Wade Sawmill Pty Ltd v Colenden Pty Limited t/as Pilks Pine
[2007] QDC 303
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- Unreported Judgment
- Appeal Determined (QCA)
- Wade Sawmill Pty Ltd v Colenden Pty Limited t/as Pilks Pine[2007] QDC 303
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Wade Sawmill Pty Ltd v Colenden Pty Limited t/as Pilks Pine[2007] QDC 303
Wade Sawmill Pty Ltd v Colenden Pty Limited t/as Pilks Pine[2007] QDC 303
DISTRICT COURT OF QUEENSLAND
CITATION: | Wade Sawmill Pty Ltd v Colenden Pty Limited t/as Pilks Pine [2007] QDC 303 |
PARTIES: | WADE SAWMILL PTY LTD Plaintiff v COLENDEN PTY LIMITED t/as PILKS PINE Defendant |
FILE NO/S: | BD 4174/05 |
DIVISION: | Civil Jurisdiction |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court, Brisbane |
DELIVERED ON: | 27 April 2007 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 5.10.06; 6.10.06; 23.1.07; 24.1.07. |
JUDGE: | O'Sullivan DCJ |
ORDER: |
|
CATCHWORDS: | Detinue; sawmilling equipment; common law or equitable lien; quantum of damages; order for return of the chattel and damages to be assessed; General and Finance Facilities Ltd v Cooks Cars (Romford) Ltd [1963] 1 WLR 644; McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303. |
COUNSEL: | Mr Myers for the plaintiff Mr Webb for the defendant |
SOLICITORS: | Carswell & Co for the plaintiff MBT lawyers for the defendant |
- [1]The plaintiff, who is the owner of a Bezner Log Sizer, model RF50-150, serial number 8435 (‘the Bezner’) sues the defendant Colenden Pty Limited t/as Pilks Pine (‘Pilks’) in detinue.
- [2]The plaintiff came into possession of the Bezner when it purchased the business of Karastar Pty Ltd trading as Sunshine Pine (‘Sunshine Pine’) on 12 July 2004. The Bezner was included in the Inventory to the sale agreement (‘the agreement’) as follows:
‘(not operating – disconnected)… located at Pilk’s Pine and Pursuant to Agreement with Pilk’s Pine dated 13/01/2003.’
- [3]The plaintiff seeks delivery up of the Bezner, together with damages calculated at $500 per day from 12 October 2004 to the date of return, together with interest.
Evidence of Mr Wade
- [4]Mr Wade first started logging in 1966 and has been sawmilling since 1977. He gave evidence that the Oswald machine had the same capacity as the Bezner, that is, 40/160, but it was a two-headed machine and thus roughly had 20 per cent more capacity (T15). He also said that he had never seen a 40/160 Bezner machine working.
- [5]He gave evidence that the Bezners ‘usually run minimum 4 metres a minute up to 16 metres a minute. We usually run our machines down at the 4 metres a minute to get finish, and that will produce 1.8 cubic metres per hour’ (T16). He worked seven hours per day five days per week and sold first grade logs at $350 a cubic metre and second grade logs at $290 a cubic metre. The ratio of second grade to first grade was 12%.
- [6]In cross-examination, he said that he was milling to the capacity of the Oswald on the site. He had a larger Bezner machine, with a capacity of 100-300, single-headed machine, but he considered it was ‘a big, cumbersome machine’. He did not use the machine which was located on an adjoining property because he was concerned about the contamination of soil. There was also the problem of having to build all new rollers.
- [7]I accept his evidence that the Bezner 100-300 was uneconomic and also that it was too big to fit where the Bezner, the subject of this action, fitted in.
- [8]When it was put to him that the Bezner had a capacity of 12 metres per minute, he responded that you do not run a machine at the full capacity, because you do not get a finished product. He said that the Oswald was a double-headed machine so there was twice as much downtime changing knives. When it was suggested to him that the throughput on the Oswald machine was 40 metres a minute, he responded, ‘You would never achieve it, not to have a finish you could sell’ (T18). He was not aware of its maximum design speed.
- [9]He agreed that he had supplied Mr Calabro with a figure of 20 cubic metres per day from the Oswald. He agreed that he had provided this information because although it was ‘capable of producing 20 metres a day,’ it did not produce 20 metres a day because that depends on the log forms that are coming into the mill which, in turn, depends on whether there is a need to re-peel the logs.
- [10]He said that the Oswald machine could operate at 6 metres a minute ‘if the logs are just right,’ and do not require a re-peel (T24).
- [11]He denied the suggestion that the production summaries he produced to Mr Calabro from October 2005 to September 2006 show that the Oswald was under-utilised.
- [12]He was referred to the historical summary of financial performance supplied to Mr Calabro, Exhibit 5, for the years 2004 to 2006, and the financial reports for the periods ending 30 June 2005 and 2006. He agreed that he had not produced for trial any sale dockets, invoices, accounts, to establish his suggested sales figures of $350 and $290 per cubic metre.
- [13]He gave evidence that he had lost clients as a result of not having the Bezner, and suggested a name of Totally Treated Distributors.
- [14]He said that when he first took over Sunshine Pine, he could have used the Bezner to supply a market which existed at that time. Documents for that time are not available because records were not kept in the period prior to October 2005. He agreed that there was ‘a downturn in May 2005, so we didn’t push the machines to their capacity’ (T40). He did not give evidence as to when ‘the slump’ ceased. He was asked ‘You didn’t have a market’, to which he replied: ‘We were holding the market, yes we didn’t have a market and that’s the – to an extent’ (T40). He said that he used the Oswald for the logs he had (T45).
- [15]Mr Wade conceded that at the times shown in his production figures he did not have a market to warrant the Bezner, but he said that ‘early in the piece when we were trying to establish ourselves in the market,’ he would have been able to use the Bezner (T42). No evidence was produced as to demand at that time, other than the loss of Mr Hill as a customer.
- [16]It was suggested to him that the Oswald produced 3.3, or thereabouts, times as much material as the Bezner. He said that although he had never seen the Bezner operating, he would find that hard to believe (T69). He stressed that in the first nine or 12 months of his company’s operations, the machine was used much more. He said, ‘We lost all our customers in the early part … probably not lost them so much as the fact we couldn’t step up to production to claim a bigger part of the market that no one had’ (T70).
Evidence of Mr Schreir
- [17]Mr Schreir’s company, TTS Machinery Sales Pty Ltd, has been the Australian agent for Bezner machines for more than 20 years. For 52 years he has been in the industry of selling sawmilling and woodworking equipment. He was familiar with the Bezner at the time it was sold to Sunshine Pine in 1991 for $58,000.
- [18]He was unable to give any evidence concerning the speed at which the machine operated.
- [19]He gave evidence he had sold only three or four second-hand Bezners in the last 8 to 10 years.
- [20]He opined that a reconditioned machine would normally cost 75% of a new machine (T52). The current price is $Aus 160,000.
Evidence of Mr Aylward
- [21]Mr Aylward, an Auctioneer and Valuer, prepared a valuation report (Exhibit 10), and gave evidence at trial. He said he was not able to get anything which he could say was comparable to a Bezner machine. Because of this, he looked at another machine he considered ‘sort of the equivalent value’ which ‘sort of did the same sort of thing.’ It was a particular moulding machine which takes sawn timber and produces mouldings. This machine was auctioned and fetched $12,000. He considered that the moulding machine and the Bezner machine values were comparable because the machines are both extremely specialised, with an extremely limited market to sell. The similarities are that they both change the shape of timber, they are both in a sawmilling industry, they are both of around the same value and they both have limited markets to sell to (T57). He assessed the value of the Bezner at $12,000.
- [22]His second basis of valuation, a scrap or fire sale value, was $3,000.
- [23]He agreed in cross-examination that the Bezner was ‘as scarce as hen’s teeth.’ He was unable to find anybody in his industry that had much to do with Bezners. He agreed that people who have had them hang on to them, although he considered this did not make them worth any more money.
Evidence of Mr Hill
- [24]Mr Hill gave evidence concerning his company, Treated Pine Distributors, and his dealings with the plaintiff. He said that he needed a supply of extra logs and approached Wade Sawmills. He bought some logs off them to keep him going while his own supply line was having problems. He said he ceased dealing with Wade Sawmills because it was a competitor in the same market. He disagreed with the suggestion put in cross-examination that the reason he ceased to buy from Wade Sawmills was they did not deliver as required. He denied a conversation with Mrs Wade in which he said he had complained about logs he had ordered not arriving, and that he had seen a load of logs belonging to Wade Sawmills on a truck going up the road. It was further put to him in that conversation with Mrs Wade that he had said to her, referring to a truck he had seen, that she was supplying to a potential customer. He strenuously denied this conversation. He totally rejected the claim that he wanted an agreement with Mrs Wade for him to take all of their production, and that she replied it was not their policy to give exclusivity. His response was, ‘Now that is a total lie’ (T114).
- [25]I accept the evidence of Mr Hill.
Evidence of Mr Moorhead
- [26]Mr Moorhead, a qualified fitter and turner, with extensive experience in design and production for the timber industry over 18 years, gave a quotation for $26,000 for work on the Bezner. When it arrived at his premises at Lowanna, ‘it looked like it hadn’t worked for quite a long time, it was covered in dust and had rats’ nests in it, and all that sort of stuff’ (T117). The machine had arrived at his premises for the work to be done in August 2002.
- [27]After the work was done, he commissioned the machine and fitted in-feed and out-feed decks. During the commissioning over 4-5 days, the throughput was 5 to 6 cubic metres of timber for the day.
- [28]He had done the work of fitting the hydraulic hold-down arrangement. He did not replace any other worn out part. He did not consider the machine was ‘really a proposition to work at that age in its condition’ (T121). He also put in a safety outlook system and new guards on the front. He considered that the Bezner was ‘not heavily enough designed in the workings of it to produce quite a lot of timber’ (T119).
- [29]He agreed in cross-examination that his company is a direct competitor with Bezner. He conceded that he had tried to sell one of his machines to the defendant.
Evidence of Mr Diefenbach
- [30]Mr Diefenbach operated Sunshine Pine just outside of Gympie. He had been a logging contractor since 1977, and then went into log processing solely, and then went into purchasing rounding machines.
- [31]He bought an Oswald after the Bezner because the market was becoming more and more competitive and he needed to produce logs faster and faster. He said the maximum reasonable production for the Oswald was 40 metres a minute, although at the time of purchase he was told 47 metres a minute, but he did not consistently achieve that. At the time he purchased the Oswald, he used the larger Bezner, and not the Bezner which was sent to Pilks. He indicated to the people from Pilks that the Bezner was not working.
- [32]He said that there was a ‘ready market’ for the logs he produced, and he kept the rounding machines working all day (T169).
- [33]He said that he first received logs from Pilks some time towards late 2002. The figure which had been mentioned in the agreement was $160 a cubic metre for all logs. At some stage there was a discussion, and it was agreed that he would take seconds as well, at $100 a cubic metre, and he was to pay for the carriage of logs from Pilks to Gympie.
- [34]He sold the seconds for $280 a square metre and the firsts for $320 - $350 a square metre. The prices for the 100 ml logs varied between $320 and $350, depending on the quantity that the customers bought, unlike the second grade where there was no deviation for quantity.
- [35]He said that the difference of $175 between the $160 he paid to Pilks and the average sale price for first grade of $335 was taken up with costs which included transport, cradling, stripping, storage and drying (the kiln drive machine costs $1.3m). He said that for the Oswald there was a profit of ‘about $10 a cubic metre. It was that low’ (T 151).
- [36]He had been trading for 17 years before the Receivers were appointed. During that period, there were years when the business was very profitable (about 4 or 5 good years) and years when it was marginal and he barely made ends meet. Producing logs and doing the rounding, the sizing, was the least valuable part of his business; there was no margin in doing the rounding; the profitability was in the treating of the wood.
- [37]He reached an oral agreement with two men from Pilks whom he trusted, and the written document which was subsequently produced was intended to reflect the terms of a binding agreement.
- [38]His last supply of logs in terms of the agreement was 4 March 2004. He said he did not know that as early as 8 April 2004 the produce from the Bezner was going to Pinewood Products. He said, ‘I don’t have any issue with that. Quite possibly we had fallen behind in paying Pilks and they probably felt that they had the right to sell them wherever they liked’ (T160). He said that had his company paid their bill, I would have expected to be bound by clause 5 of the agreement.
- [39]It was put to him that certainly from no later than March 2004, the date of the last consignment, the agreement was at an end. His response was, ‘Only because we would have breached it by not paying the bill’ (T160).
- [40]In cross-examination, he was taken to a published prices list and the figure of $291 per square metre calculated from that schedule. He said that for customers who bought a significant volume of untreated Pine logs, they would have paid a lot less than the prices in the list. He said that he had a thick folder of lists which pertained to various customers. I find that prices vary between customers.
- [41]He said that the Bezner had a maximum speed rate of 12 metres a minute, but he was unable to say what he used to run it at. He said the particular machine had problems with chatter on the ends of the logs, and so he found that he had to run it significantly slower than the maximum recommended feed speed. He thought he probably ran it more like 2.8 cubic metres per hour to produce reasonable quality logs. He said that the rounding machines produced all day every day, except if there was a breakdown; that was the way he endeavoured to operate. Work commenced at 6 a.m. through till 2.30; there was a lunch break and blade changes which could take two hours a day, and sometimes that would occur a couple of times a day.
Evidence of Mr Rovere
- [42]Mr Rovere is the general manager and financial controller of the defendant. He said he had been at Pilks for 10 years and had been doing financials and costings for two other sawmills in addition to Pilks.
- [43]He undertook an analysis based on the invoices for timber that went to Sunshine Pine and Pinewood Products. His calculations were used by Counsel for the defendant to produce a cost per cubic metre for seconds of $184.215 (T269).
- [44]He received a letter from the Receivers for Sunshine Pine dated 19 March 2004. He could not recall when he received it: ‘It might have been a month. Might have been longer. Might have been July. I really can’t recall what date it came in’ (T176). He said:
‘The reason why we supplied Pinewood Products was twofold. One, I’ve just mentioned the fact that we couldn't supply Sunshine Pine because the receiver said ‘No more products until we – unless we specifically order it’, the other valid reason was the fact that we had a resource coming into the mill – we had an agreement with State Forests, who basically said ‘You’ve got to take it’. So we had to do something with it’ (T179).
- [45]He was unsure when (‘I’d only be guessing at this point’) in ‘October or July maybe’ he had a conversation with Mrs Wade (T180). He said he believed, from memory, she wanted to buy round logs and she made an offer of buying the logs for $110 a cubic metre delivered in her yard. He said that he could not do that. He mentioned a higher price and the fact that the company was getting $160 a cubic metre from Owen at Sunshine Pine who was paying the freight on that. The next thing was he received a letter from Wade’s solicitors.
- [46]He said that Pilks had never received an offer for the rebated repair costs.
- [47]The exercise which Mr Rovere undertook in Exhibit 21 can be described in this way:
- (a)Page 1: Daily production averaged 4.426 cubic metres per day;
- (b)Pages 2 and 3: Calculations of gross margins, the first based on the average sale price provided by Mr Diefenbach of $335 for first class and $280 per square metre per day for second class, and the second based on prices for Wades of $350 for first class and $265.95 for second class. This produces gross margins for the periods from 8 April 2004 to 7 October 2004 and from 12 October 2004 to 16 February 2005;
- (c)Page 4: Calculation of production expenditure based on records of actual costs. A recovery rate of 54 per cent was used, representing the percentage of the original logs sold by Forestry produced as a perfect round. His company paid $45.97 per cubic metre to Forestry for the logs. He thus calculated a cost per square metre for finished product of $85.13 for the log in gross form before treatment (the labour component was calculated at $44.79 per square metre.)
- (d)Page 5: Costs for repairs and maintenance, operating supplies, depreciation, electricity, fuel, kiln drying, treatment costs and transportation costs.
- (e)Page 6: Review of gross output; using the different prices per square metre from $250 to $409.50, the gross margin % varies from (14.6%) to 30.0%.
- [48]He was asked in cross-examination whether it was an implied term of the contract that if Sunshine Pine did not pay the $160, the contract would be at an end. His response was: ‘Well, I believe if you look at the back of our invoices, they clearly state that unless the product is paid for it still belongs to Pilks Pine’ (T191). He said that at the time his company ceased to supply any product to Sunshine Pine, he did not know if the company was finished or was continuing to trade. From April 2004, all of the product that previously went to Sunshine Pine then went to Pinewood Products.
- [49]He gave evidence of an oral conversation with someone from the Receivers. He considered that this person understood the contract. He said that the Receivers ‘had no intention to receive any more wood from us.’ When asked in cross-examination whether the person actually said that, Mr Rovere responded, ‘In a round about way, yes’ (T194). He said that he and the representative of the Receivers discussed the contract, and the representative understood it fully. Mr Rovere asked for a written order, ‘but we wouldn't have been able to supply anyway … because the money that was outstanding was 120 days and … we can’t continue supplying someone that’s gone outside their credit terms’ (T194). He said he would have supplied to the Receivers if they had cleaned up the debt that was currently owing. He agreed that the letter said that they had to prove any estate for the debt.
- [50]He said the Receivers were not interested in buying any more wood: ‘He gave me the impression that they weren’t interested in getting any more wood from us … and I believe that was because he knew how much money they owed us and I don’t think he was prepared to owe any more money to us’ (T 194). He said he could not exactly remember whether he asked for an order in accordance with the middle paragraph of the letter. When asked again whether the debt being more than 120 days was the reason for refusing to honour the terms of the agreement, he said:-
‘No, that’s not the only reason. No … it’s probably part of it … well, but it was … well, that’s only one criteria. Before we supply product to anybody we have – we have got to establish if they’re going to be able to pay us irrespective if they’re receivers, (liquidators?) or whatever. They’ve got to be able to provide evidence that they can pay us when they receive the goods’ (T195).
- [51]When he was referred to the Receivers’ letter, and its invitation to make a written order, he said that there had been many other customers that had said the same thing and they had not paid (T196).
- [52]When the trial resumed in January of this year, Counsel for the plaintiff continued his cross-examination of Mr Rovere, who said, ‘One of the reasons we stopped supplying was because they had ample supply – ample stock in holding’ (T200). He said there were a lot of factors involved when Sunshine Pine was behind in payment. They had been behind in payment for some time. When it was specifically put to him that he ceased to send timber to Sunshine Pine because they were outside the terms of trade he said, ‘That’s not exactly correct. Because we sent a load of timber just prior to the receivers taking over the business from my understanding’ (T200). In response to a question from me, Mr Rovere said:
‘Well, it’s a two-tiered effect – I mean, the reason why we didn't supply them. One was they hadn’t paid us and the other reason was the fact the receiver specifically stated they didn't want any more product unless they put an order in and we had a commitment’ (T202).
- [53]Mr Rovere said that it may have been earlier than July or October 2004 when he first knew about the Receivership. He disagreed with the suggestion that when the company commenced the supply to Pinewood Products on 8 April 2004, he had not heard anything from the Receivers; he said: ‘that’s not correct at all’ (T203). Concerning when the Receivers contacted him, he said: ‘That would have to be before we supplied Pinewood Products, before 8 April; he said I didn't record any dates’ (T203).
- [54]He said there were many factors involved as to why they no longer supplied to Sunshine Pine.
- [55]He said that Owen Diefenbach told him he didn't want any more product. This was not put to Mr Diefenbach at trial.
- [56]Mr Rovere said that the Receiver specifically stated not to sell to him [Diefenbach] any more product unless they’d given us a written order’ (T204). He also said, ‘I didn't consider the arrangement of the agreement to be over. So far as I was concerned Owen Diefenbach was going to trade out of it and that’s what he said to me, he was going to trade out of it’ (T204). He said:
‘Well, as I said earlier, if the Receivers or Owen Diefenbach had ordered more logs or the receivers we probably would have supplied them. It’s hard to tell what we would have done, but I would have to say at this point in time that I would have supplied them’ (T204).
- [57]He said he spoke to Owen Diefenbach in relation to logs going to Pinewood Products, and ‘he [Diefenbach] didn't have a problem with that.’ So far as Mr Rovere was concerned, the agreement between Sunshine Pine and Pilks was still in existence. He said the discussion with Mr Diefenbach occurred before the logs went to Pinewood Products.
- [58]Mr Rovere explained the difference between the $160 per square metre which applied for Mr Diefenbach and the $230 per square metre for Pinewood Products as arising because Pilks were paying the freight, which he said was between $35 to $40 a cubic metre. He also said all of the product that Pinewood Products were getting was top class round wood, whereas Owen Diefenbach would take all classes.
- [59]It was suggested to Mr Rovere in cross-examination that Mrs Wade rang him and told him that they had bought the business of Sunshine Pine and they wanted the Bezner back. He agreed he possibly said to her, ‘You’re not getting the machine back,’ and she may have said, ‘Will you continue the contract with us?’ (T207). He said he did not recall saying, ‘No, so far as I’m concerned the contract is null and void.’ He did not recall her asking to talk to one of the bosses, nor did he recall saying he was the appropriate person for her to talk to. It was put to him that Mrs Wade had suggested a figure of $120 per cubic metre, not $110. He did not agree. Mr Rovere said he told Mrs Wade he could not supply the product. He did not suggest to her that there was a contract in existence that was binding on her.
- [60]In re-examination, Mr Rovere said he was absolutely certain he spoke to the Receivers before supply to Pinewood Products ‘because I didn't want to sour the relationship between Sunshine Pine and Pilks Pine because as far as I was concerned, and Owen Diefenbach indicated, … he was going to continue trading’ (T214).
- [61]In re-examination, Mr Rovere said he could not recall any discussion about the return of the Bezner at the time of his conversation with Mrs Wade. He said, ‘What I distinctly remember when Mrs Wade rang up was in relation to buying the logs from Pilks Pine, round wood … that was the crutch (crux) of the phone call’ (T214).
Evidence of Mr Vincent
- [62]Mr Vincent is a ‘Chartered Accountant’ who describes himself as a forensic accountant, who prepared a written report which reviewed a report prepared by Calabro Consulting of 1 August 2005, and also assessed the plaintiff’s claim for damages and the value of the lien claimed by the defendant.
- [63]In summary, his opinion was that the ‘lost’ profits claimed by the plaintiff had been wrongly calculated on a production volume of 20 cubic square metres per day; that the plaintiff had failed to mitigate its losses by entering into a leasing agreement; that the Calabro report failed to consider alternative arrangements which could have been made by the plaintiff. He valued the defendant’s lien at $20,253.76 as at 12 October 2004 and $11,288.42 at 17 March 2006.
- [64]He prepared a document entitled ‘Review of Production Data Monthly’ (Exhibit 26). He looked at production over a period of 104 days from October 2005 to September 2006 and calculated that the Oswald machine at the plaintiff’s premises was operating at 45 per cent capacity. He also made calculations for earlier periods for which there were not production figures provided from Wade Sawmill. He based his calculations on Forestry royalties, and calculated that for the previous year there was also unused capacity of close to 50%. He concluded there was no lost capacity by virtue of the unavailability of the Bezner.
- [65]It was put to Mr Vincent in cross-examination that, based on the Oswald, and using a fair average daily production of 14.621 cubic metres, the loss of profits to the plaintiff would be a little more than $700 a day (T239). It was put that for the Bezner it would be $570 per day. Mr Vincent disagreed with this methodology, and said that it would be necessary to do a further exercise on production costs.
- [66]Counsel for the plaintiff put to Mr Vincent that based on the exercise he had done in Exhibits 26 and 27, or even going to Mr Vincent’s summary, the loss of profits seems to be about $50 per cubic metre. Mr Vincent did not agree. He said he was not sure what the loss actually is or how you can do that calculation because in fact there was no loss (T240). Counsel for the defendant submitted that if there is no evidence of unsatisfied demand or level of sales, it is not possible to calculate loss of profits (T269).
- [67]Counsel for the plaintiff put to him that assuming a selling price of $350 per square metre, and based on a gross profit per square metre of $63.39 [Mr Rovere; Exhibit 21, page 6] and the figures of Mr Vincent in Exhibit 26, there is a loss of $500- $800 a day (T241). Mr Vincent disagreed with his methodology, and referred to the obligation to mitigate and the excess production in the Oswald.
- [68]In arriving at the value of the lien, Mr Vincent adopted the accuracy of the figure in the schedule at para 7.5, that is, $31,483.93. He adopted the production data produced by the defendant and agreed that he had not attempted to carry out the same analysis of production days as he had in Exhibits 26 and 27.
- [69]Mr Vincent considered that over 550 days there was a production figure of 4.42 for the Bezner, whereas for the Oswald on average over a year it was 14 cubic metres per day (T245).
Findings of credibility
- [70]I accept the evidence of Mr Diefenbach concerning the capacity of the Bezner.
- [71]I consider Mr Rovere was a less than frank witness and he was guarded and defensive. I am unable to agree with Counsel for the defendant that his evidence can be explained in terms of him being a person who unless he had proof of matters, was very reluctant to commit himself unless he had a diary note or something of that nature. In making this finding on credit, I am referring to Mr Rovere’s dealings with the Receivers, and with Mrs Wade. In contrast, I consider that his calculations of production costs are careful and reliable.
What was the plaintiff’s position in relation to the contract between Sunshine Pine and Pilks?
- [72]Counsel for the plaintiff stressed that the plaintiff was not a party to the contract between Pilks and Sunshine Pine. That agreement was at an end before the plaintiff purchased Sunshine Pine on 12.7.04. The agreement was repudiated by Sunshine Pine in late 2003 or early 2004 (the last supply of timber by Pilks was 4.3.04. The first supply to Pinewood Products was 8.4.04). The agreement no longer existed, and thus could not be assigned pursuant to clause 8.1.
- [73]Counsel for the plaintiff responded that the construction of the clause by Counsel for the defendant is such that the words ‘subject to’ were substituted for the word ‘pursuant.’
- [74]Counsel for the defendant submitted that the rights of the plaintiff were governed by the contract between Pilks and Sunshine Pine; because there was no winding-up of Sunshine Pine, the plaintiff ‘stepped into the shoes of Sunshine Pine.’ He relied on clause 8 of the agreement.
- [75]Counsel for the defendant submitted that the plaintiff was not a bona fide purchaser for value without notice because it had notice of the terms of the agreement between Sunshine Pine and Pilks. He submitted that ‘Wade’s become Sunshine Pine. In one sense there’s no change. The principals of Sunshine Pine have changed but Sunshine Pine who entered into the agreement, is still there, but the Wades are the people in it’ (T298). He stressed that the plaintiff could only get the title that the ‘old Sunshine’ had, and that was subject to the clause about payment or subject to the lien (T299).
- [76]In his written submissions, Counsel for the defendant listed 14 questions which he said arose in the case. Counsel for the plaintiff largely adopted these questions in his oral submissions, and I propose to also refer to them.
A How did the defendant come into possession of the Bezner?
- [77]Counsel for the defendant submitted that the Bezner came into the possession of the defendant lawfully and by virtue of the agreement, which was partially oral and recorded in writing after the obtaining of possession (T254).
- [78]Counsel for the plaintiff stressed the importance of the written document. He conceded that the defendant obtained lawful possession.
- [79]I find that the defendant came into possession of the Bezner lawfully pursuant to the agreement.
B What rights to possession of the Bezner did the defendant acquire – specifically, will the law infer a lien
was created, being the right to retain possession until a liability is satisfied?
- [80]Counsel for the defendant submitted that the law infers a lien to the extent of the rebated costs; he referred to Clause 5:
All peeled logs produced are to be sold to Sunshine Pine 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 agreement will terminate with the rounding machine being returned to Sunshine Pine at pro-rata value attached as referred to clause 4 above.
- [81]Clause 4 is as follows:
It is recognised that there was some work to be done on the machine itself prior to re-installation at your site. This is to be at Pilks Pine expense and becomes the property of Sunshine Pine after five years (January 2008). Infeed decks and associated equipment remain the property of Pilks Pine.
- [82]He acknowledged that although the clause in the Contract did not use the word ‘lien,’ there is nevertheless either a contractual lien, or a lien inferred in the circumstances. He acknowledged that the work was not done by the defendant, but was done by its agent, Mr Moorhead. He submitted that the words ‘and pursuant’ in the Inventory to the agreement can only be interpreted as creating a lien. He further submitted that that an equitable lien arises by operation of equity from the relationship between the parties: Hewett v Court (1982) 149 CLR 639.
- [83]Counsel for the plaintiff submitted that as the agreement was terminated within the first 12 months, the law would probably require that there be implied into the contract generally the same sort of arrangement as the pro-rata payment in clause 4, specifically re-imbursement of the defendant’s expenses on the Bezner [but this entitlement would be non-transferable] (T282). I agree.
- [84]He denied the defendant’s alleged lien. He referred to clause 2 of the letter dated 13/01/03 from Mr Diefenbach on behalf of Sunshine Pine to Pilks: ‘the Bezner Log Peeler and associated electrical box and control panel always remain the property of Sunshine Pine regardless of location.’ He submitted that in these circumstances a lien cannot possibly arise because the contractual agreement between Pilks and Sunshine Pine provided for this very situation.
- [85]I find that the defendant did not acquire a contractual lien, a common law lien, or an equitable lien.
C How did the plaintiff obtain the title to the Bezner?
- [86]Counsel for the defendant submitted that the title to the Bezner was obtained by the purchase of the whole of the business of Sunshine Pine as listed in the agreement, but not the right to possession.
- [87]Counsel for the plaintiff submitted that the plaintiff obtained the title to the Bezner by virtue of having bought it lawfully from the Receivers, without encumbrance.
- [88]I find that the plaintiff obtained the title to the Bezner pursuant to the agreement.
D What right to possession did the plaintiff have on obtaining title?
- [89]Counsel for the plaintiff submitted that the plaintiff obtained a right to immediate possession.
- [90]Counsel for the defendant submitted that the plaintiff had no right to possession and its rights were governed by the Contract between Pilks and Sunshine Pine. He submitted that Sunshine Pine ‘pre –Wade’ had title but a right to possession did not exist at that time (T256).
- [91]I find that the plaintiff had a right to possession pursuant to the agreement.
E Did the plaintiff obtain an absolute right to possession?
- [92]Counsel for the plaintiff submitted that the plaintiff obtained an absolute right to possession.
- [93]Counsel for the defendant submitted that without payment of the rebated costs of the accretions/repairs, the plaintiff would only acquire full title (a right to possession) of the accretions/repairs in January 2008 (paragraph 8, Written Submissions).
- [94]I find that the plaintiff obtained a right to possession on 12 July 2004.
F Did the defendant lose its rights in connection with the work it carried out, and if so, how?
- [95]Counsel for the defendant submitted that the agreement provided that even on termination the defendant did not lose its rights to get the rebated costs of repair. The defendant did nothing to take away its rights in respect of those costs.
- [96]Counsel for the plaintiff submitted that McDonald v Dennys Lascelles Limited (1933) 48 CLR 457 does not apply to a situation where rights are sought to be asserted against a third party.
- [97]Counsel for the plaintiff submitted that the work was carried out by Mr Moorhead, and any lien he may have had was extinguished.
- [98]I find that the defendant has an equitable claim to be reimbursed for the costs of repairs on the Bezner.
G id those rights continue whilst it was in possession?
- [99]Counsel for the defendant submitted that the rights to a lien continued while the defendant remained in possession.
- [100]Counsel for the plaintiff relied on clause 2 of the agreement, and stressed that there were no rights so they could not be lost.
- [101]I find that there is no lien but the defendant has equitable rights, as outlined in paragraph [97] above.
H How did the plaintiff’s rights of lawful possession become unlawful?
- [102]Counsel for the plaintiff submitted that the defendant’s right to lawful possession became unlawful upon termination of the agreement, which seems to have occurred no later than 8 April 2004. The defendant’s right to possession was transposed into one for damages pursuant to an implied term along the same lines as clause 4 of the agreement. He submitted that in any event the possession became unlawful when the demand by the plaintiff was made (T286).
- [103]Counsel for the defendant submitted that the demand by the plaintiff for the return of the property without a co-relative offer to pay the rebated cost of repairs did not make the possession unlawful (T257). He referred to Capital Finance Company Ltd v Bray [1964] 1 WLR 323 and Nelson v Nelson [1923] QSR 37 for the proposition that a lack of response to the McCullough Robertson letters was not a refusal for the purposes of a claim in detinue.
- [104]He also cited Capital Finance Company Ltd (supra) as authority for the proposition that the defendant was not bound to take the Bezner back to the plaintiff. The defendant must not prevent the plaintiff from getting it back when it sought its retrieval. I agree.
- [105]I find that the defendant’s right to possession became unlawful when Sunshine Pine was in breach because of the failure to pay [Mr Diefenbach acknowledged this failure [T160] and the defendant accepted that repudiation, and thereafter supplied logs to Pinewood Products.
I If the defendant’s possession became unlawful, did the plaintiff make a proper demand (recognised by,
and enforceable in law) for the return of the Bezner which is necessary to found an action in detinue?
- [106]The plaintiff’s case is that a proper demand was made for the return of the Bezner.
- [107]As discussed earlier, Mr Rovere’s evidence on this issue is inconsistent.
- [108]Counsel for the defendant submitted that in any event proper demand was not made because it was not accompanied by an offer to pay out the lien.
- [109]I find that proper demand was made by the plaintiff, and it was not lawfully obliged to offer to pay the rebated costs of repair.
J Was there a refusal to give up possession since refusal is the gist of detinue, distinguishing it from trover?
- [110]Counsel for the defendant submitted that there was no refusal, and cited Nelson (supra) and Capital Finance (supra) for the proposition that a failure to respond is not a refusal.
- [111]Counsel for the plaintiff submitted that there was a refusal.
- [112]I find there was a refusal by Mr Rovere on behalf of the defendant when Mrs Wade requested the return of the Bezner in their telephone conversation.
K If the action is sound, what damages in addition or alternatively to an Order for the return of the Bezner
has the plaintiff established?
- [113]Counsel for the plaintiff referred to Rosenthal v Alderton and Sons Limited [1946] 1 KB at 374, 379 to the effect that the damages must be assessed. Moreover, General and Finance Facilities v Cook [1963] 1 WLR 644 requires a separate assessment of both the value of the chattel, and damages for the detention.
- [114]Counsel for the defendant submitted that the proper basis for damages is the commercial rate of hire of the object detained, and there was no evidence of this at trial, other than Mr Diefenbach’s evidence of a value of $1 per year.
- [115]Counsel for the defendant submitted that the plaintiff has not satisfied its onus of providing evidence in support of its action for damages or return of the Bezner. There was no evidence that the plaintiff could have made a profit from the Bezner. I find that the plaintiff has not discharged its onus of proving that it lost customers because it could not supply enough timber due to the unavailability of the Bezner.
- [116]He referred to the following factors:
- (a)The evidence led by the defendant shows a profit for the defendant on firsts of $45.2785 and a loss on seconds of $24.215 per cubic metre. This is much less than the 30% profit on gross selling price referred to in the opening of the plaintiff’s case, and ‘nothing like the figures advanced by counsel for the plaintiff in cross-examination of Mr Vincent’ (page 7 of written Submissions);
- (b)Mr Diefenbach’s evidence concerning losses he made on rounding;
- (c)The costs of retrieval of the Bezner from the defendant;
- (d)The costs incurred by the defendant in the building of in-feed and out-feed decks to enable production (T272);
- (e)The plaintiff’s claim did not allow for the altered demand after May 2005.
- (f)Prices realised in sales by the defendant to Pinewood Products (Exhibit 19).
- [117]Counsel for the defendant submitted that if I were to find that the plaintiff is entitled to an Order for the return of the Bezner, it will be subject to the payment of the rebated value of repairs at the date of trial. I agree.
- [118]Counsel for the plaintiff conceded that the plaintiff did not produce its own evidence of production and sales, but relied instead on the defendant’s evidence, from Mr Rovere and Mr Vincent. He submitted that the ‘real value in the machine is the fact that you could sit back in your retirement and not raise a finger and have a cheque arrive in every week for over $2,000 because you own this machine’ (T292). He submitted a figure of $420 per day, that is, $2100 per week.
- [119]He arrived at the figure of $420 per day on the basis of capacity of 14 cubic metres a day, and a profit of $30 per cubic metre. The difference between the contractual price of $160, and the figure of $230 charged by Pilks to Pinewood Products, was $70, and, allowing for transport of $40, there was an increased price of $30.
- [120]Counsel for the plaintiff submitted that, alternatively, if the assumption is that the Bezner was capable of production of 11.7 square metres daily, the daily loss of profits would be $584.84 (less contingencies).
- [121]In the further alternative, he submitted that using Mr Rovere’s figures for profit on first grade timber of $68.15, and allowing for the Oswald having 20% more capacity, then the daily loss of profits for the Bezner would be $797.14.
L Has the defendant shown that the plaintiff has failed to mitigate its claimed loss, by failing to use excess
capacity in the Oswald and the 100/300 Bezner to satisfy any demand it has established existed and it could
not satisfy?
- [122]Counsel for the defendant relied on the evidence of Mr Vincent concerning the plaintiff’s failure to use all of the capacity of the Oswald, and its failure to use the other Bezner which was available to it. He referred to Private Parking Services (Vic) Pty Ltd v Huggard (1995) BC 9600650.
- [123]Counsel for the plaintiff denied any obligation to mitigate. He referred in particular to the decision of the National Court of Papua New Guinea in RH Trading Ltd v Damansara Forest Products (PNG) Ltd [1999] PGNC 88. That case in turn referred to Strand Electrical Co v Brisford [1952)] 3 AER 796.
- [124]I find that the plaintiff was under no obligation to mitigate its damages.
M If no to L, should any more than nominal damages be awarded, particularly when the only value of hiring
of this old, worn out, redundant machine was $1 per year?
- [125]Counsel for the defendant relied on the evidence of Mr Diefenbach that the machine was so antiquated, and in such bad repair, that you might give it to someone without transferring title to them for a dollar a year.
- [126]Counsel for the plaintiff relied on the evidence of Mr Schreir who did not see the Bezner but valued it at 75% of the value of a new machine. Counsel for the defendant challenged the usefulness of his evidence given that he assumed it was reconditioned and there was no evidence to that effect.
- [127]Counsel for the plaintiff relied on the evidence on the docket that it had been reconditioned, and its landed cost of AUD$59,000. He conceded that it had been manufactured in 1974 or 1976. He referred to Strand Electrical (supra), and in particular the Judgment of Lord Justice Romer, commencing at 256, who did not make a reduction in the assessment of damages for detention for the possibility of damage occurring during detention.
N Does the plaintiff have to pay the rebated cost of repairs, either on the basis of a lien or on the basis
of application of law relating to accession and/or unjust enrichment?
- [128]As indicated above, Counsel for the plaintiff conceded the appropriateness of a term analogous to clauses 4 and 5 of the agreement, which would give the defendant a money claim for moneys expended on the Bezner (T284).
- [129]Counsel for the defendant was critical that the submissions of Counsel for the plaintiff meant that the rights the defendant had against ‘the old Sunshine Pine’ in relation to the rebated costs ‘had just somehow or other disappeared’ (T298).
- [130]He submitted that the plaintiff’s claim is ‘effectively unjust enrichment.’ (T272).
What is the value of the machine?
- [131]The plaintiff’s Claim refers to the replacement cost of the chattel of $50,000. No evidence was led at trial in support of this figure. Instead, the plaintiff relied on the evidence of Mr Schreir that the value is 75% of the current cost of a new machine, that is, 75% of $Aus 160,000, $120,000.
- [132]As outlined earlier, Mr Aylward’s evidence of valuation is $12,000.
- [133]Counsel for the plaintiff submitted that the Bezner has a value which is illustrated in its ability to produce ‘significantly’ (T277). He referred to the production figures shown at Appendix 5 of Mr Vincent’s report (Exhibit 25). He said that Pilks continued to use the machine to produce substantial income ($197,616.33 gross or thereabouts) until it stopped doing so for reasons unconnected with a demand by the plaintiff or, indeed, anything to do with the actions of the plaintiff. He submitted that the use of the machine to produce that gross figure belies the truth of the suggestion that it was a worthless machine.
- [134]I find that the value of the Bezner is $120,000, which includes the value of the improvements made by the defendant of $31,438.93, and the cost of decks, the safety outlook system, and new guards (these were not quantified at trial).
Conclusions and Orders
- [135]Counsel for the defendant referred to McKeown v Cavalier Yachts Pty Ltd (1988) 13 NSWLR 303 I find that the Bezner is sufficiently special to warrant its recovery from the defendant.
- [136]The plaintiff is entitled to damages for its loss of the Bezner from 12 July 2004. Counsel for the plaintiff submitted a figure of $336,283.000, assuming 230 production days per annum and daily loss of profits of $584.84. Counsel for the defendant submitted that there is no evidence to enable damages to be calculated.
- [137]I find there is no satisfactory evidence of sales lost by the plaintiff because of the unavailability of the Bezner, particularly in view of Mr Wade’s evidence of a slump in May 2005. Mr Diefenbach’s evidence of losses on rounding is also relevant.
- [138]I find that the plaintiff has failed to show that it could have made a profit on sales in the period after 12.7.04. I consider it is insufficient to rely on the level of sales by Pilks to Pinewood Products, and profits on those sales, or on Mr Diefenbach’s ‘ready market’ (T161), without proper evidence that the plaintiff could have achieved the same sales and prices, and evidence of the differences between the operations of Pilks and Wades.
- [139]Moreover, in any event, the figures produced by Mr Rovere suggest profits for firsts, but losses for seconds.
- [140]I find that the figures put to Mr Vincent in cross-examination, concerning the daily loss of profits, are not supported by the evidence.
- [141]In accordance with the principles outlined in McKeown (supra), prior to delivery up of the Bezner, the defendant is entitled to be recompensed by the plaintiff for the cost of repairs to the Bezner of $31,483.93, together with the costs of the in-feed and out-feed decks, safety equipment and new guards, and interest.
- [142]I invite submissions as to the appropriate Orders.