* Senscsnnssenee: JUDGMENT NO. ounu.0,6 7 94 No. G 378 of 1992 ot et GENERAL DIVISION Between: ROBERT MICHAEL RICHMAN Applicant RECEIVED And: PACIFIC WASTE MANAGEMENT PTY LIMITED (ACN 002 902 650 22 NOV 1994 ( Respondent FEDERAL COURT OF AUSTRALIA PRINCIPAL REASONS FOR JUDGMENT SYDNEY VE R 4 The respondent moves for an order under Order 35 rule 7 varying the judgment given in this matter on 6 December 1993 awarding damages to the applicant of $89,000. Order 35 rule 7 states: (1) The Court may vary or set aside a judgment or order before it has been entered. (2) The Court, where it is not exercising its appellate or related jurisdiction under Division 2 of Part III of the Act, may if it thinks fit vary or set aside a judgment or order after the order has been entered where - (a) the order has been made in the absence of a ' party, whether or not the absent party is in default of appearance or otherwise in default and whether or not the absent party had notice of the motion for the order; (b) the order was obtained by fraud; (c) the order is interlocutory; (ad) the order is an injunction or for the appointment of a receiver; (e) the order does not reflect the intention of the Court; or (f) the party in whose favour the order was made consents. (3) A clerical mistake in a judgment or order, or an error arising in a judgment or order from an -2- accidental slip or omission, may at any time be corrected by the Court. (4) Sub-rule (2) shall not affect the power of the Court to vary or terminate the operation of an order by a supplementary order. The judgment in this matter was entered on 9 February 1994 so that this application does not arise under subrule (1). No evidence has been led on any of the matters covered by subrule (2). Nor is subrule (4) relevant to this application which therefore turns on whether what is popularly known as the "slip rule" as prescribed in subrule (3) should be applied. This case turned on whether a contract for the collection of waste had ever been concluded between the parties such that the applicant was not a subcontractor hireable and dismissible by the respondent at will but an owner-operator with enforceable rights to work and remuneration. The features of each category which had important differences are set out in full in the judgment at pages 16-17 and do not need repetition here. As the judgment reveals, the evidence established that the respondent agreed as part of its contract with the applicant: ' . (a) to purchase the applicant's compactor (thereby paying out or enabling the payout of the compactor portion of the applicant's Esanda lease on the compactor and the chassis) (b) to arrange for AGC to refinance the truck/chassis (c) to guarantee the new lease -3- (d) to pay half the tipping fee if the rate was $3.90 per metre or less (e) to ensure that the applicant earned sufficient to be commercially viable The affidavit filed in support of the motion, which was made by the respondent's solicitor, annexed 3 pages of the judgment, two exhibits in the case, some correspondence and the respondent's submissions on the motion. These materials establish that the motion relates to the part of the judgment as deals with the applicant's claim for damages for loss of future profits. The relevant findings of fact were: (a) the contract between the parties would not have been likely to run more than one year from its commencement in early October 1989 (b) the applicant's truck was repossessed in early May 1990 (¢) joss of profits should therefore be calculated on a maximum ' of 22 weeks (May to October 1990) (ad) the minimum rate of remuneration paid to the applicant would have been $3.90 per metre (e) the minimum weekly load would have been 500 metres -4- These findings led to the conclusion that an indicative amount for loss of profits was $43,000 in round figures to which interest of $7,000 should be added, giving a minimum total of $50,000. The judgment pointed out that there was an absence of real evidence on this aspect of the claim.thereby requiring the making of global or general estimates. The respondent's submissions on this application alleged that by accidental slip or omission, this conclusion failed to take into account the costs of operating the truck of some $41,000 in all, or $8,069 per month during the relevant period. If accepted, this would almost eliminate the allowance for loss of future profits altogether and reduce the applicant's verdict by almost half. The amount fixed in the judgment was not an error; what the respondent is now suggesting would distort both the judgment and the evidence. The respondent's desire to set off the $8,069 per month expenditure against the minimum calculation of loss of profits essentially relied on two exhibited documents. One (exhibit 13 at trial) is a letter from the applicant's accountant to his bank in January 1990 seeking a consolidation of several of his liabilities and a working overdraft. This letter itemised a number of claimed operating expenses totalling the figure suggested. The second document (exhibit 14), the authorship of which I do not know, is relevantly an extraction from the letter to the bank and therefore contained the same global figures and total. ~5- I have always regarded these amounts with suspicion and as substantially irrelevant for the purposes of calculating loss of future profits. Apart from the documentation itself, virtually no attention was given to them in evidence either in chief or in cross examination and there was little and in most cases no analysis or explanation of what they were or meant. As the documents reveal, they were figures produced for the applicant's personal benefit which were not audited or independently checked for accuracy. On their face they embraced and were always intended as accountancy and taxation concepts, not' this applicant's actual costs of being an owner-operator in this particular contract with this respondent. It is true that the applicant's specific interest at the time was to minimise his expenses so as to increase his apparent profitability and thus entice the bank into granting the requested facilities. Yet if expenses had been omitted altogether the bank would have been suspicious. I therefore treated them with a different concern. The documents did not even refer to depreciation which, in the case of a garbage truck and compactor, would be an item of some significance. Exhibit 14 actually divided the expenses into 2 columns of which only one, totalling $6,305, was made applicable to the respondent's contract. This immediately invalidates the suggested figure of $8,069. Working from this second document, the 5 major items were: $ Tipping 2,300 Fuel 1,050 Hire Purchase Esanda 1,935 Registration and Insurance 430 Repairs and Maintenance 480 Although it seems to me to be already clear from the judgment, I shall briefly explain why each of these items was discounted. Tipping fees Although at one stage the applicant's rate was increased to $4.50 per metre, and there was a corresponding requirement by the respondent that the applicant pay all the tipping fees, in fact it seems that the applicant was not required to pay tipping fees at all. When the respondent lost the AMP and David Jones jobs in early 1990, the applicant's earning rate decreased by about half, less than he needed to survive financially, increasing the likelihood that the respondent would pay the tipping fees thereafter, including during the relevant 5 month period for the loss of profits claim. I therefore concluded that this was not a true operating expense in that period. Fuel Other than its mention in what was in substance one exhibited document, there was no evidence about this item at all. Nor was -~7- it either asserted or challenged in submissions. Obviously the vehicle would have needed fuel to operate but there was no reason at all to accept that this was the appropriate figure. Indeed when the applicant's run was cut in half just before the truck was repossessed, the fuel cost would clearly have been much less than it would have been some months earlier when this figure was presented to the bank. Further, most of the fuel use would have been caused by the weight of the compactor which was to be owned by the respondent. It would thus have been unfair for the applicant to bear this expense and it is unlikely that he would have done so. Moreover, as the applicant was at all relevant times in dire financial circumstances and the respondent was undertaking substantial financial commitments to keep him, the respondent had at least as much if not more to gain from keeping the applicant "on the road". I thought it unlikely that the applicant would have been able to afford to pay for fuel and that he would have had to look to the respondent either to do so or to increase his rate by at least the amount of the fuel cost. Hence it seemed to me that I should in the relevant 22 weeks discount to negligible sums any fuel expenses which would actually have been paid by the applicant. Hire purchase Esanda The evidence spoke of a lease not a hire purchase agreement. Thus this item could have been dismissed as unsupported by any evidence. However, the item was discounted on a more substantial basis. As the judgment reveals, at all relevant times the - 8 - applicant was having trouble meeting his lease payments. Eventually he was unable to do so at all, when his run was substantially depleted by the loss of the two major sites. The agreement was that the amount of the lease would be reduced by the extraction of the compactor to be purchased by the respondent and by the renegotiation of a more favourable lease to be guaranteed by the respondent. No substitute terms were proved and there was no cross examination on the point but even if the applicant had a guaranteed 500 metres of waste per week at $3.90 per metre, it seemed more likely than not that the applicant would not have been able to make the lease payments during the period in question and the guarantee would have had to be called on. Hence this item was unlikely to be a relevant operating expense. In addition, lease payments were of course capital payments, not income related. Exhibit 14 indicated that the applicant had other, albeit small, income, and several other quite significant expenses in respect of that income. No such division appeared in exhibit 13 and this discrepancy, indeed the division itself, was not explained or subjected to cross examination. It was difficult to see why this amount should be made applicable to the Pacific Waste contract alone as an income and expenditure item. Registration and insurance Again there was no discussion or explanation of this item at trial or in submissions. The amount apparently applied to both the compactor and the chassis. As the compactor was to be owned -9- by the respondent, its insurance and any appropriate registration would have become the responsibility of the respondent. As for the chassis, insurance was irrelevant as both repair and temporary replacement were express parts of the respondent's agreement. Total write-off or theft was impliedly if not expressly in the same category. Registration was of the same genre as fuel and the judgment treated it accordingly. Repairs and maintenance These were all to be absorbed by the respondent and would not have been outgoings of the applicant. All these matters fell to be decided more on the basis of no explanation or investigation at the trial than on any precise mathematical analysis or proof. That was why I was left with the task of a global assessment rather than strict deductive logic or conclusions from actual testimony. In this task, although significantly unaided by counsel, I cut what I thought was a fairly hefty swathe through the applicant's exaggerated claims and fixed on integers reduced for reasonable contingencies and to take account of the best available likelihoods as to future occurrences and any appropriate true expenditure deductions. The indicative minima for the loss of profits claim were accepted as as fair an allowance both ways of the probable truth as the evidence and submissions permitted. - 10 - No basis has been established for any accidental or substantive error in the conclusions reached and calculations made in the judgment. The motion is dismissed with costs. Py