Gooch, E.C. v Byrt Ford Pty Ltd

Re: EDMUND CHARLES GOOCH AND LORRAINE KERRY GOOCH
And: BYRT FORD PTY LIMITED
No. ACT G34 of 1988
FED No. 85
Contract - Damages - Practice and Procedure

COURT

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY
GENERAL DIVISION
Davies(1), Kelly(2) and Neaves(2) JJ.

CATCHWORDS

Contract - Oral warranty - New motor vehicle - Written warranties given by vehicle assembler and engine manufacturer - Whether additional oral warranty given by dealer - Whether additional warranty covered economic loss.

Damages - Assessment - Warranty by motor vehicle dealer that vehicle reliable and suitable for particular work - Vehicle acquired by finance company and leased to users - Vehicle defective and off road for substantial periods - Eventual failure of rear suspension resulting in extensive damage and personal injuries - Measure of damages considered.

Practice and Procedure - Interest on damages - Action for breach of warranty not commenced until some years after cause of action arose - Whether circumstance that no entitlement to interest if proceedings instituted promptly after cause of action arose relevant in considering amount of interest to be awarded.

Australian Capital Territory Supreme Court Act 1933 (Cth), s.53A

HEARING

CANBERRA

#DATE 13:3:1989

Counsel for the appellants : Mr T.J. Higgins, Q.C.

and Mr P.L.R. Dodson

Solicitors for the appellants: Porter Pilkington

Counsel for the respondent: Mr I.A. Curlewis

Solicitors for the respondent: Snedden Hall & Gallop

ORDER

The appeal be allowed.

The judgment of the Supreme Court of the Australian Capital Territory given on 15 July 1988 be varied by substituting for the order that judgment be entered for the plaintiffs against the firstnamed defendant in the sum of $29,116.70 an order that judgment be entered for the plaintiffs against the firstnamed defendant in the sum of $65,227.65 and for the sum of $29,116.70 appearing secondly the sum of $65,227.65.

The respondent pay the appellants' costs of the appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The principal issue in this appeal is whether oral representations made by Mr P. Donohue, an employee of the respondent ("Byrt Ford") to the firstnamed appellant, Edmund Charles Gooch, with respect to the capability of a Ford "Louisville" 8000 tipper truck, constituted a warranty given by the respondent as to that capability.

The Louisville truck which Byrt Ford had for sale was a new truck. It failed to stand up to the work to which Mr Gooch put it. The engine was replaced three times, the differential housing was replaced twice, the clutch was replaced twice, the water pump was replaced, the shock absorbers were replaced more than once, repairs were required to the injector pump, the fly wheel, the pressure plate, the air compressor, the starter motor, the kingpins, the tipping body and hoist and to instrument gauges. Finally, the rear walking beam, a structural part of the rear suspension assembly, fractured causing the vehicle to overturn.
At the trial, a case was put on behalf of Byrt Ford that Mr Gooch had consistently overloaded the truck. Mr Gooch gave evidence that he had endeavoured to keep the loads within the load carrying capacity of the truck, namely 12.75 tonnes. The learned trial Judge made no comment on this aspect of the case, perhaps because of the nature of the issues that were raised by the pleadings. Paragraph 4 of the amended statement of claim alleged that Byrt Ford, through Mr Donohue, had warranted and represented to the appellants that the truck was:-

"(a) In proper and sound working order and free of mechanical defects;

(b) capable of performing the work of carrying loads of soil and sand normally carried by the Firstnamed Plaintiff, the requirements of which work having been described to the Firstnamed Defendant by the Firstnamed Plaintiff."

Paragraph 3 of the amended defence denied the allegations in paragraph 4 of the amended statement of claim but admitted that Mr Donohue had said that "the vehicle was in good working order and was capable of carrying soil and sand." Neither pleading made any reference to the weight of the loads of soil or sand transported or to be transported by Mr Gooch.

Mr Gooch gave evidence that he had met Mr Donohue at Yarralumla by arrangement and arranged a demonstration of the truck to prove that it would do the type of work that Mr Gooch wanted to do with it.
Subsequently, Mr Donohue demonstrated the vehicle's capabilities at Mugga Quarry. Present at the demonstration were Mr Donohue, Mr Gooch and several other persons including persons for whom the appellants were carting soil and sand.
Mr Gooch gave this evidence as to the demonstration:-

"And what was done?---The truck was taken down to put under the loading bins to see what sort of weight and how it would go under the bins, and what we did was give us a demonstration of what the truck should have been capable of doing.

And what was the truck loaded with?---Blue metal.

What weight of blue metal?---About 18.6 ton. Are we talking there imperial measure or the --?---That would have been imperial measure. Yes, and was the truck driven?---Yes, Mr Donohue drove the truck with a load on. And did you accompany him?---I did. And can you recall where you went to?---Well, we went down to come out through under the loading bins and we had a problem because the front of the truck was too high to come out from under the bins so we had to come out, and then we took it for a run around up through the quarry and up over the general type pulls that it would be going out to see what it was capable of doing.

And as far as the performance of the truck was concerned, were you happy with it?---I did ask at the time - I was not quite happy with it because the motor size was smaller than what I had been running and asked could I have a 210 instead of the one that I had - the one that I ended up buying.

You asked for a - what, does that mean a greater horsepower, does it?---A bigger horsepower motor, yes.

So that was one thing you asked about, was increasing the capacity of the motor?---That is correct.

Was there anything else you asked for as a modification?---Well, when we discussed it and Mr Donohue said that he could not supply a 210, then we discussed the alterations and modifications that would have to be made to the truck to make it serviceable. And that is serviceable for your purposes?---That is correct. And what were those modifications that you listed?---The truck was built with a loading rack over the top of the cab which unfortunately was too high to go under the bin and to go on to the spreaders which was - the maxi boosters on the back protruded too far out.

Yes, now these boosters on the back, they are brake boosters, are they not?---That is correct; they were double maxis. And there are various types of brake boosters customarily fitted to trucks?---That is correct.

And you asked that it be changed to the more squat type of brake booster than the extended one?---Yes.

And I take it you asked for the vehicle to be lowered?---Yes.

Were there any other modifications that you asked Mr Donohue to arrange?---That was the extent of what had to be done for service. And what did he tell you then about whether that could be done?---He suggested he would ring Byrt Ford in Wollongong and see if the modifications could be done for us."

Mr Gooch gave evidence that subsequently Mr Donohue informed him that Byrt Ford would agree to the modifications for the truck but that Byrt Ford would not be able to supply a truck with a 210 motor, the larger motor, for at least three months. Mr Gooch then gave this evidence:-

"What did you say to him?---That I wanted to get out of the truck that I had because it was coming to the end of its natural term and I would prefer to start with a new one. Yes. And did he tell you something as a result of that?---Well, he said, 'We can do a good deal on this truck now. It is ready to go', and that if I wished to do the deal we could make arrangments for some finance. Yes. And would you continue with the conversation please, if you responded to that?---I had a phone call - or I said, you know, we would think it over, first of all, as to whether or not it was suitable."

Mr Gooch also gave this additional evidence respecting the demonstration at Mugga Quarry:-

"And was anything said about whether the truck would be able to do the job you wanted?---He assured me up in the quarry that the truck was capable of doing the work that I was doing. That was the day that we was discussing the fact that I would have liked a bigger motor and he assured me after loading the truck and weighing it off and that the truck was quite capable of carrying the work that I wanted. And did you accept what he told you about the truck's capabilities?---I think my comments were the fact that I did want something that was going to be reliable and was going to carry out the type of work that I was doing without being off the road and broken down and what not.

Did you accept what he told you about the capability of this truck to perform as you wished?---I did, that was one of the things that made us agree to buy it."

It will be noted that, in the above, Mr Gooch gave no evidence as to any conversation respecting carrying capacity. The truck had been loaded with 18.6 tons of blue metal at the Mugga Quarry. Yet there was no evidence of any discussion between Mr Gooch and Mr Donohue at the quarry as to what weight the vehicle could carry. Mr Gooch gave this evidence in cross-examination:-

"You did get some specifications relating to the truck, did you not, when you picked it up?---After I had taken delivery, yes. 18 tonnes you would recognize after you picked up the specifications was a great overload to put on the truck, was it not?---12.75 was the legal weight."

Mr Gooch did not make any complaint that the legal load of the truck was substantially less than the load which was the subject of the demonstration at the Mugga Quarry. He said:-

"... I had the truck weighed off with a legal load, and the spring rates were painted on the chassis as to approximately where that load was, and that is how I loaded the truck."

and:-

"All I can tell you, sir, is that I was guaranteed 12 and three quarter tons when I bought ---"

As I have said, the trial Judge did not deal with the issue of overloading for the reason, I assume, that the appellants' case was not a case that it had been warranted that the truck could carry 12.75 tonnes of soil or sand but in fact could not do so without breaking down. The case as pleaded and as put in Mr Gooch's evidence was that it had been warranted that the truck could carry out without breaking down the type of work demonstrated at the Quarry. His Honour rejected the view that anything that was said by Mr Donohue amounted to such a warranty. I would not draw any different conclusion.
I respectfully agree with the following statement by the trial Judge of the legal principles to be applied:-

"To create a warranty no special form of words is necessary. It must be a collateral undertaking forming part of the contract by agreement of the parties, express or implied, and must be given during the course of the dealing which leads to the bargain and should then enter into the bargain as part of it (De Lassalle v. Guildford (1901) 2 KB 215 per AL Smith M.R. at 221). The requirements for establishing a collateral warranty were stated by the High Court in J.J. Savage & Sons Pty Ltd v. Blakney (1970) 119 CLR 435 at 442: 'The Full Court seems to have thought it sufficient in order to establish a collateral warranty that without the statement as to the estimated speed the contract of purchase would never have been made. But that circumstance is, in our opinion, in itself insufficient to support the conclusion that a warranty was given. So much can be said of an innocent representation inducing a contact. The question is whether there was a promise by the appellant that the boat would in fact attain the stated speed if powered by the stipulated engine, the entry into the contract to purchase the boat providing the consideration to make the promise effective. The expression in De Lassalle v. Guildford that without the statement the contract in that case would not have been made does not, in our opinion, provide an alternative and independent ground on which a collateral warranty can be established. Such a fact is but a step in some circumstances towards the only conclusion which will support a collateral warranty, namely, that the statement so relied on was promissory and not merely representational.' That passage was applied by the High Court in Ross v. Allis-Chalmers Australia Pty Ltd.

(1980) 32 ALR 561."

It is worth noting the discussion by Barwick C.J., Kitto, Menzies, Owen and Walsh JJ. in J.J. Savage & Sons Pty Ltd v. Blakney (1970) 119 CLR 435 at p 443 of the facts in that case:-

"In our opinion, there is nothing in the evidence before the trial judge to support the view that the respondent took either the first or second of these courses: the only conclusion open upon that evidence was that the respondent took the third course; he accepted the appellant's estimate of what the boat would do under the power of the 4/53 G.M. diesel as sufficient to found his (the respondent's) own judgment as to the powering of the vessel. As he said 'I prefer upon your advice the G.M. 4/53'. That the statement actually made by the appellant was intended to have some commercial significance upon a matter of importance to the respondent can be conceded; that the respondent was intended to act upon it, and that he did act upon it, is clearly made out. But those facts do not warrant the conclusion that the statement was itself promissory."

I would also refer to remarks of Gibbs C.J. in his dissenting judgment in Hospital Products Ltd v. United States Surgical Corporation & Ors (1984) 156 CLR 41 where his Honour said at pp 61-2:-

"A representation made in the course of negotiations which result in a binding agreement may be a warranty - i.e., it may have binding contractual force - in one or two ways: it may become a term of the agreement itself, or it may be a separate collateral contract, the consideration for which is the promise to enter into the main agreement. In either case the question whether the representation creates a binding contractual obligation depends on the intention of the parties. In J.J. Savage & Sons Pty. Ltd. v. Blakney (1970) 119 CLR 435, at p 442 and Ross v. Allis-Chalmers Australia Pty. Ltd.

(1980) 55 ALJR 8 at pp 10, 11; 32 ALR 561, at pp 565, 567, it was said that a statement will constitute a collateral warranty only if it was 'promissory and not merely representational', and it is equally true that a statement which is 'merely representational' - i.e., which is not intended to be a binding promise - will not form part of the main contract. If the parties did not intend that there should be contractual liability in respect of the accuracy of the representation, it will not create contractual obligations. In the present case Mr. Blackman, who made his statements fraudulently, had, of course, no intention that they should amount to contractual undertakings, but he could not rely on his secret thoughts to escape liability, if his representations were reasonably considered by the persons to whom they were made as intended to be contractual promises, and if those persons intended to accept them as such. The intention of the parties is to be ascertained objectively; it 'can only be deduced from the totality of the evidence': Heilbut, Symons & Co. v. Buckleton

(1913) AC 30, at p 51. In other words, as Lord Denning said in Oscar Chess Ltd. v. Williams (1957) 1 WLR 370, at p 375; (1957) 1 All ER 325, at p 328:

'The question whether a warranty was intended depends on the conduct of the parties, on their words and behaviours, rather than on their thoughts. If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice.'

The intelligent bystander must however be in the situation of the parties, for 'what must be ascertained is what is to be taken as the intention which reasonable persons would have had if placed in the situation of the parties': Reardon Smith Line v. Hansen-Tangen

(1976) 1 WLR 989, at p 996; (1976) 3 All ER 570, at p 574."

In my opinion, the statements made by Mr Donohue were too general to constitute warranties. To be a warranty, that is to say a legally binding promise, a statement must have sufficient clarity and certainty to be understood as a promise and to be so enforced.
The appellants pleaded a warranty that the truck was "in proper and sound working order and free of mechanical defects". The defence admitted that Mr Donohue said that the vehicle was "in good working order". But there was no evidence as to any such conversation and, as the vehicle was a new vehicle, it is unlikely that Mr Gooch wanted or received any warranty as to this. What concerned Mr Gooch was whether the truck could satisfactorily do the work theretofore done by the appellants' Fiat truck.
The statement of claim also alleged a warranty that the truck was "capable of performing the work ... the requirements of which work having been described by the firstnamed defendant by the firstnamed plaintiff". This pleading itself was uncertain for it did not state what were the requirements which had been described or of which the vehicle was warranted to be capable.
Any relevant assurances given by Mr Donohue that the truck could do the work that Mr Gooch was doing were not promissory in nature. They were too vague or general to have that character. The appellants' case was not put on the basis that the truck was incapable of carting soil and sand. It could do that. What it did not do was stand up to the work to which Mr Gooch put it. But Mr Gooch did not specify or quantify to Mr Donohue the work capacity that he required of the truck. At the demonstration, the truck was loaded with 18.6 tons of stone. Yet it was clear that a capacity to carry loads of 18.6 tons was not warranted for Mr Gooch in cross-examination conceded that he was guaranteed a 12.75 tonnes carrying capacity.

It is to be noted that the transaction which took place was not a sale by description but a transaction involving a particular vehicle. Mr Gooch did not state his requirements to Mr Donohue and leave it to Mr Donohue to produce a vehicle meeting the description. Rather, Byrt Ford had this vehicle for sale. The decision as to whether it met Mr Gooch's requirements was a decision for him. Mr Donohue was asked to demonstrate the vehicle to the satisfaction of Mr Gooch. This he did. A number of other persons who were concerned with the transport of the soil and sand were also present, persons who presumably had some experience in the field. When Mr Donohue made it clear that he could not supply a truck with the larger 210 motor which Mr Gooch preferred, Mr Gooch said that he would think the matter over, as to whether or not the truck on offer was suitable for his purposes. Mr Gooch decided to go ahead with the transaction only after he had considered the matter and decided that the truck would meet his needs.
Accordingly, circumstances were not present such as, in the case of the sale of goods, might lead to an implied condition as to quality and fitness. See for example s.19 of the Sale of Goods Ordinance (1954)(ACT). It does not seem to me that there was anything in the terms of what was said or in the circumstances in which the discussions were held which gave to Mr Donohue's representations the quality of collateral warranties or promises.
The trial Judge said:-

"It seems to me to be implicit in the transaction that so far as mechanical defects and capacity of the vehicle were concerned, Byrt Ford would simply rely upon the written warranties from Ford and Caterpillar. They would be the type of warranties to be expected in the purchase of a new vehicle and it would be unnecessary for Byrt Ford, as the vendor of the vehicle, to warrant additional warranties in the same or similar terms to the written warranties of Ford and Caterpillar."

His Honour was there pointing out that the discussions were taking place against the background that both parties knew that there would be written specifications relating to the vehicle and warranties with respect to failure. Such a background does not, of course, exclude the existence of a collateral warranty. But in that context, it would be likely to be understood that any collateral warranty, being promissory, should set out clearly what was warranted. As the pleading indicates, no such clear promise was made.

For these reasons, I think there was no warranty given by Mr Donohue.
Mr T.J. Higgins Q.C., with whom Mr P.L. Dodson of counsel appeared for the appellants, further submitted that a warranty must be found as the interlocutory judgment entered by consent had conceded one of the claims in the action based on the allegation that the rear walking beam of the vehicle had been defectively cast and that the rear walking beam had been of inadequate weight bearing capacity and an inadequate shock resistant capacity. These two particulars of mechanical defects had been given under paragraph 7 of the amended statement of claim which alleged a breach of the warranty and representations alleged in paragraph 4 of the amended statement of claim. No doubt there may be some question of inconsistency between the interlocutory judgment entered on this part of the claim and the continuation of the action with respect to other aspects of the claim. But the inconsistency was a matter in which the parties joined, for the interlocutory judgment was entered by consent. I do not think that the interlocutory judgment assists a decision as to whether or not, on the evidence as to the disputed aspects of the case, a collateral warranty as alleged was established.
Mr Higgins also relied upon the principle of estoppel by judgment. He relied upon Blair & Ors. v. Curran & Ors. (1939) 62 CLR 464 at pp 531-2 and Chamberlain v. Deputy Commissioner of Taxation (1988) 78 ALR 271. However, no defence of estoppel was raised at the trial and the interlocutory judgment was entered by consent and in the light of the understanding that the case would proceed on other aspects of the claim. For this reason, I think it is not necessary to consider this ground of appeal further.
There are two grounds of appeal with respect to damages. The first was that his Honour erred in finding that the economic loss to the appellant should be limited to the immediate loss incurred by the appellants on the damage to their vehicle, namely $17,000. The trial Judge said:-

"The plaintiffs did not claim any lack of capacity to lease another truck. Rather I am left with the impression that they were so disenchanted and disappointed with their experience with the lost truck that they decided to move out of the trucking business."

I agree with the trial Judge that the ordinary rule as to damages should apply and that no such circumstances were shown as would justify a substantial allowance for loss of profits. However, I agree with Kelly and Neaves JJ. that $1600 should be allowed for the period of one month during which the lease of another vehicle might have been arranged.

The other ground of appeal relates to interest. On this aspect I also agree with the views expressed by Kelly and Neaves JJ and would allow interest at 14% for 9 1/2 years. Making some reduction to allow for the damages with respect to personal injury, that would come to $27,000.
For these reasons I would increase the damages and interest awarded by $18,600 but would otherwise dismiss the appeal. I would order that the respondent pay one-half of the appellants' costs.

JUDGE2

At the time of the happening of the events with which this appeal is concerned and for some time prior to the happening of those events, Edmund Charles Gooch and Lorraine Kerry Gooch ("the appellants") carried on, in partnership, a business of general haulage contractors. One of the assets of the partnership was a Fiat truck. A substantial part of the business consisted in the carriage, on a continuing basis pursuant to an oral agreement between the appellants and one Gavin Thomas, of quantities of soil, sand, gravel and blue metal from various localities in New South Wales to premises at Hume in the Australian Capital Territory where Mr Thomas carried on business under the name "Thomo's Soil Yard". From time to time the appellants carried sand, soil and other goods from the premises at Hume to the premises of the purchasers of those goods. The arrangement with Mr Thomas included a provision that he would supply fuel and tyres for the appellants' vehicle, the cost to be deducted from the moneys otherwise payable to the appellants in respect of the carriage by them of soil, sand, gravel and blue metal pursuant to the oral arrangements to which reference has been made.

By the latter half of 1977, the Fiat vehicle was reaching the end of its useful life. In August of that year Mr Gooch inspected a new Ford Louisville series LNT 8000 diesel truck with aluminium tipping body which was displayed for sale at the premises of a motor vehicle dealer trading under the name Lawton Ford at Queanbeyan. The vehicle was being displayed on behalf of Byrt Ford Pty Limited ("the respondent"), a motor vehicle dealer carrying on business at Wollongong. In due course Mr Gooch had a telephone conversation with a Mr Pat Donohue, admitted to be a servant or agent of the respondent, concerning the purchase of the vehicle. As a result of that conversation a meeting between Mr Gooch and Mr Donohue was arranged.
The meeting took place on 29 August 1977. Mr Donohue and Mr Gooch discussed whether the vehicle would be suitable for the type of work in which the appellants were engaged and arrangements were made for a demonstration of the vehicle's capability to do that work. The demonstration, at which Mr Gooch and Mr Donohue were present, began at the Mugga Quarry in the Australian Capital Territory. The vehicle was loaded with a quantity of blue metal and was driven for some distance in a loaded condition by Mr Donohue with Mr Gooch as a passenger. The demonstration showed that some modifications to the vehicle were necessary to make it suitable for the appellants' purposes. Mr Gooch gave evidence, which was accepted by the trial judge, of the conversation he had with Mr Donohue on the occasion of the demonstration. Mr Gooch was not cross-examined upon that evidence and Mr Donohue was not called as a witness. Mr Gooch's evidence was as follows:

"Q. And was anything said about whether the truck would be able to do the job you wanted?

A. He assured me up in the quarry that the truck was capable of doing the work that I was doing. That was the day that we was discussing the fact that I would have liked a bigger motor and he assured me after loading the truck and weighing it off and that that the truck was quite capable of carrying the work that I wanted.

Q. And did you accept what he told you about the truck's capabilities? A. I think my comments were the fact that I did want something that was going to be reliable and was going to carry out the type of work that I was doing without being off the road and broken down and what not."

Mr Gooch also gave evidence that he accepted what Mr Donohue had told him about the capability of the truck to perform as he wished and that "that was one of the things that made us agree to buy it".

A few days later Mr Donohue informed Mr Gooch that the respondent could not then supply a motor with a higher horsepower rating but that the other modifications which had been discussed would be carried out. There was also some discussion concerning the means by which the purchase of the vehicle by the appellants might be financed.
Mr Gooch subsequently informed Mr Donohue that the appellants wished to acquire the vehicle. Mr Donohue informed him that arrangements could be made for the vehicle to be leased to the appellants by Industrial Acceptance Corporation Limited, for which purpose that company would acquire the vehicle from the respondent. The arrangements included the acceptance by the respondent of the appellants' Fiat truck as a trade-in at an agreed valuation.
A lease agreement, which bears date 1 September 1977, was entered into between Industrial Acceptance Corporation Limited (subsequently Citicorp Australia Limited) and the appellants for the lease of the vehicle to them. The period of the lease was shown as 48 months computed from 1 September 1977, the rent instalments being $1207.57 per month payable in advance. The appraisal value of the vehicle, described as being a pre-estimate of the value of the vehicle at the end of the period of the lease, was shown at $10,000. Mr Donohue was present at the office of Industrial Acceptance Corporation Limited when the agreement was signed by the appellants.
Under the terms of the lease agreement, in which Industrial Acceptance Corporation Limited is referred to as "the Lessor" and the appellants are referred to as "the Lessee", the obligation to pay rent was to continue notwithstanding the occurrence of any defect in, or breakdown of, the vehicle or any damage to it (cl. 3(c)). The appellants covenanted and agreed with the Lessor to pay interest at the rate of 20 per cent per annum on any moneys payable under the lease which might from time to time be overdue. Provision was made for the Lessee to indemnify the Lessor against loss arising from the destruction or loss of the vehicle, the measure of the loss to the Lessor being the then outstanding rent, rebated as provided in the agreement, together with the appraisal value of the vehicle, less the value (if any) of the salvage (cl.4(c)).
Thereafter, Mr Donohue drove the new vehicle to the respondent's premises at Wollongong so that the agreed modifications could be effected. By arrangement, Mr Gooch drove the Fiat truck to Wollongong and, after the modifications had been carried out, took delivery of the new vehicle.
Although Mr Gooch gave evidence that he did not receive a copy of the warranty documents until much later, written warranties were given by Ford Sales Company of Australia Limited in respect of the vehicle and by Caterpillar of Australia Limited in respect of the diesel engine. The warranty given by Ford Sales Company of Australia Limited was that it would, subject to certain terms and conditions to which it is unnecessary to refer, for a specified period, repair or replace, in some cases free of charge and in other cases upon payment of the charge referred to in a schedule of charges, any part of the vehicle (with certain exceptions) found to be defective in factory workmanship or materials under normal use and operation within Australia. The warranty given by Caterpillar of Australia Limited was that, subject to certain conditions, the engine fitted to the vehicle was free from defects in material and workmanship for 160,000 kilometres or 3,600 hours or 24 months, whichever should first occur after the delivery of the engine to the initial user. Both warranties expressly excluded any liability for loss of time or other economic loss.
On numerous occasions between 1 October 1977 and 7 July 1979 mechanical defects in the vehicle became apparent, necessitating the vehicle being off the road for repairs with resultant disruption to the appellants' business. In summary, the evidence established that the engine was replaced on three occasions, two differential housings were replaced, the clutch was replaced twice, the water pump was replaced, shock absorbers were replaced a number of times and repairs were carried out to the injector pump, the flywheel, the pressure plate, the air compressor, the starter motor, the oil pressure gauge, the king pins, the tipping body and hoist and the instrument gauges. In the majority of instances repairs and replacements were carried out under the warranties referred to above. In addition payments of $368.40 and $2,500 were made to the appellants by Ford Motor Company of Australia Limited and Caterpillar of Australia Limited respectively. The evidence shows that, as a result of the defects, the vehicle was off the road for a total of 84 2/3 days prior to 7 July 1979. The evidence also shows that the appellants incurred expenditure totalling $1,102 in making repairs to the vehicle which were not accepted as being covered by the above warranties.
On 7 July 1979 Mr Gooch was driving the vehicle laden with soil from Bredbo to Hume. While travelling north on the Monaro Highway, the rear walking beam, a structural member of the rear suspension assembly of the vehicle, fractured, resulting in the vehicle coming to rest on its side. The vehicle was extensively damaged and Mr Gooch suffered personal injuries in the accident.
By arrangement between the appellants and Citicorp Australia Limited, the vehicle in its damaged condition was surrendered to the company which arranged for its sale. Sale of the vehicle was effected on 10 September 1979, the sale price being $14,364.
Negotiations between the appellants and representatives of Ford Motor Company of Australia Limited and of Caterpillar of Australia Limited failed to satisfy the appellants and on 12 October 1982 they instituted proceedings in the Supreme Court of the Australian Capital Territory. In those proceedings the appellants sued other parties as well as the respondent, the latter being the firstnamed defendant. However, when the proceedings came on for hearing and before any evidence was adduced, the trial judge was informed that agreement had been reached between the parties in relation to certain of the matters in dispute. As a result, judgment was, by consent, entered for the parties other than the respondent against the appellants with no order as to costs. It was also ordered, by consent, that interlocutory judgment be entered for the appellants against the respondent "for damages to be assessed in respect of the breach alleged in paragraph 7(b) and (c) of the amended statement of claim relating to the walking beam and the accident of the 7th day of July 1979".
By paragraphs 4, 5, 6 and 7 of their amended statement of claim the appellants pleaded:-

"4. By an oral collateral agreement entered into by and between the Plaintiffs and the Firstnamed Defendant by its servant or agent, on or about the 1st day of September, 1977, in consideration that the Plaintiffs entered into the agreement with the Lessor set out in Paragraph 3 herein, the Firstnamed Defendant by its servant or agent expressly warranted and represented to the Plaintiffs that the vehicle was:-

(a) In proper and sound working order and free of mechanical defects;

(b) capable of performing the work of carrying loads of soil and sand normally carried by the Firstnamed Plaintiff, the requirements of which work having been described to the Firstnamed Defendant by the Firstnamed Plaintiff.

5. In reliance upon and pursuant to the said warranty and representation, the Plaintiffs were induced to enter into the said Lease agreement with the Lessor on the 5th day of September, 1977.

6. At all material times the Firstnamed Defendant well knew the terms and conditions of the Lease agreement into which the Plaintiffs entered with the Lessor.

7. In breach of and contrary to the said warranty and representation, the vehicle was not in proper and sound working order and free from mechanical defects, nor was it capable of performing the work of carrying loads of soil and sand as described and required by the Firstnamed Plaintiff.

Particulars of Mechanical Defects

(a) Multiple defects of the lubrication system producing damage to four motors, defective instrument gauges, defective air compressor and water pump, defective tail light and mudguard arms and other defects, further particulars of which will be supplied prior to trial.

(b) Rear walking beam defectively cast.

(c) Rear walking beam of inadequate weight bearing capacity and inadequate shock resistant capacity."

By its defence, the respondent admitted that its agent had said "that the vehicle was in good working order pand was capable of carrying soil and sand" but otherwise denied, or did not admit, the allegations made by the appellants.
On 15 July 1988, the Supreme Court ordered that judgment be entered for the appellants against the respondent in the sum of $29,116.70. The component parts of that sum were -

Damages for personal injuries suffered by Mr Gooch in the accident on 7 July 1979 $2,116.70 Damages arising from the mechanical failure of the rear walking beam 17,000.00 Interest 10,000.00 $29,116.70

The appellants' claim for economic loss in respect of the periods between 1 October 1977 and 7 July 1979 when the vehicle was off the road because of its defective condition was dismissed. In this connection, the trial judge said:

"Accepting his (Mr Gooch's) evidence on the subject, it would nevertheless not be appropriate, in my view, to class Mr Donohue's assurances about the suitability of the vehicle for the plaintiff's purposes and the demonstration of its capacity as amounting to the express warranty alleged by the plaintiffs. Those assurances and demonstration no doubt relate to the proper and sound working order of the vehicle and that it was free of mechanical defects, and further that it was capable of performing the sort of carrying work for which the plaintiffs intended to use the truck. It seems to me to be implicit in the transaction that so far as mechanical defects and capacity of the vehicle were concerned, Byrt Ford would simply rely upon the written warranties from Ford and Caterpillar. They would be the type of warranties to be expected in the purchase of a new vehicle and it would be unnecessary for Byrt Ford, as the vendor of the vehicle, to warrant additional warranties in the same or similar terms to the written warranties of Ford and Caterpillar. Especially is that so if the warranty extended to economic loss which was expressly excluded by Ford and Caterpillar in the written warranties. The plaintiffs' claim for economic loss is therefore dismissed."

The amount of $17,000.00 awarded by the trial judge represented, in round figures, the difference between the value of the vehicle immediately before the accident on 7 July 1979 ($31,000 or $32,000) and the price at which the damaged vehicle was sold by Citicorp Australia Limited ($14,364). The trial judge dismissed claims by the appellants to recover from the respondent the amount (agreed between the parties to be $8,444.75 at the date of trial) for which the appellants remained liable to Citicorp Australia Limited under the lease agreement and an amount on account of loss of profits during what would have been the expected working life of the vehicle had the accident of 7 July 1979 not occurred. His Honour, in rejecting these claims, accepted a submission on behalf of the respondent that the appellants could have leased another truck to replace the lost vehicle but had failed to do so and had, in fact, decided to move out of the trucking business.
The trial judge awarded interest on the damages for personal injuries and the damages for loss of the truck, totalling $19,116,70. However, his Honour thought that a lump sum should be awarded in lieu of a calculation of interest and he awarded the sum of $10,000.
The appellants have appealed from the judgment, claiming that the amount awarded should be increased by -

(a) an amount representing the loss of profits due to the vehicle being off the road because of its defective condition on various dates between 1 October 1977 and 7 July 1979;

(b) the amount of $1,102, being expenditure incurred by the appellants in making repairs to the vehicle which were not accepted as being covered by the manufacturer's warranties to which reference has been made;

(c) an amount representing loss of profits after 7 July 1979 calculated at the rate of $1,600 per month; and

(d) an additional amount by way of interest.

The appellants challenge the conclusion of the trial judge that it was not appropriate "to class Mr Donohue's assurances about the suitability of the vehicle for the (appellants') purposes and the demonstration of its capacity as amounting to the express warranty alleged by the (appellants)". To sustain their challenge, the appellants must satisfy the Court that the assurances found by the trial judge to have been given by Mr Donohue to Mr Gooch, considered in the context in which they were given and in the light of the totality of the evidence, were reasonably regarded by Mr Gooch as contractual promises binding upon the respondent, as statements promissory and not merely representational, and were accepted by him as such, his entry into the leasing agreement providing the consideration to make the promises effective. J.J. Savage & Sons Pty Ltd v. Blakney (1970) 119 CLR 435 at p 442 and the statements by Gibbs CJ in his dissenting judgment in Hospital Products Limited v. United States Surgical Corporation and Others (1984) 156 CLR 41 at pp 61-2. The appellants must have relied on the assurances. The extent of such a reliance was considered by the Privy Council in Ashford Shire Council v. Dependable Motors Pty Ltd (1960) 104 CLR 139. At pp 146-7, Lord Reid said:

"He must have realized - any reasonable man would have realized - that in making his report Mr Bowman intended to rely on the assurances which (the managing director of the respondent) had given, and he had no reason to suppose that the appellant was not so relying when it placed its order. ... The respondent founds on well-known statements of the law.

'Such a reliance must be affirmatively shown: the buyer must bring home to the mind of the seller that he is relying on him in such a way that the seller can be taken to have contracted on that footing. The reliance is to be the basis of a contractual obligation.' (Cammell Laird & Co. v. The Manganese Bronze and Brass Co. ((1934) AC 402) per Lord Wright (at p 423). 'The reliance in question must be such as to constitute a substantial and effective inducement which leads the buyer to agree to purchase the commodity' (Medway Oil and Storage Co. v. Silica Gel Corporation

((1928) 33 Com Cas 195), per Lord Sumner (at p 196). ...

... There is no doubt that the making known to the seller of the buyer's particular purpose may take place during negotiations which precede the making of the contract of sale and that there need be no reference to this in the contract itself. What is necessary is that the buyer shall contract in reliance on what took place during the negotiations, and that his reliance at the time when the contract is made 'is a matter of reasonable inference to the seller and to the Court' (per Lord Sumner in Manchester Liners Ltd. v. Rea Ltd. ((1922) 2 AC 74, at p 90))."

The evidence presents a number of significant features. Mr Gooch had made known to Mr Donohue in some detail the purposes for which the vehicle was required. His concern to discuss with Mr Donohue the capability of the vehicle, leading as it did to the demonstration being arranged, reflected his desire to be satisfied, before the appellants proceeded to acquire the vehicle, that a truck of a different manufacture from that which he had previously been using and with a motor of lower horsepower rating than he thought necessary would be suitable in all respects to carry out the work required of it and could be relied upon to perform satisfactorily. These were matters of real importance to the appellants. That this was the position must have been apparent to Mr Donohue. He was put forward by the respondent as a person who could speak with authority as to the characteristics and qualities of the vehicle. Clearly, the statements he made were statements as to matters of fact, not opinion, and were intended to induce, and did induce, the appellants to decide to acquire the vehicle, a decision which was made within a very short time after the conversation took place.
Precise details of the terms of the warranty were neither pleaded nor given in evidence but no detailed cross-examination was directed to Mr Gooch in an endeavour to suggest that what he had said concerning the assurances given him by Mr Donohue was untrue. In response to paragraph 4 of the amended statement of claim the respondent admitted that its agent (who could have been none other than Mr Donohue) had said that the vehicle was in good working order and was capable of carrying soil and sand. Obviously such a statement could not relate merely to the vehicle's capacity to carry modest load of soil and sand but must have related to its capacity to carry loads up to its specified weight bearing capacity. The specifications showed, as appears from the evidence, that the vehicle's load bearing capacity was 12.75 tonnes.
When the vehicle was test loaded and driven by Mr Donohue before the appellants entered into the leasing agreement it was loaded with 18.6 tonnes and driven. Any modifications made to it had nothing to do with its weight bearing capacity and, in our opinion, that test, none of the details of which was denied, or even cross-examined upon, was entirely consistent with the statement that the vehicle was capable of doing the work for which the appellants required it subject, of course, to its not being overloaded.
The respondent did claim in its defence that the appellants had contributed to their damage by overloading the vehicle. Mr Gooch was cross-examined on this question but made no concessions that overloading had occurred and no evidence to the contrary was led by the respondent.
The learned trial Judge's conclusion that there was no warranty given was, of course, a finding on a question of fact and therefore not lightly to be set aside. But it was an inference drawn from facts found by him and not disputed and this court is therefore in as good a position as he to decide on the proper inference to be drawn from those facts and entitled, indeed bound, after giving due weight to his conclusion, to come to its own. Warren v. Coombes (1979) 142 CLR 531.
In Dependable Motors Pty Ltd v. Ashford Shire Council (1959) 101 CLR 265, Dixon CJ said in his dissenting judgment at p 271:

"I would imagine that if the liability of the seller in such circumstances were governed by the common law and not by the statutory formula a simple finding that the vendor sold the implement for the purpose of road making by the vendee would spell a warranty of fitness for that purpose. At all events that is what Best CJ thought. 'If a man sells an article, he thereby warrants that it is merchantable - that it is fit for some purpose .... If he sells it for a particular purpose, he thereby warrants it fit for that purpose': Jones v. Bright ((1829) 5 Bing 533, at p 544 (130 ER 1167, at p 1172)). Best CJ stated the position simply. While the rule was affirmed without much loss of its simplicity of form, the underlying principle was expounded by Brett LJ for the Court of Appeal in Randall v. Newson ((1877) 2 QBD 102). With perhaps more flexibility than the code allows, the law, so it appeared, sought the intention of the parties by determining the real commercial or business description of the thing forming the subject-matter of the transaction. 'If the subject-matter be an article or commodity to be used for a particular purpose the thing offered or delivered must answer that description, that is to say, it must be that article or commodity, and reasonably fit for the particular purpose.' ((1877) 2QBD, at p 109)."

Some support for the view that a warranty was intended is also to be found in the circumstance that the respondent consented to interlocutory judgment being entered for the appellants in respect of the breaches alleged in the amended statement of claim relating to the walking beam. By so consenting, the respondent must be taken to have conceded that the assurances given by Mr Donohue to Mr Gooch amounted to the giving of a collateral warranty in respect of the walking beam. No other basis for that concession could exist. To hold, in the absence of any evidence being given on behalf of the respondent as to what was said by Mr Donohue, that no warranty of any kind had been given by the respondent would be inconsistent with the position it adopted in respect of the walking beam.
Taking these matters into account, we are of opinion that the true inference to be drawn from the proved facts is that the assurances given by Mr Donohue concerning the capability of the vehicle to perform specific tasks, its reliability and its suitability for the work in which the appellants were engaged were promissory in nature and amounted to an express warranty contractually binding on the respondent. Although the matter is, perhaps, not expressed as clearly as it might have been, we do not read the judgment of the trial judge as expressing a contrary view. His Honour's conclusion that the appellants had failed to establish that a warranty was given in the terms alleged was based on the view which he formed as to the extent of the warranty given. In his view, while the warranty covered defects in the design or manufacture of the rear walking beam, it was not to be taken as extending to mechanical defects of the kind on which the appellants relied, the only warranties being available to them in regard to such defects being the warranties given respectively by Ford Sales Company of Australia Limited and Caterpillar of Australia Limited.
While it might be thought unusual for a motor vehicle dealer to give an express warranty additional to any given by the manufacturer in respect of the vehicle or of certain of its component parts, there is nothing inherently improbable in a dealer doing so in order to secure a sale. Given the unqualified terms of the assurances found to have been given by Mr Donohue and his absence, unexplained, from the witness box, we find no sufficient justification for the view that the respondent "would simply rely upon the written warranties from Ford and Caterpillar".
The other matter upon which the trial judge relied to sustain the conclusion that a warranty in the terms alleged by the appellants had not been given by the respondent was that, when the appellants had trouble with the vehicle, they made claims under the warranties given by Ford Sales Company of Australia Limited and Caterpillar of Australia Limited. While it is true that the evidence does not disclose that the appellants made a formal claim against the respondent separately from that made against the manufacturers of the vehicle and the diesel engine at any time before to the institution of the proceedings on 12 October 1982, we do not think that that circumstance is, of itself, sufficient to warrant a conclusion that the appellants did not accept that what had been said by Mr Donohue amounted to a contractual promise.
In the result, we are of opinion that the respondent contracted with the appellants that the vehicle was suitable in all respects for the purposes for which it was required by the appellants, such purposes having been made known to the respondent, and that it could be relied upon to perform satisfactorily.
It was not disputed at the trial that, if what was said by Mr Donohue amounted to a warranty, the warranty was collateral to the lease agreement between the appellants and Industrial Acceptance Corporation Limited and might be enforced by the appellants against the respondent. There can be no doubt, on the evidence, that the respondent was in breach of the warranty which we have found was given by it. In those circumstances, the appellants are entitled to recover from the respondent the full extent of the loss or damage, including economic loss, suffered by them as a result of the breach. We turn, then, to that issue.
So far as the claim for damages in respect of the period before 7 July 1979 is concerned, it follows from what has been said above that the appellants are entitled to damages for loss of profits and for the cost, not otherwise reimbursed, of repairs carried out on the vehicle as a result of the breach of warranty during that period.
Because of the view the trial judge took of the warranty question, it did not become necessary for him to consider that repair cost which amounted to $1,102. It should be allowed. What was described as "down time", when the vehicle was not earning profits because off the road for repairs before 7 July 1979, totalled 84 2/3 days. The true net profit gained per month from the operation of the vehicle seems to have been $1,511.00 but it was agreed at $1,600.00 or $369.23 per week. The number of days said to constitute a month did not become clear, but assuming that the vehicle was employed for six days per week (7 July 1979, the day on which the accident happened, was a Saturday), 84 2/3 days may be taken as 3.25 months and the net loss at $1,600 per month at $5,200.
As a result of the accident, the male plaintiff, who was driving the truck when the walking beam failed, was off work until 26 July 1979. Since it appears that he was the usual driver of the vehicle and that, therefore, his labour was essential to the appellants' profits in respect of its use, it seems just and reasonable that they should recover profits at the rate of $1,600 per month for the period when he was off work. He may be taken to have been absent from work for 16 working days, excluding Sundays, or .61 months. We accordingly allow $976.00.
In respect of the period after 25 July 1979 we see much difficulty in awarding the appellants any damages except for some relatively short time during which they might reasonably have considered their position. In fact they surrendered the vehicle to the lessor. As we have earlier indicated the trial judge, stating that the appellants did not claim any lack of capacity to lease another truck and that he was left with the impression that they were so disenchanted with their experience with the lost truck that they decided to move out of the trucking business, accepted that they could have leased another truck.
We think these findings were open to him and should not be disturbed. Damages of $1,600.00 for a further period of one month during which they might have arranged for the lease of another truck should be allowed them. Since the net profit must have represented in large part the value of Mr Gooch's labour we can see no injustice in not awarding further damages for loss of profits since, no doubt, he should have been able to obtain employment at a wage approaching that of the lost weekly net profit. This he should have done in order to mitigate damages.
Counsel for the appellants said there was evidence that they could not afford to lease a new truck and pointed to a letter written by the appellants in which they claimed to be on the verge of bankruptcy. We do not think the references to bankruptcy in the letter constituted sufficient evidence of impecuniosity to vitiate the trial judge's finding.
To the figures set out above we add the damage for personal injury and in respect of the loss of the truck, $19,116.70, awarded by the trial judge. We are not to be taken as necessarily agreeing with the approach to damages in relation to the loss of the truck taken by his Honour, but since, on any view, the appellants' damages in respect of that loss were of the order of $17,000 and since the figure was not the subject of appeal or challenge by either side, we are content to accept the amount as appropriate.
The appellants are therefore entitled to damages in the sum of $27,994.70.
Interest was claimed under s.53A of the Australian Capital Territory Supreme Court Act 1933 (Cth) which reads:

"(1) In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) the Supreme Court or the Judge shall, upon application, unless good cause is shown to the contrary, either -

(a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which the judgment is entered; or

(b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.

(2)Sub-section (1) does not -

(a) authorize the giving of interest upon interest or of a sum in lieu of such interest;

(b) apply in relation to any debt upon which interest is payable as of right whether by virtue of an agreement or otherwise; or

(c) affect the damages recoverable for the dishonour of a bill of exchange.

(3)Where the sum for which judgment is given (in this sub-section referred to as the 'relevant sum') includes, or where the Court or the Judge in its or his absolute discretion determines that the relevant sum includes, any amount for -

(a) compensation in respect of liabilities incurred which do not carry interest as against the person claiming interest or claiming a sum in lieu of interest;

(b) compensation for loss or damage to be incurred or suffered after the date on which judgment is given; or

(c) exemplary or punitive damages, interest, or a sum in lieu of interest, shall not be given under sub-section (1) in respect of any such amount or in respect of so much of the relevant sum as in the opinion of the Court or the Judge represents any such amount."

The trial judge refused to award interest in respect of the total period, fixing a lump sum of $10,000 in lieu. He pointed out that had the proceedings been instituted promptly a claim for interest could not have been made since s.53A did not come into effect until December 1981 and does not apply to proceedings instituted before the commencement of the section: see Statute Law (Miscellaneous Amendments) Act 1981, s.17(2). Section 53A came into effect on the 30th of the month.
The appeal book does not show the history of the action but it was instituted on 12 October 1982. It thus took nearly five and one half years to come to trial. The delay is not explained but we are entitled to take into account that originally three defendants were sued and that the respondent seems to have claimed contribution or indemnity from the other two defendants.
In his reasons for judgment, his Honour said:

"It is appropriate to award interest on the damages for personal injuries and damages for loss of the truck, totalling $19,116.70 at the usual rate of 14 per cent. since the date of the accident to date. The normal calculation would be to halve the amount for interest in respect of the damages for personal injuries on the basis that all the damage was not incurred at the one time but I think that is a rather artificial approach in the circumstances of the present case. An interest rate of 14 per cent. on $19,116.70 from 7 July 1979 yields a round figure of $15,000. In my view it would not be just to award that sort of a figure for interest for the following reasons."

Two things are to be noted about that paragraph. The first is that the word "appropriate" appears to have been used in error for clearly his Honour meant "inappropriate". The second is that interest of 14% on $19,116.70 from 7 July 1979 to the date of judgment, which was delivered on 15 July 1988, is not approximately $15,000 as his Honour said but a sum slightly in excess of $24,000. In substance, his Honour refused to award the full amount of interest which might have been awarded at the conventional rate on the ground that there had been undue delay in prosecuting the action to trial coupled with the fact that, had the action been instituted promptly, the appellants would not have been able to take advantage of s.53A at all.
Section 53A, in our opinion, allows for interest to be claimed in respect of an action commenced on or after 30 December 1981 even though the cause of action might have arisen as much as six years before. Indeed, because of the provisions of the Limitations Ordinance 1985 (A.C.T.), the possibility now exists that interest might be claimed in respect of a cause of action that had arisen even earlier.
We do not think it appropriate to penalise a plaintiff for delay in bringing an action in respect of a cause of action which had arisen before 30 December 1981 but still within the time permitted by limitation legislation unless his or her conduct was such as to indicate an inappropriate disregard of the rights of a defendant.
His Honour plainly awarded two-thirds of the interest he would have awarded had his calculation been correct but, in the circumstances, we do not feel bound to approach the matter in the same way, particularly as we have increased the amount of damages which we think are properly payable to the appellants. This action arose out of a commercial transaction and, in the result, the respondent has had the benefit of what now proves to have been the appellants' money for many years. We see no reason why any reduction in the amount of interest which would have been awarded at the conventional rate should be made.
We think that the appropriate rate of interest therefore is 14% and the appropriate period for which it ought to be payable 9 1/2 years. This makes adequate allowance for the fact that some of the interest would be payable in respect of sums which would not have become due for up to seven weeks after 7 July 1979. The proper amount to award for interest is, therefore, $37,232.95 and the total amount to which the appellants are entitled is $65,227.65. In reaching this conclusion we have taken into account the recent decision of the High Court in Nicol v. Allyacht Spars Pty Ltd (No.2) (1988) 62 ALJR 557.
The appeal should be allowed. The judgment appealed from should be varied by substituting for the orders that judgment be entered for the plaintiffs against the firstnamed defendant in the sum of $29,116.70 and that the plaintiffs recover against the firstnamed defendant the sum of $29,116.70 and costs orders that judgment be entered for the plaintiffs against the firstnamed defendant in the sum of $65,227,65 and that the plaintiffs recover against the firstnamed defendant the sum of $65,227.65 and costs. The respondent must pay the appellants' costs of the appeal.

[1989] FCA 85

13 MARCH 1989