Cashmere Bay Pty Ltd v Hastings Deering (Australia) Ltd [2011] QSC 32

SUPREME COURT OF QUEENSLAND CITATION: Cashmere Bay Pty Ltd v Hastings Deering (Australia) Ltd [2011] QSC 32 PARTIES: CASHMERE BAY PTY LTD (plaintiff) v HASTINGS DEERING (AUSTRALIA) LTD (defendant) FILE NO/S: 2946 of 2007 DIVISION: Trial Division PROCEEDING: Trial ORIGINATING COURT: Supreme Court of Queensland DELIVERED ON: 11 March 2011 DELIVERED AT: Brisbane HEARING DATE: 19, 20, 21, 22, 23, 26, 27 July 2010 JUDGE: Daubney J ORDER: [1] There will be judgment for the plaintiff against the defendant in the sum of $196,521.16. [2] I will hear from the parties as to interest and costs. CATCHWORDS: CONTRACTS – BUILDING, ENGINEERING AND RELATED CONTRACTS – PERFORMANCE OF WORK – REMEDIES FOR BREACH OF CONTRACT – DAMAGES – where the plaintiff alleges a series of contracts entered into between the plaintiff and the defendant which lead to implied contractual terms and concomitant duties of care – where the plaintiff alleges suffering damages as a consequence of the defendant’s ongoing failure to rectify the engines of the vessel – where the plaintiff claims for structural damage caused to the vessel because of the removal of the aft panel. McCrohon v Harith [2010] NSWCA 67, cited COUNSEL: P Freeburn SC for the plaintiff APJ Collins for the defendant -- 1 of 32 -- 2 SOLICITORS: Tucker & Cowen Solicitors for the plaintiff Minter Ellison Lawyers for the defendant [1] In 2003 the plaintiff purchased the motor vessel now known as the “Ginger Megs” (“the vessel”). The vessel, which was built in 1993, is a 41 foot fibreglass motor yacht. It is the model of motor yacht known as a flybridge cruiser. The vessel was powered by two Caterpillar turbo charged diesel engines. [2] The vessel was in Singapore when purchased by the plaintiff. It was brought by freighter from Singapore to Brisbane and then transported to a marina at Scarborough. Aqua Mobile Marine Services, through its proprietor Mr Jim McKinnon, was retained to do an extensive refit of the vessel. Various works were then performed on the vessel, including an upgrade of the electrical wiring. [3] The principal of the plaintiff, Mr David Nilsson, said that his intention was to enable the vessel to be used for commercial charters. The vessel needed to be brought to a standard which would enable it to be put in commercial survey. [4] In June 2004, Nilsson took the vessel out on Moreton Bay for a fishing trip. He took McKinnon and a number of other tradespeople who had assisted with the refit as a gesture of appreciation for their work. While out on Moreton Bay, certain problems with the engines were noticed. Nilsson described the engines blowing white smoke on start-up, and then blowing a little bit of black smoke under load. He said they could not run the vessel at full speed because the starboard engine was overheating. McKinnon said that he observed overheating of the starboard engine and “light smoke”. [5] McKinnon recommended that Nilsson contact the defendant to check the engines. The defendant was the Brisbane agent for sales, service and support of Caterpillar engines. Nilsson said that he telephoned the defendant and spoke with the service adviser, Mr Martin Fordham. (Fordham’s evidence was to the effect that his first contact with Nilsson came subsequently, but Fordham also said that, given the passage of time, he did not recall every conversation he had with Nilsson.) In any event, this initial contact with the defendant resulted in a diesel mechanic then employed by the defendant, Mr David Browning, attending at the vessel in late July 2004 with Nilsson and McKinnon. [6] Nilsson and McKinnon gave evidence to the effect that on this occasion Browning listened to their complaints about the engines, inspected the engines, and recommended, amongst other things, that the fuel injectors in the engines be replaced. They said Browning also recommended that the turbo chargers be reconditioned and the after cooler cleaned. Browning said in his evidence in chief that his first visit to the vessel was as a consequence of being given a job sheet which instructed him to fit 16 fuel injectors to the vessel. The “job sheet” to which Browning referred was not produced in evidence. I consider it more likely than not that he did attend initially in the manner described by Nilsson and McKinnon, and that he attended subsequently to fit the fuel injectors. In this regard, Nilsson said that Browning told him that it would be cheaper if Nilsson went to the defendant’s workshop with the old fuel injectors and asked to be supplied with rebuilt injector nozzles. Nilsson said that Browning took the injector pumps, the after cooler and -- 2 of 32 -- 3 the turbo chargers off the engines, put them in his truck and took them away, but left the injector nozzles with Nilsson. Nilsson said that about a week later he went to the defendant’s spare parts department and asked to be supplied with 16 fuel injector nozzles. The spare parts department only had seven nozzles in stock. Nilsson paid for all 16 nozzles, took those seven with him and arranged for the other nine to be made available to be picked up by Browning to bring to the vessel. [7] Browning’s evidence was to the effect that his first attendance at the vessel was for the purpose of fitting the fuel injector nozzles. [8] I consider that the version of events described by Nilsson and McKinnon is more likely to have occurred. That version is consistent with a Hastings Deering tax invoice dated 5 August 2004, which evidences the purchase by the plaintiff of a total of 16 fuel injector nozzles on 28 July 2004. The tax invoice contained a specific notation requiring nine nozzles to be delivered to Browning from the defendant’s “cash sale collect area”. The clear inference is that, as described by Nilsson, seven of the nozzles were taken away at the time of purchase and nine were provided to Browning to bring to the vessel. [9] Regardless of the differences in recollections as to the details of Browning’s first visits to the vessel, however, it is clear even on Browning’s evidence that, from the time of his first attendance at the vessel, his (and thereby the defendant’s) retainer was not merely for the replacement of fuel injector nozzles. Browning agreed in evidence that, on the occasion of his first attendance at the vessel, he recommended to Nilsson that four actions needed to be undertaken with respect to the engines: - remove, reseal and reinstall the fuel injector pump; - bench test the fuel injector pumps; - remove, clean and reinstall the after cooler core, and - recondition the turbo chargers. [10] To that extent, then, there was broad agreement between Nilsson and Browning in their evidence before me as to the scope of the works which Browning initially undertook to perform, although, as I have already noted, there are differences in their versions as to the detail of their dealings. [11] It is sufficient for present purposes to note that work was done on these various engine parts, with several of them needing to be sent to third parties for servicing and repair. Browning attended at the vessel in mid-August 2004 to refit these components and fit the fuel injector nozzles. The plaintiff paid the defendant a total of $14,739.36 for this work to the engines. [12] Nilsson said that, when Browning completed this work, they started the engines while Browning was still present, but did not take the vessel for “sea trials”. (It is appropriate to note here that when Nilsson and McKinnon referred to “sea trials” in their evidence, they were referring to the vessel being taken out on a short voyage to test the engines. Their reference to “sea trials” did not involve, for example, extended diagnostic tests being performed on the engines while the vessel was underway.) Nilsson said the engines were not running properly, did not “sound -- 3 of 32 -- 4 right”, were “blowing more smoke than normal” and “seemed to be running very rough”. [13] Browning’s evidence, however, was that after he had worked on the engines, he and Nilsson took the vessel out onto Moreton Bay. He said Nilsson was driving the vessel, and they went out for about an hour “just to make sure [the vessel] came up on the plane” (i.e. reached a speed sufficient to lift the boat in the water to a level at which it could hydroplane across the water). Browning said the vessel performed well – “the best it’s ever gone” – and there was no smoke. [14] At the end of the day, nothing turns on these differences in recollections but I should record that, for reasons of credit which I will address later, I generally prefer Nilsson’s evidence to that of Browning. [15] What did emerge from Browning’s evidence, however, is that on this occasion he performed a valve adjustment on the engines. While he was working on the starboard engine, the brass timing pin sheared off and he repaired this by removing the rest of the thread, inserting a bolt and sealing it with a product known as “Locktite”. [16] Nilsson said that a couple of days after Browning’s attendance, he and McKinnon took the vessel out for a “sea trial”. He said: “We tried to get peak revs out of it to see if the overheating had ceased but the problem was still there. The vessel was still overheating but the smoke from the vessel was four to five fold more than what it originally was. It just seemed to get progressively worse. Instantly worse since Browning worked on the vessel.” [17] He identified this as occurring in late August or early September, and said that the problems were excessive smoke, the engines running rough, and the engines overheating. He said that the vessel “struggled” to get up on the plane. [18] McKinnon referred briefly in his evidence to this “sea trial”, and confirmed that there were still problems with the engines smoking. [19] Nilsson said he telephoned Fordham and explained the problems, and Fordham agreed to send Browning back out to look at the vessel. Fordham said he recalled Nilsson phoning and expressing “concerns with the engines that when they were idling they were blowing white smoke”. In any event, it was agreed that Browning would attend at the vessel again. [20] Nilsson said that Browning returned to the vessel in September 2004, and Nilsson showed him what was wrong. He said that Browning adjusted the throttle cables and checked the timing cover on each engine. After Browning left, Nilsson took the vessel out and experienced the same problems of excessive smoke, rough running and overheating. When the vessel returned to the marina, he and McKinnon inspected the engine compartment and found “massive amounts of oil” in the bilge. Nilsson observed an oil leak from the front timing cover on the starboard engine. [21] Nilsson said he contacted Fordham, who sent Browning out again to the vessel. Nilsson said that, when Browning attended, he put sealant on the timing cover. Nilsson complained to Browning about the problems he was continuing to have -- 4 of 32 -- 5 with the engines. Browning suggested that the problems might be bad fuel, and recommended that Nilsson use a fuel additive to treat the fuel. [22] In his evidence, Browning said he did recall being asked by Fordham to go and look at the vessel because Nilsson was complaining of smoke. He says he attended at the vessel and rechecked the timing and adjusted the throttles. He said that these engines usually blow white smoke on start up, and that there was no complaint by Nilsson of black smoke. Browning did not recall attending again at the vessel in September 2004. He did, however, remember that he had observed a fungus in the engines which he called “black death”, and said that he recommended a particular fuel additive to treat that condition. [23] Nilsson’s evidence was that, after being advised by Browning to use a fuel additive, he topped up the vessel’s fuel tanks and used the additive. He then drove the vessel on a number of occasions over the next couple of months to use up the fuel in the tanks. [24] Over the 2005 New Year’s break, Nilsson took the vessel out on Moreton Bay for a fishing trip. While out on that trip, the vessel struck a submerged object and material became entangled in the propellers. This caused significant damage to the vessel’s gearboxes. [25] The vessel was removed from the water and placed on the hardstand at the Scarborough marina. [26] McKinnon removed the gearboxes, which were sent away for repair. [27] At this time, Nilsson and McKinnon observed that the starboard engine was still leaking oil. Nilsson said he telephoned Fordham, who said he would send Browning to look at the engine. [28] Nilsson said, in his evidence in chief, that when Browning attended Browning said, in effect, two things: - That the only way Browning could diagnose what was wrong with the engines was to put them on a dynamometer, and - The only way he could fix the front timing cover on the starboard engine was to remove the engine from the vessel because there was not enough room to work on it while it remained in the engine compartment. [29] Nilsson said there were a number of people present on the vessel at the time – McKinnon, McKinnon’s apprentice Mr Carl Schultz, Mr Stan Cox and Mr Mark Keats. [30] Due to the location of the engines, it was necessary to remove the port engine in order, in turn, to remove the starboard engine. The problem was that, whilst the engines could be removed in one piece from the engine compartment, they were too wide to be removed out of the vessel’s saloon cabin through the rear or aft door. The engines were about 100 millimetres wider than the door space. [31] Nilsson said that Browning insisted on each of the engines being taken out without disassembly for dynamometer testing. Nilsson’s evidence was as follows: -- 5 of 32 -- 6 “Right?-- And Browning insisted that he wanted to take it out in one piece, and that was the only way he was prepared to give me my warranty. Because he explained it to me to take the engines out you would have to take them piece by piece, lift them out through the front door, break the engines out, lift them out by crane, put them on a truck, take them back to Hastings, reassemble the engines, put them on a dyno tune to see what the problem was, fix the problem, disassemble them, put them back on the truck, bring them back to Scarborough Marina, lift the main block back in the engine and reassemble the engines. He said, “This is too much work, too much time, and too expensive”. Right. So what’s – what’s the next sequence? He is saying it is too much time and trouble. What then happens?-- Well, Browning said to me there is no way Hastings were going to give me the warranty unless the could lift the engines out in one piece.” [32] Nilsson said that Browning wanted to cut away a vertical panel adjacent to the door (this was referred to in evidence as “the aft panel”). Removal of the aft panel would effectively widen the door space sufficiently to allow the engines to pass through. Nilsson said that when Browning told him he wanted the aft panel removed he discussed the matter with McKinnon, and McKinnon advised him not to remove the aft panel because it would weaken the structure of the vessel. Nilsson asked Browning whether he had previously done anything like this, and Browning said he had worked on engines where they had cut the sides out of boats to remove engines. Browning referred to the aft panel as “an ornament, just to separate the glass and the sliding door”. Nilsson said he gave approval to the aft panel being cut out, but insisted that a boat builder do the work. Mr Stan Cox, a boat builder who worked around the marina, was identified and Nilsson said that he insisted that the defendant pay for Cox to do the work. Nilsson said he told Browning to “get the engines fixed”, and referred to the excess smoke problem and the front timing case cover. He said he also asked Browning to give a quote to fix the rear and front seal in the engine (presumably the starboard engine). He said that Browning agreed to this and “on behalf of Hastings Deering he would take them out in one piece and would take full responsibility for all costs including the hardstand cost as well ... because the thing was under warranty and I had nothing to worry about”. [33] Nilsson said that he then telephoned Fordham, and Fordham agreed that the work was being done “under warranty”, that the defendant would cover the truck and crane hire costs associated with removal of the engines, and that the defendant was taking responsibility for Cox’s removal of the aft panel. [34] In his evidence, McKinnon confirmed that it was Browning who insisted on the engines being removed in one piece and on the aft panel being cut away. He said that Browning wanted each engine removed whole because he wanted to test the engines in the factory to determine the cause of the smoke problem. McKinnon said that Browning referred to the aft panel as being “purely cosmetic” and that Browning stated that it was “quite normal to remove that section to get the engine out”. McKinnon said that Nilsson was worried about cutting into the vessel, but Browning insisted that the removal had to be done that way if the work on the engines was to be done under warranty. McKinnon was challenged on this under cross-examination, but was firm in his recollection that Browning stated that to get -- 6 of 32 -- 7 the warranty on the engines, he was taking over control of the cutting of the aft panel to get the engines out in one piece. [35] Mr Carl Schultz, a marine mechanic, gave evidence. He was formerly employed by McKinnon in the Aqua Mobile Marine Services business. He was McKinnon’s apprentice between 2004 and 2006. He was one of the passengers on the fishing trip in mid-2004 when engine problems were observed. He described one of the motors overheating and excessive smoke in the exhaust. He also went out on the vessel after Browning had first worked on it, and described his observation of the engines idling rough, blowing excessive smoke and suffering a loss of power. Schultz was present in January 2005 when Browning attended at the vessel on the hardstand. He recalled McKinnon and Cox measuring up the vessel to see whether the engines could be brought out in one piece without cutting a panel. He said that Browning insisted that he wanted the engines brought out in one piece, but McKinnon was talking about breaking the engine down. He said that Browning “wanted it out in one piece for warranty”. [36] Mr Stan Cox gave evidence about his attendance at the vessel when it was on the hardstand at the Scarborough marina in January 2005. He remembers that Nilsson, McKinnon, Schultz, Browning and Mr Mark Keats were there. He had not met Browning before, but identified him because Browning was wearing a Hasting Deering shirt. Cox said that he was working on another vessel in the marina and was approached by McKinnon to look at the vessel, specifically in relation to removal of the engine. He said that he, McKinnon and Browning measured the engine and the cockpit doorway and ascertained that the engine would not fit through. He said there was a discussion about deconstructing the engines or removing the aft panel. He described there being a “joint discussion” about the appropriate way to proceed, but also said that “Dave Browning was the engine remover, so it was his final decision that that panel would be removed”. He said that Browning gave him directions to do the work of removing the aft panel. [37] Mr Mark Keats, a spray painter, gave evidence. In 2004 he traded in the business “Mark Keats All Boats Maintenance”, and performed painting and maintenance work on the vessel. He recalled being present in January 2005 with Nilsson, McKinnon, Cox and Browning when there was discussion as to how the engines were to be removed from the vessel. He thought either McKinnon or Cox measured the doorways and said that Browning wanted the engines pulled out in one piece “so he didn’t have to split the engine up in any way to find out what was wrong with them”. He said that Browning suggested the engines be removed in one piece by cutting the aft panel. He recalled that Nilsson was reluctant to have the boat cut, and there was a discussion between them. He did recall, however, that Browning was adamant that the engines were to be pulled out in one piece. Under cross- examination, he was challenged but remained firm in his recollection that Browning wanted the aft panel cut out for the purposes of pulling the engines out in one piece. When challenged on whether Browning gave any direction for the work to be done, Keats said specifically: “David Browning gave Stan Cox a direction to cut the panel out so he could get the engine out because he didn’t want to pull it apart.” -- 7 of 32 -- 8 [38] In his evidence, Browning recalled being sent by Fordham out to have a look at an oil leak on the vessel. He said that the only people present on that occasion were Nilsson, McKinnon and himself. Browning said he went into the engine compartment and saw a slight hairline crack where the timing bolt hole was. He assumed it related back to the original work he had done, and described the oil leak as “very fine”. He denied that it would leave a big patch on the floor. He said he told Nilsson that there was slight hairline crack, and that it could be fixed with the application of a specific metal product. Nilsson responded, however, that he wanted it fixed properly. Browning said, in effect, that the whole engine would have to be removed because of the work involved in replacing a front timing cover. He also explained that it would be necessary to remove the port engine in order to then remove the starboard engine. He described measuring the engine and the doorway, and recalled that there was about 100 millimetres difference. He said that he, McKinnon and Nilsson looked at the doorway and the aft panel. He said: “For what you’d need, you’d just have to trim the panel ... and then you could get the engine out”. Browning said that there was no discussion about this, and that Nilsson said that there was a man who could “probably cut that out and he does the fibreglass and the woodwork at that place”. He said that Nilsson gave him Cox’s name and number. Browning said that Nilsson tried to telephone Cox but there was no answer so he, McKinnon and Nilsson finished up then and he said to Nilsson that once the panel had been removed to phone the defendant and Browning would come back and remove the engines. He said that both engines were to be taken back to Hastings Deering because Nilsson was “talking about low power at this stage and he was saying that he was getting black smoke, and he wanted to have them, you know, checked”. Browning told Nilsson that the best way to check the engines was by a “dyno test” (i.e. testing on a dynamometer). Browning said that Nilsson responded that if the starboard engine was going to be tested because of the crack and oil leak, then the defendant may as well do both. [39] Browning denied meeting Cox at the marina that day and also denied standing around discussing removal of the aft panel with a group on the boat while Cox was there. He said that he returned after the panel had been removed and that the engines were removed with a crane. Browning also said that he never told Nilsson that the dynamometer testing would be covered by Hastings Deering. He also said that, prior to this occasion, Nilsson had never complained of black smoke from the engines nor had he complained about a lack of power. [40] On 19 February 2005, Nilsson wrote to Fordham, saying: “This is to confirm that following the inspection by your mechanic, David, and our telephone conversations, the work to be carried out on my vessel by your firm will be done completely under Hastings Deering warranty and there shall not be any charge regarding these repairs.” [41] In his evidence, Fordham recalled having conversations with Nilsson, and said that the only recollection he had of the conversation was that the cost relating to the repair of the oil leak from the front cover on the engine would be covered under the Hastings Deering warranty. [42] Nilsson’s recollection, however, was that he had a telephone conversation with Fordham in which he told Fordham that Browning wanted to take the engines out in one piece, take them back to the workshop and have them dynamometer tested to -- 8 of 32 -- 9 see what the problems were, to fix up the front timing cover case, and to organise Stan Cox to remove the aft panel. Nilsson said that Fordham confirmed that all of that work was being done under the Hastings Deering warranty. He said that Fordham told Nilsson to make all the necessary arrangements, and also confirmed that truck hire, crane hire and money spent on the vessel would be covered under the Hastings Deering warranty. Nilsson said that it was this conversation which led him to write the letter on 19 January 2005. [43] As at February 2005, therefore, the situation was that the vessel was on the hardstand, the gearboxes had been removed by McKinnon and sent away for repair, and the engines had been removed and taken to the defendant’s workshop after the aft panel had been removed by Cox. [44] Nilsson said that he telephoned Fordham in February and asked how things were going with the engines and whether they had been put on the dynamometer to find out what the problem was with excess smoke and overheating. Fordham told him that the engines had not been put on the dynamometer, that Fordham had gone to the pump shop and checked with the people who worked on the injector pumps, that he had ascertained that the setting on the injector pumps were correct and that the matter had been fixed. When Nilsson asked as to what he meant by “fixed”, Fordham told him that the timing cover case had been fixed and the injector pumps had been tested and were working correctly. Fordham told him that there was no need for a dynamometer test and that if Nilsson wanted this done he would have to pay $1,350 per engine. Nilsson told Fordham that he would not proceed with the dynamometer testing if Nilsson had to pay for it. Nilsson said that when he was advised that the gearboxes were ready to be reassembled, McKinnon advised him to put the gearboxes on the engines and then put the units on the dynamometer to make sure the engines were working properly and that the gearboxes were not leaking. Nilsson said he telephoned Fordham and said that he was prepared to have dynamometer tests done because he wanted to put the gearboxes on. Fordham told him that the price had then risen to $2,500. There was some discussion about this jump in price. Fordham also quoted $3,000 per engine for them to be repainted. Nilsson said he discussed these quotes with McKinnon and also made inquiries with other Hastings Deering and Caterpillar dealers. He then phoned Fordham back and said that he would agree to pay $2,500 for dynamometer testing on each of the engines, but wanted McKinnon present at the time of the testing to make sure that everything was correct. Nilsson said that Fordham initially agreed to this, but when McKinnon later contacted Fordham to make the necessary arrangements, McKinnon was refused access to the Hastings Deering workshop for the test. Nilsson said that by this time he had “had enough” of Fordham and the defendant, so he asked McKinnon for advice, and McKinnon recommended that the engines be taken to DA.MET for the dynamometer testing. Nilsson telephoned Fordham and told him that the engines were to be transported to DA.MET for testing. [45] On 10 February 2005, Nilsson sent another facsimile to Fordham in which he said: “Dear Martin, Following today’s conversation, here is to confirm the followings to be either replaced & fixed:- 1. Both the front & rear motor crankshaft seal -- 9 of 32 -- 10 2. The sump guard gasket 3. Oil filters anodes & oil 4. Hoses and clamps that may be brittle 5. The leaking of water pump of port motor The crankshaft seal of starboard motor, which you have already done at the front & rear, is part of the warranty under Hasting Deering. The diesel fuel leaking, mentioned by David, was due to the fact that we had to bleed the motors just recently. Please also check the timing of each motor because at idle these engines seem to be blowing more white smoke than usual. Furthermore, please let me know should you see anything else that might need repairing. I’m not going ahead with the Dino tune as these engines only had 1700 hours used. Please send me a quote & time frame for the above works before starting.” [46] Fordham did not recall receiving this facsimile, and said that he believed that Nilsson just sent it without having any prior discussion. Fordham’s only recollection of conversations in January 2005 was of advising Nilsson that the cost of repairing the oil leak from the cracked timing cover would be covered under the Hastings Deering warranty. He had no recollection of discussing any of the matters referred to in the fax of 10 February 2005. [47] Fordham did, however, recall being contacted by McKinnon with a request to attend at the Hastings Deering premises. He told McKinnon that he would only be allowed on the premises if he completed the Hastings Deering workplace safety induction before commencing work on site. He said that McKinnon replied that he would not worry about it and that the gearboxes would be installed when the engines were back at the marina. McKinnon confirmed in evidence that Fordham was not prepared to allow him on the defendant’s premises because of workplace health and safety issues. [48] On 29 March 2005, Nilsson sent another fax to Fordham, in which he said: “Dear Martin, Re caterpillar engines 3208, these motors had new fuel pumps, injectors & turbo rebuilds done by your company late last year. Since the work was done, these engines have approximately 50 hours use. I spoke to you & sent a fax regarding the smoke coming out of the engines & I was going to get them Dino tune with your company. However, I changed my mind due to two factors:- 1. You would not let allow our fitters to come & connect the gearboxes on your premises; 2. You want $3,000 to paint each engine of which I found being extremely high. Therefore, I had the motors delivered to DA.MET (Aust) Pty Ltd. They presently have one engine on the Dino machine & have found that the injector pump is -- 10 of 32 -- 11 faulty. This engine is loosing approximately 50 hp, DA.MET has the specification data 2T-5113/01Z25415. These injector pumps are covered by your warranty. Do you want to send your fitter to fix this problem, or will you prefer to have DA.MET fix them & bill you directly. Also, there is a matter of handstand cost, & Dino tune expenses to be covered which I believe should be covered by your warranty. The person to speak to at DA.MET is Peter Bova, phone number is 07 3277 3111. Last time I spoke to you Martin, I mentioned to you that I was sending the engines to DA.MET, your comments were that they do very good work. I would appreciate a quick decision on this as time is money.” [49] Fordham agreed that he had given the “verbal price” of $3,000 per engine for painting. He also confirmed that he had initially told Nilsson, in a subsequent conversation, that the price had gone up to approximately $2,500. [50] On 31 March 2005, Nilsson sent another fax to Fordham, saying: “Dear Martin, Following your call yesterday afternoon, I noted that you had spoken to the person who did the work on the injector pump & that he informed you that the settings was set as per the specification. However, it was a shock to me when you told me that the work done on the injector pump was out of warranty. Martin, since your company billed me on 27/08/2004 to claim the work was completed, I have been complaining to you about the excess smoke & the engine’s rolling. This can be proved when you sent your fitter to come to my boat to check the timing until re- adjust the idle of the engines. The problem was also mentioned to you on my fax dated 10/02/2005 Martin, I may have no choice but to seek Consumer Council & Office of Fair Trading to further explain to me if a warranty is lapsed when the work is NOT assumed to be satisfactory completed! Furthermore, I found it hard to believe that the cost of dino tune has jumped from $1,350 in February to $2,500 second month in March. The reason I want to get the dino tune was to try to found out why my boat’s engine smoked. The reason why I didn’t get Hastings Deering to do the dino tune initially, was because you rang me & asked me when would Jim McKennon (fitter) be coming out to fit the gearboxes. I got Jim to call you to arrange a time & you refused him access to your workshops & you would not install the gearboxes yourself. On top of all of these, you want to charge me $3,000 to paint each engine. Your comments that the hp that I’m losing is due to my motors being old, I do not consider 1700 hours on a caterpillar motors being old. However, I have instructed peter Bova of DA.MET to bench test the injector pumps. As soon as the work is completed, I’ll let you know so that you can arrange a fitter to come & reinstall the engine of my boat which will be fixed under warranty. If you disagree the above that I mentioned, I would appreciate something in writing so that I may dispute this matter with you.” -- 11 of 32 -- 12 [51] With reference to the assertion in that letter concerning McKinnon’s proposed attendance at the defendant’s workshops, Fordham said that he could not recall whether he had had a conversation with Nilsson or McKinnon, but did recall saying that the defendant would prefer that the gearboxes not be installed because it had not been involved in their removal, and this reluctance was due to previous bad experiences. [52] The engines were taken from the defendant’s workshop to DA.MET. The principal of DA.MET, Mr Peter Bova, gave evidence. Mr Bova is a very experienced diesel mechanic. He explained the use of a dynamometer as a diagnostic tool for diesel engines. He said that when each of these engines was dynamometer tested, it was found that neither engine was performing to the manufacturer’s specification. Each was about 68 horsepower below its recommended horsepower rating. Some of the engine pressures were also not in alignment with the manufacturer’s specifications. He said that, after the dynamometer test results were studied, it was seen that the reason for the lack of horsepower, the elevated exhaust temperature and the low boost temperature could only come from the fact that the turbo charger on each engine was not supplying enough air into the engine. Mr Bova said that he then telephoned the Hastings Deering spare parts department and gave them the serial number of each engine and asked that they provide him with the turbo charger part number which related to that engine. The turbo charger part number which he was then given did not correlate to the number that was on the turbo chargers actually fitted to these engines. He then ordered for each engine a turbo charger under the part number that had been given to him by Hastings Deering. These turbo chargers were then supplied to Mr Bova by the defendant. Mr Bova fitted the new turbo chargers to the engines and, when the engines were re-tested, they were found to run to specification. [53] Mr Bova also gave evidence about some scoring on the injector pumps of the engines, but said that this scoring was not sufficient to create a power loss on the particular diesel engines. [54] Under cross-examination, Mr Bova confirmed the sequence of events by which he telephoned the Hastings Deering spare parts department and was informed that the turbo chargers were not matched to those engines – they had been superseded by another part number. He gave the following evidence: “You were told in this phone call that the turbocharger number was the wrong number for the engine number that you have been given? -- Yes. Do you know who you were talking to? -- Would have been one of the spare parts people there. I have John Williamson there. May have been him. Could have been one of a myriad of other people that were there. Did he tell you straightaway it was the wrong turbocharger or did he have to go away and phone you back or do you recall? -- No, no, they told me straightaway. When I say “straightaway”, they have a computer screen in front of them and they punch in all the particulars and the part number comes up so within a few minutes I had – I was – I had the information I needed. -- 12 of 32 -- 13 MR COLLINS: Can I ask you with that, how do you – you may be guessing here – but how do you know it wasn’t a superceded number that the original turbocharger was the number that went on to the original engine? -- Because that part number of the original turbocharger we took off did not supersede to the number that – of the turbocharger we got.” [55] Mr Bova, who was an impressive independent witness, described the matter in simple and graphic terms: “I remember distinctly that it was a black and white case. ... Take that turbo off, put that turbo on, immediate performance, you have the horsepower, all the boost pressure, exhaust temperatures, everything lined up. ... That was it. ... It was case closed.” [56] On 17 April 2005, Nilsson sent Fordham a fax advising that the engines were ready to be installed and asking whether Fordham wanted Nilsson to send the engines back to the defendant or to the Scarborough marina. The letter concluded: “Please note that this is under warranty”. [57] It was then arranged between the plaintiff and the defendant that Browning would attend at the hardstand on 26 April 2005 to reinstall the engines. [58] Nilsson was dissatisfied with the manner in which Browning reinstalled the engines. He said the following in evidence: “And to reinstall the engines back in the vessel? -- He partly installed them. He just virtually dumped the engines in there, didn’t put the right nuts and washers on them. He didn’t put the washers under the engine mounts where you have to adjust the engine mounts to adjust the engines. Jimmy couldn’t realign the gear boxes up on the propeller shafts because there was no washers underneath to take the weight of the engines. So – also when he put the wiring back together on the vessel, that was a mess, the 12 volt wiring. Also, before he put the engines back in he said to me he needed to take off one of the fans in the engine room, the thing was a 240 volt fan. He said it was in the way, I said, “If you want to remove it, you know, there is a marine electrician here, MRE, use them.” Browning put the engines in. I got a call from Jimmy McKinnon to come and look at the workmanship. He’d made a mess of the new wiring in the vessel. There was half the nuts and bolts weren’t on. The throttle cable was bent. He had a fuel line running over a throttle cage which would have virtually worn through. The header tank wasn’t connected, starboard and port.” [59] McKinnon also gave evidence about his observations after Browning had reinstalled the engines. He said that Browning had left out the main washers underneath the engine mounts, and McKinnon could not perform his work in reinstalling the gearboxes as a consequence. He said that Browning then had to attend again to put the washers back under the engine mounts. McKinnon said that Browning left the engine bay in a very poor and messy condition, that there were problems with the temperature wires not being connected, fuel lines were loose and throttle cables were bent and distorted. He said that when he attended at the vessel he also found that a 240 vault fan in the engine room was hanging loose, with the wires disconnected, and he had to organise an electrician to make the fan safe and reconnect it. -- 13 of 32 -- 14 [60] Browning, in his evidence, described his attendance to reinstall the engine. He confirmed that there was a fan in the engine room which had been installed since his last attendance and that he had to remove it because it was blocking his work in reinstalling the engines. He said that Nilsson told him to remove the fan because it had not yet been fitted properly and had not been wired up. Browning said that he just unbolted the fan’s connection box and put it to one side. He said that when he attended at the vessel on this occasion the engine bay looked as if everything was clean, there was new paint in the engine beds, and it looked to him as if the engine mounts had been re-fibreglassed and repainted to look new. He said that when he put the engines in, there were no washers on the engine mounts. He did not know where the washers were because the gearbox transmissions had been removed before the engines had been taken out. He confirmed returning on the following day, when he was told by McKinnon where the washers were. He reinstalled the washers. He said that he observed that the wiring in the electrical box in the engine bay was a “shambles”, describing it as looking like a “rat’s nest”. He said that the engine bay was left clean – no oil had been spilt and he put clean engines back into a clean engine bay. He said that no-one complained to him about his workmanship. [61] There was then further correspondence between Nilsson and Fordham. On 4 May 2005, Nilsson sent a fax to Fordham, saying: “ Dear Martin, A quick update – my boat is still on the hard stand, the Ship Wright cannot complete his work due to the wet weather. The fiberglass panel, which was cut out so that the engines could be removed, has been put back in place and re-fiberglassed. There is a little work to be done on the aluminium sliding door and door latch, also on the interior. However, due to the wet weather, the painter cannot spray the repairs also the vessel has to be moved into a spray pen. I can’t see this being completed before the end of next week pending on weather also the spray painter is available. The only alternative is to pick up the boat and transport it to undercover workshop to complete the repairs. What do you want to do Martin? For your information, I kept a diary note & photographs of the vessel before these works took place. I expected to be in the same condition before your company removed the engines under warranty.” [62] On 5 May 2005, Nilsson sent a further facsimile to Fordham in which he said: “Dear Martin, Following our telephone conversation today, by the tone of your voice, you were saying that you were not prepared to pay for the hardstand charges. Could you please explain how you would get the motors out of the boat as my boat is generally moored on finger 19c at the Moreton Bay Boat Club. There is no facility at the Club where this work can take place. For your information, my boat is like a toolbox to a tradesman, I’m in real estate & my boat is used for clients. My logbooks will show this to be fact. -- 14 of 32 -- 15 I would not be in this position if your company had done its job the correct way in the first place, and I am talking about the very first day that Hastings installed the injectors in my boat & rebuilt the turbo charges. This matter I consider serious enough to take it up with Caterpillar Australia and the U.S.A. Simple matter is your company is at fault, you are the Service Manager & I find you very difficult to deal with. Martin, you leave me with no choice but for me to this matter to higher authority within Caterpillar.” [63] On 18 May 2005, Nilsson wrote again to Fordham advising that weather had delayed further work being done on the vessel. [64] On 26 May 2005, Nilsson wrote a letter of complaint to Fordham in the following terms: “Dear Martin, A quick update what’s going on with my boat. Today we examined the writing that has been connected to the port and starboard motors by your fitter. We were very disappointed to find the wiring box a bloody mess (this boat was professionally rewired 12 months ago by a certified marine electrician). Last week we found a 240 volts lead cut and untapped, your fitter had cut off the port fan to put the engine in. There was no need to cut the wires and dismantle the fan. This wire was not tagged safely or tapped up and could have resulted an fatal accident or fire in engine room. This problem was discovered by young Carl, the apprentice fitter with Jim McKennon. Is it Hasting & Deering’s policy that the fitters do the wiring installations on marine engines (12 volts and 240), do you have professional indemnity/insurance which covers these works? I am engaging a marine electrical engineer to rectify this problem that has been caused by your fitter. Martin, all my problems stem back to your company, and I hold Hasting and Deering and yourself personally for my problems.” [65] Fordham responded with an email on 27 May 2005, in which he said: “Dear Dave, Thank you for you fax received this morning. We would like to address the issues you have raised. In response to the wiring box issue. All our fitter did was remove the fourteen wires from the box and re-install them in the same position. His comments were that the wiring was messy prior to us touching it. With the fan issue. The fan and wiring were installed while the engines were removed. Our fitter recalls that you were present when the fan had to -- 15 of 32 -- 16 be removed and the wire cut as to allow the engine to be re-installed and in fact authorised him to do so. As to the point that the cut wire could cause a fire. The wire in question was not live and had not been connected, further more we did tape the cut ends. I would like to assure you that we will honour our warranty obligations as per our service warranty statement regarding the oil leak from the front of the engine, and await your fax/letter with costs that will be looked at with reference to that statement. However we believe that the issues you have raised regarding the wiring are not warrantable.” [66] Nilsson replied to Fordham’s communication with a lengthy email on 9 June 2005. This email disputed the contents of Fordham’s email at length. Significant detail was given by Nilsson about the problems with the fan in the engine room, the port engine throttle cable being bent and partly connected, the placement of the fuel line on the starboard engine and the way in which the engines had been “dumped” back into the boat. Nilsson then revisited some of the history of the matter. This email stated, amongst other things: “Martin, I spoke to you and Dave Browning on numbers of occasions about my engines rolling and smoking. Dave Browning said to me that this was normal for 328 Cats. Jim McKinnon did not agree & recommended that I get a Dyno Tune to find out what the problem was. I asked you for a quote for Dyno and to paint each engine. You came back with a price $1,350 for Dyno Tune plus $3,000 to paint each engine. At 3pm on the 30 th March 2005, you phoned me and said that the Dyno Tune has gone up to $2,500 for each engine and you were standing by your price of $3,000 each to paint the engines (total $11,000). You also told me that I was out of warranty. The smoking could be that my engines were old. I replied to you that 1700 hours was not a lot of hours for these engines. Also, I informed you that I was sending the engines to DA.Met because I thought you were too expensive. Refer to your note that I have sent you a fax regarding this. Your comments were DA.Met do very good work. This call I took on a handsfree phone system. My passenger in the car listened to the conversation and took diary note. She is prepared to give me an affidavit to this effect.” Nilsson then referred to the work done by Bova, and said: “At no time did Jim McKinnon or I give Dave Browning or you permission to cut the back panel out of my boat to remove the engines. I nearly died when I saw what he had done.” [67] Nilsson’s email then went on to complain about the damage that had been done to the vessel and the losses which he claimed the plaintiff was suffering as a consequence. -- 16 of 32 -- 17 [68] The version of this email in evidence before me was labelled “draft”. Nilsson explained that after he received Fordham’s email of 27 May 2005, he became angry and wrote an email which contained some “choice language”. He said that in the email as he originally drafted it there were, apart from the instances of “choice language”, a list of the conditions which Nilsson said had attached to Browning’s removal of the engines. He said that he had set out that Browning was allowed to remove the engines in one piece on the basis that he “took full responsibility”, that it was “under warranty from [the defendant]”, that the plaintiff would get the vessel back in the same manner it was before Browning had worked on the vessel, that the defendant would “use Stan Cox to remove the aft panel”, that the defendant would pay all hardstand costs, and that Browning would obtain a quote to put the two new seals in the crankshafts. Nilsson explained that when he edited the email to remove the “choice language” he also accidentally removed his recitation of these “conditions”. The engines and the service letters [69] The engines on the vessel were 435 horsepower model 3208 TA marine engines manufactured by Caterpillar. In 1994, Caterpillar issued a document entitled “Product support program for installing a new turbo charger and fuel injector nozzles on certain 435 hp 3208 TA marine engines”. At the outset of the document, it was noted that the program described in the document could “be administered either before or after a failure” and that “in either case the decision whether to apply the Program is made by the dealer”. The “termination date” noted on the front page of the program was April 30 1995. The document described the following “problem”: “Under certain operating conditions, customers may complain of slow response and black smoke on certain 435 hp 3208 TA marine engines.” [70] The document then identified two groups of engines, referring to each particular engine by its serial number. It is not in issue that each of the engines fitted to the vessel were listed in group 1 on that document. Under the heading “Action required”, the document had action required under three headings. In relation to “Parts stock”, it called for the removal of identified turbo charger groups and fuel injection nozzle assemblies from parts stock. In relation to the engines specified in “Group 1” the document called for the replacement of the existing turbo charger and fuel injection nozzles with new turbo chargers and fuel injection nozzle assemblies, identified by part number. [71] It was also clear on the evidence before me that the reference to the “termination date” of April 30 1995 referred to the expiration of the period during which Caterpillar would reimburse dealers for the parts and costs associated with taking the remedial action referred to under the program. [72] This “product support program” document was effectively reissued in March 2002. The problem identified on the face of this service letter was, as previously, that “under certain operating conditions, customers may complain of slow response and black smoke on certain 435 hp 3208 TA marine engines”. Otherwise, by nomination of the specific serial numbers of the engines on the vessel, reference to this service letter would have made it clear that the original turbo chargers which were still on the engines needed to be removed and replaced with the new turbo -- 17 of 32 -- 18 chargers and fuel injection nozzle assemblies referred to in the service letter. What was also clear was that, because the “termination date” of the service letter had long since expired, Caterpillar would not cover the costs associated with the replacement of the turbo chargers and fuel injection nozzle assemblies. [73] Considerable evidence was given before me as to the presence of these service letters on the defendant’s various computer systems, and the various labels which attach to the information. What was, however, clear (for example from the evidence of Mr Bliss, commercial engine account manager for the defendant) was that the information in these service letters was quickly available to a serviceman in the position of Browning. If the serviceman accessed the defendant’s service information system, and entered the particular engine’s serial number, the display would indicate a tab referring to the particular service letters. Bliss confirmed that in 2004, a serviceman in Browning’s position would have had access to this service information system while he was on site. [74] In any event, it was quite clear that this information was immediately accessible within Hastings Deering. As I have already mentioned, Mr Bova gave evidence that he was able to obtain this information simply with a phone call to the defendant’s spare parts department. [75] The plaintiff also led expert evidence from Dr Duncan Gilmore, a highly learned and experienced mechanical engineer. In a written report, Dr Gilmore reviewed the history of work done on the engines and recorded the results of his own observations and testing. He concluded that the reconditioned turbo charges fitted by the defendant in August 2004 were of the type originally supplied with the engines and not the units referred to in the 1994 Caterpillar service letter. Dr Gilmore said: “…with a combination of revised fuel injectors, but an original specification turbo charger, it is my opinion that engine performance would be adversely affected. Excessive smoke emissions and a below-rated- power output could be expected, in my opinion, as is claimed to have been observed in late August 2004. In my opinion, the most probable cause of deficient engine performance in August 2004 following work conducted by Hastings Deering, is the reinstallation of the incorrect turbo charger model. It is understood that CAT had recommended a turbo charger change on these specific engines since 1994. In my opinion, Hastings Deering has correctly identified the correct turbo charger model recommended by CAT to achieve rated output and performance when queried by DA.MET in April 2005. However, between August 2004 and April 2005, Hastings Deering appear not to have recognised that a turbo charger which had been the subject of a service recall by CAT some ten years earlier, had been incorrectly fitted to the engines. Had this incorrect selection of turbo charger been identified promptly, perhaps in August 2004, removal of the engines from the vessel by Hastings Deering in January 2005, included structural alteration of the vessel and subsequent refitting, would have been expected to have been unnecessary.” -- 18 of 32 -- 19 [76] When called to give evidence before me, Dr Gilmore confirmed the ease with which the information concerning the need to change the turbo chargers on these particular engines could be accessed within the defendant. In terms of the appropriateness of a mechanic resorting to this information, Dr Gilmore said it was a: “…commonsense thing to do if the customer is saying ‘my engines aren’t behaving well’. It was almost like falling off a log. It was just such an easy thing to do because it was there right in front of them on the CAT database. If the customers complain of this, do this. It was right there. Why wouldn’t you do that?” Credibility of Witnesses [77] Before turning to determine the cases advanced by the plaintiff, it is necessary to say something briefly about the credibility of the principal witnesses called by the plaintiff and the defendant. [78] Having had the opportunity to see and hear the witnesses, and observe their demeanour while giving evidence, I am satisfied that none of the witnesses called to give evidence set out to deliberately mislead the court or give false evidence. As is to be expected, the recollection of each of the witnesses was affected, to greater or lesser degrees, by the passage of time. [79] That being said, I consider that the more reliable evidence, particularly in terms of chronologies and descriptions of events, came from the witnesses called by the plaintiff. [80] Mr Nilsson was a relatively good historian, although he did have a tendency to overstatement, particularly for the purposes of attributing responsibility or blame to the defendant. [81] Mr Browning had, I think, real difficulties with his recollection of events. His chronology of dealings with Mr Nilsson and his attendances at the vessel was at odds with the evidence of other witnesses and contemporaneous documents. I have already made observation above concerning the circumstances of his initial attendance at the vessel. Similarly, his recollection of his attendances in January 2005 was poor, and simply at odds with the evidence of independent witnesses. [82] Mr Fordham’s evidence was also adversely affected by a lack of recollection. It was quite clear that, in the course of his evidence, he was reconstructing events based on his reference to documents. [83] I regarded Mr McKinnon, Mr Keats, Mr Cox and Mr Schultz to be credible witnesses. There were, of course, variations in the details of their respective memories of events, particularly concerning the events in January 2005. They were, however, sufficiently consistent to enable me to form a view as to the likelihood of what occurred. The Plaintiff’s claims [84] As the case was run before me, there were two principal areas of claim: -- 19 of 32 -- 20 1. claims for damages suffered by the plaintiff as a consequence of the defendant’s ongoing failure to rectify the engines by removing the existing turbo chargers and replacing them with the turbo chargers referred to in the service letters; and 2. a claim for structural damage caused to the vessel by reason of the removal of the aft panel. There were numerous other claims for relatively incidental items of damage. I will refer to these later in the judgment. The Turbo Charger claims [85] The case pleaded by the plaintiff alleged a series of contracts entered into between the plaintiff and the defendant (commencing, in effect, with Browning’s first attendance at the vessel). It was contended in the statement of claim that, in respect of the works on the engines, the defendant was subject to implied contractual terms and concomitant duties of care to: “1. perform the Works with reasonable skill and care; 2. carry out all reasonable enquiries or searches in relation to the plaintiff’s engines; 3. recognise and warn of recall notices which applied to the plaintiff’s engines; 4. recognise and warn of problems identified in those recall notices.” [86] The “recall notices” referred to in the statement of claim were, in fact, the service letters described above. In the course of the trial, reference to the pejorative term “recall notices” (which the service letters clearly, on their face, were not) was eschewed in favour of the more accurate term “service letters”. [87] The plaintiff’s case, in essence, was that: 1. the defendant, by Browning, failed to make any enquiry as to whether these engines were the subject of a service letter in circumstances where such an enquiry was reasonably called for; 2. the defendant, by Browning, failed to warn the plaintiff that, unless the turbo chargers were replaced, there was a risk that the plaintiff would experience engine problems. [88] Considerable time was spent in the trial and in final submissions parsing the contents of the service letters. Considerable time was spent cross-examining witnesses with a view to having them say whether it was white smoke or black smoke which they saw blowing from the engines on particular occasions, and who they told about having seen black or white smoke. This was done presumably with a view to seeking to establish that the precise terms of the service letter were not invoked on the facts of this case. That line of argument, however, founders on the fact that Browning never in fact referred to the service letters. In his evidence, Browning said: -- 20 of 32 -- 21 “When you take some of that – you take that equipment back, the turbochargers and some of the other equipment, you go back to Hastings Deering’s workshop, it would have only taken a few minutes to check on whether there were any service letters applying to Mr Nilsson’s two engines, wouldn’t it?-- With service letters, that’s usually if you – you wouldn’t go and look for a service letter if you were only going to do injector nozzles or clean an after cooler. Usually if we go a service letter it is because we still have an issue so it is more of a help for a trouble shooting and then if you have looked up a service letter that’s because we have always, like, we still have that problem. So we then go further into check has anyone else had an issue, is there any letters to say we have updated this version. That’s the only reason why. You don’t really go and look for a service letter for every time you go to an engine. That answer you have just given me is basically or given the Court, is basically what your practice is, is that right? You don’t do it – you don’t go to a service letter unless you were at a second level of a problem, is that right?-- Yes, that is right. But, had you, to go back to my question, it would have only taken a few minutes to check whether there was service letters applying to Mr Nilsson’s two engines; correct?-- Correct.” [89] When he was challenged on the fact that he did not check the service letters relating to these engines, Browning’s answers were confused and defensive: “ See, did Hastings Deering have a system for checking whether a service letter applies to a particular engine you are working on?-- Could you repeat that? I will say that again; did Hastings Deering have a system for checking whether there was a service letter applying to the particular engine you were working on ?-- No, you just – you ordered your parts unless, like, say there was a fault. Then you could, if you were going to rectify a fault like say a black smoke, low power----- How do you know if you don’t look? How do you know?-- Well, you are not looking because there is nothing – there is no complaint. So if there is no complaint and it is only a maintenance thing, you don’t look.” [90] On any view of the evidence, it is clear that by September 2004: 1. the defendant had been retained by the plaintiff to perform works on the engines; 2. those works involved the turbo chargers which were then fitted to the engines; 3. the plaintiff’s complaints about the engines, the alleviation of which was the basis of the defendant’s retainer, included complaints of the engines not running smoothly, overheating and blowing smoke (regardless of whether it was specifically described as black smoke or white smoke); -- 21 of 32 -- 22 4. reference to the 2002 service letter, which was immediately and easily accessible by Browning, would have (a) identified that each of the plaintiff’s engines was specifically covered by the service letter; (b) identified the potential characteristics of problems which may be the subject of complaint by customers in respect of these engines; and (c) in any event indicated the desirability of removing the existing turbo chargers and installing the model recommended in the service letter. [91] It seems to me that a reasonable diesel mechanic in the position of Browning, when faced with the situation in September 2004 by which it appeared that the repair work initially undertaken had not brought the engines back to proper working order, should and would, when formulating a further response to repair of the engines, have made basic enquiries about the particular engines. If Browning had interrogated the information system which was immediately available to him about these engines, he would have seen the 2002 service letter and its recommendation concerning the turbo chargers on these engines. [92] In failing to make this enquiry, Browning, and therefore the defendant, breached the contractual and common law obligations owed to the plaintiff to perform the retainer with reasonable care and skill. [93] The question then arises, however, as to what loss the plaintiff suffered as a consequence of the breach. A significant component of the plaintiff’s pleaded case consisted of a claim for the profits which the plaintiff claimed to have lost as a consequence of not being able to use the vessel for commercial purposes between July 2004 (when the defendant was first retained) and April 2005 (when DA.MET replaced the turbo chargers). At trial, however, the plaintiff encountered difficulties in its attempt to lead evidence to support its claim for lost profits, and ultimately abandoned its attempt to lead that evidence. No submission was made at the conclusion of the trial to seek such damages. [94] It is also clear that, even if Browning had from the outset identified the need for the turbo chargers to be changed in accordance with the 2002 service letter, this would have been done at the plaintiff’s expense. The long expired “termination date” of the service letters meant that the replacements would not be underwritten by Caterpillar. In short, the plaintiff would always have had to pay for the replacement turbo chargers and for the work associated with fitting the replacement turbo chargers. [95] What this meant was that this aspect of the trial came down to an argument as to whether the plaintiff should recover for the cost of the dynamometer testing undertaken by DA.MET. In argument, Counsel for the plaintiff frankly, and properly, conceded that, apart from the dynamometer testing, he was otherwise “driven to not much” in respect of this part of the claim. [96] The defendant resisted liability for paying for the dynamometer testing. Despite the fact that in January 2005 the vessel was out of the water because of the damage which had been done to the gearboxes, Browning confirmed in evidence that proper repair of the front timing cover of the starboard engine (for which the defendant did not deny liability) had to be affected by the removal of the starboard engine. It was -- 22 of 32 -- 23 necessary to remove the port engine in order to remove the starboard engine. It is clear, even on Browning’s evidence, that it was discussed with Browning in January 2005 that while the engines were out of the vessel Browning would test them to ascertain the cause of the performance problems. Indeed, Browning says that he advised Nilsson that the best way to check the engines was by dynamometer testing. McKinnon had also recommended dynamometer testing. Nilsson may have initially thought the defendant would do the dynamometer testing for free. In any event, he was prepared to pay for it, albeit not at the price ultimately quoted by the defendant. [97] The fact that Nilsson may have been prepared to pay at that time for the dynamometer testing is not to the point. The question, rather, is whether the dynamometer testing would have been required at all if the defendant had not breached its duty. It is clear that, if Browning had advised Nilsson of the necessity to replace the turbo chargers in accordance with the advice on the service letter, Nilsson would have accepted that advice and the replacement turbo chargers would have been installed in September or October 2004. It is also clear from Mr Bova’s evidence that as soon as the replacement turbo chargers were fitted, the engines ran properly and to their specifications. I therefore find that if the defendant had not breached the duty, it is more likely than not that the cost of the dynamometer testing would not have been incurred by the plaintiff. [98] DA.MET issued a single invoice to the plaintiff for all of the work it undertook on the engines (including the cost of installation of the replacement turbo chargers). The invoice did not specifically itemise the cost of the dynamometer testing undertaken by DA.MET. The labour component (nett of GST) on the invoice totalled $8,307.50. When cross-examined, Mr Bova confirmed that about $300.00 of that labour charge related to work concerning the fuel injection, and that the rest of the labour was attributable to the dynamometer testing. Accordingly, I will allow the plaintiff to recover $8,000.00 (plus GST), representing the amount paid to DA.MET for the dynamometer testing. The award is, therefore, $8,800.00 in respect of this part of the claim. The Aft Panel claim [99] The plaintiff’s claim in this respect turned on an allegation that Browning, when attending at the vessel in January 2005, made a representation to the plaintiff (by Nilsson) to the effect that “the cutting away of the aft panel would not have any adverse affect on the structural integrity of the Vessel because the aft panel was not load bearing and had nothing to do with the physical strength and structure of the Vessel”. [100] The plaintiff’s case was that it relied on this representation when it agreed to let Cox cut out the aft panel, that the representation was false because, in effect, the aft panel was a structural member in the vessel, and that the vessel was structurally damaged as a consequence of the removal. Accordingly, the plaintiff has claimed the cost of repair. [101] There were three areas of dispute: 1. whether the representation was made by Browning; 2. whether the aft panel was a structural member such that its removal compromised the structural integrity of the vessel; and -- 23 of 32 -- 24 3. the cost of repairs. [102] The first of these issues is resolved by reference to the versions of the plaintiff’s witnesses and Browning as to the discussions prior to the removal of the aft panel. I should observe that counsel for the plaintiff conceded that, were I to find that the alleged representation was not in fact made, then this aspect of the plaintiff’s claim would fall away completely. [103] As has already been seen, there are quite different versions as to what was discussed when Browning attended at the vessel when it was on the hardstand in mid- January 2005. I had the very firm impression when he was giving his evidence that Browning was seeking to minimise his involvement in this incident and the discussions which were held on that day. The evidence of Nilsson, McKinnon, Schulz, Keats and Cox is broadly consistent and credible, and I prefer their evidence in this regard to that of Browning. [104] Regardless of the precise reason for which the engines were being removed, I find that Browning in fact insisted that each engine be removed in one piece, and that this removal be effected by the removal of the aft panel. I also find that: 1. it was Browning who gave Cox the direction to proceed with the removal of the aft panel; 2. prior to Browning giving Cox this direction there was discussion between at least Nilsson, McKinnon and Browning as to whether removal of the aft panel would adversely affect the structure of the vessel; and 3. Browning orally represented to Nilsson to the effect that it would not have any such adverse affect. I find it more likely than not that Browning did refer to the aft panel in terms to the effect that it was an “ornament” or “purely cosmetic”, that he did so in the context of explaining that he had previously worked on engines where the sides of the boats had been cut out to remove the engines, and that he referred to it being “quite normal” to remove the aft panel in order to remove the engines. [105] I further find that the statements by Browning, individually and collectively, amounted to a representation by him, and therefore the defendant, to the plaintiff that removal of the aft panel would not have any adverse affect on the structural integrity of the vessel. [106] Nilsson’s concern about the potential impact of the cutting out of the aft panel was manifested by the fact that he insisted, as I accept he did, that the removal of the panel had to be performed by a boat builder. I accept that Nilsson relied on Browning’s representations when he gave his consent to Cox removing the aft panel. [107] As to whether removal of the aft panel in fact had any adverse affect on the structural integrity of the vessel, expert evidence was led by each of the plaintiff and the defendant. The plaintiff called Mr Thomas Clough. Mr Clough is a naval architect, holding a degree in mechanical engineering (naval architecture) from the University of New South Wales. He has extensive experience and expertise in the engineering design of marine structures, including structural design and analysis, subdivision, buoyancy calculations, stability, hydrodynamic and hydrostatic performance and the compliance with codes. In particular, he has experience in the -- 24 of 32 -- 25 design of fibreglass vessels, including those of models similar to the vessel in question here. [108] Mr Clough explained the difference between the qualifications and experience of naval architects, on the one hand, and marine surveyors, on the other foot. He explained that a naval architect is a mechanical structural engineer who designs ships, whereas the term “marine surveyor” is a title (generally applied to ex-boat builders or marine mechanics) who comment on the condition of certain aspects of vessels. As a marine architect, Mr Clough has formal tertiary qualifications. A marine surveyor may have no formal or, perhaps, trade qualifications. There is no formal qualification for the title “marine surveyor”. In Queensland, there is an accreditation system for marine surveyors to certify for the registration of commercial vessels. [109] This evidence about the distinction between the professions of “naval architect” and “marine surveyor” was relevant, because the expert evidence led by the defendant came from Mr Russ Behan. Mr Behan described his extensive experience as a boat builder and, more recently, as a valuer of vessels. In evidence, however, Mr Behan conceded that his expertise did not include engineering or structural advice concerning vessels, that he did not have any marine engineering qualifications, and that he did not have the qualifications to address engineering aspects concerning vessels, including loads, torsion loads, and dynamic loads. [110] Mr Clough, in a report tendered before me, described the “primary faults” that he said were immediately evident when he inspected the vessel in July 2007: “1. Aluminium framing at the rear bulkhead had cracking evidence in joining welds, and there was further evidence (by way of differing joinery lines) of movement of this frame and adjoining structure; 2. Corrosion evident in framing further indicating movement and water ingress; 3. Movement of the rear bulkhead door was not smooth, indicating either movement after installation or a poor installation; 4. Side overhang supports had visual evidence of preliminary cracking; 5. Water ingress marks to adjoining joinery in way of bulkheads; and 6. Side cabin windows leaking as a result of movement with further damage to internal joinery.” [111] Mr Clough said that these faults were of primary concern relating to the structural integrity of the vessel’s superstructure as a whole, but his inspection also indicated that the quality of the internal joinery reinstatement “was not what could be considered an acceptable standard”. He said that his inspection indicated that the rear bulkhead (referring to the aft panel) did not appear to provide complete support. He said: “A simple test whereby the upper fly bridge deck was loaded (by one person exerting pressure from above) confirmed that there was vertical movement at the bulkhead deck join. This, in my opinion, directly confirmed that there was a lack of direct vertical support being provided by the bulkhead (inclusive of the door framing) to the upper deck.” -- 25 of 32 -- 26 [112] He continued: “My inspection indicated that there is now evidence of movement and subsequent water ingress. The works undertaken in this area was the removal and reinstatement of the rear bulkhead. The only conclusion I can draw in relation to the evidence, movement and leakage is that this local structure has been compromised by these works undertaken. It is my opinion that the removal and subsequent reinstatement of the rear bulkhead has not been completed in a sound engineering fashion such that movement now exists in this area from localised loading. If the works had been completed in a sound engineering fashion, I’m of the opinion that the faults in this area would not be evidenced.” [113] Mr Clough went onto explain his conclusion from engineering principles, noting that marine structures are dynamic and therefore the global or environmental loads need to be assessed. He said that these loads can include hull girder bending and induced torsion loads and that these loads, whilst initially exerted on the hull and its supporting structure, have to be supported and transmitted through the cabin structure. He described the entire structure as basically being assessed as a single entity absorbing load with the stresses transmitted through adjoining members. He noted that if any of the members are weakened or fail then the adjoining members must transmit and support a far greater load. In his report, he drew comparison with the structure of a sedan car to that of a convertible car – a convertible requires a far stiffer chassis to withstand dynamic loading on the vehicle. Mr Clough was of the opinion that the global loads induced on the vessel from dynamic use were not being effectively resisted in the rear bulkhead region, thereby causing an increase in movement and flexure in the adjoining cabin structure, and that this had then resulted in the subsequent evidenced leaking of the side windows and cracking in the overhangs. [114] Mr Clough summarised his opinions as follows: “In my opinion, the removal and subsequent reinstatement of the rear bulkhead has caused the now evidenced movement in the vessel structure. That such movement is evident indicates that the original structural integrity of the vessel structure has been compromised, that is there is a lack of support within the existing structure. It is my further opinion that the faults that were evident at the time of my inspection (detailed above) are directly attributable to this evidenced movement and lack of support within the vessel structure.” [115] Mr Behan inspected the vessel in July 2009. He also provided a written report. Mr Behan’s view was that the defects observed by Mr Clough were not structural defects but were as a consequence of normal wear and tear on a vessel of that age. Mr Behan’s report, however, needs to be approached with some caution. He expressed general wariness of vessels built in Asian countries, without in any way properly substantiating that concern. He also assumed matters concerning the -- 26 of 32 -- 27 previous state of the vessel, including assumed leakages, without any proper justification for those assumptions. Importantly, however, he expressly conceded that it was beyond his expertise “to comment on the strength of the bulkhead in general”, and said that a naval architect “would be able to pass a more informed opinion on this structure”. [116] One example of Mr Behan’s propensity to speculate was found in the statement in his report that the vessel “seems to have had some leaking problems prior to the removal of the engines”. He referred and relied in that regard on an invoice from Australian Marine Windows & Plastics Pty Ltd from June 2004 which stated “supplied and fitted glass, resealed boat”. In fact, as it appeared from evidence from the principal of that company, Mr Schoenberger, the work performed was replacement of glass in windows which had gone milky. These “milky” panels were across the front of the vessel. It had nothing to do with “leaking problems” such as those assumed by Mr Behan. [117] Mr Clough, in his evidence, described the “sandwich” nature of the construction of the aft panel and noted that, when reinstated, there should have been significant overlapping of the fibreglass to achieve the original strength of the structure. He said: “Such overlap would go over both veneers, and to effect such overlap would require that the veneers be removed, the overlap would also have to be as a minimum the same thickness as the original structure that it was reinstating. So, hence, you would expect the structure to have been built out by at least that 10mm.” [118] He described the effect of cutting the structure, which impacted on its ability to deal with torsional loads. Under cross examination, he gave this evidence: “But you have done no – in respect of the assumption that this is some type of structural member, I am suggesting to you the aft panel is not there and built into the boat to hold up the fly bridge. That’s not its role?-- That’s totally incorrect. That is its primary role----- So-----?-- -----and given that the thickness of it was 10 millimetres, that is thicker than – if you were using sandwich construction in the bottom of this boat, you would probably have about six millimetres of fibreglass. They have used 10 millimetres of fibreglass on a relatively simple post structure. Without having the exact quantities – quantification of it, I would suggest the original designers and builders intended that centre support to take a lot of the load.” [119] Mr Clough gave this further evidence under cross-examination: “Just so I am clear, you are saying the panelling there in the middle of the aft panel is a support structure for the fly bridge?-- That’s exactly what I am saying. -- 27 of 32 -- 28 Well, I am suggesting to you that’s not the case; it is the external parts around the boat itself that holds up the fly bridge and not the aft panelling in the middle of it?-- No, well, I am saying to you from an engineering perspective, that after panel contributes. The side panels also contribute. There is no denying that. It is an overall structure. And, significantly, it is not just what everyone thinks about in a vertical load. The biggest load that this cops is in racking and twisting, and that is when a vessel is in use and it can get a wave on the bow and a wave on the stern, and we basically twist the whole structure. Yes?-- It is not a localised load, it is what we call global loading on the boat. But-----?-- And it can be loaded into the hull and then the whole boat gets stressed.” [120] I accept the evidence of Mr Clough, and prefer it to the evidence of Mr Behan. On the basis of the naval architectural evidence given by Mr Clough, I find that the aft panel was a structural member, and that removal of the aft panel had an adverse affect on the structural integrity of the vessel. I also accept that the manner in which the aft panel was reinstated was insufficient to restore the vessel’s structural integrity. I discount Mr Behan’s explanations as to observed cracking, deficiencies and leaking being merely attributable to wear and tear, and accept Mr Clough’s evidence that the defects he observed were caused by the removal and subsequent inadequate reinstatement of the structural member comprising the aft panel. [121] It follows from these findings that the representations made by Browning were false. It also follows from these findings that the defendant is liable for the cost of repair of the deficiencies caused by the removal and inadequate reinstatement of the aft panel. [122] For the purposes of proving the cost of rectifying the damage caused by reason of the removal of the aft panel, the plaintiff relied on a further report from Mr Clough. The plaintiff itself had obtained a number of quotes from various marina trades people and suppliers. Mr Clough then prepared a report in which he expressly relied on those quotes, on the material with which he had previously been supplied and the contents of his previous report, and on his inspection of the vessel. He then reported on the scope of works which he considered was reasonably required, saying that: 1. to rectify the structural problems associated with the rear bulkhead, the veneers will be required to be removed, to allow assessment for what internal structures need to be reinstated and/or rectified; 2. he identified areas of damage to saloon joinery as a result of water ingress which need replacement; 3. the matching of older timber veneers and mouldings is a serious concern because of the difficulty in matching with new material. In this regard Mr Clough agreed with an assessment by one of the quoting repairs, Marine Team, as to the inability to match veneers and expressed the opinion that, as well as the structural modification required to the rear bulkhead area, the internal joinery work in the saloon will need to be replaced to reinstate the -- 28 of 32 -- 29 vessel back to its original condition and in order to reinstate the vessel to a reasonable condition. He said that if the internal joinery work in the saloon were not replaced, or left in a mismatched condition, “the vessel would be virtually unsaleable”. 4. movement has caused various stress cracks to appear in the exterior surface which, whilst simple to repair, necessitated major repainting in order to achieve consistency and to “maintain a reasonable aesthetic appearance”. He said that this painting would need to include all deck areas “as the gelcoat colour would be otherwise impossible to match”. [123] Mr Clough then reviewed quotes that had been obtained by the plaintiff to perform this work, one from “Marine Team” and the other from “Catersons”. He said: “The quotes both indicate allowances being made for the required structural repairs to the bulkhead areas after consultation with a naval architect. As this consultation and complete advice cannot be given until the veneers are removed and the area inspected, obviously the quotations are an estimate covering same. Given the entire scope of works, however, the direct structural rectification work to the bulkhead would be minimal compared to the further “cosmetic” work required (e.g. internal joinery). As such, I would not think that the quotes would vary by any significant amount after consultation with a naval architect regarding the rear bulkhead structural work.” [124] Mr Clough noted that the quote obtained from Catersons included an allowance to paint the hull from the waterline up. Mr Clough said that he did not agree that this would be a requirement with regards to repair as a consequence of the removal of the aft panel, and thought that painting of the hull would be considered betterment. Mr Clough said: “The quotes supplied indicated a large difference in the final figures. My analysis of the quotes indicates that the difference is mainly attributable to the estimated time to complete the tasks. As the scope of works are basically identical and, in my opinion both are reputable repairers, I would consider the lesser quote, from Marine Team, to be the more fair and reasonable. Whilst the detail in the Marine Team quote does not exactly specify painting the hull, I am of the opinion that the quote is inclusive of this and an adjustment should be made accordingly. Based on the percentage from the Caterson quote, the reasonable figure would be approximately $16,000 less. The secondary quote from Marine Team detailed costs associated with anti- fouling the vessel. These costs were not detailed in the quote from Catersons. Given the length of time that the vessel will be required to be out of the water to undertake the required repairs, I consider that the costs associated with anti-fouling the vessel are reasonably necessary as, over this time, the anti-foul would dry out and be rendered useless.” -- 29 of 32 -- 30 [125] Mr Clough also expressed the view that a quote from a certifier, Raebel Design, was reasonable, and also estimated the cost of the engineering works, including design certification, required in respect of the bulkhead structure once the veneers are removed. [126] Mr Clough summarised his opinion as follows: “In my opinion the quotes from Marine Team provide a fair and reasonable estimation of the costs of rectification and repair after deduction of the estimate for painting the hull. The quote from Raebel Design also appears fair and reasonable in relation to certifying the physical repair. As an allowance for the cost of engineering analysis is reasonably required, I therefore assess the total estimated cost as follows: ‘Marine Team quote (reduced by $16,000) $165,869.60 Marine Team anti-foul quote $ 2,017.65 Raebel Design $ 2,640.00 Naval architect analysis estimate (say $3,000 to $6,000) $ 4,500.00 Total estimate: $175,027.25’ ” [127] The defendant contended that the plaintiff had failed properly to prove the costs to rectify the vessel. Counsel for the defendant referred to the judgment of McColl JA in McCrohon v Harith [2010] NSWCA 67, and particularly the authorities referred to by Her Honour at [117]-[127] in support of the proposition that the Court should not resort to speculation when conducting an assessment of damages. That is undoubtedly correct, but it does not relieve the Court from the task of making the best assessment (sometimes estimate) of damages on the basis of the admissible evidence which is led. I do not accept the defendant’s submission that the plaintiff, by Mr Clough’s evidence, was inviting me to form a “guesstimate” of the claimed costs of rectification. True it is that Mr Clough acknowledged that further engineering analysis was required in the course of rectification, but, as is apparent from the passages I have quoted above, it is also clear that he not only expressly took this into account in forming his opinion, but the expected cost impact of that further engineering advice (once the veneers are removed) is likely to be minimal. Mr Clough also made allowance for the cost of obtaining that engineering advice. It seems to me that his evidence sufficiently addressed this issue. It is also not correct that Mr Clough did not identify the deficiencies which needed to be rectified with any precision. While Mr Clough did not descend into the detail which Mr Behan set out his report, Mr Behan’s report was written on a completely different basis, and with a view to identifying matters which he would describe as wear and tear. A complaint by the defendant that there was no “meaningful scope of works” also does not stand up against the evidence of Mr Clough. Mr Clough had the quotes from two reputable repairers. It is clear from his report that he examined those quotes critically to ensure that they encompassed the rectification works which, in Mr Clough’s opinion, needed to be undertaken. He specifically rejected work which was not related to the reinstatement works. [128] In short, I am content to accept Mr Clough’s expert opinion as to the cost of the reinstatement works required. In doing so, I am not making a “guesstimate”. -- 30 of 32 -- 31 Credible and substantiated evidence from an appropriately qualified expert was led and subjected to scrutiny in the course of the trial. [129] The plaintiff is therefore entitled to recover the sum of $175,027.25. Other Claims [130] The defendant accepted the liability to pay the costs of repairing the front cover timing case. There were payments to DA.MET of $6,218.11 and parts from Aqua Mobile Marine Services of $2,234.60. The total recoverable by the plaintiff for timing cover case repairs is, therefore, $8,452.71. [131] Otherwise, the damages ultimately sought to be recovered by counsel for the plaintiff in final submissions were as follows: 1. Fees of $1,320.00 charged by Mr Cox. In view of my findings on liability, the defendant does not really contest that this should be recovered by the plaintiff. 2. Repairs and parts supplied by Aqua Mobile Marine Services totalling $1,921.50. I find, contrary to the evidence of Mr Browning, that parts were missing from the engines when he reinstalled them. These parts needed to be replaced. I also accept that some incidental damage was done to the vessel in the course of Browning reinstalling the engines. I will allow the claimed amount of $1,921.50 for repairs after the reinstallation of the engines. 3. The sum of $2,690.00 charged by Mr Keats for work done around the vessel, including cleaning up after the engines were put back in. I accept the defendant’s submission that part of the works claimed related to parts of the vessel unconnected with the engines. I do accept, however, that part of this invoice relates to cleaning up work which was needed to be done after the engines were reinstalled. The defendant, by its counsel, conceded that if there is any liability under this head, then the sum of $1,000.00 would represent reasonable compensation for the cleaning up. I accept that submission, and will allow that sum. 4. The plaintiff has claimed for hardstand costs from January to May 2004, totalling $7,315.00. The difficulty for the plaintiff, however, is that the proximate reason for the vessel being lifted out of the water onto the hard stand in January was that the gearboxes had been broken in the incident over the New Year’s break. In any event, the plaintiff has already been compensated by its insurer for hardstand costs up to the end of March 2005. Moreover, there is no real explanation in the material or on the evidence for the delay in installing the engines after the plaintiff’s facsimile of 17 April 2005, which referred to the fact that the engines were ready for reinstallation. It seems that some time may have elapsed while arrangements were made with the defendant for the reinstallation. It also seems that it is possible that tradesmen were delayed by wet weather. The plaintiff has not, however, adequately proved an entitlement in respect of this aspect of its claim. [132] In summary, the damages to which the plaintiff has established an entitlement are: -- 31 of 32 -- 32 1. Dynamometer testing $ 8,800.00 2. Repairs and rectification $175,027.25 3. Timing cover case repairs $ 8,452.71 4. Stan Cox fees $ 1,320.00 5. Repairs after reinstallation $ 1,921.20 6. Cleaning $ 1,000.00 TOTAL $196,521.16 Conclusion [133] There will be judgment for the plaintiff against the defendant in the sum of $196,521.16. I will hear from the parties as to interest and costs. -- 32 of 32 --