Coromby Pty Limited v Matthews [2008] NSWDC 249

New South Wales District Court

CITATION: Coromby Pty Limited v Matthews [2008] NSWDC 249

HEARING DATE(S): 19 and 20 February 2008 at Port Macquarie and 23, 24 and 25 June at Sydney

JUDGMENT DATE: 1 August 2008

JURISDICTION: Civil Jurisdiction

JUDGMENT OF: Johnstone DCJ at 1

DECISION: 1. Judgment for the plaintiff for $74,449.40. 2. The defendant is to pay the plaintiff's costs. Those costs are to be on the ordinary basis up till 31 March 2008 and thereafter they are to be on an indemnity basis.

CATCHWORDS: CONTRACT - SALE OF GOODS - the objective common intention of the parties - when risk passed from vendor to purchaser - whether the goods delivered fitted the description of the goods purchased - whether the goods were defective

Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61 at [71] - [74] Gardiner v Agricultural and Rural Finance Pty Limited [2007] NSWCA 235 at [11] - [13] Integrated Computer Services Pty Limited v Digital Equipment Corp Australia Pty Limited (1988) 5 BPR [97326] CASES CITED: Kooee Communications Pty Limited v Primus Telecommunications Pty Limited [2008] NSWCA 5 Ormwave Pty Limited v Smith [2007] NSWCA 210 at [68] Pacific Carriers Limited v BNP Paribas [2004] HCA 35 at [22] Peppers Hotel Management Pty Limited v Hotel Capital Partners Limited [2004] NSWCA 114 per McColl JA at [69] Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52 at [40]

PARTIES: Coromby Pty Limited (Plaintiff) Mark Damien Matthews (Defendant)

FILE NUMBER(S): 38/05 at Port Macquarie

COUNSEL: Mr M Gilbert (Plaintiff) Mr K Andrews (Defendant)

SOLICITORS: Byrnes Lawyers (Plaintiff) McKays Solicitors (Defendant)

JUDGMENT

The proceedings and the issues 1. Dr Julie Knight practised as a cosmetic physician in Port Macquarie. Her clinic, the Coolenberg Clinic, was operated through the plaintiff company, Coromby Pty Limited, of which she was the sole shareholder and director.

2. In early 2004, Dr Knight saw an advertisement for sale by the defendant of a laser machine, which she agreed, on behalf of Coromby Pty Limited, to purchase for her practice. The laser machine was only delivered to the practice some six weeks later, on 17 May 2004. It was incomplete and not fully operative for the purpose for which Dr Knight purchased it. There followed a saga of problems and difficulties with the machine and its capacity to operate as required, and with the defendant vendor. Eventually the company was forced to commence these proceedings to obtain redress.

3. Dr Knight thought the problems were resolved when on 6 December 2004, the parties entered into a Deed of Release with a view to settling the proceedings, pursuant to which a Notice of Discontinuance would be filed. Unfortunately, however, the defendant failed to discharge his obligations under the Deed and the difficulties with the laser machine and its capacity to operate as required persisted.

4. The plaintiff company alleged that the laser machine is now totally inoperative and valueless. It complained that it never received a machine capable of performing the functions for which it was purchased. It seeks damages.

5. The defendant sought to rely on various defences. He alleged, firstly, that he fully complied with the terms of the settlement agreement in the Deed of Release such that the plaintiff's cause of action was extinguished. Alternatively, the defendant denied any breach of the sale agreement. He denied the laser machine failed to properly operate, but even if it was defective, property had passed to the plaintiff before delivery so any defects in the machine were not his responsibility. Thirdly, the defendant alleged that any defects in the laser machine were remediable at minimal cost. Finally, the defendant contended that the laser machine is not valueless.

6. For reasons to which I will come, I was satisfied that the plaintiff's cause of action was not extinguished by reason of the Deed of Release. It was necessary therefore to consider the totality of the plaintiff's claim.

The contract for sale 7. The plaintiff's case was that it agreed to purchase a laser machine that was capable of performing a particular function for which Dr Knight wanted the machine to assist in her cosmetic practice, namely an epilight function. The laser machine was never capable of performing this particular function.

8. The defendant's case was that he supplied a laser machine that corresponded with the description of the goods the subject of the contract. He alleged that he never agreed that the machine sold had an epilight function. He contended that to the extent that Dr Knight believed the machine had the capacity to perform the epilight function, she relied upon advice from a source other than the defendant or his wife. At paragraphs 26 to 28 of his written submissions, it was contended: "26. It is submitted that the evidence establishes that Dr Knight agreed to purchase the machine only after satisfying herself by way of conversations with Mark Hassell and others that the machine was suitable for the purpose for which she required it. Mark Hassell was the agent of the manufacturer and the repairer of that machine and knew of the condition of that machine.

27. Mark Hassell indicated it was a good machine and estimated its value.

28. Irrespective of any representation made by Carmel Matthews, Dr Knight accepting that she had no knowledge of Carmel Matthews's qualifications in relation to the machine, they did not influence Dr Knight in the purchase of the machine."

9. It was not disputed that the advertisement for sale to which Dr Knight responded was as set out in Exhibit A: "FOR SALE Item - PHOTODERM VASCULIGHT PLUS - including Epilight [hair removal] head, Photoderm [vascular - pigmented lesion etc] head, with extensive set of filters for both, and YAG laser, with manuals. Also extra cooling device - solid state recirculating chiller. Price - $65,000 - cost over $250000 new in May 1999 - in very good condition. Contact - Carmel Matthews mobile 0418 98 00 76"

Carmel Matthews is the wife of the defendant, Dr Matthews. She entered into the contract for sale of the laser machine on behalf of her husband, the defendant.

10. There was, however, considerable dispute over the content of two telephone conversations that followed, as between Dr Knight and Mrs Matthews.

It is clear from her evidence that Dr Knight wanted a machine that had an epilight capacity for use in skin treatment in her practice by way of "photorejuvenation". Her evidence was that when she rang Mrs Matthews in response to the advertisement, Mrs Matthews assured her that the laser machine had the epilight upgrade and was in good condition.

Dr Knight's evidence then continued (T 10): "A. I said I was familiar with that upgrade. I asked if the lenses were in good condition, he said yes. I asked if the machine were used for photorejuvenation and she said yes, her husband had used it for photorejuvenation.

Q. So it had been used for photorejuvenation, yes, and she said? A. She asked if I knew Mark Hassell and I said yes, I did know Mark Hassell.

Q. How did you know Mark Hassell? A. I had previously--

Q. Who was Mark Hassell? A. Mark Hassell was the director of a company known as Spectra Medical who had sold that machine to Dr Matthews and I had in a few years prior looked at that same machine which Mark Hassell - of which mark Hassell had sold a number. At that time I chose not to purchase it.

Q. At that time? A. Yes. Right.

Q. So she said something about Mark Hassell, did she? A. Yes, she said Mark Hassell was familiar with the machine and I said I would call Mark Hassell to get his opinion of the machine.

Q. Did you talk about price at that time? A. Yes, she said the machine was advertised for $60,000 but she was prepared to accept $50,000 plus GST.

Q. Was that the end of the conversation? A. Yes."

11. So Dr Knight did ring Mr Hassell. Her evidence of that conversation, which is uncontested, was as follows (T 10 -11): "A. I asked if he thought it were a good machine. He told me it was an excellent machine and he would purchase it himself for $45,000.

Q. He was familiar with the machine that Dr Matthews had? A. He was.

Q. Did you ask him about its suitability for anything? A. I asked him if it was suitable for photorejuvenation and he said yes, it was.

Q. Did you discuss with him or ask him about training? A. I asked if he would be able to come to my clinic and train myself and my staff and he agreed he would be able to do that at a certain price.

Q. How much was that price? A. Travel and accommodation plus $2,000 per day, and he is from New Zealand.

Q. That was the end of the conversation? You made a decision, did you? What was the decision you made? A. On that information I decided to go ahead and purchase the machine." What Dr Knight meant by the words "that information" was not elucidated by her counsel. But in cross-examination she agreed that she wanted Mr Hassell's opinion as to whether or not it was a machine she should consider buying. She specifically asked him if it was suitable for photorejuvenation and he said it was (T 25.9). She then said: "Q. So you are, as far as you are concerned, Mark Hassell being the distributor, the repairer and the maintenance provider, had told you on an independent enquiry you'd made of him that this machine was suitable for you to do what you needed to do with it? A. That's correct.

Q. And you relied on that then to get back in contact with Carmel Matthews to make arrangements to purchase the machine? A. Yes.

Q. If for example Mark Hassell had said anything less than what - the way he described the machine, you would have been hesitant to continue? A. Yes.

Q. Having received that assurance from him, you decided you would continue the purchase, you contacted Carmel Matthews and you renegotiated the price? A. Actually, Carmel suggested the price because, I don't know, she must have had an offer made. I didn't try to negotiate the price.

Q. You already had the price in the advertisement, didn't you? A. Yes, the price was in the advertisement. Carmel suggested that I could have it for $50,000 plus GST.

Q. So you then agreed to purchase that machine? A. Yes, I did."

12. The defendant's contention is to the effect that Dr Knight relied solely upon what Mr Hassell told her in deciding to buy the laser machine and placed no reliance upon anything Mrs Matthews said. Indeed, it was suggested that Mrs Matthews said nothing to Dr Knight about her husband having used the machine for photorejuvenation (T 24.9). Mrs Matthews's evidence about the telephone conversations with Dr Knight was not fulsome but she did deny saying the machine had been used for photorejuvenation. Dr Matthews himself was not called to corroborate this piece of evidence.

13. The conflicts in the evidence on the conversations between Dr Knight and Dr Matthews require resolution. I have no hesitation in preferring the evidence of Dr Knight. There are many reasons, apart from their demeanour in the witness box. The whole history of the dealings between the protagonists, as evidenced by the correspondence in particular, persuaded me as to the integrity of the plaintiff's camp in preference to the defendant's camp. Mrs Matthews was unconvincing and eristic. Her evidence was directly contradicted by a Ms Karen Mann, who I regarded as honest and straightforward and independent of either party in the case. I thought it was particularly telling that when giving her evidence in chief about her telephone conversations with Dr Knight that Mrs Matthews never once said anything about the machine being sent for a service before delivery to Dr Knight. Mrs Matthews only referred to this issue later when she was addressing her subsequent conversation with Ms Karen Mann. (Ms Mann firmly denied any such conversation).

14. For these reasons, I am satisfied that Mrs Matthews told Dr Knight that the laser machine had an epilight capacity and could perform photorejuvenation. Dr Knight believed she was purchasing a laser machine with an epilight function capable of performing photorejuvenation.

15. The fact was, that following delivery the laser machine was never capable of performing that critical function. Indeed, upon delivery in May 2004, it was missing various key components including the epilight head, the epilight filters (see Exhibit C). The machine was also missing a switch that enabled it to be switched to the epilight function.

Was the Laser machine in working order? 16. The second major plank in the defence was that the laser machine was in working order when it left the defendant's possession (paragraph 30) and that if it was in a defective condition when it was delivered to Dr Knight's clinic, the defendant could not be held liable because the risk of loss or damage had passed to the plaintiff upon payment of the purchase price on or about 7 April 2004: paragraph 13A of the Amended Defence (see also the defendant's written submissions at paragraphs 31 - 37).

17. This was the defence which was inadequately pleaded and thus led to the adjournment of the trial from Port Macquarie to Sydney, it having been my view that the allegation was insufficiently pleaded to clearly put the plaintiff on notice of it.

18. After Dr Knight had concluded the contract for the purchase of the laser machine and paid for it, unbeknown to her it was sent by Mrs Matthews to Medtel Pty Ltd for servicing.

19. As I have already found, Dr Knight was never informed in her discussions with Mrs Matthews that the laser machine was to be sent for a service prior to delivery to the Coolenberg Clinic. Mrs Matthews asserted that she told Ms Karen Mann, the part-time contract accountant for the clinic, in a later conversation, that the laser machine was to be serviced by Mr Darren Cohen at Medtel. There are a number of problems with this evidence. Firstly, Ms Mann denies it, and in that regard I prefer her evidence to that of Mrs Matthews. To my mind it is inconceivable that Ms Mann would not have told Dr Knight about the machine being sent for a service, particularly as she was so opposed to its purchase, and Dr Knight was undoubtedly surprised when she found out (T 13.13 - 50). Secondly, even if there had been such a conversation, it had no effect on the contractual arrangements. The contract had already been concluded and I was not persuaded Ms Mann had any authority, ostensible or otherwise, to vary the contract.

20. It was further asserted by Mrs Matthews that, in later conversations with Dr Knight and someone from the surgery, she had explained that the machine would not be covered by insurance after it left Medtel. She said Dr Knight responded with words to the effect that she "had so many machines and so much insurance, I'm sure it's covered by something". This was, of course, denied by Dr Knight (and was never put to her when cross-examined in Port Macquarie). I simply did not believe Mrs Matthews on this issue and I find that no such conversation occurred.

21. The one thing that did emerge with some certainty is that the laser machine was clearly deficient when it went to Medtel. It emerged, oddly enough, not until Mrs Matthews was cross-examined on the last day of the hearing, that she had had to pay Medtel $8,000 for new software to be installed in the machine because its "functions were corrupted". I took the trouble to re-read all the correspondence (exhibits G, H, J, K, L, M, N, O, Q, R, S, T and U). This assertion was never once mentioned to anyone before Mrs Matthews got into the witness box apart, perhaps, from an oblique reference in the letter of 25 May 2004. That letter from Dr Knight to the defendant records the following: "I awaited delivery of the machine. After 1 week, my nurse telephoned Carmel to ask when the machine would be delivered. She was informed that the machine was at Medtel being serviced. I was surprised as Carmel told me that the machine had recently been serviced and was in excellent working order. We then called Medtel and were told that the machine had needed a lot of work, that the software had been corrupted and needed to be replaced and that this was due to the previous users failing to operate the machine correctly. I was surprised because Carmel had told me that since she stopped using the machine a few years ago, it had been in storage. She did not mention any other users.

My nurse had a conversation with Darren at Medtel, informing him that I would not be responsible for the costs of repairs as I had purchased a machine in "excellent working order".

The machine remained with Medtel for a further two and half weeks.

When the machine was delivered, we unpacked it. I might comment that it was in a filthy condition and my staff spent one whole day cleaning it.

It surprised me that a set of lenses was missing as it was obvious that there were spaces present for a larger set of lenses. Also, there were no NdYag safety goggles. Not being familiar with the actual computer program and having had no training in the use of the machine, we awaited the arrival of our trainer, Tracy Macarthur. We had flown Tracy from Brisbane to Port Macquarie and booked her accommodation for two nights and agreed to pay her for two days training.

She had actually used this very machine in the past and I was surprised to learn that the machine had previously been sublet to Janie Dallas-Kelly in Byron Bay so was in fact a third-hand machine, not a second-hand, little-used and then put in storage machine.

Tracy immediately noticed the absent treatment head, absent 30 lenses and absent switch on the rear of the machine. She telephoned Carmel. This was at 9.30am on Tuesday 18 May 2004. Carmel was apparently aware of these deficiencies. She "passed the buck", saying that we should speak to Darren from Medtel. I spoke to Darren who said that he had made the alterations under instruction from Carmel and not unreasonably suggested I sort it out with her. We put through at least two calls to Carmel leaving messages requesting that she return a call to me. These calls were to her mobile phone and to her home number. Messages were left at both numbers on that Tuesday, telephone records will support this fact. There was no reply from Carmel to our calls. It appeared to me that she was avoiding the calls."

22. For these reasons, I find that Dr Knight was never informed that that laser machine was to be sent to Medtel for servicing prior to the delivery to her clinic. Whatever the reason for Mrs Matthews sending it for a service, it was a unilateral act unconnected with the concluded contract and irrelevant to the contractual intent of the parties either as to delivery, the description of the goods or the passing of property (or risk) in them.

23. I find, further, that the machine was not in full working order either at the time it left the defendant's position or at the time of delivery to Dr Knight's clinic at which time it was also missing various key components. In particular, it did not have an epilight capacity consistent with the description of the goods purchased.

The relevant legal principles 24. I turn at this point to refer to principles of law relevant to the determination of this dispute.

25. The High Court has strongly affirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined: Pacific Carriers Limited v BNP Paribas [2004] HCA 35 at [22]. This principle was reaffirmed in Toll (FGCT) Pty Limited v Alphapharm Pty Limited [2004] HCA 52 at [40] in the following terms: "It is not the subjective beliefs or understandings of the parties about their rights and obligations that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction."

26. The Chief Justice of New South Wales, Spigelman CJ, recently discussed the High Court's approach and the circumstances in which it is appropriate to have regard to the extrinsic facts and matters surrounding the contract document to assist in the ascertainment of the common intention of the parties as to their contractual rights and liabilities. In Gardiner v Agricultural and Rural Finance Pty Limited [2007] NSWCA 235 he said at [11] - [13]: "In a number of joint judgments the High Court has adopted an approach to statutory interpretation which requires attention to the broader context of the words in issue in the first instance, not only after some kind of 'ambiguity claim' had been identified. (See, e.g. CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 at 408; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69] and Network Ten Pty Limited v TCN Channel Nine Pty Limited (2004) 218 CLR 273 at 280 - 281). There is nothing new about this approach. (See, e.g. R v Wilson; Ex parte Kisch (1934) 52 CLR 234 at 244). However its application in recent cases was based on a judgment of Mason J in K & S Lake City Freighters Pty Limited v Gordon & Gotch Limited (1985) 157 CLR 309 at 315.

It has been suggested that Mason J adopted a different approach to the task of contractual interpretation by requiring the identification of ambiguity in the first instance. (See Codelfa Construction Pty Limited v State Rail Authority of NSW (1982) 149 CLR 337 at 348). I have, however, expressed the view that his Honour did not intend to confine the approach to contractual interpretation in that way but that his reference in Codelfa at 348 to the proposition that language may not only be 'ambiguous' but also 'susceptible of more than one meaning' invoked a concept of 'ambiguity' extending to any situation in which the scope and applicability of the formulation was for whatever reason doubtful. (See South Sydney Council v Royal Botanic Gardens [1999] NSWCA 478 at [35]).

This approach is consistent with the subsequent authority in the High Court, particularly the passages to which I have referred in Pacific Carriers [Pacific Carriers Limited v BNP Paribas (2004) 218 CLR 451 at [461] - [462] and in Alphapharm . In this respect I agree with the reasoning in the Federal Court at first instance in Lion Nathan Australia Pty Limited v Coopers Brewery Limited (2005) 223 ALR 560 at [78] - [79] and on appeal in Lion Nathan Australia Pty Limited v Coopers Brewery Limited (2006) 156 FCR 1 at [45] - [52], [98], [101] and [254]. In this respect also contractual interpretation has been brought into alignment with statutory interpretation. (See Bowtell v Goldsborough, Mort & Co Limited (1905) 3 CLR 444 at 456 - 457; Minister for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273 at 287 - 288; Repatriation Commission v Vietnam Veteran's Association of New South Wales Branch Inc [2000] 48 NSWLR 548 at [116].)"

27. A court may find that a contract exists and enforce it notwithstanding a lack of clarity in the conduct and language of the parties: Integrated Computer Services Pty Limited v Digital Equipment Corp Australia Pty Limited (1988) 5 BPR [97326]. McHugh JA (as he then was) said: "It is often difficult to fit a commercial arrangement into the common lawyers' analysis of contractual arrangement. Commercial discussions are often too unrefined to fit easily into the slots of offer, acceptance, consideration and intention to create a legal relationship which are the benchmarks of the contract of classical theory. In classical theory a typical contract is a bilateral one and consists of an exchange of promises by means of an offer and its acceptance together with an intention to create a binding legal relationship...moreover in an ongoing relationship it is not always easy to point to the precise moment when the legal criteria of a contract have been fulfilled. Agreements concerning terms and conditions which might be too uncertain or too elusive to enforce at a particular time in the relationship may by reason of the parties subsequent conduct become sufficiently specific to give rise to legal rights and duties. In a dynamic commercial relationship new terms will be added or supersede older terms. It is necessary therefore to look at the whole relationship and not only at what was said and done when the relationship was first formed...the contract may be inferred from the acts and conduct of the parties... The question...is whether the conduct of the parties viewed in the light of the surrounding circumstances shows a tacit understanding or agreement."

28. Consistent with this approach the Court of Appeal has also recently held that it is not necessary in determining whether a contract has been formed to identify either a precise offer or a precise acceptance, nor the precise time at which an offer was made or accepted: Ormwave Pty Limited v Smith [2007] NSWCA 210 at [68]. The offer and acceptance analysis is a useful tool in most circumstances and indeed is normal and conventional but it does not work well in various circumstances: Brambles Holdings Limited v Bathurst City Council [2001] NSWCA 61 per Heydon JA as he then was at [71] - [74]: "While the process by which many contracts are arrived at is reducible to analysis turning on the making of an offer, the rejection of the offer by a counter offer and so on until the last counter-offer is accepted, that analysis is neither sufficient to explain all cases nor necessary to explain all cases."

29. However, the concept of commercial unreality should not been seen as unrestricted permission for judicial re-writing of contractual provisions: Kooee Communications Pty Limited v Primus Telecommunications Pty Limited [2008] NSWCA 5 per Basten JA. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered inconvenient or unjust even if it suspects that the parties intended something different: Peppers Hotel Management Pty Limited v Hotel Capital Partners Limited [2004] NSWCA 114 per McColl JA at [69]: "If the words used [in a written contract] are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered inconvenient or unjust."

30. There were, in the present case, aspects of the contractual intent of the parties that were sufficiently doubtful, having regard solely to the documentation, to warrant a consideration of the surrounding circumstances and the purpose and object of the transaction.

Conclusions on the contract 31. For the reasons I have expressed I find that the common intention of the contracting parties in this case was as follows:

(a) the laser machine would have a fully operative epilight function capable of carrying out photorejuvenation on patients

(b) property (and therefore risk) would only pass to the purchaser upon delivery to it of a properly functioning laser machine with a fully operative epilight function capable of carrying out photorejuvenation on patients.

32. I find further that the defendant failed to deliver a laser machine that accorded with the contract and was therefore in breach of the contract at the time of delivery and continuing thereafter, because the breach was never adequately remedied in that the epilight function never became operative.

Was the plaintiff's cause of action extinguished by the Deed of Release? 33. On 6 December 2004 the parties entered into a Deed of Release with a view to settling their dispute (Exhibit V). It was a term of the Deed that, provided the defendant carried out his obligations under the agreement, he was to be released and discharged from any liability arising out of his sale of the laser machine. The defendant contended that he carried out all his obligations, which were: "(a) the defendant would pay to the plaintiff an amount of $5,307.78 in two instalments;

(b) the defendant would make all necessary arrangements and meet all necessary costs to have the machine removed from the plaintiff's premises and transported to the offices of Medtel Pty Limited so that the machine could be upgraded to make it suitable to carry out epilight treatments and return the machine to the plaintiff;

(c) on return of the machine the defendant is to provide a statement in writing from Medtel Pty Limited that the upgrading referred to in the previous was authorised by Medtel Pty Limited;

(d) as soon as practical after the machine is returned to the plaintiff the defendant will arrange for Mr Mark Hassell of Medtel Pty Limited to attend at the plaintiff's premises to provide training for the plaintiff's employees in the use and maintenance of the machine."

34. Apart from the first of these conditions as to payment, the defendant did not fulfil any of his obligations under the Deed of Release. Even after delivery back to the plaintiff the laser machine still did not perform the required epilight function.

35. Nor was the required statement from Medtel provided on return of the machine. The defendant's purported reliance on the affidavit of Mr Mark Hassell (Exhibit 6) was too little, too late. Even if it could somehow be described as a statement of the type contemplated by the Deed, it was not provided at the time required, namely on return of the machine.

36. I am satisfied that the defendant failed to fulfil his obligations under the Deed of Release and I therefore find that the plaintiff's cause of action was not extinguished.

What is the plaintiff's loss? 37. The plaintiff's claim is for $61,844.18 made up as follows: Lease payments $52,766.88 Residual $12,500.00 Courier fees $ 385.00 Training costs $ 1,500.00 Sub total $67,151.88 Less paid under the deed $ 5,307.78 Net Total $61,844.18

38. No submissions were made quibbling with the formulation of the claim or the mathematics. The defendant did however make two contentions: Firstly, it was argued that the only problem with the machine after redelivery following its removal to Medtel pursuant to the Deed of Release was remediable at a costs of $1,200. Alternatively, the evidence suggested the machine could be fixed for $28,000. Accordingly, the plaintiff's maximum loss was either $1,200, or alternatively, $28,000.

39. The evidence on these two figures was, in my view, inadequate to establish that the continuing problems with the laser machine were capable of remedy for such amounts. First of all, the evidence as to why the machine was still incapable of performing the epilight function was incomplete and the evidence as to the cost of repairs could not therefore be referable to any established fact.

40. Even if for example the machine could have been repaired for $28,000, it was not in my view unreasonable for Dr Knight after everything she had been through, to decline to outlay that sort of money against the uncertain prospect of getting a machine capable of performing the function for which she bought it.

41. There is evidence, which is uncontradicted, which I accept (Exhibit AA) from Dr Georghy that he inspected the machine in March 2007 and it was completely inoperative and therefore valueless. No doubt if the defendant thinks it has some continuing value, Dr Knight would make it available for his collection.

42. For these reasons I find that the laser machine has no practical value to the plaintiff such that there has been a total failure of consideration for which she is entitled to be compensated in damages as claimed in the sum of $61,844.18.

43. The plaintiff also claims interest on those damages pursuant to s 100 of the Civil Procedure Act. In my view it is appropriate that interest be awarded on the damages to the date of judgment at the relevant statutory rates.

Disposition 44. There will be a verdict for the plaintiff against the defendant for $61,844.18, plus interest under

s 100. Interest was agreed at $12,605.22. I direct the entry of judgment for the plaintiff for $74,449.40.

45. Having regard to the second offer of compromise dated 31 March 2008, I am satisfied that the necessary preconditions for an order for indemnity costs have been made out. That being the case, I order the defendant to pay the plaintiff's costs, those costs to be on the ordinary basis up till 31 March. Thereafter they are to be on an indemnity basis.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.