KELSO BUILDERS SUPPLIES PTY LTD v TIMBRECK PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY P, SAMUELS and MEAGHER JJA 11 May 1989, 30 May 1989 [1989] NSWCA 121 CONTRACT — express terms — credit arrangements for the supply of timber — discount provided if paid within 30 days — alleged conversation, rejected by trial judge, that discount arrangement a "sham" — schedule of payments shows that discount was frequently allowed although payment made outside 30 days — witness justifies allowance of discount by reference to existence of disputes and certain over-payments — trial judge accepts that witness — held: (1) Having regard to the rejection of the credit-worthiness of the appellant's witness, the trial judge's findings concerning the terms of the contract between the parties could not be disturbed by an appellate court. Brunskill vy Sovereign Marine and General Insurance Co Ltd (1985) 59 ALJR 842 applied. Chambers v Jobling (1986) 7 NSWLR 1 and Jones v Hyde, High Court of Australia, unreported, 11 April 1989 referred to; (2) The evidence did not justify a conclusion of an estoppel against, or waiver by, the creditor of the terms, as found, providing for discounted price only for payments made on time; (3) A defence that the terms constituted a penalty and that the amount claimed was not enforceable could not be raised for the first time on appeal. Coulton v Holcombe (1986-7) 162 CLR 1 applied; O'Dea v Allstates Leasing System (WA) Pty Ltd (1982-3) 152 CLR 359 and Esanda Finance Corporation Ltd v Plessnig (1989) 63 ALJR 238 referred to; (4) Other challenges as to the amount of the judgment and the provision for interest had no substance; (5) Appeal (from Conomos DCJ) accordingly dismissed. CONTRACT — penalty — provision for indulgence in credit arrangements if price paid within 30 days — provision for a substantially larger sum to be paid if the 30 day requirement was not complied with — frequent failure to impose the larger sum despite late payments — whether constitutes a penalty — held: Unnecessary to decide — the point not properly raised below could not be raised for the first time on appeal. O'Dea v Allstates Leasing System (WA) Pty Ltd (1982-3) 152 CLR 359 referred to. CONTRACT — waiver — requirement of clear conduct to constitute waiver — McCutcheon v David Macbrayne Ltd [1964] 1 WLR 125, 128 (HL) applied. Kirby P The only interesting point in this appeal was one which was not arguedat the trial. It is one which, for reasons which I will state, I would not allow the appellant to argue in this Court. It concerns whether an arrangement between the parties, companies engaged in the building trade, included a credit provision which amounted to a penalty upon the appellant which a court would not enforce. The matters which remain for decision are otherwise unremarkable and relatively easy of resolution. Supply of timber on trade terms The judgment under appeal requires the appellant to pay the respondent the sum of $46,104.14. It was in that sum that the trial judge (Conomos DCJ) on 3 March 1987 entered judgment in favour of the respondent. The sum includes the amount claimed by the respondent in its statement of claim together with interest of $9,801. The dispute between the parties derives from dealings between them connected with the supply of timber by the respondent to the appellant. The respondent's business involves the sale of timber to wholesalers and retailers. 2 UNREPORTED JUDGMENTS There is no dispute that the appellant purchased timber from the respondent. The amount of the judgment (other than the sum for interest) represents the debt which the respondent alleges is due to it upon a reconciliation of the accounts between the parties for the months of February to April 1984. The principal dispute at the trial concerned the terms of the contract between the parties by which the arrangements between them as to the credit to be provided to the appellant, were agreed. Put very shortly, the respondent alleged a simple agreement under which timber would be supplied at a discounted price, provided that the price was paid in full within 30 days. The financial records, which were in evidence, showed that the discount was regularly given to the appellant before it fell into arrears. Indeed, even after the appellant failed to pay its full account within the time specified, the discount was allowed. This fact provided the appellant with the first, and the principal, ground upon which it asserted that it was not liable to the respondent for the amount claimed. That amount was, in effect, the difference between the price agreed without the discount and the price from which the discount had been deducted. A second ground, relied on at the trial, arose from a conversation which the appellant's witness, Mr Michael Ovchinnikov claimed he had had with the witness for the respondent, Mr Robert McDonald. The evidence of these two gentlemen constituted the whole of the oral evidence taken at the trial. According to Mr Ovchinnikov, Mr McDonald had acknowledged that the discount arrangement was, in effect, a sham introduced for "insurance purposes" or for the purpose of enlarging the respondent's claim against a liquidator, in the event that the purchaser later became insolvent, something apparently not unknown in the building trade. Having regard to the course of dealings between the parties, and this conversation, the appellant urged that it had paid its debts to the respondent in full. It asked Conomos DCJ to accept that the arrangement for discounting was a sham and that the real contract between the parties involved terms which simply bound the appellant to pay the "discounted" price. Alternatively, the appellant argued that, by its course of dealings, the respondent had waived the payment of the higher sum or was estopped from alleging that the terms as to the allowance of discounts were those upon which it dealt with the appellant. Finally, when the appeal was called, the additional basis for resisting the "undiscounted" price was urged by senior counsel for the appellant, who did not appear below. This was that the "discount" amounted to the imposition of a penalty and could in no way be seen as a genuine attempt by the respondent to estimate the credit charge reasonably to be levied on the appellant for a late payment of the agreed sum. It will be necessary to return to this argument. Turning first to the argument in contract concerning the terms which the parties actually agreed upon, it was obviously essential for Conomos DCJ to reach a conclusion about the evidence given by Mr Ovchinnikov. His Honour does not list his findings of fact. He contented himself instead with a resume of what each of the witnesses told him. However, in the closing page of his judgment, he proceeded to set out his conclusions both as to the credit-worthiness of the witnesses and as to the true nature of the agreement between the parties which emerged from their dealings. As to his findings on credit, Conomos DCJ said this: "Having observed both witnesses, I have no hesitation in accepting the evidence of Mr McDonald. Mr Michael Ovchinnikov was unconvincing and evasive. It is obvious to the Court that he has been carrying on business, using his brother and sister-in-law as a URJ KELSO BUILDERS SUPPLIES PTY LTD v TIMBRECK PTY LTD (Kirby P) 3 front, because of the provisions of the Bankruptcy Act and the Companies Act. His credit was severely damaged in this Court and I do not accept his evidence. The defendant maintained that the discount stamps and the discount offer in the price list were a sham. I do not accept that. The discount stamps and the discounts were an ordinary prudent form of dealing between persons in commerce in the community, and they can properly be viewed as such. I am reinforced in my finding on this point by the cogent, clear and honest evidence of Mr McDonald." It is clear from this passage that Conomos DCJ did not accept Mr Ovchinnikov's testimony. The case must therefore be approached in this Court upon the basis that the evidence of Mr Ovchinnikov is rejected and the evidence of Mr McDonald is accepted. In its first ground of appeal, the appellant urged that his Honour's "preference" for the evidence of Mr McDonald over that of Mr Ovchinnikov did not go so far as to amount to a positive holding that he disbelieved Mr Ovchinnikov's evidence in its entirety. I do not so interpret his Honour's remarks. In fact, upon this point, I think they could scarcely have been clearer. His Honour said "His evidence was severely damaged in this Court and I do not accept his evidence". It is rare in this Court, nowadays, to see such an emphatic statement of general disbelief of a witness's testimony. An appellate court might have reservations about the capacity of a judge to determine truth telling by the appearance of a witness in court. Such doubts have been expressed by judges of the highest authority. For example, Lord Atkin, then in the English Court of Appeal, quite frequently expressed his doubts about the capacity of "the lynx eyed Judge who can discern the truth teller from the liar by looking at him". He declared that such a person was "more often found in fiction or in appellate judgments than on the Bench". See Lek v Matthews (1926) 25 Ll L Rep 525, 543. In Soc d' Avances Commerciales v Merchants Marine Insurance Co (1924) 20 LI L Rep 140 at 152 he said: "T think that an ounce of intrinsic merit or demerit in the evidence, that is to say, the value of the comparison of evidence with known facts, is worth pounds of demeanour." I agree with these comments. They are borne out by recent empirical studies which show the unreliability of determining truth from appearances. However that may be, the orthodox rule in Australia, repeatedly expressed by the High Court of Australia and applied in this Court, is that an appellate court must accept such findings as to credit by a trial judge unless they involve a clear misuse of the advantage which that judge has in seeing the witnesses or unless they result in a conclusion which is glaringly improbable. See Paterson v Paterson (1953) 89 CLR 212, 222; Warren v Coombes (1979) 142 CLR 531, 537; Brunskill v Sovereign Marine and General Insurance Co Ltd (1985) 59 ALJR 842; 62 ALR 53 (at 844, 56-57). See also Chambers v Jobling (1986) 7 NSWLR 1, 8, 19. Any belief that Lord Atkin's view might, eventually prevail in Australia, and that a wider authority might be given to appellate courts conducting a rehearing to reach their conclusions on the basis of the "pound of evidence', was dealt its most recent blow by the unanimous decision of the High Court in Jones v Hyde (unreported, 11 April 1989). There, McHugh J (with whom Brennan, Deane, Dawson and Toohey JJ agreed) pointed out that even where a trial judge makes no express reference to demeanour and credibility, these considerations may have played a part in his conclusion. In that case, although the trial judge (Kelly J) had not expressly referred to his observations of the demeanour of the parties and "their manner of giving evidence", McHugh J did not accept that such considerations "played no part in his findings". On the 4 UNREPORTED JUDGMENTS contrary, his Honour concluded: "TI think that they almost certainly did". He then expressed the opinion which led to the setting aside of the order of the Full Federal Court: "Tn accordance with the rules relating to the review of findings of fact based in whole or in part on demeanour, those findings are not open to review in an appellate court. The judgment for the plaintiff must be reinstated." This, therefore, is the approach which must be applied in this Court. It must be applied with particular stringency in this appeal because of the enthusiastic and emphatic way in which Conomos DCJ grounded his conclusion about the terms of the contract between the parties in his rejection of the credit worthiness of the testimony of Mr Ovchinnikov. There would have been other ways by which his Honour could have arrived, on the objective evidence, to a similar conclusion. For example, Mr Ovchinnikov said that his conversation with Mr Fisher for the respondent took place in late 1982 or early 1983. He says this was before he did any business with the respondent. This claim is not readily reconcilable with Mr Ovchinnikov's document titled "An Introduction and Application for Credit". It bears the date December 1980. However that may be it was clearly open to his Honour to disbelieve Mr Ovchinnikov and to reject his evidence. This is what he did. There is no basis for suggesting that his conclusion is glaringly impossible. In these circumstances, this Court is not authorised, at least in this case, to disturb his Honour's conclusion and to substitute its own. It must approach the resolution of the issues in the appeal from the standpoint that the evidence of Mr Ochinnikovic is rejected and the evidence of Mr McDonald is accepted. Notwithstanding this finding, the appellant argued that Conomos DCJ erred in finding that it was a term of the contract between the parties that the full (or non-discounted) price for the timber would be paid if the timber were not paid for within the time specified on the monthly statements. Conomos DCJ found that the terms governing the agreement between the parties were, relevantly, contained in a letter of 12 December 1981. This letter addressed to the predecessor of the appellant and signed by the Managing Director of the predecessor of the respondent was in these terms: "Thank you for your recent application of a 30 day credit account... This account has been opened and credit can be extended to $3000 at any one time. Discounts agreed upon are subject to payment of accounts during the month following date of invoice. We would anticipate that routine queries regarding your account can be handled by our usually efficient accounts department. Allan Smith is at your service for the more difficult problems...." Conomos DCJ described these terms in the following passages in his reasons for judgment: "The terms of trade require payment within 30 days in order to obtain a discounted price. A letter is sent in the normal course of events by the plaintiff confirming such arrangements with customers. The terms of payment that are given by the plaintiff are negotiated. Discounts are only allowed if payment is made within the 30 days. Returns of timber supplied by the plaintiff are not allowed if not informed to the plaintiff within 3 days of delivery. The purpose of this time limit is to enable the plaintiff to conduct an inspection of the timber sought to be returned. The invoice price is prepared from a price list and to that a discount stamp is applied. The gross discount for any one month of purchase is stamped on the account. The accounts normally go out within 5 working days of the end of any given month." URJ KELSO BUILDERS SUPPLIES PTY LTD v TIMBRECK PTY LTD (Kirby P) 5 And he went on: "Tn any event, following upon the application for credit, two letters dated 12 January, 1981, were sent by the plaintiff to the address at 125 Sydney Road, Kelso. Those two letters set out quite clearly the terms and conditions upon which the plaintiff was prepared to deal with the defendant." The appellant disputed these conclusions. It urged that the letter was but one element in determining the terms of the contract entered between the parties. It was argued that the contract was only partly in writing but also partly oral and partly implied. In particular, the appellant relied-upon conversations which Mr Ovchinnikov said that he had had with Mr Fisher for the respondent. It also relied upon price lists, invoices and the course of conduct of the parties. So far as the conversation with Mr Fisher was concerned, the appellant pointed out that Mr Fisher had not been called. The last mentioned argument founders once again upon the rejection by Conomos DCJ of the evidence of Mr Ovchinnikov. Even if he had a conversation with Mr Fisher, there were many reasons which could explain the failure of the respondent to call Mr Fisher, or indeed Mr Alan Smith with whom also Mr Ovchinnikov had dealings. Once his Honour had rejected the credit-worthiness of Mr Ovchinnikov, anything he said about his conversation with Mr Fisher (or other officers of the respondent) must be disregarded. The case must then be determined on the basis of the evidence of Mr McDonald (whom his Honour accepted) and the objective written material, such as the letter quoted above and the financial statements to which reference will now be made. Waiver and conventional estoppel These conclusions dispose of the first two grounds of the appeal. The third ground asserted that Conomos DCJ erred in rejecting the argument that the respondent was, by the pattern of payments shown in the financial dealings between the parties, estopped by the repeated acceptance of late payments and the provision of discount notwithstanding. Alternatively, the appellant claimed that the pattern of the acceptance of late payments demonstrated a waiver by the respondent of the term of the contract found originally to have been entered between the parties. According to the appellant, the respondent should be held to that waiver as this was the basis upon which the appellant continued to deal with the respondent and to purchase timber from it. The appellant pointed out that this argument did not rely upon the credit worthiness of Mr Ovchinnikov. It was grounded, fundamentally, in the records of the respondent and the undisputed fact that it allowed the discounted price to the appellant despite a repeated pattern of late payments. I incorporate in these reasons a schedule of the invoices sent by the respondent to the appellant, the due date, the amount of the "discount", the date upon which the invoice was actually paid and the amount of the payment accepted by the respondent: SCHEDULE OF PAYMENTS Month of Total Due Date Discount Date Paid Amount Paid Statement Invoices $ $ $ July 14,363.30 31.8.1982 3,340.22 27.8.1982 10,114.33 August 19,389.39 30.9.1982 7,195.65 8.9.1982 5,000.00 27.9.1982 5,000.00 September 29,667.65 31.10.1982 8,648.55 13.10.1982 5,000.00 25.10.1982 5,000.00 UNREPORTED JUDGMENTS October November December January February March April June July August September October November 19,599.29 22,004.99 19,486.69 8,306.21 18,853.51 29,662.28 20,584.30 20,170.39 28,651.65 50,113.10 44,797.27 40,152.53 32,923.55 54,242.53 30.11.1982 3,608.05 31.12.1982 5,851.45 31.1.1983 28.2.1983 31.3.1983 30.4.1983 31.5.1983 30.6.1983 31.7.1983 31.8.1983 30.9.1983 4,900.03 1,348.04 5,698.85 9,534.09 4,372.66 4,836.52 29.10.1982 5.11.1982 16.11.1982 30.11.1982 22.12.1982 11.1.1983 2.3.1983 28.1.1983 10.2.1983 9.3.1983 24.3.1983 30.3.1983 29.4.1983 9.4.1983 12.5.1983 27.5.1983 3.6.1983 31.5.1983 10.6.1983 1.7.1983 1.7.1983 24.6.1983 15.7.1983 11,492.67 1.8.1983 5.8.1983 16,250.95 31.8.1983 19.8.1983 12.9.1983 31.10.1983 14,085.51 16.9.1983 30.9.1983 21.10.1983 31.10.1983 31.10.1983 14,230.35 17.11.1983 25.11.1983 1.12.1983 30.11.1983 11,115.85 9.12.1983 5.1.1984 31.12.1983 20,056.66 17.1.1984 2.2.1984 6.2.1984 7,000.00 2,167.17 5,000.00 10,000.00 10,000.00 4,000.00 1,360.77 10,000.00 5,000.00 5,833.58 5,000.00 6,236.37 10,000.00 5,000.00 3,000.00 2,128.19 5,000.00 3,000.00 4,000.00 3,711.48 3,000.00 4,000.00 6,905.48 12,000.00 5,158.98 10,000.00 10,000.00 8,040.87 4,066.53 5,000.00 15,000.00 5,000.00 4,447.68 10,000.00 5,000.00 5,099.91 15,000.00 6,807.70 10,000.00 10,000.00 10,000.00 URJ KELSO BUILDERS SUPPLIES PTY LTD v TIMBRECK PTY LTD (Kirby P) 7 11.2.1984 4,185.87 December 26,814.75 31.1.1984 5,292.31 17.2.1984 10,000.00 2.3.1984 3,154.97 January 17,892.86 29.2.1984 6,147.82 2.3.1984 = 11,775.04 February 54,714.07 31.3.1984 26,602.04 13.4.1984 10,000.00 10,000.00 It is true, as the appellant points out, that the schedule shows a repeated provision of the "discount" despite late payment. However, the claim for the application of the doctrine of conventional estoppel fails because this is not a case where the parties entered into a transaction upon a basis of facts which were assumed, by convention, to exist but were not stated in their written documents. Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226. Once the assertion by Mr Ovchinnikov is rejected, namely that the discount arrangement was from the start a "sham", all that is left is the letter quoted by Conomos DCJ and the subsequent dealings between the parties. There is no basis for holding, in these circumstances, that the parties have dealt with each other from the start upon a basis which was assumed to operate between them. As to any other form of estoppel upon which the appellant sought to rely (or the alternative proposition that by its conduct the respondent had waived reliance on the strict terms of the contract between it and the appellant) it is essential to notice the reason that Conomos DCJ gave for rejecting this argument. His Honour records, at one point in his reasons, the reaction of Mr McDonald when he was taken to the schedule of late payments and asked to reconcile them with the suggested terms of the contract upon which the respondent sued. According to his Honour: "Mr McDonald was cross-examined. He agreed that if the discounted figures were charged, then the account, to all intents and purposes, would be fully paid.... [He] was taken to Exhibit 1... That exhibit is an extract of statements delivered to the defendant from time to time by the plaintiff. He agreed that the document revealed that, from time to time, small amounts were received by the plaintiff outside of the time stipulated for discount, but at the discounted price. He agreed also that, from time to time, credits of discount were made to the defendant's account before the last payment, as revealed in Exhibit 1. He said that the plaintiff always requested its money and the defendant made the payments. He said that Mr Michael Ovchinnikov would pay in advance and on occasions would hold moneys due in terms of disputes which arose from time to time in relation to invoices and statements sent by the plaintiff to the defendant. Mr McDonald indicated that disputes could arise because of faulty timber, as to the price charged and as to the amount of credit to be posted by the plaintiff in favour of the defendant for returns of timber. He stated that was the reason that the plaintiff accepted moneys from the defendant outside the discount period." It will be remembered that his Honour accepted the evidence of Mr McDonald. Accordingly, his conclusion about the defence of estoppel or waiver is unsurprising: "The plaintiff acted quite properly in accordance with honest, commercial dealing in not insisting upon the retail price. It gave the defendant the benefit of any doubt as to the bona fides of disputed amounts. In those circumstances, I 8 UNREPORTED JUDGMENTS reject the submissions relating to waiver or estoppel. In relation to the returns of timber, I accept the evidence of Mr McDonald." In order to establish an estoppel against the respondent's reliance upon the strict terms of the contract (as found) or a waiver by the respondent of those terms to which it should be held, it is necessary for the appellant to point to conduct which unequivocally amounts to a representation which it was entitled to rely upon in further dealings with the respondent. Cf Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana [1983] QB 529. It is true that there is a "trend" as Conomos DCJ found, by which the respondent accepted late payments and, notwithstanding, allowed a discount. But this acceptance cannot be attributed exclusively to a representation by the respondent that it would no longer insist upon the strict terms of its contract. Nor can it amount to a waiver of those terms when later the respondent insisted upon the letter of the agreement. In McCutcheon v David Macbrayne Limited [1964] 1 WLR 125 (HL) (Scot), Lord Reid referred to the need for clarity in the dealings between parties where it was claimed that from their course of dealings certain implied conditions could be derived: "The only other ground on which it would seem possible to import these conditions is that based on a course of dealing. If two parties had made a series of similar contracts each containing certain conditions, and then they make another without expressly referring to those conditions it may be that those conditions ought to be implied. If the officious bystander had asked them whether they had intended to leave out the conditions this time, both must, as honest men, have said 'Of course not"'. His Lordship rejected that argument in the case before him. Upon the same basis, I would reject it in the present case. Once his Honour had accepted the evidence of Mr McDonald, the argument for estoppel or waiver was untenable. It is notable, that in his evidence, Mr McDonald recounted the following conversation with Mr Ochinnikovic when, the two met for the last time: "Q: Did Mr Ovchinnikov attend your office? A: Yes he did. Q: What did he say? A: He said to me 'I want to settle my account'. Q: What did you say? A: I said, 'Fine'. Q: Go on, what else was said? A: Mr Ovchinnikov then said to me, 'If I give you my cheque in full payment of this account will you allow me my discount?' Q: What did you say? A: I said 'No'. Q: What happened after that? A: He left his seat and left." It should be remarked that this account, the central part of which Conomos DCJ recorded, and which he obviously accepted, does not contain an assertion by Mr Ovchinnikov that he was entitled to pay for the timber at the discounted rate. It does not assert that the real terms of the contract were, of course, for the payment of the discounted price or even that, whatever their formal terms, he had been led into continuing his dealings with the respondent upon an assumption that the discount would be allowed, despite slow payments. Instead, there is a request for an agreement to allow the discount. That request itself acknowledges an appreciation that the full price was payable and that any waiver of it was then in the gift of the respondent - as for example because of a previous over payment or a dispute concerning the quality of timber or returns. The third ground of appeal, as elaborated at the hearing of the appeal, must likewise be rejected. The defence of penalty URJ KELSO BUILDERS SUPPLIES PTY LTD v TIMBRECK PTY LTD (Kirby P) 9 To overcome the fact that no defence had been raised at the trial, claiming that the credit charge represented an unenforceable penalty, the appellant at first urged that this could nonetheless be taken into account in determining the terms of the contract between the parties. A contract which contained such a penalty would not be found by the Court, if there were doubt. This ingenious argument fails because of the clear finding of the trial judge based upon his rejection of the evidence of Mr Ovchinnikov and his consequent reliance upon the written exchanges between the parties. The appellant then sought to enlarge the grounds of appeal to enable it to argue directly that the appeal should be allowed on the basis that the judgment debt was based upon a contractual term which amounted to the imposition on the appellant of a penalty which the law would not enforce. O'Dea v Allstates Leasing System (WA) Pty Ltd (1982-3) 152 CLR 359. See also Esanda Finance Corporation Ltd v Plessnig (1989) 63 ALJR 238 (HC). The respondent opposed the application of the appellant to raise this issue. It pointed out that no issue of penalty had been raised in the defence filed in the District Court. Nor was such an issue raised in the definition of the issues for trial at the outset of the hearing. No such issue was therefore raised by any of the evidence given below. Nor was a defence upon this basis raised in submission to Conomos DCJ. Hence, it was not dealt with by his Honour. If, notwithstanding these facts, the issue raised by the defence were a pure question of law, this Court could nonetheless permit the appellant to raise it for the first time on the appeal. The Court could then simply proceed to apply to the proved facts the applicable legal principle. However, the respondent argued that, had the issue of penalty been in dispute at the trial, it would have called evidence concerning the practice of the trade in relation to "discounts" and credit arrangements, the costs involved in providing credit to companies such as the appellant and other material to justify the contractual term as to credit which it had laid down and which the appellant had accepted. Clearly, where a defence of penalty is raised it must be open to the party, whose contract is attacked, to endeavour by evidence to justify its terms. For example, it might wish, by evidence, to attempt to prove that the term of the contract under attack is perfectly reasonable, is common in the trade or amounts to its genuine attempt to estimate the loss suffered by failure to comply with the credit arrangement. Consistent with the established authority of the High Court of Australia which lays down the approach to be taken by an appellate court to an application such as that made by the appellant, it must be refused. Coulton v Holcombe (1987) 162 CLR 1; Water Board v Moustakas (1987) 62 ALJR 209. I nevertheless reach this conclusion with some hesitation because there is no gainsaying in the fact that the "discount" provided here for punctual payment was very substantial indeed. When latterly denied to the appellant it amounted to a very substantial charge over and above that which would have been paid for the timber supplied, had the payment been made on time or the default waived as so often it had been. I find it difficult to think that evidence could have been brought to justify the very substantial differential as a true pre-estimate of the loss caused by late payment. The respondent, in any case, argued that the amounts could be justified because they did not constitute a "penalty" in law. It was said that where a creditor grants an indulgence, no penalty is involved even though, where the conditions are not met, the indulgence is lost. There is some support for this proposition. See eg O'Dea at 367 and Meagher, Gummow and Lehaine, Equity 10 UNREPORTED JUDGMENTS Doctrines and Remedies (2nd ed) 1816. Although I have doubts that the policy of the law as to penalty could be avoided by such a simple expedient, it is not necessary to resolve that issue in the present case. It is an important question which can remain for the future. The respondent was certainly entitled to call evidence and to conduct cross-examination to meet a contention that its contractual arrangements amounted to a penalty. It was denied the opportunity to do so at the trial. Accordingly, the point cannot be raised in the appeal. A dispute as to the amount owing Next, the appellant sought to dispute the amount in which the judgment had been entered by the trial judge. It was alleged that a mathematical mistake had been made in the calculation of the sum due. It was argued that, if the respondent was entitled to succeed, its judgment should have been in the sum of $30,155.32 and not $36,303.14. The difference between the two amounts is $6,147.82. But as the respondent has pointed out, this discrepancy arises because that sum was included twice in the appellant's calculations, to the benefit of the appellant. Furthermore, as the respondent justly complains, had this point been raised at the trial (as it was not) evidence in explanation of the amount claimed could have been provided by Mr McDonald. The trial was conducted on the basis that the issue for decision was the entitlement of the respondent to charge the appellant the full and non-discounted rate for the timber supplied during the last months of their dealings. At the trial, the amount itself was not disputed. I am not convinced that a mathematical mistake was made which justice to the appellant requires this Court to correct. Interest Finally, without any ground of appeal to permit it to do so, the appellant urged on a weary court that the trial judge had erred in allowing interest. It was said that the judgment debt already contained a provision which was equivalent to the imposition of interest for late payment so that no substantial interest should have been allowed by his Honour or should be allowed by this Court. Once again, this is a matter which, if it were to be contested, ought to have been raised before Conomos DCJ. Before his Honour there was no dispute concerning the application of the normal rules as to interest. The fallacy in the appellant's contention is, in any case, clear. If, as it has been held, the respondent was entitled to payment at the full ("non-discounted") rate for the timber it supplied, that was the debt which in law the appellant contracted to pay. That is the sum in which the respondent has been kept out of its money. Upon that sum it is entitled to interest in the normal way. Necessarily the determination in this case resolves the issues in the appeal which were in contest at the trial. In particular, nothing which I have said should be taken as an endorsement of the credit arrangement which this respondent made with the appellant. But on the issues which the parties chose to fight below, and which they could properly raise in this Court, the challenges to the judgment entered by Conomos DCJ have failed. Order The appeal must therefore be dismissed with costs. Counsel for the Appellant: D Bennett QC and P Joseph Solicitors for the Appellant: John J Puleo and Co URJ KELSO BUILDERS SUPPLIES PTY LTD v TIMBRECK PTY LTD (Kirby P) 11 Counsel for the Respondent: J Hamilton QC and J Duncan Solicitors for the Respondent: Thurlow Fisher