Fried v Dixie Holdings Pty Ltd

Case [2000] FCA 1048

FEDERAL COURT OF AUSTRALIA

Fried v Dixie Holdings Pty Ltd [2000] FCA 1048

TRADE PRACTICES – consumer protection – misleading or deceptive conduct – s 52 of the Trade Practices Act 1974 (Cth) – sale of luxury high speed cruiser – representation by vendor as to top speed and comfortable cruising speed – representation that boat in “extremely good condition” – representation that engines were Detroit Diesel – whether representations false – whether applicants relied upon representations – measure of loss and damage – s 75B of the Trade Practices Act 1974 (Cth) – whether second respondent involved in contravention of s 52 – whether report prepared by fourth respondent constituted negligent misstatement.

Trade Practices Act 1974 (Cth), ss 52, 75B, 82
Federal Court of Australia Act 1976 (Cth) s 51(A)

IOOF Australia Trustees (NSW) Ltd v Tantipech (1998) 156 ALR 470 at 478-80 referred to
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Pty Ltd (1978) 140 CLR 216 at 225 referred to
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197 referred to
Gould v Vaggelas (1985) 157 CLR 215 at 236 referred to
Dominelli Ford (Hurstville) Pty Ltd v Karmot Auto Spares Pty Ltd (1992) 38 FCR 471 at 482-3 referred to
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525 referred to
Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302 referred to
Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601 at 611 referred to
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 at 588 referred to
Sutton v AJ Thompson Pty Ltd (in Liq) (1987) 73 ALR 233 at 239 referred to
Yorke v Lucas (1985) 158 CLR 661 referred to
Compaq Computer Australia Pty Ltd v Merry (1998) 157 ALR 1 at 5 referred to
Bowler v Hilda Pty Ltd [2000] FCA 899 referred to
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 at 87 referred to
Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 171 referred to
General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 referred to

RUBEN FRIED and MORRY FRAID v DIXIE HOLDINGS PTY LTD (ACN 061 362 794), GRAHAM McDONALD, IAN JOHN McDONALD and ANTHONY GEORGE GRIPSKE

VG 318 of 1998

WEINBERG J
3 AUGUST 2000
MELBOURNE & BRISBANE


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 318 OF 1998

BETWEEN:

RUBEN FRIED
FIRST APPLICANT

MORRY FRAID
SECOND APPLICANT

AND:

DIXIE HOLDINGS PTY LTD (ACN 061 362 794)
FIRST RESPONDENT

GRAHAM McDONALD
SECOND RESPONDENT

IAN JOHN McDONALD
THIRD RESPONDENT

ANTHONY GEORGE GRIPSKE
FOURTH RESPONDENT

JUDGE:

WEINBERG J

DATE OF ORDER:

3 AUGUST 2000

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.There be judgment in favour of the applicants against the first respondent in the sum of $216,050.02.

2.The sum of $20,000 interest be paid by the first respondent, pursuant to…

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Details
AGLC
Fried v Dixie Holdings Pty Ltd [2000] FCA 1048
Case
[2000] FCA 1048
Decision Date

CaseChat Overview and Summary

Isaac Fried and Morry Fried brought proceedings in the Federal Court against Dixie Holdings, alleging that they had suffered a loss due to the negligent misstatements made in the advertisement for the boat known as the Circa II. The applicants claimed damages for the loss of opportunity to use the Circa II as a family boat for recreational purposes, as well as for the cost of repairs to the engines. The applicants also sought damages for negligent misstatement against Anthony Gripske, but the claim was not actively defended, and Mr Gripske ultimately did not participate in the proceeding.

The central legal issue was whether Dixie Holdings, as the seller of the Circa II, was liable for the loss suffered by the applicants due to the negligent misstatements in the advertisement. The court had to determine whether the advertisement contained false and misleading statements about the boat's engines, and if so, whether these statements were made negligently. The court also needed to assess whether Dixie Holdings was liable for the loss of opportunity to use the boat for recreational purposes and the cost of repairing the engines.

The court found that the advertisement for the Circa II contained false and misleading statements about the boat's engines, specifically that they were genuine Detroit Diesel marine engines. The court held that Dixie Holdings was liable for the loss of opportunity to use the boat for recreational purposes and the cost of repairing the engines, as the misleading statements were made negligently. The court held that Dixie Holdings was vicariously liable for the actions of Graham McDonald, who drafted the advertisement. The court also held that the applicants were not entitled to damages for negligent misstatement against Anthony Gripske, as there was no evidence of his involvement in drafting the advertisement.

The court awarded judgment in favour of the applicants against Dixie Holdings in the sum of $216,050.02, with interest of $20,000, making a total sum of $236,050.02. The court dismissed the application against the other respondents, and ordered Dixie Holdings to pay 80% of the applicants' costs of and incidental to the application, including reserved costs.

Orders

Orders of the court

1. There be judgment in favour of the applicants against the first respondent in the sum of $216,050.02.

2. The sum of $20,000 interest be paid by the first respondent, pursuant to s 52A(1)(b) of the Federal Court of Australia Act 1976 (Cth), as a lump sum to be included in the sum for which judgment is given, making a total sum awarded of $236,050.02.

3. The application against the second respondent be dismissed.

4. The application against the third respondent be dismissed.

5. The application against the fourth respondent be dismissed, with costs.

6. The first respondent pay 80% of the applicants’ costs of and incidental to the application, including reserved costs, save for any costs incurred by the applicants in proceeding against the fourth respondent.

Background

Background to the litigation

Finally, the applicants claim damages for negligent misstatement as against Anthony Gripske. This claim was not actively defended by Mr Gripske, and he ultimately elected not to take any part in this proceeding. Background In February 1996 Isaac Fried (known generally, and hereafter, as “Zac Fried”) saw an advertisement in a boating magazine known as “Trade-A-Boat”. The advertisement was for a fifty-four foot sport cruiser. It displayed a photograph of the Circa II. Beneath the photograph was the following description:“54’ SPORT CRUISER – IN SURVEY(TC93 – 026 – 1) ‘Circa’ is a truly remarkable vessel. Designed by Alan Warwick in New Zealand, ‘Circa’ has been lavishly appointed to provide sumptuous accommodation with three double staterooms, a saloon and dining area with leather lounges and a superbly equipped galley. ‘Circa’ is fully air conditioned. With its twin jet drives and a draft of only 0.6 metres, ‘Circa’ allows you to visit secluded waterways which are normally inaccessible to conventionally propelled craft. With a top speed of 35 knots and comfortable cruising around 30 knots, ‘Circa’ will take you where you want to go. ‘Circa’ has been fastidiously maintained by her original owner and is in current survey for charter purposes.” In 1996 Zac Fried was twenty-four years of age. When he saw the advertisement for the Circa II he was immediately impressed. For a number of years his father Ruben had owned a much smaller boat, a thirty foot Bayliner Avanti 2900. However, that boat no longer met the family’s needs. The applicants had decided that they wanted a boat to use for day cruises out of Hamilton Island. Morry Fraid said that he was anxious that the boat be able to travel at high speed because he was a scuba diver who enjoyed going out to some of the far reaches of the Barrier Reef. He said that it was important to him that he not spend an inordinate amount of time getting from place to place. Both Ruben Fried and Zac Fried also stressed the importance to them of being able to achieve high speed. The Circa II was precisely what Zac Fried and his father had been looking for. Zac Fried drew the advertisement to the attention of his father. He was told to have the boat checked out and, if it seemed satisfactory, to negotiate for its purchase. The Circa II had been purchased by Dixie Holdings from Coopers & Lybrand in October 1995. Coopers & Lybrand were the receivers and managers of Welrose Pty Ltd. That company had owned the boat since 1990 and had used it to operate luxury charters out of Hamilton Island. The boat was purchased by Dixie Holdings with the intention of being resold at a profit. Graham McDonald was given the task of selling the boat. He arranged for the advertisement to be placed in “Trade-A-Boat”. In doing so, he drafted the description of the boat which accompanied the photograph. The information concerning its “top speed of 35 knots” and its capacity to cruise comfortably at “around 30 knots” had been provided to him by Ian McDonald.

Evidence

Evidence Before The Court

John Gordon said that throughout the second half of 1996, and throughout the whole of 1997, numerous attempts were made to repair the boat’s engines. He produced a large number of invoices to prove these repairs. He said that he was satisfied that the repairs were necessary, and he confirmed that they all had been carried out. Zac Fried said that he had authorised each of the invoices to be paid.The expert evidence The applicants called both Mr Hood and Mr Grose to give evidence. Mr Hood confirmed that the engines of the Circa II were not genuine Detroit Diesel marine engines, but had been built up by Transmissions & Diesels Ltd in New Zealand. They had been built with non-genuine componentry in order to gain a light-weight, high horsepower package. The only parts of the engines which were genuine Detroit Diesel engines were the cylinder block, the crankshaft and possibly the cylinder heads. The external parts of the engines were not genuine Detroit Diesel parts at all. Mr Hood said that in his opinion the reason for the overheating problems experienced with the engines was that they were automotive engines with major modifications to the cooling system. He said that marine engines had a higher horsepower than automotive engines. The main problem with the modification was that the cooling system was inadequate to cope with the horsepower that a marine engine needed to achieve. Mr Hood said that when he spoke to Zac Fried about the engines in September 1997 he told him not to bother having them repaired as they would soon break down again. He said that he had advised that new engines be fitted which were “the genuine product”. Shortly after his initial meeting with Zac Fried, Mr Hood inspected the engines at Rose Bay. At that time he observed that the manifolds showed indications of rust and that there were water leaks around the header tanks and around the expansion tanks. He noted that the heat exchanger was too small. He said that there should have been two turbo chargers rather than one. He said that genuine Detroit Diesel marine engines had always been made with cast-iron manifolds in order to withstand the extreme heat to which they were subjected, and that the aluminium manifolds fitted on the Circa II’s engines were unsuitable for marine engines of this size. Mr Grose agreed with Mr Hood that the basic problem with the engines was the manifold system. The gaskets continually leaked causing water to enter the engines. This, in turn, caused problems with the cylinder heads. He said that these engines had a high exhaust temperature which was a design fault brought about by the modifications. The cooling system was inadequate for the amount of horsepower which the engines produced. He agreed with Mr Hood that the Circa II’s engines were inherently defective, and would constantly overheat and break down. He agreed that the engines needed to be replaced by genuine Detroit Diesel marine engines. The applicants both said that they were surprised to learn in 1997, for the first time, that the Circa II’s engines had been designed as automotive engines, and modified for marine use, and that they were not genuine Detroit Diesel marine engines. Zac Fried said that he knew of Detroit Diesel prior to purchasing the boat. It was a highly reputable manufacturer of diesel engines, whose engines were used by, among others, the Australian Navy. He said that the fact that the engines were said to be Detroit Diesel had been a selling point of particular importance when he recommended the purchase of the boat.

Decision

Reasons for decision

WEINBERG J

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Ratio Decidendi

Legal Principle Established

Established by: WEINBERG J

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