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Supreme Court of Victoria |
Last Updated: 21 August 2012
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
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JUDGE:
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WHERE HELD:
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Melbourne
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DATE OF HEARING:
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DATE OF JUDGMENT:
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CASE MAY BE CITED AS:
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TRADE AND COMMERCE – agreement for supply and installation of industrial refrigeration system in new coolstore – supplier sued to recover last unpaid instalment – operator counterclaimed for substantial damages for misleading and deceptive conduct – whether supplier made alleged representations about capacity of system – whether operator relied on those representations - determination of preliminary questions of fact – Trade Practices Act 1974 (Cth) s 52.
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APPEARANCES:
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Counsel
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Solicitors
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For the plaintiff and the defendant by counterclaim
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Mr A Kornhauser
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For the defendants and the plaintiffs by counterclaim
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Riordan Legal
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1 On about 1 October 2004, the Radevski family engaged Tri Tech Refrigeration Contracting & Engineering Pty Ltd to supply and install a large industrial refrigeration system at the coolstore which they were building in Benalla Road, Shepparton. The price was $1,243,000 (inclusive of GST).
2 When the Radevskis failed to pay the last instalment of $49,720 which was due under the contract, Tri Tech issued recovery proceedings in the Magistrates’ Court of Victoria. The response of the Radevskis was to issue a defence and counterclaim for substantial damages against Tri Tech for (among other things) alleged misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) and failing to supply and install the system which was promised (in those representations and contractually). This resulted in the proceeding being uplifted into this court.
3 The trial of the proceeding has commenced. The evidence which has been given or is to be given falls into two broad categories. In the first category, witnesses have given non-expert evidence about the contractual negotiations and are to give evidence about the supply and installation of the system and the difficulties which the Radevskis allegedly encountered thereafter. In the second category, experts are to give mechanical engineering evidence of a highly technical nature concerning the operation and performance of the system.
4 By the arrangements adopted for the conduct of the trial, the evidence of the witnesses in the first category was given first. When that phase of the trial was almost complete, it became clear that it would be convenient and appropriate for certain issues in the proceeding to be finally determined before the expert evidence was taken. I will explain why.
5 The representations which were made by Tri Tech and the scope of the work under the contract are important issues in the case. At the risk of oversimplification, the main question in relation to the scope of the works is whether the contract required the system to be capable of pulling down the core temperature of 1000 bins of fruit from ambient to 20 centigrade within 32 hours. That question is inextricably linked with the question whether Tri Tech represented to the Radevskis that the system would have that refrigeration capacity. The Radevskis contend, and Tri Tech denies, that the contract does so provide and that Tri Tech did so represent. Tri Tech’s position is that the contract provides that the system would pull down the core temperature of 900 bins of fruit from ambient temperature to 20 centigrade within 32 hours, reflecting its pre-contractual representations.
6 The scope of the works under the contract, and as represented, is an important foundation of the expert evidence. In preparing for the trial, that evidence has been formulated, and would therefore be given, on the basis of the various hypotheses which are open as to the representations and the scope of the works. If that course were to be followed, the technical issues in the case, which are already complex enough, would be made more complex.
7 After the reception of most of the evidence in the first category, it became clear that the court could determine the contractual and representation issues which I have mentioned, so providing a better foundation for the expert evidence. With the consent of the parties, I therefore ordered that certain questions in that category, as formulated by them, would be heard and determined as preliminary questions, which I specify below. This is my judgment on those questions.
8 During the course of the submissions of the parties in relation to the preliminary questions which were specified, it became clear to all parties that some of them could not or should not be answered at this stage. Also, the parties were in dispute about whether a particular question should be answered now or later. I will deal with all of these issues at the end of the judgment.
9 As formulated and stated, the questions are in detailed form, but unnecessarily so. The central issue is whether Tri Tech represented that the system had the capacity (whether the number of cool rooms was kept at 16 or expanded to 25) to pull down 1000 bins of fruit from ambient to 20 centigrade core temperature within 32 hours or air temperature within 24 hours, provided that no more than 150 bins would be pulled down in a cool room at the one time and all other rooms would only be used in maintenance mode, which is essentially the representation alleged in paragraph 3(ca) of the amended counterclaim for which I have given leave, and whether the Radevskis relied on that representation, as alleged in paragraph 9 thereof.
10 I do not accept the submission made for Tri Tech that this alleged representation was a representation as to future matters. If made, it was a representation that the system proposed had certain design features and performance qualities such that it had the capacity to meet the requirements of the Radevskis, not a prediction that the system would operate in a certain way in the future.
RADEVSKI FAMILY ORCHARD AND COOLSTORE BUSINESS
11 The Radevskis have been orchardists and coolstore operators on a major scale in the Shepparton district for 50 years. The business draws on apple, pear and apricot trees (among others) planted in hundreds of acres of orchard. They have an existing coolstore in Swainston Road. Although it is substantial and still serviceable, it is outdated. Therefore it was decided to build a new facility of about 10,000 square metres on a large green-field site in Benalla Road. The intention was to install 16 cool rooms in that facility, with allowance for nine more later. The facility was to have a modern refrigeration and controlled atmosphere system.
12 Under the various contracts, the main coolstore structure was built by BFB Metals Pty Ltd, the 16 cool rooms were supplied and installed by BFM Coolrooms Pty Ltd, the controlled atmosphere system for the cool rooms was supplied and installed by Cool Storage Technology Australasia Pty Ltd and the refrigeration system was supplied and installed by Tri Tech.
13 Harvesting fruit is a time critical operation. Ideally, the fruit is picked when it is ripe and cooled to about 20 centigrade soon after it is picked to prevent its deterioration. Fruit is picked into bins of a standard size which hold about 500 kilograms when full. The harvest time is dependent on the climatic conditions in the given season and the type and variety of the fruit. In Shepparton, the harvest typically occurs in successive waves from early February until April.
14 At the new facility, there were to be, and now are, 16 cool rooms of two different sizes, capable of holding either 600 or 900 bins of fruit. You cannot load (say) 900 bins of fruit, with a mass of 450 tonnes, into a cool room and expect the refrigeration system to cool the fruit down to 20 centigrade within a reasonable time, if ever. The thermal energy in a body of just-harvested fruit having that mass is very great and cannot be removed quickly by industrial refrigeration equipment of the standard kind. Therefore the job has to be done gradually.
15 On the undisputed evidence, the operator can load (say) 150 bins into a cool room like the Radevskis’ and pull the core temperature of the fruit down from ambient to (say) 20 centigrade within (say) 32 hours. This is called pulling down the temperature of the fruit. Further loads of 150 bins can be successively loaded into the cool room, and pulled down, over the same time frame, until the room is full. Once full, the temperature of the fruit can be maintained at (say) 20 centigrade. That is called maintaining the temperature of the fruit.
16 The refrigeration system is working at its hardest when it is pulling down the temperature of the fruit. For example, to pull down the core temperature of 150 bins (75 tonnes) of fruit from 320 centigrade to 20 centigrade in 32 hours requires the cool room to perform a refrigeration duty of (say) 140kW in that time. To maintain the temperature of the fruit at 20 centigrade once so cooled down, the cool room need only perform a refrigeration duty of (say) 17kW.
17 The refrigeration capacity (or total plant duty) of the system will vitally affect the quantity of fruit which the system can pull down. If the system has a certain refrigeration capacity, it will only be able to pull down the temperature of a certain quantity of fruit in a certain time, depending on the climatic and operating conditions. The system cannot pull down more fruit than its refrigeration capacity (total plant duty) will permit. Once that refrigeration capacity is met, the system is operating at its design operating limit. All other things being equal (especially climatic operating conditions), the system could only pull down more fruit if the refrigeration capacity were to be increased, ie by supplying and installing equipment and machines with higher specifications and at greater expense.
18 It follows that the refrigeration capacity (or total plant duty) of a refrigeration system must be designed carefully to meet the capacity requirements of the coolstore operator in more or less peak load conditions. It is therefore necessary for the system designer to work backwards from the operator’s instructions as to what amount of fruit (or other substances) must be pulled down in those conditions.
19 We arrive now at the critical point of contention between the parties in the present case. The Radevskis contend that Tri Tech represented that the system had the capacity to perform certain refrigeration work, and contracted accordingly. Yet, when the system was supplied, installed and properly operated, it had the capacity to do much less. Tri Tech contends that the system as represented and contracted, and as supplied, installed and properly operated, had the capacity to do exactly what was promised.
Parties’ submissions
20 The Radevskis submit that the court should find, as a fact, that they communicated their design requirements to Tri Tech, which were that the refrigeration plant was to be capable of pulling down up to 1000 bins of fruit per day, in circumstances where no more than 150 bins would be loaded into any one cool room and while the other rooms were not to be used in pull down mode but only in maintenance mode. By ‘pulling down’ was meant pulling down the temperature from ambient to a core temperature of close to 00 centigrade within 32 hours, which equates to pulling down the ambient cool room temperature to close to 00 centigrade within 24 hours. The Radevskis sought findings of fact, which Tri Tech opposed, that Tri Tech represented that the system would meet those design requirements. In the evidence and submissions, those alleged requirements of the Radevskis were called the ‘Radevski requirements’ and the alleged Tri Tech representations were called the ‘design representations’.
21 The Radevskis submitted that the court should determine that the scope of the works specified in the contract were materially identical to the design representations. That submission was made on the basis that, as a matter of law, the terms of the contract were to be so interpreted. Tri Tech submitted to the contrary. For reasons which I will explain, it is not appropriate now to determine the answer to this question.
22 On the Radevskis’ side, the evidence which is relevant to those issues was contained in the first and second witness statements of Chris Radevski and his oral evidence and the first witness statement of Peter Radevski senior and his oral evidence.
23 On the Tri Tech side, the evidence which is relevant was in the first witness statement of Graham Solomon and his oral evidence and the witness statements of Murray Lawson and Leo Van Zuiden and their oral evidence.
24 The distribution of knowledge between the Radevskis and Tri Tech about the technical features of the refrigeration system was asymmetrical. The Radevski family have been successful orchardists and coolstore operators for three generations. But they are not mechanical engineers and much less refrigeration engineers. The two brothers Chris and Peter Radevski, and Peter’s son (Peter junior), have a sound practical knowledge of the operation of coolstore and refrigeration equipment, Chris (who is the coolstore operator) more so than Peter senior (who is the orchardist). Peter junior is younger and more familiar with modern equipment, such as computers, but had little to do with the contract negotiations. On the other hand, while Tri Tech were the experts, the Radevskis were not novices.
25 It is convenient to set out the evidence in this chronological order:
First discussion between Chris Radevski and Graham Solomon (18 June 2004)
26 Mr Radevski’s evidence was that he telephoned Mr Solomon and told him that the Radevskis wanted a refrigeration system which was capable of pulling down the temperature of the fruit in 150 bins from ambient to about 00 centigrade to a total of 1000 bins per day but with no more that six or seven cool rooms being used at the one time. He told Mr Solomon that the coolstore would have 16 cool rooms with scope to add nine additional rooms later. Mr Radevski stuck firmly to this evidence in cross-examination and was not shaken in any significant respect. He said these details were very clear in his mind.
27 Mr Solomon’s evidence was that he made a file note of the conversation in his diary at the time, which reads:
Chris Radevski Shep16 rooms 1200 bins
600-900
135-150 bins
6 rooms on pull down.
28 As explained by Mr Solomon, ’16 rooms’ was the number of rooms which Mr Radevski specified. He was adamant during the course of his evidence that Mr Radevski said nothing about possibly expanding the number of rooms to 25 until a later stage. ‘1200 bins’ was the number of bins which Mr Radevski expected to pull down in a week. ‘600-900’ was the number of bins which might be pulled down at one time. ‘135-150 bins’ was the number of bins which might be loaded for pull down into a single cool room at the one time. ‘6 rooms on pull down’ was the maximum number of rooms which might be used for pull down at any one time. There was no discussion of the length of the pull down period (24 or 48 hours).
29 Mr Solomon also firmly stuck to his evidence in cross-examination and was not shaken in any significant respect.
30 The evidence was that, in the initial conversation, Mr Radevski said he would send a plan of the cool rooms to Mr Solomon, which he did that day by facsimile transmission. The two subsequently spoke by telephone. Mr Solomon wrote on the plan ‘480 pull down 500 holding’. His explanation of these figures in his oral evidence was hard to follow, but not implausible.
First quotation (22 June 2004)
31 The first quotation was supplied in a letter on 22 June 2004 (it was dated incorrectly 22 July 2004).
32 In material parts the quotation stated:
We thank you for your valued enquiry and have much pleasure in submitting the following pricing and specifications for the above project.
1.0 PLANT DESIGN |
We have based our plant design on the following information provided by the supplied documents and discussions we have had with your personnel.
Description |
Size |
Temp. |
Motor |
Product Load |
Product Storage |
Room No. |
Duty per Room |
Room 1-5 Room 14-16 |
20x10x8 Meters |
00C |
12 Kw |
75 Tonne 32 to 20C in 48Hr |
900 Bins |
8 |
100 Kw |
Room 6-7 |
11x9x8 Meters |
00C |
10 Kw |
75 Tonne 35 to 20C in 48Hr |
600 Bins |
2 |
91 Kw |
Room 8-13 |
14x10x8 Meters |
00C |
10 Kw |
75 Tonne 35 to 20C in 48Hr |
750 Bins |
6 |
96 Kw |
TOTAL PLANT DUTY 1090 KwThe above table is based on the following general information.
33 It can be seen that the quotation gave these performance specifications:
34 The quotation states these (selected) machinery and equipment specifications:
35 The price specified in the quotation was:
Total Plant Option New: $998,000 + $99,800 GSTTotal Plant Option Secondhand: $844,000 + $84,400 GST
This offer is for 1 x 6 cyl Mycom package, 1 x 8 cyl Vilter package, 2 x 4 cyl Vilter packages and 1 x Large Evaporative condenser.
Discussion after first quotation
36 Mr Radevski’s evidence was that he was disappointed with Tri Tech’s first quotation. He responded by telephoning Mr Solomon to tell him that the Radevskis did not want to use second-hand equipment, that they wanted to pull down 1000 bins of fruit in 24 hours (not 900 bins in 48 hours) using up to 150 bins in a cool room at the one time and that they wanted a state of the art facility which may be expanded to 25 rooms. He said he thought Mr Solomon had got it wrong but everyone deserved a second chance.
37 Mr Radevski said he was sure he had said 1000 bins a day at up to 150 per room and had again mentioned the possible expansion to 25 rooms. Mr Radevski told Mr Solomon that he had a quotation from another company specifying a pull down time of 24 hours and he wanted to know whether Tri Tech could do the same. The quotation was probably that supplied by CA Group Services on 10 June 2004. The given system specifications were 16 rooms at 150 kW per room. The loading rate was calculated on ‘180 bins of pears and apples entering at 30 deg C cooled to 0 deg C within a 24 hr period’. The maximum total load for the entire plant was ‘to be calculated @ 800 – 1000 bins per day’. Contrary to Tri Tech’s submissions, I do not find the contents of this quotation to be inconsistent with Mr Radevski’s evidence, including his evidence about what he told Mr Solomon.
38 Despite that quotation, Mr Radevski told Mr Solomon that he would accept a 32 hour core-temperature pull down (which Mr Radevski equated in his mind to a 24 hour air-temperature pull down). There was discussion about using a different kind of condenser. Mr Radevski said he was told by Mr Solomon that he would requote on this basis.
39 In his evidence, Mr Solomon said that he explained to Mr Radevski why it was theoretically but not practically possible to achieve a 24 hour pull down with 900 bins per day. He agreed that Mr Radevski asked him to requote, which he agreed to do. He agreed that new equipment would be used, that the quotation would be on the basis of a 900 bin pull down within 32 hours from ambient to a core temperature of 20 centigrade and that a ‘3C’ (adiabatic) condenser would be used. Mr Radevski said nothing about pulling down 1000 bins per day and nothing about expanding the number of rooms until much later.
Second quotation (24 June 2004)
40 The second quotation was submitted in a letter on 24 June 2004 (it was dated incorrectly 24 July 2004).
41 In material parts, the quotation stated:
We thank you for your valued enquiry and have much pleasure in submitting the following pricing and specifications for the above project.
1.0 PLANT DESIGN |
We have based our plant design on the following information provided by the supplied documents and discussions we have had with your personnel.
Description |
Size |
Temp. |
Motor |
Product Load |
Product Storage |
Room No. |
Duty per Room |
Room 1-5 Room 14-16 |
20x10x8 Meters |
00C |
12 Kw |
75 Tonne 32 to 20C in 32 Hr |
900 Bins |
8 |
140 Kw |
Room 6-7 |
11x9x8 Meters |
00C |
10 Kw |
75 Tonne 35 to 20C in 32 Hr |
600 Bins |
2 |
132 Kw |
Room 8-13 |
14x10x8 Meters |
00C |
10 Kw |
75 Tonne 35 to 20C in 32 Hr |
750 Bins |
6 |
I34 Kw |
TOTAL PLANT DUTY 1300 KwThe above table is based on the following general information.
42 It can be seen that the quotation gave these performance specifications:
43 The quotation stated these (selected) machinery and equipment specifications:
44 The price specified in the quotation was:
Total Plant New: $1,120,000 + $112,000 GST
45 In the evidence, the increase in the size of the diameter of the glycol/chilled water piping from 150-65 NB to 200-65 NB (150 mm to 200 mm) came to assume significance. Mr Solomon said in oral evidence that the increase in plant duty was designed to allow the Radevskis to pull down 900 bins of fruit in 32 hours, with up to 150 bins in a cool room at the one time. The figures were worked out using computer software calculations which were not retained. The extra duty was achieved using ‘bigger compressors, bigger pipe work, bigger condensers, bigger fan coil units’. He said the whole system was scaled up.
Discussion after second quotation
46 Mr Radevski gave no written evidence about the second quotation. He said in his second witness statement that he had ‘neglected’ it in his first statement. His oral evidence was that, in telephone conversations, he again expressed disappointment with Mr Solomon’s quotation. He did not use stronger or more colourful language, despite having been twice disappointed. He told Mr Solomon that he wanted a 1000 bin pull down from ambient to about 00 centigrade air temperature within 24 hours (or 32 hours, if 20 centigrade core temperature was the target). In reference to this or another of the quotations, Mr Solomon said of the 900 bins which had been specified: ‘It’s a typo. It will be right. 1000 bins’. Mr Radevski said he noted the bigger compressors in the second quotation. That was to get more pull down. He also noted the price increase.
47 Mr Solomon said these conversations occurred between 28 June and 8 July 2004. He strongly denied saying that the system had the capacity to pull down 1000 bins per day or within 32 hours. The discussion was about 900 bins. The discussions also concerned the make of the compressors, the use of buffer tanks for the secondary refrigeration fluid, the use of variable speed drives for the screw compressors, the use of soft starters for those compressors, the use of an ‘Allen Bradley’ PLC computer control system and the use of more powerful Lu-Ve fan cool units. Mr Solomon said he was asked to requote with soft starters and the Allen Bradley PLC system as options, which he did.
48 The final quotation was supplied in a letter dated 8 July 2004.
49 In material parts, it stated:
We thank you for your valued enquiry and have much pleasure in submitting the following pricing and specifications for the above project.
1.0 PLANT DESIGN |
We have based our plant design on the following information provided by the supplied documents and discussions we have had with your personnel.
Description |
Size |
Temp. |
Motor |
Product Load |
Product Storage |
Room No. |
Duty per Room |
Room 1-5 Room 14-16 |
20x10x8 Meters |
00C |
12 Kw |
75 Tonne 32 to 20C in 32 Hr |
900 Bins |
8 |
140 Kw |
Room 6-7 |
11x9x8 Meters |
00C |
10 Kw |
75 Tonne 35 to 20C in 32 Hr |
600 Bins |
2 |
132 Kw |
Room 8-13 |
14x10x8 Meters |
00C |
10 Kw |
75 Tonne 35 to 20C in 32 Hr |
750 Bins |
6 |
I34 Kw |
TOTAL PLANT DUTY 1300 KwThe above table is based on the following general information.
50 It can be seen that the quotation gave these performance specifications:
51 The quotation stated these (selected) equipment specifications:
52 The price specified in the quotation was:
Total Plant New: $1,120,000 + $112,000 GSTOption: Full AB control and RS view monitoring + 28,000 + GST
2 off Soft Starters Danfoss + 7,500 + GST
Note [from Mr Solomon]: I am currently waiting to discuss with John of Lu-Ve if the larger units can be supplied at same cost.
53 It can be seen that the final quotation was identical to the second quotation in relation to plant design, room and plant duty and the machinery and equipment items. The main difference between the two quotations was the inclusion, at Mr Radevski’s request, of a price option for the use of an Allen Bradley PLC system and electronic soft starters for the screw compressors.
Discussion and meeting after third quotation (14 July 2004)
54 Mr Radevski’s evidence was that he was again disappointed with the third quotation because it still specified pulling down 900 bins, not 1000. He was not especially troubled about the 32 hour pull down time as he took this to refer to the core-temperature pull down rather than the air-temperature pull down.
55 Mr Radevski said he communicated his disappointment to Mr Solomon in telephone conversations. It was agreed that he would inspect a refrigeration plant which Tri Tech had installed at a supermarket in Melbourne and meet with Mr Solomon afterwards at Tri Tech’s offices to discuss the quotation. His intention was that the meeting would be a make-or-break meeting. Unless Mr Solomon agreed to his requirements, including pulling down 1000 bins a day, the deal would be off.
56 On both Mr Radevski’s and Mr Solomon’s evidence, on 14 July 2004 there was an inspection of the refrigeration plant which Tri Tech installed at the IGA distribution centre in Laverton and then a meeting at Tri Tech’s offices in Thomastown. There was a minor dispute, on which nothing turns, about whether the parties met at Costas distribution centre in Derrimut before going to the IGA premises. At the meeting, Mr Radevski was present with his brother Peter. Mr Solomon was present with Tri Tech’s service manager, Murray Lawson.
57 On Mr Radevski’s evidence, the purpose of the meeting was to clarify and clear up the terms of the quotation. It would go either one way or the other. Other people were tendering at the time.
58 Mr Radevski said he and Mr Solomon did the talking. They discussed the use of variable speed drives for the compressors, which Mr Solomon said were unnecessary because a 10,000 litre glycol tank was being used. On Mr Radevski’s request, Mr Solomon agreed to use Grundfoss pumps instead of Regent pumps. They discussed the size of the glycol piping and whether it was big enough for pulling down 1000 bins per day and, in addition, for the possible nine extra cool rooms operating in maintenance mode.
59 Mr Radevski strongly refuted the suggestion that he said at this meeting for the first time that he would need a pull down capacity of 1000 bins if he increased the number of rooms to 25 and that this was the first time he mentioned the possibility of increasing the rooms to that number. He said the suggestion was ‘ridiculous’. His evidence was that he and Mr Solomon did not discuss any pull down requirements if the plant was to be expanded. When the 1000 bins pull down requirement was discussed, both at this meeting and previously, it was always in the context of the initial 16 rooms. He did not expect to pull down any more fruit when the facility was expanded. It was up to him to manage his rooms in the appropriate manner. He did ask Mr Solomon at the meeting whether the glycol pipe size was sufficient if the room number was expanded. Mr Solomon half-confirmed that it was sufficient. He said: ‘Providing you stick to your 1000 bin pull down the size of the pipe is fine’. Mr Solomon said he would get back to Mr Radevski to confirm.
60 Chris Radevski’s evidence in this respect was supported by the evidence of his brother Peter. Peter’s written evidence was that Chris said to Mr Solomon that they needed to be able to pull down 1000 bins to temperature within 24 hours with up to 150 bins per room. Mr Solomon said something like ‘yep, we can do that’, or ‘that’s not a problem’. In cross-examination, Peter refuted the suggestion that 1000 bins had not been discussed. He said the discussion was about ‘150 bins per room up to a thousand’.
61 In evaluating the weight to be given to Peter’s evidence, I take into account that he and Chris are brothers and business partners. Further, as is not surprising, they discussed the relevant issues before and after the meeting at Thomastown on 14 July 2004 and also discussed their accounts in preparing for the legal proceeding. Even considering these matters, Peter’s evidence about what occurred at the meeting clearly supported Chris’s account and not Mr Solomon’s account and I give it some weight.
62 Chris Radevski was cross-examined about the fact that the second and third quotations, and the facsimile transmission of 5 August 2004 (see below), were based on the same refrigeration load (1300kW) and equipment and machinery, which was bigger and more expensive when compared with the first quotation. He did not agree that this should have told him that the system being proposed by Tri Tech was based on a pull down of 900 bins within 32 hours. He was more interested in what the plant could do, not how it would do it. He noticed some of the changes between the first and second quotation and also the price increase. In his mind, how the system was priced and put together was Mr Solomon’s responsibility. The question for Mr Solomon was what the Radevskis would get for the price, and Mr Radevski wanted a 1000 bin per day pull down, which is what Mr Solomon said he would get.
63 Mr Solomon’s evidence about the discussions after the third quotation and the meeting on 14 July 2004 at Thomastown was that Mr Solomon contacted Mr Radevski after sending the last quotation to see if he could clarify any matters. He agreed to arrange the IGA visit and meet afterwards to discuss the quotation. At the meeting, Mr Radevski did not say that the number of rooms may be increased to 25. That was raised later in a telephone conversation a short time before the facsimile transmission of 5 August 2004. In that conversation, Mr Radevski asked whether the main secondary refrigerant (glycol) line would be large enough if more rooms were added. Mr Solomon said the number of bins to be pulled down would dictate the required diameter of the pipes. Mr Radevski said the maximum number of bins to be pulled down if more rooms were added would be 1000. This was the first time that he nominated this number of bins for pull down and then only in the context of what might occur if the number of rooms were to be expanded.
64 Mr Lawson’s evidence was that, although he was present at the meeting, he could not remember what had been discussed.
65 In his written evidence, Mr Solomon said that, after this conversation, the main issues he had to consider in reference to the nine possible extra rooms were as follows:
(a) whether and if so where an additional condenser could be placed on the roof in to order to provide the additional cooling capacity;
(b) whether and if so where an additional compressor could be placed in the plant room in order to provide the additional cooling capacity;
(c) the size of the piping which would be required to carry the secondary refrigerant, to enable up to 1000 bins to be pulled down at any one time;
(d) The location of the take off on the main secondary refrigerant pipelines for any new rooms.
66 In reference to the additional condenser and compressor, he said:
In order to cool an additional 9 rooms it will be necessary for the Radevskis to purchase and to install another condenser and another compressor. There was sufficient space on the roof for another condenser and sufficient space in the plant room to accommodate another screw package compressor of the type which were [sic] referred to in Tri Tech’s quote of 8 July 2004.
67 In relation to the piping, he said:
The valved connections to each cool room were originally designed to operate on the pipes with a nominal bore (or diameter) of 150 mm. To allow for the possibility of an additional 9 rooms, the size of the pipe was increased from a nominal bore of 150 mm to a nominal bore of 200 mm. I cannot now recall whether I was the person who suggested the change from 150 mm pipe to 200 mm pipe. I am, however, of the opinion that a secondary refrigerant loop of 200 mm diameter is more than adequate to supply secondary refrigerant (assuming of course that an additional compressor and condenser are installed) for a total of 25 rooms in circumstances where a maximum of 1000 bins are being pulled down at any one time.
Confirmation of final quotation (5 August 2004)
68 The final quotation was confirmed in a facsimile transmission dated 5 August 2004 from Mr Solomon to the Radevskis which was in the following material terms:
Following our discussions I would like to confirm the following pricing and our specific inclusions.As requested the following items are included in our pricing.
Based on the above offer our confirmed price for the project would be$1,130,000 + GST at $113,000.
69 It can be seen that the price specified was only $10,000 more than the third quotation, despite the inclusion of two options worth $35,000. Therefore the quotation was a little lower in real terms than the third quotation.
Written agreement (1 October 2004)
70 On about 1 October 2004 the Radevskis and Tri Tech entered into a written ‘industrial refrigeration supply and installation agreement’. In schedule 1 of the agreement, ‘the works’ to be performed were described in these terms:
Tri Tech will supply Materials and perform works in accordance with its letter of 8 July 2004 to P, C, M & T Radevski including the Works referred to in a letter from T & L Electrical Services and also as further detailed in a letter from Tri Tech Refrigeration to P, C, M & T Radevski dated 5 August 2004 (copies of which letters are annexed to and form part of this Schedule 1).
Work not included in the scope of works was also specified:
The scope of the Works does not include:
DID TRI TECH MAKE THE DESIGN REPRESENTATIONS?
71 As I have stated, the matters to be determined are whether Tri Tech represented that the system had the capacity (whether the number of cool rooms was kept at 16 or expanded to 25) to pull down 1000 bins of fruit from ambient to 20 centigrade core temperature within 32 hours or air temperature within 24 hours, provided that no more than 150 bins would be pulled down in a cool room at the one time and all other rooms would only be used in maintenance mode and, also, whether the Radevskis relied on that representation. Of course, the standard of proof is the civil standard of proof on the balance of probablities.
72 Tri Tech submit that Mr Solomon’s evidence is to be preferred. He had a better recollection of the critical events, supported by the notes in his diary and the plan of 18 June 2004, as well as the contents of the three quotations and the facsimile transmission of 5 August 2004. As a professional engineer, it is not likely that he would be mistaken about the matters in contention on three occasions. Mr Radevski made no dairy or file notes and sent no written communications to Tri Tech at any time. His reaction to Mr Solomon getting the quotations wrong on three occasions was disappointment when a much stronger reaction was to be expected.
73 Tri Tech opened the case on the basis of Mr Solomon’s written evidence that he was not told about the possible expansion in the number of rooms to 25 until the telephone conversations which occurred after the meeting at Thomastown on 14 July 2004. In his oral evidence he adopted and repeated that written evidence. The submissions made by Tri Tech on the preliminary questions were initially to the same effect. Later, in additional written submissions for which I give leave, Tri Tech adopted a different position. It is submitted that Mr Solomon could have been wrong about when this information was communicated to him. It probably was communicated to him during a telephone conversation with Mr Radevski at about the same time as the meeting, at which the matter was also probably discussed. Further, Tri Tech submitted it was not correct for Mr Solomon to say in his statement that the refrigeration piping had been increased from 150 mm to 200 mm to accommodate the proposed expansion in the number of cool rooms. This had been done earlier to achieve a 32 hour pull down time.
74 Tri Tech submitted that, on the evidence which should be accepted, the representation which it made through Mr Solomon was that the system had the capacity to pull down the core temperature of 900 bins of fruit from ambient temperature to 20 centigrade within 32 hours, on the basis that no more than 150 bins would be used in a room in pull down mode at the one time.
75 For the following reasons I reject that submission.
76 Submissions were made on both sides criticising the ‘credit’ of witnesses. I reject all the submissions but they were not really submissions about the credit of the witnesses. All of the witnesses gave evidence honestly and to the best of their recollection, having regard to the long passage of time since the relevant events occurred. I have preferred the evidence of Mr Radevski over that of Mr Solomon in relation to certain critical matters, but not on the basis that Mr Solomon is a not a witness of credit or is a witness of lesser credit than Mr Radevski. I consider Mr Solomon to be a skilled and professional engineer who gave evidence honestly and to the best of his recollection. I have found his recollection to be wanting on important factual issues addressed in this judgment, on the basis of the evidence which is relevant to those issues.
77 I take into account that Mr Radevski made no file or diary notes and that, as regards the events of 18 June 2004, Mr Solomon had the benefit of the notes in his diary and the plan. Those provide some but not total support for his account of what was discussed on that day, the notes in the diary much more than in the plan. However, the evidence as a whole suggests Mr Solomon probably did use those notes incorrectly (albeit innocently) to reconstruct his evidence, as was submitted for the Radevskis.
78 The evidence is that, very soon after getting the first quotation, Mr Radevski asked for it to be revised. Mr Solomon agreed to do so. The second quotation involved a substantial increase in the size of the equipment and machinery and the secondary refrigeration piping. With exceptions that are not material, that is the system which was specified in the contract and supplied and installed. Mr Radevski’s testimony is that he was assured that this system had the capacity to pull down the core temperature of 1000 bins of fruit from ambient temperature to 20 centigrade within 32 hours, on the basis that no more than 150 bins would be used in pull down mode at the one time. I accept that testimony.
79 It was Mr Solomon’s clear written evidence that the nominal bore of the secondary refrigeration piping was increased from 150 mm to 200 mm to ‘allow for the possibility of an additional 9 rooms’. That is not a qualified statement.
80 The statement is not consistent with Mr Solomon’s account as to when he was told about the possible expansion in the number of rooms. On the account of his evidence being pressed by Tri Tech, he was given that information on or about 14 July 2004. The second quotation with the increase in the nominal bore of the secondary refrigeration piping from 150 mm to 200 mm was supplied by Tri Tech to the Radevskis on 24 June 2004. Mr Solomon’s evidence about when he was told of the possible expansion in the number of rooms cannot be accepted. He was not given that information on about 14 July 2004 in the context of the discussions about the third quotation. Mr Radevski gave him that information at least before the second quotation was prepared and very probably before the first quotation was prepared. Mr Radevski repeated it consistently thereafter.
81 The passage of time since 2008 when these events occurred has been eight years. It is understandable that a professional engineer dealing with many contracts, such as Mr Solomon, would be unable to remember clearly and accurately what occurred in the negotiations over the Radevskis’ contract. Mr Solomon’s memory has been proven to be incorrect in a number of significant respects. On his own admission, his evidence has not been correct in relation to his presence at the meeting at Swainston Road when the contract was signed. On Tri Tech’s submissions, his evidence has not been correct in relation to when he was told about the possible expansion in the number of rooms. On my findings, his evidence has not been correct in relation to the critical question of when the decision was made to increase the diameter of the refrigeration piping. Mr Radevski’s recollection has, by contrast, been proven to be generally accurate.
82 The facsimile transmission of 5 August 2004 connects the issue of the expansion in the number of rooms and the issue of the ‘line sizing’ or diameter of the secondary refrigeration piping. It states that ‘200 NB is more than adequate for your future requirements’. I do not think it was an accident that the line sizing specified in the second quotation just happened to be adequate for that future requirement. The requirement was for 9 additional rooms. The probabilities are that the line sizing was increased in the second quotation not just to make allowance for a shorter pull down time (32 hours down from 48) but to make allowance for the possible expansion in the number of rooms.
83 The facsimile transmission of 5 August 2004 does more than connect the issue of possibly expanding the number of rooms with the issue of the ‘line sizing’ or diameter of the secondary refrigeration piping. It connects those issues with the issue of the total number of bins to be pulled down. It states that the nominal bore of 200 mm for the line sizing is adequate ‘on the understanding that your pull down requirements are as per our discussions (Around 1000 bins)’. It goes on to state that Tri Tech has ‘specifically designed the piping to the refrigeration load of the plant so that the two are matched’. That necessarily involved a consideration of the pull down capacity of the system as required by the Radevskis and the possible expansion of the number of rooms to be used in maintenance mode. On the evidence, that pull down capacity was always 1000 bins (on the assumption that the cool rooms not being used to pull down those bins would only be used in maintenance mode) and the number of rooms was 16 with scope to expand to 25.
84 The 200 mm nominal bore was adopted in the second quotation more than six weeks earlier – as Mr Solomon said in his evidence, to ‘allow for the possibility of an additional 9 rooms’ being installed. Once that is appreciated, it is clear that Mr Radevski’s account of the ‘discussions’ referred to in the facsimile transmission should be accepted. The discussions were not discussions in which the issue of possibly expanding the room number had only recently been raised, as Mr Solomon deposed. The discussions were the discussions which had been occurring from near the commencement of the contract negotiations. On my findings so far, those discussions concerned the connected issues of the pull down time (32 hours from ambient to 20 centigrade in terms of core temperature), the number of bins to be loaded in the rooms to be used in pull down mode (no more than 150 bins in rooms used in that mode at the one time) and possibly expanding the number of rooms from 16 to 25. I have accepted Mr Radevski’s evidence in all those respects. I also accept his evidence in relation to the total number of bins to be pulled down. I find that, in those discussions, Mr Radevski was repeatedly assured by Mr Solomon that, whether there were 16 or 25 cool rooms, the system proposed had the capacity to pull down 1000 bins of fruit from ambient temperature to 20 centigrade within 32 hours, on the basis that no more than 150 bins would be used in rooms in pull down mode at the one time, and that is what the facsimile transmission confirmed.
85 In reaching that conclusion I have taken into account the substantial increase in the specifications of the machinery and piping as between the first and second quotations and the fact that this did not increase thereafter. On Mr Solomon’s evidence in the trial, the system did not have the capacity to pull down 1000 bins of fruit from ambient temperature to 20 centigrade within 32 hours, on the basis that no more than 150 bins would be used in a room in pull down mode at the one time, without additional equipment (at least another condenser and compressor) being installed. He examined whether there was space for the equipment on the roof of and in the plant room and concluded that there was.
86 Whether or not that is correct, I do not accept that Mr Solomon told Mr Radevski. Further, given Mr Radevski’s limited knowledge of mechanical engineering, even allowing for his substantial knowledge of coolstore refrigeration operations, it is not something I would expect him to have appreciated.
87 On the evidence which I have accepted, Mr Radevski rejected the first quotation for not meeting his requirements. The second quotation contained a substantial upgrade of the equipment, machinery and piping, although Mr Radevski may not have fully understood how substantial the upgrade was. Mr Radevski was verbally told by Mr Solomon that the system specified in the second and third quotations had the capacity which Mr Radevski had specified and expected.
88 It is clear that Mr Radevski was approaching the discussions of July and August 2004 from the point of view that Tri Tech would either confirm or not confirm to him in writing that the system had the capacity which, on his evidence, the Radevskis were being promised. If it was confirmed, the contract would go ahead. If it was not confirmed, it would not go ahead.
89 Mr Radevski was operating on the basis that, on what Mr Solomon had told him and what he already knew, the Radevskis would need an additional compressor and other machinery if the additional rooms went ahead, ‘depending on our pull-down requirements at that time’, that is, depending on whether their pull-down requirements were increased. From what Mr Solomon had told him and what he knew, he was operating on the basis that the system would need to be upgraded after the addition of the 9 rooms only if the Radevskis’ pull down requirements exceeded 1000 bins, 150 bins at a time. On Mr Radevski’s evidence, that pull down requirement contained an inbuilt margin for expansion to cover the installation of the additional rooms and did not need to be exceeded if that addition were to take place.
90 In those circumstances, it is not reasonable to expect Mr Radevski to conduct his own technical examination of the equipment, machinery and piping being offered by Tri Tech to see whether it had the capacity to pull down 1000 bins, 150 bins at a time, a task for which he was unqualified.
91 I do not accept the submission made for Tri Tech that Mr Radevski failed to make a proper complaint about Mr Solomon’s failure on three occasions to specify what the Radevskis required. Mr Radevski made immediate contact with Mr Solomon after each quotation, expressed his disappointment and insisted that Mr Solomon provide a quotation on the basis of his stated requirements. It is true that he did not stamp his feet or raise his voice. Rather, he was quietly determined to ensure that Mr Solomon confirm in writing whether the Tri Tech quotation had the capacity to meet those requirements or not. He achieved that objective.
92 I do not accept the submission that, to make the representations which he did, Mr Solomon would have needed the dimensions of the new rooms and a protocol specifying how many and what rooms would be used in each mode. Mr Radevski and Mr Solomon were negotiating on the sensible and practical basis that the new rooms would be similar in size, design and use to the rooms which were to be initially installed. In the facsimile transmission of 5 August 2004, Mr Solomon quite comfortably proceeded on that basis. There is no evidence suggesting that the additional rooms would be of a different size, design and intended use.
93 On the evidence, I find that Mr Radevski consistently communicated to Mr Solomon that the refrigeration system had to be capable of pulling down 1000 bins of fruit per day from ambient to 00 centigrade air temperature, on the basis that no more than 150 bins would be pulled down in a cool room at any one time, that the cool rooms not operating to pull down that fruit would be operating in maintenance mode, that there would initially be 16 cool rooms with scope for an additional nine and that, if those nine rooms were to be added, the bins to be pulled down would not be increased. Mr Radevski communicated that to Mr Solomon from the very commencement of the discussions preceding the first quotation up to the discussions preceding the facsimile transmission of 5 August 2004.
94 Mr Solomon represented to Mr Radevski (and therefore to the Radevskis) that the system which Tri Tech would design and install had the capacity to meet those requirements, although he expressed the temperature specification in terms of pulling down the 1000 bins of fruit within 32 hours from ambient to 20 centigrade core temperature, which is the equivalent of pulling down 1000 bins of fruit per day from ambient to 00 centigrade air temperature. Mr Solomon represented that to Mr Radevski in the many discussions which occurred in relation to (at least) the second and third quotations up to the sending of the facsimile transmission of 5 August 2004 which, taken with the third quotation and understood in the context of those discussions, operated to confirm those representations.
95 On the evidence, I find that Mr Radevski (and therefore the Radevskis) relied on the representations which were made by Mr Solomon in awarding the contract to Tri Tech. That finding follows naturally from the other findings which I have made and from the fact that the Radevskis entered into the agreement only after receiving the confirmation in the facsimile transmission of 5 August 2004.
ANSWERS TO QUESTIONS
96 The preliminary questions which I specified for determination are:
Representation issues
Contractual terms
Noise
97 It has been agreed that all questions associated with the excessive noise which was allegedly emitted from the system should be deferred pending the making of an application by the Radevskis for leave to amend their amended counterclaim to include an excessive noise claim based on the express terms of cll 13.1(c) and 14.1 of the agreement. I will answer the questions in this category accordingly.
98 In the view of Tri Tech’s counsel, the agreement cannot be properly interpreted without receiving expert evidence about the relationship between the various parts of the technical specifications in the agreement. That view appears to be reasonably held. On that basis, I accept Tri Tech’s submission that the contractual questions should not be answered at this stage.
99 The questions will be answered as follows:
Representation issues (questions 2-6)
(1) The Radevskis orally informed Tri Tech in various discussions between Mr Radevski and Mr Solomon from before the first quotation was given up to when the facsimile of 5 August 2004 was sent that, whether the number of cool rooms was 16 as initially planned or expanded to 25, the refrigeration system had to have the capacity to pull down 1000 bins of fruit from ambient to close to 00 centigrade air temperature within 24 hours, provided that no more than 150 bins would be pulled down in a cool room at the one time, that any cool rooms not being used to pull down that fruit would only be used in maintenance mode and that, if the number of cool rooms was to be increased from 16 to 25, the number of bins to be pulled down would remain at 1000.
(2) Tri Tech represented to the Radevskis orally in various conversations between Mr Solomon and Mr Radevski from (at least) before the second quotation was given up to when the facsimile of 5 August 2004 was sent that the system being proposed by Tri Tech had that capacity and also made that representation by submitting the third quotation and sending that facsimile.
(3) The Radevskis relied on Tri Tech’s representation in entering into the agreement.
(4) Consideration of the questions in paragraph 3(f) will be deferred pending the making of an application by the Radevskis for leave to amend their amended defence and counterclaim to include an excessive noise claim based on the express terms of cll 13.1(c) and 14.1 of the agreement.
(5) It is unnecessary to answer any other aspects of questions 2-6.
Contractual terms (questions 7-10)
(1) These questions will not be answered at this stage of the proceeding.
Noise (questions 11-12)
(1) As with question 3(f), consideration of these questions will be deferred pending the making of an application by the Radevskis for leave to amend their amended defence and counterclaim to include an excessive noise claim based on the express terms of cll 13.1(c) and 14.1 of the agreement.
100 There will be orders granting leave to the Radevskis to amend their amended defence and counterclaim to include paragraph 3(ca) as follows:
(ca) the 16 coolstore rooms were to be capable of collectively pulling down up to 1000 standard bins of freshly picked fruit introduced to the coolstore per day, provided that no more than 150 of those bins were loaded into any one room, such that:
(i) the rooms into which that fruit was loaded would reach a room air temperature of 0 degrees Celsius within 24 hours;(ii) the rooms would continue to cool that fruit until the fruit reached a core temperature of 0 degrees Celsius, and would then maintain the fruit at that temperature; and
(iii) all of the other rooms in the coolstore would continue to maintain the temperature of already pulled down fruit stored in them at zero degrees Celsius.
There will also be orders specifying and answering the questions for preliminary determination as set out above.
CONCLUSION
101 The Radevskis have established, on the evidence, that they communicated to Tri Tech, from the start of the negotiations until agreement was reached, that their new cool store would have 16 cool rooms with scope for 25 and that the refrigeration system for which Tri Tech was quoting had to have the capacity to pull down 1000 bins of fruit from ambient to close to 00 centigrade air temperature within 24 hours, provided that no more than 150 bins would be pulled down in a cool room at the one time, that any cool rooms not being used to pull down that fruit would only be used in maintenance mode and that, if the number of cool rooms was to be increased from 16 to 25, the number of bins to be pulled down would remain at 1000.
102 The Radevskis have also established, on the evidence, that Tri Tech represented to them, from an early stage in the negotiations until agreement was reached, that the system being proposed by Tri Tech had that capacity (expressed in a slightly different way).
103 Lastly, the Radevskis have established, on the evidence, that they relied on Tri Tech’s representations in entering into the agreement.
104 The preliminary questions will be answered accordingly.
[1] The notation ‘kW’ refers to kilowatts or 1000 Watts
[2] ‘DB’ and ‘WB’ refer to dry bulb and wet bulb respectively.
[3] ‘NB’ refers to the nominal bore (inside diameter) of the pipe (150 mm).
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