Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd
[2009] QCA 218
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- Notable Unreported Decision
- Appeal Determined (QCA)
- Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd[2009] QCA 218
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Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd[2009] QCA 218
Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd[2009] QCA 218
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | DC No 2223 of 2004 |
Court of Appeal | |
PROCEEDING: | General Civil Appeal |
ORIGINATING COURT: | |
DELIVERED ON: | 31 July 2009 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 22 July 2009 |
JUDGES: | Chief Justice and Fraser and Chesterman JJA Separate reasons for judgment of each member of the Court, each concurring as to the orders made |
ORDERS: |
|
CATCHWORDS: | CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE CONTRACT – GENERALLY – where the appellant was to provide drilling and blasting services for the respondent – where the contract did not specify the number of blasts or ‘shots’ to be performed by the appellant – where the appellant stopped work and left the site after completing seven shots – where the respondent argued that the appellant had contracted to provide eight shots – whether the appellant was contractually obliged to complete eight shots CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE PERFORMANCE OF WORK – TIME – where the contract did not specify a date for completion of work by the appellant – where the trial judge held that there was an implied term that the appellant would complete the work within a ‘reasonable time’ – where the appellant argued that its delay was not unreasonable due to the fact that its driller had been given a leave of absence from the site by the respondent and had subsequently resigned – whether this argument was supported by the evidence at trial – whether the appellant failed to complete the work within a ‘reasonable time’ CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – THE PERFORMANCE OF WORK – REMEDIES FOR BREACH OF CONTRACT – DAMAGES – MEASURE OF – where appellant disputed the evidence relied upon by the respondent to establish the amount of its loss – where appellant argued that the respondent had failed to mitigate its loss and that the trial judge erred in failing to take into account an amount that the respondent obtained from leasing its idle equipment to a third party within the relevant period – whether the appellant was entitled to object to evidence on appeal when no objection was taken at trial – whether the respondent failed to mitigate its loss – whether the amount of damages awarded to the appellant should be increased to take into account the amount the respondent received from leasing its equipment Business and Professional Leasing P/L & Anor v Akuity P/L & Anor [2008] QCA 215, cited Coulton v Holcombe (1986) 162 CLR 1; [1986] HCA 33, applied Garnac Grain Co Inc v HMF Faure & Fairclough Ltd & Bunge Corp [1968] AC 1130, cited Hick v Raymond & Reid [1893] AC 22, applied Hughes v National Trustees, Executors & Agency Co of Australasia Ltd (1979) 143 CLR 134; [1979] HCA 2, cited Maynard v Goode (1926) 37 CLR 529; [1926] HCA 4, cited Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; [1982] HCA 29, cited Postlethwaite v Freeland (1880) 5 App Cas 599, cited Re Longlands Farm [1968] 3 All ER 552, cited Roper v Johnson (1873) LR 8 CP 167, cited Sopov v Kane Constructions Pty Ltd (No 2) (2009) 257 ALR 182; [2009] VSCA 141, cited Telina Developments Pty Ltd v Stay Enterprises Pty Ltd [1984] 2 Qd R 585, applied |
COUNSEL: | I A Erskine for the appellant M Steele for the respondent |
SOLICITORS: | Results Legal Solutions for the appellant Clarke Kann Solicitors for the respondent |
[1] CHIEF JUSTICE: I have had the advantage of reading the reasons for judgment of Fraser JA. I agree with the orders proposed by His Honour, and with his reasons.
[2] FRASER JA: After a two day trial in the District Court the trial judge found that the plaintiff ("Sequel") was entitled to recover $50,590.99 from the defendant ("Whitsunday") for drilling and blasting work Sequel had performed under their contract. The trial judge also found that Whitsunday was entitled to recover $48,696.00 from Sequel as damages for breach of that contract. Accordingly judgment was given in favour of Sequel for the net sum of $1,894.99.[1]
[3] Sequel appeals against so much of the judgment as reflected Whitsunday's success on its counterclaim.
Ground 1: Was Sequel contractually obliged to complete shot 8?
[4] The trial judge found that Sequel breached its contractual obligation to Whitsunday by leaving the site before shot 8 was completed, thereby causing the defendant a loss of shifts in its production for which Whitsunday was entitled to be compensated.[2] “Shot” is a compendious term which the parties used to describe Sequel’s contracted services of drilling holes in rock, filling them with explosive, and detonating the explosive, thereby producing rock which Whitsunday could crush to make road base material.
[5] The first ground of Whitsunday's appeal is that the trial judge erred in finding that upon the proper construction of the contract Sequel was contractually obliged to complete shot 8.
[6] Whitsunday admitted Sequel's pleaded allegations that in November 2003 Sequel contracted to carry out drilling and blasting of rock at the German Creek coal mine upon the terms contained in Sequel’s letter dated 12 November 2003 and in accordance with an instruction given by Whitsunday to Sequel on 13 November 2003. Whitsunday pleaded in its counterclaim that it was an implied term of the contract that Sequel would provide those services in a timely manner and in accordance with Whitsunday’s instructions.
[7] Sequel does not challenge the trial judge's finding[3] that there was an implied term that Sequel would provide its services within a reasonable time. Rather, Sequel argues that Whitsunday did not plead that Sequel contractually promised to carry out shot 8 "as an integral contractual obligation", that the trial judge erred by failing to find that after Sequel had completed shots 1 to 7 it left the mine on 10 March 2004 with Whitsunday's knowledge and consent and on the footing that the contract was completed, and that the contract did not specify either a time frame or any particular number of shots.
[8] The written part of the contract did not define the scope of the work, so this issue turns on the oral evidence about the contract. The contract was negotiated by Mr Fitzgerald, who was Whitsunday’s senior project manager, and Mr Payne, who represented Sequel throughout.
[9] The trial judge accepted Mr Fitzgerald's evidence. He gave evidence that during the negotiations for the contract he told Mr Payne that Sequel would be engaged to do all of the drilling and blasting work required by Whitsunday at the mine; that it would be necessary for Sequel to keep up with Whitsunday's program and to maintain a steady flow of rock; that Whitsunday needed that rock so that it could crush it for road base material which Whitsunday had contracted to supply to another company (“BGC Contracting”), which required the material to fulfil its contract to construct a haul road for the owner of the mine (“Anglo Coal”); that it was necessary for Whitsunday to have a "body of rock on the ground" (meaning a stockpile) so that Whitsunday’s crusher would not stop operating; that Sequel was required to maintain a steady flow of rock to the crushing plant; and that Sequel would need to have a driller and the necessary machine on-site for the whole of the project, although if Whitsunday got ahead of its program it would agree to allow Sequel to take its machine off site for a short amount of time if Whitsunday could still meet its timeframes.
[10] As the trial judge observed,[4] although Mr Payne gave evidence that there was no "mention of time being imperative" during his conversations with Mr Fitzgerald, he also gave evidence that, "It depended on how quick they crushed the material…they had other processes still on the job and depending on how that worked…Obviously we wanted to get in – in and out as quick as we could". In cross-examination Mr Payne agreed that Whitsunday was to use the rock created by Sequel's drilling and blasting by crushing it and using the crushed rubble; that he knew that Whitsunday "had a lot of work on"; that he knew from his previous contracts with Whitsunday that if it had no rocks to crush then machines and labour hired or owned by it would be sitting idle; that he was contracted "to blow up rock until [Whitsunday] didn't need you to do it anymore"; and that Whitsunday "was to drill and blast as required by them but that may have meant coming and going".
[11] On Mr Fitzgerald’s accepted evidence, which was not relevantly disputed, Sequel agreed to drill and blast as and when Whitsunday required rock to comply with its obligations to supply crushed rock to BGC Contracting for its use in constructing the haul road at the mine.
[12] Mr Fitzgerald gave evidence that 11 shots in all were required to produce enough rock for Whitsunday to supply the volume of base material required for the haul road. After Sequel completed shot 7 the haul road was no more than about 50 per cent complete. Sequel’s counsel cross-examined Mr Fitzgerald on this topic, but counsel did not suggest that shots 1 – 7 supplied enough rock to enable Whitsunday to complete its obligations to BGC Contracting. What was put to Mr Fitzgerald was that by the completion of shot 7 Sequel had provided some 212,000 tonnes of the originally estimated total contractual requirement of 250,000 tonnes, and that one or two more shots would be required to supply the total of 250,000 tonnes. Mr Fitzgerald thought that was an under-estimate, but in any event there was no effective challenge to Mr Fitzgerald’s evidence that shot 8 was required to supply Whitsunday with the rock necessary for it to fulfil its obligations to BGC Contracting.
[13] Accordingly, the trial judge did not err in concluding that Sequel was contractually obliged to perform shot 8.
[14] Sequel also argues that in the performance of the contract invoices were not rendered in advance by Sequel but after it had provided its services and in response to purchase orders. There was no purchase order delivered by Whitsunday in respect of shot 8, but Sequel did not plead, the evidence did not establish, and the trial judge did not find, that Sequel’s obligation to render timely performance arose only after the delivery of a purchase order.
Ground 2: Did Sequel fail to perform shot 8 within a reasonable time?
[15] The trial judge found that Sequel breached the contract by failing to perform shot 8 before 31 March 2004 after Whitsunday had instructed Sequel on 17 March 2004 that it was required to perform shot 8 by 22 March 2004; as a result, Whitsunday had no rock to crush from 25 March 2004 until 31 March 2004, when a different contractor, Mr Beardsell, performed shot 8.[5]
[16] Sequel argues that its delay in performing shot 8 was not unreasonable when regard is had to the following circumstances, which Sequel argues were established by the evidence: Mr Kane Whitelegg (who then represented Whitsunday) had granted leave of absence from the site for Sequel's driller, Mr Stevenson, for a week from 10 March 2004; on 17 March 2004 Mr Payne told Mr Kane Whitelegg both that Mr Stevenson had resigned so that Sequel was therefore not able to drill and blast by the stipulated date of 22 March 2004 and that Mr Payne had started to attempt to locate a substitute driller; on 18 March 2004 Mr Payne told Mr Kane Whitelegg that Mr Payne had not been able to find a substitute driller; before Mr Payne left for an overseas trip on 25 March 2004 he told Mr Kane Whitelegg that he had organised a substitute driller, Mr Beardsell; Mr Kane Whitelegg spoke with Mr Beardsell on 25 March 2004; and Mr Beardsell attended on site with his drill rig on 29 March 2004 and started drilling on 30 March 2004.
[17] The question of what is a reasonable time is a question of fact. It is to be determined at the time when performance is alleged to be due and the relevant circumstances then existing must be taken into account.[6] That is not to say, however, that a party is entitled to justify its delay by relying upon the materialisation of a risk which that party was contractually obliged to bear. The circumstances which are relevant in determining a reasonable time do not include those which were under the control of the party performing the services:[7] as Connolly J held in Telina Developments Pty Ltd v Stay Enterprises Pty Ltd,[8] the relevant considerations which govern the reasonableness of the time taken must be determined as at the date of the contract.
[18] In light of the evidence about the contract which I earlier summarised, it is not easy to see how circumstances of the kind upon which Sequel now relies constituted a legal justification for its delay in performing shot 8. However, the trial judge did not resolve the issue in that way and nor did his Honour give any reasons for concluding that Sequel’s delay in performing shot 8 was unreasonable; but this was, I think, a consequence of the way in which the case was litigated.
[19] On the pleadings, the relevant liability issue on Whitsunday’s counterclaim was whether the unavailability of rock for Whitsunday to crush on and from 25 March until 31 March was attributable to unreasonable delay by Sequel in performing shot 8.
[20] Mr Stevenson had died before the trial and Mr Beardsell was not called by either party. The relevant evidence was given for Sequel by Mr Payne and for Whitsunday by Mr Fitzgerald and Mr Kane Whitelegg. Sequel's evidence was given first. Mr Payne accepted that on 17 March 2004 Whitsunday instructed him to perform shot 8 and he did not suggest that the instruction did not allow Sequel a reasonable time to complete the work before 25 March 2004. He also did not suggest that there was any difficulty in finding a replacement for Mr Stevenson after he had resigned. Indeed, Mr Payne emphatically and repeatedly denied that he had sought to organise a replacement for Mr Stevenson. Mr Payne did not give any evidence that supported an argument that any shortage or unavailability of labour led to Sequel’s delays in carrying out shot 8. He also denied suggestions in cross-examination that he had told Whitsunday’s representatives that Sequel’s delay was attributable to the resignation of Mr Stevenson or that he (Mr Payne) was attempting to organise a replacement for Mr Stevenson.
[21] Mr Payne’s explanation for Sequel’s failure to perform shot 8 was instead that, after Mr Stevenson had organised the firing of the first seven shots, Sequel finished work in mid-March 2004, possibly around about 10 March. He said that the contract "had finished" at that stage and he organised the demobilisation of his equipment. He said that he thought that was the "end of the project" and he took his rigs to another project. He said that, "As it turned out, I didn't have anything else for Ray Stevenson to do so he - he actually sought other employment." He adhered to that evidence in cross-examination. When pressed for details he gave the unconvincing evidence that someone from Whitsunday, whose identity he could not recall, "would have" asked him to leave after he had completed shot 7.
[22] Sequel’s answer to this aspect of Whitsunday’s counterclaim was therefore not one which involved any attempt to justify delay in the performance of shot 8. Rather, Sequel contended that it was not contractually obliged to perform it and that Whitsunday had acquiesced in Sequel leaving the site after it had performed shot 7.
[23] Whitsunday met those contentions in its case. Mr Fitzgerald and Mr Kane Whitelegg gave evidence that they had not acquiesced in Sequel demobilising from site or treating the contract as having been concluded. Mr Kane Whitelegg gave evidence that he appreciated that after shot 7 Whitsunday was running low on rock. When Mr Stevenson asked him for permission to leave the site to do another job near the mine he told Mr Stevenson that he could go provided that he was back on the following Monday, 15 March 2004. Mr Stevenson did not return.
[24] The trial judge accepted Mr Kane Whitelegg’s evidence in preference to the evidence given by Mr Payne. Sequel does not argue that there was any proper basis for setting aside that credibility finding. The first of the circumstances upon which Sequel relies in this appeal – that Mr Kane Whitelegg granted leave of absence from the site for Sequel's driller, Mr Stevenson, for a week from 10 March 2004 – is therefore not made out.
[25] Sequel relies upon the further evidence of Mr Kane Whitelegg, which the trial judge may be taken to have accepted, that, in response to repeated requests for Sequel to return to site and perform shot 8, Mr Payne said that Sequel could not perform the work because Mr Stevenson had resigned and that he was attempting to replace Mr Stevenson. Mr Kane Whitelegg understood from discussions with Mr Payne that he eventually arranged for Mr Beardsell to come to the site to replace Mr Stevenson, but Mr Beardsell told Mr Kane Whitelegg on 25 March that in fact nothing had been arranged by Sequel. Mr Kane Whitelegg subsequently negotiated a new contract directly with Mr Beardsell. Mr Beardsell arrived on Monday 29 March, he started drilling the next day, and shot 8 was fired on 31 March.
[26] Whitsunday adduced the evidence of the conversations with Mr Payne as part of its case that Sequel did not perform shot 8 at any time before 31 March after Whitsunday had instructed it to do so on 17 March. Whitsunday's witnesses did not give evidence that any of the statements attributed to Mr Payne were true and the evidence was not adduced for that purpose. There is no basis for thinking that Whitsunday's witnesses knew whether they were true or not. In the result, there was no proof of any of the circumstances now relied upon by Sequel to justify its delay.
[27] Whether or not Mr Payne ultimately organised the attendance on site of Mr Beardsell, there was no dispute on the evidence that the reason for Sequel’s failure to perform shot 8 in a timely fashion was Sequel’s decision to decamp after it had performed shot 7. The real issue for the trial judge then was whether Sequel was contractually obliged to perform shot 8. For the reasons I earlier gave, Sequel has not demonstrated that the trial judge erred in finding that this work was part of Sequel’s contract.
Grounds 3-8: Causation and quantum of damages
[28] Mr Keith Whitelegg gave evidence that when Whitsunday’s crushing plant was idle it incurred costs of $6,087 per shift, calculated in the manner set out in a document headed "Oak Park Daily Costs Analysis". He swore that the "Oak Park Daily Costs Analysis" contained details of the actual costs incurred by Whitsunday for equipment and labour; that it contained costs that the company incurred when it was not working; and that the company could not put the labour off and later bring it back when there was something for it to do. After he gave that evidence counsel for Whitsunday tendered the "Oak Park Daily Costs Analysis" and it was admitted into evidence without objection. The trial judge accepted Mr Keith Whitelegg’s evidence and the evidence in the exhibit and found that Whitsunday had sustained a loss of $48,696, comprising wasted expenditure of $6,087 per shift for each of the eight shifts during 25, 26, 29 and 30 March 2004 when Whitsunday’s crushing plant ordinarily would have crushed rock but was idle because of Sequel’s failure to perform shot 8 within a reasonable time of being instructed to do so.[9]
[29] Sequel argues that the "Oak Park Daily Costs Analysis" was not evidence of those costs because it was secondary evidence of the contents of other documents, some of the contracts mentioned in it were disclosed but none were tendered, none of the employees’ payslips were disclosed or tendered, and no evidence of any payment by Whitsunday was disclosed or tendered. These complaints are not now maintainable. The evidence of the costs analysis may have been open to objection on the grounds now advanced for Sequel, but Sequel did not make that objection. It is fundamental that the parties are bound by the manner in which they conduct the trial of civil cases. The costs analysis having been tendered and admitted as the truth of its contents without objection, it was evidence for that purpose.[10]
[30] Sequel argues that the evidence demonstrated that Whitsunday was in fact able to carry out crushing work during the various shifts identified by the trial judge as having been lost as a result of Sequel's breach of contract. Reference was made to the daily shift reports and extracts in the diaries of Mr Fitzgerald and Ms Toohey. Upon analysis, however, the submission was based merely upon the absence of references in some of those records to the crushing plant being inoperative as a result of the unavailability of rock. Mr Kane Whitelegg gave evidence, which the trial judge accepted, that Whitsunday had run out of rock to crush as a result of Sequel's failure to carry out shot 8. In cross-examination he explained that, despite the absence of references in some of the records to the unavailability of rock to crush, there was in fact no rock at the relevant times. The records plainly showed that there was no rock on 25 March and Mr Kane Whitelegg said that he could "absolutely say" that if there was no rock on 25 March then there could not have been any rock on the following shifts through until when Mr Beardsell carried out shot 8.
[31] Sequel also argues that Whitsunday was responsible for some of the delay because it did not get Mr Beardsell to the site until 29 March after he had spoken to Mr Kane Whitelegg on 25 March 2004. Sequel does not contend that Whitsunday’s entitlement to recover damages for its loss did not survive the termination of the contract or that Whitsunday received any benefit from the termination of the contract which should have been set off against its damages. Sequel’s argument is that its breach did not cause such of Whitsunday’s loss as it might have avoided by organising the recommencement of work more quickly than it did. There is, however, no ground for setting aside the trial judge’s finding that Sequel’s breach of contract caused Whitsunday’s loss. Sequel’s argument really amounts to a contention that Whitsunday failed to mitigate its loss.
[32] It is not easy to see how the mitigation doctrine may be invoked in circumstances in which, so the accepted evidence suggests, Whitsunday did not terminate the contract and insisted upon Sequel performing its contractual obligations until after all of the awarded loss was sustained or was unavoidable. Assuming, however, that the doctrine is potentially applicable, it is settled law that the onus lies upon the party in breach to prove that the innocent party failed to take reasonable steps to mitigate its loss.[11] No notice of any such criticism of Whitsunday’s conduct was given in Sequel’s pleading, it was not put in cross-examination of Whitsunday’s witnesses, and it was not advanced in the written or oral submissions made by Sequel’s counsel at trial. The argument emerged for the first time in argument in this Court. For that reason it should not be entertained.[12] In any case there is no evidence that Whitsunday, acting reasonably, could have caused shot 8 to be performed at an earlier time.
[33] Finally, Sequel argues that there should be a deduction from the amount assessed by the trial judge of $5,170. There was evidence, in the form of a document which both parties provided to the trial judge as reflecting the true position, that Whitsunday charged that amount to BGC Contracting for hiring to it some of the equipment described in the “Oak Park Daily Costs Analysis” on 25, 26 and 29 March 2004. In cross-examination, Mr Keith Whitelegg confirmed that on those days Whitsunday hired that equipment to BGC Contracting.
[34] Whitsunday argues that this evidence did not justify a deduction because, had Sequel complied with its contract, Whitsunday might nevertheless have been able to crush the rock which then would have been available whilst also hiring the same equipment out to BGC Contracting. The argument was unencumbered by any reference to supporting evidence. It is impossible to reconcile it with the evidence upon which Whitsunday relied to prove that all of the costs set out in the “Oak Park Daily Costs Analysis” were wasted.
[35] The trial judge appears to have overlooked this point, which Sequel did pursue at the trial. I accept that the judgment should be varied by reducing the amount allowed for the counterclaim and therefore increasing the judgment awarded to Sequel by $5,170.
Proposed orders
[36] I would vary the judgment by increasing the amount of the judgment in favour of Sequel from $1,894.99 to $7,064.99. Otherwise I would dismiss the appeal. I would give the parties leave to make submissions about costs within 10 days and in accordance with paragraph 37A of Practice Direction No 1 of 2005.
[37] CHESTERMAN JA: I agree with the orders proposed by Fraser JA for the reasons given by his Honour.
Footnotes
[1] Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd [2008] QDC 301.
[2] [2008] QDC 301 at [34](x).
[3] [2008] QDC 301 at [30], [34](ii), (viii).
[4] [2008] QDC 301 at [14], [16].
[5] [2008] QDC 301 at [7], [8], [34](i)-(iv), (x)-(xi).
[6]Hick v Raymond & Reid [1893] AC 22. These principles have been applied in numerous authoritative decisions: see, for example, Maynard v Goode (1926) 37 CLR 529 at 538, Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537 at 567 – 568 and Business and Professional Leasing Pty Ltd v Akuity Pty Ltd [2008] QCA 215 at [46] (citing Australian Blue Metal Ltd v Hughes [1963] AC 74 at 99 (PC), Rudi’s Enterprises Pty Ltd v Jay (1987) 10 NSWLR 568 at 576, Stickney v Keeble [1915] AC 386 at 419, and Laurinda Pty Ltd v Capalaba Park Shopping Centre Pty Ltd (1989) 166 CLR 623 at 638 and 639).
[7] Hick v Raymond & Reid [1893] AC 22; Sopov v Kane Constructions Pty Ltd (No 2) [2009] VSCA 141 per Maxwell P, Kellam JA and Whelan AJA.
[8] [1984] 2 Qd R 585 at 591, citing Re Longlands Farm [1968] 3 All ER 552 at 556 per Cross J and Postlethwaite v Freeland (1880) 5 App Cas 599 at 608.
[9] [2008] QDC 301 at [34](x)-(xi).
[10] Hughes v National Trustees Executors & Agency Co of Australasia Ltd (1979) 143 CLR 134 at 153. per Gibbs J.
[11]Roper v Johnson (1873) LR 8 CP 167 at 181–2; Garnac Grain Co Inc v HMF Faure & Fairclough Ltd & Bunge Corp [1968] AC 1130 at 1140.
[12]Coulton v Holcombe (1986) 162 CLR 1.