Franklin Motors P/L v Paino No. Scgrg-98-1692 Judgment No. S476
[1999] SASC 476
•12 November 1999
FRANKLIN MOTORS PTY LTD v PAINO
[1999] SASC 476
Full Court: Duggan, Debelle and Bleby JJ
DUGGAN J.
Introduction
The respondent (the plaintiff) purchased a BMW motor vehicle from the appellant (the defendant) in May 1997. The defendant conducts a used car business and the sale was negotiated on its behalf by its salesman Mr Carolan. The vehicle had been consigned by a third party to the defendant to sell. The plaintiff rang Mr Carolan after he heard that the defendant had the vehicle, a second-hand BMW 635CSI Coupé, for sale. The plaintiff had been on the lookout to purchase this particular model for some time.
According to the plaintiff’s evidence Mr Carolan told him during the initial telephone call that the car was a 1988 model. There were further discussions between the plaintiff and Mr Carolan after the original call and eventually the plaintiff agreed to purchase the vehicle for $45,000. The plaintiff was residing in Perth at this time and Mr Carolan faxed him an invoice in which the vehicle was described as a “used BMW 635 CSI Coupé 1988”. A contract form in which the vehicle was described in the same terms was faxed to the plaintiff on 15 May 1997. The following day the plaintiff arranged for a transfer of funds to the defendant in payment for the vehicle.
The vehicle was delivered to the plaintiff on 20 May 1997. He drove it over the following two days and then discovered that a plate in the engine compartment of the vehicle stated that it had been manufactured in 1986. After making this discovery, the plaintiff rang Mr Carolan and advised him of what he had found. He complained to Mr Carolan that he understood he was purchasing an 1988 model when in fact it was a 1986 model. He said in evidence that he received no satisfaction from Mr Carolan in relation to his complaint and on 23 May 1997 he wrote to the defendant setting out the details of the negotiations and complaining that he had received a 1986 model when he had bargained for a 1988 model. The defendant’s solicitors replied with a letter denying liability and these proceedings were commenced.
The history of the pleadings is of relevance to issues which will be discussed later in these reasons, but at this stage it is sufficient to note that the plaintiff alleged in his amended particulars of claim that the defendant had misrepresented that the vehicle was a 1988 model. He claimed the following relief in his amended pleading:
“(i) A declaration that the Contract has been rescinded.
(ii) In the alternative, an order rescinding the Contract either at common law or pursuant to the provisions of the Trade Practices Act 1974 (CW) or the Fair Trading Act.
(iii) Consequential orders following rescission of the Contract including an order that the Defendant repay to the Plaintiff the purchase price plus interest thereon.
(iv) In the alternative to the foregoing, damages.”
The finding that there was a misrepresentation
The defendant denied that there was any misrepresentation. Mr Carolan said in evidence that it was the practice of manufacturers to import new vehicles into the country in batches so as to provide a pool from which cars could be assigned to distributors when orders were placed. The vehicles are held in bond and, when an order is made, a final fit out of equipment necessary to comply with Australian standards takes place and the vehicle selected to fulfil the order is officially complianced and given a date of compliance. Mr Carolan said that the vehicle in the present case was brought in with a batch in 1986 and sold in 1988. He said the practice in the trade in these circumstances was to call the vehicle a 1988 vehicle, although it was manufactured in 1986.
The learned trial judge accepted Mr Carolan’s evidence that when he took the vehicle on consignment it was described to him “as a 1988”. His Honour also found that this model manufactured in 1988 had certain improvements which were not incorporated into the model manufactured in 1986.
In his judgment the learned trial judge confined his attention to the claim under the Trade Practices Act 1974. The plaintiff based its case principally on this claim. His Honour reached the following conclusion on the misrepresentation issue:
“I am satisfied, and find, that, in purchasing the vehicle, the plaintiff relied on the representation made to him by the defendant, through Mr Carolan, that the vehicle was a 1988 model, by which he, the plaintiff, reasonably understood that the vehicle was manufactured in 1988; and that the defendant, through Mr Carolan, allowed him to understand that, well knowing that the vehicle could have been manufactured before that date.”
His Honour also found that the plaintiff would not have purchased the vehicle if he had known that it was not manufactured in 1988.
The defendant argued that it was not a misdescription of the vehicle to say that it was a 1988 model in that there was evidence that the trade would use this description because of the pooling and compliance procedures to which I have referred.
In my view, the findings and conclusions of the learned trial judge on this issue were correct. The question whether there has been misleading or deceptive conduct for which the Trade Practices Act provides a remedy is:
“.. a question of fact to be answered in the context of the evidence as to the alleged conduct and as to relevant surrounding facts and circumstances.” (Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 199).
It was open on the evidence for the trial judge to find that the plaintiff had been told the vehicle was a 1988 model. It is for the court to determine whether the conduct was misleading or deceptive and the test is objective. (Taco supra at 202). I think that the defendant’s representation would be understood generally to mean that the vehicle was manufactured in 1988. Any other meaning which it might have conveyed to someone with knowledge of a particular trade practice is not to the point.
It was further argued on behalf of the defendant that, in the passage from the learned trial judge’s reasons quoted above, his Honour wrongly had regard to the state of mind of the defendant’s agent, Mr Carolan. I agree that the words “the defendant through Mr Carolan, allowed him to understand that, well knowing that the vehicle could have been manufactured before that date” suggest either purposive or reckless conduct on the part of Mr Carolan. The trial judge made a similar comment later in his reasons for judgment when he said:
“Nevertheless, the defendant, through Mr Carolan, allowed the plaintiff to think that the vehicle was manufactured in 1988 notwithstanding that he knew the vehicle could have been manufactured at an earlier time.”
However, the learned trial judge stated the law correctly in another part of his judgment when, referring to the issue as to whether a misrepresentation had been made, he said “no question of intent arises”. Despite the references to Mr Carolan’s state of mind, it is clear that his Honour’s findings of fact support the conclusion that the defendant had engaged in misleading conduct when its agent, Mr Carolan, made statements which were likely to be understood as implying that the vehicle was manufactured in 1988. It was irrelevant to enquire into the state of Mr Carolan’s mind, but his Honour’s comments on this aspect which went a little further than required to establish a misrepresentation cannot vitiate the essential findings based on the fact that the representation was made and that it was misleading. I should add that in my view the evidence does not establish that Mr Carolan’s conduct was fraudulent. However, it is my view that the evidence supports the finding of misleading conduct and the argument to the contrary must be rejected.
The relief granted
The remaining grounds of appeal relate to the relief granted by the trial judge. His Honour made the following orders consequent upon his finding that the defendant had engaged in misleading conduct:
“(1) that the contract entered into between the plaintiff and the defendant is hereby declared to be void;
(2) that, within 28 days, and at the cost in all things of the defendant, the vehicle the subject of the contract between the parties be returned to the defendant and
(3) that, within the said period of 28 days, the defendant pay to the plaintiff the sum of $45,600.00, such payment to be made to the plaintiff’s solicitors whose receipt therefor on behalf of the plaintiff shall be a sufficient discharge in respect thereof.”
The orders were made under s 87 of the Trade Practices Act.
According to the defendant’s argument on appeal, the court had no power to make these orders and, alternatively, if it did have power, there was an error in the exercise of the discretion to declare that the contract between the plaintiff and the defendant was void.
In order to deal with this aspect of the appeal, it is necessary to refer to what transpired after the discovery by the plaintiff of the date of manufacture of the vehicle. I have said that the plaintiff wrote to the defendant on 23 May 1997. He put three options to the defendant in his letter:
That he return the vehicle to the defendant upon the refunding of the purchase price and delivery cost;
That he return the vehicle and the defendant provide him with an authentic 1988 model;
That the defendant pay him the amount of $10,000 which the plaintiff believed to be the difference in value between an 1988 model and the vehicle which he purchased.
On 25 June 1997 the defendant’s solicitor replied denying that his client had made any misrepresentation and stating that he had instructions to accept service of proceedings.
Three months later, on 26 September 1997, the plaintiff issued proceedings in which he claimed damages for breach of contract and, in the alternative, damages for breach of s 56 of the Fair Trading Act 1987. There was no claim for rescission. The plaintiff said in evidence that his preference was to send the vehicle back, but his solicitors advised him that there was a problem in doing this and that it was better to claim damages. The defendant filed a defence on 31 October 1997.
The next development took place on 8 January 1998 when the plaintiff’s solicitors wrote to the defendant’s solicitors in the following terms:
“Consistent with our client’s earliest demands to your client, we are now instructed to amend the Plaintiff’s claim to seek primary relief of rescission of contract. Our client requires rescission of contract and will return the motor vehicle to your client at your client’s cost upon payment of interest and costs in respect of the monies.”
Leave to amend the claim so as to include rescission in the prayer for relief was granted on 23 March 1998. The trial took place on 25 November 1998 and the trial judge made his orders on 3 December 1998.
The power to grant relief
Section 87(1A) of the Trade Practices Act provides as follows:
“Without limiting the generality of section 80, the Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage by conduct of another person that was engaged in (whether before or after the commencement of this subsection) in contravention of a provision of Part IVA, IVB or V or on the application of the Commission in accordance with subsection (1B) on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person.”
Subsection (2)(a) enables the court to make an order-
“Declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, or of a collateral arrangement relating to such a contract, to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after such date before the date on which the order is made as is specified in the order.”
Other provisions in subs (2) enable the court to make various orders including an order for damages for any loss which has been suffered or likely to be suffered.
The first question which arises is whether the learned trial judge had power to make the orders which he did under s 87. It is a precondition for the exercise of the power “that a person who is a party to the proceedings has suffered or is likely to suffer, loss or damage by conduct of another that was engaged in contravention of Part IVA, IVB or V”.
The learned trial judge accepted evidence to the effect that the vehicle had depreciated by approximately $15,000 up to the date of trial. The only evidence of its value at the time of the purchase came from Mr Carolan who said it was worth $45,000 at this time. There was no proof that the plaintiff paid more for the vehicle than what it was worth. The only relevant evidence in this respect was the unchallenged assertion of Mr Carolan that the price which the plaintiff paid was equivalent to the retail value of the vehicle. In view of this evidence the defendant argued that the plaintiff had not suffered any loss or damage by reason of the alleged misrepresentation, nor was he likely to suffer any loss or damage.
The trial judge ordered that the defendant pay the plaintiff the sum of $45,600. The amount of $600.00 was added to the price paid for the vehicle because the plaintiff had to pay for it to be transported from South Australia to Western Australia. I leave aside for the moment the issue of depreciation. However it is apparent that the cost of transport was a direct result of the purchase which was, in turn, brought about by reason of the misrepresentation. In other words it was a loss suffered by the conduct of the defendant and is sufficient, of itself, to meet the precondition for relief under s87.
Restitution or damages
The difficult question in the case is whether the trial judge acted correctly in ordering restitution instead of granting relief by way of damages. The choice of relief under the section is discretionary, but his Honour did not give any reasons as to why he exercised his discretion in the way in which he did.
In equity it is the act of the injured party which constitutes rescission and it is the court’s function to decide whether there was an entitlement to rescind. Under s 87 of the Trade Practices Act the setting aside of the agreement is the function of the court. In JAD International Pty Ltd v International Trucks Australia (1994) 50 FCR 378 at 380. It was pointed out that:
“The power of the Court to grant relief under the statutory provision is wider than the power of the equity court to grant rescission: the bars to rescission in equity, such as affirmation and the non-availability of restitutio in integrum, are no more than discretionary matters that the Court will take into account in deciding whether in a given case to grant relief under the statutory provision: see Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 at 564-571; Platz v Creative’s Landscape Design Centre Pty Ltd [1989] ATPR 50,309 at 50,312-50,313, approved on appeal in Creative’s Landscape Design Centre Pty Ltd v Platz [1989] ATPR at 50,686.”
(See also Marks v GIO (1998) 73 ALJR 12 at [38]).
Issues relevant to the exercise of the discretion in the present case were discussed by the Full Court of the Federal Court in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd(No 1) (supra). The misrepresentation in that case was made during negotiations for the sale of a business. There was some delay by the purchaser in prosecuting the claim under the Trade Practices Act and, although an indication was given at one stage that the purchaser would be pursuing a remedy for damages, the principal claim for relief was changed later to one of rescission. The Full Court of the Federal Court set aside the trial judge’s order for rescission. Lockhart J said (564):
“In granting a remedy under s 87, the court is not restricted by the limitations under the general law of a party’s right to rescind for breach of contract or misrepresentation. Nevertheless, in exercising its discretion under s 87, the court will consider the conduct of the parties after they had knowledge of the misleading quality of the conduct: Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23 per Northrop J at 60. Such an approach is consistent with that adopted by the Privy Council in Senanayake v Cheng [1966] AC 63 at 83, observing that at general law the questions for the court in determining whether to allow restitution are ‘whether restitution in integrum is substantially possible and whether rescission is timely and just and fair’. On this approach the court must consider all the circumstances before it in the exercise of its discretion.
Equity, of course, allows rescission without requiring that the status quo ante can be exactly restored: Alati v Kruger (1955) 94 CLR 216 per Dixon CJ, Webb, Kitto and Taylor JJ at 223-224. The court will be more open to granting rescission at the suit of an innocent party where a contract has been induced by fraud, in order to deny the defendant the benefit of the fraud at the expense of the innocent party: Spence v Crawford [1939] 3 All ER 271 per Lord Wright at 288-289. It remains that the longer the time elapsed since the agreement, and the more substantial any deterioration in the intervening period as a result of the purchaser’s management of the business, the more difficult it will be to secure restitution in a manner which does ‘practical justice’ between the parties, in the phrase adopted by the majority in Alati v Kruger (supra).”
In my view restitution is an inappropriate remedy in the present case. The defendant denied liability in the letter of its solicitors dated 25 June 1997. It was clear at this stage that the defendant was not prepared to take the vehicle back. It is notorious that motor cars other than vintage vehicles depreciate in value regardless of use. The evidence in this case confirms that in the case of this vehicle. There was no attempt by the plaintiff from this time on to sell the vehicle before it depreciated further. The proceedings issued on behalf of the plaintiff claimed damages only. This was on the advice of the plaintiff’s solicitor. It was a deliberate choice made in full knowledge of the alternative remedy. Even at this stage no steps were taken by the plaintiff to mitigate his loss. It was not until approximately nine months after the discovery of the misrepresentation that the plaintiff’s claim was amended so as to seek rescission. Throughout this time it must have been obvious that the vehicle was depreciating.
In my view, the granting of the remedy of rescission in these circumstances is less appropriate than an award of damages to compensate the plaintiff. The return of the significantly depreciated vehicle would fall a long way short of achieving restitutio in integrum. No recognition would be accorded to the failure to mitigate loss and the important change in the nature of the remedy being sought by the plaintiff.
The assessment of damages
In Kenny & Good Pty Ltd v MGICA (1992) Ltd (1997) 77 FCR 307, a case involving misrepresentations constituting misleading conduct contrary to s 52 of the Trade Practices Act, the court offered the following guidance on the assessment of damages under the Act (330):
“. in assessing damages under s82 of the TP Act, the principles applicable to actions for deceit, being closely analogous, provide a useful guide in most cases
. in a case where something is purchased in consequence of a misrepresentation, the prima facie measure of damages is the difference between the price paid and the true value of the thing. But this is not an inflexible rule and is merely illustrative of a more general proposition, namely, that the purchaser is entitled to recover as damages, a sum representing the prejudice or disadvantage he has suffered in consequence of altering his position under the inducement of the respondent’s misrepresentation. That general principle applies to other claims, such as those brought by lenders or mortgage insurers who have entered into transactions in reliance on false or misleading representations
. a person induced to enter a transaction by misrepresentations, generally speaking, must show that the losses claimed are related to the misrepresentation. It is not enough simply to show that the transaction was induced by the representation and the losses would not have occurred but for the transaction. The loss must flow directly from the inducement
. where property acquired in a transaction induced by a misrepresentation subsequently declines in value, damages are not awarded in respect of that decline if it is attributable to an independent, extrinsic or supervening cause
. if the applicant would have entered into the relevant transaction, even if the misrepresentation had not been made, any losses flowing from the transaction as such cannot be said to flow directly from the inducement. In such a case the applicant would have been exposed, in any event, to the precise risk that ultimately eventuated.”
I have said that the sum of $600.00 for the transportation of the vehicle would seem to be part of the loss caused to the plaintiff. It might well be that there were also insurance and stamp duty costs, although there was no proof of such loss at the hearing. Then there is the question of depreciation. It would seem appropriate that any depreciation up to the time of the defendant’s letter denying liability and refusing to accept the return of the vehicle would also be a loss for which the plaintiff should be compensated. The measure of depreciation will probably best be represented by what the plaintiff, not necessarily a dealer, could expect to have received for the vehicle at the time he could and should have sold it. An estimate should be made so as to allow for a reasonable time in which the vehicle might have been sold and for the costs associated with the sale. But it is my view that it would be inappropriate to compensate the plaintiff on account of the depreciation of the vehicle after that time.
As in the case of Henjo (supra) there is a paucity of evidence on the issue of loss, the principal relief under consideration having been rescission. This court could attempt to calculate the plaintiff’s loss on the limited information available. However, I think this is one of those cases in which the matter should be remitted to the trial court for the assessment of damages in the light of these reasons. While it is unfortunate to have to make such an order, this was the course adopted in Henjo’s case where Lockhart J said (566):
“I have considered whether the award of damages made by his Honour should stand and this litigation thus be brought to an end. There is something to be said for this view, but on balance I think that the interests of justice require that the question of damages be remitted to the trial judge or other single judge of this Court for reassessment. His Honour himself drew attention to the difficulties under which he laboured in determining the appropriate relief under which he laboured in determining the appropriate relief including the assessment of damages. His Honour directed the attention of the parties to this difficulty at the commencement of the trial on the issue of liability so that they had ample opportunity to prepare properly for the determination of damages some months later. Notwithstanding this, much of the evidence directed to damages appears to have been fundamentally misdirected as his Honour pointed out in his reasons for judgment. The parties now have the benefit of his Honour’s reasons for judgment and the reasons for judgment of this Court and I think fairness requires that a final opportunity be given to them to litigate the question of damages before this Court. It is a matter for the trial judge as to how the further hearing will be conducted, though no doubt he will adopt as his starting point the present evidence, supplemented by such fresh evidence as he sees fit to allow. The assessment can also take place without the intrusion of other questions of relief such as restitution; the whole attention of the parties can be directed to the question of damages.”
Conclusion
I would uphold the trial judge’s finding of a breach of s 52, but I would allow the appeal for the limited purpose of setting aside the trial judge’s order for rescission and the orders made in consequence thereof and remit the matter to the trial judge to determine the loss or damage suffered by the plaintiff as a result of the contravention by the defendant of the Trade Practices Act. I would do so on the basis adopted in Henjo’s case of permitting further evidence to be given in relation to loss or damage.
DEBELLE J. The facts are recited in the reasons of Duggan J which I have had the advantage of reading. I agree with him that the defendant fails in his appeal against the finding that there had been a misrepresentation. However, for the following reasons, I do not agree with His Honour’s conclusions as to the appropriate form of relief.
The defendant submitted that the circumstances of this case did not attract the operation of s 87 of the Trade Practices Act, 1974 (Cth). The submission overlooks the evidence of loss and damage caused by the misrepresentation. The plaintiff incurred the cost of $600 for the freight of the car from Adelaide to Perth. In addition, he incurred the cost of a policy of comprehensive insurance. However, the precise cost of the policy was not proved.
A plaintiff induced to enter into a transaction by misrepresentation is entitled to recover the losses caused by the misrepresentation. He is entitled to recover all those losses which would not have been incurred but for the misrepresentation: Brown v Jam Factory Pty Ltd (1981) 53 FLR 340, 351; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, 13; Marks v GIO Holdings Australia Ltd (1998) 73 ALJR 12, 20. The plaintiff would not have incurred the cost of freight and comprehensive insurance but for the misrepresentation. The cost incurred for the freight and comprehensive insurance was a sufficient loss to attract the operation of s 87. There was a causal connection between the misrepresentation and that loss or damage. Once that causal connection had been established, the Court had a discretion to make orders under s 87. The learned trial judge was therefore entitled to consider whether he should make an order pursuant to s 87.
The next ground on which the defendant relied was that the trial judge erred in exercising his discretion to make an order for rescission. There were two limbs to this argument. The first was that the plaintiff had, by issuing proceedings to claim damages, elected to affirm the contract and was by that election precluded from pursuing the alternative claim for rescission. The second was that the trial judge had erred in exercising his discretion to order rescission.
It is convenient to deal first with the question whether the plaintiff has by his conduct made an election which disentitled him to an order for restitution. The effect of the defendant’s argument is that the plaintiff has made an election which is irrevocable. For the reasons which follow, the election was in the circumstances of this case capable of being revoked.
In this context, election concerns a choice between alternative remedies and inconsistent rights. It is a common law principle which is different from the equitable principles which apply where there is a gift by deed or will on conditions and equity fastens on the conscience of the donee to ensure that the gift is not taken except upon compliance with certain conditions: Lissenden v CAV Bosch Ltd [1940] AC 412 at 418 - 419. The equitable principles are examined and discussed in Meagher, Gummow and Lehane, Equity - Documents and Remedies (3rd ed) ch 39 and in Snell, Principles of Equity (28th ed) pp 495 - 504. It should also be noted that it is inaccurate to describe the principles of election at common law as an instance of the rule that you may not approbate and reprobate. Instead, that rule is more closely related to the equitable principles of election: see Lissendon v CAV Bosch Ltd per Viscount Maughan at 417 - 418.
The common law draws a distinction between an election between alternative remedies or inconsistent rights. The common law principles were examined at some length by Jordan CJ in O’Connor v SP Bray Ltd (1976) 36 SR (NSW) 248 at 257 - 263. Although the decision was reversed on appeal to the High Court (56 CLR 464), reference is frequently made to Sir Frederick’s reasons as a statement of the relevant principles. They repay reading not only for the helpful statements of principle but also for the examination of the underlying rationale. The distinction between remedies and rights and the consequences of that distinction were examined in United Australia Ltd v Barclays Bank Ltd [1941] AC 1 and in particular in the speeches of Viscount Simon LC and Lord Atkin. The question of election in relation to breach of contract has been examined in a number of decisions by the High Court and in particular in Sargent v ASL Developments Ltd (1974) 131 CLR 634. Given the issues in this case, reference should also be made to Ciavarella v Balmer (1983) 153 CLR 438 and Ogle v Comboyuro Investments Pty Ltd (1976) 136 CLR 444.
The rationale for the common law rule as to election is that a party who has alternative or inconsistent rights or remedies available cannot enjoy both but must choose between them. As Sir Frederick Jordan noted in O’Connor v Day at 257: “Since the days of the Year Books it has been recognised that you cannot have the egg and the halfpenny too, Holdsworth, 3rd ed II 549. As a general rule, in order that this result may be produced, one of the alternative rights must have been satisfied.” Thus, in the case of a breach of contract by one party, the other may, according to circumstances, have the right to recover damages for the breach and keep the contract on foot or rescind the contract. But a choice must be made. A party to a contract cannot recover a benefit under the contract while at the same time seeking to rescind it. So a vendor of land who has rescinded the contract because of the breach of the contract cannot seek to retain the deposit.
An election is not necessarily irrevocable. If the right which has been initially chosen has not been satisfied, it may be possible to revoke the initial election. As Sir Frederick Jordan noted, one may be permitted to change one’s mind. After examining the authorities he concluded (at 262):
“It would appear, therefore, from the authorities, that an intimation of an election between alternatives of itself produces no irrevocable results, except in cases where the intimation, of itself, produces legal consequences independently of any question of election, or where it is necessary that the choice should be treated as irrevocable, in order to do justice to the other party:” (cf Ward v Day 4 B&S 337 at 352.)
In the course of his reasons, he noted (at 258) that Lord Blackburn’s observations in Scarf v Jardine (1882) 7 App. Cas. 345 at 360 are too broadly stated and, in particular, that the statement that “where a man has an option to choose one or other of two inconsistent things, when once he has made his election it cannot be retracted, it is final and cannot be altered” cannot be supported as a general proposition, unless a very great deal is read into the phrase, “made his election”. Thus, where a party has alternative rights to obtain relief either at law or in equity, the fact that he commenced proceedings in either jurisdiction is not, of itself, an irrevocable election which prevents him from enforcing his rights in the other: Fuller’s Theatres Ltd v Musgrove (1923) 31 CLR 524 at 546 - 547. Sir Frederick notes other instances (at 258 - 259).
As Stephen J emphasised in Sargent v ASL Developments Ltd (at 641), the principles relating to election are concerned to prevent the inconsistent exercise of rights so that the exercise of one will extinguish the other. Later (at 646 - 647), Stephen J noted that there was a divergency of views on the question whether detriment to the other party is an ingredient in election. Although His Honour concluded that detriment was not an ingredient and instanced circumstances in which an election could not be withdrawn, I do not understand His Honour’s reasons to qualify the conclusion of Jordan CJ in O’Connor v SP Bray Ltd at 262 that an election is not irrevocable except in cases where the intimation, of itself, produces legal consequences independently of any question of election or where it is necessary the choice should be treated as irrevocable in order to do justice to the other party. Furthermore, the principles expressed by Jordan CJ were referred to with apparent approval by Mason J in the Commonwealth v Verwayen (1990) 170 CLR 395 at 407. Finally, it should be noted that there are other instances where the institution of proceedings claiming one form of redress has not been held to be a final and irrevocable election. In Ogle v Comboyuro Investments Pty Ltd and Ciavarella v Balmer, the relief initially claimed did not constitute an irrevocable election because of changes in circumstances following the institution of the action in each case. Thus, an election is not necessarily irrevocable. Whether an election can be revoked will depend on all relevant circumstances.
One instance when an election may be revoked is when it has not been acted upon by the other party to the contract or the rights of the parties have not been affected by any legal consequences independently of election. It may therefore be concluded that, in the case of an action for misrepresentation, where a party issues proceedings claiming damages, he may revoke his election to affirm the contract and amend the proceedings to claim rescission if the other party has not acted in a way which would result in the prosecution of the amended proceedings causing injustice. However, if the election has been communicated to the other party and that party acts on it, the alternative right necessarily vanishes: see Jordan CJ in O’Connor v SP Bray Ltd (supra at 261).
In this case, although an election to affirm was communicated, it was not acted upon by the defendant. The plaintiff issued proceedings claiming damages. The defendant filed its defence but did nothing further in response to the claim. Notice of the intention to amend the claim was given on 8 January, a little over three months after the proceedings had been instituted. There was no undue delay in giving notice. Leave to amend was granted on 19 March. By then the defendant had not acted in any way to its detriment or prejudice. Subject to the depreciation of the motor car to which I will shortly refer, the parties were then in the same position as they were when the proceedings were issued. Performance of a contract had been completed in that the defendant had sold and delivered the motor car and the plaintiff had paid for it. The only question was whether the plaintiff was entitled to redress for the misrepresentation. The interests of justice did not require that the election to affirm the contract should be irrevocable.
By way of a footnote, it might be noted that the plaintiff could have avoided this difficulty if he had sued for alternative grounds of relief. As was pointed out in United Australia Ltd v Barclays Bank Ltd [1941] AC 1, a distinction is drawn between a choice between inconsistent rights and a choice between alternative remedies. In the case of alternative remedies, no question of election arises until one or other claim has been brought to judgment: see Viscount Simon LC at 18 - 19, Lord Atkin at 30 and Lord Porter at 49. As Viscount Simon said at 19:
“No doubt, if the plaintiff proved the necessary facts, he could be required to elect on which of his alternative causes of action he would take judgment, but that has nothing to do with the unfounded contention that the election arises when the writ is issued. There is nothing conclusion about the form in which the writ is issued, or about the claims made in the statement of claim. A plaintiff may at any time before judgment be permitted to amend. ...At some stage of the proceedings the plaintiff must elect which remedy he will have. There is, however, no reason of principle or convenience why that stage should be deemed to reached until the plaintiff applies for judgment.”
Lord Atkin referred (at p 29) to the fact that two or more causes of action may be included in the same writ and (at p 30) His Lordship concluded:
“I therefore think that on a question of alternative remedies no question of election arises until one or other claim has been brought to judgment. Up to that stage the plaintiff may pursue both remedies together, or pursuing one may amend and pursue the other: but he cannot take judgment only for the one, and his cause of action on both will then be merged in the one.”
Thus, it was open to the plaintiff to have claimed alternative remedies and so defer the problem of election until judgment.
For all of these reasons, the plaintiff had not irrevocably affirmed the contract when he instituted this action and it was open to the trial judge to make an order for rescission.
The next question is whether the conduct of the plaintiff in any way precluded him from being entitled to an order for rescission. The discretion to order rescission which is vested in the Court by s 87 is not restricted by the limitations under the general law of a party’s right to rescind for breach of contract or for misrepresentation but, nevertheless, the equitable principles concerning rescission provides safe, if not necessarily exclusive guidance: Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23 at 60; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 at 102; Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700 at 713 - 714; and JAD International Pty Ltd v International Trucks Australia Ltd (1994) 50 FCR 378 at 380 - 389. In the exercise of its discretion the Court will consider the conduct of the parties after they had knowledge of the misleading quality of the conduct: Henjo (supra) at 102.
The task for this Court is not to consider how it would have exercised its discretion but whether the defendant has demonstrated that the trial judge erred in the exercise of his discretion. The trial judge did not spell out the factors which caused him to make the order beyond saying:
“...On the facts as I found them, and taking into account the conduct of the plaintiff and the defendant after the plaintiff discovered the date of the manufacturer of the car, I consider that to be the appropriate remedy.”
The defendant says that the trial judge erred in failing to take adequate account of certain facts, namely, that the plaintiff had driven the car for some 350 kilometres, that the car had depreciated in value, that the trial was twice delayed on account of the actions of the plaintiff, that the plaintiff did not specify that he required a car which was manufactured in 1988, that it would have been immediately apparent to any observer of the car that the car was not manufactured in 1988, and that the car was worth the amount the plaintiff had paid.
The last three factors do not affect the discretion whether to make the order. Those factors concern the question of liability and, for the reasons already expressed, the defendant has failed in his appeal on the question of liability. The assertion that the car was worth the amount paid for it is not relevant. The plaintiff believed he was getting a 1988 model. He was entitled to a 1988 model.
The fact that the plaintiff drove the car for 350 kilometres does not mean that the discretion was wrongly exercised. He drove the car for that distance before he learned that it was not a 1988 model. As soon as he learned that fact he stopped driving the car and kept it in a garage. He then immediately informed the defendant and gave him three options including taking the car back at the defendant’s own expense and refunding the purchase price and cost of freight. He did not seek to recover the cost of his comprehensive insurance. This case is to be distinguished from Tompkins v Nossida (No 1) Pty Ltd (1986) 8 ATPR 40 - 662 where the car was driven for some 2,000 kilometres and the plaintiff had engaged in conduct tantamount to an acceptance of the car within the meaning of the Sale of Goods Act. For like reasons the fact that the plaintiff had not returned the vehicle is not relevant.
I acknowledge that the car depreciated in value from the date of purchase. However, the plaintiff endeavoured to keep that depreciation to a minimum by garaging the car and not using it. Equity allows rescission without requiring that the status quo ante be exactly restored: Alati v Kruger (1955) 94 CLR 216 at 223 - 224. The object is to attempt to achieve “practical justice” between the parties, the phrase adopted by the majority in Alati v Kruger. It will be inevitable in a case such as this that there will be a delay between the entitlement to an order for rescission and the making of that order. If a party is entitled to rescission, I do not think that he is necessarily denied that right because the other party chooses not to rescind and it is necessary to take legal proceedings. The plaintiff’s duty to mitigate his loss did not require him to sell the car and claim the price he paid for the motor car and the price for which he sold it. Of course, the longer the time between the agreement, the greater will be the depreciation. It is necessary, therefore, to consider whether the defendant is defeated by the delay caused by his indecision.
Having given the defendant three options including rescission, the plaintiff reiterated his desire to rescind the contract when his solicitors wrote on 8 January 1998 advising that the claim was to be amended to a claim for rescission. Thus, about 7 months after the sale the defendant was aware of the plaintiff’s considered attitude. Had the defendant agreed to accept the proposal, the car would have depreciated a good deal less. Some 8 to 10 months of further depreciation would have been thereby avoided. In addition, the delays in the hearing of the action were not entirely due to the conduct of the plaintiff or his solicitors. The defendant’s solicitors did not deal promptly with a number of matters which also caused delay. Delay does not, therefore, lie at the door of the plaintiff only. Further, the delay was not so significant as to necessarily preclude an order for rescission. For these reasons, I am satisfied that this court should not interfere with the exercise of discretion.
For all of these reasons the appeal should be dismissed.
BLEBY J. I agree with the orders proposed by Duggan J and with the reasons that he gives. I merely add a few remarks of my own on the question of the appropriate remedy.
Section 87 of the Trade Practices Act provides a range of possible remedies which is much greater than the common law would allow for breach of contract, or as a consequence of fraudulent or innocent misrepresentation. It goes much further than the removal of limitations on common law remedies provided by the Misrepresentation Act 1972.
The remedies provided are only available where a person has suffered or is likely to suffer loss or damage by conduct of another person in contravention of Part V of the Act. The plaintiff qualified for the application of s 87.
The guiding criteria for the awarding of any of the remedies provided by s 87 are contained (in this case) in subsection (1A). They are that “the Court considers that the order or orders concerned will compensate (the plaintiff) in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered by” the plaintiff. That, together with the breadth of possible remedies provided by subsection (2), enables and requires the court to do justice between the parties according to the circumstances of the case.
An important circumstance in this case is that the item purchased by the plaintiff as a result of the defendant’s misleading and deceptive conduct was one which depreciates in value with time, whether used or not. Another important factor was that, once the plaintiff was told unequivocally by the solicitors for the defendant that liability was denied, it was clear that the defendant was refusing to take the vehicle back or to agree to any other alternative suggested by the plaintiff. He must have been aware that he was possessed of a depreciating asset, and that for that reason the possibility of complete restitution by rescission would disappear, if it had not already done so by then. The plaintiff was at liberty to resell the vehicle. He could be fully compensated by an award of damages. He decided to sue for damages.
It has been held that there is an obligation on a person claiming remedies under the Act to take reasonable steps to mitigate his loss: Brown v Jam Factory Pty Ltd (1981) 53 FLR 340 per Fox J at 351; Finucane v NSW Egg Corporation (1988) 80 ALR 486 per Lockhart J at 519. The Full Court of the Federal Court in Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700 at 712 ‑ 713 considered that the phrase “by conduct of another person” marks out the measure of damages, such as to exclude liability for loss brought about by the plaintiff’s own conduct, thereby importing “concepts analogous to remoteness, mitigation or contributory negligence”. In some cases, such as continuing to trade in a business in the hope of mitigating losses, there may be arguments as to what is reasonable conduct, especially when it turns out that the trading losses become greater. However, in the case of a motor car or other depreciating asset, the choice is reasonably clear. The plaintiff was obliged, by selling the vehicle, to mitigate the loss that would inevitably be caused by further depreciation of the vehicle. He took no such steps.
To order restitution in those circumstances, more than eighteen months after property in the vehicle had passed to the plaintiff, was not to do justice between the parties. The plaintiff was entitled to be compensated for the prejudice or disadvantage suffered by the plaintiff in consequence of altering his position under the inducement of misrepresentation: Kenny and Good Pty Ltd v MGICA (1992) Ltd (1997) 77 FCR 307 at 330. Such prejudice or disadvantage would include expenses incurred in the purchase of the vehicle over and above the purchase price. It would also include compensation for any loss incurred upon the resale of the vehicle within a reasonable time after 25 June 1987, together with the expenses associated with such sale. It is nothing to the point that the car, at the time of sale to the plaintiff, was actually valued at the amount paid by the plaintiff. Compensation for such losses would have done appropriate justice between the parties.
Whilst the remedy ordered by the trial Judge was a discretionary remedy available to him, the exercise of the discretion miscarried in this case because the trial Judge appears to have ignored the depreciating nature of the goods purchased and the plaintiff’s failure to take any action to prevent further losses from running. There was nothing in the evidence to suggest that an award for compensation for the plaintiff’s losses was otherwise impracticable or inappropriate. The choice of remedy therefore failed to do justice between the parties.
It is regrettable that there is insufficient material before the Court to enable it to substitute an award of compensation for the order made by the trial Judge. It might be said that the plaintiff should rest on his failure to prove the loss. However, so to hold in this case would be to perpetuate an injustice, albeit of a different sort. I am satisfied that the approach taken by the Federal Court of Australia in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 justifies a similar course in this case.
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