Triple M Mechanical Services Pty Limited v Climate Technologies Pty Limited [2021] NSWSC 1554

Supreme Court New South Wales

Medium Neutral Citation: Triple M Mechanical Services Pty Limited v Climate Technologies Pty Limited [2021] NSWSC 1554 Hearing dates: 30 November 2021 Decision date: 02 December 2021 Jurisdiction: Equity - Commercial List Before: Ball J Decision: (1) Judgment for the cross-claimant in the sum of $934,660.19; (2) The cross-defendant pay the cross-claimant's costs of the cross-claim. Catchwords: CONTRACT – sale of goods – breach of damages – no issue of principle Legislation Cited: Sale of Goods Act 1923 (NSW) Sale of Goods Ordinance (HK) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: UGL Rail Pty Ltd v Wilkinson Murray Pty Ltd [2014] NSWSC 1959 Texts Cited: J Edelman, McGregor on Damages (21st ed, 2021, Thomson Reuters) Category: Principal judgment Parties: Triple M Mechanical Services Pty Limited (Plaintiff) Climate Technologies Pty Limited (Defendant | Cross-Claimant) Sonkor Global HVAC Solutions Limited (Cross-Defendant) Representation: Counsel: M F Newton (Defendant | Cross-Claimant)

Solicitors: Sparke Helmore (Defendant | Cross-Claimant) File Number(s): 2017/270866 Publication restriction: None

Judgment 1. In these proceedings, the plaintiff, Triple M Mechanical Services Pty Limited (Triple M), sued the defendant/cross-claimant, Climate Technologies Pty Limited (Climate), for damages arising from the supply of 606 defective Ventitech fan coil units (FCUs) acquired by Triple M as part of the air-conditioning system for the ICC Hotel development in Darling Harbour, Sydney. Triple M was a subcontractor to the head contractor, Lendlease Building Pty Ltd (Lendlease), and was responsible for installing the air-conditioning system. Climate was the Australian distributor of the FCUs, which were manufactured by the cross-defendant, Sonkor Global HVAC Solutions Limited (Sonkor), a company incorporated in Hong Kong. 2. Climate settled the claim brought by Triple M for $800,000 (inclusive of interest and costs). The evidence is that it has paid that amount. By its cross-claim filed on 21 May 2019, Climate seeks to recover that amount from Sonkor together with legal costs incurred in connection with Triple M's claim. Those costs total $95,520.32. Sonkor has not filed an appearance and did not appear at the hearing of the matter. 3. I am satisfied that the cross-claim has been properly served on Sonkor in accordance with Div 2 of Pt 11A of the Uniform Civil Procedure Rules 2005 (NSW). 4. It is unclear whether New South Wales or Hong Kong law applies to the contract for the supply of the FCUs by Sonkor. Nothing, however, turns on the resolution of that question. Whether the contract is governed by New South Wales or Hong Kong law, implied into the contract are terms that the FCUs be of merchantable quality and fit for purpose: see Sale of Goods Act 1923 (NSW), s 19(1), (2); Sale of Goods Ordinance (HK), s 16(2), (3). The evidence discloses that it was made known to Sonkor that the FCUs were required for installation in a hotel project in Darling Harbour. 5. The evidence also establishes that the FCUs were defective. According to expert evidence given by Mr George Floth, a mechanical engineer, the FCUs principally suffered from a design defect because the FCU motors were not earthed to the FCU chassis, which caused bearing failures to arise from 'electric discharge machining' (EDM) of the bearing housing. EDM is the process by which metal is removed by the application of a pulsed voltage between two electrodes in the presence of dielectric fluid. In Mr Floth's opinion, the fluted erosion pattern in the bearing cases of the FCU motors was clear evidence of EDM arising from the fact that the bearings were subjected to a regular voltage pulse, which could only be explained by the failure to earth the motors. According to Mr Floth, the damage to the bearings explained the excessive noise that the FCU motors had been heard to emit and would lead to the FCU motors being irretrievably damaged after a short period of operation. 6. Mr Floth expressed the view that approximately 90.6 percent of the motors inspected presented with shaft voltages which represented a dangerously high risk of bearing failure due to EDM and that a further 6.3 percent of those motors presented with shaft voltages that would be considered to entail risk of bearing failure due to EDM. He also expressed the view that it was not practicable to rectify the FCUs by retro-fitting an earthing mechanism because, among other things, assessing the state of the bearings for each individual unit would require dismantling them and the cost of doing so would likely exceed the cost of replacement of the motors and provision of an earthing mechanism. 7. In these proceedings, Triple M ultimately claimed an amount of $1,342,430.64. That amount was broken down as follows: i. Costs incurred by plaintiff engaging subcontractors, suppliers and consultants $373,657.97 ii. Labour cost to plaintiff of removal and reinstatement of FCU's from ceiling spaces including the cost of disconnecting mechanical electrical and mechanical plumbing and the replacement of motors $560,770.48 iii. Off-site overheads $158,002.19 xiv. Insurance Excess claimed by Lendlease $250,000.00