Case: Helicopter Sales (Australia) Pty Limited v Rotor-Work Pty Limited [1974] HCA 32 ; (1974) 132 CLR 1
Outcome: applied
I am of opinion that nothing turns on whether the contract for the supply of the new line was, on its true characterisation, a contract for the sale of goods or a contract for work and materials. In the former case, s 14(i) of the Sale of Goods Act ordinarily would operate to imply a condition that the goods be reasonably fit for the purpose for which they were required, as made known by the purchaser. In the absence of special circumstances, a contract to do work and supply materials will carry with it two implied warranties: first, that the materials are of good quality and free from latent defects; and secondly, that the materials are reasonably fit for their intended purpose: Helicopter Sales (Australia) Pty Limited v Rotor-Work Pty Limited [1974] HCA 32 ; (1974) 132 CLR 1 at 6 per Menzies J, at 8 per Stephen J, Barwick CJ agreeing with their Honours at 4 and Mason J agreed with Stephen J at 15; Young &amp; Marten Ltd v McManus Childs Ltd [1969] 1 AC 454. I am of opinion that because, not only was Proud Machinery to supply the goods, it was also to erect and install them, the contract was not merely a contract for the sale of goods, but was in substance a contract for the provision of work and materials: cf Hewett v Court [1983] HCA 7 ; (1983) 149 CLR 639 at 646-647 per Gibbs CJ, 650 per Murphy J, 655 per Wilson and Dawson JJ, 662 per Deane J. As Gibbs CJ noted, the distinction between a contract for the sale of goods and one for the provision of work and materials is frequently a fine one and the tests for distinguishing them are unsatisfactory and imprecise: Hewett 149 CLR at 646; see too Sutton KCT, Sales and Consumer Law (4 th ed, Lawbook Co, 1995) at [2.42]-[2.43]; Benjamin's Sale of Goods (7 th ed, Sweet &amp; Maxwell, 2006) at [1-041]-[1-043]. 345 I summarise below the contractual terms and representations which I have found Proud Machinery made to North East Equity and my findings on them. In analysing whether the new line, as installed, conformed with the purposes and terms referred to in [66](a)-(e) above, I have had regard to the implication that the new line would be reasonably fit for those purposes ( Helicopter Sales 132 CLR at 4, 6, 8, 15: see [64]-[66] above). (1) Pack out rate per hour I have not found that terms or representations were made exactly corresponding to those pleaded and set out at [66](a) and [67](g) above. Rather I have found (at [87] above) that, at the time of entry into the contract, the processing capacity was contained in a term and representation that: the new line would have the capacity to process and pack at a rate of production per operating hour of 18.75 tonnes final pack out on the pallet (later reduced to 17.55 tonnes). For the reasons given above, I am not satisfied that this was incorrect or misleading or deceptive. The new line had that capacity. And, by operating a split shift, the new line had the capacity to achieve a pack out in excess of 150 or, later (after the handline was deleted), 140.4 tonnes in eight working hours. (2) Temperature I have found that terms and representations were made which corresponded to those pleaded and set out at [66](b), (c) and [67](h) and [102](iii) and (v), namely that the new line would, first, be designed so as to be reasonably fit to achieve: (b) the ability to process farm fresh carrots at field temperatures; (c) the core temperature of packed carrots to be not more than 5deg.C; and secondly, (h) achieve a guaranteed maximum of 5deg.C core temperature for North East Equity's carrots; (iii) have hydro-cooling tanks capable of producing constant product output; and (v) be capable of controlling the temperature of the carrots. I have found that I am not satisfied that the new line did not have these capacities if operated correctly. (3) Grading I have found terms and representations were made that corresponded to those pleaded and set out at [66](d) and [102] (ii) and (iv), namely that the new line would, first, be designed so as to be reasonably fit to achieve: (d) the ability to sort and grade carrots into eight distinct streams of size and length grades; and secondly, (ii) have nine hydro-cooling tanks which would allow one of those tanks for each length or size grade and provide the opportunity to have a spare tank; and (iv) provide quality length sizing for three separate lengths. I have found that I am not satisfied that the length graders (there being no complaint about the width or girth graders) were not reasonably fit for the purpose of providing quality length sizing in accordance with what both parties understood were their inherent limitations. I am not satisfied that the new line was not reasonably fit for the purpose of having the ability to sort and grade carrots into eight different streams of length and size. I am satisfied that the hydro cooling tanks conformed with representation (ii). (4) Efficiency I have found that terms and representations were made that corresponded to those pleaded and set out at [66](e) and [102](vii), namely that the new line would first, be designed so as to be reasonably fit to: (e) achieve an increase in efficiency of labour usage compared to the existing Sumich line; and secondly, (vii) increase production while reducing the man hours required to achieve that production compared to the existing at the Wattleup plant line. I am satisfied that these were correct. As Mr Tana admitted in the meeting of 18 November 2003, labour costs per carton had reduced by 25% or more. (5) Reduction in damage to carrots I have found that a representation was made that corresponded to that pleaded and set out in [102](vi) namely that the new line would greatly reduce damage to carrots and wastage. I am not satisfied that this was incorrect, misleading or deceptive. In any event there were no records of waste or damage to carrots so as to enable any finding to be made as to the position before or after the new line was installed. And, the quality of carrots delivered for processing after the new line was installed was very different from, and worse than, their earlier quality. North East Equity has not established that this representation was not met. 346 North East Equity also pleaded that the representations were made by Proud Machinery and Mr Proud: (a) as to the performance characteristics, uses or benefits of the new line and because they were incorrect there were contraventions of s 53(c) of the Trade Practices Act ; (b) as to future matters, thus engaging s 51A of the Trade Practices Act . On the findings I have made, it is not necessary to consider these claims. 347 Proud Machinery and Mr Proud argued that the contractual measure of damages was not appropriate or available to North East Equity because it had assigned all of its contractual rights to the Bank of Western Australia Ltd in November 2002. North East Equity had entered a master lease agreement with the bank in August 2002. The master lease agreement contemplated that in the future North East Equity would seek to lease goods from the bank and set out the general terms which would apply once goods were nominated and acquired by North East Equity. On 19 November 2002 the bank and North East Equity sent to Proud Machinery a 'novation notice to and acknowledgment from supplier'. This recited that North East Equity had: (1) 'novate[d]' to the bank all of its rights under the contract that it had with Proud Machinery relating to the construction of the new line under which the bank would receive title to it and become its owner (cl 1); (2) 'assign[ed] to [the bank] the [new line] and all of its rights in relation to the [new line]' (cl 2). 367 Nonetheless the contract contained an implied promise that Proud Machinery would exercise reasonable care and skill in the performance of its services, including the selection of goods or work and materials that were reasonably fit for the purposes for which North East Equity had (expressly or by implication) indicated they were required: Astley v Austrust Ltd [1999] HCA 6 ; (1999) 197 CLR 1 at 21-22 [46] - [47] per Gleeson CJ, McHugh, Gummow and Hayne JJ; Helicopter Sales [1974] HCA 32 ; 132 CLR 1. 368 In the relationship between North East Equity and Proud Machinery, that implied promise was parallel and concurrent with a co-extensive duty in tort on the part of Proud Machinery and Mr Proud to exercise the same reasonable skill and care: Astley 197 CLR at 23 [46]-[48] per Gleeson CJ, McHugh, Gummow and Hayne JJ. 369 The pleading of Proud Machinery's and Mr Proud's alleged negligence and the way in which North East Equity argued this claim reflected, in substance, its complaints of failures in the design, procurement and installation of the new line, which gave rise to the shortcomings in its operation as installed. The duty of care in this matter arose because and in the context of the contractual relationship. Proud Machinery had parallel and concurrent obligations in tort and contract to exercise reasonable care and skill in performing professional tasks owed to North East Equity under the contract. Mr Proud had a parallel and congruent obligation in tort: Astley 197 CLR at 23 [48]. There is no circumstance pleaded in the present case which would justify extending those obligations in tort beyond a parallel and concurrent liability of Proud Machinery and Mr Proud, co-extensive with the contractual obligations of Proud Machinery to exercise reasonable skill and care. 370 The contract was negotiated at arms length between two experienced and capable business people, Mr Tana and Mr Proud. Its express and implied terms reflected the commercial relationship agreed on by the parties for the procurement and installation of the new line. That relationship is a commonplace in commerce; a vendor who is the distributor of plant and equipment and a purchaser who, after negotiating with the vendor, agrees on terms for the purchase and installation of the equipment. The common law and statutory obligations (such as in Part V of the Trade Practices Act and the Sales of Goods Act ) which govern such a relationship do not need extension or modification on the facts of this matter or merely because one party was unhappy, after the event, with the result arrived at by the performance of the contract. 371 On the basis of my findings in respect of the contractual terms and representations, the claim in negligence, must also fail. 372 I have rejected the claims for damages for economic loss and loss of a chance to earn further profits as being without foundation. I have also found that, in substance, North East Equity has not established that the new line failed to operate in accordance with the pleaded contractual terms and representations, or that Proud Machinery and Mr Proud breached the duties of care they owed. There are still some subsidiary matters which I will address below.