Brown, M. v Southport Motors Pty Ltd

[1982] FCA 142

Re: MARGARET BROWN
And: SOUTHPORT MOTORS PTY. LTD. (1982) 67 FLR 254
Qld G45 of 1981
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Fitzgerald J.(1)

CATCHWORDS

Trade Practices - Consumer Protection - false representations - misleading and deceptive conduct - whether representation a material inducement - measure of damages.

Trade Practices - Consumer Protection - associated jurisdiction - breach of implied warranty - "merchantable quality" - defects which ought have been revealed upon examination - measure of damages.

Trade Practices Act 1974, ss. 52(1), 53, 71(1), 82

Trade Practices - Consumer protection - False representations - Misleading and deceptive conduct - Whether representation a material inducement - Measure of damages - Trade Practices Act 1974 (Cth), ss 52(1), 53, 71(1), 82.

HEADNOTE

The applicant claimed under s. 82 of the Trade Practices Act 1974 (Cth) to recover from the respondent the loss she was said to have suffered as a result of certain misrepresentations made by the respondent, in contravention of ss 52(1) and 53(a) of the Act. The representations were:

(a) as to the accuracy of a motor vehicle's odometer reading, and

(b) by way of the display of that odometer.

Held: (1) That the respondent's conduct in displaying the vehicle without qualification of the odometer reading in circumstances where the respondent's agent had confirmed its alleged accuracy was a misrepresentation within s. 52 of the Act.

(2) That, as the misrepresentation was a material inducement in the purchase, the applicant was entitled to succeed on her claim for damages under s. 82 of the Act, in so far as the claim related to contravention of s. 52(1) and s. 53(a) of the Act.

(3) The test in such a case for assessing damages is: how much worse off was the applicant by reason of the contract induced by the misrepresentations, than she would have been if she had not entered that contract at all.

Mister Figgins Pty Ltd v. Centrepoint Freeholds Pty Ltd (1981) 3 ATPR 40 - 225, referred to.

(4)(a) That the display of the inaccurate odometer and the statements concerning it could form part of the "relevant circumstances" within the meaning of s. 66(2) of the Act, for the purposes of a claim under s. 7(1) of the Act for breach of an implied condition as to merchantability.

(b) That any absence of merchantable quality could only be related to defects in the vehicle at the time of sale, which ought to have been revealed to the applicant on her agent's inspection of the vehicle.

HEARING

1982, July 15, 16, 19, 21. #DATE 21:7:1982

APPLICATION

Application under s. 82 of the Trade Practices Act 1974 (Cth) for damages for misrepresentations falling under ss 52 and 53 of the Act. The facts appear sufficiently in the judgment.

R.D. Gore, for the applicant.

P.D. Dutney, for the respondent.

Cur. adv. vult.

Solicitors for the applicant: L.B. Moynihan, Lambert & Watt.

Solicitor for the respondent: McPherson & Shakespeare.

P.H.M.

ORDER

1. The respondent pay to the applicant damages of $3,000.00.

2. The respondent pay the applicant's taxed costs of these proceedings including reserved costs. Order that the respondent pay the applicant damages of $3,000 together with the taxed costs of these proceedings including reserved costs.

JUDGE1

The applicant, Margaret Brown, claims under s.82 of the Trade Practices Act, 1974, to recover from the respondent, Southport Motors Pty Ltd, the amount of the loss or damage which she is said to have suffered by misrepresentations allegedly made by the respondent in contravention of ss. 52(1) and 53(a) of the Act in connection with the sale and purchase of a Jaguar motor vehicle. Briefly stated, what the applicant seeks to recover is the difference between the real value of the vehicle and what was paid for it or, if greater, the value which it would have had if the representations had been true. Damages are also claimed for breach of the condition implied into the contract of sale of the vehicle by s.71(1) of the Act.

The respondent's defence admitted the following paragraphs of the Statement of Claim:
"1. The respondent is and at all material times has been a corporation duly incorporated in the State of Queensland.

2. At all material times, the Respondent carried on the business of selling used motor vehicles from premises at the address of its registered office at 121 Scarborough Street, Southport in the State of Queensland.

3. By an agreement made in October, 1979, the Respondent agreed to sell and the applicant agreed to buy one Jaguar Sedan motor vehicle registered number 984-NFR ("the Jaguar") for the sum of $12,000-00 ("the Agreement").

4. Pursuant to Section 4B(1)(a)(i) of the Trade Practices Act 1974 ("the Act"), the Applicant is taken to have acquired the Jaguar as a consumer."
The respondent also admitted by answers to interrogatories that, just prior to the sale, the Jaguar was displayed for inspection and sale at its premises at Scarborough Street, Southport, that its odometer then showed a reading of 54,621 kilometres, and that the Jaguar is a 1974 model.

The negotiations leading to the purchase were conducted on Mrs Brown's behalf by her husband, Dr Richard Brown, and on the respondent's behalf by a Mr Mahon, who was then its accountant and is presently its Sales Manager. The respondent admitted that Mr Mahon acted as its agent in the sale. Dr Brown visited the respondent's premises, had discussions with Mr Mahon, superficially inspected the Jaguar motor vehicle, and arranged to take it for a proper inspection by an expert. He drove the vehicle to C.A. Rizzo Motors, a trip lasting about 20 minutes, during the course of which he noticed a hissing noise associated with the steering. He then delivered it to Mr Rizzo with instructions to confirm that it was a good car and worth the money asked. A few days later he obtained the vehicle back from Mr Rizzo, together with a list of defects, and he drove it back to the premises of the respondent where it was left for the matters on Mr Rizzo's list to be attended to. The agreement between the parties was that Mrs Brown would purchase the vehicle for $12,000 and contribute $500.00 towards the cost of remedying the defects on Mr Rizzo's list. After some days, the car was delivered to Dr Brown who paid for it with the applicant's cheque.

Much of the trial was occupied with evidence of the problems which were encountered with the vehicle, the steps taken to have defects remedied, and the attendant costs. The case for the applicant was that the vehicle was totally unsatisfactory. The applicant, Mrs Brown, has her own vehicle and has never driven the Jaguar. She acquired it to provide it on lease for use in her husband's medical practice. However, she has been in the vehicle on occasions when it was driven by her husband and gave evidence partially confirming his description of the problems. In all, Dr Brown drove it for some 8,000-9,000 kilometres after purchase until August 1981, since which date it has been unused and has remained in the garage at the home of Dr and Mrs Brown. Although it could have been driven, it is more than usually noisy and uses more oil than is normal. Investigations not yet carried out may indicate that now, or in the not too distant future, a complete engine overhaul will be required, possibly costing as much as $3,000.

Certainly, the Browns have reason to be disappointed with the vehicle which Mrs Brown purchased. It was first back with Mr Rizzo soon after it was acquired. The difficulties which have been experienced cover a considerable range, both in nature and severity. Whether or not all the defects on Mr Rizzo's list were corrected by the respondent prior to its delivery on sale to Dr Brown on behalf of the applicant, I am satisfied that the vehicle was not then in good order and condition. I find that it possessed defects which required attention and were later attended to at considerable expense to Dr Brown. Nonetheless, I have concluded that by no means all of the defects referred to in the invoices, Exhibits 5 to 19, some of which defects were quite minor, were present in the vehicle when it was sold and delivered.

Dr Brown gave evidence that Mr Mahon said that he thought that the vehicle was a 1976 model and that that statement influenced Dr Brown's decision to purchase the vehicle. Mr Mahon claimed that he knew that the vehicle was a 1974 model and denied that he made such a statement. The overall impression which I formed was that the year of manufacture was of minimal significance in the discussions or the decision to purchase subject to a qualification to which I will come.

The applicant's case in relation to ss. 52(1) and 53(a) of the Act also relied upon the conduct of the respondent in displaying the Jaguar for inspection and sale at its premises with 54,621 kilometres on its odometer and alleged statements by Mr Mahon to the effect that the odometer reading was genuine. Evidence was called to show, and I find, that the vehicle had in fact been driven considerably further than the odometer revealed prior to its sale to the applicant. Dr Brown's evidence, which I accept, was that in discussions with Mr Mahon prior to the conclusion of the sale he had it confirmed that the Jaguar was a good car with low mileage and that Mr Mahon said that it had been completely overhauled and had even had the motor out of it. It was in the context of such statements that the price was reduced from $13,000 to $12,000 on the basis that no warranty need be given with it by the respondent. Dr Brown also said, and again I accept his evidence, that when Mr Mahon was asked whether the Jaguar was a "genuine 54,000 kilometre motor car" he answered "Yes Dick, it is".

I reject Mr Mahon's evidence denying that he made any statement to Dr Brown concerning the odometer reading or the distance the Jaguar had travelled. In any event, by his own evidence he did not believe that the odometer reading was genuine but made no mention of his doubt to Dr Brown. The respondent's conduct in displaying the vehicle without qualification of the odometer reading was plainly a relevant misrepresentation for present purposes. I find that, although Mr Rizzo's advice played a most material part in persuading Dr Brown that the vehicle ought be purchased, he would not have proceeded to purchase the vehicle on behalf of his wife for the price paid had he not been led to believe that the figure shown on its odometer was correct. Dr Brown's belief that the vehicle was a 1976 model as a result of Mr Mahon's statement that that was what he thought served to confirm what Dr Brown had seen and been told about the distance over which the vehicle had been driven but was, I find, otherwise irrelevant. It was not of itself a material inducement which affected the decision to purchase the car.

It does not seem to be important to make a finding just how far the vehicle had travelled prior to sale or to speculate as to whether or not Dr Brown would have purchased it on behalf of his wife if he had been accurately informed of that distance. He made his decision on what was represented to him and that was false. What he would have done if he had been told the odometer was inaccurate and that the vehicle had done, say, 70,000 kilometres cannot rise above conjecture. He might well have decided that the price was too high or that he would have nothing further to do with the vehicle at least unless he could be totally satisfied of exactly what its history was. On hearing of its history he might have gone on with the purchase, or he might have considered himself fortunate that he was in a position to break off negotiations. In any event, for what it is worth, I incline to the view that the understatement on the odometer was probably much more than 15,000-20,000 kilometres.

Accordingly, I am satisfied that the respondent is entitled to succeed on her claim for damages under s.82 of the Act insofar as the claim relates to contravention of ss. 52(1) and 53(a) by misrepresentations by, and by reference to, the vehicle's odometer, but upon her claim related to Mr Mahon's statement that he thought that the vehicle was a 1976 model.

A number of authorities dealing with the measure of damages where there has been a contravention of s.52(1) of the Act were discussed at some length by Northrop J. in Mr Figgins Pty Ltd v. Centrepoint Pty Ltd (1981) 3 A.T.P.R. 40-226 at p. 43,066 ff. It was common ground that similar tests are applicable in respect of contraventions of ss. 52(1) and 53(a). My tentative view is that the question in a case such as the present is not how much better off the applicant would have been if she had entered the contract and the representations had been true. Rather, the question is how much worse off is the applicant by reason of the contract induced by the misrepresentations than she would have been if she had not entered that contract at all. If that be the test, counsel for the applicant conceded that, even if Mr Mahon's statement as to what he thought was the age of the vehicle constituted a material misrepresentation which induced the contract, the applicant could point to no additional loss which she suffered in consequence of that conduct. The factual conclusion as to value at which I have arrived make it unnecessary to deal more fully with the question of how damage is to be quantified in a case such as this.

The evidence adduced directed to the issue of damages generally suggested a range for consideration but no more. I cannot doubt that in any valuation of a particular vehicle account must be had of any individual features it possesses, for example, the need for its engine to be reconditioned. Each of the matters in respect of which mis-statements were made, the age of the vehicle and the distance it had travelled, might and probably would affect the value of a vehicle irrespective of any demonstrable effect on its condition. However, in the present case there is an obvious connection between the unsatisfactory state of the vehicle at the time of sale and the amount of use which it had had and, perhaps but to a relatively minor extent, its age. Even so, not all the wear and tear to the vehicle at the time of sale is properly to be related to the distance which it had travelled in excess of the figure shown on its odometer, and few of the problems can be related to the fact that its date of manufacture was 1974 not 1976. By no means all of the expenditure since the purchase of the vehicle by the applicant, or of any additional outlay which is or may be required, can be attributed to defects which would not have existed had the representations by the respondent been accurate. For the calculation of Mrs Brown's loss by reason of the relevant mis-statements related to the odometer, the position may perhaps be summarized thus. Mrs Brown received instead of a Jaguar which had travelled 54,000-55,000 kilometres a vehicle which had travelled considerably further and had, in consequence, additional wear and tear and defects. I am not satisfied that even if it had done no more than 54,000-55,000 kilometres, the value of the vehicle would have exceeded the agreed price of $12,000. The actual value of the vehicle, a 1974 vehicle which had travelled considerably further than the odometer indicated, was at the time of purchase significantly less than the agreed purchase price, and was, I find, $9,000. Accordingly, I hold that the loss or damage to the applicant caused by the relevant contravention of the Act, the misrepresentations by and by reference to the odometer, was $3,000.

The conclusion at which I have arrived makes it unnecessary for me to deal at length with Mrs Brown's claim for damages for breach of contract which the respondent conceded was within this Court's jurisdiction. Section 71(1) of the Act provides that, subject to exceptions, where a corporation supplies (otherwise than by way of sale by auction) goods to a consumer in the course of a business, there is an implied condition that the goods supplied under the contract for the supply of the goods are of merchantable quality, that is, that the goods "are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all other relevant circumstances" (s.66(2)). Section 71(1) continues, however, that there is no such condition by virtue only of its force - "(b) if the consumer examines the goods before the contract is made, as regards defects which that examination ought to reveal."

Superficially at least, there may be difficulties in a case such as the present in determining whether or not the goods are of merchantable quality. Whether the statements made by Mr Mahon to Dr Brown concerning the vehicle were promissory or merely representational, it is not immediately obvious why such statements, and the display of the inaccurate odometer, would not form part of the relevant circumstances to be brought to account in accordance with s.66(2) of the Act. Curiously, when regard is also had to the price which she paid, the result may be to weaken, rather than strengthen Mrs Brown's claim that the Jaguar sold to her was not of merchantable quality. According to the valuation evidence called by the applicant, if the vehicle was a 1976 model the price of $12,000 would have been consistent with a vehicle which had done considerably more than 54,000-55,000 kilometres and was in need of substantial repairs.

I do not consider that there is any occasion to pursue such questions. Even if the matter be considered from the point of view most favourable to the applicant, I am firmly of opinion that the applicant's claim under s.71(1) of the Act could not entitle her to any additional sum by way of damages.

Any absence of merchantable quality could only be related to defects in the vehicle at the time of sale which ought not have been revealed by Mr Rizzo's examination. The relevant warranty breached by the sale of the vehicle with such defects would be a warranty that there were no such defects. Whether the measure of damages be taken as the cost of making good the defects or the difference in market value of the vehicle with and without the defects, on no view of the evidence could it sustain a finding that the breach of such a warranty would sound in damages in excess of $3,000. It was not submitted for Mrs Brown that the damages under s.82 of the Act and for breach of contract were cumulative.

The order of the Court is that the respondent pay to the applicant damages of $3,000.00 together with the taxed costs of these proceedings including reserved costs.