Don Cowie's Downunder Acquatics Pty Ltd v Edwards [1990] QSC 339

10 ?.O 30 40 50 Q, I60 IN THE SUPREME COURT OF QUEENSLAND CIVIL JURISDICTION No. 84 of 1989 BEFORE THE CHIEF JUSTICE {Mr. Justice Macrossan) BRISBANE, 2 OCTOBER 1990 (Copyright in this transcript is vested in the Crown. Copies thereof must not be made or sold without the written authority of the Chief Court Reporter,Court Reporting Bureau.) BETWEEN: DON COWIE'S DOWNUNDER AQUATICS PTY. LTD~. tradin_g as OCEAN SPIRIT PIVING SERVICES -and- ROSS ARTHUR EDWARDS carrying on business as BARRIER REEF RENDEZVOUS JUDGMENT Plaintiff Defendant HIS HONOUR: In this case there will be judgment for the plaintiff against the defendant for $256,077 with interest calculated as I set out in my reasons. HIS HONOUR: The plaintiff is to have the costs of and incidental to the action, including reserved costs, if any, to be taxed. I publish my reasons. •. l""\frl. 1 or 3 3'7 10 20 30 40 50 60 -- 1 of 27 -- IN THE SUPREME COURT OF QUEENSLAND CAIRNS DISTRICT REGISTRY BETWEEN: AND: No. 84 of 1989 DON COWIE'S DOWNUNDER ACOUATICS PTY. LTD. trading as OCEAN SPIRIT DIVING SERVICES Plaintiff ROSS ARTHUR EDWARDS carrying on business as BARRIER REEF RENDEZVOUS Defendant JUDGMENT - THE CHIEF JUSTICE Delivered the second day of October, 1990 The plaintiff in its statement of claim relies upon an agreement which it says was entered into with the defendant to conduct the business of a diving operation upon the defendant's vessel for a period of five years. Under the agreement the plaintiff says that it was to make monthly payments to the defendant of 2. 5 per cent of all moneys received by it in carrying on the business together with a further 10 per cent of receipts coming from customers' payments when they made what were referred to as "pre-bookings". These were payments made by customers to agents when booking excursions in advance. The plaintiff's allegation is that its agreement with the defendant was one made orally, in writing and by conduct. So far as it was oral it is alleged that the agreement was made in or about May, 1988 between Don Cowie on behalf of the plaintiff on the one hand and the defendant on the other. Insofar as the -- 2 of 27 -- 2 agreement was in writing it is said that it is to be found in a memorandum of agreement dated 1 July 1988 signed by and on behalf of the parties in or about July, 1988. Insofar as it was arrived at by conduct reliance is placed upon the carrying on of the operation between May 1988 and April 1989 in accordance with the terms of the written memorandum of 1 July 1988. The plaintiff's claim is for damages for breach of contract together with interest pursuant to the provisions of the Common Law Practice Act 1887-1981 and is based upon an alleged wrongful repudiation by the defendant conveyed by solicitor's letter dated 6 Apri~ 1989. This repudiation the plaintiff accepted but it says that it was involved in substantial loss of profit in consequence. The defence denies wrongful repudiation. The effect of the further allegations in the defendant's pleading is that the relevant relationship between the parties was governed by the signed document of 1 July 1988 to which reference has already been made. A copy of that document became ex. 1 in the proceedings. Before the document of 1 July 1988 was signed there were, as the statement of claim suggested, certain negotiations between Cowie on behalf of the plaintiff and Peter Edwards acting on the ~efendantrs behalf. So much appeared to be admitted although Cowie claimed that some of the negotiations involved the 'defendant Ross Edwards as well. Peter Edwards is Ross Edwards' son. Once ex. 1 was signed as it incontrovertibly was, the plaintiff's case did not, in·any relevant respect, depend upon -- 3 of 27 -- 3 the survival of any of the earlier terms as constituting .a competing source of contractual terms or as containing any relevant collateral terms. Since the defendant's pleading, in effect, set up ex. 1 as the repository of the terms of agreement between the parties there was no particular significance in the plaintiff's reference to the agreement's being partly oral. The reliance upon conduct as contributing to the arrangement between the parties was also not in the end significant except that on one possible construction of ex. 1, it may be that what was an option granted to the plaintiff was exercised by the plaintiff's conduct over a period of time. The fundamental question remained, however, whether it was truly something in the nature of an option as it is usually understood that had been granted to the plaintiff under the agreement ex. 1. This is a question of construction. Where the effect of the defence is that the signed document, ex. 1, governed the relationship between the parties, the important question becomes what was. the effect in the circumstances of that document. The plaintiff's dive operation was carried out on the defendant's vessel, Ocean Spirit, from May 1988 until April 1989. The defendant took passengers in addition to the plaintiff's dive customers who were accommodated on the ship. The skipper's practice was to take the ship to spots which were attractive to the customers .and those who were interested in diving then took part in that activity. The defendant was paid by his passengers and the result was that he received an advantage from the presence on board of the plaintiff's dive patrons since in their character as passengers they paid for their place on the ship. -- 4 of 27 -- 4 The plaintiff received the fee which was paid for the dive portion of the excursion. The way in wnich the respective sums were collected was varied at a point after the joint operation commenced. In particular, agents who took advance bookings commenced to write out separate vouchers for the two aspects - boat fare and diving fee - and this new practice eliminated a complication which might otherwise beset the appropriation of moneys paid by fare-paying customers. I accept, broadly, the plaintiff's principal, Cowie, in the evidence which he gave describing how the contractual arrangement between the parties came into being. The defendant's son, Peter, made an approach to Cowie and made the suggestions which eventually led to agreement between the parties. At first the precise basis upon which the arrangement should proceed was hot settled and the length of time for which it might run was also not settled in final form. An employee, or as it might be more accurate to describe him, a business associate, of the defendant contributed to the form which the final agreement took. Both Cowie.on the one hand and Peter Edwards as well and probably, his father, the defendant, drafted versions of the arrangement which· they were respectively desirous of implementing. Eventually agreement was arrived at upon the substance of an arrangement to be enshrined in a document and this was typed up and signed on both sides. The result is that this document, which is ex. 1, presents difficulties in its construction since it was prepared without the benefit of professional assistance. -- 5 of 27 -- 5 Basically, it was an unwillingness to pay the fees which would be involved in obtaining professional advice which resulted in the agreement being prepared as a "layman's" document (cf cl.31). The views advanced by the parties upon the proper construction of -the document, ex. 1, are in conflict. The plaintiff said that, notwithstanding the awkward language of cl. 1, its effect was that a five-year term for the operation of the arrangement was definitely concluded with the result that, other than by mutual agreement, the defendant would not be free to terminate it sooner than then except on account of some fundamental breach of its terms by the plaintiff. Put ~a little differently, and the practical effect for the plaintiff would be the same, it might be said that the plaintiff's contention was that the parties had agreed that the -contract would run for five years subject to a right in the plaintiff to terminate it sooner if it chose but with no corresponding right in the defendant to terminate it except by reason of some fundamental breach of its terms committed by the plaintiff. On these contentions the effect of the first sentence of cl. 1 could be put in this fashion: the agreement will run for five years unless the plaintiff chooses to end it sooner and provided that the plaintiff shall continue to observe its terms. This construction gives some effect to the use of the word "option" in the first sentence of cl. 1. It may be observed that the use of the word in the second sentence of that clause involves a different effect being given to it. That second sentence speaks of the plaintiff's having an option to extend for a further three years but only, in effect, if both ~ides then agree i.e. the -- 6 of 27 -- 6 word appears in the second sentence in the context only or an agreement to agree. The defendant's contention was that the word "option" in the first sentence of c·1. 1 had more of its usual technical meaning and that no definite term of five years came into existence until, in some way or another, the plaintiff communicated its desire to take advantage of the availability of that five year term after some period had passed during which the plaintiff assessed the acceptability of the arrangements. This construction made the arrangements, once they had been initi~lly implemented, nothing more than provisional in their operation. Presumably, during this initial period, which the defendant's counsel referred to as a "settling in" period, the plaintiff would lose its right to exercise its option if it did not adhere lo ~he requirements of the agreement. Counsel for the defendant did not submit that any breach, however slight or technical, committed in this initial or settling in period, would result in the plaintiff's loss of its right· to exercise the option, al though it was asserted on behalf of the defendant that a substantial departure from the terms of the agreement would have this effect. The result then still was, on this submission, that something rather resembling a fundamental breach by the plaintiff would be needed to entitle the defendant unilaterally to bring ·the arrangement to an end. The defendant asserted that in the events which happened it had this . right to terminate and therefore that there existed justification for the letter of termination dated 6 April 1989 (ex. 5) which the defendantis solicitors wrote to the plaintiff. -- 7 of 27 -- 7 The particulars which the defendant supplied in his defence on the one hand on the basis that there was conferred by ex. 1 only a right to an option which was lost because of the plaintiff's breaches or, on the other hand, on the basis that there may have been a concluded agreement for five years, were, in each case, the same. The defendant did not argue that if the agreement was for an option only, then anything less than strict compliance with the terms of the grant including some relatively inconsequential departure from those terms would entitle the defendant to terminate the arrangement. In this respect the argument presented on behalf of the defendant drew no distinction with wha.t would be required to give the defendant a right of termination if the agreement were one which operated for a period of five years. It was not suggested that anything other than substantial breaches by the plaintiff would suffice in either case. Since the same alleged breaches were identified in either event, that is whether there was an agreement for five years or an option only the practical difference between the alternative positions adopted by the defendant was that if the agreement was one for an option only, then the way was open for the defendant to contend that the right of option had not been exercised. It was said that notice of exercise in some form was required to be given and that this had not been done. This submission tended to disregard the conduct of the parties and placed the defendant in the position of suggesting that the parties had allowed what was described as the settling in period to extend through until -- 8 of 27 -- 8 April of the following year without the arrangements ever being firmed into an agreement for a fixed term. The form of the notice of purported termination given by the defendant's solicitors, dated 6 April 1989 (ex. 5) is rather more consistent with a view then being entertained that an agreement for a term was in operation between the parties (see especially the right asserted in that document to claim damages for breach of agreement) but, perhaps, not intractably so and, probably, not in any case with an effect which would preclude the defendant from subsequently broadening the basis of his contentions to embrace the alternative positions subsequently taken in the defence. I am prepared to accept that if all that was granted to the plaintiff by ex. 1 was an option to bring into existence an arrangement which would operate for a definite term, then a nofic~ of exercise, in some form or other, would have to be given (cf,Ballas v. Theophilos [No. 2] (1958) 98 C.L.R. 193 at 197.8 per Dixon C.J., "any definitive communication of an election would suffice"). At least this would be so if in the circumstances it was not possible to imply an exercise of the right from the conduct of the parties. The argument from conduct acquires a certain strength in the present case from the fact that the parties remained in a continuation of their business relationship right through until April 1989 and it would be expected that any exercise of option which was called for would have to occur within a reasonable time (Ballas v. Theophil6s [No.i] (supra) at 197.) -- 9 of 27 -- 9 The competing views would seem to be that the parties, by their continuing conduct, signified that they accepted that the plaintiff had sufficiently intimated its desire for a definite term and that the defendant acknowledged that this intimation had been conveyed, or, alternatively that they had by implied mutual consent, extended the "settling in" period and with it the time for exercise of the option. The difficulty in distinguishing the two states of the parties' possible relationship stems from the fact that the terms which were to govern their relationship and therefore the conduct which could be expected to be manifested by them both were, on the defendant's contentions, to be the same whether or not the plaintiff's option had been exercised. Even upon the interpretation of ex. 1 advanced by the defendant, the argument would have to be acknowledged as compelling that the parties had, by implication, accepted, prior to April 1989, that their relationship had come to be one for a definite term governed by ex. 1. However, I do not think that the defendant's interpretation of ex. 1 should be accepted. It attributes too great an effect and an unnecessarily technical one at that, to the use of the word "option" in the first sentence of cl. 1 when the document was drawn by laymen. The use of the word in the second sentence of that clause shows that the draftsmen were not using it entirely consistently or in a fully conventional sense. I think that the construction contended for by the plaintiff should be accepted and that the first sentence of cl. 1 has an effect which might be stated as follows: "the plaintiff is given (that is, by the document itself) for five -- 10 of 27 -- 10 years from th~ date of the agreement the right to conduct a diving operation upon the defendant's vessel provided that the plaintiff adheres to the stated terms." It is necessary now to consider whether any breach by the plaintiff had occurred which justified the defendant in terminating the agreement in April 1989. The following are the breaches which the defendant relies upon: failure to pay the defendant on a monthly basis as provided by cl. 2; failing to supply its own credit facilities as provided by cl. 7. , failing to carry in storage bins the "associated equipment" referred to in cl. 15(C); and, in breach of cl. 16(G), failing to carry a serviceable V.H.F. radio. By the time that the parties came to address, the defendant, for reasons which were then obvious in view of the state of the evidence and the form of cl. 7 of the agreement abandoned reliance upon the failure to supply credit facilities. The failure to carry the "associated equipment" (as defined) in storage bins was a complaint made ex post facto and lacking in substance . The evidence to which it could be taken as relating merely showed that discussions may have occurred and that adjustments may have been necessary to relevant procedures. which were being adopted. The plaintiff's customers would, no doubt, on occasions have been numerous and their every action could not have been fully policed, but when the defendant drew attention to the behaviour of some of the divers in dropping their weighted belts (and it was principally to this that the complaint finally related) upon the deck of the vessel -- 11 of 27 -- 1 1 appropriate steps were taken and additional storage bins were provided. It clearly was advisable, from a safety point of view, to carry a serviceable radio to be available for use in the dive tender and Cowie readily acknowledged this. The complaint that the requirements of cl. 16 ( G) were breached, reflected, I conclude, the subsequent attempt to drag in everything possible in an attempt to justify the defendant's termination. There was a period when the radio was away being repaired and the complaint seemed principally to attach to a period when it was said that it was not brought back into use. Cowie was not asserting a right not to be bound by cl. 16(G) - he acknowledged it, although he disputed the absence of the radio for the period or periods claimed. I was not left persuaded that any real issue was made over the radio during the operation or, in terms of the principles to which I shall refer, that the conduct involved in this matter either alone or in association with other conduct of the plaintiff involved a substantial breach or exhibited an intention not to be bound by the terms of the agreement. The principal matter relied on by the defendant to establish a right to terminate the agreement was the failure to pay on a monthly basis. The relevant obligation comes from the concluding sentence of cl. 2 of ex. 1 which is in these terms: "Payment will be on a monthly basis". I conclude that this phrase probably means - "calendar monthly, and by the end of the following month". So interpreted, there were occasions when it should be accepted that the plaintiff failed to comply. -- 12 of 27 -- 12 Cowie left the task of attending to the books and accounts and the making of payments to his wife and she accordingly had more knowledge of whether or· not payments were made late and whether there were complaints about this fact. The effect of her evidence probably was that she was prepared to admit that in the early part of the association between the parties some payments were made late but then the accounting necessary on both sides was deficient. She denied that complaints were made to her or to the plaintiff on this issue. In September of 1988 a change was made to the basis upon which the parties' respective entitlements were collected from travel.agents and accounted for, but a reference to ex. 4 shows that after that date some payments were made which were late in terms of the interpretation which I would apply to the obligation in cl. 2 of ex. 1 . In particular, the October 1988 and the November 1988 payments were significantly late and after some improvement in December 1988 and January 1989 the February 1989 payment was again late. The February 1989 payment was only tendered at the time that the defendant's notice of termination had been forwarded or served and the cheque in question was never banked. Mrs. Cowie' s conduct when she endeavoured to make the February, 1989 payment by tendering the relevant cheques gave rise to a suspicion that she was responding to some sense of urgency which she perceived in the situation although she denied foreknowledge of an intention on the defendant's part to rely upon late payment to terminate the agreement. However, the defendant's evidence concerning the issue raised upon the -- 13 of 27 -- 13 lateness of payment by the plaintiff lacked cogency and I was not in the end persuaded that it had the serious overtones which the defendant endeavoured to attribute to it at the trial. In particular, Inglis' s evidence stood rather alone in attributing real significance to the matter of late payment. He contended, in effect, that he had received a highly serious communication from the defendant on the matter, something equivalent to an ultimatum, but the defendant in his evidence merely said, comparatively colourlessly, that he had spoken to Inglis. When the defendant was asked if he had spoken to Cowie he gave a rather strange answer considering the importance which was attributed to this matter by the defendant's side at the trial. He said that he had asked Cowie about it in a round-about kind of way suggesting that the plaintiff should be a little quicker in its payments but making "no big trouble" over the matter. The defendant's son in his evidence did not refer to·any problem over the plaintiff's making late payments or. suggest that the arrangement between the parties might have to be terminated on account of it. This left Inglis's evidence rather standing alone and I am not prepared to act on it. Inglis and the remaining members of the plaintiff's team of employees seem to have been wholly taken over by the defendant when he terminated his arrangement with the plaintiff. The defendant certainly achieved a considerable coup in this respect since he was able to take over the business ready made after the plaintiff had spent time and effort organising it and setting it -- 14 of 27 -- 14 up. I think that the defendant's driving motive was his desire to get the business for himself and the whole of the profits from it and not just the two and a half per cent commission which he was receiving while the business was in the plaintiff's hands. In Shevill v. Builders' Licensing Board (1981-1982) 149 C.L.R. 620 at 626~627 relevant authorities and principles are examined and discussed by Gibbs C.J. In terms of what is there adverted to I do not think it has been shown that any breach of which the plaintiff was guilty was substantial; or went "so much to t~e root of the contract that it makes further commercial performance of the contract impossible" ( see Hong Kong Fir Shipping Co. Ltd v. Kawasaki Kisen Kaisha Ltd. [1962] 2 Q.B~ 26 at 64); or that the present parties should be regarded as having agreed either expressly or by necessary implication that any breaches of the kind and to the degree which may have been established by the evidence should be regarded as going to the root of the contract so that those breaches should at once be able to be regarded as justifying termination ( see Suisse Atlantigue Societe d' Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale case [1967] 1 A.C. 361 at 422 and Associated Newspapers v. Bancks (1951) 83 C.L.R. 322 at 337). The breaches of which the plaintiff may have been guilty in the matter of late payments were more in the class of the covenant to p~y rent i~ advance referred to by Gibbs C.J. in Shevill's case at 627. They should not be regarded as breaches of "a fundamental or essential term having the effect that any failure, however slight, to make payment at the specified times would entitled the lessor to terminate the lease". The words in -- 15 of 27 -- 15 cl. 1 of the leas.e "provided that the Diving Operation conforms with agreement reached in this contract then ... " should not in my view be construed as an agreement between the parties that any failure, however slight, on the part of the plaintiff would ' entitle the defendant to release himself from the arrangement. I conclude that the defendant's termination of the agreement was unjustified and amounted to a breach of conflict. I turn to the assessment of damages. The Statement of Claim says that as a result of the defendant's repudiation the plaintiff has "lost the benefit of the " agreement and "the revenue it would have otherwise received thereunder and has suffered loss and damage". The object of the assessment in the case of a breach of contract is to place the plaintiff in the position in which he would have been if the breach had not occurred, that is 1 the position he would have been in if the. contract had been performed according to its terms. To assist in the task of assessment the court had the benefit of certain expert accounting evidence and a number of sets of account went into evidence. Mr. Thomson was called for the plaintiff and Mr. Blanche on behalf of the defendant. The figures which were produced were designed to demonstrate the financial.results which the plaintiff obtained during the period th.at the arrangement between the parties was in operation. It was suggested that those results provided an indication of what the plaintiff would have been likely to receive had the arrangement run for a full five years without premature termination. From another point of view, figures were produced -- 16 of 27 -- 16 which were said to demonstrate the results which the defendant achieved after he brought the arrangements to an end in April 1989. He thereafter conducted the business himself employing the plaintiff's erstwhile senior staff members. It was said that these figures provided an indication of what the plaintiff might have received had he and not the defendant continued to operate the business after April 1989. The accounts were subjected to detailed examination and challenge and there was debate about the accuracy of the profit figures which were derived by the accountants. Obviously it cannot be accepted that the plaintiff would necessarily· have continued to achieve the same profit level had it continued to run the operation after April, 1989 and it cannot be uncritically accepted that the results which the defendant in fact achieved 'in the later period can be regarded as representing the results wtiich the plaintiff would have achieved had it continued to operate the business. A number of matters must be borne in mind. The personal factors in the operation of the business at the two different times cannot be regarded as equivalent. The evidence showed that at relevant times there had been a marked downturn in the tourist industry and the area's general financial situation. More operators of diving businesses subsequently came upon the scene. Access to suitable areas is restricted by the ~arine ~ark Authority. Weather at times was particularly bad and this fluctuating influence cannot be assumed to have an even effect:: throughout any extended period. The plaintiff's business was not· restricted to the operation upon the defendant's vessel the "Ocean Spirit", and the plaintiff at all -- 17 of 27 -- 17 times made use in his business of his own smaller vessel the "Downunder". The fact that the arrangement with the defendant was terminated gave the plaintiff greater freedom to use his own vessel and develop his business in connection with it. It is possible that without the defendant's premature and, as I have found, wrongful termination, the parties may not have stayed together in their relationship for the whole of the remaining period of the five-year term. I became persuaded by imponderables of these kinds and other matters which I shall mention that it was not appropriate to take other than a broad approach to the assessment of damages including those to be awarded for future loss. In· considering whether British Transport Commission v. Gourley [1956] A.C. 185 should find a place in the approach to assessment of damages it is necessary to bear in mind the change in the stand previously adopted by the High Court in Atlas Tiles Ltd. v. Briers (1976-1978) 144 C.L.R. 202. We now have the benefit of its reconsideration in Cullen v. Trappell (1979 - 1980) 146 C.L.R. 1. The question whether the impact of taxation should be allowed for in the figure which would otherwise be assessed for loss of profit under the agreement, in other words whether the Gourley principle should be applied, calls for a consideration of two factors. The first is would the profits derived by the plaintiff from carrying on its business under the agreement have been taxable and the second is will the damages which I assess or a component of them, be taxable in the plaintiff's hands under -- 18 of 27 -- 18 some provision or other of the Income Tax Assessment Act 1936, as amended. On the first question, not much attention was paid to the plaintiff's general situation. There was reference to the fact that the plaintiff was incurring a loss upon other operations that is, considered apart from the profitability of its business conducted from the "Ocean Spirit". Whether some or all of the profit it would have received from the "Ocean Spirit" operation would have been taxable in its hands was a question which was not really explored. so far as the second question is concerned, counsel for the plaintiff submitted that any amount received by the plaintiff assessed on account of profits lost as a result of the defendant's breach would fall into the category of income taxable under s. 26(j) of the Income Tax Assessment Act. Gourley's case it was said would have no application, the danger adverted to in that case of a plaintiff being over-compensated not then being applicable here. Counsel for the defendant did not suggest that this was incorrect or submit that any loss of profits otherwise found in assessing damages resulting from the defendant's breach should be discounted to compensate for the tax which the plaintiff would have had to pay upon that amount if earned as profit. Accordingly and particularly in view of the broad assessment which I believe is called for in the present case, no such discount will be made in my assessment. In a number of cases consideration has been given to the scope of s. 26 ( j) of the Income Tax Assessment Act and its possible application to sums assessed by courts as damages for -- 19 of 27 -- 19 loss of profits which might, apart from the defendant's wrong, have been earned by the plaintiff. As well as Roberts v. Collier's Bulk Liquid Transport Pty. Ltd. [1959] V.R. 280 these cases include O'Keefe v. Ellis (1961) Tas. S.R. 169, Lonie v. Perugini & Perugini (1978) 18 S.A.S.R. 201 and Associated Grocers Co-operative Ltd. v. Hubbard Properties Pty. Ltd. (No. 2} (1987) 45 S.A.S.R. 57. In some instances a distinction is made between the character of assessments of damages to compensate for pre- trial loss of profits and future loss of profits. However these cases other than Roberts v. Collier were not referred to in the argument before me and the submissions proceeded upon the restricted basis that I have already mentioned. I, therefore, feel justified in adopting the approach which I have indicated. On the further point that it might be necessary to discount to allow for the benefit of future loss of profit being paid in one sum under the judgment, counsel for the defendant, referring to Todovoric v. Waller (1981) 150 C.L.R. 402, where the many factors which influenced the choice of an appropriate discount figure in personal injuries cases were explored, submitted that the proper discount rate to adopt here was three per cent, the matter being free of the statutory provision which is applicable in personal injuries cases. Counsel for the plaintiff conceded that the loss of profits which would be assessed fell outside the constraints applicable in personal injury cases, but since, as he suggested, the profits assessed in the action would be taxable in the hands of the plaintiff (reference being made to Roberts and Collier [1959] V.R. 280) submitted that a discount rate more in keeping with commercial rates should be adopted. -- 20 of 27 -- 20 Because of the approach adopted by counsel for the defendant and since I see no need to discount by some additional figure it is in my view appropriate to adopt the three per cent figure when I use discount tables in the calculation of loss of future profits. I shall consider now the figures upon which I shall base myself in making the assessment. Some separate consideration will be given to the figures said to reflect the operation of the plaintiff's business in the period up to April 1989 and the further period after the defendant took over the running of the diving business on the vessel "Ocean Spirit". The accounts relating to the plaintiff's trading position in the period up to 14 April 1989 were exhibits 9 and 12; as prepared by Thomson, and ex. 13 which contains Blanche's accounts for the same period as well as including, for convenience, the details from the two accounts prepared by Thomson. Counsel for the defendant made the general submission that Blanche's version should be preferred to Thomson's and in particular said that the fact that Thomson saw the need to revise the earlier version of the accounts prepared for the period up to 14 April 1989 (ex. 12) by preparing a new set (ex. 9) gave some reason to be suspicious of his work. I was not persuaded by this. Thomson had been the plaintiff's accountant for some four years and, having observed him giving his evidence, I concluded that there was no reason to regard him as other than generally reliable. :-~ The most significant change in terms of the amount involved in the two Thomson versions for the period to April 1989 was the -- 21 of 27 -- 21 reducti.on in the I?laintiff.' s gross income from some $210,000.00 down to some $175,000.00. This is a sizeable proportional reduction in gross income, certainly, but Thomson explained it by saying that he had taken the first figure from an examination of the bankings but later discovered that income from sources other than the diving operation on the "Ocean Spirit" had been included. The revised figure . he obtained by examining the manifests which were continually filled out in the course of the plaintiff's operations and accordingly reflected actual takings. Blanche's gross income figure for the comparable period is very close to Thomson's, being about $2,600.00 less. Blanche seems to have got his gross income figure by examining the bankings and adjusting the resulting figure to allow for amounts outstanding at the end of the period. There is no reason to expect that the evidence of the daily manifests would not be a perfectly reliable source and there is always a possibility that moneys taken may, for one reason or another, not have been all banked. I prefer to rely upon Thomson's figure. Al though as between his first and second versions Thomson reduced the figure adopted for gross income by some $35,000.00 and made a number of alterations in the deductions allowed against gross takings the difference between his derived net profit figures tended to remain about the same. His net profit figures as between ex. 12 and ex. 9 was reduced from some $95,000.00 to some $61,000.00. The net profit which Blanche presented in his accounts for the same period was some $38,000.00. -- 22 of 27 -- 22 ', In making certain deductions both accounta.nts adopted the same basic approach, taking a proportion of the overall expenses incurred by the plaintiff company, based on a comparison between the receipts from the "Ocean Spirit" diving operation and the total income of the company. In other cases the figures shown as a deduction were a cost directly ascertained and applicable to the "Ocean Spirit" operation. Amongst the deduction items there were a number where there was some substantial difference between the figures adopted by the two accountants. These were concerned with the items for telephone costs, repairs and maintenance, workers' compensation expenses, motor vehicle expenses and insurance. In the projections advanced as a basis for assessing future profitability, there was again difference between the two accountants. The accounts which they prepared to illustrate their respective views appear in exhibits 10, 11, 16 and 18. The defendant's profit and loss statement, ex. 10, was prepared by Blanche for the period 1 July 1989 to 20 April 1990, it being contended that this statement not only showed the position for that period but could be used as a basis for future predictions regarding the course of the business in the defendant's hands as well as illustrating what the business might have earned for the plaintiff had it continued to conduct it. That profit and loss statement covers a period less than a year and does not show the period between 14 April and 1 July 1989. Exhibit 11 in part takes details from the defendant's accounts in ex. 1 0 and shows the points at which Thomson disagrees with the figures adopted by the defendant's accountant. -- 23 of 27 -- 23 Thomson's reconstruction and adopted figures appear in the right hand columns of ex. 11 under the heading "Our Estimate - Ocean Spiri tll. Exhibit 16 represented the account prepared by Blanche for the defendant for the period 14 April 1989 to the end of that financi.al year. Exhibit 18 showed the defendant's adjustment of accounts. There were some additions under the heading "Add Back" and there was one major deduction and the result according to Blanche was that the profit for 55 weeks which appeared on ex. 10 and ex. 16 as $18,284.00 when adjusted for a 52 weeks period could be reduced, according to Blanche, to an adjusted net profit of $10,554.00. Thomson in his reconstruction which appears in the right-hand columns of ex. 11 taking Blanche's accounts in ex. 10, in some cases accepted amounts adopted by Blanche and in others made alterations which he considered were appropriate. Blanche gave the impression that in some cases when confronted with a point of difference he altered his ground somewhat. In one case, after Thomson's evidence had concluded so the matter could not be put to him, Blanche deducted an extra amount, $10,738.00 for office wages (this appears on ex. 18) on the basis that it represented 8.6 per cent of the total office wages $142,627.00 paid by the defendant. There were other i terns where substantial differences eJUerged between Thomson and Blanche. These were under the headings - wages - divers, manager, advertising and promotion, cleaning, -- 24 of 27 -- 24 depreciation, fuel and oil, repairs and replacement, postage, printing and stationery and telephone expenses. The result of the analysis was that the defendant's figures for the ten-month period from 1 July, 1989 onwards when the diving operation was being conducted by the defendant could be adjusted as for a period of 12 months. Thomson said that it would have produced approximately $79,000.00 net profit in the plaintiff's hands. For a ten-month period it would have produced some $66,000.00, in other words a comparable figure to that which was according to Thomson, yielded in the plaintiff's hands for the similar period shown in ex. 9. Blanche said that the net profit in the defendant's hands, adjusted for a 12 month period was not $79,000.00 as Thomson claimed but only $18,000.00 (see ex. 11). He further adjusted this downward in the way shown in ex. 18 to give an adjusted annual profit of $10,554.00. One matter of some significance is that the gross income in the defendant's hands from fees received when the operation was in the defendant's hands after 1 July 1989 was comparable with the gross income for a similar period when it was in the plaintiff's hands (compare the figures on ex. 13 and ex. 11). Thomson did not accept the figure which Blanche arrived at for gross fees derived by the defendant in the peiiod after 1 July 1989 but the difference here was only about $3,500.00. Thomson said that he arrived.at his adopted figure of $173,092.00 by verification from the daily manifests. By and large I rather preferred the evidence and ~esults arrived at by Thomson to those given and supplied by Blanche. -- 25 of 27 -- 25 I further think tbat Thomson's figures for the period prior to the defendant's termination are a more accurate guide to what the plaintiff would have managed to achieve thereafter had the arrangements between the parties continued. I think that, broadly, the evidence from the defendants of the defendant's figures for the subsequent period shows that the plaintiff's takings could have been maintained and I think, again broadly, that the plaintiff's preceding level of deductions represent a more reliable guide to the economy with which the plaintiff would have managed to conduct its operation. There is no reason to assume that the two different operators would have been equally good as managers. On the other hand there is evidence that conditions in the industry changed after April, 1989 and the plaintiff, notwithstanding its previous policy, might have been obliged to spend money on advertising to maintain its gross takings had it continued to operate the business. I further take into account that as a result of the termination Cowie and the plaintiff company were freed to devote time elsewhere. Still Cowie had not been personally involved for a great deal of time in the diving operation on the defendant's vessel and his other pursuits to which he did subsequently devote himself using certain of the equipment previously used on the defendant's vessel were not profitable. I was persuaded that he made reasonable efforts to make similar arrangements for diving operations to be conducted on some other vessel but the efforts were unsuccessful. However, there are all of the uncertainties for the period ahead. It has to be remembered that there is the dispute between Thomson -- 26 of 27 -- 26 and Blanche as to the more accurate accounting basis and although I express a preference for Thomson's approach there is an element of uncertainty here which must be allowed for. In quantifying profits lost I propose to base myself upon a broad figure of $60,000.00 per annum which, principally in reliance on Thomson, I find established on the evidence for the period from April 1988 to April 1989. Both for future profits and for recoverable loss for the period up to the trial, I propose to take the same global annual figure, namely $50,000.00 arrived at by discounting the figure of $60,000.00 somewhat for the various reasons I have endeavoured to express. For the period ahead I shall further discount the global figure of $50,000.00 per annum using the 3 per cent tables to allow for the benefit of accelerated receipt in the plaintiff's hands. The result is that loss of profit will be assessed as $123,627.00 for the period from April 1988 to October, 1990. I shall allow the plaintiff interest on that sum at 6 per cent per annum from 14 April, 1988 to the date of judgment. For the further period from October, 1990 to July, 1993, that is the end of the term provided by cl. 1 of ex. 1, I assess $132,450.00 using the base annual figure of $50,000.00 I have referred to but discounted using the 3 per cent tables. I propose to enter judgment for the plaintiff against the defendant for $256,077.00 with interest as above and with costs, including reserved costs, if any, to be taxed. -- 27 of 27 --