Dwyer v Alfex CNC Australia Pty Ltd
[2020] VCC 1674
•22 October 2020
He was li
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNEMELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-19-02904
| CHRIS DWYER (TRADING AS THE LETTERBOX SHOP) | Plaintiff |
| v | |
| ALFEX CNC AUSTRALIA PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4, 5, 15, and 19 May 2020 | |
DATE OF JUDGMENT: | 22 October 2020 | |
CASE MAY BE CITED AS: | Dwyer v Alfex CNC Australia Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 1674 | |
REASONS FOR JUDGMENT
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Subject: CONTRACT – TRADE PRACTICES – DAMAGES
Catchwords: CONTRACT – terms and conditions – incorporation of terms by reference – limitation on warranty – whether incorporated in contract – whether terms onerous or unusual – whether special steps required to bring terms to other party’s attention
TRADE PRACTICES – misleading or deceptive conduct – representations about suitability of product for purchaser’s business – whether representations false – whether purchaser relied upon representations – whether independent research negates reliance on vendor’s statements – operation of exclusion clauses as a defence to an action under s 18
DAMAGES – quantification of loss and damage – where total amount of affected goods uncertain – evidence of replacement cost of affected goods deficient – lack of evidence as to loss of profit – lack of evidence as to loss of goodwill
Legislation Cited: Competition and Consumer Act 2010 (Cth); Goods Act 1958 (Vic);
Cases Cited:ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640; Allianz Australia Insurance Limited v GSF Australia Pty Ltd (2005) 221 CLR 568; Bateman v Slatyer (1987) 71 ALR 553; BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Services GmbH & Co KG [2014] VSCA 338; Byers v Dorotea Pty Ltd (1986) ATPR 40-760; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; Collins Marrickville v Henjo Investments Pty Ltd (1987) 72 ALR 601; Cummins Generator Technologies Germany GmbH v Johnson Controls Australia Pty Ltd (2015) 326 ALR 556; Dibble v Aidan Nominees Pty Ltd (1986) ATPR 40–693; Fried v Dixie Holdings Pty Ltd [2000] FCA 1048; Galloway v Mapmakers Pty Ltd (Burchett J, unreported, Federal Court of Australia, 5 September 1985); General Newspapers Pty Ltd v Telstra Corporation (1993) 117 ALR 629; Global Sportsman Pty Ltd & Anor v Mirror Newspapers Ltd & Anor (1984) 55 ALR 25; Gould v Vaggelas (1985) 157 CLR 215; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83; Henville v Walker (2001) 206 CLR 459; Hornsby Building Information Centre v Sydney Building Information Centre Ltd (1978) 140 CLR 216; L’Estrange v Graucob [1934] 2 KB 394; Longden v Kenalda Nominees Pty Ltd [2003] VSCA 128; Marks v GIO Australia Holdings (1998) 196 CLR 494; MA & JTripodi Pty Ltd v Swan Hill Chemicals Pty Ltd [2019] VSCA 46; Maxitherm Boilers Pty Ltd v Pacific Dunlop Ltd & Anor [1998] 4 VR 559; MBF Investments Pty Ltd v Nolan (2011) 37 VR 116; Neilsen v Hempston Holdings Pty Ltd & Anor (1986) 65 ALR 302; Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17; Petera Pty Ltd v EAJ Pty Ltd (1985) 7 ATPR 40-805; PJ Berry Estates Pty Ltd v Mangalone Homestead Pty Ltd (1984) 6 ATPR 40-489; Rozenblit v Vainer [2019] VSCA 283; Sargent v ASL Developments Limited (1974) 131 CLR 634; Sutton v A J Thompson Pty Ltd (in liq) (1987) 73 ALR 233; Taylor v Johnson (1983) 151 CLR 422; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Venerdi Pty Ltd v Anthony Moreton Group Funds Management Ltd [2015] 1 Qd R 214; Williams v Pisano [2015] NSWCA 177; Wilton v Farnworth (1948) 76 CLR 646
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G Mukherji | McDonald, Slater & Lay |
| For the Defendant | Mr C Smith | Barry Nilsson Lawyers |
HIS HONOUR:
Summary
1 This case concerns a contract of sale for laser engraving equipment. The plaintiff, Chris Dwyer (“Dwyer”) alleged the defendant, Alfex CNC Australia Pty Ltd (“Alfex”), made certain representations which induced him to enter into the contract. Dwyer contended that these representations formed part of the contract of sale and that Alfex breached the contract. Alternatively, Dwyer claimed that Alfex engaged in misleading and deceptive conduct in breach of the Australian Consumer Law (“the ACL”).
2 Alfex disputed both that it made the representations and that they formed part of the contract. Alfex also relied upon an exclusion of liability clause and limitations on the scope of the warranty contained within the contract.
Background
3 Dwyer operates a letterbox manufacturing business known as The Letterbox Shop.
4 Alfex supplies laser equipment for marking, cutting, and engraving. Alfex sells its equipment to a range of different companies for varying purposes.
5 Dwyer manufacturers high quality letterboxes, predominantly in stainless steel, for the building industry and other end users. Although he has a website, most of Dwyer’s business is generated by word of mouth or repeat orders from builders or developers with whom he has worked in the past.
6 Having completed VCE, Dwyer began an apprenticeship as a carpenter. Some years later he became a registered builder. He worked in the building industry for about 15 years before establishing his own business in 2006. Dwyer has a niche market with his high grade stainless steel letterboxes. They are made to last, being marine grade 316 stainless steel, and are usually installed in brickwork outside people’s homes.
7 Dwyer customises the letterboxes to suit the client’s specifications. For example, in addition to the number, Dwyer can include things like a street address and a “no junk mail” sign.
8 When he first began the business, Dwyer laser cut the number out of the stainless steel and put black Perspex at the back of the steel, thereby highlighting the number. Dwyer outsourced this laser cutting work. As the business grew, Dwyer was keen to reduce both the turnaround time in producing letterboxes and the cost of the laser cutting work. Dwyer said that after he launched his website in 2007, the business took off. The volume of orders increased to the point where the cost of outsourcing the laser cutting work affected profit margins. Dwyer did not control the production timetable because he was reliant upon third parties. The lead time to produce a panel became about two weeks.
9 In 2008, a friend of Dwyer’s who ran an engineering business told him that there were machines available which he should look at because they were capable of putting a permanent mark on stainless steel. As a result of this advice, Dwyer began researching and found three or four companies which sold CO2 lasers. It was as a result of this research that Dwyer first became aware of Alfex in 2008.
10 Dwyer said that he contacted Alfex and was directed to speak to Jordan Buhagiar (“Buhagiar”). Buhagiar was the laser division manager at Alfex. After an initial discussion over the phone, Dwyer visited the Alfex premises in Broadmeadows. Dwyer took a letterbox with him in order to show Buhagiar the product he was selling and what the laser machine would have to be capable of producing.
11 Because Dwyer had also taken to the meeting with Buhagiar samples of the stainless steel which he used for his letterboxes, Buhagiar performed for him a test demonstration of the Epilog Helix CO2 laser. Dwyer said that the mark produced by the laser was good but it had a brown tinge and was not sufficiently black. Dwyer left some of his steel samples with Buhagiar who said that he would work on improving the mark.
12 On 8 August 2008, the day after Dwyer’s visit, Buhagiar sent Dwyer an email thanking him for his visit and enclosing a quotation for the Helix range of lasers.
13 On 29 August 2008, Buhagiar again emailed Dwyer to advise him that, with further testing, he had achieved a much blacker mark with the Epilog laser than he had managed at the demonstration earlier that month. Buhagiar said that the mark was a completely solid black mark with no variations.
14 The Epilog Helix CO2 laser required the application of a special paste on the stainless steel. The laser reacted with the paste and bonded it to the face of the stainless steel.
15 Ultimately, Dwyer did not buy the CO2 laser from Alfex but from a business in Queensland which produced a better, sharper mark. At the time of the purchase, Dwyer contacted Alfex to advise it of his decision. Dwyer said that because he had spent the most time with Buhagiar and Alfex was the only business located in Melbourne, he was keen to ring and explain the situation to him. Dwyer also notified the two other unsuccessful parties that, on this occasion, he was not buying their product.
16 Over the next couple of years, Dwyer used the CO2 laser. While the mark it made was permanent and still looked good, he thought it was starting to fade a little and become dull. Dwyer also became concerned about the CerMark paste which had to be applied to the stainless steel for use with the laser. Dwyer learned that the paste had carcinogenic properties and posed a potential health risk. For both those reasons, Dwyer kept his eye open for other lasers which were suitable for his purposes.
17 In May 2010, Dwyer visited the Alfex display stall at the Austech trade fair in Melbourne. This trade fair was a metal work machinery show which displayed the different kinds of machines and technology available within the metal industry. Dwyer saw a person from Alfex using a Vision router to engrave stainless steel. Dwyer was impressed with the demonstration and thought that the laser might suit his business. The router drilled out about 0.2-0.3 millimetres from the stainless steel and then used a syringe of special paint to fill the hole. Dwyer thought the router seemed to engrave the stainless steel quite easily.
18 From May to September 2010, Dwyer had discussions with Buhagiar about the router he saw at the trade fair. Alfex had the exclusive reselling rights in Australia to the Vision brand of router.
19 On about 15 September 2010, Buhagiar provided a quote to Dwyer for the Vision router in the sum of $51,700 (including GST). Dwyer bought the router. Buhagiar came to Dwyer’s premises to install and commission the machine, run some tests on it, and train Dwyer in its use.
20 Once he began using the router, Dwyer discovered that the machine did not work as easily upon stainless steel as he had thought. Moreover, the router was expensive to operate, more so than the CO2 laser, because the wear and tear on drill bits was significant and they were expensive to replace.
21 While Dwyer kept the router, he recommenced using the CO2 laser. Dwyer retained the router primarily for working on brass or copper plaques. This comprised only about 5% of his business with the balance devoted to stainless steel.
22 After buying the router, Dwyer remained in touch with Buhagiar. Dwyer rang him whenever he had an issue with the computer program for the laser or was trying to work out some problem with the machine. Buhagiar always took his calls and endeavoured to help. Dwyer said he believed they spoke a couple of times a year. Alfex serviced the equipment from time to time.
23 In September 2013, Buhagiar rang Dwyer to inform him that he had a new type of laser, a galvo-steered laser, which operated differently from the CO2 laser. It made a mark directly on the stainless steel. According to Dwyer, Buhagiar told him that the new laser created a black permanent mark and it would be really good for Dwyer’s business. Dwyer asked Buhagiar to send him some information about it.
24 On 5 September 2013, Buhagiar sent Dwyer an email which included information about the galvo-steered lasers. Buhagiar explained how they differed from the CO2 lasers and said that they worked much faster than the other type of laser. Buhagiar provided links to a number of websites and videos. He recommended the Lotus Laser Meta C1 and said that:
“The Lotus Laser systems would be more than suitable for your requirements.”
This laser, which was manufactured in England, was about $25,000 cheaper than the German galvo-steered machine referred to in the email.
25 Dwyer said that he went through the information Buhagiar supplied, examining the material on the websites and performing his own research as well. Dwyer was excited about the product because it appeared it would provide the permanent waterproof black mark which he required for his letterboxes. As an added bonus, he no longer had to work with the CerMark paste.
26 By email on 7 October 2013 , Dwyer thanked Buhagiar for the samples he sent him and the information about the galvo-steered lasers. The reference to samples was to samples which Buhagiar had prepared and sent to Dwyer. They were not samples of Dwyer’s 316 stainless steel which he sent to Buhagiar. The main point of the email was to advise Buhagiar that, because he had the CO2 laser working well again (after a service) and due to the expense of the new machine, Dwyer would not buy the galvo-steered laser then but would look at buying one the following year.
27 Dwyer said that in his conversations with Buhagiar around this time, Buhagiar told him that Epilog was offering a new laser product called a FiberMark which was similar to a CO2 laser but had a different laser beam. However, because Buhagiar said that the product was not as good as the galvo-steered laser, Dwyer did not pursue this option.
28 In considering what he should do, Dwyer said that he looked at the Alfex website. There, one of the pages under the heading “Laser Marking” said:
“Laser marking involves the marking of workpieces using a laser. The workpiece material determines the process and energy requirements. Almost all materials can be marked with a laser. Laser markings are water-proof, wipe-proof, and extremely durable. They can be created quickly, automatically, and for individual applications.
Consequently, manufacturers from various industries use flexible and permanent laser markings as their preferred method for making parts.
Fiber Lasers and CO2 lasers are ideal radiation sources for the majority of laser marking applications.”
29 About a year later, Buhagiar rang Dwyer to follow him up regarding the possible purchase of the galvo-steered laser. Dwyer told him that, while he was still using the CO2 laser, he had issues with it such as the fading, so he was interested to look again at the other laser. Buhagiar sent him an email on 29 October 2014 with some information, a link to a video, and some pricing advice.
30 Ultimately, Dwyer decided not to buy the new laser. He explained to Buhagiar that the Vision router was still under finance and that he was interested to have another look at the new laser the following year after he had paid off the router.
31 In May 2015, Dwyer went to the Austech trade fair in Melbourne and spoke to Buhagiar at the Alfex stand. Buhagiar had a smaller version of the new laser at the trade fair and produced some samples for Dwyer on stainless steel bottle openers. Dwyer thought the result was impressive – the mark was a deeper, darker black and better than the product he produced. Dwyer asked Buhagiar to contact him to get some sample work done on Dwyer’s stainless steel after the trade fair was over.
32 Buhagiar contacted him in June 2015 to obtain some samples. On 21 July, Dwyer sent Buhagiar a computer file of exactly what he wanted him to test on the stainless steel.
33 Dwyer received the samples back from Buhagiar in early August and thought that the marking on the stainless steel looked sensational – sharp, shiny, and black. Dwyer tested the marks by scraping them with a screwdriver and had to gouge them vigorously to remove the mark. Dwyer said he didn’t check whether the marks were waterproof. He said that he had explained many times previously to Buhagiar that the mark had to be waterproof. This was because, usually, the letterbox was outside and exposed to the elements.
34 After Dwyer chased him for a quotation and sample times by email on 20 August 2015, Buhagiar responded by forwarding a quote for the Lotus Meta C1 Laser on 24 August 2015. The quote contained, amongst other things, warranty information and terms and conditions.
35 The warranty section within the quote provided:
(a)“Without limiting the generality of any of the exclusions or limitations described in other paragraphs, Manufacturer’s warranty does not include any warranty that the equipment will meet the Buyer’s production specifications or other requirements…”; and
(b)“Manufacturer’s liability under this agreement shall be limited to repairing or replacing defective equipment only”
36 There was a problem with the quote because it related to the wrong machine. Nonetheless, Dwyer read the quote in some detail and recalled seeing a clause which referred to the AMTIL[1] general terms and conditions (“AMTIL T&C”).
[1]AMTIL is the Australian Manufacturing Technology Institute Limited.
37 The quote referred to and purported to incorporate by reference the “attached” AMTIL T&C. The parties agreed that no such terms and conditions were attached to the quote. Dwyer acknowledged that he read the quote in full and specifically recalled reading the section that incorporated the AMTIL T&C. He said that he did not know what AMTIL was and, as there was nothing attached to the quotation, he assumed the terms and conditions were enclosed in the quotation attached to the email correspondence.
38 The relevant sections of the AMTIL T&C provided as follows:
12.1Except as the Terms specifically state, or as contained in any express warranty provided in relation to the Goods or Installation Services, the Contract does not include by implication any other term, condition or warranty in respect of the quality, merchantability, acceptability, fitness for purpose, condition, description, assembly, manufacture, design or performance of the Goods or Installation Services or any contractual remedy for their failure.
.
.
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12.5The Company is not liable for any indirect or consequential losses or expenses suffered by the Purchaser or any third party, howsoever caused, including but not limited to loss of turnover, profits, business or goodwill or any liability to any other party, except to the extent of any liability imposed by the ACL.
12.6 The Purchaser acknowledges that:
(a)it has not relied on any service involving skill and judgment, or on any advice, recommendation, information or assistance provided by the Company in relation to the Goods or Installation Services or their use or application.
(b)it has not made known, either expressly or by implication, to the Company any purpose for which it requires the Goods or Installation Services and it has the sole responsibility of satisfying itself that the Goods or Installation Services are suitable for the use of the Purchaser.
39 On 1 September 2015, Buhagiar sent Dwyer a video of the times for the tests on his samples. When Buhagiar had performed laser tests on the samples provided by Dwyer in around late July or early August, he had forgotten to record the timings associated with the laser work on the stainless steel. As a result, he sent the same program as he had used to the laser manufacturer in England and asked it to perform the tests and detail the results. The manufacturer took a video of the tests specifically for Dwyer and recorded the time it took to create various marks. The evidence in the case included a number of slides from the video.
40 On 3 September 2015, Buhagiar emailed to Dwyer the revised quote for the Lotus Meta-C1 FL30 laser (“the Lotus Laser”) with an X2 axis and filtration extraction unit attached. The quote contained, among other things, warranty information and terms and conditions. The relevant terms were identical to the initial quote. I shall examine them in greater detail later. Dwyer entered into the contract to purchase the Lotus Laser on the same day.
41 Dwyer began using the Lotus Laser to mark numbers and address details onto the stainless steel letterboxes in around January 2016. After approximately seven months use of the Lotus Laser, Dwyer began to receive complaints from customers that the markings on the letterboxes had rusted and flaked off.
42 Dwyer notified Alfex of the issues he was experiencing and halted production of his letterboxes with the Lotus Laser.
43 After some initial troubleshooting failed to reveal the cause of the rust, Alfex facilitated testing of the material used in the construction of the letterboxes as well as the laser markings. The initial testing did not reveal any obvious factors that could cause the corrosion. Further testing conducted on the laser markings showed that the laser marked areas were more susceptible to corrosion.
44 In 2017, Dwyer independently consulted with a materials and corrosion consultant, Dr Graham Sussex. Dr Sussex reported that the mark formed by the laser was a type of iron oxide called magnetite and that magnetite was unstable in the presence of water and air, thus leading to rust.
45 Alfex recommended applying a protective coating over the mark. Dwyer opted against this option as there was no guarantee the protective coating would permanently preserve the laser marking.
46 Dwyer initiated this proceeding by filing a writ and statement of claim in June 2019. Dwyer alleged that Alfex made certain representations regarding the suitability of the Lotus Laser for his business, that those representations formed part of the contract, and that Alfex breached the terms of the contract. Alternatively, Dwyer alleged that Alfex made false representations which he relied upon to enter the contract.
47 Alfex contended that it made no representations that went beyond the specifications of the equipment and that it was the responsibility of the customer, Dwyer, to ensure that the samples provided were fit for the purpose he sought to use them for.
48 Alfex further relied upon the warranty term contained in the quote that Dwyer signed. The term expressly provided that it did not include “any warranty that the equipment will meet the Buyer’s production specifications or other requirements”. Alfex also argued that the AMTIL T&C expressly excluded implication of any term as to fitness for purpose.
Credit
49 There were two witnesses for the plaintiff, Dwyer himself, and his expert, Dr Graham Sussex. Buhagiar was the sole witness for Alfex.
50 Credibility was not a decisive factor in this case.
51 Dwyer presented as an honest witness. He gave quite detailed evidence about key aspects of the case. He answered the questions put to him without prevarication or delay. The issue with the numbers on the letterbox was plainly a major concern for him. I regarded him as a credible and reliable witness whose evidence I could generally accept.
52 Buhagiar also presented as a basically honest witness. Given his role in the company and the number of actual and prospective clients with whom he interacted, it was unsurprising that his recollection of events was not as detailed as Dwyer’s recollection. This was apparent in a number of instances.
53 First, when asked about a conversation with Dwyer that preceded an email Buhagiar sent to Dwyer on 29 October 2014, Buhagiar said he could not remember the specific conversation. He explained that any time he had a conversation with a customer he followed it up with an email afterwards to ensure he was clear on what was discussed. His evidence was that the substance of the conversation was as set out in the email. I infer from this that Buhagiar had no independent recollection of the conversation.
54 Secondly, when asked if, in 2015, he told Dwyer the black laser marks would be permanent, waterproof, and suitable for use on letterboxes used outdoors, Buhagiar said he could not “recall that being a specific question”.
55 Thirdly, when asked if he told Dwyer the Lotus Laser marks would be permanent, Buhagiar said he could not recall saying “permanent” and that permanent was not a word he used in regard to laser marking.
56 Fourthly, when asked if he told Dwyer that the Lotus Laser marks would be suitable for use on his letterboxes in outdoor conditions, Buhagiar responded:
“Ah, I can’t remember the specifics of the question. Like, whether that specific question was asked or it was a more general question, um, on using them for letterboxes, but you know, the main question that was asked was, (a), is it suitable to put a black mark on letterboxes? Yep, we can – yes, we could put a letter – a black mark on a letterbox.”
57 Finally, when asked if he recalled Dwyer saying that he wanted the mark to be black, permanent, and durable, he said he could not recall but agreed that Dwyer could have said something like that.
58 Additionally, there was some disagreement between the parties about who contacted whom first in 2013. Buhagiar contended that it was Dwyer who contacted him first by way of email to enquire about a YAG laser. However, no such email was in evidence. Though I consider it of little relevance who initiated contact in 2013, if Buhagiar’s evidence was correct about sending emails to a client after a conversation, then I would have expected to see an email from him referring to the YAG laser. There was no such email.
59 There was one aspect of Buhagiar’s evidence which troubled me. When asked if he told Dwyer that the marks would be waterproof, Buhagiar stated that he never referred to a laser mark as being waterproof because it was not a term typically used in the laser marking and engraving industry. This evidence was inconsistent with the Alfex website which advertised in 2015 that “laser markings are waterproof, wipe-proof and extremely durable…”. Given his role at Alfex, I would have expected Buhagiar to be familiar with that part of the company’s advertising referable to his area of responsibility, namely, laser products. Buhagiar’s claimed lack of familiarity suggests that he was not aware of the website information (which in turn might reflect laziness or a failure to master the whole of his field of work) or an indifference to the truth. Whichever it is, it does not encourage confidence in his professionalism and reliability.
60 Because of my assessment of the principal witnesses, including their demeanour, to the extent that there is a conflict between them or Buhagiar was unable to recall a particular event, I prefer the evidence of Dwyer to Buhagiar.
Issues
61 There are a number of issues which the court must determine:
(a) Do the AMTIL terms and conditions form part of the contract?
(b) Did Alfex make the representations alleged by Dwyer?
(c) If Alfex made the representations:
(i) do they form terms of contract between the parties?
(ii) were the misrepresentations misleading and deceptive contrary to the ACL?
(d) Did Dwyer rely upon the representations?
(e) What, if any, damages can Dwyer recover?
Do the AMTIL terms and conditions form part of the contract?
62 Dwyer contended that it cannot reasonably be concluded he consented to the AMTIL T&C. This was said to be the case because:
· such terms were not common in Dwyer’s industry and were not commonly used by Alfex
· they were not referred to in the quotes prepared by Alfex in 2008 or 2010
· they were not accessible online or on Alfex’s website
· they were not appropriate in the context of the contract between Dwyer and Alfex
· they were not attached as stated in the quote. Thus, the natural conclusion to be drawn was that the AMTIL T&C were the terms set out in the quote.
63 Dwyer submitted that the AMTIL T&C were not of a kind which a customer would expect in a contract like the one entered into between himself and Alfex, particularly in circumstances where that customer had received advice from a knowledgeable salesman to purchase a highly specialised product.
64 Alfex argued that a party can be bound by terms incorporated by reference into a contract, even when that party has not seen or read those terms. It said that the AMTIL T&C were not so onerous or unusual that they could not reasonably have been expected. Alfex further submitted that limitations on the scope of a warranty were not unusual in circumstances where section 61 of the Goods Act 1958 (Vic) expressly permitted them. The section provided that rights, duties, or liabilities which would otherwise arise under a contract of sale by implication of law can be negatived or varied by express agreement, usage, or the course of dealing between the contracting parties.
65 Both Dwyer and Alfex relied upon the same case in support of their respective positions – Maxitherm Boilers Pty Ltd v Pacific Dunlop Ltd & Anor.[2]
[2][1998] 4 VR 559.
66 In Maxitherm, the parties had, over the course of several months, negotiated the supply of an autoclave, a pressurised oven designed to cure rubber mats. The pre-contractual communications consisted of an initial quotation from Maxitherm to Pacific Dunlop which was expressed to be subject to terms and conditions attached, none of which were attached, and, among other things, a confirming fax from Maxitherm to Pacific Dunlop which stated its offer was based upon its standard terms.
67 The trial judge found that Maxitherm’s mere reference to the standard terms was insufficient. Without providing the terms or otherwise drawing Pacific Dunlop’s attention to them, Teague J concluded they could not form part of the contract.
68 On appeal, Buchanan JA, with whom Ormiston and Callaway JJA agreed, found to the contrary. His Honour said:[3]
“A reasonable reader of the quotation would have concluded that Maxitherm intended to contract in accordance with certain conditions, and that those conditions, which were not contained in the body of the quotation, could be identified. I do not think that the failure to attach the terms would be reasonably taken to countermand the words ‘subject to conditions of tender’”.
[3]Ibid at 567.
69 Buchanan JA went on to say that it was not axiomatic that if one accepts an offer which incorporates terms by reference, it will be taken to have accepted all those terms. If a person accepting an offer has not read the incorporated terms, it is possible that acceptance may only be regarded as an acceptance of those terms that could be expected in a contract of the kind entered into. Thus the starting point is whether it is reasonable to assume a contracting party assented to a particular term.[4] Whether such an assumption is reasonable is dependent upon the circumstances of the particular case. If a term is unusual in the context, the proponent may have to bring the term to the attention of the other party because otherwise, it might not be reasonable to assume consent. The mere fact that a provision is onerous does not entitle a court applying the common law to reject it as a term unless special attention has been drawn to the term.[5]
[4]Ibid at 568.
[5]Ibid at 569.
70 Where a party to an agreement has not read the terms incorporated by reference, any consent might be limited to those terms which are appropriate to a contract of the type in question. If the terms include a provision which no one would anticipate in such a contract, it would not be appropriate to assume consent.[6] The more unusual or uncommon the term in the context, the less likely it is to be enforced.
[6]Ibid at 568.
71 The contract in the present case comprised an offer by Alfex in the form of the quotation document and acceptance of that offer by Dwyer. The AMTIL T&C formed part of that contract as they were incorporated in the quotation document which Dwyer expressly accepted. It is evident that Dwyer carefully read the quotation document. He specifically recalled having read the section that referred to the AMTIL T&C. Though they were not attached, it was open to Dwyer to request them. In circumstances where Dwyer made no attempt to locate the terms prior to signing the quote, it is of no consequence that they were not available on Alfex’s website or elsewhere online. Alfex’s failure to attach the AMTIL T&C is not, in and of itself, enough to vitiate the words “subject to the attached AMTIL General Terms and Conditions”.
72 Was it reasonable for Alfex to assume that Dwyer’s acceptance extended to all terms subject of the contract, specifically sections 12.1, 12.5, and 12.6 of the AMTIL T&C?
73 Firstly, it should be noted that Dwyer did not plead that these sections were not terms of the contract because they were onerous or unusual. Nor did he adduce any evidence that they were onerous or unusual. In fact, the only evidence Dwyer offered in respect of this point was that he had not seen any reference to the AMTIL T&C when he bought other machines he used in his business, including those purchased pursuant to the prior quotes from Alfex. In closing submissions, Dwyer said they were not common in Alfex’s industry, but offered no evidence in support of this proposition.
74 While there was no direct evidence about how long Alfex had been incorporating the AMTIL T&C into its contracts, Buhagiar gave evidence that AMTIL is the industry association or governing body for Australian manufacturing companies, including suppliers such as Alfex. Buhagiar said Alfex has been a member of AMTIL since before he started with the company in 2001. The AMTIL T&C were provided by AMTIL to its members for use as a stand-alone document or in conjunction with a member’s existing trading terms.
75 One could safely assume that terms and conditions provided by an industry association or governing body for use by its members are relatively standard or common in the industry. In the absence of any contrary evidence from Dwyer, I reject Dwyer’s submission that the AMTIL T&C are not common in Alfex’s industry.
76 I do not regard it as relevant that the AMTIL T&C were not referred to in earlier contracts entered between Dwyer and Alfex. Dwyer said that he read the agreement in question for the Lotus Laser and noticed the references to AMTIL. He did not say that he assumed the latest agreement was in materially the same terms as the prior agreements with Alfex.
77 Limitations on the scope of a warranty or blanket exclusions of other warranties are a common occurrence in commercial transactions. To find that these particular terms are onerous or unusual requires more than a bare assertion. In circumstances where Dwyer has expressed his acceptance of a contract inclusive of these terms and now seeks to have those terms deemed ineffective or void, the onus lies upon him to satisfy the court of their onerous and unusual nature. He has not done this.
78 I am not satisfied, based upon the evidence, that the AMTIL T&C are so onerous and unusual that Dwyer should be taken not to have accepted them. Accordingly, I find that the AMTIL T&C form part of the contract and Dwyer is bound by them.
79 This finding is significant because Dwyer acknowledged in his submissions that, if the court reached this conclusion, then the representations alleged could not form part of the contract and Dwyer could not succeed on this element of his claim.
80 Independent of the above considerations, another factor relevant to this part of the case is that Dwyer chose to enter the agreement with Alfex by accepting its quotation. There is long established authority that, in the absence of fraud, mistake, or some other disqualifying factor, a person who signs a contract is bound to its terms by his or her signature.[7] Here, Dwyer was an intelligent adult who had successfully run his own business since 2006. He did not allege fraud or mistake against Alfex. Nor did he claim that Alfex had improperly taken advantage of him in some way such that a court should not allow Alfex to rely upon the terms of the agreement.
Warranty and exclusion of liability clause
[7]Wilton v Farnworth (1948) 76 CLR 646, 649; L’Estrange v Graucob [1934] 2 KB 394, 403; Sargent v ASL Developments Limited (1974) 131 CLR 634, 644; Taylor v Johnson (1983) 151 CLR 422, 446; and Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165, at [46].
81 Although it is not necessary for me to do so, given my findings in paragraph 78 regarding the AMTIL T&C, I shall briefly consider the other exclusions contained in Alfex’s quote for the laser.
82 The warranty terms, which were set out in paragraph 35 above and expressly pleaded in Alfex’s defence, in effect provided that:
· the manufacturer’s warranty did not include a warranty that the equipment would meet Dwyer’s production specifications or other requirements;
· the manufacturer’s liability would be limited to repairing or replacing equipment only;
· the quotation and any subsequent offers were subject to the AMTIL T&C.
83 Dwyer contended that the term “Manufacturer” in the warranty clause referred to the manufacturer of the Lotus Laser and that the exclusion contained in the warranty had no reference to any warranties or representations made by Alfex. He submitted that this warranty clause was irrelevant to Alfex’s position because it was not the manufacturer. The term “Manufacturer” was not defined in the quotation. Dwyer said, in circumstances where he alleged the agreement with Alfex was oral and written, there was no reason to prohibit as terms of the agreement the oral representations which Alfex made. As a result, he argued that the representations should be included as terms of the agreement.
84 Alfex pleaded that the agreement was wholly written and, by reason of the exclusion clause, even if it made the representations alleged (which it denied), they could not constitute terms of the agreement. Alfex noted that the only two parties to the agreement containing the exclusion clause were Dwyer and Aflex – the English manufacturer of the Lotus Laser was not a party to the contract and therefore stood outside the contractual privity which existed between Dwyer and Aflex.
85 Alfex submitted that its construction of the agreement where “Manufacturer” referred to Alfex was preferable to Dwyer’s construction. Dwyer’s interpretation of the clause was not commercially sensible. Alfex argued that because Alfex had to install and commission the Lotus Laser at Dwyer’s premises, some level of assembly was likely and so the reference to Alfex as the manufacturer was apposite. This construction of the agreement was said to be consistent with what a reasonable business person would conclude where:
· the term “Manufacturer” was used in the same sentence as “buyer”. Again this term was not defined but referred to Dwyer.
· A reading of the whole exclusion clause shows that it appeared in a context which referred to the manufacturers liability “under this agreement”. This emphasised a construction which required the court to construe “manufacturer” and “buyer” by reference to the parties to the agreement.
86 I prefer the submissions of Alfex on this point. Given the context and the terms of the quotation, I consider that the better construction of the document is to treat Dwyer as the buyer and Alfex as the manufacturer. This means that there was no contractual warranty by Alfex that the equipment would meet Dwyer’s requirements. Also, any representations which Alfex made about the equipment meeting Dwyer’s requirements would be excluded from the agreement between the parties on this basis as well.
Did Alfex make the representations alleged by Dwyer?
87 Dwyer alleged that Alfex made the following representations:
(a) the Lotus Laser is suitable for use in the business of the plaintiff, that is, suitable to be used to make permanent, dark marks on stainless steel to be used to make letterboxes which were to be, after being marked, exposed to the weather;
(b) the dark marks made on stainless steel by the Lotus Laser would not ablate, that is, they would not gradually erode from the stainless steel surface if exposed to the weather; and
(c) the dark marks made on stainless steel by the Lotus Laser are waterproof and extremely durable.
The above formulation of the representations is taken from Dwyer’s final submissions. This formulation is not identical to the representations pleaded in the statement of claim, although the substance of the allegations remains the same. It was probably for this reason that Alfex raised no objection to Dwyer’s formulation of the representations at trial and simply argued its case on the merits.
88 I will address each representation alleged by Dwyer in turn.
(a) the Lotus Laser is suitable for use in the business of the plaintiff, that is, suitable to be used to make permanent, dark marks on stainless steel to be used to make letterboxes which were to be, after being marked, exposed to the weather;
89 Dwyer alleged this representation (“the 2013 representation”) was made by Buhagiar orally over the telephone in 2013 and in person at the Austech trade show in 2015,[8] and in writing by way of email on 5 September 2013.
[8]Dwyer’s closing submissions referenced a portion of the transcript in which Dwyer recited a conversation with Buhagiar at the trade show. I note that portion of the transcript contained comments made by Dwyer about the equipment, rather than any statements made by Buhagiar or Alfex.
90 His evidence was that in 2013, Buhagiar called him to discuss a new laser (the Lotus Laser) that worked differently from the CO2 laser which he had been using. During the telephone call, Buhagiar reportedly said to Dwyer that the new laser “creates a black permanent mark” and that “it’d be really good for your business”.
91 Subsequent to that telephone conversation, Buhagiar sent a follow up email to Dwyer in which he provided some information about the difference between galvo-steered lasers (like the Lotus Laser) and flying optic style systems. Buhagiar recommended the Lotus Laser Meta C1 and stated “the Lotus Laser systems would be more than suitable for your requirements”.
92 When questioned about the 2013 telephone conversation, Buhagiar’s recollection was that it related to the creation of a black mark on stainless steel and nothing more. Similarly, Buhagiar said his follow up email stating that the Lotus Laser would be “suitable for [Dwyer’s] business” was only in relation to “achieving that black mark on stainless and less about the durability”.
93 In closing submissions, Dwyer argued that the narrow meaning Buhagiar sought to apply to his statement that the Lotus Laser was “suitable for the business” was artificial and illogical in light of the surrounding circumstances.
94 Part of Buhagiar’s job involved understanding a customer’s specific requirements and recommending a product to meet those needs. Dwyer submitted that, since 2008, Buhagiar had been aware of the nature of Dwyer’s business and that:
· Dwyer manufactured letterboxes out of stainless steel;
· Dwyer intended to use a laser to make markings on the letterboxes;
· the mark had to be black, permanent, and durable;
· the mark should not wear off in 6 months;
· the letterboxes would usually be outside; and
· the mark made by the laser on the stainless steel panels had to be permanent, durable, and weatherproof.
95 In those circumstances, Dwyer said there could be no doubt that Buhagiar was aware of the requirements of his business. Dwyer further submitted that, at the time of providing his advice, Buhagiar was unaware that the Lotus Laser could not make permanent, durable marks on stainless steel which would be exposed to the elements. Therefore, he had no reason not to make the alleged representation because, at that time, he did not know it to be untrue. However, it does not follow from the mere fact that Buhagiar was unaware of the Lotus Laser limitations that he made the representations alleged. A finding to that effect depends on the existence of other relevant evidence.
96 Alfex argued that the conversations between Dwyer and Buhagiar were both removed in time and disputed by the parties and thus could not give rise to the alleged representation. Alfex submitted that Buhagiar’s email correspondence suggests the conversation related to the marking speed of particular lasers and that Dwyer’s reliance upon a particular line in the email, namely “more than suitable for your requirements”, was misplaced. Alfex argued that there was no clear identification of what those requirements were, aside from those specified in Buhagiar’s email, and that Buhagiar was offering to have samples prepared so that Dwyer could assess them.
97 Alfex further submitted that the nature of the Lotus Laser machine was a relevant consideration in determining what representations were made to Dwyer and what reliance he placed upon them. It said that the machine had a wide range of uses across many different industries and that Dwyer was aware that it was not made, or promoted, for the purpose of producing signage or related applications.
98 I do not accept that Buhagiar intended to convey only that the Lotus Laser was suitable for Dwyer’s business in that it could create a black mark on stainless steel.
99 This is apparent when the defendant’s conduct is viewed as a whole and in context. This includes not only the 2013 telephone conversation and subsequent email, but also the business relationship between Dwyer and Alfex and the history of dealings between them. Many conversations took place prior to the 2013 conversation in which Dwyer talked about his desire for a permanent black mark.
100 Buhagiar acknowledged that he was talking about the making of a black mark on stainless steel and he acknowledged that he understood the markings were to be used on letterboxes which would be outside and, therefore, exposed to the weather. Buhagiar agreed in cross-examination that if he had known that the Lotus Laser did not make a permanent black mark, he probably would not have recommended the Lotus Laser to Dwyer. I accept his evidence on this point.
101 The parties have a long history of dealings. While Buhagiar could not recall if Dwyer made his requirements known specifically, he acknowledged having a general awareness of Dwyer’s requirements – that the mark be black, permanent, and waterproof. I accept that, as a result of the dealings between the parties in and after 2008, Buhagiar was well aware that: Dwyer’s business comprised largely the manufacture of stainless steel letterboxes; Dwyer used a laser to make the markings on the stainless steel; the black mark on the letterbox had to be permanent, durable, and waterproof; and the letterbox would usually be located outside and exposed to the elements.
102 I note also that Buhagiar said that it was his practice, after talking on the phone with a customer, to send the customer a follow-up email. The email was to record the substance of the conversation to make sure Buhagiar was clear on the matter and that he had an accurate record for future reference. Dwyer alleged that in 2013 and 2014, Buhagiar told him that the fiber laser would be suitable for his business in marking letterboxes.
103 Buhagiar agreed that he said to Dwyer in 2013 that the fiber laser would be suitable for his business. At the time, Buhagiar was aware that the laser was to be used in marking stainless steel letterboxes, most of which would be located outside. Buhagiar was also aware (in 2013) that Dwyer’s requirement for his business was a machine which made permanent, durable, and weatherproof black marks. Buhagiar said that when he made his comment, he was referring to the laser being capable of creating a black mark on stainless steel. He said that he was focused only on whether the laser could make a black mark – he was not concerned about its permanence.
104 In this case, Buhagiar sent emails to Dwyer in September 2013 and October 2014 after conversations about lasers. However, neither email contained a qualification or statement to the effect that his comment about suitability was limited to the laser being capable of creating a black mark (which was not necessarily permanent, durable or waterproof) on stainless steel. Given Buhagiar’s evidence about his usual practice regarding follow up emails after conversations with customers and the unexplained absence of any qualification or limitation in the emails, I find that Buhagiar did not communicate to Dwyer that his comment about the suitability of the laser was confined only to its capacity to make a black mark and said nothing about the permanence or the durability of the mark. The context was such that, if Buhagiar were not fully endorsing the laser’s suitability for Dwyer’s business, he ought to have made this clear to Dwyer.
105 Having regard to the whole of the circumstances, I find Alfex did represent to Dwyer that the Lotus Laser was suitable for use in his business in that it would make permanent dark marks on stainless steel which was to be exposed to the weather.
(b) the dark marks made on stainless steel by the Lotus Laser would not ablate, that is, they would not gradually erode from the stainless steel surface if exposed to the weather
106 This representation was said to be made in a video provided by Alfex to Dwyer to demonstrate the suitability of the Lotus Laser to mark a stainless steel surface. The text accompanying the video stated:
“this video shows the annealing technique to mark stainless steel near to a black finish without ablating the material.”
107 Dwyer gave evidence that he did not know what the word “ablating” meant and that when he looked it up on Google, it was defined as “eroding over time”.
108 Dwyer argued that the text in the video, together with a statement in the video that the Lotus Laser was used to mark medical instruments, comprised the representation alleged.
109 Alfex submitted that the term “ablating” in this context meant that the annealing technique used in the video achieved the black finish without eroding the surface material. Alfex said the term was used in reference to the process occurring in the video, not any future performance of the mark and that any different understanding on Dwyer’s part was idiosyncratic and unreasonable.
110 Alfex further submitted that medical equipment has different uses to outdoor signage and that Dwyer acknowledged medical equipment was not stored outdoors and exposed to rain, salt spray, or other pollutants.
111 I do not understand the text accompanying the video to make any representation as to the future condition of the mark. It simply describes the process used to mark the stainless steel and that no ablation to the steel resulted from that process.
112 While I do not doubt that Dwyer interpreted the text as a statement about the future properties of the mark, I think the construction contended for by Alfex is preferable. I am not satisfied that Alfex made the second representation.
113 It is not immediately obvious why a reference to medical instruments is made in the video. One could infer the purpose is to convey the hardiness and durability of the mark. It certainly seems that is what Dwyer inferred from the statement. This is a reasonable view if one assumes that hospitals would require medical instruments to wear well even when used on a daily basis and subjected to rigorous cleaning.[9]
(c) the dark marks made on stainless steel by the Lotus Laser are waterproof and extremely durable
[9]See the evidence of Dr Sussex at paragraph 124 where it appears the markings are not necessarily that robust.
114 Dwyer submitted that this representation was made in writing on Alfex’s website at or about the time the contract was entered into (“the website representation”). The relevant text stated that:
“Laser markings are waterproof, wipe-proof and extremely durable
…
Manufacturers from various industries use flexible and permanent laser marking as their preferred method for marking parts.”
115 Dwyer argued that the website representation could not be considered “puffery” as its contents were capable of being proven correct. The language used and the forum within which they appeared did not suggest to Dwyer anything other than that he should take the statements seriously.
116 Alfex argued that the webpage Dwyer relied upon was extremely general and incapable of giving rise to the alleged representation because:
(a) it referred to fiber lasers and CO2 lasers without distinction (and made no specific reference to the Lotus Laser); and
(b) the statements about markings related to “almost all materials”, with no specific reference to stainless steel or as to what was meant by the terms “waterproof”, “durable”, or “permanent”, which are all capable of having different meanings in different factual contexts.
117 Alfex submitted that a reasonable person in Dwyer’s position would not place any reliance on the webpage as giving rise to the representation and the fact that Dwyer sought to rely on a general webpage supported a conclusion that Buhagiar made no such representation to him. Alfex argued that if Dwyer wanted to act in reliance on a relevant representation, one would expect him to have confirmed such a position in writing.
118 I do not accept Alfex’s submission on this point.
119 It is well established that a certain level of puffery is common in commerce.[10] However, there was nothing boastful or grandiose about this representation such that a reader would infer it was mere puffery which was not intended to be taken seriously. The appearance of the webpage was simple and professional – the background was white and the text black and red. It conveyed a message to the reader that the statements contained therein should be treated seriously and taken to mean what they said.
[10]See, e.g. General Newspapers Pty Ltd v Telstra Corporation (1993) 117 ALR 629 and Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17.
120 Although the text on the webpage did not specifically refer to the Lotus Laser’s markings as waterproof, wipe-proof, and extremely durable, the text appeared under the heading “Laser Marking” and the Lotus Laser is listed on the same page under the sub-heading “Associated Products”. It is not necessary that every descriptive term on a webpage be defined in order for a reader to form a belief as to the message being conveyed and to rely upon the statements contained therein. I do not consider that a reasonable person in Dwyer’s position would view the webpage and interpret the statements as mere puffery.
121 Further, it does not follow that because Dwyer seeks to rely upon the webpage such a representation was not also made to him orally by Buhagiar. Nor is it reasonable for a company to make assertions about a product on its website and then expect its customers to confirm the veracity of those assertions in writing before relying upon them. In short, I find that Alfex made the third representation.
Did the representations form part of the contract between Dwyer and Alfex?
122 As discussed above, neither of the representations which I found Alfex made formed part of the contract between Dwyer and Alfex.
Were the misrepresentations misleading and deceptive contrary to the ACL?
123 Dwyer submitted that because the markings made by the Lotus Laser rusted, they were, therefore, not permanent, waterproof, or durable. This submission was supported by the expert evidence of Dr Graham Sussex.
124 Dr Sussex concluded the marking on the sample provided to him was clearly not permanent as there were rust spots on it. I also note in passing that when asked in cross-examination if a laser marking on medical equipment which was periodically washed and therefore exposed to water would last for a long time, Dr Sussex replied “no”.
125 Dwyer contended that Alfex’s conduct in holding out the Lotus Laser as a product suitable for his business was misleading and deceptive.
126 Alfex denied engaging in any misleading or deceptive conduct and argued that Dwyer sought to rely upon certain words and phrases in isolation. It said that consideration of the circumstances as a whole revealed there were no representations made that were misleading or deceptive.
127 Alfex submitted that it offered to supply a product that was capable of making markings on stainless steel but that Dwyer made certain assumptions about the properties of those markings based upon his own research. Dwyer did his own research into the equipment and it was up to him to determine the suitability of the product for his own needs.
128 While Alfex was aware on a general level that the letterboxes could be used outside, it contended that Dwyer did not mention any specific requirement as to the corrosion resistance of the markings when used outdoors. Alfex submitted it made no representation that these products would achieve any minimum period of corrosion resistance when used outdoors.
129 Conduct is misleading or deceptive if it induces, or is capable of inducing, error. A causal link must exist between the conduct complained of and the error on the part of the person exposed to it.[11]
[11]ACCC v TPG Internet Pty Ltd (2013) 250 CLR 640.
130 Determining whether certain conduct was misleading or deceptive requires an objective assessment of the whole of the circumstances. The effect or likely effect of the conduct is to be considered by reference to the minds of those whom the question of whether the conduct is, or is likely to be, misleading or deceptive is to be tested. I make the following findings based on the specific representations alleged in the context of the surrounding circumstances.
The 2013 representation
131 In cross-examination, Buhagiar acknowledged that he had an understanding of Dwyer’s requirements and had he known the markings would rust, probably would not have recommended the Lotus Laser to him. At the time of the 2013 representation, Alfex had been dealing with Dwyer in a professional context for a period of over five years and was aware that, should Dwyer purchase the Lotus Laser, it would be used to mark stainless steel panels on letterboxes. In those circumstances, I do not consider it essential for a customer like Dwyer to specify a minimum level of corrosion resistance to Alfex before Alfex could be held liable for a misrepresentation.
132 Alfex’s submission that it made no representation that the products would achieve any minimum period of corrosion resistance when used outdoors is, in my opinion, not accurate. By representing that the Lotus Laser was suitable for Dwyer’s business and was capable of producing a black, permanent mark, Alfex implicitly, if not explicitly, made a representation as to the corrosion resistance of the mark. At the time Alfex made the representation, Buhagiar, the manager of the laser division, knew:
· Dwyer manufactured stainless steel letter boxes;
· the letter boxes were usually located outside and exposed to the weather;
· Dwyer required that black markings on the letterbox be permanent durable and weatherproof;
· the nature of Dwyer’s business had not changed from 2008 when Buhagiar and Dwyer first met.
In that context, no reasonable customer would expect that a permanent black mark created by a laser recommended by expert vendors would corrode and begin to rust within the first year of the letterbox’s installation. Opinions might differ about how long a permanent mark should remain on the stainless steel without any, or any notable, deterioration. But whatever time that may be, it would be more than 12 months. Something in the range of 5-10 years would seem reasonable.
133 It is immaterial that Alfex did not specify or guarantee a particular level of corrosion resistance. Alfex marketed the laser product as one that met Dwyer’s requirements and was good for his business. Such statements were sufficient to engender a belief in the mind of the reasonable customer that the product achieved or satisfied a particular minimum standard.
134 Accordingly, I am satisfied that the 2013 representation was misleading and deceptive and contravened section 18 of the ACL.
The website representation
135 I have already concluded that a relevant representation was made in the form of the text on the Alfex website. Based upon the evidence, that representation embodied in the text is untrue.
136 It does not matter if Alfex was unaware the statements on its website were false. Nor does it matter whether Alfex intended to mislead or deceive its customers.[12] A contravention of section 18 of the ACL is not established by reference to a party’s intention or its belief as to the accuracy of the statement made, but upon whether the statement contains or conveys a meaning that is false or misleading.[13] Whether Alfex believed its lasers could create markings that were waterproof and extremely durable is immaterial. The reality is that they did not and, as a result, the statements on its website were misleading. A company may act honestly and nevertheless engage in conduct which is misleading or deceptive or likely to mislead or deceive.
[12]Hornsby Building Information Centre v Sydney Building Information Centre Ltd (1978) 140 CLR 216, 228.
[13]Global Sportsman Pty Ltd & Anor v Mirror Newspapers Ltd & Anor (1984) 55 ALR 25, 30.
137 Alfex argued that Dwyer was not led into error by the conduct of Alfex, but rather by his own assumptions and failure to undertake sufficient enquiries.
138 The maker of a misrepresentation is not automatically absolved from liability if the person the subject of the misrepresentation could have discovered the misrepresentation had he or she made further enquiries.[14]
[14]Neilsen v Hempston Holdings Pty Ltd & Anor (1986) 65 ALR 302, 309. See also Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 and Sutton v A J Thompson Pty Ltd (in liq) (1987) 73 ALR 233.
139 In Neilsen v Hempston Holdings Pty Ltd & Anor,[15] the applicant purchased a motel from the first respondent as a result of false representations made by the second respondent about the motel occupancy rates. Although the applicant engaged an accountant to advise him on the potential purchase, the accountant did not analyse the books or records of the motel. The court held that the applicant’s right to relief under section 52 of the Trade Practices Act 1974 (Cth) (“TPA”),[16] was not adversely affected by the conduct of his accountant.
[15](1986) 65 ALR 302.
[16]The modern equivalent of which is section 18 of the ACL.
140 Similarly, in a case involving the sale of a boat in which the applicants relied upon the respondents’ representation that the boat was in “extremely good condition”, Weinberg J held that:[17]
“The fact that they engaged their own consultants who, it would seem, let them down by not alerting them to the problems with the boat's engines, is no answer to their claim. It does not constitute a break in the chain of causation.”
[17]Fried v Dixie Holdings Pty Ltd [2000] FCA 1048, [92].
141 Further, the fact that Dwyer did some of his own research and Alfex’s conduct might not have been the sole factor in his decision to purchase the Lotus Laser is of no assistance to Alfex’s defence. The misleading and deceptive conduct need not be the only factor in a person’s decision to enter into a particular agreement.[18] Indeed, counsel for Alfex properly acknowledged at trial that any representations of Alfex need not be the sole cause of Dwyer’s acting to his detriment for Alfex to be liable. He also accepted that, if Alfex were liable for misleading and deceptive conduct, it would be 100% liable.
[18]Gould v Vaggelas (1985) 157 CLR 215; Marks v GIO Australia Holdings (1998) 196 CLR 494; and Henville v Walker (2001) 206 CLR 459.
142 When Buhagiar was asked in cross-examination if the subject text on the website was removed because it was not true, he confirmed it had been removed but said he did not know exactly why. Though I attributed no weight to this fact in my reasoning, it is an interesting point. It raises the question: if Alfex did not believe those statements were capable of leading someone into error, why were they removed?
143 I find that the website representation was misleading or deceptive.
Did Dwyer rely upon the representations?
144 In order to recover damages as a result of a contravention of section 18 of the ACL, Dwyer must show that he relied upon or was influenced by Alfex’s misrepresentations.
145 Dwyer pointed to Buhagiar’s evidence that Alfex’s customers relied upon the information he provided in relation to a product, along with Dwyer’s own evidence including his point that if Alfex had not made the alleged representations, he would not have purchased the Lotus Laser.
146 Alfex argued that Dwyer did not rely on any conduct on the part of Alfex, but rather his own assumptions and independent research.
147 To suggest that Dwyer in no way relied upon Alfex’s conduct is, in my opinion, fanciful. Alfex’s conduct was not just a contributing factor in Dwyer’s purchase of the Lotus Laser, but the main cause. I accept Dwyer’s evidence that he relied upon what Buhagiar told him and the written documentation from Alfex. Thus, even if Dwyer conducted some research and this was a factor in his choice of the Lotus Laser, this does not eradicate or exclude the crucial role of Alfex in persuading Dwyer to buy the Lotus Laser.
148 Before turning to damages, there are two matters I wish to address:
(a) disclaimers, exclusions and entire agreement clauses;
(b) Dwyer’s failure to take reasonable steps to protect his interests.
149 An issue which arises here is the effect of the disclaimer or exclusion clause in the quotation. Alfex contends that because Dwyer read the quotation and understood its terms, he understood that when he entered the agreement to buy the Lotus Laser, he was bound by its terms and it was a matter for him to decide if the equipment met his requirements.
150 I accept that Dwyer read the quotation and knew that he was bound by the terms of the contract. As a result, he had a role to play in determining whether the Lotus Laser met the needs of his business. However, that is not the end of the issue.
151 The AMTIL T&C excluded any terms or warranties about the fitness for purpose of the Lotus Laser other than those in the quote. They also contained an acknowledgement by Dwyer that:
· he did not rely upon any service, advice, recommendation or information provided by Alfex about the Lotus Laser;
· he had not made known to Alfex any purpose for which he required the Lotus Laser and he was responsible for satisfying himself that the goods were suitable for his use.
In addition, the quotation excluded any warranty that the Lotus Laser would meet Dwyer’s production specifications or other requirements.
152 Such contractual terms as those referred to, as well as entire agreement clauses or provisions which expressly deny reliance upon precontractual representations will not necessarily operate to prevent a contracting party being liable for misleading and deceptive conduct which induces a party to enter such a contract. This is so for at least two reasons.
153 First, whether the conduct is misleading or deceptive is a question of fact to be decided by reference to all the relevant circumstances. The terms of a particular contract are part of the circumstances but are not determinative.[19]
[19]Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [31] and [130].
154 Secondly, many cases have recognised that liability under section 52 of the TPA and section 18 of the ACL cannot be excluded by contract (“the no exclusion principle”). The most commonly cited reason for the no exclusion principle is that of public policy. A good example is found in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd.[20] There, Henjo operated a restaurant business. In breach of the council approval and liquor licence conditions, Henjo increased the number of seats in the restaurant by more than one third and installed stools in the bar area. Henjo sold the business to Collins without informing it of the breaches. Special condition 6 of the sale of business agreement contained an acknowledgment by Collins that, in entering the agreement, it had not relied upon any statement, representation or warranty by Henjo in relation to the premises or anything which might have an effect upon them. The only statements and representations relied upon were set out in the written agreement. Special condition 7 provided that the written agreement constituted the whole of the agreement and there were no other representations, warranties or promises between the parties made prior to the agreement.
[20](1988) 39 FCR 546.
155 Lockhart J (with whom Burchett and Foster JJ agreed on this point) agreed with the trial judge who rejected Henjo’s reliance upon special conditions 6 and 7. His Honour said that section 52 of the TPA was concerned to protect the public from misleading and deceptive conduct and unfair trade practices which might result in contravention of the Act. His Honour went on to say:[21]
“There are wider objections to allowing effect to such clauses. Otherwise the operation of the Act, a public policy statute, could be ousted by private agreement. Parliament passed the Act to stamp out unfair or improper conduct in trade or in commerce; it would be contrary to public policy for special conditions such as those with which this contract was concerned to deny or prohibit a statutory remedy for offending conduct under the Act. There are various judgments of judges of this court where this approach has been adopted and they are collected in the judgment of the trial judge, so I need not repeat them.”[22]
[21]Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546, 561.
[22]The cases referred to by the trial judge, Wilcox J, in Collins Marrickville v Henjo Investments Pty Ltd (1987) 72 ALR 601, 613 were: PJ Berry Estates Pty Ltd v Mangalone Homestead Pty Ltd (1984) 6 ATPR 40-489, 45,638; Petera Pty Ltd v EAJ Pty Ltd (1985) 7 ATPR 40-805, 46,887; Galloway v Mapmakers Pty Ltd (Burchett J, unreported, Federal Court of Australia, 5 September 1985); Dibble v Aidan Nominees Pty Ltd (1986) ATPR 40–693, 47,619; Byers v Dorotea Pty Ltd (1986) ATPR 40-760, 48, 230; and Bateman v Slatyer (1987) 71 ALR 553.
156 That the statement by Lockhart J was an expression of the no exclusion principle is supported by authorities including MBF Investments Pty Ltd v Nolan[23] and Venerdi Pty Ltd v Anthony Moreton Group Funds Management Ltd.[24]
[23](2011) 37 VR 116 at [217] (CA).
[24][2015] 1 Qd R 214 at [40] and [46].
157 In short, if on consideration of all the relevant circumstances, the court decides that conduct is misleading or deceptive and that the applicant was misled, then a clause in a contract to the opposite effect will not prevent a finding that a party contravened the statute.
158 When considering the circumstances, the court must be alive to a situation where, for example:
· the applicant does not believe the representation made or advice given by the defendant;
· the applicant would have entered the contract irrespective of any representation made by the defendant;
· the applicant in fact relied upon information or advice from a third party and not the defendant.
Here, notwithstanding Dwyer’s evidence about his knowledge of the terms in the quotation, I am comfortably satisfied that Dwyer relied upon the representations made by Alfex in purchasing the Lotus Laser and that, but for the representations, Dwyer would not have purchased the Lotus Laser from Alfex.
159 It will be an unusual case where the plaintiff’s lack of care would be so dominant as to sever the causal chain and be properly regarded as the real or effective cause of the loss sustained by the plaintiff.
160 Alfex says that Dwyer failed to take reasonable steps to look after his own interests. Alfex argued that this followed from a combination of circumstances namely:
· Dwyer knew that the Lotus Laser was not specifically designed or promoted to produce signage in the manner that he proposed;
· Dwyer was aware that the Lotus Laser chemically changed the surface of the stainless steel but he made no enquiries about the nature or properties of the black marks;
· Dwyer knew he needed tests on the marine grade 316 stainless steel which he used in his letterboxes. After receiving the test samples from Alfex, he conducted no other tests;
· Dwyer gave Alfex no written criteria which the Lotus Laser was to satisfy in relation to corrosion resistance;
· Dwyer was aware of the contractual limitation imposed by Alfex in relation to its liability but he did not seek to try to vary the terms and conditions.
161 I do not consider Dwyer’s conduct was such as to absolve Alfex from any responsibility for his problem with the defective letterboxes. While Dwyer could have taken additional steps, neither individually or collectively were his failures sufficient to override the role of Alfex.
162 In the context of Alfex’s criticism, it is difficult to overstate the importance of the knowledge which Alfex, through Buhagiar, had of Dwyer and his business. Because of their dealings and interactions since 2008, Buhagiar knew the nature of Dwyer’s business, the stainless steel he used, and the need for a laser to produce a durable black mark. Buhagiar recommended the Lotus Laser and said it would be more than suitable for Dwyer’s requirements. Buhagiar, whose expertise with lasers and whose job it was to identify lasers suitable for clients’ needs, knew Dwyer’s business and made the recommendation. Given those circumstances, I do not regard it as significant that Dwyer knew there was no laser specifically designed for his intended use. He knew Buhagiar, having bought other machinery from him previously, and had no reason to question his judgment or recommendation.
163 Even if Dwyer knew there was some chemical change in the surface of the stainless steel caused by the Lotus Laser, why should that concern him if Buhagiar recommended the product for his business? Dwyer was a carpenter/builder, not a scientist. In my view, it was reasonable for him to rely upon the recommendation of an experienced person like Buhagiar who was the laser division manager at the only Australian supplier of this brand of laser equipment.
164 Dwyer wanted to see the effect of the Lotus Laser on the stainless steel he used in his business. Accordingly, he arranged for test work to be performed on samples which he provided to Buhagiar. Dwyer inspected the test work and found it to be satisfactory. He did not perform corrosion tests on the samples. There was no suggestion in the evidence at trial that this possibility was ever discussed between Dwyer and Buhagiar. There is no reason to believe that Buhagiar suggested it and Dwyer declined to do it. It appears that it did not arise as a factor until the trial. I have addressed elsewhere in the judgment my views on Dwyer not spelling out for Alfex written criteria regarding corrosion resistance.
165 Alfex’s suggestion that Dwyer could have tried to vary the terms and conditions of the supply agreement with it reflects more a debating point than a substantive point. In earlier transactions between Dwyer and Alfex, Alfex relied upon terms and conditions which made no reference to the AMTIL T&C. By 2015, the AMTIL T&C were included within the existing form of quotation. There is no reason to believe that Alfex would have been amenable to varying its standard terms.
166 Finally on this point, I note that although the defence contained a reference to contributory negligence, this issue was not raised by Alfex in final address and I infer that it places no reliance on this point. Nor did Alfex rely upon section 137B of the ACL. Given this, and the acknowledgement referred to at paragraph 141 above, Alfex will be fully liable for any loss and damage which Dwyer suffered as a result of Alfex’s contravention of the ACL.
167 I note that Alfex, through such things as its website, attending trade fairs, and interacting with prospective purchasers like Dwyer, advertised its products and spruiked their qualities and suitability for various tasks. It does not sit well when, having acted this way, Alfex seeks to deny and avoid all responsibility when a product fails to perform in the manner represented. Alfex cannot expect to obtain the sales benefits which accrue from advertising without also bearing the consequences of making statements which are factually incorrect. Alfex was aware that the Lotus Laser was a fiber laser machine which had a wide range of applications across many industries. Alfex was also aware that Dwyer had not given it specific written criteria regarding performance or corrosion resistance. If Alfex nevertheless chose to make general statements about the lasers it sold, without qualification or limiting the comments to particular machines or models or usages, then I consider that it should bear the consequences when customers rely upon them and the lasers do not perform in accordance with the representations.
What, if any, damages can Dwyer recover?
168 Dwyer’s claim for damages relies upon section 236 of the ACL which is in the following terms:
(1) If:
(a)a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
169 Alfex drew attention to some specific principles which it argued were important in the context. First, the plaintiff bears the onus of proof and must prove the quantum of its loss.
170 Secondly, a court will not engage in guesswork or estimation in respect of a plaintiff’s damages where the plaintiff is in a position to adduce precise evidence but fails to do so. Alfex made specific reference to the judgment of Chernov JA, with whom Buchanan JA agreed, in Longden v Kenalda Nominees Pty Ltd,[25] where His Honour said:[26]
“Thus, it is for the plaintiff to prove both the fact of loss arising from the defendant’s breach and the amount of the loss. Moreover, the plaintiff is required to establish both matters with as much certainty and particularity as is reasonable in the circumstances. Consequently, where a plaintiff could have produced evidence of loss but has simply failed to do so, it ordinarily means that it has failed to prove its case on damages (so that, where the claim is based on breach of contract, the plaintiff would only recover nominal damages). There are, of course, situations where a plaintiff cannot adduce precise evidence of the amount of loss, in which case the court will do its best in that regard and will estimate the damages and, where appropriate, will engage in a certain amount of guesswork.” [emphasis in original, citation omitted]
[25][2003] VSCA 128.
[26]This passage was cited with approval by the Victorian Court of Appeal in Rozenblit v Vainer [2019] VSCA 283, at [44] and in MA & JTripodi Pty Ltd v Swan Hill Chemicals Pty Ltd [2019] VSCA 46 at [73] and [102].
171 In BHP Billiton Olympic Dam Corporation Pty Ltd v Steuler Services GmbH & Co KG,[27] the Victorian Court of Appeal comprehensively summarised the applicable principles for damages claims made under the ACL[28] as follows:[29]
206 To the extent that Dwyer relied upon average prices for elements of the goods sold, I consider that, albeit after spending a possibly disproportionate amount of time and money in undertaking much detailed work, Dwyer could have been more exact, at least regarding the number and cost of both replacement panels and the panels laser cut by AG Holding after October 2016. However, the invoices do provide the underlying data upon which Dwyer relied.
207 While I acknowledge that the use of average figures falls short of the ideal, it still provides a reasonable basis for the claims Dwyer made. Given the context of the damages claim, the calculations are necessarily somewhat conclusory in nature. Dwyer’s claims are not binding on the court. Ultimately, the court must be satisfied to the requisite standard that Dwyer has established his case.
(a) Lotus Laser
208 Dwyer gave evidence that, in order to buy the Lotus Laser, he entered a chattel mortgage agreement whereby he agreed to make 60 monthly payments totalling $77,442.60. Under the chattel mortgage agreement, the payments began in about November 2015 and will expire in November 2020. Dwyer claimed the full cost incurred in connection with the purchase of the Lotus Laser. He said that he had not used the machine since September 2016.
209 If I allowed this element of Dwyer’s claim, he would not only still retain the Lotus Laser, but he would have fully recouped the cost of purchase. This is unacceptable.
210 Dwyer argued that the Lotus Laser was of no use to him and, therefore, he should recover the funds he outlaid to procure it. The position is not that simple. At trial, the evidence suggested that Dwyer had produced about 349 letterboxes using the Lotus Laser and somewhere between 90-100 were returned as defective. At present, there are many letterboxes still retained by their owners and about which no claim has been made. That being so, the Lotus Laser cannot fairly be said to be worthless in Dwyer’s hands.
211 Further, even if Dwyer regards the Lotus Laser as without value, his view is not necessarily reflective of the market. Buhagiar indicated that lasers have a working life of 15-20 years and Alfex sells some second hand machinery as well as new products.
212 Alfex argued that Dwyer led no evidence about the value of the Lotus Laser in 2016 when he decided it was not suitable for his work (or indeed at any other time). Had he done so, the court could have awarded him damages under this head. But in circumstances where Dwyer adduced no evidence about value, it is not for the court to speculate about what that value might be. I agree with this submission.
213 It was within Dwyer’s power to adduce some evidence as to value: an expert valuation; an offer made to buy the Lotus Laser; or a dealer’s assessment of likely value. But Dwyer did not produce any evidence of value at all. Nor did he establish that the Lotus Laser was valueless, especially as it was the kind of machine which could be applied to a broad variety of tasks.
214 In summary, in the absence of evidence regarding the difference between what he paid for it and its market value (in 2016 or now), I am unable to quantify any alleged loss and award no damages under this head.
(b) Cost of replacing the affected product
215 Dwyer gave evidence about the alleged costs associated with replacing the defective letterboxes. The costs totalled $72,487.30. This assumed that Dwyer had to replace all 349 letterboxes manufactured using the Lotus Laser between January and 30 September 2016.
216 Dwyer said that three particular styles of letterbox, Indian, Atlantic, and Tasman, comprised about 80-90% of his letterbox sales. The balance comprised custom made models or letterboxes made from brass or copper. In arriving at the costs, Dwyer calculated the average cost of producing the three common models of letterbox. Each of the replacement letterboxes was laser cut by AG Holdings. Dwyer divided the total cost charged by AG Holdings for cutting the panels by the number of panels produced in order to arrive at an average cost per panel. Dwyer intimated that it was too difficult to determine precisely the exact cost associated with each panel. He said that the cost of each panel varied depending upon the size of the panel, the number on the panel (it might be a single figure or more than one figure or contain words as well), how difficult it was to program the machine, and how long it took to cut the panel. Dwyer then calculated the average cost of stainless steel for face panels based on his experience and knowledge of those prices. He also relied on his knowledge and experience to arrive at the average cost of black Perspex used as the backing on each letterbox. Dwyer also calculated the average cost of putting threaded lugs on the letterbox to fix the mounting and the cost of packaging and delivering the replacement product around Australia. Because delivery charges varied between $10 for an average package within Melbourne to $15 in Sydney, $25 in Queensland, and $40 in Western Australia, Dwyer chose an average cost of $15.
217 Alfex accepted that from the way Dwyer conducted his case, if he had not bought the Lotus Laser, he would have laser cut the figures and used the black Perspex backing rather than revert to using the CO2 laser. From October 2016, Dwyer used the laser cutting method to produce letterboxes. Alfex argued that, assuming Dwyer would have proceeded this way but for allegedly being misled by Alfex, he would have incurred the costs of laser cutting and the black Perspex in any event. The only additional costs were the replacement stainless steel panels, the cost of packaging, and the delivery of the replacement panels. Alfex contended that the evidence on these issues was deficient. Although Dwyer said that he retained the invoices for his business expenses, he did not identify from the many in the court book those which evidenced the expenses he claimed.
218 Another point Alfex made was Dwyer’s failure to be specific about the number of panels replaced. Dwyer’s position seemed to be that, at the time of trial, he had replaced about 90-100 panels of the 349 he produced between January and September 2016. Dwyer’s expectation was that, due to the problems with the numbers created by the Lotus Laser on stainless steel, he would have to replace all the panels he produced using the Lotus Laser.
219 Given that the problem with the Lotus Laser emerged in September 2016 and, at the time of trial in May 2020, more than two thirds of the stainless steel plates have not been replaced, I consider it unlikely that they will all require replacement. Dwyer’s evidence on this aspect of the case did not make clear:
· the timing of complaints regarding deterioration of the stainless steel letterboxes – was there a rush of complaints in late 2016 which then died down or have there been regular complaints since then?
· whether some states generated more complaints than others and what proportion of letterboxes were manufactured for those states.
· where the defective letterboxes were located at the host site – were they in a position exposed to the elements or under cover? Were they in a beachside suburb or an industrial suburb or one which was not particularly susceptible to salt spray or pollution?
220 Evidence about replaced panels is peculiarly within the knowledge and control of Dwyer rather than Alfex. To that extent, Dwyer should have been able to produce detailed evidence on the exact number of replaced panels. However, he did not do so.
221 I am prepared to adopt the lowest figure put forward by Dwyer, namely 90, as the number of letterboxes which he replaced. As regards the balance of outstanding letterboxes not yet replaced, I have no firm evidence about how many will need replacement. As noted above, the fact that less than one third of those made have thus far required replacement suggests that by no means all of them will need replacement in the future.
222 Dwyer’s evidence about future replacements was not compelling. When only about 25% of the letterboxes have been replaced over a period of about 4 years, there is substantial uncertainty about what the future holds. Other than being satisfied that not all the letterboxes must be replaced, I have little confidence about the future numbers. If the rust issue were uniformly serious for all letterboxes exposed to the weather, I would have expected more black numbers to have deteriorated by this time. Because so many letterboxes have apparently not deteriorated to the point where a client is demanding rectification, I should be careful not to exaggerate the extent of the risk which Dwyer faces. Doing the best I can, I think it reasonable to allow for another 25 letterboxes to fail and be replaced.
223 In trying to determine the cost of replacing the defective letterboxes, Alfex argued that, assuming the work was not done on the Lotus Laser but was laser cut, Dwyer would have incurred the costs of laser cutting and the cost of the perspex in any event. The extra costs incurred due to the laser cutting of the stainless steel were the replacement stainless steel panels, packaging and delivery. Dwyer adduced no detailed evidence about the total production costs associated with manufacturing a stainless steel letterbox.
224 When comparing competing situations to examine the extent of Dwyer’s loss, the position seems to be as follows: Dwyer used the Lotus Laser and, having produced 349 letterboxes had to replace 90. On the basis of my finding above, he will replace 25 more. On this hypothesis, Dwyer incurs the production costs twice for the replacement letterboxes. This seems a reasonable way of quantifying Dwyer’s loss. But for being misled, he would have produced letterboxes by a different method. Using the Lotus Laser, he had to conduct the manufacturing process twice for up to approximately 115 of his letterboxes.
225 Dwyer claims $72,487.30 for this work comprising 349 letterboxes at an average cost of $207.70. Of this latter sum, $85 is claimed for one hour’s labour to order, program, pick up, stud, glue up, package, and send the product. Dwyer gave no evidence about having employees in his business. Dwyer did not produce any financial statements so I do not know for certain if he pays himself a wage as well as claiming the nett profits of the business. From the way in which Dwyer has framed his damages claim with his reference to lost profits, I infer that he took only profits and no wage. If he lost wages as well, I would have expected to see a claim for that loss. In the circumstances, I do not consider that the claim for labour can be justified.
226 By way of contrast, the other elements of this part of the claim appear to me to be reasonable. They are based on Dwyer’s knowledge and derive support from the business records in the court book. However, this part of the claim is limited to 115 units. As set out above, I do not accept that all 349 letterboxes should be replaced.
227 On this rationale, the cost of replacing the panels manufactured between January and 30 September 2016 totals $14,110.50, being 115 letterboxes at a cost of $122.70.
(c) Costs of laser cutting
228 For the period 1 October 2016 to 30 June 2017, Dwyer claimed extra costs of $27,680.25, comprising the additional cost of laser cutting panels as opposed to using the Lotus Laser to manufacture the panels.
229 Dwyer said that whichever production method was used for the numbers on the face of the panels, there were certain common costs: the stainless steel panels; the cost of mounting and fixing on the panels; packaging; and delivery costs.
230 The differential costs were:
· the average cost of cutting the face panels
· the average cost of black Perspex for the panels
· an extra 15 minutes in gluing and mounting the Perspex
These three components were said to apply to the 255 letterbox panels produced during the time in question.
231 Alfex noted in its submissions that there was no evidence to explain why the production costs were higher when using the laser cut method rather than Dwyer using the Lotus Laser. Further, Dwyer’s evidence was inadequate because the bundle of invoices in the court book covered a broader range of laser cutting costs. Dwyer did not identify with any precision those invoices which he selected and relied upon in his calculations or set out how he calculated the average cost.
232 While I agree that Dwyer might have produced more detailed evidence explaining the cost differential between the two production methods, I accept Dwyer as a witness of truth and, accordingly, accept his factual evidence about costs. I am content to believe the costs figures he gave, even if not absolutely precise to a second decimal point, fairly reflected the cost incurred on the laser cutting production.
233 Page 1B of MFI-3 set out Dwyer’s calculations of the differential cost for the period from October 2016 to 30 June 2017 to obtain laser cut panels. I accept the figures for the laser cutting and black Perspex of $79.80 and $7.50 respectively. However, because Dwyer runs the business himself and there is no evidence that he pays himself a wage, I consider that he his not entitled to the additional labour cost of $21.25 per panel. Thus, on this part of the claim, Dwyer is entitled to $22,261.50, being 255 panels at a cost of $87.30 each.
(d) Cost of testing
234 Dwyer claims $2,265 as the amount charged by Sussex Material Solutions Pty Ltd for testing affected stainless steel in July 2017. Dr Graham Sussex of that company performed the testing work.
235 Alfex submitted that the testing costs related to the evidence used in the trial and therefore, they formed part of any claim for costs which Dwyer might make if he were successful in the litigation.
236 The report which Dr Sussex provided about the reason for the failure of the numbers on the stainless steel letterboxes was marked “Prepared for the purposes of potential litigation”. This report was sought and produced in July 2017 at a time when Alfex could provide no definitive answer about the cause of the problem with the numbers on the letterboxes. Various hypotheses were tested but none was proven until Dr Sussex examined the stainless steel.
237 Dwyer did not formally issue proceedings until 2019. Dr Sussex prepared his report in compliance with the requirements of the Expert Witness Code of Conduct presumably knowing that the report could be used in court if required. While this was a prudent approach to adopt, I consider the prime reason for the report was its diagnostic value. Dwyer needed answers to the rusting problem and Alfex and its contacts could not provide those answers. The expense associated with the report by Dr Sussex is recoverable as part of Dwyer’s damages.
(e) Loss of profit
238 Dwyer claimed loss of profits in the sum of $69,289. He did this by calculating the average profit he made for the financial years ending 30 June 2011, 2012, 2013, and 2014. The profits were set out in a document produced at the hearing which included, inter alia, the profits generated in the years in question. Profit ranged from $90,000 to $98,615. Dwyer adopted as the average the sum of $93,488, which was the profit generated for the financial year ending 30 June 2015.
239 Then Dwyer examined the profits made in the two financial years affected by the issue with the Lotus Laser, namely those ending 30 June 2016 and 30 June 2017. In the first of those years, the profit dropped to $82,079 and the next year it fell even further to $36,700. Dwyer claimed as the loss of profit the total of the combined loss of profit over the two years – that is, the difference between $93,488 and $82,079 was $11,409 and the difference between $93,488 and $36,700 was $56,788. $11,409 plus $56,788 equals $68,197.
240 Alfex argued that the claim was totally speculative and simply assumed without any proper basis that the business would continue to be profitable from year to year. It said that, although Dwyer sold a range of products apart from his stainless steel letterboxes, he produced no financial data to show how these elements of the business contributed to its profitability. Alfex pointed out that though Dwyer confirmed that a consumer could go to a specific page on the business website for each product category, Dwyer gave no details of the number of page views which each product category attracted. Nor was any information provided about the constitution of his customer base, namely, whether there were many individual customers or a small group of customers who placed large orders. Another factor not canvassed was the cost base of the business and the extent, if at all, to which it varied from year to year.
241 Alfex submitted that without such information, it was not possible to satisfactorily test Dwyer’s claim that the decline in profits was due wholly to the problem caused by the Lotus Laser.
242 Given I accept that Dwyer was misled by Alfex and there were some real issues caused by the deterioration of the numbers on the letterboxes, it seems reasonable to expect that this would have some impact upon the profitability of Dwyer’s business. There would be some direct cost in having to produce replacement letterboxes. There might well also be some indirect cost where builders who, in the past, obtained letterboxes from Dwyer ceased placing orders due to an unsatisfactory experience caused by the disintegration of the number.
243 At a practical level, it is hard to know on the present evidence the extent to which this element of the damages claim is justified. I cannot assess with confidence whether the Lotus Laser issue was the determinative factor affecting profit. Dwyer asserted that his business was growing at a steady rate and there was nothing occurring in the building industry more generally to account for the drop in profitability. In my view, this aspect of Dwyer’s claim would have benefited from some expert evidence. An expert could have examined the evidence and provided the court with an independent assessment of the extent to which the reduced profitability of Dwyer’s business was attributable to Alfex. This is a significant claim. It is inadequate for Dwyer as the owner and person involved in the daily running of the business to simply assert that he has lost profit of $69,289 as a result of Alfex’s misleading and deceptive conduct. Dwyer produced no persuasive analysis, data or reasoning to justify the assertion that the reduction in profits was attributable factually and legally to Alfex. Nor did Dwyer convincingly address the issues raised by Alfex. That being so, I cannot properly award any damages under this head.
(f) Goodwill
244 Dwyer claims $80,000 as loss of business reputation or goodwill. His rationale was that when the problems developed with the 316 marine grade stainless steel letterboxes, builders who ordered product from him abused him. This was serious because Dwyer said his business was built on word of mouth and return business. When the numbers on the letterbox faded after seven months, Dwyer’s sales dropped as did his goodwill because some builders decided not to use him again due to the defective product. Dwyer said the events badly affected his business reputation in the market. He claimed that the business stagnated as a result of the problem caused by the Lotus Laser and it still affected the business in May 2020. Dwyer said that, between 2006 and 2016, business grew at about 10% per annum. From 2016 to 2017, when the Lotus Laser problem occurred, the business declined around 20%. According to Dwyer, the $80,000 claimed for loss of reputation is based upon the 30% loss on the projected growth of the business.
245 Alfex contended that this head of damage was without foundation or explanation. There were no calculations advanced in Dwyer’s evidence, closing submissions, or the documents comprising MFI-3. Alfex argued that, if the claim were based on the loss of profits, that claim had already failed for the reasons set out above. If the claim were intended to represent the loss of future profitability, it was too speculative. It failed to take into account that the main issue was letterboxes sold in the period January – September 2016 and that Dwyer was able to advise builder clients and customers that it was a one-off problem which he had now fixed.
246 This aspect of Dwyer’s claim was more notable for its assertion than its supporting evidence. Dwyer provided no persuasive detail to justify awarding $80,000 for damaged goodwill. There was no compelling rationale or analysis advanced in support of the claim. A suitably qualified expert might have enhanced Dwyer’s prospects. Such a person might have been able to articulate and quantify a claim. But even had such evidence been available, Dwyer would still have had to address the question of the efforts he made in and after September 2016 to persuade builders and other customers that he had taken firm action to rectify the problem and that there would be no recurrence of the problem in the future.
Conclusion
247 In summary, I find that Alfex engaged in misleading or deceptive conduct regarding the Lotus Laser. Dwyer relied on that conduct in buying the Lotus Laser. Dwyer has suffered loss and damage as a result of Alfex’s conduct. Dwyer is entitled to the cost of replacing the defective letterboxes, the extra cost of producing letterboxes in the period October 2016 to June 2017, and the cost of Dr Sussex’s report. Otherwise, I reject Dwyer’s claim for damages.
248 I will hear the parties on the form of final order and costs. I direct the parties to confer on these matters in an effort to agree upon orders giving effect to this judgment. If they cannot agree, then by 4:00pm on Wednesday, 28 October 2020, each party is to file with my chambers and serve a written submission setting out the orders sought and the reasons therefor. The submissions are not to exceed five A4 pages, a minimum 12 point typeface, and 40mm margins on either side of the page. By 4:00pm on Friday, 30 October 2020, each party may file a reply submission limited to no more than three A4 pages.
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