Atkinson v Hastings Deering (Queensland) Pty Ltd
[1985] FCA 477
•18 SEPTEMBER 1985
Re: BRIAN KEVIN ATKINSON and HELEN MAIE ATKINSON
And: HASTINGS DEERING (QUEENSLAND) PTY LTD
No. Qld G28 of 1985
Trade Practices
COURT
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.
CATCHWORDS
Trade Practices - who is a "consumer" under s.4B - measure of damages where statement induced purchase.
Sale of Goods - application of statutory warranties to sale of used machinery - whether sale of specific article a sale by description - fitness for purpose - need to show substantial reliance on vendor.
Damages - difference between tort and contract measure - proper measure of damages under s.52 of Trade Practices Act - claim for lost profit in respect of defective chattel - cost of replacement only recoverable - whether Court must assess damages where extent of damage uncertain - assessment where claim dismissed.
Trade Practices Act, ss.4B, 52
Sale of Goods Act (Q), ss.17, 37, 54
HEARING
BRISBANE
#DATE 18:9:1985
ORDER
Judgment for the respondent in the sum of $355,384.79.
The applicants pay the respondent's costs of the proceedings, including reserved costs, to be taxed.
JUDGE1
The applicants claim damages and other relief on the basis that a Caterpillar D8K tractor they bought last year was defective. In its final form the claim for damages amounts to about $250,000. The respondent counter-claims for various sums totalling $352,838.41.
The case took seven days and much technical evidence, oral and written, was tendered. These reasons, to confine them within reasonable length, do not deal with several of the issues raised which turned out, in the end, to be entirely peripheral.
The applicants are a partnership of husband and wife, Mr and Mrs Atkinson, but the latter took almost no part in the transactions the subject of the litigation; her role in the partnership may have been significant for other purposes, but was not as to the subject matter of this litigation. For simplicity I shall refer to Mr Atkinson as "the applicant" rather than "the male applicant".
In March 1980 the applicants took on lease from Australian Guarantee Corporation Ltd a new Caterpillar D7 tractor, for a term of four years. Because of misfortunes which it is unnecessary to detail, they were unable to meet their obligations under the lease and when they approached the respondent, in the second half of 1984, with a view to obtaining a second tractor, they still owed a substantial amount of money to Australian Guarantee Corporation Ltd. The reason the applicants desired to obtain a second tractor, despite their substantial indebtedness in respect of the first, was that they wished to have two tractors to engage in a scrub pulling business. The applicant had arranged, subject to being able to obtain suitable equipment, scrub pulling work of considerable value and had an expectation that his income from that work would be enough to service a large debt.
After some negotiations which are mentioned further below, the respondent agreed to discharge the applicants' liability to Australian Guarantee Corporation Ltd, including the making of a sufficient payment to obtain ownership of the D7, and to sell the applicants a second tractor, a second-hand Caterpillar D8K. It was agreed that the total liability thus created, $315,000, would be paid off by instalments, including components of interest, over four years. The applicants had to pay monthly instalments amounting to well over $100,000 a year to meet their obligations.
Scrub pulling in accordance with the method mentioned in the evidence involves the use of two fairly large tractors joined by a heavy steel chain some 30 metres in length. One tractor, which is (if the machines are of different size) the larger and more powerful one, moves through the scrub - "on the inside". The other is driven along the edge of the scrub and the chain between them, if all goes well, pulls the vegetation down. Trees of substantial size have to be dealt with individually. The work, particularly in summer in western Queensland where the relevant operations were being done, places considerable strain on the machines, as well as the operators.
The applicant had much experience in that work but has no expertise of a technical kind. In particular, he did not have the skills of a diesel fitter or mechanic. That was, no doubt, a disadvantage to him in his scrub pulling work, but it also affected the value of his evidence given before me. To establish his case that the D8K was defective, he had to rely upon his own inexpert observations of the behaviour of the machine, together with records of the work done on behalf of the respondent in response to his complaints, which records were obtained on discovery.
It is convenient to recount the history of the tractor in issue in a summary way, at the outset. The D8K was delivered in October 1984, and the applicant used it in his work, with substantial breaks, until January 1985. The breaks were, at least in substantial part, due to the fact that the applicant believed the tractor was over-heating and he required the respondent to rectify the problem. In February 1985 the applicants purported to rescind the agreement they had made with the respondent for the purchase of the D8K tractor. That led to litigation both in this Court and in the Supreme Court, the immediate source of the dispute being that the respondent sought to obtain possession of one of the three items of property over which security had been granted in respect of the debt mentioned above, namely the house in which the applicants reside. The issue was temporarily resolved by an order made on 24 April 1985, by which the respondent was restrained from exercising its security rights in respect of the real property, but not as to the two tractors, which were also mortgaged to secure the debt. The respondent promptly got the tractors back. The D7 was sold, at a substantial loss, but the D8K was still in the possession of the respondent at the date of trial, although subject to negotiations for sale.
Although no significant work had been done to the D8K between the time of its repossession and the trial, neither party, during those months, appears to have arranged to have the tractor tested by an expert, independent or otherwise, to find out what, if anything, was wrong with it. That is an odd feature of the litigation: each side's case relied mainly upon the experience of the applicant with the machine, between the date of sale and that of repossession, not on a proper expert inspection of the tractor. The closest approach to such an inspection was one performed by a young fitter called Morgan, an employee of the respondent; the result of that was equivoca1.
Nevertheless, the case for the applicants has a superficial appearance of considerable strength. The applicant was a fairly impressive witness and he had the support of the only independent technical evidence called, that of Dr Frank Grigg.
It was alleged that the respondent was liable on three bases: firstly by reason of the warranties implied by the Trade Practices Act in favour of a "consumer", secondly because it had engaged in misleading or deceptive conduct within the meaning of s.52 of that Act and thirdly, under the warranties implied by the Sale of Goods Act (Q). I considered first the legal basis of the last head of claim.
CONTRACTUAL WARRANTIES
There was a dispute, of a legal as well as factual kind, as to whether the D8K was bought free of any warranty. The applicant first saw mention of the tractor in question in an advertisement in Queensland Country Life, a newspaper circulating mainly in rural areas in this State. The advertisement mentioned three Caterpillar tractors for sale. He had some discussions with Mr Ian Smith, a finance officer of the respondent and having received what he took to be encouragement from Mr Smith, the applicant flew to Brisbane and spoke to a Mr Brian Copeland. It was the latter's task to sell tractors but, unlike many people given similar tasks, he seemed to me to be a man with considerable knowledge and experience of the goods being sold. That is, of course, important in view of the allegation referred to above, that the applicant decided to buy partly in reliance upon what Mr Copeland said to him.
The applicant's conversation with Mr Copeland was a matter of dispute; Mr Copeland said, but the applicant denied, that the tractor was expressly bought "as is". For reasons I shall explain I prefer the applicant's account. That is, I find that the applicant had a conversation with Mr Copeland substantially as sworn to by him. He explained to Mr Copeland that he wanted to buy another tractor for his scrub pulling operations, one to drive "on the inside". The applicant mentioned to Mr Copeland the advertisement he had seen in Queensland Country Life and Mr Copeland confirmed that the machines were for sale. There was a discussion about each of the machines. As to the one which was eventually purchased, the subject D8K, Mr Copeland said:-
"This is a good machine, Brian. This was ex-Coastal Earth Movers. It's quite a very - it's quite a tidy machine. It's got very low hours."
There was discussion of the fact that it had previously been owned by Goodall and then Mr Copeland told the applicant that it was a good machine and that it would be suited for his work.
I do not think that the applicant relied wholly, or even mainly, on these commendatory statements made by Mr Copeland. However, I think he was influenced by them to some extent. I have no doubt that they were honestly made by Mr Copeland. That is, he genuinely thought the machine was a good one and that it was suitable for scrub pulling work which, as I find, is a particularly arduous duty. It seems clear that the statements made by Mr Copeland were within the scope of his authority.
In his evidence, Mr Copeland expressed the view that he would have recommended the subject D8K as suitable for the applicant's purposes, but in some other respects he did not admit the conversation alleged. In view of the admission just mentioned, this may not matter much, but I should briefly explain my reasons for accepting, as I do, the applicant's account of the conversation as substantially accurate, rather than Mr Copeland's much hazier recollection. The chief is that, as Mr Copeland freely admitted, he but dimly remembered the conversation. From his point of view it was but one of many similar talks with prospective customers, whereas it was much more memorable to the applicant; it led to a transaction which was, quite probably, the biggest one of the applicant's life. Mr Copeland was an impressive witness in that he appeared to be honestly trying to give a proper account of the matter. But he seemed unable clearly to distinguish what was in fact said and what might have been expected, in accordance with his ordinary practice, to have been said. Further, I have been influenced in favour of the applicant's version by the fact that, although it was put to the applicant by counsel for the respondent that there was no haggling about price, and that presumably came from Mr Copeland, there seemed to be an admission by both Mr Smith and Mr Copeland that such haggling occurred.
The principal importance of my acceptance of the applicant's version, rather than that of Mr Copeland, is that I find that nothing was said about the machine's being bought "as is". It may be that on other occasions, when selling second-hand tractors, Mr Copeland makes that a term. I am fairly well satisfied that he did not do so on this occasion.
The applicant had a substantial amount of work done on the D8K before he took it out to work, but it does not seem to me necessary to go into the details of that, except in one respect. He had some tests done by the respondent's workshop which were described as "pressure tests regarding steering clutches and fuel and oil". That is of some significance because it goes in favour of the respondent on the question of the extent to which the applicant in fact relied upon Mr Copeland's skill and judgement in deciding to purchase the equipment.
The claims under the Sale of Goods Act (Q) are two-fold. It is said that s.17(1) of the Sale of Goods Act (Q) applied, so that there was an implied condition that the goods should be reasonably fit for the particular purpose for which they were required. Secondly, Mr McMurdo argued for the applicants that s.17(2) brought in an implied condition that the goods should be of merchantable quality, because they were bought by description.
Numerous attempts have been made to elucidate the meaning of these provisions. Not being satisfied that they have, on balance, achieved any clarification, I do not propose to attempt to add to the learning on the subject. The critical question, as to fitness for purpose, is whether it appeared that the applicant trusted to a substantial extent to the skill or judgment of Mr Copeland: see Australian Knitting Mills Ltd. v. Grant 50 CLR 387 at p 446 per Evatt J. The plaintiff's case on this aspect was not particularly strong and the view is quite open that the applicant bought substantially upon his own observation of the machine in question. But, on the whole, I think it probable that there was sufficient reliance upon Mr Copeland's view. I should add that it was argued that the case was one of a sale of a specified article under its patent or other trade name, within the meaning of the proviso to s.17(1); I am satisfied, to put it briefly, that it was not.
As to s.17(2), the principal question is whether the goods were bought "by description". It is true that there are instances in which a sale of a chattel or chattels specifically identified at the time of sale has been held to be by description, the well-known example being Grant's case (above). But I do not think the present case is of that kind. The goods being sold had a description which both vendor and purchaser knew, but the sale was not "by" that description. It was a sale of one, selected by the plaintiff, of a number of similar but not identical articles, the selection being largely but not wholly on the basis of the plaintiff's own inspection.
It was argued for the respondent that if either part of s.17 applied, that did not take the applicants far because the goods were second-hand and that the statutory warranties do not avail the buyer much, in respect of such a purchase. The submission was supported by reference to the decision of the Court of Appeal in Bartlett v. Sidney Marcus Ltd. (1965) 1 WLR 1013.
The point is of sufficient, recurring, importance to justify quoting from the judgment of Lord Denning M.R., with whom Danckwerts L.J. agreed:-
"... on a sale of a second-hand car, it is merchantable if it is in usable condition, even though not perfect. This is very similar to the position under section 14(1). A second-hand car is 'reasonably fit for the purpose' if it is in a roadworthy condition, fit to be driven along the road in safety, even though not as perfect as a new car.
Applying those tests here, the car was far from perfect. It required a good deal of work to be done on it. But so do many second-hand cars. A buyer should realise that when he buys a second-hand car defects may appear sooner or later; and, in the absence of an express warranty, he has no redress. Even when he buys from a dealer the most he can require is that it should be reasonably fit for the purpose of being driven along the road."
While not necessarily accepting that the buyer of second-hand equipment, absent any exclusion clause, is in as weak a position as the Court of Appeal suggests, I proceed on the basis that special considerations apply to such a sale. That is consistent with the ordinary commercial view of them, exemplified in this case by the fact that the applicant never questioned, until this litigation, that any repair work would have to be done at his expense and not that of the respondent. It is my view that the applicant has to show, so far as the Sale of Goods Act is concerned, that the machine was not reasonably fit for the purpose for which it was bought, having regard to the fact that it was bought as a machine which had seen much service, and was therefore more likely to be subject to deficiency due to wear and tear and the like.
LIABILITY
As to the other two legal bases on which the claim is put, I reject the former, on the ground that the price of the goods exceeded the prescribed amount and they were not "of a kind ordinarily acquired for personal, domestic or household use or consumption": see s.4B(1)(a) of the Trade Practices Act. As to the latter, the claim under s.52, I have found that the respondent, by Mr Copeland, told the applicant that the machine was good and that it would be suited for his work. The question which then arises, under that section, is whether Mr Copeland's statement was misleading or deceptive, or likely to mislead or deceive.
The allegations made by the applicants were of a major and minor defect in the tractor. The former was that the engine commonly over-heated, to such an extent that the water in the cooling system was dangerously hot. The minor complaint was that there was difficulty with the hydraulics. Although a considerable amount of evidence was given with respect to the trouble with the hydraulics, which undoubtedly existed, there is no occasion to analyse it elaborately. This is because it was plainly not such as to make the machine unsuitable for use for its intended purpose. Eventually, whatever was wrong with the hydraulic system was, as the applicant admitted, corrected. Further, the applicant kept careful and fairly accurate time sheets which recorded not only the work the machine was doing but also any interruptions to the work and the reason for them. Examination of the time sheets shows that although the hydraulic system gave some trouble in late October it never again appeared to be a cause of any hold-up or difficulty. The applicant's case, as presented by his counsel and as sworn to by the applicant, depended essentially on the allegation that the engine became generally too hot, a condition manifested by the reading shown on the water temperature gauge.
The applicant's evidence did not establish to my satisfaction that there were any significant symptoms of over-heating of the water in the cooling system, other than the reading on the temperature gauge. He repeatedly said, in effect, that he was concerned about the gauge getting too high. It is true that, rather late in his evidence, he made the claim that steam used come out of the relief valve, but I am not satisfied that he observed that more than occasionally, if at all. On the other hand, I accept that he was concerned about what he regarded as the unduly high temperature shown on the gauge purporting to show the temperature of the water in the cooling system. For example, when asked why he could not have continued pulling operations after 22 January 1985, the applicant answered:-
"Well, if I had have kept on going, your Honour, things would have happened to the engine such as cracked heads, and I was not prepared to keep working the machine as hot as this one to be faced with a more serious problem."
Although he guessed that:-
"... the cooling system would probably have been reaching somewhere around about, you know, 210, 220 ..."
he did not know, in my opinion, what number of degrees the divisions on the gauge corresponded to. It is true, also, that he claimed he was "struggling with the machine all the time" but the time sheets, which seem to me (in general) both full and accurate do not give support to that. The applicant explained that:-
"... I do not operate tractors in the red, Mr Hanson, because by doing so that only causes bigger problems with the engine ... I was concerned that the engine would seize up. I was concerned that it would crack heads."
Mr Hanson suggested on behalf of the respondent that an important part of the problem was that the applicant was concerned that the gauge on the D8K persistently read higher than that on the D7. The applicant explained that the difference was:-
"... from the hottest part of the day with the D7 the needle should have been working about an eighth of an inch off the red, which is okay when the D7 is operating at that range, and the same - in the same day, the same time, the D8 would be in the red and the hydraulic would be right in the red at certain times."
He said that the D7 would be about an eighth of an inch off the dividing line and the D8 about a sixteenth of an inch into the red sector of the scale.
That three-sixteenth of an inch is the essence of the applicant's case. It was proved to my satisfaction that the gauge fitted to the D8 was not that specified. The precise nature of the specified gauge did not appear. Mr Hanson argued for the respondent, however, that I should find on the basis of the documents presented that the "right" gauge went into the red sector at 234 Fahrenheit. Without discussing the point in detail, I find that to be so. The finding is of some significance; I cannot be satisfied that, with the right gauge fitted, the needle would ever have gone into the red. That would require a further 8 rise in temperature, beyond the point at which the needle on the gauge fitted went into the red. It is true, as counsel for the applicants stressed, that the gauge fitted was the one with which the respondent sold the machine to the applicants and the latter cannot be held responsible for its not being of the correct type. But the applicants do not base their case that the machine was unsuitable on any allegation that the gauge was wrong; they say the machine was over-heating and the onus is on them to show that. Looking at the matter more broadly, the blame which might be thought to attach to the respondent for selling the machine with an incorrect gauge fitted (whether or not fitted by the respondent does not appear) is lessened by the circumstance that the respondent wished to change the gauge, as the evidence shows, but the applicant refused to have that done.
There was much dispute as to whether or not the engine was likely to be damaged by over-heating. I am inclined to think, basing this on the evidence of Dr Grigg, that it is unlikely that any damage to the engine will occur as long as the water in the cooling system is circulating properly and does not boi1. It is true that, as a matter of every-day experience of petrol engines, if the temperature gauge moves into the red sector that is commonly taken to be a sign of serious trouble. But, on the applicants' case, this engine ordinarily operated with the temperature needle about the margin between the red and the green and the significance of that should not be decided by reference to my own limited knowledge and understanding of the operation of internal combustion engines. Further, the evidence showed that the cooling system was pressurised, when Morgan came to inspect it, to 12 pounds per square inch above atmospheric pressure, and that the water in the system would therefore have boiled above 240 Fahrenheit. At about 226 Fahrenheit, then, the point at which the needle on the applicant's gauge went into the red, it was well short of the boiling point.
In deciding the strength of the allegation of over-heating, considerable help can be got from the time sheets referred to above. They may be divided into five segments tabulated as follows:-
Period Days Worked Heating up Noted Time Lost in Cooling
17-27 11 2 0 Oct.
9-16 8 0 6 Nov.
17 Nov. 8 0 14 -9 Dec.
14 Dec. 9 1 32 -1 Jan.
7-22 9 4 135 Jan.
The periods in the left-hand column are chosen simply because the time sheets appear to recognise those divisions; in fact the third period was broken by a time during which the machine was undergoing repairs and modifications. The third column records the number of times the applicant has noted "D8 heating up" or "machine too hot". There are other notes such as "D8 problem" which may possibly refer to heating up but I think it more likely that, where the applicant could identify the difficulty as being over-heating, he said so in the note. The last column totals the times during which the applicant said the machine was idling, because it had got too hot - into the red. Those times are recorded in minutes. It is of particular importance to observe that during the first period there are only two notes mentioning heating up. Each of them is made at the end of more than seven hours work, that being at least close to a full working day, in accordance with the applicant's practice at the time. During those 11 days in the first period, further, the applicant earned $9,657.25 in his pulling operations - i.e. over $6,000 per week. That, coupled with the evidence the applicant gave about his fuel consumption, shows that shortly after it was purchased the machine was working solidly and profitably. When it is kept in mind that during the first period the applicant had significant trouble with the hydraulic system (which trouble later disappeared), it becomes all the more difficult to follow why he ceased operations with the tractor completely in January, when he says substantial work of an equally profitable kind was available.
In the second period, from 9-16 November, the applicant earned $10,436.25 in his pulling operations, there was no note of the machine's having heated up and only one note, a period of six minutes, of its being left to cool down. The earning rate has improved to over $9,000 per week, as compared with the first period. Again, it is not easy to accept that during that period the D8K was not reasonably suitable for the intended purpose. The applicant disclaimed any suggestion that he was working slower because of the trouble with the engine but implied that he would have worked longer hours, had the machine been performing better. Assuming that to be so, he still seems to have worked many hours in these first weeks, and successfully, in a financial sense. That continued up to 19 November on which day (having worked 7 hours 35 minutes with no recorded interruption except for lunch) the applicant noted that he had a "D8 problem". In evidence he explained that he ceased work at that time "because of the continuous problems I was having with it again". I thought the applicant gave his evidence honestly and that, in so far as there were inaccuracies in it, they were due to anxiety rather than any desire to mislead. Nevertheless, I am quite unable to accept that the difficulties he had encountered with the machine from 17 October 1984, the first day of operation, to 19 November 1984, when he ceased operation for the time being, were such as to demonstrate that the machine was completely, or even substantially, unfit for use.
It is unnecessary to discuss the work which was done on the machine, by the respondent, between 19 November and 10 December when operations resumed. Then there was another break early in January 1985, but apart from that the machine was used almost every day until 22 January. According to the time sheets, in these last three periods the sum of $28,025 was earned in pulling operations (some lesser sums were earned performing earthworks and the like) at an average rate of earning at over $1,000 per day. The applicant says there was still plenty of work available. In these circumstances it is difficult to understand the statement he says he made to the respondent in December 1984 that he was dissatisfied with the machine, that he had lost a considerable amount of time and it was not "a paying proposition". Nor can I understand his statement to Mr Smith that "the way the machines have been going" he could not make any payments. It was not suggested that there was any deterioration in the machine's performance during the period I have reviewed. It is true that, as the table set out above shows, more time was lost, towards the end, than had been lost in the beginning, as a result of the alleged necessity to let the machine cool down. But over the whole period only about four minutes per day, on the average, was lost in that way.
If the matter depended upon the evidence of the applicant, then, I could not possibly find that there was any such deficiency in the machine as to render it not in conformity with the statement made by Mr Copeland, or with the warranty I have found to have been given. But much reliance was placed upon the evidence of Dr Frank Grigg, a highly qualified engineer, called on behalf of the applicants; his evidence was of particular importance, as it seemed to me, as he was the only independent expert witness called on either side. Further, his practical experience included having had much to do with engines of the general type in question, and in particular their cooling systems.
Dr Grigg's view was that there was an over-heating problem and that it was probably caused by combustion gas leakage. Some aspects of the evidence he gave were rather complex but in essence he said three things: the D8K, as a model, is prone to combustion gas leakage, the particular machine in question was shown by a "bottle test" performed by the fitter, Mr Morgan, probably to be afflicted with that condition and his tests also demonstrated that the temperature of the water in the machine under full load was too far above the ambient temperature. The first proposition was plainly not made out, although much evidence was directed to it. As to the second, there was a difference of view between the applicant and Mr Morgan as to what the "bottle test" showed. Its significance depended upon the accuracy of the recollection of these gentlemen, unassisted by any note, as to the circumstances in which bubbles appeared in the test bottle, and their size and frequency. I did not think either of them gave an account of the matter on which one could safely rely, nor do I think any confident conclusion could, in general, be drawn from Mr Morgan's notes as to his alleged results, since those notes were on any view incomplete and inaccurate.
There is left the third point, the fact that Mr Morgan recorded a difference of 110 Fahrenheit between the water temperature and the ambient temperature, on a day when the latter was about 100 . According to the Caterpillar literature tendered, as interpreted by some witnesses on both sides, a discrepancy in excess of 110 shows a malfunction and Dr Grigg argued that in ordinary operation, as opposed to operation in the test conditions, the discrepancy must have been over 110 . I do not accept the basis of the argument and think that either the interpretation, or the reference in the literature I have mentioned, must be founded upon a misunderstanding. It is common ground that the needle on the gauge actually fitted to the machine remained in the green sector until a temperature of 226 Fahrenheit was reached. I accept the contention of Mr Hanson, based on the evidence, that the "right" gauge would not go into the red until a temperature of 234 is reached. Taking as a base the ambient temperature on the day Mr Morgan did his tests, the former of these is 116 and the latter 124 above the ambient temperature. It seems to me a reasonable inference that the needles are so calibrated that when in the green sector one can assume there is no over-heating of a dangerous kind. That assumption is quite inconsistent with the alleged 110 limit.
My conclusions, then, on the question of liability are that while there is some reason to think that the engine was running rather hot, the evidence as to its performance and use did not falsify the statements Mr Copeland made about its qualities, nor show that there was any breach of the implied warranty under s.17 of the Sale of Goods Act.
DAMAGES
The question arises whether I should, as suggested at the hearing, assess damages "in any event". The assessment involves what are, to my mind, some difficult points especially as to certainty of proof. However, reported cases show that courts frequently assess damages where there is held to be no liability, in case an appeal on the former point succeeds and in the particular circumstances I have decided to set out my views on damages. One reason is that some of what I have to say on the topic gives additional support to my conclusion that liability was not established.
The findings which follow are made on a hypothesis as to liability - that is, on the assumption that I am wrong in my conclusion on that aspect and that I should have found the respondent liable on the basis that the tractor was not reasonably suitable for the intended purpose, in the respects alleged by the applicant in his evidence. I shall consider first the s.52 claim, on that assumption.
Two questions of principle arise at the outset. The first is that of certainty. Counsel for the respondent strongly submitted that, for reasons set out in detail below, there should be no assessment of damages on the ground that the evidence did not go far enough to enable one to be made. The question is whether the Court is entitled to refuse to assess on that ground. The point was considered in relation to an action for damages for deceit, Ted Brown Quarries Pty. Ltd. v. General Quarries (Gilston) Pty. Ltd. (1977) 16 ALR 23. The case, decided by the High Court, is of importance here because one would assume that the rules as to assessment of damages would tend to be weighted rather more against a fraudulent defendant than against a company making an innocently false statement giving rise to liability under s.52 of the Trade Practices Act. The trial judge had assessed damages on the basis of an estimate. Gibbs J., (as his Honour then was), who with Aickin J. formed the majority, said at p.37:-
"Once the learned Chief Justice rejected Dr Solomon's evidence that the resource was worth $600,000, he was left with no evidence of what its value was. It was put to us that he was entitled to make a 'jury assessment' as the Court of Appeal did in Doyle v. Olby (Ironmongers) Ltd. (1969) 2 QB 158; (1969) 2 A11. ER 119. But that would only be possible if there was sufficient evidentiary material to enable the court to do so, as Winn L.J. recognised in Doyle v. Olby
(Ironmongers) Ltd. QB at p 169. In the present case it seems to me that, apart from Dr Solomon's evidence, there was no material from which the learned Chief Justice could properly draw any inference as to the value of the 'resource'. The case was not one in which the matter had necessarily to be left to the opinion and judgment of the court, acting at large, as is the case, for example, in the assessment of damages for personal injuries. It was possible, in the circumstances, to prove, with some certainty and precision, the value of the property purchased, and it was not unreasonable to expect General Quarries to call acceptable evidence as to the value of the 'resource'. General Quarries failed to discharge the burden of proof that rested on it."
Aickin J. expressed a similar view (p.38).
The view upon which their Honours acted is not new. Bowen L.J., giving the judgment of the Court of Appeal in Ratcliffe v. Evans (1892) 2 QB 524 at pp 532-533 said:-
"As much certainty and particularity must be insisted on, both in pleading and proof of damages, as is reasonable, having regard to the circumstances and to the nature of the acts themselves by which the damage is done. To insist upon less would be to relax old and intelligible principles. To insist upon more would be the vainest pedantry."
Australian examples of treatment of difficulties in determining the adequacy of proof of damage are to be found in Bowen v. Blair (1933) VLR 398 and in Woodman v. Rasmussen (1953) St R Qd 202 especially at p 218, per Townley J.
It is not easy to reconcile the views referred to above, and in particular that expressed in the High Court, with the decision in the Full Court in a Trade Practices Act case, Enzed Holdings Ltd. v. Wynthea Pty. Ltd. (1984) 57 ALR 167 at p 183. I refer in particular to the following dicta:-
"The principle is clear. If the court finds damages has occurred it must do its best to quantify the loss even if a degree of speculation and guesswork is involved. Furthermore, if actual damage is suffered, the award must be for more than nominal damages."
On the assumptions on which I am considering the question of damages, the principle just mentioned would apply; if the tractor was unsuitable for the intended purpose, no doubt the applicant suffered actual damage as a result. Then, the Enzed case suggests, an assessment must be made. The view of Gibbs J., on the other hand, appears to be that no damages should be assessed for deceit inducing a purchase, unless the value of the property purchased is proved "with some certainty and precision", where it is possible to adduce such proof. In the present case, there is nothing to suggest that it was impossible for the applicants to do so and the principle stated in the High Court appears to apply. One would be justified in declining to apply it only if there were some special consideration applicable to cases of deceit placing a heavier onus on the deceived party than in an ordinary action for damages; on the contrary, the trend of the cases appears to be specially to assist a plaintiff who has shown fraud towards proof of his loss: see for example Redgrave v. Hurd (1881) 20 Ch D 1 at p 21 and Barton v. Armstrong (1976) AC 104 at p 120. No contention was advanced, nor does any rational basis appear, for imposing upon the applicant here a lighter onus than that which the law places upon one who is successful in showing deceit.
The second question of principle is that of the correct measure of damages. It appears to me that, prima facie, the measure of damages in a case of this sort, where the conduct complained of induced a purchase, should be that laid down with respect to actions of fraudulent misrepresentation, in a line of High Court authority culminating in the recent decisions in South Australia v. Johnson (1982) 42 ALR 161 at pp 169-170 and Gould v. Vaggelas (1984) 56 ALR 31 at pp 34, 51, 60, 68. The view is sometimes put forward that a sufficient guide is given if one says that such damages are allowable as flow directly or indirectly from the wrong done. But in fact there are two quite distinct methods of assessing damages where, in reliance on a statement about property put up for sale, it is purchased. Suppose the owners of all the shares in the company sell them to a buyer who is induced by a false statement that the assets of the company include $1,000 in the bank. In fact that amount has been drawn out before the sale. The obvious course is to allow damages of $1,000. Yet the tort measure of damages may allow no recovery, or recovery considerably in excess of $1,000, because "the amount recoverable is prima facie to be measured by the difference between the price paid and the actual value of the thing purchased at the time of the purchase" - Gould v. Vaggelas 56 ALR at p 68, per Dawson J. If the shares appear, perhaps with the advantage of hindsight, to be worth as much as has been paid for them, no damages are, on this prima facie measure, recoverable in fraud. On the other hand, if there is a contractual provision as to the state of the bank account, the amount is plainly recoverable. Under the tort measure of damages there may be claimed, as in this case, a larger sum than directly reflects the misstatement complained of.
Apart from the difference between price and actual value, the cases show that damages may be awarded for "consequential losses". Commonly, however, as in the Ted Brown case referred to above, the critical issue is proof of the actual value; so it is here.
The first segment of the damages claim which it is convenient to consider, then, is that advanced along the lines just mentioned. This was supported by the evidence of Mr A.M. Hedger, called on behalf of the applicant. Mr Hedger is a man of considerable relevant experience, not only in the technical but in the commercial aspects of the operation and sale of machines of the kind in issue. I am, however, quite unable to accept his evidence as to value. He was asked by counsel to give a view about value on assumptions derived from the evidence of the applicant, namely that the cooling system "regularly over-heated in scrub pulling work and by that you have been asked to assume the temperature gauge for the cooling system would go into the red whilst the machine was being used in scrub pulling work". He was also asked to assume that there was "sometimes steam coming from the relief valve of machine" and that "Mr Atkinson regularly had to stop because of these problems with the cooling system". In addition, he was to assume that there was "at least one bottle test performed on this machine", the result of it apparently being no part of the assumption, and that "there have been problems with the hydraulic system in that it would over-heat, and that sometimes that would result in the hydraulic lever becoming fixed".
On those bases, Mr Hedger expressed the view that the machine was worth about $70,000. He went on to say that "the engine would have to be pulled from the machine or rebuilt or subsequently gone right through to find the problem". He said he had "done two or three of these and they have been very expensive exercises ... $35,000-$40,000, on one particular machine". In cross-examination, he told Mr Hanson of his varied experiences with the diagnosis of over-heating D8Ks. It turned out - hardly a matter for surprise - that the machines of which Mr Hedger had experience were found to have a variety of defects causing over-heating. No doubt some of them were serious and some not. It is evident that a substantial part of the gap between the price agreed to be paid and the value fixed by Mr Hedger is attributable to the assumed cost of investigation and repair. Precisely how much he did not say; he was not asked what the machine would have been worth free from the assumed defects. The difficulty the applicant has is that he did not, in my view, come forward with any satisfactory evidence as to the nature of the assumed defect in the engine. As a result of interlocutory proceedings, there was to be an expert inspection of the machine, which is apparently still in the same condition as when the applicant ceased to use it. Yet that was not pursued. It seems likely that this was a case in which it was possible, in the circumstances, to prove, with some degree of certainty and precision "the value of the property purchased ..." (per Gibbs J. in the Ted Brown case 16 A.L.R. at p.37). There may have been perfectly good reasons for the absence of any evidence as to the underlying cause of the problem, but no such reasons were placed before me. It should be kept in mind that Dr Grigg was not asked to, and did not, ever see the machine which the case is all about. Had there been evidence as to the cause of the trouble, no doubt Mr Hedger might have made a proper estimate. I do not think there is any satisfactory evidence which comes up to the minimum standard necessary to enable an assessment to be made, on the basis of difference between price and value; I am not persuaded that the estimate given by Mr Hedger has any relation to reality.
The second segment of the damages claim was concerned with loss of profits. This was supported by the evidence of an accountant, Mr Summerson, who admitted in cross-examination by Mr Hanson that he had not taken into account matters, such as depreciation, which are material to the assessment of profit. Mr Hanson argued that because of these admissions I should hold that the loss was not proved with sufficient certainty. I am not entirely convinced that is so. It may be permissible, for example, to make an estimate of the proper rate of depreciation, despite the fact that the applicant could easily have called evidence of such a rate. The reason for the view, which I hold, that the evidence of Mr Summerson did not provide any basis for an award of loss of profits is that it went on the hypothesis that the respondent is liable for the amounts the tractors, both that in issue and the D7, would have earned. The applicant's case, however, fails as to this aspect because it was not proved that no other tractors were available. Indeed, the applicant gave evidence that before deciding to buy the D8K he approached the respondent looking for a machine for hire, his assumption being that the hire rate would be considerably lower than amounts likely to be payable under a hire-purchase agreement. There were apparently no machines available on that basis from the respondent, in September 1984, but there was no evidence as to whether hire machines were available in 1985, from the respondent or otherwise. It is true, as the applicant complained in his evidence, that he had unhappy experiences in hiring machines with a driver, in the past, and it may be that I should infer that that course was not practicable. But, where the complaint is that the use of a machine of a common type has been lost for a period, the claim one would expect to be made is for the cost of replacing the missing machine; see S.S. Strathfillan v. S.S. Ikala (1929) AC 196 at p 200. Of course, the replacement need not necessarily have been a Caterpillar.
Difficult problems, no doubt, might have arisen had the applicant put forward a case that lack of funds prevented him from hiring replacement equipment: Liesbosch, Dredger v. Edison S.S. (Owners) (1933) AC 449, distinguished by the High Court in Fox v. Wood (1981) 35 ALR 607. Here, that was not advanced and damages were sought simply on the basis that the defect in the D8K, whatever it was, entitled the applicant to the sum he would have made from its use. Prima facie, in my opinion, that is not so, there being no reason to think a replacement was unobtainable.
The fallacy of the basis of assessment of this secondary head of damages put forward is illustrated, in a practical way, by Mr Summerson's report. On the figures he presented he arrived at the conclusion that the loss up to 26 August 1985 was $163,914, a sum in excess of the machine's price. It was not until 22 January 1985 that the applicant ceased to use the D8K; the claim based on its unsuitability is concerned with a period of seven months after that date, to which might be added another month to cover the time when deficiencies in the machine were being rectified. If allowed to make guesses about hire rates and availability, for the purposes of assessing damages, I would be most reluctant to assume that the cost of hire of such a machine for eight months would be somewhat in excess of its purchase price. Even if the rate for long-term hire were 50% of the cost of the machine annually, hire for the period in question would be less than one-third of the profits said to have been lost. These figures illustrate that departure from the ordinary measure of damages for loss of use of a machine of a kind which is commonly available can lead to odd results.
It should also be noted, as to this second aspect of the claim under s.52 of the Trade Practices Act, that if damages were assessed on the basis of a loss of profits there would be no logical foundation for limiting them to the period ended on 26 August 1985, as claimed. The only significance of that day is that it was when the hearing began. If the applicant is entitled to his loss of profits, on the basis that there is no obligation to replace the tractor assumed to be unsuitable for use, presumably that obligation covers the future as well.
I turn now, and in a summary way, to the assessment on the assumption that damages are recoverable under the Sale of Goods Act. Applying the contractual measure of damages, prima facie the applicant is entitled to be placed in as good a position as that which he would have occupied if the warranty had been true. Mr McMurdo pointed out that under s.37 of the Sale of Goods Act 1896 (Q) the applicant was taken to have accepted the goods and he therefore had to sue on the basis of damages for a breach of warranty, under s.54 of the same Act. That leads to the result that, prima facie, the applicant is entitled to the difference between the value the vehicle would have had, if it conformed to the warranty, and its actual value. For practical purposes that may be equated to the cost of rectifying the defect. For the reasons explained above, no assessment on that basis can be made. Since the cause of the problem was not established, the Court could not, other than by mere speculation, make an estimate of the cost of rectifying it.
My conclusion is that the applicants have not established a right to damages, assuming liability in the respondent. There is also a small claim in respect of a canopy, which was not seriously pursued; I hold that it fails.
It follows that the applicant fails on both questions, liability and damages. The claim of the respondent therefore ceases to be in dispute. As set out in Exhibit 36, it totalled $352,838.41 up to 30 August; from that point on interest runs at a daily rate of $134.02.
There will, therefore, be judgment for the sum of $355,384.79, with costs, including reserved costs, in favour of the respondent.
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