Lefty's Excavator & Drott Hire Pty Ltd v Samuel Edward Stratti & Ors [2003] NSWIRComm 106 (9 April 2003)

Last Updated: 22 May 2003

NEW SOUTH WALES INDUSTRIAL RELATIONS COMMISSION

CITATION : Lefty's Excavator & Drott Hire Pty Ltd v Samuel Edward Stratti & Ors [2003] NSWIRComm 106

FILE NUMBER(S): IRC 2060

HEARING DATE(S): 05/08/2002, 06/08/2002, 07/08/2002, 08/08/2002, 09/08/2002, 10/02/2003, 11/02/2003, 12/02/2003

DECISION DATE: 09/04/2003

PARTIES:

LEFTY'S EXCAVATOR & DROTT HIRE PTY LTD

(ACN 082 820 595)

Applicant

SAMUEL EDWARD STRATTI

First Respondent

TROY KENNETH STRATTI

Second Respondent

DETAIL ROCK TOOLS PTY LTD

(ACN 076 292 987)

Third Respondent

STRATTI OCEAN & EARTHWORKS PTY LTD

(ACN 067 274 220)

Fourth Respondent

JUDGMENT OF: Schmidt J

LEGAL REPRESENTATIVES

APPLICANTS:

Mr DH Murr SC with Mr JC Thompson of counsel

SOLICITORS:

R.A. Dunbier & Associates

RESPONDENTS:

Mr P Menzies QC with Mr MJ Lawler of counsel (as he then was) and later Ms N Obrart of counsel

SOLICITORS:

Norman Waterhouse

CASES CITED: Burgess & Ors v Mt Thorley Operations Pty Limited (2002) 115 IR 13

Davis v General Transport Development Pty Ltd [1967] AR 371

O'Brien v Australian Native Landscapes Pty Ltd & Ors (2001) 105 IR 409

The State of Queensland & Anor v JL Holdings Pty Ltd (1997) 189 CLR 146

LEGISLATION CITED: Industrial Relations Act 1996

Trade Practices Act 1974 (Cth)

JUDGMENT:

- 44 -

INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES

IN COURT SESSION

CORAM: Schmidt J

DATE: 9 April 2003

MATTER NUMBER IRC 2060 OF 2000

LEFTY'S EXCAVATOR & DROTT HIRE PTY LTD v SAMUEL EDWARD STRATTI & ORS

Application under section 106 of the Industrial Relations Act 1996

JUDGMENT

1 This application was brought under s106 of the Industrial Relations Act 1996 (‘the Act’) by Lefty's Excavator & Drott Hire Pty Ltd. It concerned a contract for the purchase of an excavator and associated equipment from one of the respondent companies, Detail Rock Tools Pty Limited ('DRT') and an associated contract with the other corporate respondent, Stratti Ocean & Earth Works Pty Ltd ('SOEW') for the performance of work with that equipment. The two individual respondents, Mr Sam Stratti and Mr Troy Stratti, a father and son, were directors of the corporate respondents and worked in the businesses which they conducted. I will refer to these parties collectively as the respondents, except where it is necessary to identify with precision, which of respondents I am referring to.

2 The applicant was a company of which Mr and Mrs Metaharis were directors. It operated a business in the earthmoving industry. Mr Lefty Metaharis was an experienced earth moving equipment operator. Mrs Patricia Metaharis worked in the administrative side of the business, initially, while employed by Telstra. She later resigned that employment.

3 The orders sought in the summons were:

(1) An order declaring the contracts unfair, as at the time at which they were entered into.

(2) In the alternative to (1), an order declaring that the contracts became unfair subsequent to the time at which they were entered into.

(3) An order declaring wholly or partly void, or varying, the contracts, either from the commencement of the contracts or from a time after the commencement of the contracts.

(4) An order declaring void Clause 9 ("DISPUTE RESOLUTION") of the Agreement for Sale of Equipment.

(5) An order declaring void Clause 4 ("DISPUTE RESOLUTION") of the Works Agreement.

(6) An order that the respondents pay, and be jointly and severally liable to pay, the sums particularised at D (below).

4 The money claim finally advanced was:

D. Particulars of the manner in which any amount claimed is calculated.

(a) Cost of bucket paid for but not supplied -

$5,000.00

plus interest from 04.08.98 to 05.08.2002 -

$1,993.77

(b) Difference between the cost to the applicant of the saw contracted for (as deposed to by T. Stratti at par. 25 of his affidavit sworn 14.11.01 -($115,000.00) and the value of the saw supplied (allow the cost of manufacture as deposed to by S. E. Stratti at par.47 of his affidavit sworn 16.10.01 $40,000.00 together with a profit margin of 100%, being $80,000.00) -

$35,000.00

plus interest from 04.08.98 to 05.08.2002 -

$13,956.37

(c) Applicant's nett loss of the difference between the total value of the hours of work which, pursuant to the Work Agreement, should have been offered to the Applicant during the two years commencing 03.08.98 and the work actually offered and invoiced, calculated as follows -

Work Agreement

8 (hours) X 5 (days) X 46 (weeks) = 3,680

Hours @ $200.00 per hour) = $736,000.00

Offered, Worked and Invoiced 03.08.98 to 09.01.99

$106,115.00

Difference

$736,000.00 - 106,115.00 = $629,885.00

Net Loss

38.5% of $629,885.00 = $242,505.22

Less

Nett income from other sources during the period 10.01.99 to 03.08.00 = 38.5% of $467,089.15 = $179,829.32

$242,505.22 - $179,829.32 =

$66,675.90

plus interest from 01.03.99 to date -

$22,935.60

(d) Difference between the total of the amounts invoiced by the Applicant $107,980.40) and the total of the sums paid by the Third Respondent (in cash or kind, $70,072.30) -

$37,908.10

plus interest from 01.03.99 to 05.08.02 -

$13,039.87

(e) Finance costs - additional equipment (hammer) (see Esanda Offer to Hire dated 20.01.00) -

50,000 / 80,776 x 100 = 61.89957 %

18,645 / 0.6189957 / 60 x 7 =

$1,346.47

plus interest from 4.8.00 to 5.8.02 -

$277.34

(f) Depreciation - additional equipment (see depreciation schedules to financial statements 2000 and 2001)

$248,261.91

Ripper: $2,600.00 @ 20% for 15 months

11.03.99 to 03.08.00 - $530.40

Extension: $12,500.00 @ 30% for 12 months

27.07.99 to 03.08.00 - $3,656.25

Digging Bucket: $7,362.00 @ 30% for 9 months

14.10.99 to 03.08.00 - $1,601.24

Hammer: $50,000.00 30% for 6 months

20.01.00 to 03.08.00 - $7,125.00

$12,912.89

plus interest from 04.08.00 to 05.08.02 -

$2,659.70

TOTAL

(excluding balance of interest up to judgment)

$213,706.01

5 Evidence was called by the applicant from Mr Metaharis and his wife, Mrs Metaharis. The respondents called Mr Sam Stratti, Mr Troy Stratti and Mr Ross Vanderslys, Auctioneer and Valuer; Daniel Stratti, Plant Operator and Michael Toohey, Fitter and Turner.

The circumstances

6 The purchase agreement was for the sale of a Halla 28 tonne excavator and an articulated rock saw, designed to be operated as an attachment to the excavator. It was the applicant's case that the agreement inaccurately described the rock saw as being the subject of an Australian patent, which attached to the saw mounting system and not the saw itself. In any event, the saw supplied did not contain the patented system.

7 The Purchase agreement contained a warranty in clause 7:

'7.7 Subject to clause 7.7(b) Detail warrants that the Purchaser will earn $230,000.00 in gross fees in respect of the operation of the Equipment during the twelve (12) month period commencing on the date of this Agreement:

(a) if, upon the expiry of twelve (12) months from the date of this Agreement, the Purchaser has not grossed $230,000.00 in fees in respect of the operation of the Equipment in the twelve (12) month period commencing on the date of this Agreement from work offered to the Purchaser (whether such work is under contract to Stratti or any third party), the Purchaser may, at its option, return the Rock Saw to Detail and Detail will pay to the Purchaser:

(i) $115,000.00; or

(ii) the value of the Rock Saw determined at the date which is twelve (12) months after the date of this Agreement as determined by a Valuer experienced in valuing excavators agreed by the parties or, failing agreement, appointed by the President for the time being of the Law Society of New South Wales.

whichever is the lesser amount, in exchange for the Rock Saw.

(b) if the Purchaser refuses, neglects or is unable to accept any work offered to it by Stratti for any reason whatsoever, the amount of $230,000.00 set out in clause 7.7(a) shall be reduced by the total value of all such work offered by Stratti to the Purchaser and not undertaken by the Purchaser.

8 The Works agreement was for two years and provided that:

2. WORKS

2.1 To the extent that it is able after having made all reasonable endeavours, Stratti will offer to the Purchaser work sufficient to engage the Equipment for eight (8) hours per day for five (5) days per week during the period commencing on the date of this Agreement and terminating on that date which is two (2) years after the date of this Agreement.

2.2 Stratti warrants to the Purchaser that all work offered to the Purchaser by Stratti may be carried out within a 150 kilometre radius of Parramatta.

2.3 The rates at which work shall be offered by Stratti to the Purchaser shall be calculated in accordance with generally accepted industry practice.

2.4 The Purchaser may invoice Stratti on a monthly basis for work undertaken by the Purchaser for Stratti and Stratti will pay such invoice within thirty (30) days of the date of receipt of such invoices.

9 The word 'Equipment' was defined in Clause 1 Definitions and Interpretation of both the Purchase and the Works agreement, as "Rock Saw and the Excavator".

10 The Works agreement referred to the work being paid for at rates calculated in accordance with generally accepted industry practice. The evidence was that the going rate for excavator work was $90 per hour and $200 per hour when a rock saw was used. The excavator was sold with a bucket as a standard piece of equipment. The rate of $90 per hour applied when such a bucket was used, or when other attachments, such as a ripper, were used. Higher rates were charged for hammer work.

11 It was the applicant's case that the work promised for the excavator and rock saw was not supplied; the work performed was not paid on time and indeed, was never completely paid for. There was evidence of discussions and complaint by Mr and Mrs Metaharis about the respondents’ approach to the obligations it owed the applicant, over the course of the parties' relationship. The parties entered into the agreements in August 1998. It was agreed in January 1999 that the applicant would contract direct with one of the respondents' contractors, P Wards Civil Engineering ('Wards'), rather than subcontracting through the respondents. It was common ground that this was agreed in order to address the difficulties resulting from delayed payments being made to the applicant. Mr Troy Stratti’s evidence was that the delays in payment resulted from errors in invoices supplied by the applicant and because the respondents themselves experienced delays in receiving payments from their contractors. This affected the respondents' cash flow and their ability to pay their own subcontractors, including the applicant, on the terms agreed. Mr Sam Stratti described this as a difficulty endemic in the industry.

12 After January 1999, no more work was performed under the Works agreement by the applicant. The respondents offered the applicant further work, but the applicant declined such offers, having itself already accepted other work. Mr Metaharis confirmed that he could not have accepted other work, he was fully occupied.

13 There was a conflict in the evidence as to discussions about the supply of a batter bucket, a ripper and a hammer. It was common ground that at the outset, the applicant had paid $5,000 for the supply of a batter bucket, which was never delivered by the respondents. By March 1999, including this sum, the applicant's unpaid invoices amounted to $45,322.95. To perform some of the work provided, the applicant had had to hire other equipment from the respondents, such as a hammer at the rate of $30 per hour.

14 It was agreed in 1999 that a second hand ripper and a new hammer with a total value of $45,600 would be supplied to the applicant, to extinguish the debt which the respondents then owed the applicant for unpaid work and to replace the batter bucket which had not been delivered. It was also agreed that the applicant would be given the loan of a hammer, while the respondents procured a new hammer for the applicant. This was of interest to the applicant, because it was not getting enough saw work and had been hiring equipment from the respondent to do other work. Hammer work was charged at $130 per hour. It was also common ground that the new hammer was never supplied and that the loan hammer broke down in January 2000 was not returned to the respondents, nor did the respondents collect it. It was finally retrieved by the respondents, to put it neutrally, during the course of the hearing.

15 The evidence also demonstrated that after the purchase of the rock saw, which had been designed and developed as the result of the work of Mr Sam Stratti, Mr Troy Stratti developed further modifications to the saw, which enabled it to perform sawing work which the original rock saw was not capable of performing. I will hereafter refer to the two types of saw as 'Mark 1' and 'Mark 2' respectively. The applicant had purchased a Mark 1 Saw. The evidence was that Mr Metaharis became aware of the development of the Mark 2 saw, when he saw it operating at the Ward site at which he was working. There were discussions between he and Mr Troy Stratti as to the possibility of his saw being modified, so as to enable it, too, to perform the sawing work of which the Mark 2 model was capable. There was a dispute on the evidence as to whether any agreement was reached between them. In the end, however, no modifications were performed by the respondents to the applicants' rock saw.

16 The evidence was that the applicant then took the rock saw to another manufacturer, RN Cribb Pty Ltd ('Cribbs') and had it modified. It was the respondents' case that this was contrary to the terms of the Purchase agreement, which provided:

'4. CONDITIONS OF USE OF THE ROCK SAW

4.1 the Purchaser must not:

(a) attempt to reverse-engineer the Rock Saw;

(b) procure authorise or allow any person to reverse-engineer the Rock Saw;

(c) repair or dismantle the Rock Saw;

(d) procure authorise or allow any other person to repair or dismantle the Rock Saw;

(e) make any copy of the Rock Saw;

(f) procure authorise or allow any person to make any copy of the Rock Saw without the prior written consent of Detail.'

17 The applicant also had another rock saw built by Cribbs. As part of their defence of the applicants' claims, the respondents alleged in these proceedings that this had involved a breach of the Works agreement, had infringed the patent, had led to competition in the market place for rock saws and a reduction in the price which was paid in the building industry for rock saw work. This breach of the agreement was also claimed to have damaged the respondents' business.

18 The parties' dealings with each other ceased. Some work was offered by the respondents which the applicant declined. It was, however, not at a level contemplated by the Works agreement.

Amendment of the claim refused

19 The respondents' cross examination of applicant witnesses revealed that in defending the claims brought the respondents would rely upon the applicant's conduct in having the rock saw modified by Cribbs and having a new rock saw built. The applicant sought leave to amend the claims made in the summons, in order that Clause 4 of the Purchase agreement be declared void ab initio.

20 The respondents objected to such a late alteration in the case which they had to meet, arguing that justice would not permit the leave sought to be granted, given the nature of the amendment proposed and the time at which the application was made.

21 I declined leave to amend the summons.

22 As has been observed in other cases, the approach to be adopted to an application for leave to amend is that discussed by the High Court in The State of Queensland & Anor v JL Holdings Pty Ltd (1997) 189 CLR 146 at pp152-3. (See O'Brien v Australian Native Landscapes Pty Ltd (2001) 105 IR 409 at pp415-18 and Burgess & Ors v Mt Thorley Operations Pty Limited (2002) 115 IR 13 at pp40-41.)

23 Section 106 provides in ss(2), that:

(2) The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason.

24 It is well settled that in considering an application brought under s106 that the Court must have regard to the conduct of each of the parties. Here, the complaints advanced by the applicant in the summons on which they proceeded were concerned with the various representations said not to have been honoured, alleged breaches of the agreement which the parties had reached, as well as a complaint about the purchase price of the rock saw. While some of the allegations were denied by the respondents, it was common ground between the parties that some aspects of their agreements had not been honoured by the respondents. By way of explanation, the respondents relied upon the difficulties which they had faced in their business, as the result of contractors failing to honour obligations owed to them to make payments due to the respondents in accordance with 30 day terms. The evidence showed that delayed payment was a significant factor in the undoubted souring of the parties' relationship. The respondents defence of the claims made also relied upon the alleged breaches of the agreements by the applicant. These were matters which did not arise for the first time in cross examination of the applicant's witnesses. They were dealt with in the respondents' written materials.

25 The matters which the respondents sought to raise in their defence of the claims made against them, were obviously matters which the Court was obliged to consider, given that relief under the section depends not only upon a finding that the contracts in question were relevantly unfair, but also upon the exercise of a discretion in favour of the applicant seeking relief. The matters upon which the respondents sought to rely, went directly to the question of whether any such discretion would be exercised in the circumstances of this case.

26 It is not unusual in this jurisdiction for leave to be granted to amend a summons. Obviously enough, the later in the proceedings such an application is made, the less likely it is to be successful. This reflects not only common sense, but also the fact that the Act is designed in such a way as to provide a compulsory conciliation process, whereby parties are granted access to a member of the Commission, whose function it is to take '... all means it considers proper and necessary, to settle a matter under this Division by conciliation.' (s109 (1)).

27 Where an amendment is sought to be made, not only after conciliation, but during cross examination of the applicant's witnesses, leave to amend the summons will not lightly be granted. This must particularly follow in cases where, as here, the parties have been legally represented throughout the proceedings. An application to amend a summons, brought during a hearing, after it is appreciated that the conduct revealed by the evidence being given by the applicant's witness in cross examination, might provide support for a defence of the claims which the respondent seeks to advance in its case, will not, in my view readily be granted. If the evidence which has been revealed in the applicant's case supports aspects of a respondent's case, long apparent on the material filed by the respondents, an application to amend the summons, in effect to remove a respondent's defence, by seeking a new and further variation of the challenged contract, must be approached with considerable caution.

28 In this case, I was satisfied that the application for amendment of the summons came forward at a time and in a manner which would not permit it to be granted, consistent with the need to ensure that justice was done between the parties. The time at which this application was brought sought to recast the application in such a substantial way, that justice could not permit the amendment. At that stage, justice required that the parties' cases be determined on the basis of the summons which the applicant had long been pursing and the respondents had then long been acting to meet. That cross examination of the applicant's witnesses might reveal that some foundation for an aspect of the respondents' defence had a basis namely, that the applicant might have been in breach of its obligations to the respondents under the contract, was not a proper basis for granting leave to the applicant to amend its summons, so as to remove the contractual obligations upon which the respondents sought to rely.

29 I was also satisfied that this was not a case where an adjournment and a costs order could ensure that justice would be done between the parties. Indeed, it was the applicant's stated position that they could not afford an adjournment and a costs order.

30 I was confirmed in that conclusion by two other matters. Firstly, that the existing summons, in any event, sought orders declaring the contracts void from their commencement. Secondly, that if a proper consideration of the evidence were to lead to the view that the contracts were unfair, any breach of the parties' agreements by the applicant could be dealt with as a matter of discretion, given that the orders sought were that the contracts be declared void ab initio. Such an order could be made, without the need for the amendment of the summons sought so late in the proceedings.

31 It was for these reasons that leave to amend the summons was refused.

The parties' respective cases

32 The case advanced for the applicants by Mr Murr SC appearing with Mr Thompson of counsel, was that the evidence had amply demonstrated the unfairness of the parties' extended arrangements, comprising the two written agreements reached in 1998 and the later arrangements in 1999 in relation to the supply of the ripper and hammer, when the respondents had failed to make the payments due to the applicant. The evidence showed that the respondents had induced the applicant to enter the agreements by their misrepresentations. The rock saw had plainly been overvalued and the purpose of the Works agreement had been to ensure that the respondents retained control of the distribution and use of the saw, without there being any real intention to provide the promised work to the applicant. In any event, the agreements provided the applicant with no enforceable rights to such work.

33 The false inducements were argued to have included that the rock saw was the subject of a patent and that the promised work for that saw was available and would be provided, with payment to be made within 30 days of invoice. Had it been revealed to the applicant that at best 70% of the work provided was not to be rock saw work, that additional equipment would have to be acquired by the applicant in order for such other work to be performed and that payment would only be made by the respondents on a 'payment when paid' basis, the applicant would never have entered the contract. The contract also contained draconian provisions as to the use of the rock saw, which the applicant was unlikely to have entered, had it not had the belief that it was a piece of patented equipment, capable of generating significant returns.

34 The evidence showed that the patent referred to in the Works agreement was not directed to the rock saw, but to a mounting system. Given the evidence of the Stratti's technical expertise, involvement in the development of the saw and the grant of the patent, the respondents could never have seriously believed that the patent applied to, or protected, the rock saw. The misrepresentations made in the agreements as to the patent were plainly deliberate.

35 While in cross examination the Strattis had made reference to other patents which applied to the saw, none had been produced in evidence. The proper inference was that there were no such patents.

36 The respondents had conceded that payment was never made to the applicant in accordance with the agreed 30 day terms. The proper inference from the evidence as to the difficulties which the respondents had themselves obtaining payment on such terms, demonstrated that there had never been any intention on their part to abide by these terms.

37 As to rock saw work, the proper inference from the evidence was that the respondents had always been aware that the applicant's interest was in rock saw work, not general excavation work. The respondents had encouraged the belief that such work would be provided. The proper construction of the parties' agreements was that such work had been promised, but not delivered. The evidence was that only some 30% of the excavation work which the respondents had was rock saw work. This was not disclosed to the applicant and further, while the parties' relationship subsisted, before the applicant began contracting direct with Wards, only 15% of the work provided by the respondents was rock saw work.

38 It was accepted that the respondents' desire to protect its intellectual property in the rock saw was important to them and legitimately so. What was submitted not to have been legitimate, however, was that the real purpose in the agreements entered was to protect that property, rather than to provide the promised work. A further vice in the agreements was that the applicant had not been granted generally enforceable rights in relation to the work it had been promised. (See Davis v General Transport Development Pty Ltd [1967] AR 371 at pp383 and 384).

39 The evidence also showed that the price of the equipment was excessive. Mr Vanderslys' valuation had been based on the premise that the product was unique and that the value therefore was whatever the vendor wished to charge. There was, however, evidence of at least one other rock saw available in the market place, account of which had not been taken in the valuation, which removed the basis upon which the valuation rested.

40 It followed that the orders sought would be made. Orders in relation to the dispute resolution provision of the agreements were not pressed. It was submitted that justice required that the contracts be declared void, in order to ensure that the dealings between the parties were brought to an end.

41 The case advanced for the respondents by Mr Menzies QC, appearing with Mr Lawler of counsel (as he then was) and later Ms Obrart of counsel, was that there could be no finding of unfairness on the evidence. The contracts complained of had been in the possession of the applicant for three months before execution; the applicant had taken legal advice about the contracts, which were written in plain terms and which Mr and Mrs Metaharis understood, Mr Metaharis having 34 years' experience in the industry.

42 While it was conceded that the Works contract was probably inaccurate as describing the rock saw to have been the subject of a patent, on the evidence nothing flowed from the misdescription. It was uncontested that the rock saw supplied was a Mark 1 saw of the type which Mr Metaharis had seen operating at a site at which he had worked for several months. The saw was unique in the industry. That was the saw which the applicant sought to purchase and which it acquired under the Purchase agreement. The reference to the patent in the contract was inserted by the respondents, who were seeking to protect what they believed to be a valuable invention, a legitimate aim, as the applicant conceded.

43 The result was that no unfairness had been demonstrated to flow to the applicant as the result of any misdescription.

44 The price of the saw had also not been demonstrated to have been unfair on the evidence. There was evidence of the uniqueness of the saw in the marketplace at the time of its purchase and uncontradicted evidence of its valuation. Mr Metaharis' experience in the industry and his knowledge of the price of the saw, which others had also paid, also gave rise to no question as to the fairness of the price paid.

45 As to the Works agreement, it was submitted that clause 2.1 was written in plain and clear terms. It provided no warranty as to income or work to be provided. That appeared in the Purchase agreement. The evidence showed that this warranty was met.

46 The applicants' claim depended upon the definition of 'equipment' in the agreements. That definition had to be understood in light of the fact that it was standard in the industry that an excavator came with a bucket attachment. This explained why no reference was made to the bucket in the agreement definition. It followed that the obligation to provide work imposed by the contract was work sufficient to engage the excavator, bucket and rock saw, for the periods specified. This was consistent with Mr Metaharis' understanding of the operation of the industry. It was common ground that excavation work would typically involve various phases, only some of which would require rock saw work. In his evidence Mr Metaharis had also conceded that he was aware that if he was offered saw work, by the respondents that it would also involve the use of a bucket.

47 The applicant's invoices showed that over the time that the applicant had worked for the respondent, under the Works agreement, some 46.8 hours of work per week had been provided on average, in which the applicant had used the equipment purchased. Thereafter, when working as a direct subcontractor for others, the applicant had worked an average of 48.95 hours per week until August 2000. Mr Metaharis' evidence was that rock saw work had increased in the latter period. This was consistent with the evidence of the respondents having left the site at which Mr Metaharis was working, in order to leave more rock saw work for the applicant.

48 The proper inferences from the evidence included that the work contemplated in the Works agreement had been provided, directly by the respondents initially and after January 1999, indirectly as the result of the arrangement made by the respondents with Wards. It was also relevant that the respondents had remained willing to provide direct work and sought to do so, but it was refused by the applicant.

49 As to payment, it was submitted that neither unwillingness nor incapacity to pay had been established on the evidence. It was conceded that a breach of the agreement had occurred, when the respondents failed to pay invoices within 30 days, but it was argued that no relevant unfairness flowed from such breaches. Account would also be taken of the problems which existed with the applicant's invoices and the evidence of the difficulties caused in the industry by the failure of head contractors to the respondents to pay invoices on 30 day terms, resulting in difficulties for subcontractors such as the respondents. This was submitted not to excuse the respondents' breaches, but to evidence their willingness and ability to pay the invoices and to explain the arrangements made in January 1999, designed to address the resulting problems which emerged for the parties.

50 As to the 'contra arrangement' in March 1999, it was submitted that the applicant could not, as a matter of justice, seek to have the benefit of what had there been agreed, as well as what was pursued in the summons. This agreement had been designed to settle sums then outstanding to the applicant. A ripper and a loan hammer, were provided by the respondents, while the new hammer was procured. The loan hammer was heavily used by the applicant until it broke down in January 2000 and account of its provision should be taken, as should provision of the ripper, in lieu of the batter bucket.

51 It would be accepted that the failure to deliver the bucket had resulted from a failure on the part of a supplier, not the respondents. While there might have been a resulting breach of contract, no relevant unfairness resulted.

52 It was also argued that in the event that unfairness was found, contrary to the respondents' submissions, regard to the applicant's conduct would preclude any relief being granted. The evidence showed that the applicant had breached clause 4 of the Purchase agreement, although it was accepted that s47 of the Trade Practices Act 1974 (Cth) precluded any reliance upon clause 4.1(c), in so far as the section made it illegal to restrain the applicant from having the rock saw repaired elsewhere. It would be accepted, nevertheless, that supplying the rock saw to Cribbs in order to have the saw modified, and a new saw built, involved the applicant in a knowing breach of the agreement, which damaged the respondents.

53 Submissions were also advanced as to the respective credit of various of the witnesses, it being submitted that the evidence of Mr Sam Stratti and Mr Troy Stratti would be preferred over that of Mr or Mrs Metaharis, in the event of conflict. Submissions were also directed to money orders to be made, in the event that the respondents' primary submissions were not accepted. They included various payments, deductions and other sums not paid, of which it was argued proper account must be taken, if justice were to be achieved as between the parties. I do not propose to detail those submissions, but have taken account of them.

54 Likewise in relation to the submissions advanced by Mr Murr in reply. I will touch upon them where relevant, later in my consideration of the orders to be made.

Consideration

55 There is no doubt, on the evidence, that the respondents breached the agreements which they had entered with the applicant. Given the parties' respective positions and the promises which had been made to the applicant in the parties' agreement, consistent with the earlier discussions between Mr and Mrs Metaharis and Mr Troy Stratti and Mr Sam Stratti, as well as the evidence of the way in which the respondents later treated the applicant when Mr and Mrs Metaharis were pursuing the payments due to the applicant, it cannot be doubted that a proper view of the evidence leads to a finding that the parties' agreements were relevantly unfair, as that term is defined in s105 of the Act. The respondents' failure, which persisted at the hearing, either to pay the sums outstanding to the applicant for work performed or to supply the hammer which it had been agreed would be supplied by way of offset of the debt, put that conclusion beyond doubt.

56 The Works agreement provided for payment within 30 days of invoice. It was a standard form agreement, prepared by the respondents' solicitors, upon their instructions. Both Mr Troy Stratti and Mr Sam Stratti were conscious of the difficulties which apparently generally exist in this industry and which have long affected the business of the respondents, as the result of large contractors failing to pay subcontractors like the respondents in accordance with their normal terms, which also require payment within 30 days of invoice. That these problems caused the respondents cash flow difficulties, can readily be appreciated. That this excuses the respondents' failure to make the payments due to the applicant, in accordance with the terms agreed, cannot. This must particularly follow, given that this problem was apparently of long standing, yet the agreement which the respondents devised, paid no regard to it.

57 The applicant was established by Mr and Mr Metaharis, in order that they could commence a business in the earthmoving industry. The respondents represented that payment on certain terms would be made to the applicant, which plainly they never intended to meet, given their own problems. That they should have devised an agreement which paid no regard to those difficulties and which they did not reveal to the applicant, in my view established the requisite unfairness. That this would lead to difficulties for the applicant, seems entirely predictable. That there might have been problems in the early days of the relationship, given the way and time at which the applicant's invoices were provided to the respondents, does not explain why none of its invoices were ever paid on time, or in full. That in March 1999 the respondents accepted that some $45,000 remained outstanding to the applicant, but further demonstrated the unfairness of the respondents' conduct, as well as that of the impugned contracts.

58 The respondents' failure to provide to the applicant the batter bucket for which it had paid $5,000 upon order in June 1998, further evidenced the respondents' unfair conduct and the unfairness of the contract. The respondents' explanations for the failure to deliver this bucket were not convincing, given the length of time during which the bucket was not supplied. Agreement was finally reached in March 1999, in relation to the provision of a ripper, and hammer in lieu of the outstanding sum and bucket. This agreement, too, was not adhered to.

59 The evidence of the negotiations between Mr and Mrs Metaharis and the respondents prior to agreement and their respective conduct afterwards, showed a marked disparity in their respective bargaining positions. After taking legal advice, the applicant met all of the respondents' contractual terms, accepted the prices the respondents charged for the equipment purchased and made payment for the equipment in advance of delivery. The respondents provided the applicant with work, made payments and concessions to the applicant at times and in ways which best suited them and their business position. By March 1999, the applicant was clearly in a difficult position, given the respondents' conduct. If, as Mr Troy Stratti suggested in his evidence, he had reached an agreement with Mr Metaharis earlier than the written record of the agreement in March 1999, that a hammer would be provided to the applicant in lieu of payment of the money then owing, the delay in the provision of the new hammer, and ultimately the failure either to provide the hammer or to pay for the work performed, was conduct which was plainly unfair. I am satisfied that this too, provided a proper basis for a finding of relevant unfairness in the contracts. While account must be taken of the provision of a loan hammer, given what finally resulted, this cannot completely address the unfairness established.

60 Other evidence showed that the respondents plainly preferred their business interests to their obligations to the applicant. The respondents charged contractors a higher rate than the payments made to their subcontractors, like the applicant. In the case of the applicant, the respondent generally retained $10 per hour from payments received in respect of the applicant's work. The respondents had also reached an arrangement with the contractor, Transfield, that it would provide fuel at a site where access was particularly difficult. The applicant later worked at that site. Whether this was a fair arrangement, from the applicant's point of view, was not explored in the evidence. Even accepting Mr Troy Stratti's evidence at its highest, namely that the existence of the agreement was revealed to Mr Metaharis before he went to work at the site, and that the respondents then acted in accordance with the agreement, it cannot be ignored that no check was later made by the respondents as to whether any fuel had, in fact, been supplied to the applicant by Transfield.

61 The applicants' invoice made no deduction in respect of the provision of any fuel. The respondents, however, deducted $10 per hour from the payment made in respect of such fuel. When the matter was raised with Mr Stratti by Mrs Metaharis, he mentioned the arrangement in relation to fuel to her. She then checked with Mr Metaharis, who informed her that no fuel had, in fact, been supplied to the applicant while he was at the site. Mr Stratti promised to investigate this. There was no evidence that there had been such an investigation, or what it had revealed. Nor was any payment made in relation to the sum outstanding.

62 While the respondents submitted that account should be taken of the agreement in relation to the provision of fuel, I am satisfied that the evidence would not permit any conclusions favourable to the respondents to be formed in respect of this issue.

63 I turn then to the evidence as to the souring of the parties' relationship. The evidence showed that Mr and Mrs Metaharis' concern about, and distrust of, the respondents, flowed from their failure to pay the applicant what was owed to it for work performed, either on time or at all. This was hardly a surprising development in the circumstances which the evidence revealed, which included that the applicant had also paid the respondents $5,000 for a batter bucket which was never delivered. Mr and Mrs Metaharis were also concerned about the amount of rock saw work being provided to the applicant. It was not surprising that these difficulties should have given rise to a suspicion on their part, as to the respondents' motives and conduct, in relation to other aspects of the parties' relationship.

64 Complaints, for example, were made by the applicant as to the timeliness of various repairs and services of the equipment it had purchased from the respondents. While I am not satisfied on the evidence that all of these complaints had a proper basis, I am satisfied that the applicant's dissatisfaction with the way in which the respondents dealt with it in their business dealings, had an impact on all aspects of the relationship. For example, a complaint was made as to the timeliness of the servicing of the equipment. Mr Sam Stratti explained that scheduling of a service depended not only upon when the service was due, having regard to the machine's hours of operation, but also when the applicant approached in order to book the service and the other service work which the respondents then had on hand. That is an entirely understandable explanation. Whether either the applicant's complaints as to such matters, or the respondents' explanations, had a proper basis need not finally be determined. At the end of the day little turns upon such matters, but they do much to explain how it was that the relationship came to such a sorry pass.

65 I turn then to consider whether any relief should flow to the applicant.

66 One matter which requires consideration is the steps taken by the applicant to modify the saw purchased and then to have a new saw made. Did the disagreement which emerged between Mr Metaharis and Mr Troy Stratti, as to the modification which he wanted the respondents to make to the rock saw, so as to make it capable of Mark 2 rock saw work, and the steps the applicant then took, provide any basis upon which relief could be refused to the applicant, as the respondents argued?

67 On the evidence the applicant approached the respondents in order to purchase an excavator and a rock saw. This approach followed two relevant circumstances. The first, that Mr Metaharis had been working as an employee of another contractor not party to these proceedings, at a site at the University of New South Wales, where one of the respondents' rock saws was operating. Mr Metaharis was impressed with the machine and what it was capable of and became interested in acquiring one, in order to establish a business of his own. The second circumstance was that one of Mr Metaharis' relatives had purchased an excavator and rock saw from the respondents. This heightened Mr Metaharis' interest in entering a similar arrangement.

68 The applicant claimed that it had been promised rock saw work for 8 hours per day, 5 days per week. There was a conflict in the evidence as to what precisely was said or represented to the applicant in the discussions prior to execution of the agreements. It was common ground however, that at the parties' first meeting, the applicant was provided with a copy of the Works agreement, which was later entered in identical terms. The applicant took legal advice about the agreement.

69 The Works agreement, it must be accepted, suggested that the applicant would be provided with a very significant level of rock saw work, chargeable at $200 per hour, rather than at $90 per hour available for other work. Reference was expressly made in clause 3 of the agreement to the applicant becoming one of the respondents' subcontractors, the Eastern Distributor and Airport Link. Rates and conditions were subject to agreement for "each individual sub-contracting job".

70 It must also be accepted however, from the terms of clause 7 of the Purchase agreement, the evidence as to the nature of rock saw work, consistent with the evidence of the experience which Mr Metaharis had in working alongside a rock saw being operated for many months at the University, that the applicant was aware that rock saw work, 8 hours a day and 5 days a week was not being guaranteed by the respondents. Indeed Mr Metaharis' evidence in cross examination showed his understanding of this.

71 The Purchase agreement did not contain a guarantee of work in terms of the claim here advanced - namely, rock saw work for 8 hours per day, five days per week. Rather, the promise made was that if $230,000 of gross fees had not been earned within 12 months, using the Equipment for work offered by either the respondents or third parties, the applicant could return the rock saw to the respondents at the price specified in clause 7.7(a). Had rock saw work been provided for 8 hours a day, 5 days a week, over 46 weeks, as the applicant claimed it had been promised, earnings would, of course, have amounted to $368,000.

72 As I have noted, while there was a conflict in the evidence of the witnesses as to precisely what was discussed before the contracts were entered, the evidence, particularly that of Mr Troy Stratti, properly leads to the inference that Mr and Mr Metaharis were led to believe that more rock saw work was available, or would be provided to the applicant, than what was later, in fact, provided. It was the evidence of Mr Troy Stratti that in the respondents' experience excavation work, on average, only required use of a rock saw for 30% of the time. The discussions plainly did not reveal this situation to the applicant, although perhaps the terms of the agreement which the respondents had prepared had regard to this experience. It is impossible to know, that matter was not explored in evidence. Nevertheless, the sum of $230,000 broadly reflects 30% rock saw work charged at $200 per hour and the rest, other work at $90 per hour. Such a basis of calculation of the $230,000 was not, however, revealed to the applicant. Nor was rock saw work to that level ever provided. In fact, the work provided to the applicant by the respondents, while the arrangement persisted between August 1998 and January 1999, only comprised some 15% rock saw work.

73 That this situation added to the concerns the applicant had about the respondents' non-payment, seems entirely understandable. Mr Metaharis plainly formed the view that the work he had been promised was not being provided by the respondents. SOEW, like the applicant, was in the business of performing earthmoving work direct for its contractors. It owned rock saws, excavators and other equipment and employed operators for that machinery. Rock saw work was a much more lucrative way to occupy an excavator, than with use of other attachments, both for the applicant and SOEW. While the applicant was being provided with other work by the respondent, Mr Metaharis came to believe that he was wrongly being deprived of available rock saw work, the respondents preferring to retain such work for their own benefit.

74 Some basis for that belief was established in the evidence. SOEW retained some rock saw work for itself, because of the respondents' view that its operators were more proficient at that work than Mr Metaharis. That there might have been a proper basis for such a view cannot be denied. It would also obviously be in the respondents' interests to ensure that the best operator available performed rock saw work, which it had contracted to perform. That it was fair for the respondents to have proceeded on such a basis, in the circumstances of these contracts does not, however, follow.

75 Obviously enough, Mr Metaharis could only improve through experience gained performing rock saw work. The evidence showed that not only was Mr Metaharis denied some available rock saw work, the respondents did not even ensure that the 30% rock saw work which it generally had, was made available to the applicant. While the parties continued working under the Works agreement, the respondents only supplied Mr Metaharis with 15% rock saw work. This demonstrates that the respondents failed to make the 'reasonable endeavours' required by clause 2.1 of the Works agreement, to provide rock saw work to the applicant. I will refer to this again below.

76 Mr Metaharis' concerns were further exacerbated by what transpired, when the new Mark 2 rock saw was developed by the respondents. I am satisfied on the evidence that the applicant did not seek to purchase such a saw, at the outset of the parties' relationships. That saw was not then in existence. It was developed after these contracts were entered. It had capacities different to the Mark 1 saw and led to the respondents being offered work which the Mark 1 saw could not perform. Both saws continue to be used in this industry. Mr Metaharis quickly appreciated that the Mark 2 saw could perform work which his saw was not capable of performing and wanted to have his rock saw modified, so as to give the applicant access to such work.

77 It is unnecessary to resolve whether or not Mr Troy Stratti agreed initially to make such a modification. I have considerable doubts as to this aspect of the case advanced by the applicant and the evidence given by its witnesses. The end result of their discussions was that Mr Stratti declined to do so, having come to the view that it was not a simple job and would require so much work as to make it preferable for Mr Metaharis to return the existing saw and to take a new Mark 2 saw. Mr Stratti offered to make the changeover for $25,000. Mr Metaharis refused.

78 Instead, Mr Metaharis went to Cribbs, a competitor of the respondents, to have the modification work done. In cross examination, Mr Metaharis confirmed that this had occurred in January 1999, soon after he became aware of the existence of the Mark 2 rock saw. Cribbs came and measured the rock saw, then provided drawings of an offset extension and a quote and later the extension was built and fitted to the rock saw for $12,000.

79 Mr Metaharis' evidence was that Mr Troy Stratti told him that the modification of the saw involved a breach of their agreement. Mr Metaharis' raised the respondents' failure to provide rock saw work, as had been agreed. Mr Stratti warned him that the saw motor would blow out. In cross examination, Mr Metaharis explained that this never happened and he later sold the saw in May 2000 for $35,000, without the extension. The applicant retained that extension and added it to the other rock saw made by RNC Attachments Pty Ltd ('RNC'), a Cribbs subsidiary. The applicant stopped using the Stratti saw when it obtained the new saw in July 1999.

80 Later Mr Metaharis also spoke to Mr Sam Stratti, who asked him why he had not had the work done by the respondents. Mr Metaharis told him that they were too dear. Mr Stratti referred to the agreement which precluded others working on the saw and Mr Metaharis claimed that he could not get the respondents to return his calls, when he wanted work done. Mr Metaharis refused to discuss the matter further.

81 Mr Sam Stratti confirmed that he was very angry when he learned of the rock saw having been shown to Cribbs and discussed this with Mr Metaharis. A short time later, Cribbs began manufacturing an identical rock saw, which no other manufacturer had done, to that point. Mr Stratti denied that the respondents had ever refused to service or repair the saw. They were always concerned to do so, because they wanted to protect their invention.

82 Mr Troy Stratti's evidence was likewise. He was very upset and angry when he learnt that the applicant had had Cribbs work on the saw. On his evidence this led him to tell Mr Metaharis that the respondents no longer wished to sell the applicant a hammer, that he should return the loan hammer and he would be paid what was outstanding. Mr Metaharis refused. Mr Metaharis confirmed that he had had the rock saw modified by Cribbs and insisted that was a matter for the applicant. They disagreed. On Mr Stratti's evidence the Cribbs subsidiary, RNC began manufacturing and selling rock saws at the end of 1999, leading to the price of rock saws falling.

83 In cross examination, Mr Metaharis confirmed that he was aware of the provisions of clause 4 of the Purchase agreement. He had given the respondent the first option to modify the rock saw and Mr Troy Stratti had refused to do so, because Mr Stratti did not want him 'to do offset cutting, his line of work'. Mr Metaharis agreed that the saw he had bought was the one he had seen working at the University of New South Wales, but when he saw the more versatile saw, that was what he wanted. He agreed that by January 1999, his view was that the applicant was no longer bound by the parties' agreement, because of the respondents' breaches. He insisted that he was not concerned about letting Cribbs see the rock saw, but he did not have it repair the saw. He was aware that the respondents were concerned to protect their invention and agreed that his new Cribbs saw looked like the Stratti saw, but explained that 'if you know your saws you can pick the difference'.

84 Mr Metaharis also explained that he had never bought a complete saw from RNC. Initially he bought a housing, then he asked them to build a blade and later asked RNC to get a motor. RNC priced them in that order. The total cost was some $38,000 and then he asked Mr Slade of RNC to put them all together to create a rock saw, with the extension arm the applicant had earlier acquired from RNC for $12,000. Mr Slade agreed, but Mr Metaharis was not sure if RNC ever made any charge for that work. Mr Metaharis also explained that he had originally sought a price for a blade and a motor as replacements for the Stratti saw, but had, in fact, never sought to replace them.

85 Mr Metaharis finally agreed, after some reflection that:

"Q. Didn't you assist Mr Cribbs company by permitting him the inspection by Mr Slade or someone else in the Cribb organisation of the Stratti saw to assist them in solving design problems that they had in the manufacture of such a saw

A. Yes"

86 After an adjournment to enable instructions to be taken from Mr Metaharis, in re-examination it was explained that what he meant by this answer was:

'The way I assisted them was he come out, he must have come out to look at designing me offset bit and I was using the saw on the site and he could not - you can't walk up to a saw while it is working to inspect - what it ordered. I ordered the part; he had to come out and have a look see what it is going to fit on. I can't recall the date but it must have been around about the time I ordered the part, the extension. He didn't come to - he come for me to have a look at the part that I want to make - he didn’t come to observe the saw.'

87 Mr Metaharis further explained that he had first showed Mr Slade a diagram of his own and that he said "I will have to have a look what you mean. You can't just make me an extension without measuring up bits and pieces to see if they will fit." He denied that he had made the Stratti saw available to Cribbs or RNC or anyone associated with them, for the purpose of being disassembled or in any way to "assist them to overcome design problems with their own saw."

88 In further cross examination, Mr Metaharis confirmed that RNC had taken the saw to their premises, after their quote for the manufacture of the extension had been accepted. Mr Metaharis denied, however, that this was why he had earlier agreed that he had rendered assistance to RNC.

89 Mrs Metaharis also gave evidence about these matters, as well as evidence about her recent contact with Mr Cribbs, a director of Cribbs, who was called by Cribbs to give some evidence about difficulties that company had in answering the respondents' summonses for the production of documents, relating to the design and production of rock saws. There were some disturbing aspects of that evidence, which it is unnecessary to outline in detail, but which, together with Mr Metaharis' evidence, led me to the view that this aspect of the applicant's case had to be approached with some caution.

90 Mrs Metaharis' evidence was that the respondents became aware of the construction and fitting of an extension to the rock saw and threatened the applicant with legal action, if the saw was provided to a competitor. The result was that the applicant later purchased welding equipment and Mr Metaharis himself performed repair work on the saw, declining to further deal with the respondents.

91 Mrs Metaharis' evidence confirmed that apart from the cost of the three components of the saw, the applicant paid Cribbs and RNC nothing more to build the rock saw. Mrs Metaharis denied that "either more than $38,776 was paid for the saw, which does not appear in the invoices, or that you paid $38,776 for the saw and the reasons why you paid that and not more was part of a quid pro quo or offset for providing assistance to the group of companies in their creation of the saw?"

92 Mrs Metaharis accepted that under the parties' agreement, the applicant was free to buy another rock saw from another supplier. She agreed that there was, accordingly no reason why in November 1998, Mr Slade had the slightest interest in the terms of the contract between the parties. She denied having supplied the contract to Mr Slade because she was aware that RNC was going to copy the Stratti saw, in whole or part. She explained that she had sent the contract to him, because of a conversation her husband had had with Mr Sam Stratti, when legal action was threatened. The result was that the applicant could not afford to have a new rock saw made, but was forced to do so. Mrs Metaharis understood that the applicant could have nothing to do with making an alteration to, or interfering with the rock saw that it had bought. They wanted a new motor, because Mr Troy Stratti had told them that the motor of the Stratti saw would not hold out, given the extension they had already had made. A new blade and motor were then ordered, with the intention of also putting them into the Stratti saw. Mr Troy Stratti told them that they could not do that either, so they asked Cribbs to build a new one.

93 Mrs Metaharis agreed that

'Q. The question I am asking you is: Does it go to this, there was no reason at all for you to have any involvement with respect to these contractual provisions and giving them to Mr Cribb unless you believed that there may be a breach of the conditions in the contract and I suspect and suggest condition 4, isn't that right?

A. Yes

94 Mrs Metaharis denied, however, that the reason the applicant was concerned about a breach of clause 4 of the contract, was because Cribbs didn't feel that they could build a saw without access to the Stratti saw. Her evidence then was that the applicant did not need a new rock saw. They had bought a new one, only because of the respondents' warnings about altering the applicant's existing saw.

95 Mrs Metaharis' evidence was that the applicant approached RNC to have another rock saw constructed. At the suggestion of a Mr Slade at RNC, Mrs Metaharis faxed to him a copy of the parties' contract. Mr Slade's advice was that the parties' contract meant nothing, the applicant had no articulating saw. On that basis, the applicant engaged RNC to build a new rock saw, for which they later paid $38,000, representing the cost for component parts.

96 Evidence was also given of advice later received by the applicant in April 2000, from Peter Maxwell and Associates, that the rock saw which the applicant had purchased from the respondents was not the subject of the patent referred to in the Purchase agreement.

97 The upshot of all this was that the Stratti rock saw was measured by a competitor of the respondents, Cribbs, when it was engaged by the applicant to manufacture an extension for the saw, to enable it to perform the work of which the Mark 2 model was capable; that the rock saw was later taken to Cribbs' premises so that the extension could be fitted; that the applicant became concerned that the original motor in the saw would not be strong enough to operate with the extension and took steps to acquire a stronger motor; that the applicant did not have that motor installed in the Stratti machine, but rather had Cribbs build a completely new rock saw, with the capacity of the Mark 2 model; that the applicant paid Cribbs for the component parts of the machine, but nothing for the work of building the saw from those components; that to the untrained eye, the Stratti and Cribbs saws were indistinguishable; that Cribbs subsequently manufactured such rock saws for sale in the marketplace.

98 I am satisfied, having regard to the provisions of s106(2) of the Act, that this was conduct properly to be taken into account in a determination of what relief, if any, should flow to the applicant in this case. I am not, however, satisfied that the conduct was such as to warrant any relief at all being refused, as a matter of the Court's discretion. On the evidence led, it appears that the applicant proceeded on the basis that given the way in which it had been treated by the respondents, it was no longer bound by the parties' agreement. Mr Slade's advice to Mrs Metaharis that the Stratti saw was not an articulating saw, was inconsistent with Mr Metaharis' evidence in these proceedings. Nevertheless, that advice plainly provided the applicant with the assurance it was seeking that the contract did not preclude it from having another saw with the capacity of the Stratti Mark 2 model built by Cribbs. On the evidence, that saw appears to have been a copy of the Stratti saw, apart from matters of detail, which the trained eye could detect.

99 I turn to the various claims the applicant advanced. The first was in relation to the $5,000 paid for the bucket, which was never supplied by the respondents. I am well satisfied the case made out for the applicant requires that an order be made in relation to this sum. Some account must be taken of the ripper supplied in March 1999, valued at $2,600. The respondents had use of the $5,000 in the intervening period. Justice requires, accordingly, that the respondent pay interest on $5,000 between the date of payment of the $5,000 to the date of supply of the ripper in March 1999. At that date some $45,000 was outstanding. A new hammer was to be suppled in lieu of payment. The end result was that the balance outstanding was not paid, nor the hammer supplied. It follows that the respondent must now pay that sum, less the cost of the ripper, with interest from March 1999. Justice also requires that account to be taken of the use of the loan hammer from the date of the March agreement, to the date it broke down in January 2000. On the evidence the hourly rate for such a loan hammer was $30. A sum reflecting the cost of such hire should be deducted, from the sum otherwise to be paid.

100 The next complaint advanced was as to the price paid for the saw. I am not satisfied that the applicant made out this complaint. On the evidence the applicant was supplied with the rock saw which it sought, at the price which that saw then commanded in the marketplace. The evidence suggested that the description of the saw as having been the subject of a patent was incorrect, as was conceded for the respondents. I do not accept the submission that the respondents had set out to mislead the applicants as to the applicability of the patent referred to in the Purchase agreement. The agreement in question had been prepared by the respondents' patent attorneys and solicitors, on the respondents' instructions, to protect the intellectual property in the equipment. The two Mr Strattis appear to have been wrong in their understanding of what protection the patent gave the equipment. The evidence did not, however, properly leave open the conclusion that their evidence as to their understanding of what protection the patent provided was knowingly wrong, or that they had set out to mislead the applicant in that regard. Indeed, the applicant properly accepted that the respondents had the right to protect their intellectual property in the saw.

101 The evidence also showed that the original saw was developed as the result of the intellectual effort of Mr Stratti; that it was an innovation which had enabled the respondents to charge $200 per hour for its use, as opposed to the $90 per hour available to be charged in the industry for work performed using other excavator attachments and that at the time of the sale, there were no other comparable saws which provided the respondents with any competition. I accept the evidence of Mr Sam Stratti as to the other saws available in the marketplace and the respondents' competitors. This was supported by the valuer's evidence, which also cannot be ignored. I also accept Mr Sam Stratti's evidence that the agreement was designed to protect the intellectual property in the saw, as well as the price purchasers were able to command in the marketplace for rock saw work at $200 per hour.

102 The applicant relied upon the judgment of Sheldon J in Davis, to support the claim here made in relation to the price of the saw. That case, in my view, did not involve comparable circumstances. There, the applicant had been promised "an excellent table top. NRMA Inspection a rule", which was found to have been a false promise. A price of 1,500 pounds had been paid for the truck, which proved to be 12 years old, had been purchased for some 160 pounds and after some repairs, was valued at 350 pounds by the respondent. The truck broke down immediately upon delivery to the applicant and had to be towed away. His Honour described it as a 'bomb ' and assessed its value at a maximum of 200 pounds, which he described as a 'kindly epitaph'.

103 Here, by way of contrast, the applicant received what it bought, a new rock saw, of the kind Mr Metaharis had worked along side of for some months. The saw performed the work it was designed for, which the applicant sought to perform and which the respondents supplied, albeit not enough of such work was supplied. While there were complaints advanced as to service and repair, the evidence did not permit of the conclusion that the saw was defective. It commanded the rate of $200 per hour, as represented. A dispute which later arose between the parties was whether or not the saw could be modified so as to be capable of performing other tasks which the Mark 2 saw was capable of performing and whether the respondents would make such a modification. That dispute did not, however, establish any failure by the respondents to supply what was promised, nor that what was provided, was overpriced.

104 I am well satisfied that it would not accord with the cautious approach which the High Court has urged upon the Court, when the discretions vested by s106 are exercised, for orders interfering in the bargain which the parties here struck as to the price of the saw, to be entertained, in the light of all of the evidence.

105 That evidence showed on the one hand, that Mr Metaharis was illiterate, but on the other, that he was an able and very experienced operator in the earth moving industry. He and his wife established the applicant as a business. It operated with Mr Metaharis performing work with the excavating equipment acquired from the respondents and with his wife attending to the other work of the business. It was a business which was a relatively successful one. Despite the problems encountered with the respondents, the evidence showed that the business generated gross takings of $719,016 from the time of acquisition of the excavator and saw in August 1998, until the end of the 2001 tax year. Takings in the first year of $149,412 increased to $311,199 in the second year, falling to $258,405 in the third.

106 While I have not taken account of outgoings of the business in making these observations, they underline the different circumstances which arise for consideration in this case, compared to those which arose in Davis.

107 Undoubtedly, this success reflected a great deal of work on the part particularly of Mr Metaharis, as well as expense incurred in acquisition of equipment. He worked long hours operating the applicant's equipment. Nevertheless, while there was a disparity in the respective bargaining positions of the parties, the evidence does not permit the conclusion that it was of such magnitude that the Court should now move to substantially reduce the price which the respondents were able to command for the rock saw in the marketplace in 1998; which the applicant was then prepared to pay and which it never sought to return to the respondents, despite the option, available to it, in accordance with the agreement made in clause 7.7 of the Purchase agreement. Rather, it preferred to sell the saw for the sum of $35,000 without the extension which had been manufactured by Cribbs. Had the applicant returned the saw, the respondents would have been obliged to pay the price provided in the Purchase agreement. The failure of the applicant to exercise that right, confirmed the conclusion that it would be wrong now to interfere with the purchase price which the parties agreed at the outset.

108 This approach too, properly has regard to the evidence of the applicant's conduct in relation to the modification of the saw and having another saw built, in order that they could have access to the work which the Mark 2 saw was capable of performing. The applicant, in that respect, plainly took steps which it thought appropriate to deal with the souring of its relationship with the respondents. The respondents complained that this had damaged their business. Whether that view is correct, is unnecessary for me to determine in these proceedings. Indeed, the respondents did not attempt to lead the evidence which would permit views as to that claim to be formed. It is sufficient to accept, as I do, that the applicant's conduct in having the saw modified and copied, was inconsistent with the agreement which the parties had reached. The evidence that the components of the saw cost $38,000 without the cost of work of building the saw, or any profit element being considered, also confirmed that the claims made by the applicant as to the cost of production of the saw, were not made out.

109 I finally deal with the claims made in relation to the two years' income, $736,000 claimed to have been guaranteed under the agreement. The claim was advanced on the basis of a calculation that the rock saw should have been used 8 hours per day, 5 days per week, over 46 weeks per year, in order to perform work which the respondents were bound to provide under the Works agreement. As I earlier observed, I am well satisfied that this was not guaranteed under the arrangement which the parties made with each other, nor what the applicant understood the respondents were going to provide.

110 It is helpful to repeat the two clauses relevant to this issue. The first, clause 2 of the Works agreement and the second, clause 7.7 of the Purchase agreement:

2. WORKS

2.1 To the extent that it is able after having made all reasonable endeavours, Stratti will offer to the Purchaser work sufficient to engage the Equipment for eight (8) hours per day for five (5) days per week during the period commencing on the date of this Agreement and terminating on that date which is two (2) years after the date of this Agreement.

2.2 Stratti warrants to the Purchaser that all work offered to the Purchaser by Stratti may be carried out within a 150 kilometre radius of Parramatta.

2.3 The rates at which work shall be offered by Stratti to the Purchaser shall be calculated in accordance with generally accepted industry practice.

2.4 The Purchaser may invoice Stratti on a monthly basis for work undertaken by the Purchaser for Stratti and Stratti will pay such invoice within thirty (30) days of the date of receipt of such invoices.

7. WARRANTY

...

'7.7 Subject to clause 7.7(b) Detail warrants that the Purchaser will earn $230,000.00 in gross fees in respect of the operation of the Equipment during the twelve (12) month period commencing on the date of this Agreement:

(a) if, upon the expiry of twelve (12) months from the date of this Agreement, the Purchaser has not grossed $230,000.00 in fees in respect of the operation of the Equipment in the twelve (12) month period commencing on the date of this agreement from work offered to the Purchaser (whether such work is under contract to Stratti or any third party), the Purchaser may, at its option, return the Rock Saw to Detail and Detail will pay to the Purchaser:

(i) $115,000.00; or

(ii) the value of the Rock Saw determined at the date which is twelve (12) months after the date of this Agreement as determined by a Valuer experienced in valuing excavators agreed by the parties or, failing agreement, appointed by the President for the time being of the Law Society of New South Wales.

whichever is the lesser amount, in exchange for the Rock Saw.

(b) if the Purchaser refuses, neglects or is unable to accept any work offered to it by Stratti for any reason whatsoever, the amount of $230,000.00 set out in clause 7.7(a) shall be reduced by the total value of all such work offered by Stratti to the Purchaser and not undertaken by the Purchaser.

111 The applicant argued that clause 7.7 was not relevant to this aspect of the claim, other than as providing evidence of a minimum base for the work to be provided. I cannot agree. The two agreements were plainly interdependent, so much was clear from the terms of the agreements themselves, as well as the circumstances in which they were entered. The applicant received legal advice about these agreements. The clauses together provided an obvious basis for the understanding about which Mr Metaharis gave evidence, that the work which the respondents were to provide would not involve rock saw work alone. This was consistent with Mr Metaharis' experience of rock saw work. His understanding reflected the fact that other work was necessary to perform, incidental to rock saw work, during any excavation. The bucket which came standard with the excavator was suitable for such work and Mr Metaharis plainly contemplated that he would have to use it and when he did so, the applicant would be paid $90 per hour, not $200.

112 What I also accept, however, is that the applicant did not expect, nor was it an expectation likely to arise from the terms of the two agreements, or the discussions prior to agreement being reached, that the applicant would have to purchase or have other equipment, such as a ripper and a hammer, in order to perform the work provided by the respondents, so as to satisfy their obligations under the Works agreement. No reference to such a necessity was made in the agreements themselves. The evidence showed that the applicant hired such equipment from the respondents.

113 There was a dispute between the parties as to the proper construction of the agreement. The applicant argued that the work referred to in clause 2 of the Works agreement involved the use of the excavator and rock saw, chargeable at the rate of $200 per hour. The respondents, that it referred to the excavator, the supplied bucket and the rock saw, with the rate for the bucket being $90 per hour. I take the view that the construction advanced by the applicant is correct.

114 The agreements were drafted by the respondents' solicitors. A bucket was a standard attachment which came with the excavator, but no reference was made to it at all in the agreements, particularly not in the definition of the term 'Equipment', which was defined to mean the excavator and rock saw. Had the promised work been intended to include bucket or other work chargeable at $90, rather than $200 per hour, undoubtedly reference would have been made in the definition of the word 'Equipment', to the bucket, or to other attachments, such as hammers and rippers. It was common ground that the excavator could not be used with the bucket, or any other attachment, when the rock saw was being used. The failure to make any reference in the definition to the bucket, in that context, can only lead to the conclusion that the plain words of the definition were what the parties intended. I find in the definition no ambiguity which gives rise to any need to give further consideration to the proper construction of the contract.

115 These conclusions are also reinforced, by reference to the Purchase agreement. There the guarantee provided in clause 7 is given a framework, which, it seems to me, cannot be ignored. It is provided that in the event that the applicant does not generate gross returns of $230,000 from the use of the Equipment in the first year, then the rock saw would be acquired by the respondents, at an agreed price. This did not apply to the excavator and standard bucket. $230,000 reflects 5 hours per day of rock saw work at $200 per hour. Had it been intended to refer to other work, the sum of $230,000, would reflect over 11 hours per day at $90 per hour. Given the promise to make "all reasonable endeavours to offer the purchaser work sufficient to engage the equipment for eight (8) hours per day etc", it would seem curious indeed, that a right to return the rock saw would arise, if $230,000 gross were guaranteed in a year from work not involving the rock saw and which would require more than 8 hours work per day to achieve. By way of contrast, such a right, having regard to an amount based on 5 hours rock saw work per day, is a much more readily understandable guarantee, in the context of the parties' negotiations and what was sold.

116 The evidence was that in the period during which the parties arrangement persisted on the original terms, between August 1998 and January 1999, rock saw work provided to the applicant comprise only 15% of the work provided. The guaranteed $230,000 rock saw work was plainly not achieved. I am satisfied that an order for this amount, with interest, must flow. Over the year to 30 June 1999, gross takings were $149,412, even though on Mr Metaharis' evidence, the amount of rock saw work performed increased after January 1999, when the applicant worked direct for other contractors. This possibility was, in fact, contemplated in clause 7.7 of the Purchase agreement. The agreement reached in January 1999 was to address the parties' problems resulting from delayed payments to the applicant. The evidence was that small subcontractors like the applicant did not suffer the same delays in payments which larger subcontractors like the respondents were subjected to. Problems about hours worked and whether or not fuel had been provided by the applicant or the contractor, were then the subject of discussion direct between them, without the interposition of the respondents. Clearly the agreement carried with it benefits for both the applicant and the respondents, given the problems which the parties were then faced with. It was a development which plainly did not, however, involve any relief for the respondents from the guarantee in the Purchase agreement.

117 The applicant also complained that after the January agreement the respondents thereafter did not offer further work in accordance with the agreement. The evidence showed that there was certainly some work offered, which it was common ground was not accepted, because the applicant had other work to perform. How much such work was offered was in issue, but does not require further consideration, on my approach.

118 What was not in issue was the applicant's acceptance that the amount earned through Mr Metaharis' endeavours and use of the applicant's equipment should be deducted from the amount of any orders made.

119 The approach urged for the applicant to the $230,000 guarantee was that it was irrelevant to the claim. I cannot see how this can be accepted, as a matter of justice between the parties. While Mr Metaharis was illiterate, Mrs Metaharis was not. The agreements were read to him. The applicant also received legal advice about the agreements entered. The agreements and indeed, Mr Metaharis' evidence as to his understanding of what work would be provided, all showed that rock saw work, of the amount claimed in the summons, had not been promised. The evidence also showed, however, that the respondents did not honour their representations, nor the terms of the agreements in relation to the provision of rock saw work. A money order must flow, as a matter of justice. The claim was advanced in respect of a period of 2 years. I am not satisfied that relief for such a period is warranted.

120 It is relevant to this conclusion that the applicant chose not to return the rock saw at the end of the guarantee period, but proceeded on a different course, which involved that rock saw being modified, a new rock saw being built and the original saw being sold. This was not because the supplied rock saw could not perform the work that it was designed for, but because the Mark 2 saw had been developed by the respondents and the applicant wanted a saw with that capacity. It could perform different work and the applicant wanted access to such work.

121 It seems to me that a just money order to reflect the respondents' failures to abide by the agreement they had reached in relation to the provision of rock saw work, is to require payment to the applicant of the difference between the earnings the applicant's work generated in the first 12 months of the parties' relationship, over 8 hours per day, performed either for the respondents or other third parties, and the guaranteed $230,000 rock saw work.

122 While the evidence showed that Mr Metaharis regularly worked more than 8 hours per day, the Works agreement referred to 8 hours work being provided and the guarantee in the Purchase agreement, was based on 5 hours rock saw work. It would, in my view, accordingly be unjust to give the respondents the benefit of Mr Metaharis' work beyond 8 hours per day. This gross sum should then be calculated on a net basis, as proposed in the applicants' summons. Interest on that amount should flow from that date.

123 As to the claims for the second year of the agreement, I am satisfied that no money orders should flow. This conclusion has regard to the terms of the agreement; the applicant's sale of the rock saw; the steps taken by the applicant to acquire and operate another rock saw, capable of doing Mark 2 work and the fact that in the second year, to 30 June $311,199 was earnt. How much of that was rock saw work was unclear. On the evidence, the earnings flowed from work performed by the new rock saw, not that purchased from the respondents. I am satisfied that justice could not now require that the respondents to further underwrite the applicants' business pursuits, in the light of the steps taken by the applicant. This approach achieves an appropriate balance as between the parties, on the cases they each made out.

124 There was also evidence that when the agreement was reached in January 1999, the respondents had suggested that the applicant should pay 10% of any earnings to the respondents, to reflect the sum which the respondents had earlier deducted from the hourly rates paid by its contractors, in respect of the hours which the applicant worked. There was an issue as to whether this letter was received by the applicant, but it was a proposal which was certainly never accepted. The payment was never made by the applicant. Nor did it make the higher resulting charge necessary, were it to be implemented. I cannot conclude that this is a matter properly to be taken into account in assessing money orders to be made in these proceedings, just in the circumstances revealed. There was never any agreement by the applicant to the 10% payment, nor was it implemented. The result of the order would be to now impose a 10% charge, where the administration work, which on the respondents case the 10% reflected, was not performed by the respondents. It is also relevant that this was not a claim advanced by the respondents when the March 1999 agreement was reached. It is an approach which, in my view, justice could not now accommodate.

125 Other arguments were advanced by the parties as to how the claims as to other equipment acquired by the applicant should be dealt with. I am satisfied that no further account should be taken of these matters in the orders here to be made. This reflects a proper balance between the parties' respective positions and conduct.

126 For the reasons given, I am inclined to make orders finding the agreements the subject of the proceedings unfair and vary them from 30 March 1999, to require payment of the sums earlier outlined to the applicant. I am satisfied that this is not a case where justice requires that either party be sheltered from the consequence of their conduct and breach of the agreements they reached. It will be necessary for the parties to calculate the money orders reflecting this judgment. That is the interest on $5,000 and the balance of the money outstanding from March 1999 dealt with in paragraph [99] and the difference between the $230,000 rock saw work guaranteed and that performed by the applicant, to August 1999 dealt with in paragraph [116].

127 The usual order as to costs would be that the respondents' pay the applicant's costs as agreed or assessed.

Orders

128 The parties are directed to confer on the final orders to reflect this judgment. Draft orders should be filed by Monday, 28 April. The matter will be listed on 30 April at 10am for consideration of the final orders to be made.

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LAST UPDATED: 22/04/2003