Burns v Man Automotive (Aust) Pty Ltd

HIGH COURT OF AUSTRALIA

Gibbs C.J., Wilson, Brennan, Deane and Dawson JJ.

BURNS v. M.A.N. AUTOMOTIVE (AUST.) PTY. LTD.

(1986) 161 CLR 653

16 December 1986

Contract

Contract—Breach—Damages—Sale of goods—Prime mover—Warranty that engine fully reconditioned—Breach—Loss of earnings—Extent of recovery—Mitigation of loss—Purchaser impecunious—Relevance to assessment of damages and mitigation.

Decisions

GIBBS C.J.: This is an appeal from a judgment of the Full Court of the Supreme Court of Queensland which allowed an appeal from a judgment of Moynihan J. and reduced the damages awarded for breach of warranty from $220,122.90 to $70,253.06.

2. For present purposes it is sufficient to state the facts briefly as follows. In about July 1977 the appellant and the respondent company entered into a contract by which the respondent agreed to sell to Esanda Limited (a finance company) for hire to the plaintiff a diesel prime mover and warranted that the engine of the prime mover had been fully reconditioned. The respondent knew that the appellant intended to use the prime mover in a business of interstate haulage, and should also have known that the appellant was not in affluent circumstances. The cash price for the vehicle shown in the hire purchase agreement was $31,000. The engine had not in fact been fully reconditioned and it caused the appellant constant difficulty in the conduct of the haulage business. In June 1978 the prime mover broke down and in July 1978, when the appellant saw the engine stripped down, he became aware, if he did not already suspect, that the engine when he bought it had not been fully reconditioned and was in a very defective state. It would have cost $7,000-$8,000 at that time to put the engine into the warranted condition, but the appellant could not afford to pay that sum. The respondent would do nothing to rectify the state of the engine either then or later, although pressed by the appellant to do so. The appellant carried out certain repairs to the engine and had to borrow further money ($1,400) from Esanda Limited for that purpose. Thereafter the condition of the prime mover was such that it could not be used in the business of interstate haulage and the appellant used it instead in cartage in central Queensland. In November 1979 the prime mover finally broke down and it was later repossessed by Esanda Limited. At all times after July 1977 the business of interstate haulage and that of carting had been carried on by the appellant at a loss.

3. The learned trial judge awarded as damages $2,122.90 in respect of towing charges, mechanical repairs and the purchase of parts. He further awarded an amount of $131,000 for "loss of earnings", $2,000 for nervous stress and $85,000 interest. In fixing the sum for "loss of earnings", the learned trial judge acted on the basis that if the engine had been fully reconditioned it could have been expected to operate efficiently "for of the order of four years covering of the order of two…