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Aquavista Pty Ltd v Timevale Pty Ltd[2016] QDC 235

Aquavista Pty Ltd v Timevale Pty Ltd[2016] QDC 235

DISTRICT COURT OF QUEENSLAND

CITATION:

Aquavista Pty Ltd v Timevale Pty Ltd [2016] QDC 235

PARTIES:

AQUAVISTA PTY LTD

(ACN 069 599 775)

AS TRUSTEE FOR THE WALSH FAMILY TRUST TRADING AS COASTAL AMUSEMENTS

(ABN 51 719 681 695)

(plaintiff)

v

TIMEVALE PTY LTD

(ACN 003 364 985)

AS TRUSTEE FOR THE ETTAMOGAH QLD UNIT TRUST TRADING AS AUSSIE WORLD

(ABN 24 128 803 703)

(defendant)

FILE NO:

146 of 2013

DIVISION:

Civil

PROCEEDING:

Trial

ORIGINATING COURT:

District Court at Maroochydore

DELIVERED ON:

27 September 2016

DELIVERED AT:

District Court at Maroochydore

HEARING DATE:

2 March 2015; 3 March 2015 and 1 April 2015

JUDGE:

Long SC DCJ

ORDER:

Judgment for the plaintiff in the sum of $148,653.93, including $25,959.93 interest.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH – Where the plaintiff sues for damages for breach of contract and interest – Where the only issue as to liability is whether there has been a breach as opposed to a valid termination of the contract – Where the contract was in relation to the placement of amusement machines at the defendant’s site – Where the contract was executed in a typewritten pro-forma, with the allowance for handwritten details to be added at the time of execution – Where each pro-forma is comprised of a single double-sided sheet and arranged in pairs – Where writing on the top copy causes such writing to be transposed to the underneath copy – Where each party then retains a copy of the contract – Where the contracts retained by the parties were not identical – Whether the plaintiff had handwritten the numerals “5” into the clause relating to duration – Where the numerals were only written on the underneath copy and did not transpose to the top copy, which was retained by the defendant– Whether it is established that there was a defined duration for the contract

DAMAGES – GENERAL PRINCIPLES – MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT MITIGATION OF DAMAGES – PLAINTIFF'S DUTY TO MITIGATE – Where the primary approach of the plaintiff was in estimation of the profit it was denied in the remainder of the initial period of the contract – Where the defendant challenges this estimate – Whether the plaintiff failed to take steps to mitigate the loss flowing from the breach of contract – Whether it has been established that the plaintiff has unreasonably failed to sell the amusement machines after the termination of the contract or that the plaintiff has acted unreasonably or failed to act reasonably, in respect of the placement of the machines at alternative operating venues

CASES:

Biggin & Co. Ltd v Permanite Ltd [1951] 2 KB 314

Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153

Branir Pty Ltd & Ors v Owston Nominees (2) Pty Ltd & Anor (2001) 117 FCR 424

Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64

Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523

Meates v Attorney-General [1983] NZLR 308

New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1975] AC 154

Ratcliffe v Evans [1892] 2 KB 524

Robinson v Harman (1848) 1 Ex 850

Vroon BV v Foster’s Brewing Group Ltd [1994] 2 VR 32

COUNSEL:

D M Favell for the plaintiff

J K Meredith for the defendant

SOLICITORS:

Garland Waddington Solicitors for the plaintiff

Griffiths Parry Lawyers for the defendant

Introduction

  1. [1]
    Pursuant to the amended claim filed on 25 November 2014,[1] the plaintiff sues for damages for breach of contract and interest, from 15 July 2013, pursuant to the Civil Proceedings Act 2011.
  1. [2]
    In these proceedings, it is common ground that until 15 July 2013,[2] the plaintiff (trading as Coastal Amusements) was the sole provider of coin operated amusement machines at the site operated by the defendant and known as “Aussie World”, at 73 Frizzo Road, Palmview.
  1. [3]
    The only issue as to liability is whether there has been breach, as opposed to valid termination by the defendant, of contract and that in turn devolves to a question as to whether it is established that there was a defined term or duration for the contract between the parties, in respect of the placement of the amusement machines at Aussie World, as opposed to the arrangement being “one at will”[3] and therefore, an agreement able to be terminated as the defendant purportedly did.[4]
  1. [4]
    In addition and if a breach of contract is established, there are issues as to the assessment of the plaintiff’s damages.

Liability: the facts

  1. [5]
    The uncontested background to this dispute is that:
  1. (a)
    prior to 6 March 2007, the entity trading as Coastal Amusements, particularly as represented by Mr Terry Walsh, had oral agreements with Mr David Thompson, who represented the entity trading as Aussie World, in respect of the placement of amusement machines at the Aussie World site, for the mutual commercial benefit of each party;[5]
  1. (b)
    on 6 March 2007, a written agreement was executed by Mr Walsh and Mr Thompson, on behalf of each trading entity and in respect of the placement of 23 amusement machines, specifying the types of amusement machine to be placed at the Aussie World site and the agreed share of the cash takings from each unit; and
  1. (c)
    in 2010 and in the context of discussions between Mr Thompson and Mr Walsh and as to the relocation of the existing machines to a new location at the Aussie World site (a specified games room) and the supply of additional machines, a new contract was executed in relation to 32 specified types of amusement machines and the share of the cash takings from each unit, but left undated.
  1. [6]
    Each of the written contracts that were executed, including the third and which is the subject of the dispute, are in a similar typewritten pro-forma, with added written details or specifics. It is common ground that the pro-formas were contained, completed and relevantly removed from the booklet of forms, which was produced by the plaintiff and admitted as Exhibit 2. The booklet is in the form of commonly encountered pads of paper, where the sheets comprising the pad are secured by an adhesive strip at the top and which allows removal by way of tearing off. A flap or cover page, indicates that the contents are designed to be “standardised forms of Location Contract”, prepared by the “Amusement Operators Association”.
  1. [7]
    The pro-formas are comprised of a single double-sided sheet, each headed on the front: “Location Agreement – Coin Operated Amusement Machines” and arranged in pairs, with the top copy being a white colour and the next copy a green colour. As is apparent from the evidence, the forms are designed to allow a marking or imprint to be left on the bottom or green copy, but not the top or white copy, by way of replication of what is written or marked on the top or white copy. It would appear that this occurs as a result of the application of pressure that may be involved in marking or writing on the top copy or, as is apparent from Exhibits 3 and 6, also onto the front side of the green copy by application of force to the rear side that copy. However and as is also apparent from the evidence in this case, marking or writing on the rear side of the green copy does not transpose any corresponding marking onto the white copy. It may also be noted that the flap or cover sheet is designed to be inserted under the relevant green copy in the booklet, so as to avoid the marking of other pro-formas in the booklet.
  1. [8]
    Therefore, the respective white and green forms are designed to be completed as duplicates of an executed agreement and to allow for each party to retain a duplicate copy of that agreement. Although that is what superficially occurred here on 25 October 2010, the forms retained by the parties are not identical. That is because:
  1. (a)
    the green copy, retained and produced by the plaintiff (Exhibit 6), has the numeral “5” handwritten before the words “years”, in each space provided, in the following type written clause, as it appears on the rear of the agreement:

“2. TERM

The user shall operate the Units from the premise for an initial period of ….. years commencing from the date of this Agreement (“Initial Period”) and thereafter for each successive period of ….. years, (“Further Period”) commencing immediately after the expiry of the Initial Period unless either the Owner or the User gives at least seven (14) days’ notice in writing to the other party prior to the end of the Initial Period or any Further period of the Owner’s or the User’s intention to terminate this agreement at the conclusion of the Initial Period or relevant Further Period, as the case may be.”[6];

  1. (b)
    but on the white copy, which was retained by the defendant (Exhibit 7), there are no markings in the spaces provided before the words “years”.
  1. [9]
    It was common ground that on 25 October 2010, Mr Walsh came to the offices of Aussie World and asked to see Mr Thompson and that on this occasion, each of them signed what was intended to be an ongoing contract. Each of them recalled that the white and green pro-formas were, at that time, attached in the pad, with the white copy on top.[7]  And so much appears to be consistent with what may be observed, as handwritten markings on the front page of each form. However, there are divergences in the evidence as to the circumstances leading to and the precise course of events on 25 October 2010.
  1. [10]
    First and although it is common ground that prior to 25 October 2010, but in the year 2010, the parties executed an undated written agreement containing effectively the same details in the schedule section in the pro-forma[8] and therefore, in respect of a total of 32 amusement machines to be situated at the Aussie World site, there is a dispute as to whether that occurred in about early March 2010 (as contended by Mr Thompson)[9] or  earlier in October 2010 (as contended by Mr Walsh).[10]  However, it may be noted that the white copy, which is Exhibit 5, did, in Clause 2 on the rear, have the numerals “5” included and apparently written in ink and so as to provide for an initial five year period and a further period of five years.
  1. [11]
    In relation to this issue, Mr Walsh’s evidence was supported by that of his wife and their evidence as to the timing of the undated contract is to be preferred. Eventually, Mr Thompson conceded that his estimate as to it being in March 2010 was a “guess”, based on the dates that appeared on other documents, together with which, the undated white copy was eventually located.[11]
  1. [12]
    More critically, there were divergences as to what occurred between Mr Thompson and Mr Walsh on 25 October 2010. According to Mr Walsh:
  1. (a)
    he sought out Mr Thompson at the Aussie World offices and requested that he sign a new contract because the earlier one had not been dated;[12]
  1. (b)
    the details in the schedule, as to the parties, units or machines, commission and location of the machine, had already been handwritten on the white copy (and as may be observed on Exhibit 6, transposed onto the green copy);[13]
  1. (c)
    Mr Thompson signed first and dated the front of the white copy and filled out his name and details, and Mr Walsh also signed the white copy and dated it;[14]
  1. (d)
    Mr Walsh said that he then and in the presence and sight of Mr Thompson “turned it over and filled in the term for five years with a five year extension”, on the green copy and “by oversight” he did not write the numerals “5” onto the white copy;[15]
  1. (e)
    following that, Ms Diane Avery was “called in” and she “witnessed the document”.[16]  That was because Mr Walsh asked if Mr Thompson could have someone witness their signatures and Mr Thompson requested that Ms Avery do that;[17]and
  1. (f)
    Mr Walsh then gave the white copy to Mr Thompson and left with the green copy.[18]
  1. [13]
    From the evidence of Mr Thompson, it may be significantly noted that he said:
  1. (a)
    that when Mr Walsh arrived at his office on 25 October 2010 and asked “can we sign this agreement”, he “had no issues signing it”[19] and did so without reading the conditions and without ascertaining the length or term of the contract.[20]  He said there was no discussion as to the term of the contract[21] and no mention of the earlier undated contract; [22]and
  1. (b)
    he maintained that he never saw any term being inserted onto the green copy, when the contract was executed[23] and that Ms Avery was present when both men signed the contract.[24]
  1. [14]
    In the first instance, the defendant sought to support the evidence of Mr Thompson by the evidence of Ms Avery, who has been employed by the defendant, at Aussie World, for some 18 years, as an accounts manager.[25]  She confirmed that she had signed the white copy (Exhibit 7) as a witness and although she initially stated that she remembered witnessing the document,[26] she did not have recall of where that occurred,[27] or the order in which the men signed the document[28] (notwithstanding that she had just before that stated that “David signed first, then Terry signed it”),[29] and later clarified that she was relying on her normal practice in respect of witnessing documents.[30]
  1. [15]
    Ms Avery accepted that she was first requested to give evidence only shortly before the trial and then had to cast her mind back to the event that had occurred over four years previously and she conceded that her memory of the event may have faded.[31] When first asked about the prospect that the document had already been signed when she was called to witness the signatures, Ms Avery, at first, said: “I don’t remember that” and then clarified that she had no “specific recollection that that is not what happened.”[32] However and as was emphasised by the defendant, she also gave the following evidence:

“Are you saying that you have an actual recollection of what occurred on this occasion? --- No.  But, as I’ve just said, I have never signed a document without them signing it in front of me.”[33]

  1. [16]
    Secondly, the defendant called Ms Karlene Hibberd, who has been employed by the defendant since 26 October 2009, as the administration manager, providing assistance to Mr Thompson in the daily operation of Aussie World.[34] She confirmed her involvement in respect of:
  1. (a)
    the preparation of the letter dated 1 July 2013,[35] sent in response to the letter of the plaintiff’s solicitors, dated 24 June 2013,[36] and which included the following response to the suggestion that the contract had an end date of 20 October 2015:

“we are not aware of a contract with the end date of 20 October 2015. I would appreciate if you could please forward a copy to me at your earliest convenience”. 

She did this because of the absence of Mr Thompson overseas, on holiday, and upon the basis that she had gone to the folder where she kept original agreements and where she located the white copy (Exhibit 7) and observed that there was no reference to any end date in 2015;[37] and

  1. (b)
    the further letter dated 9 July 2013,[38] sent on the instructions of Mr Thompson, after receipt of the further letter from the plaintiff’s solicitors, dated 3 July 2013 and which had enclosed a photocopy of Exhibit 6. This confirmed the defendant’s position that:

“the original signed copy of this document which we hold in our possession does not state any term periods on the reverse side of the Location Agreement.”[39]

  1. [17]
    Ms Hibberd otherwise gave evidence:
  1. (a)
    that a matter of weeks prior to the trial, her attention was drawn, by Mr Thompson, to Exhibit 5 and that Mr Thompson stated (as he also explained in evidence)[40] that he had just found it amongst his files;[41]and
  1. (b)
    denying the suggestions put to her that she had been given a copy of Exhibit 6, by Mr Walsh, in the early months of 2013, after she had requested a copy from him, in order to update records.[42]
  1. [18]
    The dispute between the evidence of Ms Hibberd and Mr Walsh, is not helpful to the plaintiff’s case. On the face of things, there is no reason to doubt Ms Hibberd’s evidence that she had not been provided with any copy of Exhibit 6, or that she acted as she did in July 2013, upon the basis of her reference to Exhibit 7.[43]  By way of contrast, it may be noted that Mr Walsh’s contention that he had given her such a copy, only emerged in his cross-examination and as he was being pressed in respect of his explanation that when approached by Mr Thompson and being informed that the arrangement with Aussie World was being terminated, so that a larger operator could be brought in, he did not immediately or promptly refer Mr Thompson to the term of the agreement and did not provide any copy of Exhibit 6, until his solicitors sent it under cover of the letter dated 3 July 2013.[44]
  1. [19]
    Moreover, it would appear likely that the dispute between the parties has arisen because the defendant has acted to terminate the arrangement with the plaintiff, including as formally stated in the letter dated 6 May 2013,[45] in reliance on Exhibit 7 and the absence of a stipulated term for the agreement, on the face of that document.  In his evidence, Mr Thompson explained that prior to speaking to Mr Walsh, he had checked the white copy (Exhibit 7) and that was because the owner of Aussie World had spoken to him about bringing in another operator, Mr Patterson, and had asked whether there was a term for the agreement with Mr Walsh. Mr Thompson said that because he then had no independent recollection of it, he checked the white copy in the agreements folder.[46]
  1. [20]
    However and whilst this presents as an obstacle to the acceptance of the evidence of Mr Walsh, at least in its entirety, the critical factual dispute to be resolved is as to whether or not and before he gave Mr Thompson the white copy (Exhibit 7), on 25 October 2010, Mr Walsh had written the numerals “5” on to the rear of the green copy (Exhibit 6).
  1. [21]
    Despite the conviction of Ms Avery’s contention as to her practice in witnessing signatures, her evidence did not provide any actual recollection as to a short exchange, which occurred years previously and at the request of men with whom she was familiar. Also and as Mr Thompson disclosed in his evidence, her preparedness and also that of Mr Thompson, to speak independently of each other, was brought into question. That was because as Mr Thompson said, they had spoken about the questions she had been asked when she left the courtroom and prior to Mr Thompson’s return.[47] 
  1. [22]
    Further, there are other reasons to be concerned as to, at least, the reliability of Mr Thompson’s evidence:
  1. (a)
    As has already been noted, his original position that the undated contract (Exhibit 5) had been executed in March 2010, should not be accepted and it is obviously more likely that Mr Walsh returned, unannounced, within a short period of a matter of weeks and sought the proper execution of a contract, on 25 October 2010.
  1. (b)
    It is of some significance that Exhibit 5 was undated, as it left both the commencement and expiry dates of that contract uncertain. Notwithstanding that, as evidenced by Exhibit 5, the initial period or term was to be five years, because the numerals “5” had been written in ink in Clause 2 on the rear of that white copy. This is an important context to understanding what occurred on 25 October 2010, as is the further understanding that the contracts in respect of the 32 machines, were clearly intended to replace the earlier contract in respect of 23 machines, dated 6 March 2007 and which was also for an initial period of five years[48] and therefore, otherwise effective until March 2012. Moreover, it was Mr Walsh’s evidence that the games room into which the larger number of machines were placed, was ultimately open around 3 November 2010.[49]
  1. (c)
    In these circumstances, it is as the plaintiff contended, inherently improbable that, as Mr Thompson sought to describe it, there was no discussion as to why Mr Walsh had unexpectedly arrived, with a new contract or that Mr Thompson just agreed to execute it, without any knowledge or concern as to the term or period of the contract, even if at that stage, it may be inferred that there was no expectation other than that Mr Walsh would continue to have his machines at Aussie World.[50]
  1. [23]
    In this regard and generally, there is some considerable support for Mr Walsh’s evidence in the evidence of his wife, Mrs Roylene Walsh, in that:
  1. (a)
    she was concerned in this matter as a director of Aquavista Pty Ltd and she explained that in respect of the undated agreement, she had completed the entries appearing on the face of the white copy (Exhibit 5), in black ink, and that when her husband returned with the signed copy,[51] she “looked at it and it was undated and incorrectly witnessed. And [she] believed it to be invalid”;[52]
  1. (b)
    she specifically identified that the 5s written on the rear of Exhibit 5 were in her husband’s handwriting[53] and that she never wrote the numbers on that side;[54]
  1. (c)
    she further explained that despite her husband’s reluctance to do so, she insisted that he return “for him to take out again and have correctly dated, signed and filled in”;[55]
  1. (d)
    she identified that on the white copy of the agreement dated 25 August 2010 (Exhibit 7), she wrote all of the notations that appear in black ink, except for the date under her husband’s name and which also appears in black ink and unlike the other entries in respect of the execution of the document, which appear in blue ink. She confirmed that her entries had been transposed onto the face of the green copy (Exhibit 6) and that when she then gave these forms to her husband they were “annexed” to each other and that when her husband returned with the green copy (Exhibit 6), she checked it, to see that it was signed and witnessed and that the 5s were on the rear of the form;[56]and
  1. (e)
    she also identified that at a later stage and at about the time that these documents were given to the plaintiff’s solicitors, about June 2013, she made the pencil notations, which appear at the bottom of the rear page of each of the completed green pro-formas that are in evidence; respectively: “Page 2 - 6-3-07” on Exhibit 3 and “Page 2 - 25-10-10” on Exhibit 6.[57]
  1. [24]
    Neither Mr Thompson nor Mr Walsh (in his case, notwithstanding the dispute with the evidence of Ms Hibberd), presented as being dishonest as to their recollections of the events of 25 October 2010. But the reliability of the evidence of each of them, requires separate consideration. The reality is that their interaction on 25 October 2010, occurred many years ago. However, this was of singular importance to Mr Walsh but and as Mr Thompson admitted,[58] one instance of a more frequent type of dealing in the course of his employment at Aussie World.  Nevertheless and having regard to his experience, the inherent unlikelihood of Mr Thompson’s evidence that he was not told why he was executing another agreement and that he did so without knowledge of and completely unconcerned about the duration or term of the agreement he was executing, is a telling consideration against acceptance of his evidence.
  1. [25]
    As has been noted, the critical question is as to whether Mr Walsh wrote the numerals “5” onto the rear of the green copy before the exchange or transaction between he and Mr Thompson was completed on 25 October 2010. Such a conclusion would require the acceptance of Mr Walsh’s evidence that this is what occurred. His specific evidence as to the execution of the written agreement was as follows:[59]

“Okay.  Can you tell me what parts of the document Mr Thompson filled in, in your presence?---He filled out the – his name and Aussie World and his signature.

Yep?   And who filled in the date underneath his signature? ---He did.

And what parts of it did you fill in?‑‑‑I signed it, and I dated it.

Okay.  Now, had you signed and dated it after Mr Thompson did?‑‑‑That’s right.

Okay.  Did you write on that document anywhere else?‑‑‑Yes.  I turned it over and filled in the term for five years with a five-year extension.

And was that done in Mr Thompson’s presence?‑‑‑It was.

Did he see you do it?‑‑‑Yes.  He did.”

      However, Mr Walsh was not asked to specifically explain how it was that he has signed the front of the white copy (Exhibit 7) in blue ink, yet the notation as to the date “25-10-10” (under where his wife says she wrote his name “Terry Walsh”) and on the front of the form and the 5s on the rear of the green copy (Exhibit 6), appear in black ink.

  1. [26]
    Notwithstanding this, there are some objective indications of consistency with the evidence of Mr and Mrs Walsh and which do provide some assistance:
  1. (a)
    The appearance of the forms in evidence and relating to the three occasions when completion of a set of white and green copies occurred, is consistent with the evidence of Mrs Walsh that the notations in Clause 2 on the rear of the forms and the date of execution on the front of the white copy were not filled in, in advance, by her, but rather left to be filled in at execution. Further, all such entries have the appearance of consistency with the otherwise identified handwriting of Mr Walsh, on these forms.
  1. (b)
    Notwithstanding that there was no evidence adduced as to any handwriting analysis and nor as to the precise mechanism of marking by way of imprint onto the green copies of the pro-formas, it is notable that in respect of each of the completed green copies in evidence (Exhibit 3 and 6), the marking of the rear of each form with the numeral “5” has also resulted in an associated imprint on the front of each form, whereas there is no such associated marking on the front of those forms in respect of the pencil markings that Mrs Walsh explained she had placed there, subsequently and at a time when it may be concluded that those green copies were not annexed to or in conjunction with the white copy.[60]

A likely explanation is that the imprints relating to the 5s occurred because of annexure or association to the white copy, when those numerals were written onto the rear of the green copy and the criticism directed at Mrs Walsh’s actions in subsequently making the pencil markings on the green forms, as implying a preparedness to alter evidence, is not to be accepted for the reasons that follow.

  1. [27]
    The defendant also contended that the evidence of both Mr and Mrs Walsh should not be accepted because neither responded to Mr Thompson’s indication that their agreement with Aussie World was to be terminated or to the formal letter of termination dated 6 May 2013,[61] by any prompt production of their green copy, prior to their solicitor’s letter dated 24 June 2013.   And in Mr Walsh’s case, that criticism is linked to the dispute between him and Ms Hibberd. 
  1. [28]
    There is also a dispute with Mr Thompson, in that he refuted Mr Walsh’s evidence that he did, about a week after Mr Thompson first advised him of the written intention to bring in another larger operator, mention to him that he had a contract and was seeing a solicitor and that Mr Thompson’s response was “If you’re going to head down that track you can leave now”.[62] However and in the context of the other considerations that arise in respect of the assessment of the evidence of these two men, that is of less significance and particularly because the gravamen of the defendant’s criticism of Mr and Mrs Walsh, lies not in any verbal response but rather what is suggested to be a failure to promptly produce their green copy of the contract to Mr Thompson.
  1. [29]
    Although and in theory the defendant’s case only raised the suggestion that 5s had been added to the green copy, sometime after Mr Walsh left Mr Thompson with the white copy on 25 October 2010, it may be noted that the cross-examination of Mrs Walsh,[63] demonstrated that the contentions as to their responses to the notice to leave Aussie World are directed at a suggestion that the numerals were added after the notification of proposed termination and such a suggestion was expressly put to Mr Walsh.[64]  The simple answer to this criticism lies in the Court’s acceptance of Mrs Walsh’s evidence that she observed the numerals on the green copy, when Mr Walsh returned with it. It may be observed that each of Mr and Mrs Walsh, did not present as being particularly assertive by nature and certainly less so than Mr Thompson and that they were obviously entitled, as they said they did, to first seek legal advice. And as is not in dispute, Mr Walsh did return to execute another contract on 25 October 2010, which had details completed by Mrs Walsh. The most likely explanation for that is provided by Mrs Walsh’s evidence and it simply defies logic that having in the first instance raised concern as to the execution of the earlier documents (as evidenced by Exhibit 5), including as to the dating of the document and which would clarify the references to the five year periods in Clause 2, she would have been content to leave the matter, if her husband had returned without Clause 2 in a completed state, rather than insisting he return to Mr Thompson, again.
  1. [30]
    Another criticism of Mr Walsh’s evidence is that up until shortly before the trial, he had persisted with or allowed the plaintiff’s case to be presented on a false basis, in that the claim for damages, as calculated by the accountant engaged for the plaintiff, had included a significant amount for the holding costs in the nature of storage costs of the retained machines that had previously been at the Aussie World site, when no such costs had been incurred. This was raised in the cross-examination of Mr Walsh in the following passage:[65]

“MR MEREDITH:   Mr Walsh, in the first report from Ms Wilson dated 23 October 2013, she refers at page 12, paragraph 6.18, to holding costs in respect of all of the machines and there being the need for four storage units at $769 a month in total to date – to the end of the term, and that consequently made a part of that claim in the amount of $24,000.  I understand that you've dropped that part of your claim?‑‑‑That's right.

And you've said earlier today that you, in fact, store some 15 machines in your garage at home;  is that correct?‑‑‑That is correct.

You instructed Ms Wilson to make that part of the claim?‑‑‑When that claim was put together – two days after I moved all the machines out of Aussie World I entered hospital to have prostate surgery, and I had prostate cancer.  The recovery period I – was a couple of months.  In that time there were – excuse me – just the question again, please.  I've just forgotten what ‑ ‑ ‑ 

Well, who – did you give those instructions to Ms Wilson?‑‑‑I did give Ms Wilson – with – I had meetings with Glenn Carpenter, and they wanted to get a quantity accountant to do listings of trying to quantify what the business was worth.  At that stage that was when the – I didn't know what I was going to do with the storage, and my recovery time – that's how that came about.  I made an estimate that they would be stored, and then from there they had been moved to my garage.

So they were stored for some time?‑‑‑Yes. 

In four units, four storage units?‑‑‑No, not in four storage units.  They were stored for two months in a friend's – in a storage unit.  Not in a storage unit, in a shed, a rented shed.

HIS HONOUR:   But specifically in relation to the figures that Ms Wilson has included, do I understand you to agree with counsel that you provided those details to Ms Wilson as an estimate?‑‑‑Initially.

Initially?‑‑‑Yes, initially, I did.

MR MEREDITH:   But this was the position until Ms Wilson provided a supplementary report which is dated 25 February 2013, so that's for nearly a year and a-half it was – it was part of your claim that $24,000 was being claimed on behalf – on account of storage?‑‑‑No-one ever brought that up as a claim.

That didn't cross your mind to instruct your solicitors to – for that part of the claim to be amended?‑‑‑No, it wasn't. 

Thank you.  So who gave the quote – sorry, just going back to that storage units, who gave the figures with respect to the storage units to Ms Wilson to prepare that report;  was that yourself?‑‑‑I did.

You did.  So you went and got a quote and gave her those and this is ‑ ‑ ‑?‑‑‑No.  I had a friend that had a storage shed, and I asked him how much he was paying per month and that's how I got my figure on it.”

  1. [31]
    As has been noted, the correct position was clarified prior to trial and corrected in the calculations of the accountant. The explanation of Mr Walsh, in the context of the exigencies of his situation and dealing with his legal advisors and the engagement of the accountant, is plausible and therefore, this is not an issue that significantly detracts from his credibility or reliability as a witness.
  1. [32]
    In all of the circumstances and notwithstanding the noted concern about the conflict of his evidence with that of Ms Hibberd, on balance, Mr Walsh’s evidence should be accepted as to the interactions with Mr Thompson and Ms Avery on 25 October 2010. Accordingly, it is found that the essential facts as to the execution of the agreement between the parties are that:
  1. (a)
    Mr Walsh requested that Mr Thompson and he execute a new agreement, due to the perceived deficiency of the agreement executed shortly before then and in respect of the increased number of machines to be placed in the new location at Aussie World;
  1. (b)
    the earlier agreement had purportedly included an initial period of five years but was undated and was not witnessed by a third person;
  1. (c)
    the operation of the increased number of machines in the games room was finalised later and about 3 November 2010;
  1. (d)
    although the men executed the agreement on the front of the white copy and before Ms Avery attended to endorse her signature and details as a witness to both signatures, prior to the involvement of Ms Avery but after both men had signed the white copy, Mr Walsh, in the presence of and to the knowledge of Mr Thompson, wrote the numerals “5” into Clause 2 on the rear of the green copy and while it was annexed or connected to the white copy; and
  1. (e)
    after the involvement of Ms Avery, Mr Thompson was given and retained the white copy, which, through oversight (on the part of both men), had not been similarly endorsed in Clause 2 on the rear, either by any marking or imprint when the endorsement was made on the rear of the green copy, or by any separate writing.

Liability: Breach or Termination?

  1. [33]
    The question as to whether there was breach of contract, as opposed to valid termination by the defendant, depends upon whether or not, in the circumstances as found, the contract entered into on 25 October 2010, included a defined initial period or term of five years. If it did, then it was not in dispute that there had been breach of contract, due to an invalid purported termination and repudiation of the agreement. Otherwise, there was no issue raised as to the agreement being “one at will” and able to be terminated upon reasonable notice or that the notice given to terminate on 15 July 2013 (with the removal of machines by 19 July 2013), as formally advised by the letter dated 6 May 2015 and after earlier verbal notice, was other than reasonable in the circumstances.
  1. [34]
    Understandably, for the defendant, emphasis was sought to be placed on the white copy and the absence of completion of Clause 2 on the rear of that copy of the contract and the contention that this document evidenced the contract that was formed when the men executed the agreement, which on Mr Walsh’s evidence, occurred before he wrote the numerals “5” on the rear of the green copy. Although and for the defendant, it was also conceded that on that thesis, a question might arise as to whether there was then an agreement to vary that contract and that the critical question remained the factual dispute as to whether or not the 5s were written onto the green form as described by Mr Walsh. However, the essential point that was correctly made, is that the pleaded case for the plaintiff is simply to the effect that the written contract entered into on 25 October 2010, contained the clause in respect of the initial period, as completed on the rear of the green copy. In that sense, it was the plaintiff’s case that it was the green copy (Exhibit 6) that properly evidenced the written agreement.[66]
  1. [35]
    In the first instance, the submissions for the plaintiff sought to rely upon the concept of offer and acceptance as a foundation of the classical theory of contract formation. And it was this same approach which tended to underlie the contention for the defendant that acceptance occurred when Mr Thompson signed the written agreement and that on the evidence he did so at a time prior to the addition of the numerals “5”, in Clause 2 on the green copy. However and as will be noted by reference to statements drawn from some authorities, also embraced by the plaintiff (and notwithstanding that these cases deal with different and differing factual situations), an alternative approach may be to consider whether the evidence establishes the mutual assent by the parties to the conditions of the agreement, as evidenced by the green copy (Exhibit 6).
  1. [36]
    In the instance of the making of a written agreement, it may usually be accepted that the execution of the document containing the agreed conditions, by appendage of signature, will finalise the process of offer and acceptance or indicate the necessary mutual assent. But in the affairs of humans, things may not always be so straightforward and questions of fact may arise as to when the process of execution and mutual assent is finalised. For instance and moving away from the precise facts of this case, such an approach may be appropriate irrespective of whether or not the parties to a written agreement, first sign in the designated place for execution and then make and or initial or acknowledge any necessary corrections or additions on the printed pages of the document, or do so vice versa. And this may be so, irrespective of whether any independent witnessing of a party’s signature occurs before or after, all of the corrections or additions are made.
  1. [37]
    As was noted in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd:[67]

“The objective theory of contract requires an external manifestation of assent to an offer.”[68]

And in that case, McHugh JA (with whom Samuels JA agreed) stated a test in respect of the necessary factual determination, in the following terms:

“The ultimate issue is whether a reasonable bystander would regard the conduct of the offeree, including his silence, as signalling to the offeror that his offer has been accepted.”[69]

Further, the decision in Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd is cited by Allsop J in Branir Pty Ltd & Ors v Owston Nominees (No. 2) Pty Ltd & Anor,[70]amongst other authorities, for a passage that included the following:

“….a number of authorities discuss the need not to constrict one’s thinking in the formation of contract to mechanical notions of offer and acceptance. Contracts often, and perhaps generally do, arise in that way.  They can also arise when business people speak and act and order their affairs in a way without necessarily stopping for the formalities of dotting i’s and crossing t’s or where they think that they have done so. …. Sometimes this failure occurs because, having discussed the commercial essentials and having put in place necessary structural matters, the parties go about their commercial business on the clear  basis of some manifested mutual assent, without ensuring the exhaustive completeness of documentation.  In such circumstances, even in the absence of clear offer and acceptance, and even without being able (as one can here) to identify precisely when a contract arose, if it can be stated with confidence that by a certain point the parties mutually assented to a sufficiently clear regime which must, in the circumstances, have been intended to be binding, the court will recognise the existence of a contract. ….The essential question in such cases is whether the parties’ conduct, including what was said and not said and including the evident commercial aims and expectations of the parties, reveals an understanding or agreement or, as sometimes expressed, a manifestation of mutual assent, which bespeaks an intention to the legally bound to the essential elements of a contract.”[71]

  1. [38]
    Similarly and in Brambles Holdings Ltd v Bathurst City Council,[72] Heydon JA discussed the limitations of the offer and acceptance analysis in the classical theory of contract formation and examined authorities that deal with an approach, when necessary, that is based on the ascertainment of mutual assent manifested by conduct.[73]  In that examination, the following pertinent observations were made:[74]

“In New Zealand Shipping Co Ltd v A M Satterthwaite & Co Ltd [1975] AC 154 at 167, Lord Wilberforce, in delivering the majority advice of the Privy Council about a bargain evidenced by a bill of lading between a shipper and a stevedore made through a carrier as agent, said:

“It is only the precise analysis of this complex of relations into the classical offer and acceptance, with identifiable consideration, that seems to present difficulty, but this same difficulty exists in many situations of daily life, e.g. sales at auction;  supermarket purchases;  boarding an omnibus;  purchasing a train ticket;  tenders for the supply of goods; offers of rewards; acceptance by post;  warranties of authority by agents; manufacturers’ guarantees; gratuitous bailments; bankers’ commercial credits.  These are all examples which show that English law, having committed itself to a rather technical and schematic doctrine of contract, in application takes a practical approach, often at the cost of forcing the facts to fit uneasily into the marked slots of offer, acceptance and consideration.””

Later it was noted[75] that Ormiston J had in Vroon BV v Foster’s Brewing Group Ltd,[76] approved the following statement of Cooke J in Meates v Attorney-General [1983] NZLR 308 at [337]:

“Those passages were cited with approval by Ormiston J in Vroon BV v Foster’s Brewing Group [1994] 2 VR 32 at 82-3.  He also approved the following statement of Cooke J in Meates v Attorney-General [1983] NZLR 308 at 377:

“I would not treat difficulties in analysing the dealings into a strict classification of offer and acceptance as necessarily decisive in this field, although any difficulty on that head is a factor telling against a contract.  The acid test in the case like the present is whether, viewed as a whole and objectively from the point of view of reasonable persons on both sides, the dealings show a concluded bargain.”

Ormiston J said (at 81):

“… I am prepared to accept … that agreement and thus a contract can be extracted from circumstances where no acceptance of an offer can be established or inferred and where the most that can be said is that a manifestation of mutual assent must be implied from the circumstances.  In the language of para. 22(2) of the Second Re-statement on Contracts: ‘A manifestation of mutual assent may be made even though neither offer nor acceptance could be identified and even though the moment of formation cannot be determined’.”

He concluded (at 83):

“…there is now sufficient authority to justify the court inquiring as to the existence of an agreement evidenced otherwise than by offer and acceptance.”

  1. [39]
    In short, it may be necessary to look at the entirety of the dealings or interactions that are involved in the formalisation of a written agreement. Where, as here, there is the context of the earlier document that was being replaced and which did contain a reference to an initial period of five years and where the entire transaction was relatively short and designed for each party to be left, at the conclusion, with a duplicate copy of the written agreement, it is appropriate to look at the entirety of that transaction.
  1. [40]
    Further and notwithstanding that her involvement may, in a sense, be seen more in the nature of evidencing the execution of the contract, rather than being an essential part of that execution, the process of execution was not formalised or finalised, until Ms Avery acknowledged the signatures of the parties, as a witness and the copies separated so that each might retain a duplicate copy. Neither does it appear to matter that on the findings that have been made, she did so without having been present nor seeing the men place their signatures on the document. On the findings that have been made, it must be concluded that the men sought to have Ms Avery’s affirmation that they had signed the document, by necessary representation that they had done so, immediately before she attended. Such representation and engagement of Ms Avery, is conduct in affirmation of the agreement and the necessary request by the men to have Ms Avery affirm the placement of their signatures occurred after the numerals “5” had been added to the rear of the green copy and is to be seen as conduct affirming that their agreement included the condition, as Clause 2 was completed on the rear of the green form.
  1. [41]
    As has been noted, in those circumstances, the fact that Mr Thompson, or the defendant, was left with an imperfect duplicate copy of the agreement must necessarily be regarded as due to mutual error or oversight and it is immaterial that at some later point in time Mr Thompson, acting for the defendant, proceeded upon the basis of the imperfect copy which had been retained by the defendant and without specific recall of what had occurred on 25 October 2010.
  1. [42]
    Accordingly, the contract that was mutually agreed by the time Mr Walsh left the defendant’s offices on 25 October 2010, included a condition for an initial period of five years and therefore, the purported termination of this contract by the defendant, on 15 July 2013, was in breach of and a repudiation of that contract. Therefore, the plaintiff was entitled to terminate and seek damages.

Assessment of damages

  1. [43]
    In such circumstances, the general principle is that the plaintiff is entitled to recover any loss sustained by reason of the breach of contract, upon the basis of being placed, so far as money can do it, in the same situation, as if the contract had been performed.[77]  In this case, the primary approach of the plaintiff was in estimation of the profit it was denied in the remainder of the initial period of the contract. That estimate was challenged, in some respects, by the defendant and as well, issues were raised as to the question of mitigation of damages.
  1. [44]
    The onus is on the plaintiff to prove that loss has occurred. On the evidence, there is no doubt that there has been loss of earnings that may have been derived by the plaintiff in the balance of the initial period of the contract. However, the assessment of the loss of the plaintiff requires regard to be had to the plaintiff’s loss of profit in respect of that income and therefore, the expenses ordinarily incurred in deriving such income and any savings because of the fact that there was no operation at the Aussie World site. As disclosed in the evidence, that assessment is not able to be done with mathematical precision, particularly because it requires some elements of assumption and estimation. What is required is reasonable certainty[78] and as observed by Devlin J, in Biggin & Co. Ltd v Permanite Ltd:[79]

“It is only where precise evidence is obtainable the Court naturally expects to have it. Where it is not the Court must do the best it can.”

  1. [45]
    Each party engaged and called an appropriately qualified forensic accountant. For the plaintiff, Ms Joanne Wilson, an associate director of the forensic accounting division of Grant Thornton,[80] undertook the primary analysis of the Coastal Amusements financial records, in order to provide an assessment of the loss occasioned to that business,[81] as a consequence of being deprived of the contractual right of location of its machines at the Aussie World site, after 15 July 2013 and up to the expiry of the initial term of that contract, on 24 October 2015.
  1. [46]
    Ms Wilson analysed that position upon the basis of two scenarios. Scenario one was premised upon an assumption of 0% growth per annum in the takings for the remaining period and scenario two premised upon an assumption of 7.3% growth per annum, in that period. The loss estimated by Ms Wilson, pursuant to those scenarios, was respectively, $122,694 and $138,870. The underlying methodology that was adopted was to assess the expected takings for the balance of the initial period and to subtract that proportion of the variable expenses of the business that were referable to the conduct of the business at the Aussie World site and therefore, not likely to be incurred after the termination.
  1. [47]
    For the defendant, Ms Anita Owens, a partner at Worrells, conducted a review of the analysis prepared by Ms Wilson and her estimation in respect of each of the scenarios postulated by Ms Wilson, was respectively, $38,490.19 and $52,451.46. The difference in conclusion is due most substantially to the approach taken:
  1. (a)
    upon the instructions given to each accountant, in respect of an issue raised in relation to mitigation of damages;
  1. (b)
    to the treatment of the variable expenses of the plaintiff; and
  1. (c)
    to the treatment of motor vehicle and telephone expenses.
  1. [48]
    In due course, it will be convenient to deal with these issues in reverse order. However, it is first necessary to note some evidence that provides context for consideration of these issues:
  1. (a)
    During and for the remainder of the contract that was breached, the location of the plaintiff’s machines at the Aussie World site, represented a major portion of the Coastal Amusement’s business, whether considered in terms of the number of machines located at a single site or the proportion of income generated.[82]
  1. (b)
    The Aussie World site was for the plaintiff and for the provider which replaced the plaintiff, “Leisure House Pty Ltd” (a considerably larger operator, in comparison to Coastal Amusements),[83] the single largest site (in terms of the number of machines placed there) in the Sunshine Coast area and Leisure House, in replacing the plaintiff, was able to place about 50 machines there, in comparison to the 32 placed by the plaintiff.[84]
  1. (c)
    Leisure House operates at between 70 to 100 locations throughout Queensland and 20 to 25 locations on the Sunshine Coast, including and in addition to Aussie World, having about 20 machines at Australia Zoo and about 45 machines at “Top Shots”.[85]
  1. (d)
    At the time of trial, Mr Walsh described that Coastal Amusements was still operating at four sites, with 6 machines (including 2 that were relocated from Aussie World) at a service station at Kybong, 1 machine at another service station on the other side of Gympie, 1 machine (that was relocated from Aussie World) at the Grand Palais Resort at Alexandra Headlands and a pool table at the University of the Sunshine Coast, Varsity Apartments.[86]
  1. (e)
    Mr Walsh confirmed that after removing Coastal Amusements’ machines from the Aussie World site, 14 of the machines were sold, 3 relocated and the remaining 15, were stored in the garage at the Walsh’s residence.[87]
  1. (f)
    Notwithstanding the termination of the contract with the defendant, the operation of the Coastal Amusements business had not ceased and at the time of trial, there was a tender to place 6 machines at the Big Top Shopping Centre at Maroochydore, with the potential to thereby utilise a further 5 of the retained machines.[88]
  1. [49]
    As far as the vehicle and telephone expenses are concerned, Ms Wilson effectively excluded these, as fixed expenses or at least as not likely to significantly vary after the removal of the machines from the Aussie World site. Accordingly, she did not allow for any variable component of such expenditure, by way of reduction of her assessment of the lost income from the machines placed at the Aussie World site. Despite the proportion of the income generated at that site and the implication that after 15 July 2013, there was no longer any need to periodically travel there, as Ms Wilson reasoned, it may not necessarily follow that there were any significant savings in respect of these expenses. Ms Wilson pointed out that a number of the components under these headings are more in the nature of fixed costs; for example motor vehicle registration and insurance and fixed telephone contracts. She also had regard to any differences disclosed in the management accounts over the financial periods involved.[89]
  1. [50]
    Although Ms Owens had, in preparing her report, expressed and factored in a view that there would be variable components to be taken into account, in her evidence she conceded that her approach was to simply apportion one third of these expenses, on the basis that Coastal Amusements operated at three sites. However, in her evidence, she conceded:
  1. (a)
    her experience of some, but not all, businesses with monthly telephone contracts;[90] and
  1. (b)
    the absence of clear indicia of substantial difference in the amounts included for motor vehicle and telephone expenses in the management accounts when comparing the 2012 and 2013 years to the 2014 financial year.[91]
  1. [51]
    In respect of the treatment of motor vehicle and telephone expenses and in the context of an assessment which necessarily is conducted without an expectation of exactitude but rather reasonable approximation, the approach and evidence of Ms Wilson is to be preferred, notwithstanding any hesitation that it may err on the side of some favourability to the plaintiff.
  1. [52]
    The other substantial issue in relation to the treatment of variable expenses, is related to how the allowance for stock purchases was to be calculated. The issue may be summarised as follows. Each of the accountants proceeded upon the basis that an allowance was to be made for the variable cost of purchases of the prizes or merchandise provided in redemption style machines.[92]  Ms Wilson proceeded upon the basis that prior to termination, approximately 50% of the plaintiff’s redemption machines were situated at the Aussie World site and accordingly, took into account an amount for stock purchases on the basis of a 50% apportionment.[93]
  1. [53]
    However, a substantial difference in Ms Owens’ calculations occurs because she takes issue with the methodology of applying only 50% of the historical figures for stock purchases, in the first instance. Ms Owens points to the fact that the comparison of the figures in respect of the total net income for Coastal Amusements (i.e. income from all machines less commissions or proportion paid to site owners) demonstrates that for the 2012 financial year, 68.81% was generated from the Aussie World site and in the 2013 financial year, the percentage was 83.18%. Accordingly, she apportioned the variable cost for stock purchases for these years, according to those rates and this led her to conclude that the rate of variable expense to be deducted from the calculation of the expected income for the balance of the initial period of the contract (including the different amounts she allowed for motor vehicle and telephone expenses), was 32.5%, as opposed to the rate of 16 % calculated and applied by Ms Wilson.
  1. [54]
    As is pointed out for the plaintiff and in contrast to Ms Wilson’s evidence in support of her methodology, Ms Owens conceded that her adoption of those percentages of 68.18% and 83.18% might well be too high.[94]  An apparent problem with her approach may be that there is logically, an underlying but unverified assumption that it is the redemption machines at the Aussie World site, rather than any other, which tend to explain the imbalance in the receipts that she identified and accordingly, the further implication that this means greater stock costs because of the prospect of more frequent redemptions.  The difficulty is that to the extent that the evidence provides any assistance, it may tend to point in a different direction.  This is because and notwithstanding that there may be the vagaries of different sites to be taken into account, the 50% proportion of the redemption machines situated at other sites, represented about 9 out of 11 total machines, whereas and in respect of the Aussie World site, the redemption machines represented about 9 or 10, of 32 total machines.[95] Also it may be noted that Ms Wilson otherwise apportioned the other identified variable expense (without any issue being raised by Ms Owens) and in respect of insurance and repairs and maintenance, on the basis that 74% of the plaintiff’s machines had been located at Aussie World. Accordingly and on the face of things, an implication may well be that if it is not the greater number of machines there, which explains the higher proportion of takings at the Aussie World site, it may well be the influence of the predominance of the non-redemption machines.
  1. [55]
    Again and on balance, the approach in the evidence of Ms Wilson is to be preferred. Although and once again it should be noted that her approach of taking forward a percentage of 16%, as the amount of variable costs to be deducted from the predicted earnings of Coastal Amusements, erred towards favouring the plaintiff. This is because that is the lower of the figures she calculated respectively for the 2012 and 2013 financial years. For the 2012 year she had calculated or derived a figure of 21.7% but discarded reliance on that percentage because of her understanding that larger purchase outlays were incurred in that year, in order to stock new machines with merchandise and due to “the purchase of one-off bulk merchandise.” It is not clear how that assumption is supported by the evidence that the additional machines were placed at the Aussie World site in late 2010, but even if that understanding is correct, it is, as Ms Owens correctly observed, likely that any excess merchandise or stock purchased in the 2012 financial year, would be available for later use and particularly in the next subsequent period and accordingly, may explain the lower percentage derived for the 2013 financial year. A recognised alternative approach may have been to adopt an averaged figure.[96]
  1. [56]
    These differences in analysis of the available material go some way to explaining the different conclusions of these accountants. However and before turning to the issue of mitigation of damages and the differential treatment of this issue in the calculations and which provides the most substantial difference in the results, it is also convenient to note that:
  1. (a)
    it was common ground that the methodology adopted by Ms Wilson and not departed from by Ms Owens (except in the respects that have been noted) proceeded upon the basis of:
  1. (i)
    projecting the net earnings calculation for Coastal Amusements, as derived from the machines placed at the Aussie World site, for the 2013 financial year, across the remainder of the initial period of the contract;
  1. (ii)
    reducing that by the calculated percentage representing the variable costs attributable to the placement of those machines at that site;
  1. (iii)
    allowing, in respect of scenario two, an increase of 7.3% (commonly calculated as the growth in net income from the 2012 to 2013 financial year); and
  1. (iv)
    the calculation of the value of the lost income, as at 15 July 2013, by applying a discount factor of 10%; and
  1. (b)
    therefore, the task undertaken by Ms Wilson and reviewed by Ms Owens is more complicated than may first have been indicated by the earlier notations as to the essential matters of difference between them.
  1. [57]
    Whilst what has been so far indicated is a general preference for the approach of Ms Wilson, that is not without the observed reservations and it may be noted that the prospect of extensive recalculation being undertaken is at least confronted by the absence of any precise basis for determining what proportion of variable expenses might properly be included. However and subject to dealing with the issue in relation to mitigation of damages, it is not necessary that any such recalculation be undertaken. There are other variables that enter into the assessment. It may be noted that the application of a discount rate of 10% is not necessarily favourable to the plaintiff’s position. On the other hand, the assumption of the steady increase at the rate of 7.3% per annum through the remainder of the initial period, is also a calculation made by Ms Wilson that is based on an assumption that is not otherwise supported or refuted in the evidence.
  1. [58]
    Accordingly and subject to the issue to be further discussed as to mitigation of damages, it is appropriate to look to the lower of the figures calculated by Ms Wilson, noting that the findings that have been made otherwise indicate some substantial leaning towards her approach. Before subtracting an amount of $1,605 in respect of mitigation of damages, the figure calculated by Ms Wilson, on scenario one, is $124,299 and notwithstanding that, it does not allow for any growth in receipts over the balance of the initial period, it may be concluded that there is reasonable satisfaction that this figure represents a reasonable assessment of the plaintiff’s loss. This may be exemplified by an understanding that leaving aside an amount of $60,045, further deducted by Ms Owens on the basis of a failure to mitigate loss, her calculation of the losses under both scenarios, ranged from $99,535.19 to $112,496.46 and that otherwise, the loss calculated by Ms Wilson, on scenario two, was $140,475[97] and that $124,299 represents approximately 60% of the differential in lowest to highest approximation by these witnesses.
  1. [59]
    The issue as to mitigation of damages arises in two respects:
  1. (a)
    first, there is a contention that the plaintiff, acting through Mr Walsh, made inadequate attempts to relocate machines at other locations; and
  1. (b)
    secondly, there is an issue as to the retention, rather than sale, of the machines that were not relocated.
  1. [60]
    Notwithstanding the discussion in Knott Investments Pty Ltd v Fulcher & Ors,[98] the principle sought to be invoked here is that the plaintiff is not entitled to recover for avoidable loss, through any failure to take reasonable steps to mitigate the loss flowing from the breach of contract.  It is the demonstration of failure to avoid loss, through unreasonable action or inaction, which is necessary.[99]  The burden or onus of proof as to the failure of the plaintiff to take such reasonable steps, is upon the defendant.[100]  The question is one as to fact, to be determined in the context of individual cases.[101]
  1. [61]
    Only the second issue as to mitigation, was expressly reflected in the analysis undertaken by the accountants.
  1. [62]
    In the context of the evidence that in consequence of the notice given to the plaintiff to remove its machines from the Aussie World site, the plaintiff entered into some unsuccessful negotiations with the proprietor of Leisure House, Mr Patterson, in respect of the sale of some machines and between June 2013 and August 2014, otherwise sold 14 of the machines that had been situated at Aussie World, Ms Wilson proceeded on the basis that these were receipts that were derived due to the changed circumstances, but earlier than may have otherwise been expected. Further and in the first instance, she proceeded upon the assumption that all of the machines situated at Aussie World would have been sold at the end of the initial period of the contract and the contractual arrangements then being concluded. Accordingly and upon those premises:
  1. (a)
    She offset an amount in respect of the earlier incidence of the cost of removing the machines from the Aussie World site and calculated the value of the benefit cash flow obtained from the sale of machines by the plaintiff, at an earlier time and assuming that all machines would have been sold at the end of the initial period.  She then converted that assessed benefit to a value to the plaintiff as at 15 July 2013 and applied that, as a reduction of the loss that she had otherwise assessed. [102]
  1. (b)
    Originally and upon the later corrected understanding that there were also “holding costs” (in the nature of the costs of storage of the retained machines)[103] she proceeded to include her understanding of those holding costs in the calculation, which then served to increase the plaintiff’s claim.[104]   After correction of that misunderstanding, the amount calculated, upon the premises that have been outlined, as a reduction of the plaintiff’s loss, was $5,133.[105]
  1. (c)
    However and upon further revision and as Ms Wilson’s evidence was presented at trial, the amount of reduction was $1,605.[106]  This was effectively because the revised assumption was that only those machines that had been sold after 15 July 2013, would have been sold, but not until after 24 October 2015.[107]
  1. [63]
    By way of contrast, Ms Owens’ approach was to take the total amount of $60,045 (as calculated by Ms Wilson, in annexure S6 to her supplementary report and as the wholesale value, excluding GST, of the machines that Coastal Amusements had at the Aussie World site)[108] from the loss of income that she had otherwise calculated.  In her report, Ms Owens states her rationale as follows:

“In the event the machines were sold at wholesale value immediately after removal from the premises, any loss suffered would have been substantially reduced.”[109]

  1. [64]
    Although she recognised that the machines were the capital of the Coastal Amusements business and that her approach does not take into account whether there had been any capital gain or loss, Ms Owens sought to explain her approach on the basis of an understanding that an unspecified proportion of the cost of purchasing some machines had been included as an expense item in the 2012 financial statements[110] and that she did not have information that would have enabled her to calculate any actual loss or gain on the sale of the machines.[111] 
  1. [65]
    Moreover, she sought to disagree with a proposition that the exercise that she and Ms Wilson had otherwise undertaken, was in assessment of loss of profit to the plaintiff and to explain as follows:[112]

“…the variable costs are cash outgoings at the business. I haven’t taken into account the profit - profit adjustments for depreciation or non-cash items.”[113]

However, it can be observed that this response does not effectively address the apparent problem. Ms Owens does not, otherwise than has been noted, directly take issue with the approach or methodology of Ms Wilson and whilst that approach particularly focused on the loss of income from the machines that had been situated at the Aussie World site and the assessed difference in outgoings or variable costs, it was nevertheless an assessment of lost profit.  This is because it otherwise proceeded upon the basis that the other costs (including non-cash costs) were fixed or would have been incurred or deducted in any event. 

  1. [66]
    It can also be observed that it may be part of the problem that in respect of this aspect, Ms Wilson’s approach had commenced on the misunderstanding that there were “holding costs” to be taken into account and also and until Exhibits 12 and 13 were produced, had been further complicated by an assumption that all the machines would have been sold after 24 October 2015, in any event.
  1. [67]
    Irrespectively, the question for the Court is whether it has been established that the plaintiff has unreasonably failed to sell the machines after the termination of the contract or that the plaintiff has acted unreasonably or failed to act reasonably, in respect of the placement of the machines at alternative operating venues.
  1. [68]
    For the defendant, it was contended that the plaintiff’s claim for damages should entirely fail “on the basis that Mr Walsh’s evidence as to mitigation has been wholly unconvincing”.[114] However, the problem is that the primary criticism, apart from the failure to sell the machines, is that Mr Walsh’s explanation as to his attempts to find alternative placements “was thin, at least” and that Mr Walsh said that he never sent emails or letters to prospective venues, although he also said that this was not done in the normal course of his business.[115] The problem with this contention is that the question is not whether Mr Walsh exhausted every possibility of finding an alternative location or utilised every conceivable or even reasonable method of seeking such alternatives but rather, whether it is demonstrated that the plaintiff has not acted reasonably in securing the alternative placement of machines. In the circumstances, that has not been demonstrated. There is no evidence of any available placement or opportunity of placement that the plaintiff has failed to pursue or obtain and in the context of what has been noted as to the limited market opportunities, it may be expected that Mr Walsh, due to his experience in that market, would have an understanding as to where the opportunities might be, without resort to widespread emails or letters.
  1. [69]
    However, the restrictive market and limited opportunities for placements of the machines does underscore the decision of the plaintiff to retain some 15 machines, particularly as it may be inferred that there had been a need to obtain machines in order to fulfil the increased obligation under the 2010 contracts with the defendant.
  1. [70]
    The defendant relies on the evidence of Mr Patterson and his email exchanges with Mr Walsh and the proposition as it was put to Mr Walsh, of his refusal of the offer of Mr Patterson, made at the end of May 2013, to purchase 20 machines for $28,000.[116]
  1. [71]
    In the first instance, it may be noted that it is not clear how that evidence is related to the approach of Ms Owens, in utilising a figure of $60,045 and there are difficulties in attempting to reconcile the evidence as to Mr Patterson’s offers and what Mr Walsh did realise upon the sale of 14 machines and the values of the retained machines.
  1. [72]
    Further and again, an underlying problem is that the machines are the capital of an ongoing business. Obviously the retention of unutilised machines, does raise a question as to the utility of doing so and that may be particularly so if there were associated holding costs or costs of retention of the machines, in consideration. But and as has been noted, that is not a component of the plaintiff’s claim. Further, it is evidenced that the plaintiff did act to downsize the number of retained machines and did achieve the alternative placement of three machines and that there had been a tender for the placement of a further five machines.
  1. [73]
    It is to be concluded that not only does this evidence not provide a basis for the approach taken by Ms Owens but it has not been demonstrated that the plaintiff has acted other than reasonably in the circumstances. In particular, it may be noted that some 14 machines were sold and realised $27,864 (excluding GST) and that in these circumstances, Ms Wilson’s approach to calculating the value of the benefit of the early receipt of that sum, as a benefit to plaintiff in mitigation of damages is a more appropriate approach.

Conclusions

  1. [74]
    Accordingly, damages are assessed at $122,694 and no issue has been raised as to Ms Wilson’s calculation of interest to 2 March 2015 in the sum of $13,495 or as to further application of the rate of $21.83 per day, to the date of judgment;[117] which results in a further sum of $12,464.93 (571 days x $21.83) and a total sum for interest, of $25,959.93.
  1. [75]
    Therefore, there will be judgment for the plaintiff in the sum of $148,653.93, including $25,959.93 interest and the parties will be further heard in respect of costs.

Footnotes

[1] This was filed pursuant to leave granted by the Court and in order to identify the named corporate entities, as the appropriate parties to this proceeding.

[2] When the plaintiff ceased operations and then removed its machines from the defendant’s site: see further amended statement of claim, filed 05/12/14, at 5(A).

[3] See: amended defence, filed 19/01/15, at [3](f).

[4] See: Ex. 1, at p 1: letter, David Thompson to Terry Walsh, dated 06/05/13.

[5] This is the effect of the evidence as to the continuation of the arrangement in place from the time that Mr Walsh purchased an existing business, which included machines that were placed at Aussie World, in 2002.

[6] This is reproduced with the apparent errors as appear in the type written pro-forma.

[7] T1-24.39-42 (per Mr Walsh) and T2-34.26-35 (per Mr Thompson).

[8] As evidenced by the white copy, which had been retained by the defendant and was admitted as Ex. 5.

[9] T2-41.9-10.

[10] T1-15.35.

[11] T2-41.21-24.

[12] T1-24.23-32.

[13] T1-24.44-45.

[14] T1-24.35 – T1-25.8.

[15] T1-25.10-15, T1-25.46 – T1-26.10 and T1-46.45 – T1-47.27.

[16] T1-25.17-36.

[17] T1-46.32-40.

[18] T1-25.35-41.

[19] T1-93.38-1-94.6.

[20] T2-48.43-44.

[21] T1-94.45-1-95.1.

[22] T2-45.15-46.

[23] T1-95.46.

[24] T1-94.10-15.

[25] T2-3.20-35.

[26] T2-4.1-2.

[27] T2-4.7-8.

[28] T2-4.29-32.

[29] T2-4.17.

[30] T2-12.15-45.

[31] T2-9.5-18.

[32] T2-7.3-10.

[33] T2-12.41-43 and cf: T2-13.20 – T2-14.15.

[34] T2-15.1-23.

[35] Ex. 1, at p 4.

[36] Ex. 1, at pp 2-3.

[37] T2-15.25 – T2-17.15.

[38] Ex. 1, at p 9.

[39] Ex. 1, at pp 5-8. And see T2-17.17 – T2-18.40.

[40] T2-41.29-37.

[41] T2-20.40 – T2-21.25 and T2-22.27 – T2-23.30.

[42] T2-23.40 – T2-24.11.

[43] Including as to anything that might be made of the contention for the plaintiff of the potential application of reasoning derived from Jones v Dunkel (1959) 101 CLR 298, to the defendant’s failure to produce a schedule to which Ms Hibberd made reference: see the plaintiff’s written submissions, at [31].

[44] T1-43.8 – T1-46.20.

[45] Ex. 1, at p 1.

[46] T2-48.23-39.

[47] T2-35.37-2-36.21.

[48] See: Exhibits 3 and 4, where in each instance “5” are apparently written in ink, in Clause 2.

[49] T1-26.11-14.

[50] Cf: T2-48.43 – T2-49.7.

[51] Presumably the green copy, which was not produced in evidence. Mrs Walsh said it was not retained because it was regarded as invalid: T1-60.35-41.

[52] T1-59.11 – T1-60.10. It may be noted that on the face of Ex. 5, Mr Thompson and Mr Walsh appear to have signed to witness the signatures of each other.

[53] T1-60.45-1-61.4.

[54] T1-66.5-7.

[55] T1-60.5-25.

[56] T1-61.10 – T1-62.11, T1-62.30-41 and T1-63.35 – T1-64.35.

[57] T1-64.37 – T1-66.3.

[58] T2-44.1-12.

[59] T1-25.1-15.

[60] As was expressly noted in respect of Ex. 7, which was left with Mr Thompson on 25/10/10: T2-47.14-28.

[61] Ex. 1, at p 1.

[62] Cf: T1-43.20-41 and T2-48.1-16.

[63] T1-64.1-25

[64] T1-47.31 – T1-48.40.

[65] T1-55.34 – 1-56.37.

[66] It may be noted that Clause 16 on the rear of the pro-formas is headed “Entire Agreement” and provides “the contents of this Agreement represents the entire Agreement between the Owner and the User and any representations made prior to and subsequent to the execution of this Agreement shall not form part of this Agreement.”

[67] (1988) 14 NSWLR 523 (an authority particularly relied upon by the plaintiff).

[68] Ibid, at [534]. 

[69] Ibid, at [535] and noting that Kirby P applied a similar test, at p 530.

[70] (2001) 117 FCR 424.

[71] Ibid, at [369].

[72] (2001) 53 NSWLR 153.

[73] Ibid, at [71]-[79] and noting that the discussion included reference to Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd.

[74] Ibid, at [72].

[75] Ibid, at [75].

[76] [1994] 2 VR 32, at [82]-[83].

[77] Robinson v Harman (1848) 1 Ex 850, at [855], as approved in Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64, at pp 80, 98, 117, 134, 148 and 167. 

[78] Ratcliffe v Evans [1892] 2 KB 524, at 532-3.

[79] [1951] 2 KB 314, at 438.

[80] When first engaged she was a manager at SV Partners Forensics (Qld).

[81] This not being the only business operated by the plaintiff, see: T1-41.28 – 1-42.44.

[82] See generally: Ex. 11, the report of Ms Wilson.

[83] T1-39.16-19.

[84] T1-39.27-29 and T2-64.32 – T2-65.39.

[85] T2-64.9 – T2-65.8.

[86] T1-37.8 – T1-38.11.

[87] T1-29.13-18.

[88] T1-40.38 – T1-41.6.

[89] T1-76.25-41.

[90] T2-79.9-16.

[91] T2-79.6-7 and .24-26 and see: Ex. 11, at p 87, Annexure S1.

[92] That assumption was not the subject of any criticism and is common ground. The assumption proceeded on the basis that redemption machines are those that allow a person operating the machine to obtain or possibly obtain, chocolates or other prizes.

[93] Ex. 14, at p 9 [6.2] – p 10 [6.6].

[94] T2-82.8-11.

[95] T2-81.42 – T2-82.11.

[96] See: Ex. 11, at p 78.

[97] See: Ex. 13 and Ex. 14 at p 154.

[98] [2014] 1 Qd R 21, at [29]-[36].

[99] British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673, at [689], Hasell v Bagot Shakes and Lewis Ltd (1911) 13 CLR 374, at [388], Tuncel v Renown Plate Co Pty Ltd [1976] VR 501, at [503]-[504] and Clark v Marcourt (2013) 253 CLR 1, at [17].

[100] Watts v Rake (1960) 108 CLR 158, at [159] and [163], James Finlay and Co Ltd v NV Kwik Hoo Tong Handel Maatschappij [1928] 2 KB 604.

[101] TC Industrial Plant Pty Ltd v Roberts Queensland Pty Ltd (1963) 37 ALJR 289, Payzu Ltd v Saunders [1919] 2 KB 581.

[102] See: Ex. 11, at p 81 and T1-73. 40 – T1-74.5.

[103] See: para [62] above.

[104] See: Ex. 11, at p 15.

[105] See: Ex. 11, at p 81.

[106] See: Ex. 12 and 13.

[107] See: Ex. 12 and T1-73.40-1-74.25.

[108] See: Ex. 11, at p 98.

[109] See: Ex.12, at p18, [7.35-7.36].

[110] T2-76.27-44.

[111] T2-76.32-36.

[112] T2-75.20 – T2-76.44.

[113] T2-76.30-32

[114] Defendant’s written submissions, dated 13/03/15, at [87]. 

[115] Ibid, at [86] and T1-57.21-35.

[116] T1-53.3-32.

[117] See: Ex 13.

Close

Editorial Notes

  • Published Case Name:

    Aquavista Pty Ltd v Timevale Pty Ltd

  • Shortened Case Name:

    Aquavista Pty Ltd v Timevale Pty Ltd

  • MNC:

    [2016] QDC 235

  • Court:

    QDC

  • Judge(s):

    Long DCJ

  • Date:

    27 Sep 2016

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Biggin & Co. Ltd v Permanite Ltd (1951) 2 KB 314
2 citations
Jump To
Cite 1 - (1951) 2 KB 314
Cite 2 - (1951) 2 KB 314
Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153
5 citations
Jump To
Cite 1 - (2001) 53 NSWLR 153
Cite 2 - (2001) 53 NSWLR 153
Cite 3 - (2001) 53 NSWLR 153
Cite 4 - (2001) 53 NSWLR 153
Cite 5 - (2001) 53 NSWLR 153
Branir v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424
3 citations
Jump To
Cite 1 - (2001) 117 FCR 424
Cite 2 - (2001) 117 FCR 424
Cite 3 - (2001) 117 FCR 424
British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd (1912) AC 673
1 citation
Jump To
Cite 1 - (1912) AC 673
Clark v Macourt (2013) 253 CLR 1
1 citation
Jump To
Cite 1 - (2013) 253 CLR 1
Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64
2 citations
Jump To
Cite 1 - (1991) 174 CLR 64
Cite 2 - (1991) 174 CLR 64
Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523
4 citations
Jump To
Cite 1 - (1988) 14 NSWLR 523
Cite 2 - (1988) 14 NSWLR 523
Cite 3 - (1988) 14 NSWLR 523
Cite 4 - (1988) 14 NSWLR 523
Hasell v Bagot Shakes and Lewis Ltd (1911) 13 CLR 374
1 citation
Jump To
Cite 1 - (1911) 13 CLR 374
James Finlay and Co Ltd v NV Kwik Hoo Tong Handel Maatschappij [1928] 2 KB 604
1 citation
Jump To
Cite 1 - [1928] 2 KB 604
Jones v Dunkel (1959) 101 CLR 298
1 citation
Jump To
Cite 1 - (1959) 101 CLR 298
Knott Investments Pty Ltd v Fulcher[2014] 1 Qd R 21; [2013] QCA 67
1 citation
Jump To
Cite 1 - [2014] 1 Qd R 21
Meates v Attorney-General [1983] NZLR 308
3 citations
Jump To
Cite 1 - [1983] NZLR 308
Cite 2 - [1983] NZLR 308
Cite 3 - [1983] NZLR 308
New Zealand Shipping Company Ltd v AM Satterthwaite & Company Ltd ( The Eurymedon ) (1975) AC 154
2 citations
Jump To
Cite 1 - (1975) AC 154
Cite 2 - (1975) AC 154
Payzu Limited v Saunders (1919) 2 KB 581
1 citation
Jump To
Cite 1 - (1919) 2 KB 581
Ratcliffe v Evans [1892] 2 KB 524
2 citations
Jump To
Cite 1 - [1892] 2 KB 524
Cite 2 - [1892] 2 KB 524
Robinson v Harman (1848) 1 Ex 850
2 citations
Jump To
Cite 1 - (1848) 1 Ex 850
Cite 2 - (1848) 1 Ex 850
TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd (1963) 37 ALJR 289
1 citation
Jump To
Cite 1 - (1963) 37 ALJR 289
Tuncel v Renown Plate Co. Pty. Ltd. (1976) VR 501
1 citation
Jump To
Cite 1 - (1976) VR 501
Vroon BV v Foster's Brewing Group Ltd [1994] 2 VR 32
5 citations
Jump To
Cite 1 - [1994] 2 VR 32
Cite 2 - [1994] 2 VR 32
Cite 3 - [1994] 2 VR 32
Cite 4 - [1994] 2 VR 32
Cite 5 - [1994] 2 VR 32
Watts v Rake (1960) 108 CLR 158
1 citation
Jump To
Cite 1 - (1960) 108 CLR 158

Cases Citing

Case NameFull CitationFrequency
Aquavista Pty Ltd v Timevale Pty Ltd (No 2) [2016] QDC 2722 citations
Aravanis v Millar [2017] QDC 2352 citations
1

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