DIFFERENTIALS PTY LTD v GREENCARE INDUSTRIES PTY LTD SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MAHONEY, HANDLEY and SHELLER JJA 25 November 1993, 11 August 1994 [1994] NSWCA 83 CONTRACT — ORAL- DISPUTED — NO QUESTION OF PRINCIPLE. CONTRACT — disputed contract for sale of goods — contract allegedly made during telephone call — trial judge holds that plaintiff failed to discharge civil onus — demeanour not decisive either way — On appeal — held: Appeal dismissed — Court unable to find appellant had discharged onus. ORDER Appeal dismissed with costs. Mahoney JA I have the benefit of reading the judgment of Sheller JA. I agree with his Honour's conclusions and with the orders he proposes. In a case such as this, it is difficult to arrive at a decision which one can be satisfied is certainly correct. The learned trial judge saw no ground for choosing between the two main witnesses, Mr Liprini and Mr Livingstone, as witnesses who were attempting to tell the truth. Having considered the evidence anew, I agree with Sheller JA that it is not possible to point to anything in the manner in which they gave evidence which enables one to choose between them. Therefore, the appeal must be decided, in substance, upon the basis of what, on the text of the evidence and the other material, emerges as the most probable conclusion. I agree with Sheller JA that, so considered, the appellant has failed to prove its case to the degree of satisfaction which the law requires. The appeal should be dismissed with costs. Handley JA I agree with Sheller JA. Sheller JA INTRODUCTION The appellant, Differentials Pty Ltd, sued the respondent, Greencare Industries Pty Ltd, in the District Court to recover a debt of $6,137.70 said to have arisen from an oral contract pursuant to which the appellant agreed to supply on the respondent's order ten differentials numbered in the appellant's records as 258-267 inclusive for a price of $613.77 each. The proceedings were heard by his Honour Judge Walsh at the District Court at Wollongong. Judgment was delivered on 1 August 1991. His Honour found a verdict for the respondent. The appellant appeals from that decision. ONE ISSUE It is not necessary to set out the precise terms of the contract upon which the appellant relies. At the trial and on the appeal there was only one issue, the factual issue of whether or not the respondent had ordered the ten differentials in question. There was no dispute that if it had it was liable to pay the amount, together with interest thereon, claimed in the further amended statement of liquidated claim filed by the appellant. 2 UNREPORTED JUDGMENTS The oral evidence extended over two days. Mr Kevin Liprini, a director and shareholder of the appellant, was called by the appellant. Mr David Livingstone, a director of the respondent, Mr Michael O'Brien, the respondent's financial controller during the period June 1987 to October 1989, and Mr Stephen Coy, a director and shareholder of a company referred to as Warrior Engineering, were called by the respondent. A number of documents were tendered by the parties. JUDGMENT AT FIRST INSTANCE In his judgment his Honour reviewed the evidence in detail. Mr Liprini gave evidence that during a telephone conversation between him and Mr Livingstone on 10 September 1987 Mr Livingstone ordered the ten differentials. The evidence of Mr Livingstone was a categorical denial that he had done so. Of these two witnesses, whom he described as the plaintiff and the defendant, his Honour said: "T have on the one hand the plaintiff who seems a straightforward, honest and reliable person who in some of his letters shows an inclination to be impatient with the non-payment that his company was being subjected to, but I have to look at his evidence and look at it closely because he has the onus of proving on the probabilities that this order was in fact made. The defendant gave evidence in a similar forthright manner and is just as adamant that his contention is the true version. I can accept part of a witness' evidence or the whole of a witness' evidence or I can reject a part or I can reject the whole. In this case it should be said that one can accept part of both the plaintiff's evidence and not be satisfied on some other parts. The same applies to the defendant and the same applies to O'Brien." His Honour referred to and quoted from the extensive cross examination of these witnesses. None resiled from his evidence on this point. His Honour's judgment concluded as follows: "It is indeed a difficult case. Of course this is of no comfort to the plaintiff, the plaintiff knows that he has to prove his case, he has the onus to prove the matter on the probabilities. The plaintiff's case was conducted over a range of matters seeking to strengthen an allegation by the plaintiff of this order having been made on 10 September. The plaintiff's counsel also relies on the fact that Mr Coy had said that Greencare instructed him to put and weld the brackets onto the ten cases and Exhibit U bears that out and the reason that the [differential housings] were delivered to the Warrior Engineering Company by the defendant to weld on those brackets was so the differentials would be fitted to the defendant's machine. Well that may be so but in the face of not having evidence to corroborate the matter I find it that the plaintiff's case here when one weighs all the evidence and places it in the scales that the scales remain level and if they remain level then the defendant wins the case and I very much regret that no matter how I looked at this case and all the extraneous matters that were considered I can only come to the conclusion that the plaintiff has not been able to prove to the court on the balance of probabilities that the order for ten differentials was in fact placed. Accordingly there will be a verdict for the defendant." APPELLANT'S SUBMISSION Mr Biscoe QC, who appeared for the appellant, submitted that since the trial judge * thought all the witnesses seemed honest; * derived no assistance from the demeanour of any of them, and * held that when he weighed all the evidence "the scales remained level" so that the appellant failed to prove its case on the balance of probabilities, this Court was entitled to determine the matter for itself, giving due weight to the URJ DIFFERENTIALS PTY LTD v GREENCARE INDUSTRIES PTY LTD (Sheller JA) 3 conclusions of the trial judge. Counsel then took us to the evidence in an attempt to show that the appellant had made out its case on the balance of probabilities. THE APPROACH TO BE TAKEN BY THIS COURT The approach suggested derives from what was said by members of the High Court in Taylor v Johnson (1983) 151 CLR 422 particularly at 426. In that case the trial judge had commented that there was nothing in the demeanour of any of the witnesses which would lead one to conclude that any of them was doing other than endeavouring, to the best of his or her ability and recollection, to tell the truth and that, in the result, he was "left to determine the matter upon the balance of probabilities". Mason ACJ and Murphy and Deane JJ said: "In the view we take, the members of the Court of Appeal were correct in accepting his Honour's comments as being intended to convey that, in a position where he had derived no significant assistance from observing and hearing the witnesses give their evidence, he had resolved the matter by analysis of the evidence before him. That being so, we consider that the members of the Court of Appeal were correct in taking the approach that, subject to giving due weight to the conclusions of the learned trial judge, they were entitled to determine the matter for themselves." This passage from their Honour's judgment was quoted by Samuels JA in Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 at 350. Samuels JA went on at 350-1 to quote the contrary view expressed by Dawson J at 436-7. Dawson J said that: "The trial judge, in saying what he did, was indicating that he was unable to decide the case by rejecting the evidence of a witness or witnesses. That did not mean that the truthful demeanour of the witnesses was not then to be taken into account in reaching a conclusion on the balance of probabilities. Even having regard to what was said by the trial judge, in my view it was entirely inconsistent with accepted principle for the Court of Appeal to have concluded, as in effect it did, that one of the parties was untrustworthy in his dealings and untruthful in his evidence, without having seen or heard him and without having regard to the fact that the trial judge found that he gave the appearance of a truthful witness". Samuels JA remarked at 351 that it seemed to him that the views of Dawson J were more compatible with the current trend of authority in the High Court than those of the majority. In Devries v Australian National Railways Commission (1993) 67 ALJR 528 Brennan Gaudron and McHugh JJ at 531 said: "More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against - even strongly against - that finding of fact. See Brunskill (1985) 59 ALJR 842; Jones v Hyde (1989) 63 ALJR 349; Abalos v Australian Postal Commission (1990) 171 CLR 167. If the trial judge's finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge 'has failed to use or has palpably misused his [or her] advantage' SS Hontestroom v SS Sagaporack [1927] AC 37 at 47 or has acted on evidence which was 'inconsistent with facts incontrovertibly established by the evidence' or which was 'glaringly improbable'. Brunskill at 844." At 532 Deane and Dawson JJ said: "An appellate court which is entrusted with jurisdiction to entertain an appeal by way of rehearing from the decision of a trial judge on questions of fact must set aside a challenged finding of fact made by the trial judge which is shown to be wrong. When such a finding is wholly or partly based on the trial judge's 4 UNREPORTED JUDGMENTS assessment of the trustworthiness of witnesses who have given oral testimony, allowance must be made for the advantage which the trial judge has enjoyed in seeing and hearing the witnesses give their evidence. The 'value and importance' of that advantage 'will vary according to the class of case, and,.... [the circumstances of] the individual case'. See Watt or Thomas v Thomas [1947] AC 484, per Lord Thankerton, at 488. If the challenged finding is affected by identified error of principle or demonstrated mistake or misapprehension about relevant facts, the advantage may, depending on the circumstances, be of little significance or even irrelevant. If the finding is unaffected by such error or mistake, it will be necessary for the appellate court to assess the extent to which it was based on the trial judge's conclusions about the credibility of witnesses and the extent to which those conclusions were themselves based on observation of the witnesses as they gave their evidence as distinct from a consideration of the content of their evidence. Judges are increasingly aware of their own limitations and of the fact that, in a courtroom, the habitual liar may be confident and plausible, and the conscientious truthful witness may be hesitant and uncertain. In that context, it is relevant to note that the cases in which findings of fact and assessments of credibility are, to a significant extent, based on observation of demeanour have possibly become, if they have not always been, the exception rather than the rule. Indeed, as Kirby ACJ pointed out in Galea v Galea (1990) 19 NSWLR 263 at 266, in many cases today, judges at first instance expressly 'disclaim the resolution of factual disputes by reference to witness demeanour'. However, this does not deny that in many cases a trial judge's observation of the demeanour of witnesses as they give their evidence legitimately plays a significant and even decisive part in assessing credibility and in making factual findings. Indeed, as will be seen, the present was such a case. In a case where it appears that a challenged findings of fact has, to a significant extent, been based on the trial judge's observation of the demeanour of the witnesses, the members of an appellate court are inevitably placed in a position of real disadvantage compared with the trial judge. Even in such a case, however, the 'court cannot excuse itself from the task of weighing conflicting evidence and drawing its own inferences and conclusions'. The Glannibanta (1876) 1-PD 283, per James LJ, Baggallay JA and Lush J, at 287 referred to by Dixon CJ and Kitto J in Paterson v Paterson (1953) 89 CLR 212 at 219. The appellate duty in such a case cannot, in our view, be explained in any short exhaustive formula." Had the appellant been able to demonstrate that on the balance of probabilities it had made out its case, a difficult question would have arisen as to whether we should have allowed the appeal because the challenged finding was shown to be wrong or dismissed it because, his Honour having accepted Mr Livingstone as a truthful witness, his conclusion, depending to a substantial degree on Mr Livingstone's credibility, should not be disturbed. I do not have to determine this question because, in my opinion, the appellant's case was not made out on the probabilities. THE APPELLANT'S CASE ON THE PROBABILITIES The parties were agreed that in about November 1985 an oral agreement was concluded between Mr Liprini and Mr Livingstone on the following terms: "(a) The Plaintiff would assemble and manufacture in accordance with the Defendant's requirements from time to time various types of differentials at prices agreed from time to time between the Plaintiff and the Defendant. URJ DIFFERENTIALS PTY LTD v GREENCARE INDUSTRIES PTY LTD (Sheller JA) 5 (b) To enable the Plaintiff to manufacture and assemble the said differentials the Defendant would keep the Plaintiff supplied with sufficient flanges or yokes which were required to be fitted by the Plaintiff into the said differentials. (c) Upon the Defendant ordering particular differentials from the Plaintiff the Plaintiff would deliver the housings for such differentials to the Defendant to permit the Defendant to weld onto each of such housings two brackets after which the Plaintiff would pick up the differentials." The respondent used the differentials as a component in the manufacture by it of a machine used in the maintenance of the greens on golf courses and called a Coremaster. The stages of production of the differentials involved first the acquisition or manufacture and assembly by the appellant of a differential housing. The housing was then delivered by the appellant to the premises of Warrior Engineering where work was done upon it, notably the welding on of the two brackets. As para(c) above suggests, Warrior Engineering did this work on behalf of the respondent and was paid for doing it by the respondent. The housing with the brackets attached was collected by the appellant which completed the assembly and manufacture. It attached the flanges or yokes supplied by the respondent. Part of the material before the Court was a chronology described as "Plaintiff's Chronology" which, except to the extent that it stated otherwise, was agreed between the parties. Over the period of time from November 1985 to September 1987 the appellant delivered to the respondent over two hundred and fifty differentials. The chronology showed that the commercial relationship between the parties after November 1985 was not a smooth one. The appellant complained about delays in payment for differentials supplied and the respondent about the quality of some of the differentials. In August 1987 the appellant served a notice on the defendant under s364(2) (a) of the Companies Code 1981 demanding payment of $56,895.93. On 20 August 1987 the respondent's solicitors wrote to the appellant's solicitors foreshadowing a claim for negligent manufacture of the differentials by the appellant causing loss to the reputation of the respondent in the United States of America said to amount to as much as $3.5 million. On 10 September 1987, according to the evidence of Mr Liprini, Mr Livingstone telephoned him from the United States. Mr Liprini gave evidence of the following conversation: "Q. What did he say to you and what did you say to him? A. First he said that he was going to pay me $18000, would I stop legal proceedings against him and I said 'Yes when I get the $18000', he also said 'We need some more differentials' and I said 'I would not deliver any more until I got firstly the $18000', and then I would deliver some more units to him. I asked him Mow many units?' and he said Mow many have you got?' I said 'I have ten ready now and another ten in the system'. Q. The ten that were ready now, were those the ones that you had from July, the subject of invoice number 2331? A. Yes that's correct. Q. And the ten that you referred to being in the system are they the differentials the subject of these proceedings? A. Yes. Q. All right, go on. A. Mr Livingstone said 'Yes I will take them all'. And "When can you deliver?' Q. And what did you say? A. I reiterated that I would deliver the first lot of ten after I received the cheque for $18000, and the second lot of ten needed to have more work done to them and they would be delivered in due course." 6 UNREPORTED JUDGMENTS There were two lots each of ten differentials mentioned in this conversation. The first lot of ten differentials, then ready, had been ordered by the respondent prior to 30 June 1987. These were delivered to the respondent on 14 September 1987 and were the subject of invoice number 2331 for $5,837.40 which the respondent paid on the day of delivery. By this time the appellant's terms were COD. There is no dispute about these differentials. The second lot of differentials was assembled or manufactured, except for the attachment of the flanges or yokes, after 10 September 1987, but never delivered. They were the subject of two invoices; invoice 2357, dated 23 October 1987, for a differential identified as 258 in an amount of $613.77 and invoice 2377, dated 22 November 1987, for the remaining nine differentials in an amount of $5,523.93. The second lot of differentials is the subject of these proceedings. The sum of the amounts in the two invoices is the amount the appellant claims. Mr Livingstone gave the following evidence about the telephone conversation with Mr Liprini of 10 September 1987: "Q. Would you please tell the court the conversation that you recall that took place on that occasion? A. I rang Kevin and said 'Kevin, why are you winding up my company, you know about all the problems we are having over here with your diffs?' Kevin said 'I don't care, that's your problem, I want payment now or T'll go ahead'. I said 'Kevin, I've just got here in Los Angeles from Sydney and I'm over here to speed up the cash flow'. Kevin said, I beg your pardon, I continued to say 'In fact I sent down a small telegraphic transfer to Sydney today'. Kevin said 'How much have you got?' I said, I'm sorry, Kevin also said 'Tm out of pocket from that $16,000 cheque that you stopped.', I said 'Kevin, I stopped that cheque because it took you many weeks to contact Chuck Shields'. Kevin said 'I didn't realise that that cheque was part of a deal for me to ring Chuck Shields'. I said "Yes you did and you didn't ring him after I stopped the cheque for another two weeks'. I said "That has created massive credibility problems for us over here'. OBJECTION TO EVIDENCE ON NOT BEING PUT TO PLAINTIFF IN CROSS EXAMINATION. OBJECTION NOTED. EVIDENCE IN REPLY TO BE ALLOWED. [His Honour noted in his judgment that Mr Liprini was not recalled]. Q. Mr Livingstone let us move to the central issue here, namely the evidence-given by Mr Liprini yesterday concerning a telephone conversation, if you could focus on what he said and what you said in relation to these ten units? A. Well later in the conversation Kevin said 'You still haven't made good the $16,000 cheque'. I said to Kevin, 'What if I sent you $18,000?' Kevin said 'Can you send me any more?' I said 'No, that's about the conversion of the TT I sent to Australia today' he said 'Okay'. I said 'Will you stop the action if I arrange for Michael O'Brien to give you a cheque tomorrow for $18,000, yes or no?' Kevin said 'Yes I will stop the action but only if your cheque clears'. Q. Yesterday Mr Liprini said that you had said to him on the phone "We need some more differentials', what do you say about that? A. No he didn't, because only a few days later we were receiving 41 differentials from Borg-Warner and why would I wait two days-- Q. Mr Liprini then said or yesterday his evidence to this court was this, he said to you 'David I am giving you no more until I get the $18,000 and then I'll deliver', do you remember him saying that? A. No sir." On 11 September 1987 Mr O'Brien on behalf of the respondent sent a fax in the following terms to the appellant: URJ DIFFERENTIALS PTY LTD v GREENCARE INDUSTRIES PTY LTD (Sheller JA) 7 "This morning we received a Los Angeles fax from our Managing Director, Mr D Livingstone, stating that he spoke to you at length at 7.00 pm last night. Accordingly, at Mr Livingstone's instruction, I hereby enclose a cheque for $18,000 and I understand that your Corporation will withhold all legal action against Greencare Industries Pty Ltd pending further discussions on Tuesday, 6th October, 1987 (subject to flight arrivals) when Mr Livingstone returns to Sydney. Should you have any queries please contact me at your convenience." While his Honour made no finding about this it was agreed in the chronology that-from late May or early June 1987 the respondent had been negotiating with Borg-Warner Australia for the supply of differentials and that on 17 September 1987 Borg-Warner made its first delivery of forty one differential carrier assemblies to the respondent. On 13 November 1987 Borg-Warner delivered to the respondent two hundred and one differential and carrier assemblies. The thrust of the evidence was that the respondent had sought and obtained from Borg-Warner an alternative source of supply for the goods which previously had been supplied by the appellant. On 9 October 1987 the appellant delivered ten differential housings to Warrior Engineering for brackets to be welded on to each. The differentials were numbered 258 to 267 and were the differentials the sale of which was in dispute. On 13 October 1987 Mr Liprini telephoned Mr O'Brien. Mr O'Brien told Mr Liprini that differential 257 delivered on 14 September 1987 was too long and asked for an urgent replacement. On 13 October 1987 Warrior Engineering invoiced the respondent for ten differentials for "as quoted $120". On 14 October 1987 the appellant picked up differential 257 from the respondent and the ten differential housings from Warrior Engineering. On 23 October 1987 there was an acrimonious interchange of faxes about outstanding moneys in which no mention is made about the ten differentials said to have been on order. On either 23 or 26 October 1987 a meeting took place between Mr Liprini and Mr Livingstone at Mr Liprini's house. The nature of this conversation is conveniently summarised in the chronology as follows: "Mr Liprini and Mr Livingstone meet at Mr Liprini's home and (a) Mr Livingstone pays $25,000; (b) agreement reached that balance then owing by Defendant to Plaintiff after various allowances for warranty claims is $5,788.87; (c) Mr Liprini offers differential 258 as replacement for differential 257, but Mr Livingstone declines, Mr Livingstone alleges that he insists on repaired number 257 not new number 258; (d) Mr Liprini asks Mr Livingstone to supply Plaintiff with 8 flanges or yokes to enable Plaintiff to complete assembly of remaining differentials 259 to 267 and differential 257. Defendant says he declined the request; and (e) Mr Liprini gives to Mr Livingstone letter of 10 July 1987 advising of price increases and also invoice 2357 for differential number 258 of $613.77." This summary does not record a notable difference between the evidence of Mr Liprini and Mr Livingstone about what was said at this meeting. Mr Liprini gave the following evidence: "A. I said 'I had a differential in the back of my truck, I have a differential in the back of my truck on my driveway for you to take to finish off the coremaster that had the faulty differential, namely 257'. INGRAM: Q. Was that the differential that you had the discussion with Mr O'Brien about on 13 October? A. Yes. 8 UNREPORTED JUDGMENTS Q. And what did he say? A. He said 'Fine, as we have to get a shipment overseas finished.' I said 'The other units are ready except we need some more yokes.', he said 'How many?', I said, which I have written here. 'KL check yokes in stock.' Q. What does that mean? A. It means I had to go back to work and check how many yokes we needed because there were faulty ones that Mr Livingstone had supplied us and I did not know how many were faulty and how many were okay. Q. But you knew that you were short of some number or other? A Yes." The note was written by Mr Liprini in part on the day of the conversation and in part shortly afterwards. Mr Livingstone's account of this part of the conversation was as follows: "Q. Yes, what was the next thing that was said then? A. I said 'How many flanges have you got left, I don't think you have many'. Kevin said 'I only have a couple'. I said 'I will need them back, besides they have been incorrectly machined'. Kevin then said 'I have got another differential on the back of the truck for you'. I said "Yes, I saw it on the way in'. Kevin said 'Here's the invoice for it'. I said "Why, where is number 257', I think that's the number. 'Is this a new one'? Kevin said 'I haven't fixed 257 so you have got 258'. Kevin then hands me the letter dated July, advising me of a price rise. I said to Kevin 'That's a bit rich, I was hoping for a price reduction'. I left the invoice on the table and said 'If you are repairing 257 I do not want 258. This is an extra unit which I did not order.' Kevin then said that he Q. No, he never used the word 'that he', he used the word 'I'? A. Sorry, Kevin said 'I haven't had time to fix it'. I said 'When it's fixed we'll take delivery'. I said 'I'm glad we can reconcile this whole sorry mess'. We both walked to the door. I walked through and Kevin said 'If you want another ten gear boxes, I could probably put them together with what I have got left'. I said "Don't bother, I'm never going through this again. I don't like your quality and I don't like your business, I don't like the way you do business.' DWYER; Q. Was that the end of the conversation Mr Livingstone? A. I walked away, I walked back to my house." On 13 November 1987 the appellant sent a fax to the respondent calculating what was said to be the amount then due to it namely $5,788.87 and concluding "we also require eight flanges to finish off the units on site." Although I cannot reconcile the number of the invoice it seems that this reconciliation included the $613.77 said to be due for differential 258. This brought a response dated 17 November 1987 from the respondent enclosing a cheque for an amount calculated by omitting, inter alia, the amount of $613.77. The fax was signed by Mr O'Brien and concluded: "David advised to pay for all goods currently delivered. David Livingstone will contact you upon his return from overseas regarding delivery of warranty differential and supply of 8 flanges as per your fax on 13 November 1987." Ihave read the oral evidence and examined the documentary material to which the Court was referred by the parties. Mr O'Brien, while he remained on friendly terms with Mr Livingstone, was no longer employed by the respondent when he gave evidence. He had stayed with Mr Livingstone during the night before he gave evidence and had had an opportunity to refresh his recollection from various documents, including a copy of the plaintiffs chronology. His Honour said this about Mr O'Brien: URJ DIFFERENTIALS PTY LTD v GREENCARE INDUSTRIES PTY LTD (Sheller JA) 9 "Mr O'Brien gave evidence as I have indicated and was cross examined and apart from the fact that he obviously had drawn on the evidence and dates from the chronology I see nothing in his evidence despite that fact that shows that he is dishonest or in any way not giving evidence as he remembers the events, even though he has refreshed his memory and I allow for the fact that he has discussed the matter with the defendant." Mr O'Brien was asked about the cheque drawn on 14 September 1987 to pay for the differentials delivered on that day. He gave the following evidence: "Q. Was Mr Livingstone there at the time when this cheque was drawn? A. Mr Livingstone would have been overseas at the time. Q. But he had mentioned to you had he that you were to pay for these differentials? A. Yes I remember in terms of those differentials because there was a standing order that no deliveries were to be accepted, I remember giving instruction to Max Buchanan who was the factory manager at the time that those ten differentials were to be accepted, a cheque was to be given to the driver and there was only ten to be accepted." Later Mr O'Brien said this: "Q. You're able to tell us that after almost four years and even though during that time you were having many conversations with many other different people about different things? A. I'm able to say that given that going back to June 1987 there was no orders to be made, no deliveries to be accepted and in your discovery documents there you will find that prior to that date there was negotiations in terms, or from June onwards or prior to the date there would have been negotiations with Borg-Warner so there would have been no intention for Greencare to order any more differentials also given that during that period of course the frames would have been adjusted to take the new Borg-Warner differentials." Mr Biscoe referred the Court to a number of matters which, he submitted, supported the appellant's version of events. He referred to the fact that the differential housings were delivered to Warrior Engineering and redelivered, with the brackets attached, to the appellant, that, apparently, in some way, though in what way is not clear, Warrior Engineering was recompensed for this work by the respondent, that Mr Liprini made a note as a result of the meeting in October with Mr Livingstone "KL check yokes in stock", that Mr Livingstone did not protest if indeed he was told that differential 258 was part of what was claimed to be a new order, that there was no protest to the invoice for differential 258 of 23 October 1987 or to the appellant's fax of 13 November 1987 stating it required eight flanges to finish off the units on the site and that on 14 November 1987 Mr O'Brien wrote saying that Mr Livingstone would, upon his return from overseas, contact the appellant about the supply of the eight flanges. CONCLUSION I have read the evidence about these matters and they have to be weighed in the balance. It is however plain that before September 1987 the respondent had made a decision to purchase differentials from Borg-Warner Australia instead of the appellant. Mr O'Brien gave evidence which I would accept that from June 1987 onwards there was no intention to order more differentials from the appellant. The respondent was prepared to take delivery of the last ten differentials ordered before 30 June 1987 but no more. Against this background I regard it as highly unlikely that Mr Livingstone, then in the United States of America and away from what was going on in his office in Sydney, would, during a conversation in which he was concerned, even on Mr Liprini's account, to stave 10 UNREPORTED JUDGMENTS off legal proceedings by the appellant against his company for money owing for differentials, have used the occasion to order ten more. For reasons which may or may not have been justified he was clearly not satisfied with the differentials that were being supplied by the appellant and had arranged an alternative source of supply. On the evidence I am quite satisfied that the appellant failed to prove its case on the balance of probabilities. In saying this I accept that the witnesses were honest and gave evidence they believed to be true. Mr Liprini believed that the second lot of differentials had been ordered and acted accordingly. It is possible that in the course of the telephone discussion on 10 September 1987, which was in part about the ten differentials ordered before 30 June 1987 but not yet delivered, Mr Liprini misunderstood what was said to him and took it to mean that Mr Livingstone was ordering a further ten differentials. I would propose that the appeal be dismissed with costs. Appeal dismissed with costs. Appellant: P M BISCOE QC Counsel for the Respondent: P O7 LOUGHLIN Counsel for the Appellant: DG BOWLES AND CO Solicitors for the Respondent: MACEDONE CHRISTIE WILLIS SOLARI PARTNERS