintiff is simply not in a position to invite the Court to regard the defendant's refusal to comply with the plaintiff's demand as a categorical refusal to return the chattel or as an attempt to assert some right beyond that to which it was entitled. 

[39]  It also appears that the machine was used by the defendant until February 2005 in the course of its business.  To the extent that it is said by the plaintiff that the use of the machine in this way by the defendant could not have been authorised by the lien, there was evidence that Karastar had acquiesced in the defendant's use of the machine to peel logs for sale to a third party by reason of Karastar's indebtedness to the defendant for logs supplied to Karastar by the defendant.  Further, it is at least arguable that the use of the machine by the defendant until its attached property was paid for was not outside the contemplation of the agreement bearing in mind the absence of any express prohibition on the defendant's use of the machine if Karastar failed to take or pay for logs or pay for the repairs to the machine incurred by the defendant, and the defendant's express obligation to maintain the machine while it was being used. 

[40]  In any event, the issue whether the defendant's refusal to return the chattel amounted to conduct inconsistent with its security rights was never raised by the plaintiff or litigated at trial.  It is, therefore, too late to raise such an argument on appeal.

[41]  No attempt was made by the plaintiff to show that the machine was not kept in good repair so that its use by the defendant caused it to depreciate in a way which diminished the value attributable to the repair of the machine.

[42]  In my respectful opinion, the circumstance that the defendant retained, and made use of, the machine can be recognised by an order which requires the plaintiff to pay only the value of the cost of repairs amortised to the date of judgment in the primary court.  It was common ground that this figure was $3,593.15.

[43]  Finally, I should say that I consider that, contrary to the plaintiff's argument, it was open to the learned trial judge to conclude that the "fair and just allowance" to the defendant for its improvement of the log sizer enhanced the value of the machine.  The expenditure in question was incurred to put the machine into working order[18] and the agreement between Karastar and the defendant expressly recognised that this expenditure was valuable.  That being so, it is impossible to maintain that the chattel was not improved or its value enhanced.   

The plaintiff's claim for damages for detention

[44]  Because the plaintiff was not entitled to the return of the log sizer without discharging the defendant's lien over the machine, the claim for damages for wrongful detention must fail.  Further, of course, the learned trial judge held that the plaintiff had failed to prove that it had suffered any loss in this regard.  The plaintiff challenges this conclusion; and it is necessary that I address this challenge lest I am in error in my conclusion that the plaintiff's claim for damages for wrongful detention is defeated by the defendant's lien.

[45]  In its written submissions on the appeal, the plaintiff sought to avoid the consequences of its failure to prove any loss of profits at trial by claiming the fair hire value of the log sizer.  But the plaintiff had also failed to prove the hire value of the log sizer. 

[46]  In relation to the plaintiff's written submissions, this case may be contrasted starkly and instructively with Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd & Anor.[19]  In that case it was held that, in an assessment of damages for the detention of goods by a party which applied the goods to its own commercial ends, it is unnecessary for the owner who has been wrongfully deprived of goods to show that he could have deployed the goods for reward.  In that case, the owner recovered as damages an amount which reflected the hiring charge which applied as between the parties before the owner demanded the return of the goods and the defendant wrongly refused to comply with that demand.  Giles J essayed the authorities, at length and in detail, before concluding that "where the defendant has used for his own purposes goods which the plaintiff would or might otherwise have hired out for reward" it produces a just result to measure the plaintiff's loss by reference to a reasonable hiring charge.[20]  The justice of such a measure of loss lies in the consideration that a defendant should be obliged to restore to the owner the value of the hiring charge which the defendant avoided paying as the price of retaining the chattel if it had sought to retain the chattel lawfully with the consent of the owner. 

[47]  In the present case, the attempted application of this approach to the assessment of damages fails for want of evidence of a fair market rate of hire.  There is simply no evidence of what a reasonable hiring charge might have been.  Unlike Gaba Formwork Contractors Pty Ltd v Turner Corporation Ltd & Anor, there was, in this case, no possibility of using the terminated agreement between the defendant and Karastar as the source of evidence of a reasonable hiring charge.  Under the terms of the hiring agreement between the defendant and Karastar, there was no sum payable for periodic hire.  Fixing upon a hiring charge would therefore be an exercise in speculation.  The absence of evidence which enables a rational assessment to be made is a fatal deficit in the plaintiff's case to recover loss measured as a reasonable hiring charge.[21]

[48]  On the hearing of the appeal, the plaintiff sought to argue orally that the learned trial judge should have found that the plaintiff had demonstrated a sound basis for the calculation of the plaintiff's loss of profits.  The plaintiff sought to rely upon evidence of the defendant's sales and profit margins to establish the profits which the plaintiff lost by reason of the defendant's detention of the log sizer.  The utility of this elaborate exercise depends upon the assumption that the plaintiff would have made profitable sales, ie that it would have had customers for logs sized by the machine.  The learned trial judge did not accept that this assumption was sound. 

[49]  There are compelling reasons for agreeing with her Honour in this regard.  First, on an issue where the critical question was as to whether the plaintiff could have made profitable sales, the plaintiff did not lead evidence to support its case from any potential customer.  This meant that Mr Wade's evidence was of critical importance to this aspect of the plaintiff's case.  Mr Wade was able to identify only one customer lost for want of the log sizing capacity which the machine would have provided.  The principal officer of that customer was called as a witness by the defendant, and he denied that he would have purchased logs from the plaintiff.  In final addresses at trial, counsel for the plaintiff told the learned trial judge that the plaintiff did not rely on Mr Wade's evidence on this point "in any way, shape or form".  It is, therefore, not surprising that Mr Wade was not accepted as giving reliable evidence of the existence of a market for logs sized by the machine. 

[50]  I conclude that the plaintiff's attempt to demonstrate a loss of profits by reason of the defendant's continued possession of the machine was rightly rejected by the learned trial judge.

Costs of the action

[51]  The learned trial judge's orders for costs manifestly do not reflect the level of success enjoyed by the defendant at the trial, or the unreasonableness of the plaintiff's refusal to accept the defendant's offer of 2 November 2005.

[52]  The defendant's claim that it was not obliged to return the machine until the rebated cost of repairs was paid was vindicated by her Honour's orders.  The defendant's claim for recovery of the rebated value of the repair costs was vindicated by the decision of the learned trial judge.  The plaintiff's claim for damages for detention of the machine failed for want of proof. 

[53]  The defendant was substantially successful.  The orders as to costs made by the learned trial judge did not reflect that success.  Moreover, the defendant's offer of settlement of 2 November 2005 would have enabled the plaintiff to recover the log sizer without any further payment.  Having regard to the absence of any evident basis for the plaintiff's claim for damages for loss of profits, the plaintiff's persistence in pursuing its claims to trial was distinctly unreasonable. 

[54]  In any event, the success enjoyed by the defendant on the appeal means that this Court should intervene to ensure that the disposition of the costs of the action reflects the justice of the case. 

Conclusion and orders

[55]  The appeal should be allowed, but only to the extent necessary to correct the orders which both parties agreed were erroneous.  To this end the orders of the learned trial judge should be set aside, and, in lieu of those orders, it should be ordered that, upon the plaintiff paying to the defendant the sum of $3,593.15, the defendant shall, at the defendant's premises, deliver up to the plaintiff the Bezner log sizer.

[56]  The application for leave to cross-appeal should be granted, and the cross-appeal should be allowed.  The plaintiff should pay the defendant's costs of the trial on the standard basis. 

[57]  As to the costs of the appeal and cross-appeal, the parties should exchange and file written submissions on or before 4.00 pm on Wednesday 30 January 2008, and otherwise in accordance with Practice Direction No 2 of 2004. 

[58]  DAUBNEY J:  I respectfully agree with the reasons for judgment of Keane JA, which I have had the benefit of reading, and with the orders he proposes.

Footnotes

[1] (2003) 77 ALJR 1598, Gleeson CJ, McHugh and Gummow JJ, [51]-[52].

[2] Wade Sawmill Pty Ltd v Colenden Pty Limited t/as Pilks Pine [2007] QDC 303 at [84] – [85].

[3] [2007] QDC 303 at [15].

[4] [2007] QDC 303 at [134].

[5] [1963] 1 WLR 644 at 650 – 651 (citations footnoted in original).

[6] (1988) 166 CLR 18.

[7] (1988) 166 CLR 18 at 25 – 26 (citations footnoted in original).

[8] Peruvian Guano Co Ltd v Dreyfus Brothers & Co [1892] AC 166 at 176; Greenwood v Bennett [1973] QB 195; McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 at 312 – 313.

[9] McDonald v Dennys Lascelles Limited (1933) 48 CLR 457 at 476 – 477.

[10] Cf Palmer v Lark [1945] Ch 182 at 184 - 185; Johen & Co v Ockerby & Co Ltd (1917) 24 CLR 288 at 298; Foran v Wight (1989) 168 CLR 385 at 396 - 402; 418 - 419, 455 - 456.

[11] Sandeman v Wilson (1880) 1 LR (NSW) Eq 1 at 11; Greenwood v Bennett [1973] QB 195 at 201, 202, 203; Lexane Pty Ltd v Highfern Pty Ltd [1985] 1 Qd R 446 at 452; McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 at 313.

[12] See District Court of Queensland Act 1967 (Qld), s 68 and s 69.

[13] Cf Fisher & Lightwood's Law of Mortgage, 2nd Aust ed, 2005, at paragraph 229.

[14] Re Leith's Estate, Chambers v Davidson (1866) LR1PC 296 at 305; Fisher v Smith (1878) 4 App Cas 1 at 5, 9, 10 - 11.

[15] Cf Australian Guarantee Corporation Ltd v Western Underwriters Insurance Ltd [1988] 2 Qd R 119 at 126 – 127.

[16] National Provincial Bank Ltd v Hastings Car Mart Ltd [1965] AC 1175 at 1237 – 1238; Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 647.

[17] Cf Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 638, 647.

[18] [2007] QDC 303 at [141].

[19] (1991) 32 NSWLR 175.

[20] (1991) 32 NSWLR 175 at 188.

[21] See Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23 at 37; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 7, 13 – 14; JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 245 – 246, 250; Ray Teese Pty Ltd v Syntex Australia Ltd [1998] 1 Qd R 104 at 110, 115; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 512.

Close

Editorial Notes

  • Published Case Name:

    Wade Sawmill P/L v Colenden P/L t/a Pilks Pine

  • Shortened Case Name:

    Wade Sawmill Pty Ltd v Colenden Pty Ltd

  • MNC:

    [2007] QCA 455

  • Court:

    QCA

  • Judge(s):

    McMurdo P, Keane JA, Daubney J

  • Date:

    21 Dec 2007

  • White Star Case:

    Yes

Litigation History

No Litigation History

Appeal Status

No Status