Dallas Clein Pty Ltd v Macol Pty Ltd
[2000] QDC 6
•4 February 2000
DISTRICT COURT OF QUEENSLAND
[Dallas Clein Pty Ltd v Macol Pty Ltd & Anor]
PARTIES: DALLAS CLEIN PTY LTD (Plaintiff)
v
MACOL PTY LTD (First Defendant)
TRAILERS-R-US PTY LTD (Second Defendant)FILE NO: 4882 of 1997 PROCEEDING: Trial DELIVERED ON: 4 February 2000 DELIVERED AT: Brisbane HEARING DATES: 27 and 28 January 2000 JUDGE: Judge Brabazon QC ORDER: Order that the second defendant pay damages of $17,954 and interest of $2,537 to the plaintiff CATCHWORDS: CONTRACT – Implied terms – Representations – TPA definitions ‘supply’ – TPA definition ‘consumer’, whether includes corporation SOLICITORS: Grant & Simpson for the Plaintiff
In this action the plaintiff asks for damages against the defendants because of defects in a trailer.
The Parties
Mr Dallas Clein is now an experienced truck driver. By the end of 1996 he had been self-employed for some years. He carried on business through his company, of which he was a director. His wife was also a director. She looked after the bookwork.
He had been working mainly for the Belyando Shire Council, based in Clermont. His job was to carry road building materials, such as sand, gravel and crushed road base. In the Clermont area, most of the roads on which he worked were unsealed. Only the main roads were sealed. He owned a truck and a dog trailer. The trailer was important, because it doubled the load for each trip. A dog trailer has a bin for carrying the load, wheels at each end, and an hydraulic hoist for tipping the bin up. The front wheels are mounted on a turntable so that the whole front axle turns in line with the towbar as it moves from side to side.
Mr John Willich was an experienced truck driver, before he got into manufacturing and selling various sorts of trailers. He is a director of the first defendant, Macol Pty Ltd. Often, it used the name, “Macol Trailers”. From small beginnings, that company had built up what appears to have been a quite substantial business at Ipswich. It had a workshop, and Mr Willich’s son, Mr Chris Willich, was the workshop manager.
Mr John Willich was also a director of the second defendant, Trailers-R-Us Pty Ltd. It was the company which sold the trailers manufactured by Macol. Both companies have the same address.
Buying the Trailer
In late September or early October 1996, Macol advertised some equipment for sale. The advertisement included a picture of a “new 2-axle dog trailer in stock ready to go”. The price was literally printed as $2,300, but it was always understood that was a misprint, for $23,000. The photograph showed a complete vehicle, including wheels and tyres. Mr Clein was looking around for a new truck and trailer. He came to Brisbane.
Mr Clein saw the advertisement, and went to make inquiries at Keogh Street, West Ipswich. He met Mr John Willich. He told Mr Willich that he was an owner-driver from Clermont, and that he was looking for a new dog trailer. He said that he owned a truck and trailer that he had been using to do contract work for the shire council. He wanted a new trailer straight away, because of his contract work with the council. He explained to Mr Willich that he had not been that long in the trucking business, and was still chasing work. While he might get work carting grain or cotton seed, his main business was with the council. He wanted to carry screenings and road base for the council. There was some discussion about the weight of the trailer. Mr Clein explained to him that the Council weighed the trailer and its load, so that the weight of the trailer would effect the load that the trailer could carry.
In the past, Mr Willich’s work as a truck driver had taken him to the Clermont area. He was familiar with the use of dog trailers in road building work. He said in evidence that 20% to 50% of the work in the country could be on unsealed surfaces. It is likely that Mr Clein did not literally say to him that the trailer would be used on unsealed roads. However, it must have been obvious that it was very likely, in the Clermont district. Mr Willich gave Mr Clein no warning about using the trailer on unsealed surfaces. Mr Willich did not think that the Clermont roads would cause a problem for the trailer. As he put it: “Knowing where he was going to work I would have assumed, yes, he would have been taking it on dirt roads … To the best of my knowledge when we sold this trailer to him I didn’t see a lot of fault in taking that trailer out to that area …”.
There is nothing in the evidence to suggest that this type of trailer comes in different specifications, where lighter specifications make it suitable only for use on bitumen roads. There is nothing to support the notion, that there are such different sorts of trailers. In any case, as was pointed out by Dr Grigg, the trailers often suffer stress in built-up areas because they have to turn on the shoulders of roads, and cross such things as gutters and uneven surfaces. If there were different specifications, then Mr Clein did not know about them, and Mr Willich did not mention them.
There was a curious difference of recollection at the trial, about the state of the trailer when it was inspected. Mr Willich insisted that it appeared as in the photograph, and that it was ready to go. On the other hand, Mr Clein and Mrs Clein (who remained in the car outside Macol’s yard, but observed the two men looking at the equipment) insisted that the bin had been separated from its suspension, and was sitting on the back of the truck. Mr Clein said that he could see where the suspension had been cut away from the bin.
It is hard to know whose recollection should be accepted. How could Mr and Mrs Clein be so mistaken? Why would Mr Willich want to go to the trouble of cutting the suspension off a made up vehicle, when he could have obtained a new suspension easily enough? No-one suggested that an examination of the trailer in its present condition would reveal the truth, about such changes to its suspension. No other evidence appears to point to the true facts.
In any event, there is no need to make what would be an arbitrary choice between the differing recollections. It might be assumed that Mr Willich’s recollections are correct, and that Mr Clein inspected the complete trailer. For reasons set out below, that would make no difference to any liability of Macol or Trailers-R-Us.
On that day Mr Clein agreed that he would buy the trailer. He meant that his financier would pay for it. Mr Clein had some difficulties arranging finance. In the end, the trailer was sold to CBFC Limited, and that company entered into a hire purchase agreement with the plaintiff. The hire purchase agreement also included a truck which he bought, for a total amount of $77,500. The term of the arrangement was 60 months, at an interest rate of 10.75%.
On 31st October 1996 Trailers-R-Us raised invoice no. 0046, addressed to CBFC Limited. The trailer, after registration, was sold for $25,500 (the increase on the $23,000 was due to an arrangement that Mr Willich and Mr Clein made about new retreads). The invoice contained some brief conditions of sale, that are not relevant to this dispute.
According to delivery docket no. 915, dated 2nd November 1996, the trailer was delivered on that day. It was not explained why the delivery docket describes a delivery to Bulk Truck Sales Sydney. It was accepted that 2nd November was the correct date. The trailer was delivered to Clermont.
Problems with the Trailer
Mr Clein first used the trailer for work on 5th November 1996. By about the end of January 1997, he started complaining about cracks in the metal bin. It appears that Mr Clein spoke to either Mr John Willich or Mr Chris Willich on at least five occasions, by telephone from Clermont. There was a conflict as to the substance of what was said. On his part, Mr Clein said that he was put off, with observations that the cracking was not really serious. Both Mr John Willich and Mr Chris Willich insisted that they offered to fix any problems if the trailer were returned to them. It also seems that there was some conversation dealing with the possibility of repairs being effected in Clermont. Mr Chris Willich said that he requested photographs of the cracking, but that they never arrived. Mr Clein denies any mention of photographs. He said that he suggested that Mr John Willich should send a sketch of the remedial work that should be done to Clermont, but that it never arrived.
It is not possible to be sure about what was said in those phone conversations. Mr Clein certainly complained about cracking. He was about 1,000km from Brisbane, and his work sometimes took him away from the telephone for days at a time. Messages were relayed through Mrs Clein. He probably was told something about the possibility of fixing the cracks. However, the effect of Mr Clein’s evidence should be accepted – by early February, he was sufficiently alarmed about the state of the cracking, and the disappointing responses coming from Ipswich, to justify a visit to a solicitor. He did that because the Ipswich responses, whatever they precisely were, did not show a realistic willingness to deal with his complaints.
Once matters reached his solicitor’s hands, he did not speak to either Mr John Willich or Mr Chris Willich again. Mr John Willich dealt with two different firms of solicitors, in response, and then ended up appearing in person for his companies at the trial. Unfortunately, it seems that the arrival of the solicitors on each side stopped direct communication between the parties. It might also be the case that Mr John Willich was not well advised about the position in which his companies found themselves.
Mr Clein’s solicitors first wrote on 7th February 1997. The open letter of that date complained that the trailer was defective and unsuitable for use for its intended purpose for several reasons. The reasons were set out. In a “without prejudice” letter, there was an offer to return the trailer in return for a refund of the full purchase price, that arrangement being in settlement of all claims.
Mrs Willich wrote on behalf of Trailers-R-Us on 13th February. The letter recorded (inaccurately) that Mr Clein had telephoned the office on one occasion, with a complaint of minor cracking. The letter ended with these remarks:
“In closing we would like to point out IF there is a manufacturing fault with the trailer we will most certainly stand behind the product we sell and we will do our utmost to have the manufacturer correct all if any defects caused through normal use and operation.”
It should be mentioned, that the written terms of sale, such as they are, made no mention of any contractual warranty for the trailer. Neither was it accompanied by any manual about such things as its maintenance. However, as one would expect, Mr Willich was always prepared to do at least some repair work on any equipment that was returned to him because of a genuine complaint.
Unfortunately, the exchanges of correspondence saw nothing done to the trailer. The trailer was not in work from the end of January until early February 1997, but Mr Clein did not bring it down to Brisbane. It was a long trip, and he had no confidence in Mr Willich. He then continued to use the trailer. The cracking became worse, and more widespread. His solicitors arranged for Dr FW Grigg, an engineer, to inspect the trailer at Clermont on 20th June 1997.
Dr Grigg’s inspection revealed a large number of defects. There was extensive cracking in the bin and in the chassis. His findings are illustrated in the photographs, which are explained in his report. It is appropriate to note the substance of his findings, and his conclusions:
1. When inspected, the truck had done about 7½ months work, which was only about 5% of its expected life.
2. There were design defects which allowed the bin of the lowered trailer to make undesirable contact with the steel structural members of the chassis. Wear on the cross-members threatened the structural integrity of both the bin and the chassis.
3. The method of connecting the sides of the bin to the front was defective, giving rise to severe cracking.
4. The securing of the tailgate on the side of the bin was both primitive and potentially very dangerous.
5. Additional cross-members were needed under the bin, and their absence resulted in cracking in the floor.
6. Cracking around the turntable was very serious, and could result in complete separation of the front end of the trailer with catastrophic consequences.
7. The vehicle was undoubtedly unfit for the purpose for which it was purchased (ie to carry road building materials). Remedial work would involve modifications, as well as mere repairs.
8. The trailer should be taken out of service immediately, because of the dangerous cracks.
9. It is likely that the cost of carrying out the modifications and repairs would not be justifiable, compared to the probable value of the trailer after the work was done.
Mr Clein’s solicitors communicated the substance of the report to Trailers-R-Us on 27th June 1997.
The company replied on 4th July. The letter said this:
“… As stated in our letter of 10th February 1997 that IF there is a manufacturing fault with the trailer we will most certainly stand behind the product we sell and will do our utmost to have the manufacturer correct all defects, if any, which could have been caused during normal use and operation.
If there is a warranty claim as such, please let Mr Clein know that he is welcome to return the trailer to our premises to have the faults, if any, rectified. However, we do ask that you give us notice, as, at this stage, we have approximately four weeks work in front of us …”
Once again, Mr Clein did not take that offer up.
On 17th November 1997 the plaint in this action was filed. On 18th December, solicitors for the defendants wrote to Mr Clein’s solicitors. In part, the letter said these things:
“Our client renews its offer to repair any defective welding work if the trailer is returned to its Brisbane depot for inspection. Furthermore, our client is also prepared, upon the trailer being made available for inspection in Brisbane, to consider other rectification work. It is not of course however prepared to agree to completely restore the vehicle. The trailer has apparently been used on rough dirt roads for which, as we understand it, it was never intended when it was constructed and would naturally as a result thereof be wearing out. … It is not a vehicle, we are instructed, which was built for continuous use on rough dirt which is apparently what your client has been using it for.
The purchase by your client of an already constructed trailer after his personal inspection of it, contrast sharply to the situation where a client comes to a trailer manufacturer and says he wants a trailer constructed for a particular purposes or indeed, for use in a particular area. Had your client told our clients that he wanted the constructed trailer for use on rough, dirt roads they would have constructed a quite different and considerably more expensive trailer. … It seems to us that your client received exactly what he inspected and can not fairly now complain that he should have bought something else. …Please send us a copy of the engineer’s report. …”
Mr Clein last used the trailer on 20th December 1997. Then, on 27th January 1998, he was obliged to submit the trailer for inspection by Queensland Transport. The result was a Defect Notice setting out 10 defects that had to be attended to. The inspecting officer made it clear to him that the vehicle was not to be used on any road in any way until the work was done.
Mr Clein had no choice but to buy a new trailer. He did that, and it started work at Clermont on 9th March 1998.
Things moved slowly between the parties in 1998. Mr Clein and his solicitors would not send Dr Grigg’s report as requested, on the basis that an opportunity would be taken to undermine its findings. On 26th August 1998, Mr Clein’s solicitors offered to attend a settlement conference, and to provide the report a week before the conference. There was no response to that suggestion. There was some correspondence about the preparation of the action. Then, on 21st October, Mr Clein’s solicitors offered to settle the matter on the basis that repairs were carried out under the supervision of Dr Grigg, that bank interest payable to CBFC was paid, and that he be paid lost income between the issue of the defect notice and the arrival of the new trailer. That offer was rejected.
Then, on 15th December 1998 Mr John Willich travelled to Clermont to inspect the trailer. He took an expert adviser with him. That expert was not called at the trial. All that is known of his report is that it did not support the criticisms made by Dr Grigg. There was a threat by the defendants’ new solicitors to administer interrogatories to Mr Clein, in view of that expert’s inspection. Fortunately, that did not happen. At least the defendants’ new solicitors sent a copy of the report to Mr Clein’s solicitors, on 30th March 1999. Surprisingly, Mr Clein’s solicitors still refused to release Dr Grigg’s report. There were no settlement conferences ever held, and the report was not delivered until shortly before trial.
The trailer has recently been brought to the Brisbane area. It was inspected by an assessor, Mr PJ Tinson. He has had a long experience with such vehicles, as a fitter, as a mechanic, as a transport inspector in New South Wales, as a transport driver in the army, and as a loss assessor. In his opinion (which should be accepted) the present salvage value of the trailer is $5,000. It would be unacceptable to a dealer. If the trailer had been in good condition and registered, its value would have been about $16,000. He said that, in all his years of assessing and inspecting vehicles with the Road Traffic Authority in New South Wales, he had never seen a trailer with as many fatigue cracks as this trailer has.
Liability
The plaint asks for damages. The damages are said to arise out of:
(a) A contract, whereby the defendants entered into a contract to supply the trailer to the plaintiff for an agreed price, in return for the hire purchase arrangement made by the plaintiff;
(b) Because of the operation of sections 71, 52 and 53 of the Trade Practices Act, or
(c) because of the operation of sections 38 or 40 of the Fair Trading Act.
In substance, the plaint depends on allegations that the defendants represented to Mr Clein that the trailer would be suitable for the purpose of carting gravel, road base and other materials on unsealed roads in central Queensland for profit. Alternatively, there were implied terms that the trailer would be of merchantable quality and fit for the purpose. It was suggested that such terms were either express or implied terms of the contract.
The facts show that it was the second defendant, Trailers-R-Us, that was involved in this transaction. Macol manufactured trailers, and then did a deal with Trailers-R-Us to take a trailer and sell it. The evidence does not reveal any details of that arrangement but, as Mr John Willich put it: “After the trailer is manufactured and it’s sitting there I sort of do a deal with Macol and take the trailer and sell the trailer … We’ve got an agreement I sell the trailer and that’s how it works.” The advertisement referred to “Macol Trailers” but that can be seen as a reference simply to the brand of equipment for sale. The invoices were raised by Trailers-R-Us. The hire purchase transaction was made between Trailers-R-Us and CBFC Limited. All the subsequent correspondence came from Trailers-R-Us.
There appears to be no way in which Macol might be liable to the plaintiff. It did not enter into any contract. Mr John Willich was acting for Trailers-R-Us when he dealt with Mr Clein. Trailers-R-Us was the “supplier” of the trailer, within the meaning of the Trade Practices Act. Provisions of that Act, making a manufacturer liable to pay damages to a consumer, do not apply in this case – the trailer is outside the limited definition of “goods” (which are goods ordinarily acquired for personal, domestic, or household use or consumption) and there is no claim for damages for personal injury, or for damages to other goods or property. (See s.74A and Part VA of the Trade Practices Act). There appears to be no other Queensland legislation which would give the plaintiff a right to ask for damages against the manufacturer. There is no claim for damages for negligence (it is not suggested that the facts would have made such a claim possible). It was suggested that Macol was a “supplier”, but the facts do not support the submission – even if it is accepted that the word has a wide meaning. See the decision of the High Court in The Commonwealth v Sterling Nicholas Duty Free Pty Ltd (1972) 126 CLR 297, on the concept of “supply”. It was not responsible for any misleading or deceptive conduct (see below).
It is necessary to consider the position of Trailers-R-Us. It is a corporation. The plaintiff is also a corporation. Only a “consumer” can take advantage of the consumer protection provisions of Part V of the Act. The word is defined this way, in s.4B(1):
“For the purposes of this Act, unless the contrary intention appears:
(a) A person shall be taken to have acquired particular goods as a consumer if, and only if:
(i) the price of the goods does not exceed ($40,000) or
(ii) where the price exceeded ($40,000) – the goods were of a kind ordinarily acquired for personal domestic or household use or consumption or the goods consisted of a commercial road vehicle
(iii) …
(iv) In this section, “commercial road vehicle” means the vehicle or trailer acquired for use principally in the transport of goods on public roads.”
As the price was less than $40,000, the plaintiff acquired the trailer as a consumer. Even though the plaintiff is a corporation, and there is no definition of “person” in s.4(1) to include bodies corporate, that should be taken as its meaning. A corporation may be a consumer for the purposes of the Act. The effect is that the buyer of a commercial road vehicle, regardless of the price, is a “consumer”.
In this case, the plaintiff relies on s.71 of the Act. The relevant provisions are these:
“1. 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, except that there is no such condition by virtue only of this section:
(i) As regards defects specifically drawn to the consumer’s attention before the contract is made; or
(ii) If the consumer examines the goods before the contract is made, as regards defects which that examination ought to reveal.
2. Where a corporation supplies (otherwise than by way of sale by auction) goods to the consumer in the course of a business and the consumer expressly or by implication makes known to the corporation … any particular purpose for which the goods are being acquired, there is an implied condition that the goods supplied under the contract for the supply of the goods are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that he consumer does not rely, or that it is unreasonable for him or her to rely, on the skill or judgment of the corporation …”
Here, Trailers-R-Us supplied the trailer to Mr Clein, even though there was a sale of the trailer to the financier, which then hired it to Mr Clein’s company. Quite apart from the Trade Practices Act, the same result could be reached because of the combined operation of the Queensland Sale of Goods Act and Hire Purchase Act – see sections 17 and 5 respectively. If the expression “person” does not include a corporation, then the result will be the same, because of these Queensland provisions.
Here, the facts do not show that the inspection by Mr Clein should have revealed any defects. Mr Clein was a truck driver, not an engineer. Mr John Willich, who was familiar with the trailer, was himself not aware of the defects at the time. Assuming that the vehicle was ready for sale, as Mr Willich insists, an examination by a truck driver would not have revealed its defects.
The supply of the trailer was in the course of the business of Trailers-R-Us. There was an implied condition that the trailer would be of merchantable quality. Because Mr Clein made known the purpose for which the trailer was being acquired, there was also an implied condition that the trailer would be reasonably fit for that purpose. It was reasonable for Mr Clein to rely on the skill or judgment of Trailers-R-Us in buying a trailer of that kind.
The meaning of “merchantable quality” is defined in s.66(2) of the Act:
“Goods of any kind are of merchantable quality … if they 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 the other relevant circumstances.”
The evidence of Dr Grigg and Mr Tinson should be accepted. It is clear that the trailer was not of merchantable quality, and was not reasonably fit for the purpose for which it was being acquired. The number of serious defects, in such a short time, lead to that conclusion. (It was suggested that Mr Clein’s poor maintenance and harsh use of the trailer caused the problems. However, the evidence does not support that submission.)
It is also suggested that Mr John Willich was guilty of misleading or deceptive conduct, in making a representation about the trailer, to the effect that it would be suitable for the purpose of carting gravel, road base and other materials on unsealed roads in central Queensland for profit. However, Mr Clein’s evidence does not go far enough to support such an allegation. Mr Willich said nothing that was misleading or deceptive.
Damages
The usual measure of damages is the difference between the purchase price and the lower value of the goods, caused by a breach of an implied condition about merchantable quality, or fitness for purpose. However, that approach must yield to particular circumstances. Here, Mr Clein had the use of the trailer for almost 14 months. It would not be right to apply the usual approach, as that would not recognise the benefit that he had from the trailer.
If the trailer did not have the defects, then it would have been a used trailer, but in good condition, at the end of those 14 months. That is the bargain that he expected to make. Here, his damages should take into account what he should have ended up with in any case. According to Mr Tinson, a second-hand trailer in good condition would have been worth about $16,000.00. In fact, the vehicle is worth about $5,000.00. The plaintiff should recover the difference, of $11,000.00.
There was also a claim for fixing various defects, the loss of earnings, and the cost of transporting the trailer to Brisbane. The details of those claims are set out in Exhibit 21. Mr Willich did not contest them, and they seem to be moderate enough. In particular, the loss of earnings seems to be understated, if anything. The total expenses of $2,760.00 should be allowed.
There was also a claim for the interest with respect to the trailer paid to CBFC Limited, from January 1998 to January 2000. That is a total of $4,194.00. It was not suggested that it is not recoverable. The claim appears to be reasonable. The trailer was kept by Mr Clein until the trial, and that was not said to be unreasonable.
Particular attention has to be paid to the suggestion by the defendants, that Mr Clein failed to mitigate his own damage. In particular, it was said that he did not act reasonably, in his own interests, when he failed to return the vehicle in early 1997 for repairs, when he was invited to do so.
In principle, the law makes it clear that a person who suffers damage must take reasonable steps, in his own interests, to keep that damage to a minimum. If reasonable steps are taken to do that, and the situation is actually made worse, then that will not matter. As long as the steps appear to be reasonable at the time, the full amount of the damage might be recovered. A purchaser of a vehicle will usually be expected to return it for repairs to the seller if the seller is willing and able to do the work.
It is true that Mr Clein does not seem to have been very communicative after February 1997. On the face of it, he was presented with offers to have the trailer fixed. Also, it is difficult to understand the reluctance to send Dr Grigg’s report to the defendants.
There are a number of considerations in Mr Clein’s favour. It should be accepted that he was at first discouraged by the reluctance of Mr John Willich and Mr Chris Willich to do anything effective about his claims. He was a sole owner-driver, who found himself with a defective trailer a long way from Brisbane. When Mr John Willich finally inspected it in Clermont, he was accompanied by an expert who did not accept Dr Grigg’s views. In the correspondence which has been quoted above, it will be noted that there are allegations to the effect that the trailer was used on rough roads, when it was not designed for that purpose. Finally, there has been Mr John Willich’s conduct at this trial, in which liability, based on Dr Grigg’s findings, has been denied. When all those things are taken into account, it can be seen that the damages claimed should not be refused, or reduced, because of Mr Clein’s failure to return the trailer to Ipswich. It has not been demonstrated that to do so would have seen the necessary modifications and repairs properly carried out.
Therefore, damages in the total amount of $17,954.00 must be paid by Trailers-R-Us to the plaintiff. There is also a claim for interest. All of the damage was suffered by early 1998, apart from the interest payable to CBFC Limited, which has been accruing up to the present time. Interest of 8% should be allowed for 2 years on $13,760.00, and at 4% for 2 years on $4,194.00. That is a total of $2,537.00. The total payable by Trailers-R-Us is $20,491.00.
The parties should make submissions about the question of costs.
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