Hurford Hardwood Kempsey Pty Ltd v Kempsey Timbers (Sawmilling) Pty Ltd

1. [1]

   On 8 November 2017 the plaintiff, Hurford Hardwood Kempsey Pty Ltd (“Hurford”), contracted with the defendants, Kempsey Timbers (Sawmilling) Pty Ltd and Kempsey Timbers Pty Ltd (together, “Kempsey Timbers”) to purchase a property at Yarravel, near Kempsey, and a sawmill business, which Kempsey Timbers had for many years operated on that property, for $6.8 million.

2. [2]

   The document was a standard Contract for the Sale and Purchase of Land - 2016 Edition, which included a number of “Additional Clauses” (“the Contract”).

3. [3]

   The owner and Managing Director of Kempsey Timbers was Dr Douglas Head. His son, Mr Roy Head, was the Chief Executive Officer of Kempsey Timbers. I shall distinguish between the two men by referring to them as “Dr Head” and “Mr Head”.

4. [4]

   The purchase price was to be paid as follows:

5. [5]

   Hurford granted Kempsey Timbers a mortgage over the site and a security interest under the Personal Property Securities Act 2009 (Cth) as security for that part of the purchase price as was payable after completion.

6. [6]

   Hurford paid Kempsey Timbers the $500,000 on exchange and, in the circumstances I discuss below, the $4.5 million on completion on 30 November 2017 and the $1.3 million on 30 May 2018.

7. [7]

   These proceedings were commenced shortly before 1 August 2018, when the final $500,000 was due to be paid. By then the parties were in dispute. Pending resolution of the proceedings, the parties agreed that Hurford should pay Kempsey Timbers $242,000 of the $500,000. The remaining $258,000 was paid into Court to abide the outcome of these proceedings.

8. [8]

   The Head family had been involved in the timber industry for many years prior to entry into the Contract. The sale of the Kempsey mill represented their permanent departure from the industry.

Representation

1. [9]

   Mr McCall appeared for Hurford and Mr Quickenden appeared for Kempsey Timbers. I was greatly assisted by the manner in which both counsel conducted the case. Both made concessions where appropriate, and focussed cross-examination and final submissions on the three issues that divided the parties.

2. [10]

   In his final submissions, Mr McCall, with great care, summarised the facts established by the evidence. By and large, Mr Quickenden did not cavil with Mr McCall’s summary.

3. [11]

   Much of what follows, so far as concerns the factual background, is taken with gratitude from Mr McCall’s submissions.

Unprocessed and Processed Stock

1. [12]

   Although the Contract did not say so in terms, it is common ground that there was:

   1. (1)

      included in the sale all “unprocessed board stock” (“Unprocessed Stock”) on site at completion; and

   2. (2)

      excluded from the sale “engineered and finished” stock (“Processed Stock”) on site at completion.

2. [13]

   Explanation of the difference between Unprocessed Stock and Processed Stock requires consideration of how the mill operated.

3. [14]

   The mill is shown in this aerial photograph:

4. [15]

   As indicated on the photograph there is a “Saw Mill” (also referred to as a “Green Mill”) and a “Dry Mill” at the site.

5. [16]

   Logs are delivered to and stored at the mill. In the photograph, logs appear stored on the ground to the right of the Saw Mill. The logs are cut in the Saw Mill into boards of various sizes. The boards are classified by type; for example Blackbutt, Spotted Gum, Red Mahogany and so on. The boards are also classified with a “nominal size” for width and thickness; for example, 75 x 25 mm or 100 x 25 mm.

6. [17]

   At the end of the production line in the Saw Mill, the boards are extruded onto a “Round Table” for manual removal by workers. The Round Table is in the building marked “Round Table” and is a large rotating table that allows sawn boards to accumulate without becoming congested.

7. [18]

   The boards are then stacked into packs that are about 6 metres long. Examples of such packs appear to the left of the Round Table building in the photograph.

8. [19]

   Although the boards are of a particular breadth and width depending on their “nominal size”, their length varies.

9. [20]

   The boards are packed using a method of alternating placement of boards for each row, usually eight rows across. Each row is separated vertically by thin strips of timber known as “stickers” or “strips”. There are gaps in the packing.

10. [21]

    The packs are usually about 20 rows high. The boards are packed this way to allow maximum air circulation to reduce moisture content. The packs can be seen in the photograph to the left of the Dry Mill.

11. [22]

    The Unprocessed Stock is processed in the Dry Mill. Usually, and depending on the moisture content of each pack, the Unprocessed Stock is dried in the kilns, seen beyond the Dry Mill in the photograph, prior to processing.

12. [23]

    In the Dry Mill, the Unprocessed Stock is reshaped and finished into Processed Stock: usually floor boards. One piece of machinery in the Dry Mill that achieves this result is a “moulder”. Within the moulder is a tally wheel which measures the length of boards passing through the moulder.

13. [24]

    At completion, there was a large amount of both Unprocessed Stock and Processed Stock on the site.

The issues

1. [25]

   As I have mentioned, three issues divided the parties:

   1. (1)

      whether the purchase price under the Contract should be adjusted by reason of there being less Unprocessed Stock on site than was warranted;

   2. (2)

      whether Kempsey Timbers made an enforceable promise to “account” to Hurford in relation to an understatement of long service leave entitlements;

   3. (3)

      whether, following Hurford’s denial of Kempsey Timbers’ access to certain information and services, Kempsey Timbers has suffered damage by reason of thereby having to sell Processed Stock at a greater discount than would otherwise have been the case.

2. [26]

   By cl 62 of the Contract, Kempsey Timbers warranted that “at completion, the stock will comprise 4,550 m3 plus or minus 150 m3”, that is to say, between 4,400 m3 and 4,700 m3, with provision made for an adjustment to the purchase price on completion “if the stock is outside [that] range”. Any adjustment was to be made at the rate of $1,000 per m3. I will return to cl 62, and its proper construction, below.

3. [27]

   Hurford contends that:

   1. (1)

      by an email exchange between the parties’ solicitors on 30 November 2017, shortly prior to completion, cl 62 was varied to permit any necessary adjustment to be made on 30 May 2018, when the next instalment of the purchase price was due, rather than at completion; and

   2. (2)

      there was in fact only 4,165.26 m3 on site at completion and that Hurford was therefore entitled to deduct $234,740 ((4,400 – 4165.26) x $1,000) from the payment of $1.3 million due on 30 May 2018.

4. [28]

   Kempsey Timbers contends that there was an agreement made on 1 December 2017 that there was present on the site at completion between 4,400 m3 and 4,700 m3 and that no cause for adjustment of the purchase price arose.

5. [29]

   By cl 60 of the Contract Hurford agreed to be responsible for all long service entitlements of employees, whether those entitlements arose before or after completion.

6. [30]

   Prior to completion, Kempsey Timbers disclosed that its records may have understated the amount of long service leave then due to the employees and said that “the variance in leave entitlements once reviewed and confirmed will be accounted for by” Kempsey Timbers.

7. [31]

   Hurford contends this amounted to an enforceable promise by Kempsey Timbers to pay it the $44,300, being the amount understated.

8. [32]

   In order to facilitate Kempsey Timbers’ access to the Processed Stock, by cl 59 of the Contract Hurford agreed to provide a “warehousing and ‘pick and pack’ service” on behalf of Kempsey Timbers for nine months from the date of Contract; that is, until 8 August 2018.

9. [33]

   By its cross claim, Kempsey Timbers contends that it was agreed by email between the date of the Contract and completion that the pick and pack service would be provided by allowing remote access to a computer server as well as the services of Mr Michael Borger who was then, and remained after completion, employed at the mill.

10. [34]

    On 4 June 2018, Hurford denied Kempsey Timbers remote access to the server and thereafter denied it direct access to Mr Borger. The server was turned back on 8 June 2018. Kempsey Timbers was able to access the server again on 12 June 2018.

11. [35]

    Kempsey Timbers contends that, as a result of Hurford denying it access to the server and the services of Mr Borger, it suffered damage of between some $226,700 and $249,450.

Decision

1. [36]

   As to Unprocessed Stock:

2. [37]

   Kempsey Timbers made no enforceable promise about accounting for the alleged understated long service leave.

3. [38]

   Kempsey Timbers has not proved it suffered any damage by reason of Hurford’s denial of access to the server or Mr Borger.

Matters not pressed or unavailable

1. [39]

   Before setting out my reasons for coming to those conclusions, it is necessary to deal with three preliminary matters.

2. [40]

   In his final written submissions, Mr Quickenden contended that Hurford was estopped from asserting that there was an agreement made on 1 December 2017 as to the amount of Unprocessed Stock on site on 30 November 2017 and from asserting any breach of cl 62 of the Contract. These matters were not pleaded and were abandoned in final oral submissions.

3. [41]

   Further Mr Quickenden, in final submissions, made a number of references to “the equities” and sought to deploy a number of matters passing between the parties prior to entry into the Contract. In my opinion, those matters have no bearing on the issues with which I am concerned.

Admissibility of Hurford’s business records concerning Unprocessed Stock

1. [42]

   During the hearing, Mr McCall tendered a series of “run sheets” which recorded the length of Unprocessed Stock as recorded while it was being processed in the Dry Mill.

2. [43]

   The documents were admitted into evidence without objection as business records pursuant to s 69 of the Evidence Act 1995 (NSW).

3. [44]

   In final submissions, Mr Quickenden sought to revisit that ruling on the basis that the documents had been prepared in anticipation of litigation and were thus not admissible by reason of s 69(3) of the Evidence Act.

4. [45]

   Mr Quickenden submitted:

5. [46]

   The submission reveals why it cannot be accepted. The time to take the objection was when the documents were tendered. If the point had then been taken that the documents were prepared in anticipation of litigation there were a number of witnesses that Mr McCall could have called to deal with that matter. It is too late to object in final submissions.

The warranty as to Unprocessed Stock

1. [47]

   Clause 62 of the Contract provided:

2. [48]

   The Contract did not provide, in terms, that Unprocessed Stock was included in the sale. However, that was the parties’ intention and they conducted themselves consistently with that intention.

3. [49]

   Clause 56 provided that:

4. [50]

   There is no other relevant reference in the Contract to “stock-in-trade”. Clause 62 refers to “stock” and “unprocessed board stock”. And cll 1 and 4 of the Contract make no reference to “stock-in-trade”. However, cl 59, to which I will return below when considering Kempsey Timbers’ cross claim, does refer to “engineered and finished stock” and makes clear that such stock was not included in the sale. Evidently, the references in cl 56 to “stock-in trade” and “[c]lauses 1 and 4” should have been references to “stock” and “cl 62”.

5. [51]

   Clause 62 refers to “stock” in its chapeau and sub-cl (3), but to “unprocessed board stock” in sub-cl (2). Nonetheless I think it clear that the parties intended the terms to be synonymous. The warranty given by Kempsey Timbers in cl 62 is given in respect of “stock”. That warranty is coupled with an agreement by Kempsey Timbers not to sell “unprocessed board stock” without Hurford’s consent.

6. [52]

   The distinction drawn by the parties in the Contract is between such stock, referred to in cl 62, and “engineered and finished” stock, that is Processed Stock, as referred to in cll 56 and 59; and not between the “stock” and “unprocessed board stock” as referred to in cl 62.

7. [53]

   Accordingly, my conclusion is that the warranty given in cl 62 is as to the volume of Unprocessed Stock on site at completion.

8. [54]

   There is another variety of timber product, known as scantlings. Scantlings comprise unseasoned timber cut to order for such things as fence posts and timber housing frames. They are finished products. Unseasoned timber is also used to make pallets, which are also finished products.

9. [55]

   There is no reference in the Contract such products. Nor is there any evidence that such products were on site at completion, although small amounts of scantling were apparently on site between December 2016 and June 2017.

10. [56]

    If such product was on site, I would regard it as “finished stock” and thus Processed Stock subject to cl 59 rather than cl 62.

11. [57]

    Clause 62 called for an adjustment of the purchase price if the volume of Unprocessed Stock was less than 4,400 m3 or more than 4,700 m3. But neither cl 62, nor any other provision in the Contract, stated how the volume of Unprocessed Stock should be determined in order that such adjustment be made.

12. [58]

    As I set out below, in November 2017, the parties attempted to conduct a stocktake to determine the volume of Unprocessed Stock and what if any adjustment was called for. That was an understandable approach. But it was not required by nor governed by any term in the Contract. The Contract does not mention a stocktake. It refers only to an adjustment.

13. [59]

    As Mr McCall submitted, the evidence suggests that, over time, Kempsey Timbers’ records of the amount of Unprocessed Stock at the mill became unreliable.

14. [60]

    Prior to 2004, a Mr Rabbit managed the mill. Up to that time it appears Mr Rabbit conducted regular audits of Unprocessed Stock. However, from around 2006 there appear to have been no audits to ensure that the amount of Unprocessed Stock as recorded in Kempsey Timbers’ stock sheets was accurate.

15. [61]

    In 2015 Mr Ben Geatches, who was then the General Manager of the mill, decided to reduce the volumes that were allotted to new packs of Unprocessed Stock because he thought the previous estimates applied to them were too large.

16. [62]

    In one of his affidavits, Mr Geatches said:

17. [63]

    On 13 November 2017 Hurford’s Chief Executive Office, Mr Robert Engwirda, and its Chief Operating Officer, Mr Jacob Eldridge, attended the site to prepare for handover on completion.

18. [64]

    There were many tasks to perform, including making the site safe and attempting the stocktake of the volume of Unprocessed Stock for the purposes of cl 62.

19. [65]

    At that time, Mr Head gave Mr Engwirda a stock sheet which purported to record the volume of Unprocessed Stock on site. The parties referred to this as the “13 November Stock Sheet”.

20. [66]

    Mr Engwirda quickly became concerned about the accuracy of the 13 November Stock Sheet. He gave this evidence:

21. [67]

    Mr Eldridge gave similar evidence. He said:

22. [68]

    Mr Eldridge performed calculations that showed that it was physically impossible that the volume of Unprocessed Stock could be as set out in the 13 November 2017 Stock Sheet. He said:

23. [69]

    Between 13 and 30 November 2017 Mr Engwirda, in consultation with other employees of Hurford and current employees of Kempsey Timbers, including Mr Geatches, continued to endeavour to ascertain what volume of Unprocessed Stock was present at the mill.

24. [70]

    In his affidavit, Mr Geatches said that as settlement was approaching he had this conversation with Dr Head:

25. [71]

    Dr Head denied this conversation and said that he told Mr Geatches:

26. [72]

    Dr Head has an interest in the outcome of these proceedings, whereas Mr Geatches, who was General Manager both before and after completion, but who is no longer employed at the mill, had nothing to gain by giving partial evidence in the proceedings. Mr Quickenden pointed out that comments Mr Geatches made in an email exchange with Mr Head on 18 December 2017, to which I will return, suggests that there had been some bad blood between Mr Geatches and the Head family for reasons evidently not associated with the issues in these proceedings. However, my impression of Mr Geatches in the witness box was that he was a disinterested witness giving confident evidence of what he recalled had occurred. I accept his evidence.

27. [73]

    Whatever may have been said, this evidence draws attention to the relationship between the processing of logs into Unprocessed Stock in the Saw Mill and the processing of that Unprocessed Stock into Processed Stock in the Dry Mill. Unprocessed Stock was included in the sale. Processed Stock was not. It was therefore in Kempsey Timbers’ interest to process as much stock as possible between exchange of contracts on 6 November 2017 and completion on 30 November 2017, subject to preservation at the mill of at least 4,400 m3 of Unprocessed Stock consistent with the warranty in cl 62 of the Contract. In those circumstances, Dr Head’s instruction to Mr Geatches to “aim for the lower end of that” was a perfectly proper, albeit risky, instruction in that it left open the possibility that the “lower end” might not be achieved.

28. [74]

    Mr Geatches said:

29. [75]

    By the time of completion on 30 November 2017, it became clear that it was not going to be possible to calculate the volume of Unprocessed Stock on site.

30. [76]

    Mr Engwirda told Mr Head, on a number of occasions, that in his opinion the volume of Unprocessed Stock at the mill could not be ascertained until the stock was processed and the length of the boards ascertained by reference to the tally wheel in the moulder.

31. [77]

    Mr Engwirda said that, prior to completion, he said to Mr Head:

32. [78]

    Mr Head said that, at around 1 pm on 30 November 2017, Mr Engwirda said to him:

33. [79]

    Mr Engwirda’s recollection was that he was a little more precise than this and that he said:

34. [80]

    Mr Engwirda recalled that around this time he said to Mr Head:

35. [81]

    Mr Engwirda and Mr Head agreed that they then agreed to refer the matter to “the solicitors”.

36. [82]

    At 1.42 pm on 30 November 2017 Hurford’s solicitor, Mr David Wolff, wrote to Kempsey Timbers’ solicitor, Mr Brook Worthington:

37. [83]

    Mr Worthington contacted Dr Head, who was then in Adelaide. Dr Head gave this evidence about his conversation with Mr Worthington:

38. [84]

    At 2.17 pm Mr Worthington replied:

39. [85]

    Mr Worthington’s email did not include any qualification to the effect “as long as it’s done in the next 24 hours”.

40. [86]

    There is no suggestion that Hurford did not make “every effort…to complete the stocktake” on 30 November 2017.

41. [87]

    Hurford contends the exchange amounted to a variation of the Contract. Kempsey Timbers contends it amounted to no more than a “forbearance”. I will return to this below.

42. [88]

    Following this email exchange, completion took place. Hurford paid Kempsey Timbers the $4.5 million called for by the Contract as payable on completion.

43. [89]

    The parties then focussed their attention on endeavouring to agree on the number of packs present on the site. By the end of 30 November 2017, 2,336 packs were located. Mr Geatches said there were another 20 or so packs missing. The missing 20 packs were located overnight. Mr Geatches updated the information in the 13 November Stock Sheet to reflect this number of packs. The computer system then showed the volume of Unprocessed Stock to be 4,454.82 m3.

44. [90]

    Later on 30 November 2017, there were further discussions summarised by Mr Geatches in his affidavit:

45. [91]

    Mr Head said that, at about 4 pm, Mr Geatches said to him:

46. [92]

    Mr Geatches denied saying anything to Mr Head concerning timber on the Round Table. He said:

47. [93]

    Mr Head said that, at around 6 pm, Mr Geatches said to him:

48. [94]

    Mr Geatches agreed that he said something to this general effect except that he said the words “according to the database” after the reference “4390m3”.

49. [95]

    A short time later Mr Head sent an email to Dr Head which included:

50. [96]

    I have mentioned that, by the end of November 2017, the mill’s computer system shows that the volume of Unprocessed Stock was 4,454.82 m3. It is common ground that Mr Geatches told Mr Engwirda and Mr Head of that figure. However, the mill stock list, so revised, was not circulated at that time.

51. [97]

    The stock list, as updated to 30 November 2017, was referred to by the parties as the “30 November Stock List” to distinguish it from the 13 November stock list.

52. [98]

    That stock list was only made available to Hurford by Mr Geatches in August 2018. Mr Geatches had by then retired from employment at Hurford, but had retained a copy of the 30 November Stock List on his computer. No party offers any criticism of Mr Geatches in this regard.

53. [99]

    Mr Quickenden submitted that it was implicit in the 30 November 2017 email exchange that Hurford would “complete its estimate of stock by 1 December [2017]”.

54. [100]

    I do not agree.

55. [101]

    That may be what Dr Head understood, based on his conversation with Mr Worthington immediately before Mr Worthington replied to Mr Wolff’s email. But Mr Worthington did not specify in his email that the stocktake be concluded on 1 December 2017. With a qualification that Mr Quickenden accepts was irrelevant, Mr Worthington simply accepted Mr Wolff’s proposal.

56. [102]

    In my view, the exchange of emails between the solicitors for the parties on 30 November 2017 effected a variation of the Contract.

57. [103]

    The exchange of emails between the solicitors constituted an agreement by Kempsey Timbers that notwithstanding the fact that the volume of Unprocessed Stock could not be ascertained on the date of completion, and therefore that any adjustment to the purchase price could not then be agreed, and in consideration of Hurford nonetheless agreeing to proceed to completion and to pay the $4,500,000 due on completion, any adjustment to the purchase price could be made on 30 May 2018 rather than on completion.

58. [104]

    Thus the effect of the adjustment was that cl 62 relevantly read:

59. [105]

    In my opinion, this conclusion follows from the words used by the parties’ solicitors in the 30 November 2017 email exchange. Those words are clear. There is no need to resort to surrounding circumstances to understand what they mean.

60. [106]

    It is true, as Mr Quickenden pointed out, the email exchange did not state:

    1. (1)

       when any stocktake would take place;

    2. (2)

       that Hurford proposed to determine the amount of Unprocessed Stock by processing the stock to ascertain board length;

    3. (3)

       that Hurford proposed unilaterally to undertake this process from 11 December 2017 to 30 May 2018; or

    4. (4)

       that Kempsey Timbers would not be present during the exercise.

61. [107]

    But the absence of reference to those matters does not affect what was agreed; namely that any necessary adjustment to the purchase price be made on the next date payment was due: 30 May 2018. Prior to its amendment by the 30 November 2017 email exchange, the Contract was silent as to how Unprocessed Stock volume was to be calculated in order that any necessary adjustment be effected. The Contract, as amended, remained silent as to these issues.

62. [108]

    Mr Quickenden submitted that the effect of the email exchange was that Hurford waived the right to an adjustment to the purchase price. I do not accept that submission. Nothing that happened on 30 November 2017 affected Hurford’s entitlement to an adjustment to the purchase price, nor that of Kempsey Timbers, if such an entitlement turned out to be justified by the volume of Unprocessed Stock in fact present at the mill on 30 November 2017.

63. [109]

    Mr Quickenden also submitted that the 30 November 2017 email exchange amounted to no more than a “forbearance” and “that the stocktake would conclude on 1 December 2017 and, if any adjustment was made, it would occur at the time of the next instalment payment” on 30 May 2018. I do not accept that submission. There is nothing in the 30 November 2017 email exchange that provides any foundation for it.

64. [110]

    Hurford assumed conduct of the mill on 1 December 2017.

65. [111]

    Kempsey Timbers contends that Mr Engwirda, on behalf of Hurford, and Mr Head, on behalf of Kempsey Timbers, reached an agreement on 1 December 2017 that the amount of stock present on site at 30 November 2017 was between 4,400 m3 and 4,700 m3 and thus within the range contemplated by the warranty in cl 62 of the Contract.

66. [112]

    By the morning of 1 December 2017 agreement was reached that there were 2,356 packs of Unprocessed Stock on site.

67. [113]

    Mr Head said that, at around 10.30 am, he had this conversation with Mr Engwirda and Mr Geatches:

68. [114]

    Mr Head’s reference to “the bracket” was to the range of 4,400 m3 to 4,700 m3 within which no price adjustment was called for by cl 62.

69. [115]

    The figure of 4,450 m3 that Mr Head said Mr Geatches mentioned was very close to the volume recorded in the mill’s database, for Unprocessed Stock as at 30 November 2017: 4,454.82 m3.

70. [116]

    Mr Engwirda agreed that Mr Geatches told him at about 3 pm on 30 November 2017 that the “system was showing 4,450 metres cubed” for Unprocessed Stock.

71. [117]

    Mr Geatches said, in relation to Mr Head’s evidence:

72. [118]

    As I have mentioned, it is common ground that on 30 November 2017 or 1 December 2017 Mr Geatches told both Mr Head and Mr Engwirda what the mill’s database said about the volume of Unprocessed Stock.

73. [119]

    In those circumstances, I think it more likely that what Mr Geatches said was no more than that the database showed there to be 4,450 m3 stock present.

74. [120]

    Mr Geatches went on to say:

75. [121]

    Mr Engwirda denied the conversation deposed to by Mr Head. He said:

76. [122]

    On 14 December 2017 Mr Head wrote to Mr Engwirda:

77. [123]

    On 18 December 2017 Mr Head re-sent that email to Mr Engwirda.

78. [124]

    The fact that Mr Head felt it necessary to enquire of Mr Engwirda about final cubic metre stock volume suggests that he did not then believe there was an agreement about the volume of Unprocessed Stock. If, as he deposed, Mr Engwirda had on 1 December 2017 agreed that “we have reached the final volume within the bracket”, there would be no need to make this enquiry.

79. [125]

    Later, the following email exchange occurred between Mr Head and Mr Geatches.

80. [126]

    At 7.15 pm Mr Geatches emailed Mr Head:

81. [127]

    Mr Head replied at 7.26 pm by suggesting Mr Geatches deal directly with Dr Head about the missing chainsaw and continuing:

82. [128]

    Again, this enquiry is hard to reconcile with Mr Head having a belief that an agreement had been made about volume.

83. [129]

    Mr Geatches replied:

84. [130]

    The first sentence of Mr Geatches’s email appears to relate to an issue not relevant to these proceedings.

85. [131]

    In relation to Mr Geatches’s response “it was over 4000”, Mr Head gave this evidence in response to questions from me:

86. [132]

    Mr Head’s email response was not then in evidence. Mr McCall called for it, and it was produced. It read:

87. [133]

    As Mr Head said in response to my question, his email did not directly address Mr Geatches’s statement that “it was over 4000”. In fact, he did not address the question at all. He did not say anything in his email to Mr Geatches about any “huge swing” from a “4,450 agreement” to Mr Geatches saying “it was over 4,000”.

88. [134]

    Minutes later Mr Geatches replied:

89. [135]

    Minutes later Mr Head replied:

90. [136]

    The email exchange concluded a short time later with this email from Mr Geatches:

91. [137]

    These last two exchanges suggest, as I mentioned earlier, that something had occurred between Mr Geatches and Mr Head and Dr Head that caused ill feeling on Mr Geatches’s part. That may be why Mr Head did not respond to Mr Geatches’s statement that “it was over 4,000”. However, that statement is not consistent with Mr Geatches believing there had been an agreement about volume at completion being 4,450 m3.

92. [138]

    Between 1 and 21 December 2017, Mr Engwirda endeavoured to ascertain the volume of Unprocessed Stock on site on 30 November 2017 by causing the Unprocessed Stock to be processed through the moulder in the Dry Mill. He concluded that the volumes stated in the records maintained by Kempsey Timbers were inaccurate and overstated the volume of Unprocessed Stock.

93. [139]

    I will return to the process adopted by Mr Engwirda when considering the expert evidence about volume.

94. [140]

    On 21 December 2017, Mr Engwirda wrote to Mr Head:

95. [141]

    Mr Worthington responded to this email by writing to Mr Wolff as follows:

96. [142]

    Thus, Mr Worthington asserted that an agreement had been reached about stock volume. The agreement asserted was not quite the same as that now asserted by Mr Head. According to Mr Head, the agreement was that “we have reached the final volume within the bracket”; whereas Mr Worthington asserted the agreement was that the “limits” in cl 62 had been reached and that the agreed volume was “approximately” 4,450 m3.

97. [143]

    Mr Wolff replied on 22 December 2017:

98. [144]

    The passage I have emphasised in Mr Wolff’s letter appears to acknowledge that some kind of agreement may have been made, but that it was based on “inaccurate” data provided by Kempsey Timbers.

99. [145]

    Mr Wolff said something similar on 26 February 2018 when he wrote to Mr Worthington stating:

100. [146]

     Mr Wolff’s letters of 22 December 2017 and 26 February 2018 suggest that there was an agreement of some kind made between Hurford and Kempsey Timbers.

101. [147]

     Neither counsel addressed that possibility in closing submissions.

102. [148]

     Mr Head deposed to the agreement that the parties had “reached the final volume within the bracket” in the context of his recollection that, immediately before, Mr Geatches had said that “we have reached the bracket with a volume of around 4,450m3 this morning”.

103. [149]

     Mr Geatches denied that he had said this, although he did not depose to what he recalled he said, if anything, on this subject.

104. [150]

     What is known is that, on 1 December 2017, the mill’s database showed that the volume of Unprocessed Stock was then 4,454.82 m3. Mr Geatches did not believe that that figure was accurate but had told Mr Engwirda and Mr Head that this is what the database showed.

105. [151]

     In those circumstances, as I have said at [119] above, I think it more likely that all that Mr Geatches said, and all that Mr Engwirda acknowledged, was that this was the volume of Unprocessed Stock as recorded in the database.

106. [152]

     I think it highly improbable that Mr Engwirda would have agreed that, as a matter of fact, the volume of Unprocessed Stock on site was “within the bracket”. The persistent theme of his evidence was that he found the mill’s stock records to be unreliable and that, because of the manner in which the Unprocessed Stock was stored in the packs, it was not possible to make an assessment of what the volume of Unprocessed Stock was. All that could be done, Mr Engwirda emphasised, was to ascertain the number of packs on site.

107. [153]

     I see this conclusion as being consistent with Mr Wolff’s letters of 22 December 2017 and 26 February 2018 where he said that “any agreement as to the final stock figure was based on data supplied by your client which has proved to be inaccurate”.

108. [154]

     I think it likely that Mr Worthington’s assertion of 21 December 2017 that there was an agreement that “the limits” in cl 62 have been reached reflected what I have concluded to be Mr Head’s misunderstanding of the import of what had been said on 1 December 2017.

109. [155]

     Overall, I am not satisfied that there was an enforceable agreement about the volume of Unprocessed Stock actually present on site.

110. [156]

     Having received no reply to his 26 February 2018 letter, Mr Wolff again wrote on 11 April 2018 enclosing a further spreadsheet which recorded the results of further production runs.

111. [157]

     Mr Wolff continued:

112. [158]

     Mr Worthington responded by saying he was getting instructions but made no substantive response to Mr Wolff’s letter.

113. [159]

     On 28 May 2018 Mr Wolff wrote a further letter to Mr Worthington:

114. [160]

     Mr Worthington responded on 29 May 2018:

115. [161]

     Mr Worthington demanded that Hurford pay to Kempsey Timbers the next instalment of $1,300,000 and said that Kempsey Timbers would exercise its rights under its security by taking possession of the site and appointing a receiver if the payment was not made. Mr Worthington concluded:

116. [162]

     Dr Head said in cross-examination that he was of the view that the claims by Hurford were simply a negotiating stance to reduce the remaining payments. Mr Head considered that the alleged agreement of 1 December 2017 was the end of the matter and that he was not going to agree to any adjustment to the 30 May 2018 payment.

117. [163]

     Mr Worthington’s 29 May 2018 letter caused considerable concern to Hurford. Hurford had already paid some $5 million for the mill which was still in its first year of operation. Mr Andrew Hurford, the Chairman of the Hurford group of companies, concluded that it would be disastrous for the Hurford group if Kempsey Timbers carried out its threats in the 29 May 2018 letter.

118. [164]

     Accordingly, on 30 May 2018, and as a result of these concerns, Hurford made the 30 May 2018 payment in full.

119. [165]

     If the true position was that there was less than 4,400 m3 of Unprocessed Stock on site at completion, the effect of the 30 November 2017 email exchange was that Kempsey Timbers was obliged to agree an adjustment of the instalment of the purchase price payable on 30 May 2018 if there was not between 4,400 and 4,700 m3 of Unprocessed Stock.

120. [166]

     By Mr Worthington’s letter of 29 May 2018, Kempsey Timbers manifested a refusal to countenance that any adjustment be made to the 30 May 2018 instalment; or at all.

121. [167]

     It is true that, by Mr Wolff’s letter of 28 May 2018, Hurford only revealed what adjustment it proposed be made to the 30 May 2018 instalment two days before the due date before that instalment.

122. [168]

     However that fact should be seen in the context of Hurford’s endeavour, through Mr Wolff’s letters in the early part of 2018, to engage Kempsey Timbers in a dialogue on the subject.

123. [169]

     Kempsey Timbers’ response to Mr Wolff’s letters of 21 December 2017 and 29 May 2018 was, in effect, that there was nothing to discuss, and that Hurford’s contention that an adjustment was called for on 30 May 2018 was groundless, hence Mr Worthington’s concluding sentence: see [161] above.

124. [170]

     Kempsey Timbers did not, for example, quibble as to the particular adjustment sought by Hurford and seek to engage in discussion about what the correct adjustment might be.

125. [171]

     Although Mr McCall did not put the matter this way, Mr Worthington’s letter of 29 May 2018 amounted to an anticipatory breach of Kempsey Timbers’ obligation to make any necessary adjustment to the 30 May 2018 payment. Kempsey Timbers, through Mr Worthington, evinced an intention not to comply with its obligations under the Contract as amended.

126. [172]

     Hurford paid the full instalment of $1.3 million on 30 May 2017. Although there is no direct evidence that repayment was made under protest, the surrounding circumstances show that it was.

127. [173]

     Kempsey Timbers did not plead that Hurford had in any way waived its right to assert a breach by Kempsey Timbers of its obligations under cl 62. Indeed, as I have said, Mr Quickenden abandoned the suggestion made in his written closing submissions that Hurford was estopped from relying on a breach of cl 62.

128. [174]

     It follows that, if the true position is that there was less than 4,400 m3 of Unprocessed Stock on site on 30 November 2017, Kempsey Timbers is liable to pay damages to Hurford for breach of its obligation in cl 62(3) to adjust the purchase price; such damages to be assessed, as the parties agreed, on the basis of $1,000 per m3.

129. [175]

     Both parties adduced expert evidence as to the volume of Unprocessed Stock on site on 30 November 2017. Hurford relied upon the evidence of Mr David Hayward. Kempsey Timbers relied on the evidence of Mr Peter Zed.

130. [176]

     Mr Hayward concluded that there was 4,165.26 m3 of Unprocessed Stock on site on 30 November 2017. That is 234.74 m3 less than the minimum amount warranted in cl 62(1).

131. [177]

     In his report, Mr Zed opined that the correct figure was 4,454.82 m3; a little above the 4,400 m3 minimum specified in cl 62(1).

132. [178]

     However, in final submissions Mr Quickenden eschewed reliance on Mr Zed’s opinions. To understand why that was so, it is necessary to understand how Mr Hayward arrived at his opinion.

133. [179]

     Mr Hayward based his opinion in part on the process Mr Engwirda undertook following completion to feed the Unprocessed Stock through the Dry Mill with a view to ascertaining the length of the boards in the piles. This was because inspection of the piles in November 2017 revealed that the boards were uneven in length.

134. [180]

     Between December 2017 and May 2018, Mr Engwirda caused much of the Unprocessed Stock to be processed through the moulder in the Dry Mill. The moulder incorporated a tally wheel which was able accurately to measure and record the length of the Unprocessed Stock fed through the moulder. As the Unprocessed Stock was of a particular nominal size, and thus had a known width and breadth, calculation of the length of the stock as recorded in the tally wheel in the moulder enabled Mr Engwirda to calculate volume.

135. [181]

     The result of that process is summarised in a table, a copy of which is attached to these reasons (the “Table”) (The Table (579 KB, pdf)).

136. [182]

     The Table was prepared by Mr Engwirda, Mr Geatches and Mr Hughes from business records of Hurford, including run sheets maintained contemporaneously during the process of feeding Unprocessed Stock through the moulder in the Dry Mill.

137. [183]

     The Table shows, in relation to each pile of Unprocessed Stock, what actual volume was processed, and compares this to the volume shown in Kempsey Timbers’ records for the corresponding pile. For the most part, the exercise shows that the Unprocessed Stock volumes were overstated in Kempsey Timbers’ records.

138. [184]

     On 21 December 2017, Mr Engwirda sent this information, current as at 21 December 2017, to Kempsey Timbers in the email set out at [140] evoking the response from Mr Worthington that I have set out at [141].

139. [185]

     Mr Hayward adopted the information in the Table for the purposes of his opinion. I will return to this.

140. [186]

     Mr Hayward also observed the processing of three packs of stock in November 2018.

141. [187]

     Mr Hayward’s methodology was to:

142. [188]

     Mr Hayward relied upon the following records to revise the lineal measurement for each pack:

143. [189]

     Mr Hayward concluded that the 30 November 2017 Stock Sheet was overstated by 289.54 m3. On that Stock Sheet there were 2,356 packs with a stated volume of 4,454.8 m3. His calculation of volume is then as follows:

144. [190]

     Mr Zed agreed that a process similar to that adopted by Mr Hayward was appropriate as long as three additional factors were considered.

145. [191]

     Those factors were that:

146. [192]

     As to factor (a), Mr Zed assumed that 4% and 6% of Unprocessed Stock would be rejected by the moulder during processing in the Dry Mill. But that assumption was not established in the evidence. On the contrary, Mr Hughes gave evidence that the amount of stock rejected was less than 1%. Further, Mr Hughes gave evidence that when processing the Unprocessed Stock after completion and for the purpose of measuring it, all stock was put through the moulder without rejection.

147. [193]

     As to factor (b), Mr Zed accepted during concurrent evidence that Kempsey Timbers had used nominal sizes and that this was therefore no longer a qualifying factor.

148. [194]

     As to factor (c), Mr Geatches’s evidence was that there was almost no Unprocessed Stock on the Round Table at the relevant time.

149. [195]

     In my opinion, “Rose Gum board stock” was not Unprocessed Stock. The Rose Gum had been kiln dried, unpacked, de-sticked, shrink wrapped in plastic and stored in the “Finished Product” shed shown in the photograph at [14] for sale by Kempsey Timbers to an Indonesian organisation. It was also not included in the 13 November 2017 Stock Sheet.

150. [196]

     In final submissions, Mr Quickenden did not seek to support Mr Zed’s opinion. Mr Quickenden said:

151. [197]

     During concurrent evidence, Mr Zed had sought to articulate a different basis for his opinion as to the volume of Unprocessed Stock on site on 30 November 2017.

152. [198]

     In final submissions, Mr Quickenden did not attempt to justify that opinion. Mr Quickenden said:

153. [199]

     That led me to have this exchange with Mr Quickenden:

154. [200]

     Ultimately, the only criticism Mr Quickenden offered of Mr Hayward was his statement in his first report that:

155. [201]

     Mr Quickenden submitted, in effect, that this sample was not sufficiently representative to draw a conclusion as to the whole of the Unprocessed Stock present on site on 30 November 2017.

156. [202]

     However, as Mr McCall submitted, the evidence shows that Mr Hayward’s figure is correct.

157. [203]

     Accordingly, I accept Mr Hayward’s evidence and conclude that the amount of Unprocessed Stock on site on 30 November 2017 was 4,165.26 m3, and therefore 234.74 m3 less than the minimum of 4,400 m3 specified in cl 62.

158. [204]

     There was 234.74 m3 less than the minimum amount of Unprocessed Stock required by cl 62(1) on 30 November 2017. Hurford is thus entitled to $234,740.00 in damages, assessed in accordance with cl 62(3) at the rate of $1,000 per m3.

159. [205]

     Hurford is also entitled to interest on this sum from 30 May 2018, being the date that Kempsey Timbers refused to make an adjustment.

The understated long service leave entitlements

1. [206]

   Clause 60 of the Contract relevantly provided:

2. [207]

   During November 2017, Kempsey Timbers’ then Finance Officer, Ms Carolyn Hawken:

3. [208]

   On 30 November 2017, Ms Hawken told Mr Engwirda that in her opinion Kempsey Timbers’ “payroll systems has had errors in it”, that the “employees’ entitlements are understated for about 10 employees” and that “there is approximately $40,000 or so difference”.

4. [209]

   That led to this conversation between Mr Engwirda and Mr Head:

5. [210]

   A short time later Mr Head sent Mr Engwirda an email with the heading “[v]ariance of leave entitlements” in these terms:

6. [211]

   Mr Head gave this evidence about that matter first in response to questions from Mr McCall and then in response to questions from me:

7. [212]

   There is no evidence before me of any communication of the kind to which Mr Head referred to in his last answer.

8. [213]

   Mr McCall submitted that the 30 November 2017 email from Mr Head to Mr Engwirda constituted either a variation of cl 60 of the Contract or a separate Contract to “account” to Hurford for the “variance” identified by Ms Hawken.

9. [214]

   I see two difficulties with that submission.

10. [215]

    The first is that any promise contained in Mr Head’s email was qualified. What Mr Head said was that Kempsey Timbers would account for the variance once it had been “reviewed and confirmed”. Hurford has not shown that the “variance” was so “reviewed and confirmed”.

11. [216]

    Such evidence as there is on the topic is to the contrary. Mr Head said that the matter was reviewed by Kempsey Timbers’ external accountants who reported that “further amendments” to those identified by Ms Hawken were identified. It is not clear on the evidence whether the result of that review was communicated to Hurford. Mr Head’s evidence suggests, albeit not conclusively, that it was.

12. [217]

    The second difficulty is, in any event, any promise contained in the 30 November 2017 email was not supported by consideration. Mr McCall submitted that Hurford “could have stopped or delayed the settlement pending the resolution of the issue”. I do not see how Hurford could have done this. By cl 60 of the Contract, Hurford had given its unqualified promise to pay “all” leave entitlements. Hurford did not give any consideration by proceeding to completion; it was already bound to do that.

13. [218]

    Mr McCall submitted, alternatively, that Hurford “also had claims for misleading or deceptive conduct in regard to the deficiencies in the May 2017 leave balances report”.

14. [219]

    Mr McCall was referring to a document evidently provided by Kempsey Timbers to Hurford during discussions, earlier in 2017, and many months before entry into the Contract.

15. [220]

    My attention has not been drawn to any evidence dealing with the circumstances in which that report was made available or what was said, if anything, by Kempsey Timbers as to its accuracy or completeness.

16. [221]

    Thus, the evidence does not enable me to come to any conclusion that Hurford had a right to make a claim for misleading or deceptive conduct; let alone that it forewent pursuing any such claim.

17. [222]

    For these reasons, my conclusion is that Hurford’s claim in respect of the long service entitlements fails.

The cross claim – the interruption to the pick and pack service

1. [223]

   Processed Stock was excluded from the sale.

2. [224]

   To facilitate access by Kempsey Timbers to that Processed Stock, the parties agreed in cl 59 of the Contract that:

3. [225]

   The parties contemplated that Kempsey Timbers would have remote access to a server at the mill and the assistance of Mr Michael Borger. Mr Borger had been employed by Kempsey Timbers at the mill in the data entry and payroll area and continued to be so employed by Hurford following completion.

4. [226]

   On 16 November 2017, Mr Head sent to Mr Engwirda an email setting out the detail of his proposal as to how the arrangements would work:

5. [227]

   Hurford agreed to these proposals.

6. [228]

   I accept Mr Quickenden’s submission that this amounted to a variation of the Contract whereby, in consideration of Kempsey Timbers’ agreement to contribute $500 per week to Mr Borger’s salary, Hurford agreed to provide the pick and pack service as set out in that email. Kempsey Timbers did pay that salary, although only in May 2018.

7. [229]

   The pick and pack process operated on this basis, uneventfully, between 1 December 2017 and 5 June 2018.

8. [230]

   On that date Mr Engwirda, angered by Kempsey Timbers’ 29 May 2018 response to Hurford’s 28 May 2018 request for an adjustment to the 30 May 2018 payment, instructed Mr Borger to deny Kempsey Timbers remote access to the server.

9. [231]

   In his affidavit, Mr Borger said that Mr Engwirda gave him this instruction:

10. [232]

    Mr Borger also said:

11. [233]

    Mr Engwirda also directed that he, rather than Mr Borger, be the contact point for the pick and pack service.

12. [234]

    Ultimately it was agreed that Kempsey Timbers should acquire the server.

13. [235]

    Mr Head said:

14. [236]

    As at 12 June 2018, Kempsey Timbers had less than two months to clear the remaining Processed Stock from the mill. That is because Hurford’s obligation under cl 59 of the Contract to provide rent free warehousing of the Processed Stock and to provide the pick and pack service expired nine months after the date of the Contract: on 9 August 2018.

15. [237]

    Thus, unless Kempsey Timbers could sell the remaining Processed Stock by 9 August 2018, it would have to arrange for that stock to be removed from the mill.

16. [238]

    As it turns out, Hurford agreed to extend the 9 August 2018 deadline to 30 August 2018, although that occurred only on 4 July 2018.

17. [239]

    As Kempsey Timbers’ sale of the mill to Hurford marked its departure from the timber industry it was, so far as concerns sale of the Processed Stock, engaged in what Mr Head described as a “controlled exit strategy” from the processed timber industry.

18. [240]

    Kempsey Timbers contends that the denial by Hurford of access to the server between 5 and 12 June 2018, and the ongoing interposition of Mr Engwirda between Kempsey Timbers and Mr Borger had the effect that Kempsey Timbers was obliged to offer greater discounts to customers from then on than would otherwise have been the case.

19. [241]

    By comparing the discounts Kempsey Timbers gave to its customers between December 2017 and May 2018 with those it gave to customers between June and August 2018, Mr Head calculated that the loss that Kempsey Timbers has suffered is between $226,705.80 and $249,450.46.

20. [242]

    Mr Head’s calculations in relation to the higher of those two figures are set out in a document he prepared entitled “AST Maximum Financial Losses Summary”, which is attached to these reasons (Maximum Financial Losses Summary (585 KB, pdf)).

21. [243]

    Kempsey Timbers adduced evidence from Mr Chris Katehos, a forensic accountant, who gave evidence that Mr Head’s analysis of Kempsey Timbers’ loss:

22. [244]

    Mr Katehos also confirmed that “the mathematical calculations performed by Mr Head in his analysis are correct”.

23. [245]

    I do not think that Mr Katehos’s opinion casts much light on the problem at hand. He has done no more than state the obvious, namely that Mr Head has compared the “before and after” June 2018 discounts given by Kempsey Timbers to its customers.

24. [246]

    It does not follow from that analysis that the mathematical difference between those figures necessarily reveals Kempsey Timbers’ position “but for” Hurford’s conduct in temporarily denying Kempsey Timbers access to the server and interposing Mr Engwirda in the pick and pack process.

25. [247]

    In his affidavit, Mr Head deposed, in general terms, to the impact on Kempsey Timbers’ business of Hurford’s decisions. Thus he said:

26. [248]

    Mr Head gave this general evidence about the impact of Mr Engwirda’s involvement:

27. [249]

    Mr Head also said:

28. [250]

    However, there is evidence to suggest that the impact of Hurford’s conduct on Kempsey Timbers was not as dramatic as Mr Head suggested.

29. [251]

    As Mr McCall submitted, at its highest, the interruption to Kempsey Timbers’ business was over by 12 June 2018, one week after the server was turned off on 5 June 2018.

30. [252]

    Kempsey Timbers still had its stock sheets, still had access to its customers via telephone, and was still able to place orders with Mr Borger or Mr Engwirda during that period.

31. [253]

    Mr Borger, who on Kempsey Timbers’ case was vital to the efficient running of the pick and pack process, said:

32. [254]

    Mr Borger continued:

33. [255]

    Finally, Mr Borger said:

34. [256]

    In cross-examination, Mr Borger gave this evidence:

35. [257]

    But that evidence was followed up in re-examination:

36. [258]

    Further, in final submissions, Mr McCall drew attention to a large number of email chains between Mr Head, Mr Engwirda and Mr Borger which showed that when Mr Head made a request of Mr Borger for access to Processed Stock, Mr Engwirda forwarded that request to Mr Borger within minutes (often within the minute) and that Mr Borger’s response was, in turn, relayed to Mr Head with similar alacrity.

37. [259]

    To take an example which occurred on 13 and 14 June 2018, immediately after Kempsey Timbers’ full access to the server was restored on 12 June 2018:

38. [260]

    Mr McCall took me to a number of other examples in evidence and submitted that there were many more. In his reply submissions, Mr Quickenden did not dispute that proposition.

39. [261]

    Kempsey Timbers did not call any of its customers to show that, following 12 June 2018, they had experienced less satisfactory service from Kempsey Timbers than prior to that date.

40. [262]

    The only evidence of Kempsey Timbers’ customer dissatisfaction was an email dated 8 June 2018 from Ms Olesya Lynnson, the Managing Director of Excellent Timbers in Melbourne, who expressed disappointment that Kempsey Timbers could not provide a delivery date for an order and stated:

41. [263]

    However, that sale eventually proceeded without any discount being offered.

42. [264]

    Mr Head’s analysis does suggest, on the face of it, that Kempsey Timbers offered greater discounts to its customers in June and July 2018 than in the preceding months.

43. [265]

    The starting point of Mr Head’s analysis is the “Standard Value” of the Processed Stock. However, cross-examination of Mr Head revealed that there were different “Standard Values” for particular customers and no fixed point from which it could be possible to determine any “discount”. Indeed Mr Head stated in his affidavit that “[n]ormal sell prices are not standardised”.

44. [266]

    In his calculation, Mr Head did not seek to take into account the fact that Kempsey Timbers was selling into a market that would necessarily cease to exist in August 2018 when its enjoyment of rent free storage of the Processed Stock at the Kempsey mill would come to an end.

45. [267]

    Mr Head explained his decision to increase discounts as follows:

46. [268]

    Thus, from 4 July 2018 Kempsey Timbers abandoned its “controlled exit strategy”.

47. [269]

    As Mr Head’s analysis shows, the amount of Processed Stock sold in July 2018 was more than double than in any previous month. Not only that, but the bulk of the Processed Stock sold in July 2018 was sold to Kepar Pty Ltd trading as “JVS Timber”.

48. [270]

    Hurford called Mr Aaron Susteren-Parkes from JVS Timber. Mr Susteren-Parkes had negotiated with Mr Head in June and July 2018 for the purchase by JVS Timber of Processed Stock from Kempsey Timbers. The JVS sale involved five semi-trailer loads of goods. Mr Susteren-Parkes said that the price he offered to Kempsey Timbers was based on the fact that, as he saw it, the timber being offered by Kempsey Timbers included “desirable” as well as “undesirable” varieties of timber.

49. [271]

    Mr Susteren-Parkes said:

50. [272]

    As Mr McCall submitted, the emails passing between JVS and Kempsey Timbers leading up to the sale suggest that it had all the features of a “clearance sale” of desirable and undesirable product rather than a sale somehow affected by Kempsey Timbers’ lack of access to the server between 5 and 12 June 2018.

51. [273]

    In those circumstances, I am not satisfied that Hurford’s conduct in temporarily denying Kempsey Timbers access to the server and in interposing Mr Engwirda between Mr Borger and Mr Head was the cause of the June and July 2018 discounting revealed in Mr Head’s calculations. Rather, I think it more likely that the discounting was the product of Kempsey Timbers’ need to sell the remaining Processed Stock prior to the end of the rent free period contemplated by cl 59 of the Contract.

52. [274]

    For those reasons, my conclusion is that Kempsey Timbers’ claim for damages for a breach of cl 59 of the Contract fails.

53. [275]

    Conclusion

54. [276]

    The parties should bring in short minutes to give effect to these reasons.

55. [277]

    I will hear the parties as to costs.