Cinema Center Services Pty Ltd v Eastaway Air Conditioning Pty Ltd [1999] ACTSC 57 (11 June 1999)

Last Updated: 11 May 2005

Cinema Center Services Pty Limited v Eastaway Air Conditioning Pty Limited

[1999] ACTSC 57 (11 June 1999)

Publication of Findings

No. SC 379 of 1995

Coram: Miles CJ

Supreme Court of the ACT

Date: 11 June 1999

IN THE SUPREME COURT OF THE )

) No. SC 379 of 1995

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: CINEMA CENTER SERVICES PTY

LIMITED

Plaintiff

AND: EASTAWAY AIR CONDITIONING

PTY LIMITED

Defendant

ORDER

Judge Making Order: Miles CJ

Where Made: Canberra

Date of Order:

THE COURT ORDERS THAT:

1.

Publication of Findings

1. This is an action for damages for breach of contract. The defendant agreed to supply to the plaintiff and to install in the plaintiff's motel 81 reverse cycle air-conditioning units. The plaintiff alleges that the air-conditioning units did not heat properly and that as a result it incurred consequent loss of custom and profits and was put to the cost of installing a computerised start up system and gas heaters.

The issues

2. Although paragraph 3 of the amended statement of claim relies on a wholly written contract, by amended particulars furnished during the hearing, the contract is alleged to be written, or, in the alternative, partly written and partly oral. The written contract, or the written part of the contract, consists of a proposal of the defendant in the form of a letter with attachments dated 9 November 1987 and a letter from the plaintiff to the defendant dated 12 November 1987. The relevant parts of those documents are set out below.

The defendant's proposal of 9 November 1987

3. The letter contains the following:

"RE COMFORT CONDITIONING AND MECHANICAL VENTILATION OF SUNDOWN MOTEL CANBERRA

It is with pleasure we submit our proposal for the above project.

VILLAS

To satisfy the requirements of comfort conditioning within the hotel villas, it is proposed to supply and install eighty-one (81) of 51QGO12 1½ hp reverse cycle room airconditioners. These room airconditioners would be installed into a penetration, provided by others, with a ¾ inch timber sleeve surrounding the penetration to absorb any possible vibration transmitted to the villa wall. The penetrations for the room airconditioners in the villas would be at high level in the courtyard walls, as discussed."

(The following part of the proposal then deals with air-conditioning of other areas of the motel with reverse cycle split system equipment manufactured by Hitachi and is not directly relevant. The proposal also refers to certain work associated with the installation but not included "in the quotation", and to manufacturer's warranty and other matters.) The proposal then continues and concludes:

"We have selected Carrier and Hitachi equipment on this project as they are two of the largest manufacturers in the world and their equipment is of proven performance, both mechanically and capacity wise. We believe this selection to be the best in the interest of your Company and are confident that the equipment will satisfy your requirements and look forward to your acceptance of our quotation.

Our price is submitted on the current tax levels and any changes resulting from new Government policy in this area will need to be covered by a variation.

NOTE: Further to our meeting on Friday, 6 November 1987, we have placed firm orders for all equipment to ensure prompt delivery to satisfy building programme requirements.

We would require a schedule of proposed building works to enable us to efficiently programme the project and to co-ordinate all works to your satisfaction.

If there is any further information you require please do not hesitate to contact the writer."

4. The documents attached to the letter include the "quotation" referred to. It is in the following terms:

"COMFORT CONDITIONING AND MECHANICAL VENTILATION OF SUNDOWN MOTEL CANBERRA

9 November 1987

PART 1

BISTRO, CONFERENCE & CARETAKER

INCUDING DESIGN FEE FOR MECHANICAL VENTILATION WORK IN KITCHEN AND SUPPLY AND INSTALLATION OF COMFORT CONDITIONING FOR THE SUM OF Net including sales tax

$66,775.00

FOR THE SUPPLY AND INSTALLATION OF 81 CARRIER 51QG012 1½ HP ROOM AIR CONDITIONERS FOR THE SUM OF Net including sales tax	$94,527.00
ALLOWANCE FOR 71 UNITS PRICE INCREASE ON JANUARY SHIPMENT NOT TO BE MORE THAN $46.00 PER UNIT PLUS $4.60 SALES TAX MAXIMUM PRICE INCREASE	$ 3,877.00"

The plaintiff's letter of 12 November 1987

"We confirm our acceptance of your proposal for the Sundown Village on the basis you have outlined including works to be performed by us with respect to installation and with respect to the exhaust hoods.

We are accepting your assurance that as Canberra area winter climatic conditions have been assessed by computer, the units proposed will function effectively on the heating side of the reverse cycle.

We expect that our building progress will allow works on all 84 structures (81 villas plus three separate buildings) can commence in January for completion in February."

5. It may be noted that the motel was variously called the Sundown Motel and the Sundown Village. The latter is the name used in these reasons, although different names were used in the evidence from time to time. The parts occupied by guests, consisting of one or two bedrooms, combined living room/kitchen and bathroom, were usually called villas, and that is the term used in these reasons. The term "units" is reserved for the air-conditioning units.

6. Insofar as the contract is alleged in the alternative to be partly oral (which was the plaintiff's preferred position at the stage of final submissions), the plaintiff relies on an alleged conversation over the telephone between Dr Killen for the plaintiff and Mr Anthony Long, an employee of the defendant, on 10 or 11 November 1987. In particulars furnished by letter of 23 September 1994 the plaintiff's solicitors alleged that Mr Long gave an assurance that the Carrier reverse cycle 51QG012 air-conditioning units to be supplied and installed, would perform adequately on heating cycles down to and below zero temperatures in average Canberra conditions where, on about 100 nights per year the temperature falls below 7º C for more than four hours and on a considerable number of those nights, falls well below zero. (Unless otherwise indicated temperatures in these reasons are Centigrade.)

7. In paragraph 4 of the amended statement of claim, it is alleged that at the time of making the contract the plaintiff expressly made known to the defendant the particular purpose for which it required the units, namely "that the units would heat the rooms in the Sundown Motel effectively during Canberra winter climatic conditions". In paragraphs 5 and 6 of the amended statement of claim, it is alleged that this was a condition of the contract and the defendant warranted that the units should be fit for the particular purpose specified in paragraph 4, or alternatively, that the units should be of merchantable quality.

8. In paragraph 7 of the amended statement of claim it is alleged that "at all material times the Defendant well knew that the Plaintiff required the units to function effectively during Canberra winter climatic conditions".

9. In its amended notice of defence, the defendant does not admit that it made any contract with the plaintiff as alleged in paragraph 3. It denies the allegations in paragraph 4 that the plaintiff made known to the defendant that it required the units to heat the villas effectively during Canberra winter climatic conditions. It asserts that, if there was a contract, there was no condition that the units should be fit for the particular purpose alleged or that the units should be of merchantable quality. It asserts further that the plaintiff did not show that it was relying, and did not in fact rely, on the defendant's skill and judgment in entering into the alleged contract. It denies that the defendant well knew that the plaintiff required the units to function effectively during Canberra winter climatic conditions and asserts that the plaintiff was well aware that in areas where the temperatures are regularly below 7º, heat from another source may be required to supplement that generated by the units supplied.

10. The defence, as pleaded, does not sit easily with the way in which the case was conducted for the defendant. There was never any issue during the hearing that the defendant, pursuant to contract, supplied and installed the 81 air-conditioning reverse cycle units specified. Nor was there any issue that on some very cold nights in the winters from 1989 to 1994 inclusive, at least some of the units performed so poorly that some guests complained of the inadequate heating inside the villas and some complained of noise in the early hours of the morning caused by icing up of parts of the units outside the villas. The case for the defendant was conducted as though it was relying on an express term in the contract that the air-conditioning units would provide effective heating only when the temperatures were at or above 5º to 7º and a further express term that, if effective heating was to be maintained below such temperatures, longer running times were necessary and supplementary heating from another source was required to be supplied by the plaintiff at its own expense.

11. In final submissions the plaintiff's case as to the terms of contract was summarised as relying on either a condition that the 81 room air-conditioners would heat the villas effectively during Canberra winter climatic conditions (that term or condition being either express or implied) or, alternatively, an implied condition of the contract that the units should be of merchantable quality. If the term was express, then the alleged breach gave rise to a right to damages at common law. If the term was implied, the alleged breach gave rise to a right to damages under the Sale Of Goods Act 1954 (Sale of Goods Act), alternatively under the Trade Practices Act 1974 (Cth) (Trade Practices Act), or under both.

12. The defendant's primary case on the terms of the contract as put in final submissions was that the plaintiff could succeed only "on the basis of a written contract with a warranty implied by statute".

A contract wholly or only partly in writing?

13. I reject the plaintiff's primary case as pleaded that the contract was wholly in writing. As already indicated above, it was not the preferred position pressed by counsel for the plaintiff in final submissions. As will emerge from the following analysis and discussion of the evidence, I conclude that it was never the intention of the parties that the whole of the terms of the contract be embodied in the defendant's proposal of 9 November 1987 and the plaintiff's letter of 12 November 1987. Nor do these documents, in the light of the surrounding circumstances, evince an intention that they constitute the whole of the terms of the contract. The law about what evidence can be considered in determining whether a contract is in writing or wholly oral or partly both was summarised by Hope JA (Samuels JA and Mahoney JA concurring) in Norwest Beef v Peninsula and Oriental Steam Navigation Co (1987) 8 NSWLR 568. He stated (at 570) that:

"It was once the received doctrine that a document which appeared on its face to be a complete record of the parties' contract was conclusively presumed to be the contract. This proposition was discussed by McHugh JA in State Rail Authority of News South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170. He concluded that the correct rule is that the existence of writing which appears to represent a written contract between the parties is no more than an evidentiary foundation for a conclusion that their agreement is wholly in writing. The tendering of evidence, whether oral or in writing, to prove a contractual term cannot be excluded until it is determined that any term in writing recorded the whole of the parties' agreement."

14. I interpolate here that the case was conducted on the mutual assumption that there was a contract for the supply and installation of the 81 units which was severable from a contract for the supply and installation of air-conditioning equipment in the other parts of the motel. I have set out the whole of the quotation, including the part specifically referable to the other parts of the motel because it has some relevance to the surrounding circumstances.

15. If the correspondence relied on was to constitute the whole of the contract, a good indication would be the expression therein of the classic language of offer and acceptance. On the face of it, no doubt the proposal could be regarded as expressed as if it were an offer. It identifies with precision the number and trade description of the units to be supplied and a total price. On the other hand, the offer is not one of "take it or leave it". It allows for further negotiations on such matters as timing of installation, adjustment of price for increases in sales tax and January shipment. The reference to "comfort conditioning" in the title of the letter and in the title of the quotation also suggests that the meaning needs to be ascertained from outside the written proposal itself. The invitation in the last paragraph of the proposal invites, or at least does not exclude, the contemplation of a counter offer.

16. The plaintiff's letter in reply begins as an acceptance of the offer contained in the proposal, but there follows immediately a qualification, namely the confirmation of an assurance said to have been made by the defendant that the units will function effectively on the heating side of the cycle, an assurance which is given because the Canberra climatic conditions in winter have been assessed by computer. The assurance does not appear in the written proposal. The letter of acceptance therefore suggests that the assurance is to be ascertained outside the proposal and accordingly that certain terms of the contract are not contained in the writing relied upon.

17. The inference that the contract was partly in writing and partly oral is confirmed by the evidence other than the writing itself. I turn to that evidence.

18. The only allegation of fact alleged to give rise to the conclusion that the contract was partly oral is the giving of the assurance by Mr Long to Dr Killen in a telephone conversation on 10 or 11 November 1987. It is a deceptively simple issue. Dr Killen gave positive evidence of the fact of the conversation and of its contents. Mr Long gave evidence that he could not remember or deny a telephone conversation with Dr Killen on or about those dates, but he denied that he gave an assurance then, or at any other time, of the nature alleged. That conflict cannot be decided without a close review of much of the evidence in what was a long and complex case.

History: events leading to contract

19. The plaintiff company is and was at all times effectively owned and controlled by Dr Edward Killen, an enterprising and successful businessman. Dr Killen through the plaintiff, or through one or other of a number of associated companies, owned and operated a cinema or cinema complex building in Civic. The group of companies had its offices there. The group also owned and operated the Townhouse Motel in Civic, which by the time of events in question had been sold.

20. The plaintiff and the defendant had some prior association. The defendant had for some years been engaged in the supply and installation of air-conditioning equipment in commercial situations. It was based at Artarmon in Sydney. It had been responsible for the maintenance, replacement and refurbishment of air-conditioning in the plaintiff's offices and motel in Civic in about 1983. It had some experience in the supply and installation of air-conditioning equipment in motels but that was not the bulk of its work. Its experience in colder areas such as Canberra was limited. Its moving force had been Mr Paul Eastaway. By the time of the events in question Mr Eastaway had sold his interest in the defendant to Mr. Ron Clarke, but he still maintained an active part in the day to day operations, particularly on the sales side.

21. There used to be a drive-in movie theatre at Narrabundah on the Monaro Highway. The drive-in closed down and a new highway was constructed. The former highway became known as Jerrabomberra Avenue. The plaintiff acquired the site. Dr Killen decided to develop the site into the Sundown Village. There were to be 81 single storey self-contained villas, already described, spread over what is an unusually large area for a motel complex. There was also a central area with a reception area and an administration office, a restaurant and kitchen and a separate manager's flat. Natural gas was available on the site.

22. Consideration had to be given to heating the villas and the other buildings. An associated but less compelling matter was cooling during the summer. Dr Killen entertained the idea of air-conditioners which would do both. In this connection he was advised by a Mr Tom Maguire, and possibly a Mr Ken Bishop, and through Mr Maguire he consulted the defendant.

23. There was a meeting in September or October 1987 when the project was under construction. Present on behalf of the plaintiff were Dr Killen and Mr Frank Pritchard. The defendant was represented by Mr Eastaway. Dr Killen's evidence was that the meeting was on the site. His evidence was supported in that regard by that of Mr Pritchard, an employee of the plaintiff, who was in charge of the building operations. Mr Eastaway's evidence was that the conversation was in Dr Killen's office in the city. I find that in fact the meeting took place on the site. That finding tends to support the evidence given on behalf of the plaintiff as to what was said.

24. Dr Killen's evidence was presented in the first instance in the form of a statement made to his own solicitors. He was subject to cross-examination but he was not challenged substantially on the content of the conversation at this meeting. Again he was corroborated largely by Mr Pritchard. There is a question whether Mr Maguire was present, but I do not find it necessary to find an answer to the question.

25. Without being satisfied as to the exact details of the conversation, I find that Dr Killen made Mr Eastaway aware that each of the units would contain a combined living room/kitchen a separate bathroom together with one or two separate bedrooms. I find further that Dr Killen made Mr Eastaway aware of his particular concern that the villas be heated adequately during the Canberra winter nights. There was conversation about various methods of heating. Dr Killen stated something to the effect that what was needed was to be suitable for a three star class motel. Mr Eastaway told Dr Killen that Carrier 1½ HP reverse-cycle units were adequate for the task. Mr Pritchard, who had experience of similar units, expressed his reservation about their adequacy. Mr Eastaway replied that air-conditioning technology had advanced in recent years. There was also conversation about heating the areas other than the villas and Mr Eastaway gave separate advice on that matter.

26. Although I am satisfied that Dr Killen and Mr Eastaway were aware of the limitations on the heating power of reverse cycle room air-conditioners (as contrasted with split system units which were to be installed in other parts of the motel and which had been installed at the cinema complex offices), nothing was said at that meeting about any need to switch the Carrier units on in advance of the time at which the desired level of heating was required, or about any need for supplementary heating.

27. Either at the meeting just referred to, or between that meeting and the next meeting on 6 November 1987, Mr Eastaway supplied to Dr Killen a brochure published by the manufacturer's distributor, Carrier Air-Conditioning Pty Limited ("Carrier"), and both men were well aware of its contents by the end of the next meeting at the latest. The brochure included a coloured photograph display of reverse cycle air-conditioning units used in domestic and small office or commercial settings. Among the models illustrated was that described as having the following features or specifications:

`MODEL: 51QG012

CAPACITY: 3500W

NOMINAL H.P. Type: 1½ HP HEAT PUMP"

28. The brochure also contained the following:

"WARRANTY. A two year warranty is available on all Carrier room air conditioners.

Capacities are in accordance with Australian Standard AS1861. The stated heat pump capacity of this air conditioner is obtained at an outside temperature of 7ºC. In areas where the temperatures are regularly below 7ºC supplementary heat from another source may be required."

29. Following the meeting on the site Mr Eastaway instructed members of the staff of the defendant to prepare plans, calculations of load estimates and comparative costs of available air-conditioning units that might be suitable for the plaintiff's requirements for the villas (the matter of air-conditioning and heating the other areas of the motel already being the subject of agreement in principle). Responsibility for this task was given to Mr Long, whose position was described by the defendant as "design engineer". In fact he was an apprentice mechanical draftsman. Mr Long obtained the assistance of technical staff of the defendant. Assistance was also obtained over the telephone from Carrier, who had a sales outlet and service facility at Fyshwick and were able to furnish figures from a computer database which included data on the climatic temperatures in Canberra. The end product of Mr Long's efforts was an "options sheet", a somewhat informal document with pencilled entries in columns against a list of various models of reverse cycle air-conditioners of 1¼ to 1¾ HP capacity, with indications of price, availability and other matters. The options sheet was drawn up so as to allow for prices to be shown differentiating between units identified as "R/cycle" and units identified as "Cool with element". In fact there was only one unit in the latter category shown as available. It was a Sanyo model described as "special", available for a basic price of $1,500 (together with minor additional charges). This model was the subject of a written note describing it as an "incremental unit" with the following features:

"1½ HP HEAT PUMP 3.5 KW DOWN TO 3º C

THEN PART ELEMENT DOWN To -3º C

THEN FULL ELEMENT

SPECIALLY DESIGNED FOR MOTEL USE."

30. Amongst the other models listed in the options sheet was the Carrier Reverse Cycle Unit 51QG012, shown against a price originally written as $760 but with that figure struck out and the additional figure of 848 (sic) inserted below. The Sanyo 1½ HP reverse-cycle unit (without the incremental heating element) was shown at a basic price of $770. The options sheet, which, in my view, assumes particular importance in the case, was exhibit 14.

The meeting at Artarmon on 6 November 1987

31. A further meeting was held at the defendant's premises at Artarmon in Sydney on 6 November 1987. Present were Dr Killen, Mr Eastaway and Mr Long. Mr Maguire may have arrived towards the end of the meeting, but I count that of no significance. What happened and what was said is crucial since the defendant relies upon that as the oral part of the phenomena of the agreement.

32. It hardly needs to be emphasised that where there is a conflict in the evidence about what happened or what was said at a meeting 12 years ago, it would be dangerous to assume that any of the three witnesses has a clear unassisted recollection of details. Nevertheless, considerable weight has to be given to the presentation of the witnesses as they gave their oral testimony. In some respects I think that Mr Long has to be regarded as the most impressive of the three witnesses, not least because he made no apparent attempt to express a recollection of matters which are inherently unlikely to have been remembered. Although held out by the defendant to be a "design engineer" and no doubt willingly accepting the title conferred upon him at the time, he did not give the impression of pretentiousness when he gave his evidence. He has long ceased his connection with the defendant. He appeared to me to be doing his best at accurate recollection without embellishment or self-justification and was frank to admit the limits of his recollection on some particular matters. On some other particular matters, which may be of importance, he was adamant that he had a clear recollection.

33. As both counsel conceded, or perhaps emphasised, the contrast between Dr Killen and Mr Eastaway confirms that not all men are cast in the same mould. Both are formerly successful businessmen, now retired or in semi-retirement. Dr Killen has been active in property development and primary production. The key to his success in business appears to be in strategic and managerial decision-making. When asked somewhat gratuitously by myself, Dr Killen said that his doctorate was obtained in political science and international law. Mr Eastaway, on the other hand, has a background in sales and sales management and, apparently without formal qualifications, built up a successful business from practical experience in refrigeration and air-conditioning and the ability to sell.

34. The contrast between the two personalities was apparent in their presentation of evidence. Dr Killen is an experienced litigant. His response to questioning, particularly during cross-examination, was measured and careful. Mr Eastaway was quick and unreflecting. Mr  Eastaway had to correct himself frequently. His approach to matters of observation of events and his recollection and description of them was that of the broad brush, not the fine etching pen of Dr Killen. At one stage whilst under cross-examination about his relationship with Mr Maguire, Mr Eastaway was almost eager to accept refuge in the privilege against self-incrimination when it was offered to him as a possibility. However, I do not think that the latter factor, or anything else, entirely destroyed his credibility. It was more likely a matter of confusion following an example of excessive skill on the part of the cross-examiner.

35. In general, where the evidence of Dr Killen conflicts with that of Mr Eastaway, I prefer the evidence of the former. That is not to say that I accept it unreservedly. I do not accept that Dr Killen's recollection on some matters of detail is as accurate as he maintains. Thus, where it is possible to rely upon the recollection of Mr Long or on some more or less objective feature in the case, that is of substantial assistance in deciding what was said at the meeting. For that purpose it is necessary to consider not only the direct evidence about the meeting, but evidence about some related matters as well as a substantial amount of documentary material. I now consider those aspects.

36. First, there is the matter of the options sheet. Mr Eastaway stated that he showed it to Dr Killen. Dr Killen denies that he saw it at all. Mr Long remembers only that the options sheet was on Mr Eastaway's desk with other documents and papers and that it was referred to from time to time during the meeting. I accept Mr Long's evidence. I think that if the options sheet had been shown directly to Dr Killen, then Mr Long would have seen it happen and might well have remembered. After all, it was a document which by its very nature was not likely to be shown to a prospective customer. In its pencilled and flimsy form it would have been unimpressive, especially in comparison to the glossy brochure from Carrier. Moreover, it showed the price at which the defendant was purchasing from the base supplier, not the price which the defendant would charge the customer. The price from the supplier to the defendant was not something that a customer would normally be told. Furthermore, Dr Killen and Mr Eastaway sat on opposite sides of Mr Eastaway's desk, and without Mr Eastaway actually passing the document across, it is unlikely that Dr Killen would have read what was in it.

37. Nevertheless, there is no difficulty in concluding that the options list formed a basis for what Mr Eastaway told Dr Killen and that Mr Eastaway referred to it during the meeting.

38. Dr Killen's statement (exhibit B), confirmed by him in evidence, proceeds as follows:

"8. As discussion on the air conditioning units for the motel suites commenced I recall Mr Eastaway saying words to the effect:

`I recommend the 51QG012 as the best model to do the job for you. The problem is I don't know if we can get enough of them in time.'

There was also a conversation about costs to the following effect:

I asked: ` What will these Carrier units cost?'

I believe Mr Eastaway then nominated a price of $91,129 for 81 units or $1,112 per unit.

He said also: `There is another model available, Daikin, which is comparable but it costs another 20-30 dollars more and it is no better.'

He then said: `I recommend this one - the 51QG012. I will make some phone calls and check on its availability.'

Mr Eastaway then made some calls and said words to the effect:

`There were 87 in stock on Friday morning but now there are only 30, or even only 10 left. They are being grabbed very quickly. There are 200 coming in January from Japan. We will have to hop in quickly or you wont get enough.'

Mr Eastaway then spoke of prices for Hitachi units he recommended for the other three buildings and prices for other items, the total sum mentioned being $184,000 at that stage, which included an allowance for work on site and for a price increase.

Annexed and marked "A" is a copy of a pencil note I made at the meeting of our discussion. The ink writing at the foot was, I believe, made later. At the end of the meeting I said words to the effect:

`We will go with what you are proposing.'

Mr Eastaway said words to the effect:

`We will send you a quotation.'"

39. Mr Long's statement (exhibit 19), which was admitted into evidence, and which he confirmed in his oral evidence, contains the following:

"7. I recall that all of the brochures for the various models listed in the options paper were on the table. I recall that Mr Eastaway had the options paper and the brochures on the table in clear view of Dr Killen. I recall that Mr Eastaway introduced me very briefly to Dr Killen and said that I had done all of the figures and applied the Canberra figures to the various units and prepared a list of options. I recall Mr Eastaway saying words to the effect that our calculations show that all of the brands on the list would provide comfort conditioning on the standard Canberra temperature figures. I recall him saying words to the effect that none of the reverse cycle heat pump systems will guarantee a maintained temperature like with a ducted system with a boiler. He said words to the effect that:

`You might have to run these types of units longer in extreme conditions to give them a chance to work and that you might have to supplement them with some other heating in extremes.'

He said that they were the cheapest system to install and that they would provide comfort conditioning on the standard Canberra temperature range.

8. I recall Mr Eastaway pointed out the price for each one of the options. I recall specifically that he mentioned the last one on the list which was a Sanyo 1.5. It was different to the others. It was more expensive than the others. It had an additional heating element which the others did not have and there was a notation on the options list which Mr Eastaway mentioned to the effect that it would provide heating using the extra element if the temperature dropped down below 3º Celsius. All of the others were reverse-cycle only with no element to boost it up in extremes of low temperature. I recall that Dr Killen looked at the brochure for the Sanyo 1.5 but eventually he said words to the effect:

`I think we will go for the Carrier units, the incremental units are twice the price - we might as well put in a boiler.'

Dr Killen decided on the Carrier 1.5 for the villas and asked that a proposal be prepared."

40. In his evidence to the Court Mr Long said that during the meeting Mr Eastaway added the figure 848 for the Carrier unit to the options sheet.

41. Mr Eastaway's evidence was not substantially different from that of Mr Long as to the substance of the conversation except to the extent that he claimed that he "showed" Dr Killen the options sheet.

42. Annexure A referred to in Dr Killen's statement is in the form of notes which are consistent with the statement. In fact that part of his statement hardly goes beyond the notes. The similarity between the statement and the notes is such that it suggests that the conversation, as relayed in the statement, is a reconstruction relying on the notes. I discuss annexure A further at par 56.

43. The notes in annexure A consist of a few lines of pencilled figures and phrases on what is hardly more than a scrap of paper. It may be taken to refer to 81 units, model 51QG012 1½ HP and a total of $91,129, with a price of $1,112 for each unit. There is also a note: "were 87. Fri morn. Later only 30 or even 10. Jan, 200 arriving". There is a further note "Daikin only one that compares and is 20-30 dearer". The remaining entries in the notes are unhelpful. Overall the notes do not do much more than confirm that some of the entries on the options sheet were mentioned by Mr Eastaway.

44. One of the documents that Mr Eastaway had before him at the meeting (exhibit BCZ) was a set of working figures relating to cost and the like. It includes a figure of $1,112 in the right-hand column. This figure, it may be inferred, was used as a basis upon which to arrive at a final figure shown of $94,527 which is, as it happens, the price for the Carrier units set out in the quotation annexed to the proposal of 9 November 1987. As a matter of arithmetic the figure of $1,112 may be explained by the base 848, written in by Mr Eastaway at the meeting, to which 10% is added for sales tax, a flat $30 for the manufacturer's warranty and an arbitrary $150 per unit, the latter perhaps representing a markup. I mention all this since it was the subject of extensive examination and cross-examination and lest it be thought that it has been overlooked. But in the end I think that it is inconclusive. It supports neither side on any issue in the case or on the credit of witnesses.

45. All witnesses agree that during the meeting Mr Eastaway made a telephone call during or after which the availability of the Carrier units was discussed between him and Dr Killen. Annexure A is consistent with this. It is likely, in my view, that during that telephone conversation an order (whether of a firm or of a tentative nature) was placed with Carrier by Mr Eastaway for 81 units. However, I do not find that any concluded agreement between the plaintiff and the defendant was reached at that meeting. Nor do I find that anything said at the meeting, of itself, constituted part of the contract or the terms of the contract: any such finding would be outside the issues raised on the pleadings and by the particulars.

46. Following the meeting Mr Eastaway instructed Mr Long to prepare a written proposal. Mr Long did so and sent it by fax to the plaintiff on 9 November 1987. It was put before Mr Eastaway for approval before it was signed by Mr Long. The essential contents have been referred to already. It follows from the previous findings that at the time of making the offer contained in the proposal both parties were aware that there was a question of the capacity of the Carrier units to heat effectively in extreme conditions and that Dr Killen was not interested in receiving a proposal for the installation of a more expensive unit fitted with an extra heating element for temperatures below 3º.

47. For the sake of completeness I find that the figure in the quotation of $66,775 for the ventilation and air-conditioning of the areas, other than the villas, was arrived at by the defendant after Mr Long had been instructed by Mr Eastaway to include a sum of $1,000 representing an allowance to be paid to Mr Maguire for "drawings", as is shown inter alia by exhibit BDZ. I have considered the various other documents which touch on this issue. Ultimately I do not see that it is of any significance.

The matter of a conversation on 10 or 11 November 1987

48. Dr Killen's evidence was that, following the meeting at Artarmon and receipt of the proposal on 9 November 1987, he consulted Mr Maguire with particular reference to the warranty appearing on the Carrier brochure and that Mr Maguire advised him to "ask them will the units perform on the heating side of the reverse-cycle below 7º C?". According to his evidence, Dr Killen also at that stage consulted Mr  Bishop who had been responsible for the installation of the air-conditioning at the Cinema Center building and the Townhouse Motel. Dr Killen said that Mr Bishop was concerned somehow in the air-conditioning for Parliament House, construction of which was not then completed. Mr Bishop advised him that in Canberra there are 100 days in every year when the temperature falls below 7º for more than four hours.

49. According to Dr Killen's evidence, the advice received from these two men was such as to cause him to telephone Mr Long on 10 or 11 November 1987. The following conversation took place (exhibit B):

"10. Killen: `Can you assure me that these Carrier units will perform on the heating side of the reverse cycle in temperatures below 7ºC because I am informed that in Canberra we get more than one hundred days when the temperature falls below 7ºC for more than four hours'. I was holding the original of Annexure "D" when asking the question reading from my notes taken on the top half from Maguire and Bishop.

AL: `The data for the Canberra winter climate has been put into the computer - the performance of the units has been checked by computer. I can assure you of their performance on the heating side.'

Long said that they would work on the heating side even below zero. At that temperature (he said) the units will still produce sufficient heat to keep guests comfortable.

He said: `It does drop off but there's not much difference summer and winter, about 3-4%.'

He referred to 12000BTU's. He also said it would be about 10000BTU's at zero. I made an enquiry about how noisy it would be and noted his response. My note of this is at the bottom half of Annexure "D".

I believed Mr Long when he gave the above assurance, and therefore believed that the reverse cycle units (model 51QGO12) would be adequate to heat the suites so that occupants would be comfortable in them even on days when the temperature fell well below 7ºC.

I had at this time no knowledge of difficulties that reverse-cycle units might have in extracting heat from the atmosphere during cold periods. I was very concerned that our guests should be comfortable on cold winter nights.

Reassured on that last point, I then sent a letter of acceptance to the defendant, which was faxed at 4 pm on 12 November 1987."

50. Dr Killen's evidence continued that, reassured by Mr Long, he wrote and sent by fax the letter of 12 November 1987, which contained express confirmation of the assurance.

51. I move forward in time to Dr Killen's further evidence that on 27 November 1987 he had a further conversation with Mr Long in which he put to Mr Long further information that he had from Mr Bishop about units manufactured by Kelvinator. These units had a special defrosting element fitted in order to cope with Canberra conditions. Dr Killen said that Mr Long acknowledged that Kelvinator produced such a fitting, but insisted that Carrier gets "more power out of its reverse-cycle" and that "Carrier is much more efficient and you save money on it".

52. Dr Killen said that he made a contemporaneous note of the conversation of 27 November 1987. It is annexure F to exhibit B. The entire page (a standard A4 sheet of paper) is in pencil and reads as follows:

"Per KFB 26/11/87

$35.52 extra for

defrosting device modification on Kelvinator gives heating for

22m of 32m cycle

27/11

Anthony says has sweeper that sweeps air ......

says Kelvinator introduced electrical element

& Carrier does not/Carrier gets 3 times power out reverse cycle [therefore] you save power with Carrier."

53. Dr Killen gave direct evidence about the conversations with Mr Maguire and Mr Bishop. It was not objected to and was probably admissible in any event. However, since neither Mr Bishop (since deceased) nor Mr Maguire were available to confirm it, or to be cross-examined about it, that evidence needs to be approached with some care. In this respect it is of importance that Dr Killen said in his statement that he made notes of his conversation both with Mr Bishop and Mr Long and read from the former in the conversation with Mr Long on 10 or 11 November. He also said that he made a note of the conversation with Mr Long as it occurred. The notes are in annexure D to exhibit B. The document is a conventional "with compliments" slip printed in the name of the Townhouse Motor Inn. The pencilled notes appear on what would otherwise be the blank back of the slip. On the top half are the notes which, according to Dr Killen's statement, record what he was told by Mr Bishop and which he read to Mr Long. The notes are consistent with part of the contents of a conversation, but they make no reference to the person spoken to. In particular they do not identify Mr Bishop.

54. A pencilled line is drawn across the slip of paper about halfway down and below that there are four entries which again are consistent with parts of a conversation, but again they do not identify the person spoken to. In particular they do not identify Mr Long. Neither the notes at the top, nor those at the bottom, make any reference to the date of the conversation or conversations.

55. Mr Long stated in evidence that he was not able to remember whether there was any telephone conversation between him and Dr Killen on 10 or 11 November 1987 or on 27 November, but he firmly denied that he ever gave any assurance to Dr Killen about the performance capacity of the Carrier units.

56. In considering whether I accept Dr Killen's evidence on these matters, I take into account the fact that Dr Killen's notes of the meeting of 6 November 1987 (annexure A) were not disclosed in the plaintiff's affidavit of documents sworn on 23 July 1997, although a copy was sent by the plaintiff's solicitors to the defendant's solicitors with a letter dated 3 July 1998. Dr Killen was not cross-examined about this aspect but I draw the inference from the reference to the notes in the statement that the statement was not made until some time between 23 July 1997 and 3 July 1998, and that Dr Killen has no real independent recollection of everything in the notes. In any event their importance is over-shadowed by the notes relating to the later conversations with Mr Long.

57. Some explanation for Dr Killen's notes dated 26 or 27 November (annexure F) is provided by the following. On 13 November 1987 Dr Killen received a telephone message from Mr Bishop recorded briefly as "Air Conditioner Reverse Cycle 1½ horsepower $838.48" (exhibit 1). On 20 November 1987 Mr Long wrote to Dr Killen about matters concerning the bistro but making no reference to the units or the heating of the villas (exhibit S). On 23 November 1987 Mr Eastaway sent a memorandum to Mr Ron Clarke, managing director of the defendant, in the following terms:

"As agreed, we need to confirm that the Carrier units will operate under Canberra conditions as requested in our order from the client.

Also, the order was to be placed for the units at the current price, however, a price increase could be incurred but the price was not to exceed $x. This amount is in the file and if you ask me I will find it for you."

58. This memorandum (exhibit D) which suggests that the question of the capacity of the Carrier units to meet the customer's requirements was under consideration by the defendant as at 23 November 1987, which fact is consistent with the hypotheses both that some sort of assurance about their capacity had been given and that some qualification as to the assurance had been raised at an earlier time.

59. The following day, 24 November 1987, Mr Clarke wrote to Carrier stating:

"Obviously these have to operate in the Canberra weather conditions and I would be grateful to have your confirmation that the units are suitable for this application." (Exhibit S)

60. On 8 December 1987 Carrier (through its New South Wales dealer development manager) wrote to the defendant as follows (exhibit E):

"... please be assured that these units are suitable for the Canberra climate as we have been supplying them to Delta and The Air Conditioning Centre since August 1985. They have had two full winters in Canberra as well as Goulburn and Orange and one winter in Wagga Wagga, with no suitability complaints.

I make note that the ambient temperatures are lower in Canberra than Sydney and I assume your engineers have calculated this factor into the heat load calculations."

61. Dr Killen claimed in his evidence that he made a note of a conversation with Mr Bishop on or shortly before 26 November 1987 and that the note was recorded on the front or printed side of the "with compliments" slip (annexure D to exhibit B). It reads:

"Kelvinator

Outside DBA 73

Defrost Thermostat

Special fitting for Canberra"

62. I find that there is an unlikelihood that Mr Long would have given the assurance which Dr Killen attributed to him on 10 or 11 November because he was not authorised or qualified to say it. The hypothesis that he said it conflicts with the lack of pretentiousness and his general demeanour when giving evidence. As to the contents of the conversation with Mr Long on 10 or 11 November, I must say that I find it strange that Mr Long was talking in terms of BTU's (British Thermal Units), and a "drop off" of 3 to 4 percent in the Carrier units as between summer and winter. It is possible that he was reading from some information previously supplied by Carrier. It is also reasonably clear that such information was sought and obtained from Carrier on and around the period 23 to 27 November.

63. The chronology of events and the other documentary evidence over the period 20 November to 8 December 1987 suggests that the entries on the back of annexure D to exhibit B were made at about the same time, contrary to Dr Killen's evidence that the entries on the back recorded a conversation with Mr Bishop following the meeting of 6 November 1997 and a subsequent conversation with Mr Long on 10 or 11 November 1987. I reject Dr Killen's evidence as to the date of the conversations recorded on the back of annexure D and find that they occurred on about 26 to 27 November and at about the same time as the conversation recorded on the front of annexure D. Those conversations were after the contract was made and do not constitute any part of the contract. The notes in annexure D are somewhat equivocal in some respects as I have observed. But unless Dr Killen has deliberately concocted a false document, a notion which I reject, annexure F to exhibit B is, on its face, strong evidence of the fact of a conversation on 26 or 27 November 1987 between Dr Killen and Mr Bishop ("KJB") followed by a conversation on 27 November between Dr Killen and Mr Long ("Anthony"). It is also strong evidence of the contents of both conversations. Accepting Dr Killen's evidence as to these conversations on 26 or 27 November and the content of the plaintiff's letter of 12 November leads me to accept also his evidence about the fact that there probably was a conversation with Mr Long on 10 or 11 November.

64. The question remains that, given that there probably was a conversation between Dr Killen and Mr Long on 10 or 11 November, what was said? Did Mr Long give the assurance that Dr Killen attributed to him? Did he give any assurance at all?

65. I think it is likely that Dr Killen, the experienced businessman with an eye for a bargain, got some sort of assurance out of the youthful Mr Long. It is also likely that that was the purpose for which Dr Killen made the telephone call and why he wrote the letter dated 12 November accepting the assurance. But, in my view, it is unlikely that Mr Long said anything which went beyond an assurance that the units would perform as Mr Eastaway had indicated on 6 November 1987, namely that they would provide comfort conditioning on the standard temperature range but that in extreme conditions they might need longer running or be supplemented by some other form of heating.

66. I cannot accept that it is a mere coincidence, unrelated to the terms of the contract, that as late as 26 or 27 November 1987 Dr Killen was still consulting Mr Bishop (and possibly Mr Maguire) about the cost of additional heating elements as in the Kelvinator model. Although the contract had been concluded and the order placed by the defendant with Carrier, it is possible that it was in contemplation by the parties that, the units still not having been delivered, it was not too late to call the whole thing off if there was sufficient doubt about the heating capacity of the units. It is not necessary to make a positive finding on that issue. What is clear is that over the few days between 23 and 27 November 1987 there was concerted effort both in the plaintiff's and defendant's camps to find out more about the capacity of the Carrier units and it is likely that there was some communication between Dr Killen and Mr Long about these matters.

67. The contents of the letter from Carrier of 8 December 1987 did not cause the defendant to warn the plaintiff of any likelihood of failure, to seek to withdraw from the contract, to seek to modify the terms of the contract or to cancel the defendant's order with Carrier. The conduct of the defendant does not constitute any admission on its part nor does it manifest knowledge that the units would be inadequate for compliance with the terms of the contract.

68. The evidence about what the defendant did about calculating "heat load factors" is somewhat limited, but I am not able to arrive at any conclusion on that issue except that calculations were made in accordance with data supplied by Carrier and that they did not result in any conclusion which caused, or should have caused, the defendant to believe that the units would be inadequate to heat the villas.

Express terms of the contract: conclusions

69. I am not able to find that the plaintiff has established a contract in express terms particularised in the letter of 23 September 1994. I find that there was a contract constituted by the proposal of 9 November, an assurance given by Mr Long on 10 or 11 November and the acceptance of 12 November 1967. I find further that the assurance of Mr Long was to confirm what Mr Eastaway had said on 6 November that the units would heat the villas adequately for the comfort of guests during Canberra winter conditions, subject to the qualification that in extreme conditions adequate heating could be achieved only by longer running or by using a supplementary form of heating.

70. Nor is that the end of the matter as far as the terms of the contract are concerned. I am quite convinced that Dr Killen, at the very least, suspected and probably knew that there was an appreciable risk that the units might not perform as well as Mr Eastaway claimed. Dr Killen was concerned to keep costs as low as possible and that, consistent with Dr Killen's expressed caution about providing a level of comfort above that expected of a three star motel, Dr Killen accepted the proposal to install the Carrier 1½ HP reverse-cycle units in the villas as a cheap and attractive means of heating and cooling the units, particularly in comparison with the system of air-conditioning which was being installed in other parts of the motel and in comparison with the more expensive Sanyo units. The preference for the cheaper Carrier units as recommended by Mr Eastaway was, in my view, accompanied by a continuing concern on the part of Dr Killen that they might not be adequate for the task of providing comfortable heating during the Canberra winter. That concern was reflected in the repeated consultations with Mr Bishop and Mr Maguire after the receipt of the proposal, the seeking of an assurance over the telephone from Mr Long, and, even as late as 27 November, after the contract had been concluded, in the inquiry by Dr Killen from Mr Long about the installation of a heating element as in the Kelvinator model described to him by Mr Bishop.

71. Nevertheless the fact is that Dr Killen had successfully concluded an advantageous bargain with the defendant, knowing that there was a possibility that the defendant might not be able to keep its side of the bargain. The law is that in the absence of conduct on its part constituting fraud or raising an estoppel (neither of which is alleged) the plaintiff is entitled to performance of the terms of the contract.

72. It follows from these findings that there was a contract, the express terms of which were not precisely what either party contended for in the litigation. Nevertheless, in my view, the parties are sufficiently at issue on the pleadings and on the issues fought at trial. My findings thus far stated should form the basis for proceeding to make further necessary and consequent findings.

73. The crucial question as to the express terms of the contract then becomes: what should the parties be taken to have in contemplation by the term "extreme conditions"? This unfortunately, was not a question addressed at the trial. Further, the extent to which the defendant was in breach of such a condition was also not addressed. The case must be re-listed to enable the parties to put submissions on these issues.

Implied terms: Sale of Goods Act 1954 and Trade Practices Act 1974 (Cth)

74. It was submitted on behalf of the plaintiff that it is entitled to rely on the implied terms as to fitness and merchantable quality prescribed by s 19(2) and s 19(4) of the Sale of Goods Act and also by s 71(1) and s 71(2) of the Trade Practices Act.

75. There was no issue that the transactions between the plaintiff and defendant passed some of the threshold tests for the application of the relevant sections of both the Sale of Goods Act and the Trade Practices Act. There was no argument about the extent to which rights and obligations may exist concurrently under both Acts, nor about the extent to which the express terms of the contract were displaced by or may be concurrent with the statutory implied terms. I shall deal with both aspects briefly.

76. Section 74 of the Trade Practices Act in effect declares void any term of a contract which purports to exclude, restrict or modify the terms implied by s 71(1) and s 71(2) of the Trade Practices Act. However, the Act is intended to co-exist as far as possible with State and Territory consumer laws (s 75). Hence the Sale of Goods Act survives except insofar as there is a conflict between the provisions of that Act and the provisions of the Trade Practices Act, in which case and in accordance with s 109 of the Australian Constitution, the provisions of the Commonwealth law apply.

77. Although I was not referred to any authority on the matter, it appears to me that the situation in the present case is like that in The Queen v The Credit Tribunal; Ex parte General Motors Acceptance Corporation, Australia [1977] HCA 34; (1977) 137 CLR 545 where Mason J, with whom the other justices of the High Court agreed, said at 563:

"... although a provision in a Commonwealth statute which attempts to deny operational validity to a State law cannot of its own force achieve that object, it may nevertheless validly evince an intention on the part of the statute to make exhaustive or exclusive provision on the subject with which it deals, thereby bringing s 109 into play. Equally a Commonwealth law may provide that it is not intended to make exhaustive or exclusive provision with respect to the subject with which it deals, thereby enabling State laws, not inconsistent with Commonwealth law, to have an operation. Here again, the Commonwealth law does not of its own force give State law a valid operation. All that it does is to make it clear that the Commonwealth law is not intended to cover the field, thereby leaving room for the operation of such State laws as do not conflict with Commonwealth law."

78. Although inconsistency between a Territory law and a Commonwealth law does not attract the operation of s 109 of the Constitution, the ordinary principles of statutory construction require that the provisions of a Commonwealth statute over-ride the provisions of any inconsistent Commonwealth delegated legislation, such as the Sale of Goods Act 1954 of the Australian Capital Territory which is a form of delegated legislation authorised by s 22 of the Australian Capital Territory (Self-Government) Act 1988 (Cth).

79. However, in my view, no such inconsistency arises in the present case and none was suggested.

80. I have no difficulty in finding that the plaintiff was a consumer within s 4B(1)(a) of the Trade Practices Act and that the units were "goods ... of a kind ordinarily acquired for personal, domestic or household use or consumption" also within the meaning of the section. The Carrier brochure makes that clear, as does the expert evidence. Indeed, the expert engineering evidence shows that at the heart of the problem is the fact that the Carrier reverse cycle air-conditioning units in question were ordinarily used in a domestic or small commercial or office settings in Australia but, according to the terms of the contract, were called upon to go beyond that ordinary use and to provide heating for villas consisting of several rooms in conditions colder than in most such settings in Australia.

81. I have no difficulty in concluding that the plaintiff made known to the defendant the particular purpose for which the goods were acquired and indeed there was no issue on that.

82. There was an issue, however, about whether, under s 19(2) of the Sale of Goods Act the plaintiff did make the particular purpose known to the defendant "so as to show that the buyer relies on the seller's skill or judgment". Once it is established, as I have found, that Mr Long gave the assurance to Dr Killen on 10 or 11 November 1987, it follows, in my view, that Dr Killen did show that he relied on the skill and judgment of the defendant to ensure that the units were reasonably fit for the particular purpose made known and for which the defendant knew the units were to be acquired by the plaintiff.

83. It was submitted on behalf of the defendant that there was no specification of a particular temperature that needed to be met or other requirements as to their use and that "the plaintiff cannot rely on a general reliance to create a specific implied condition". I am not sure what was meant by the words quoted. In any event, in my view, the fact that the contract made no provision for the capacity of the units to meet a specific temperature in no way affects the implication of reasonable fitness for purposes as prescribed by both the Sale of Goods Act and the Trade Practices Act. Further, as I have held, the plaintiff has proved its reliance on the defendant to supply goods that met the particular purpose made known, and that is sufficient reliance for the application of the statutory provision as to the implication of the term of implied fitness.

84. Further, it is not the law that the Sale of Goods Act requires that the buyer/consumer to rely exclusively on the supplier (Cammell Laird & Co Ltd v Manganese Bronze and Brass Co Ltd [1979] UKHL 3; [1934] AC 402 at 405, and David Jones Limited v Wallis [1934] HCA 47; (1934) 52 CLR 110 at 129). The same reasoning applies to the Trade Practices Act, see: Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd [1992] FCA 550; (1992) 110 ALR 535 at 546-547.

85. Hence reliance by Dr Killen on the advice from Mr Maguire and Mr Bishop is not to the point. It is likely that Dr Killen came to the meeting on 6 November favouring the purchase of 1½ HP reverse cycle air-conditioners as against more expensive and more reliable forms of heating, having been so advised by Mr Maguire or Mr Bishop or both that the reverse cycle units were or could be adequate. Further, there is evidence, which I accept, that after the contract had been concluded and indeed even after the units had been installed, Dr Killen continued to obtain such advice. But it is clear, in my view, that the recommendation given by Mr Eastaway at the meeting on site in October-November 1987 and at Artarmon on 6 November, and the assurance of Mr Long on 10 or 11 November 1987 were the bases of actual reliance and that the reliance was made known to the defendant before the contract was made.

86. The further submission was put on behalf of the defendant that the implied statutory conditions were displaced, in the case of the Sale of Goods Act by the course of conduct between the parties (s 58), and, in the case of the Trade Practices Act, because reliance by the plaintiff was unreasonable (s 71(2)). In either case the onus is on the defendant to prove that the implied term is excluded. It was submitted that, on the facts, Dr Killen expected that the units were of the reverse cycle type, of 1½ HP capacity and that he stressed in his negotiations with Mr Eastaway that he was concerned to achieve levels of comfort appropriate to a three star motel only.

87. I find those facts proved but they do not displace the implication of the statutory terms, in my view. The statutory terms are not inconsistent with the express terms which I have found. Terms implied by law may co-exist with express terms agreed between the parties.

88. However, there is guidance in the further passage in R v Credit Tribunal [1977] HCA 34; (1977) 137 CLR 545, where Mason J said at 565:

"The case is no different from the co-existence in the same contract of an express condition and a condition implied by statute (differing in terms from the express condition) on the same subject matter. The consumer has the benefit of both conditions and may rescind if there is a breach of one condition and not of the other."

89. I infer from the above that there may be a co-existence in the same contract of an express condition and a condition implied by statute, and that breach of one condition or the other, or of both, entitles the consumer to sue for damages.

90. I do not think that limitations in the terms of the contract imposed by Mr Eastaway's warning about the possible need for longer running times and supplementary sources of heating excludes or limits the statutory implied term that the goods be reasonably fit for the particular purpose. The significance of those matters (and others) lies, in my view, in the question of breach, and in particular in the determination of whether the units were in fact reasonably fit for the particular purpose in the light of the contractual terms and relevant surrounding circumstances.

91. The implied term does not guarantee that the goods fulfil all the consumer's expectations, only that the goods be reasonably fit for the purpose. In the present case the transactions between the parties proceed upon a shared understanding that the units might need longer running, or need to be supplemented by another form of heating in extreme conditions. Insofar as the units failed to provide comfort heating in conditions which were not extreme, they were not reasonably fit for the purpose. It becomes necessary then to establish what were extreme conditions in the circumstances of the relationship between the parties and whether, and to what extent, the units failed in conditions which were not extreme. Those are essentially the same issues as remain open on my findings as to the express terms of the contract and the parties are to have leave to make further submissions.

92. Whilst the issue of reasonable fitness remains open, it is appropriate to state my finding that the defendant was not in breach of the implied terms under the Sale of Goods Act, s 19(2) and the Trade Practices Act, s 71(2). The units were good reverse cycle air-conditioners for domestic and small commercial situations. They were probably adequate for most situations in Canberra if all that was sought was to heat and cool a single room of the size shown in the Carrier brochure. They might have been adequate even for a single bed-sitting room in a modest Canberra motel but they were inadequate in extreme winter conditions for a motel villa in Canberra with one or two bedrooms separate from the living room/kitchen. They were probably adequate for a bed-sitting room in an average motel on the New South Wales coast. The Carrier brochure indicates that objectively the market for such units was not limited to the Canberra district or to motels and that as between the parties they were aware of the wider market in which the units were usually offered for sale. The units were of merchantable quality.

Further Hearing

93. I will fix a date for directions for the reception of further submissions in the light of the above findings.

I certify that the preceding ninety-three (93) paragraphs are a true copy of the publication of findings herein of his Honour, the Chief Justice.

Associate:

Date: 11 June 1999

Counsel for the plaintiff: M D Young

Solicitors for the plaintiff: Abbott Tout Harper & Blain

Counsel for the defendant: F J Purnell SC, with D Mossop

Solicitors for the defendant: Corrs Chambers Westgarth

Date of publication of findings: 11 June 1999