SOLA BASIC AUSTRALIA LIMITED v MORGANITE CERAMIC FIBRES PTY LIMITED [1989] NSWCA 187

SOLA BASIC AUSTRALIA LIMITED vy MORGANITE CERAMIC FIBRES PTY LIMITED

SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

Hope, PRIESTLEY and MEAGHER JJA 7 February 1989, 8 February 1989, 11 May 1989 [1989] NSWCA 187

CONTRACT — sale of industrial equipment — breakdown — dispute between buyer and seller about liability for consequential damage to buyer — buyer insured against industrial risk and business interruption — payments by buyer's insurer to buyer — buyer brings proceedings against seller — seller claims agreement with buyer amounting to accord and satisfaction insurer not party to alleged agreement — seller knew of buyer's insurance situation — accord and satisfaction issue tried separately — trial judge finds — (i) as a matter of construction, no agreement to settle all disputes between parties — (ii) if there were accord and satisfaction, insurer's right of subrogation not lost — on appeal, trial judge upheld by majority on (i), the majority not deciding (ii) — Meagher JA, dissenting, would reverse trial judge on (i) and (ii). ORDERS Appeal dismissed with costs.

Priestley JA Three companies are concerned with the answers to the two questions raised in this appeal. Two of the companies are the parties to these proceedings. The third is not, but has a substantial interest in them.

The first company is Sola Basic Australia Limited ("Sola"), the appellant, a manufacturer and seller of heavy duty electrical transformers and accessory equipment. The second is Morganite Ceramic Fibres Pty Limited ("Morganite"), the respondent, which produces ceramic fibre thermal insulation products for sale. In 1983 Morganite bought from Sola a Transformer/Reactor system ("the equipment") for use in connection with an arc furnace which made some of its products. The third company, not party to the proceedings, is an insurer which indemnified Morganite against risks defined in two policies, one called an "Industrial Special Risks Insurance Policy" and the other a "Business Interruption Insurance Policy".