GP Transport (SA) P/L v Cavill Power Products P/L

[2009] SADC 77

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

GP TRANSPORT (SA) P/L v CAVILL POWER PRODUCTS P/L & ANOR

[2009] SADC 77

Judgment of His Honour Judge Herriman

28 July 2009

TORTS - NEGLIGENCE - ESSENTIALS OF ACTION FOR NEGLIGENCE - WHERE ECONOMIC OR FINANCIAL LOSS - CARELESS ADVICE, STATEMENTS AND NON-DISCLOSURE

TORTS - NEGLIGENCE - MISCELLANEOUS DEFENCES - EXPRESS AGREEMENT EXCLUDING LIABILITY

Negligent misstatement – misleading or deceptive conduct – whether particular representation made by truck repairer as to its condition – whether made as agent for truck vendor.

Representation made to promoters/directors of plaintiff company in the course of formation - whether reliance by plaintiff.

Fair Trading Act 1987 (SA) ss 54, 56, 58, 84; Misrepresentation Act 1972 (SA) ss 7, 8; Trade Practices Act 1974 ss 52, 53, 82, referred to.
MLC v Evatt [1971] AC 793; Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (1980-81) 150 CLR 225; Gould v Vaggelas (1983-85) 157 CLR 215; Charleson v Mobil Oil Australia Ltd [1987] FCA 234 (unreported, Forster J, 17 July 1989); ACN 070 037 599 Pty Ltd v Larvik Pty Ltd [2008] QSC 95 (unreported, Skoien AJ, 20 May 2008), applied.

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - DISCHARGE, BREACH AND DEFENCES TO ACTION FOR BREACH - OTHER MATTERS

CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES - CONSTRUCTION AND INTERPRETATION OF CONTRACTS - EXEMPTION CLAUSES

Alleged breaches of contractual and tortious duties by defendant in carrying out repairs to truck subsequent to purchase – whether third party repairers carried out work as agents for defendant – causation - whether any liability excluded by agreement.

Misrepresentation Act  1972 (SA) ss 7, 8, referred to.
Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Valkonen v Jennings Constructions Ltd (1995) 184 LSJS 87; Blomley v Ryan (1956) 99 CLR 362; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642; BHP Petroleum Ltd v British Steel Plc (2000) 2 Lloyds Rep 277, applied.

EVIDENCE - DOCUMENTARY EVIDENCE - STATUTORY PROVISIONS AS TO STATEMENTS IN DOCUMENTS WHERE DIRECT ORAL EVIDENCE ADMISSIBLE - WHERE MAKER OF STATEMENT NOT ATTENDING AS WITNESS

EVIDENCE - BURDEN OF PROOF, PRESUMPTIONS, AND WEIGHT AND SUFFICIENCY OF EVIDENCE - GENERALLY - CREDIBILITY AND WEIGHT - PARTY'S FAILURE TO GIVE OR CALL EVIDENCE

Proof of business records – admission of witness statements as evidence – failure of party to call witness.

Evidence Act 1929 (SA) ss 34C, 45A, 45B, referred to.
Duke Group v Arthur Young (No 3) (1990) 55 SASR 11; Hillier & Carney v Lucas (2000) 81 SASR 451; Southern Equities Corp Ltd (in Liq) v Arthur Anderson & Co (Reg) (No 10) [2002] SASC 128 (unreported, Bleby J, 16 April 2002); Jones v Dunkel (1958) 101 CLR 298; Payne v Parker [1976] 1 NSWLR 191, applied.

PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS

LIMITATION OF ACTIONS - GENERAL - APPLICATION OF STATUTES OF LIMITATION

Amendment of pleading to raise new cause – whether out of time - whether cause of action arises out of substantially the same facts – when does amendment take effect – whether new cause of action instituted – whether any required extension of time ought to be granted – statutory limitation periods.

Limitation of Actions Act 1936 (SA) ss 35, 48, referred to.
Williams v Milotin (1957) 97 CLR 465; Sutherland Shire Council v Heyman (1985) 157 CLR 424; Hawkins v Clayton (1988) 164 CLR 539; Scarcella v Lettice (2000) 51 NSWLR 302; Sheldon v McBeath [1993] ATR 62,069 (81-209); Shaw v Shaw [1954] 2 QB 429; Midland Bank Trust Co Ltd v Hett, Stubbs & Kemp [1979] Ch 384; Ulowski v Miller [1968] SASR 277; Danae v MacIntosh Nominees (1993) 61 SASR 341; Brook v Flinders University (1988) 47 SASR 119; South Australia v Streeter (1980) 154 LSJS 107; Karasaridis v Kastoria Fur Products (1984) 37 SASR 345; Sola Optical Aust Pty Ltd v Mills (1987) 163 CLR 628; Napolitano v Coyle (1977) 15 SASR 559; Lovett v Le Gall (1975) 10 SASR 479, applied.

DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR TORT - REMOTENESS AND CAUSATION - PROOF OF CAUSATION

Appropriate measure of damages in tort - whether includes interim consequential losses where plaintiff unaware of falsity of representation.

Toteff v Antonas (1952) 87 CLR 647; Gould v Vaggelas (1983-85) 157 CLR 215; Hawkins v Clayton (1988) 164 CLR 539; Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653; Slinger v Southern White Pty Ltd (2005) 92 SASR 303, applied.

GP TRANSPORT (SA) P/L v CAVILL POWER PRODUCTS P/L & ANOR
[2009] SADC 77

TABLE OF CONTENTS

1.    Introduction
2.    More Detailed History
3.    Company Representation
4.    Events Leading to the Truck Purchase and Following It
5.    Factual Issues

5.1          Witnesses – Credibility Generally

5.2          The Pleadings

5.3          The Conversation of 1 August 1994

5.4          The Meaning of the Word ‘Rebuild’

5.5          Agency

5.6      The Plaintiff’s Business Plan

5.7          Fuel Consumption

5.8          Driver Wages

5.9          The Events of March 1995

5.10     The Horton Fan and the Jacobs Switch

5.11         Engine Settings

5.12         Causes of Engine Failure - General

5.13         The Particular Engine Repairs and Claims

5.14         Millowick Loans

5.15         The Expert Accounting Evidence

6.    Legal Issues

6.1          Representations to the Promoters of a Company in the Course of Formation

6.2          Use of Interstate Repair Accounts

6.3          Duty of Care

6.4          Misleading or Deceptive Conduct

6.5Misrepresentation Act

6.6          Inducement

6.7          The Defendant’s Reliance upon Warranty/Exclusion Clauses

6.8          The Parkinson Statement and the Failure of Parties to Call Relevant Witnesses

6.9          The Proper Measure of Damages

6.10        Time Limits and Extension of Time

7.    Summary of Findings
8.    Assessment of Damages

1.     Introduction

1. The plaintiff is a private company and at all relevant times was under the proprietorship of Clifford Millowick (‘Millowick’) and Garry Parkinson (‘Parkinson’).  It was incorporated on 15 August 1994 for the purpose of commencing an interstate haulage business, its principal asset being a Kenworth K125 1984 cab-over prime mover (‘the truck’) powered by a 400 hp 3406 Caterpillar engine (‘the engine’) and a double trailer, both of which it acquired at about that time.  Its business plan was to conduct haulage activities in what it perceived was the relatively unexploited field of the carriage of heavy or dangerous goods in the Sydney-Perth road transport corridor. 

2. This litigation arises out of the circumstances in which the plaintiff acquired the truck from Quinn Transport Pty Ltd (‘Quinn’) and the problems it subsequently experienced with its operation, including repair costs and their impact upon its business operations. 

3. The plaintiff says that it was induced to make that purchase by representations made to it by the defendant, which had recently repaired the truck; that it was not in fact in the condition represented; and that, in consequence, it was obliged to expend very significant moneys on repairs, additional fuel and associated expenses.  Further, it says the defendant and other repairers on its behalf negligently and in breach of contract carried out later remedial works to the vehicle which were inappropriate, inadequate or poorly performed and which had to be rectified at its own cost.  In consequence of all these matters it suffered trading losses, to the point where it was ultimately obliged to sell the truck and close its business.

4. For its part, the defendant denies making the alleged representations, denies inducement and denies all or any negligence, breach of contract or agency in the later works carried out on the truck.  Further, it says the plaintiff’s business plan was flawed and destined to result in continuing business losses irrespective of any repair costs or interruptions.

   2.     More Detailed History

5. I will then outline the history of dealings between the parties.

6. Some time during July 1994 Millowick and Parkinson took steps to incorporate the plaintiff company.  About this time they were looking to acquire a second‑hand prime mover so that the company could commence business as an interstate haulier.

7. On 30 July 1994 Quinn published in The Advertiser newspaper an advertisement in the following terms (Exhibit P4):

   KENWORTH Prime Mover. 84. K125. rebuilt 400 H.P. Cat. No kms. 15 spd. SSHD on t/bar hydraulics, current S.A. road train permit. all extras. $70,000 o.n.o Further enq [phone]

   It is not in dispute that that advertisement, amongst other things, effectively advised that the prime mover was a 1984 model, that it contained a ‘rebuilt’ 400 horsepower Caterpillar engine and that it had not, since then, travelled any kilometres. 

8. Quinn was then a transport operator based on the west coast of South Australia.

9. In response to the advertisement Millowick telephoned and spoke to a Mr Quinn, who, inter alia, informed him that the truck engine had been rebuilt by the defendant (‘Cavill’ or ‘the defendant’) in July 1994 and was under warranty.  Further, Millowick was told, he might inspect it at Cavill’s premises. 

10. Cavill is a corporation which conducts the business of selling and servicing heavy vehicles and equipment.  In particular, it is an authorised seller, repairer and servicing agent for an international diesel engine manufacturer known as Caterpillar (‘Caterpillar’).

11. Soon after that conversation and on 1 August 1994, Millowick and Parkinson went to Cavill’s premises and there spoke with its truck engine workshop supervisor, Terry Hondow (‘Hondow’).  The plaintiff alleges that Millowick and Parkinson then informed Hondow they were in the course of incorporating the plaintiff company to operate a transport business and were interested in purchasing the truck for that purpose.  They asked Hondow about the truck and both allege that Hondow told them that the truck engine had been rebuilt ‘in chassis’ by Cavill in July 1994, had not travelled any kilometres since and was under warranty. 

12. The plaintiff says that, relying on the representations of both Mr Quinn and Hondow, Millowick and Parkinson, on its behalf, purchased the truck from Quinn on 3 August 1994 for the sum of $70,000.  It says that their agreement to purchase was a pre-incorporation contract entered into by them on behalf of the plaintiff and that it was subsequently ratified by the plaintiff upon its incorporation.

13. Before putting the truck to use, the plaintiff took it to Trueline Wheel Aligners (‘Trueline’) for various unrelated repairs and, in particular, to have works carried out on it to ensure compliance with motor registration requirements relating to speed limiting.  For the purposes of the latter task Trueline subcontracted that work to Cavill on 8 September 1994.  Transport registration was ultimately obtained. 

14. The plaintiff’s haulage operations then began in September 1994.  It says that between that time and March 1997 it was obliged to spend very substantial sums of money on repairs to and replacement of the engine and various associated components.  As a result there were significant interruptions to its operating schedule and it suffered direct and consequential losses of such a magnitude that it was ultimately obliged to sell the truck and cease haulage operations.

15. The plaintiff originally sued Quinn and Cavill in respect of its asserted losses but it settled with Quinn prior to trial and proceeds now only against Cavill, which it seeks to hold accountable for losses it alleges have resulted from Hondow’s misrepresentations and negligent misstatements as to the truck’s condition made in that conversation of 1 August 1994 and otherwise for breaches of contract and/or negligence in and about works carried out by Cavill (or, allegedly, other interstate repairers on its behalf) to the truck over the period of its operations.

16. I should pause here and say that from evidence led at the trial it appears that Caterpillar-manufactured diesel engines are very highly regarded in the haulage industry and many of their component parts, whether new or reconditioned, are protected by Caterpillar warranties.  Indeed, Caterpillar has developed a special system for dealing with worn or malfunctioning engine components.  They are returned to its workshops via authorised dealers, inspected and, if appropriate, re‑machined or repaired.  Depending upon their condition when received, the owner will receive a credit for them that is reflected in the provision to it, at a reduced price, of a replacement or reconditioned part referred to as a ‘remanufactured’ or ‘reman’ product.  A reman part carries with it a Caterpillar warranty close to that attaching to a new part.

17. It became plain during the course of the hearing that when work is done on a particular engine some parts are not replaced because they do not require it, but others are, with remanufactured or, as it may be, new parts.  The customer is often presented with the option of purchasing the new part, with warranty but at greater cost, or the cheaper remanufactured part but with a lesser warranty.

18. As I understood the evidence, an entire remanufactured engine is not purchased or installed as a single unit.  Effectively, the repairer most commonly repairs or replaces individual components or particular assemblies of components within that engine and, as I later conclude, it is only when the extent of that replacement is of a significant order that one might begin to speak of ‘rebuilding’ the engine.  Against that background, it is probably an over-generalisation to speak of a ‘remanufactured’ engine unless practically every component meets with that description.

19. To protect the integrity of its products and the works carried out with respect to them, Caterpillar authorises a limited number of repairers in Australia to sell, install and repair its products and perform warranted work. Cavill is the only party in South Australia so authorised but at relevant times companies known as WesTrac, Gough & Gilmour and William Adams were respectively authorised in Western Australia, Victoria and New South Wales.

20. I will discuss later the full extent of repair works carried out on the truck after its purchase by the plaintiff but, broadly speaking, there were seven occasions between September 1994 and January 1995 when complaints about the fuel system were attended to by Cavill and other, interstate, Caterpillar-authorised repairers.  Further, a particular cylinder liner replaced for Quinn in July 1994 cracked three times, in November 1994, February 1995 and March 1995.  On each occasion major repair works were involved. 

21. In about January 1995 the plaintiff, through Millowick, for the first time  received some more detailed information on the works that had been carried out by the defendant for Quinn in July 1994.  In consequence, Millowick acquired a Caterpillar catalogue in an attempt to understand what those works comprised and, ultimately, by March 1995, having received advice from an engineer and a former Caterpillar mechanic, came to the conclusion that those works had not comprised a rebuild, at least as the plaintiff, through him and Parkinson, had understood that term.

22. That discovery coincided with the circumstance of the third cylinder liner fracture in March 1995.  Accordingly, at that time and having the benefit of advice from one of his drivers, a former Caterpillar mechanic, and an independent engineer, Mr Winsor (‘Winsor’), the plaintiff instructed solicitors to write to the defendant complaining about the failure of the alleged ‘rebuild’ of the engine in July 1994.  A dispute then arose and there were negotiations between the parties as to how to resolve it.  Following discussions and an exchange of correspondence, the plaintiff contracted with the defendant for it to install, at an ‘arm’s length’ cost, a new ‘short’ engine – that is to say, a remanufactured Caterpillar engine block containing its core components but without all the attachments that go to make up a complete engine.  Evidence elsewhere disclosed that a short engine comprises a cylinder block, liner packs, bearings and crankshaft or, as Hondow described, a ‘bare cylinder block with the internal components’ (T/S 1838). 

23. The plaintiff was otherwise left to choose which of those additional components would be reused or replaced as new or reman items and in this respect was advised by Winsor.  The parties agreed upon a fixed and commercial price for all labour and materials and neither party contended that that outcome represented a final settlement of outstanding disputes.

24. Notwithstanding those works, the truck engine continued to present problems and further repair works were carried out over the next 22 months until, finally, what is accepted as a full engine rebuild was performed by William Adams in March 1997.  After then the truck performed adequately until it was sold in July 2000.

25. Although the plaintiff’s claim was not particularly well set out in the pleadings, it appeared to me to be based on these footings:

    (1)a claim for damages arising out of what it claimed were misrepresentations made by Hondow on 1 August 1994 as to the condition of the engine and which, it said, along with Quinn’s representations, induced it to purchase the truck.  Those misrepresentations were alleged to have been negligent misstatements and otherwise to have breached the Trade Practices Act 1974 (‘the TPA’), the Fair Trading Act 1987 (SA) (‘the FTA’) and the Misrepresentation Act 1972 (SA) (‘the MA’); and

    (2)claims for damages in tort and/or contract arising out of the works performed by the defendant in resetting the engine on 8 September 1994 and thereafter until 1997 in failing to properly diagnose and/or repair the numerous malfunctions it experienced; and

    (3)claims in tort and/or contract in respect of the various repairs carried out by interstate Caterpillar repairers over that time and who were alleged to have been agents for Cavill with respect to those works.

26. The plaintiff also sought to be indemnified for the cost of consequential repairs carried out to the vehicle, for what it asserted were the additional costs of fuel attributable to an unsatisfactory performance over that time and for other costs associated with those repairs, including the hiring of replacement vehicles.

27. Further, it asserted that as a result of inefficient operation, repair costs and delays, it incurred additional costs and losses in operating its business and, over time, an exacerbation of its business losses to the point where it had to cease operations altogether. 

28. The plaintiff also presented a claim which purported to be based upon the costs to it of funds loaned by the Millowicks in order to continue in its business over the relevant periods.  That claim was not supported as a discrete claim by its expert McPharlin as it was, on his evidence, reflected in the calculation of asserted expectation losses.

29. In addition to its denials outlined above, the defendant disputed the plaintiff’s asserted losses and further pleaded that various of its claims were out of time and statute barred.

30. I should say at this point that there was a false issue raised on the plaintiff’s Statement of Claim and dealt with in the Defence, and it related to the plaintiff’s assertion that in order to gain an extension of time in respect of its claim under the FTA it had to rely upon s 48(1) of the Limitation of Actions Act1936 (SA) (‘the LAA’) and, as well, establish a material fact ascertained within 12 months of the institution of proceedings. Whilst s 48(1) is, indeed, the appropriate section upon which such an application might be based, the provisions of s 48(3) relating to material facts are not relevant because the limitation period is not one prescribed by the Act itself.

1. In support of its case the plaintiff gave evidence through Millowick and I received in evidence pursuant to s 34C of the Evidence Act 1929 (SA):

   (1)a report of Winsor, consulting automotive engineer, dated 24 June 1996 (Exhibit P99); and

   (2)a statement from Parkinson (Exhibit P172).

2. I ruled separately as to the admissibility of that report and that statement.

3. Further, I heard evidence from a professional engineer called by the plaintiff, Mr Douglass Potts (‘Potts’) of Australian Technology Pty Ltd, from a chartered accountant, Mr Hugh McPharlin (‘McPharlin’) of Edwards Marshall, and from a former diesel mechanic and workshop supervisor of William Adams Pty Ltd, Mr Andrew Besnard (‘Besnard’).  The latter identified particular exhibits as business records of that entity, including accounts and documents relating to repair works carried out on the truck.

4. The plaintiff did not, however, call representatives from the repairers WesTrac, Gough & Gilmour, Trueline, Pirtek or Johnsons and I am obliged to consider how I should deal with that failure.  Equally, save for the statement of Parkinson, it identified some but did not call all or any of the persons who had driven the truck or acted as co-drivers during the relevant period.  Again, I must consider how I should deal with that. 

5. For its part, the defendant called Cavill employees Hondow, Lindsay Edwards (‘Edwards’), Allan Briscoe (‘Briscoe’) and Shane McEvoy (‘McEvoy’) and, as well, expert evidence from professional engineer Dr Robert Casey  (‘Casey’) of Expert Opinion Services, Mr Ranjeet Singh (‘Singh’), transport expert of TransEco Pty Ltd, and Mr Peter Holmes (‘Holmes’), chartered accountant, of Ferrier Hodgson.  It did not call any witness from Caterpillar nor, with a single exception, produce any documents relating to dealings with that entity over the truck.  Again, I must consider how I should deal with those failures.

   3.     Company Representation

6. There is a preliminary matter upon which I should comment.  For reasons expressed elsewhere, I granted Millowick leave to represent the plaintiff company in the proceedings.  Until a time close to trial the company had been represented by solicitors and counsel but, ultimately, as I was informed and indeed the evidence showed, it did not have the funds to secure legal representation for what was then estimated to be a trial of six weeks’ duration.  In the event, the trial went considerably beyond that estimate.

7. Millowick’s representation of the company gave rise to many problems.  Whilst I was satisfied he did his best to act energetically and independently, it quickly emerged that he had no real understanding of how to deal with the plaintiff’s pleadings, how to prove the matters on which the plaintiff was apparently relying and how to address the legal issues.  These limitations impacted upon his capacity to act independently.

8. He did not appreciate the need to separate evidence from argument, fact from assumption and direct evidence from hearsay.  He did not know how to lead expert evidence or prove or make use of documents and misunderstood the limits of evidence in chief, cross-examination and re-examination.  Those shortcomings were magnified by the complexity of some of the engineering and accounting issues, the volume of relevant documents tendered or referred to, the numerous amendments to the Statement of Claim and his failure or inability, as it may be, to call witnesses critical to his case, particularly Parkinson, certain repairers and the several drivers who drove the truck over the relevant period.

9. By way of example, he was under the impression that he could produce a repair account and then speak personally about, and thereby prove, problems experienced by persons driving the truck in various parts of the country and the repairs performed upon it by interstate repairers, albeit that he had not himself been present on such occasions.  He had no real appreciation of the need to support expert evidence by evidence tending to prove the factual matters upon which his experts relied.  He was unable to articulate how the evidence led by him related to his pleadings and, in particular, to any of the individual bases for recovery of damages identified in them. 

10. Further, he had no clear understanding of the legal principles underpinning his various causes of action and questions of time limitation.  He was unable to address damages in any useful way and had no understanding of the different methods of assessment applicable to contractual claims, on the one hand, and tortious or statutory claims, on the other.

11. In consequence, I received into evidence numerous invoices for repair works carried out by interstate repairers for the plaintiff and paid for by it on the footing that such accounts constituted business records of the plaintiff, but I did not then make formal findings as to their evidentiary weight.  I will return later to that question. 

12. I did as much as I could, consistent with my obligations of impartiality, to make Millowick aware of my concerns about legal questions and about admissibility and weight.  I urged him to access such legal advice as he could on questions of proof, the legal bases for his various claims, the need to call witnesses and the proper measure of damages attaching to various forms of relief.  It emerged that he was at times able to access some such assistance out of court hours.  He was afforded several lengthy adjournments for such purposes.

13. I was also mindful of the length of the trial, which grew exponentially and largely as a result of these problems, and I reminded both parties as to the costs risks inherent in that.

14. In the event, as I have noted, Millowick did attempt to conduct himself appropriately in presenting the plaintiff’s case and his manner was at all times pleasant and cooperative, but that is not to say that the plaintiff’s case was in fact presented independently or, indeed, to its best advantage, or that I necessarily accepted all that he told me.  I will come to my reasons for that observation. 

15. I should here also recognise the cooperative and professional attitude taken by the defendant’s counsel in the face of the many difficulties and delays occasioned by the plaintiff’s self-representation.

    4.     Events Leading to the Truck Purchase and Following It

16. It was not in question at trial that Quinn was the previous owner of the truck and that the July 1994 repair works to it were carried out by Cavill. 

17. It is important, however, to note just what those works were.  The exhibits P8, P18 and P90 relate to them and, as well, I heard evidence as to their nature from Cavill’s diesel mechanic, Edwards, and from the plaintiff’s expert, Potts.

18. In a document described as ‘Service Report’ (P90) Edwards identified the ‘customers’ complaint’ as ‘knock in engine’ and, pertinently, added the comment ‘Rebuild engine’.  His Job Report (P90) included the following entry:

    All little end bushes badly worn would normally use liner packs.   Instructed by owner to keep cost to a minimum ie $5000.

19. It further recorded that, on examining the engine at that time, he identified an engine knock at cylinders 5 and 6, a blown head gasket and leaking from cylinders 1 and 6.  The works he then carried out are described in the documents.  He removed the sump to inspect pistons: no piston seizures were evident.  He pressure-tested the cooling system.  He removed the cylinder head and noted that the securing bolts had rust accumulation and the gasket adjacent to No. 6 cylinder was ruptured.  The head itself and No. 6 liner were heavily eroded. 

20. All cylinder liners and pistons were thereupon removed and the edges of the cylinder bores were counter-bored to remove erosion.  Six remanufactured cylinder liners, rings, bearings and pistons were reinstalled and three faulty fuel injectors replaced. 

21. Repairs were also carried out to the cooling system and limited repairs to little end bushes on the pistons.  A remanufactured cylinder head was then fitted. 

22. The reference above to ‘liner packs’, which would ‘normally’ be used, referred to a cylinder/piston assembly, whether new or remanufactured, which included, amongst other things, a new cylinder lining, piston and little end bushes.  By reason of the Quinn instruction and following consultation with his supervisor, Mr Whittaker, Edwards did not install new liner packs in each of the six cylinders, but instead used only some of the ordinary components of such a pack and did not replace the little end bushes of any of the pistons, notwithstanding that they were described as ‘badly worn’.

23. At that time, it was also observed that the turbo cartridge was leaking oil from its compressor seals, but no repair works were undertaken because of dollar limitations imposed by Quinn.

24. The significance of that description of the works will emerge later, but it is enough to say at this point that it became the general consensus at trial that notwithstanding the note in P90, those works did not comprise an engine ‘rebuild’ such as to justify the claim in the sale advertisement that the engine had been rebuilt.  I will elsewhere in these reasons discuss the evidence as to just what the term ‘rebuild’ means. 

25. Exhibit P8 identifies components used in those particular repairs, albeit that it is an invoice made out to Kenrow Holdings, an entity associated with Quinn and nominated as the purchaser of those parts.  I am not persuaded anything turns on that.

26. I turn then to the plaintiff’s case.  The uncontested evidence of Millowick, which I accept, was that at about this time he and Parkinson had discussed and resolved upon a plan of establishing the plaintiff company, purchasing a second-hand prime mover and a specially constructed trailer and embarking on the business of an interstate haulier.  Their particular interest was in securing a prime mover with a new engine or otherwise one with an engine that could be wholly replaced.  Their plan envisaged that Millowick and his wife would provide, by loan to the company, the funds necessary for these purchases and that Parkinson’s contribution would be as the principal driver, he having had previous driving experience in interstate haulage.  For his own part, Millowick had no such experience.  He had worked for 30 years in the electrical components industry, in particular in systems analysis, software and management.

27. I am satisfied that at some time prior to July 1994, Millowick and Parkinson instructed their accountant to reserve the name ‘G.P. Transport (SA) Pty Ltd’ (‘GP Transport’) and to form a company in that name, their plan being that it would own and operate the truck and the proposed business. 

28. They had made some, but limited, previous enquiries as to the operating costs of interstate haulage and had some information on the rates commonly charged by freighters.  Such information, said Millowick, was difficult to obtain but they had satisfied themselves that the plaintiff could cover its projected costs and make a small profit by setting an initial haulage charge rate of $1 per kilometre.  Further, they considered that once their credentials were established in the industry they could likely increase that rate to as much as $1.30 per kilometre and then begin to operate more profitably. 

29. Their plan was to conduct transport operations in what they saw as a niche market carrying oversized or dangerous loads in the east-west road corridor, that is to say, from Sydney to Perth and return.  Their business projections assumed that they could complete as many as 40 round trips in that corridor each year.  The charge rates attainable for east-west carriage generally exceeded those obtainable for cartage in the opposite direction but they still anticipated achieving an average overall charge rate of $1 per kilometre.

30. Following Millowick’s initial phone call to Quinn, he and Parkinson went to Cavill’s premises to inspect the truck.  Nobody from Cavill was present then but on the following day, 1 August 1994, they went there again and met Hondow. 

31. As of the time of that initial meeting, the plaintiff company had not been incorporated but I accept Millowick’s evidence that it was in the course of being incorporated and that their interest was in purchasing the truck on behalf of the company.

32. At all events, on Millowick’s evidence, he and Parkinson then had a conversation with Hondow.  Its contents are disputed and are central to the contest in this matter. 

33. On Millowick’s account, he introduced himself and Parkinson as representatives of GP Transport, showed Hondow the Quinn advertisement (P4), which Hondow read, and said they were interested in purchasing the truck.  Millowick says that Hondow then said (T/S 38) that Cavill had:

    ‘- rebuilt this particular engine on behalf of Quinn Transport, and it was covered under the full Caterpillar warranty.’

34. Subsequently, Millowick added that the exact words used by Hondow relating to the warranty were that the truck had ‘a full Caterpillar warranty as per new engine’ (T/S 366).

35. On Millowick’s account (T/S 39), he then said ‘Could you confirm that this particular engine has done zero kilometres’ and Hondow replied ‘That is so’.

36. He was, in evidence, later invited to repeat Hondow’s words and said (at T/S 680) that Hondow had:

    … said that they had rebuilt the engine on behalf of Mr Quinn and the engine had done zero kilometres and was covered under a full Caterpillar warranty …

37. In consequence of that conversation, Millowick and Parkinson went to the vehicle and inspected it inside and out.  After that, Millowick informed Hondow that they were interested in buying it and would contact Quinn to discuss that.

38. In cross-examination, Millowick’s account of the discussion with Hondow of 1 August 1994 was challenged.  It was suggested to him that the only matter that Hondow had represented to him was that the parts supplied by the defendant in the course of the July works on the engine for Quinn came with a Caterpillar warranty.  He rejected that suggestion.  It was put to him that Hondow had told him that the engine was covered by the Caterpillar standard 12-month warranty.  He agreed that Hondow had said that there was a standard warranty but said there was no mention of a 12‑month period.   It was put to him that Hondow did not say to him that the engine had been rebuilt with zero kilometres or anything like it but he disagreed. 

39. It was put to him that he had prepared a statement for the purposes of obtaining expert advice and in that statement had asserted that Hondow had told him there was a 12-month warranty.  He said that Hondow had never said such a thing, that that statement had been prepared by his solicitors after numerous consultations and that it was incorrect in asserting that.  His belief had at all relevant times been that the Caterpillar warranty was an unlimited one and he had only learned of the claim that it was a 12-month warranty after receiving back all the papers from his solicitor and being left to read them in order to conduct the case. 

40. Millowick’s account of that conversation with Hondow was corroborated by that of Parkinson but I attach limited weight to Parkinson’s evidence as he was not subjected to cross-examination and his account of those events is brief indeed.

41. Notwithstanding that the above matters had been put to Millowick in cross-examination, when Hondow was called he was unable to recall anything of the conversation at that time with Millowick or Parkinson.  The most he was able to say on the topic was that the works performed on Quinn’s truck in July 1994 were not a rebuild and that he would never have described them as such to Millowick or Parkinson (T/S 1539).  He was not asked and proffered nothing, either in examination or cross-examination, about the plaintiff’s assertion that Millowick and Parkinson told him of their plans to operate the truck under the plaintiff’s name but nor did Millowick himself, after amending his Statement of Claim to allege it, say as much. 

42. It is against that evidentiary background that I must make findings as to whether the alleged representations were made and I will return to that.

43. I find that, subsequently, Millowick spoke to Mr Quinn by telephone and agreed to purchase the truck for the advertised sum of $70,000.  Quinn required payment of a $10,000 deposit, which Millowick sent that day by cheque drawn on his and his wife’s personal account. 

44. At that time the incorporation of GP Transport was not complete but it was understood by Millowick and Parkinson that that advance would be treated as a loan to the company once it was incorporated and, indeed, a loan agreement was later prepared affirming that.  Millowick and Parkinson then made arrangements for the truck to be driven to a transport company with which they had an association, QBIC Transport, so it could be road-tested.  Parkinson also drove the vehicle and was satisfied with it.

45. On 15 August the plaintiff was incorporated.  On 18 August the balance of the agreed purchase price, namely $60,000, was paid to Quinn, again by a personal cheque from the Millowicks and again on the footing (later put into effect) that it would be treated as an advance to the plaintiff company. 

46. Millowick was then provided with a sale invoice to the plaintiff, the truck’s registration papers and a copy of the Cavill invoice to Kenrow Holdings (P8).  As noted, that invoice did not purport to describe the works that had been carried out on the truck and simply comprised a list of parts sold to Kenrow and inferentially installed in the truck during the July 1994 repairs.  As well, the plaintiff was provided with the vehicle maintenance log (Exhibit P9). 

47. On 9 September 1994 the truck was registered in the plaintiff’s name.  I am satisfied that the pre-incorporation contract for its purchase was at least by then ratified by the plaintiff. 

48. The truck was subsequently taken to the Motor Registration Division for the type of inspection required for interstate transport registration purposes.  That inspection revealed a number of faults, most of which were of limited significance, but one of the requirements was in these terms: ‘Speed limiter form to be filled out’ (Exhibit P10).

49. That particular requirement gave rise to a substantial issue in the case which I will deal with elsewhere.  The background to it, however, was that all trucks then engaged in interstate haulage were required to have fitted a speed‑governing device limiting their speed to 100 kilometres per hour.

50. The truck did not then have such a device because it had been manufactured and first operated at a time when there was no requirement for it.  There was disputed expert evidence as to whether the registration authority had therefore been entitled to insist upon the fulfilment of this condition, but as matters then stood the plaintiff believed it had to comply.  It was at liberty to do that in one of two ways, either by installing an ‘after-market’ speed governor device or by adjusting the truck’s engine setting or air/fuel control so as to effectively limit its speed. 

51. It is now appreciated that the engine setting of the truck at that time was a Caterpillar specification identified as No. 4444 and that at that setting the truck was capable of achieving a maximum speed of 107 kilometres per hour.  It was possible, however, to reset the engine to a different Caterpillar specification identified as No. 5456 and by so doing reduce the maximum attainable speed to 100 kilometres per hour or less. 

52. That was, however, all in the future.  For his part, Millowick says that all he and GP Transport then appreciated was that the department was requiring compliance with the matters set out on the form.  They had no real awareness of how that would be achieved but took the truck to Trueline to have it attended to.  Despite its descriptive title, it appears that Trueline at that time undertook various kinds of truck repairs and maintenance.  It worked on the truck and ultimately returned it to the plaintiff with an invoice dated 12 September 1996 (Exhibit P175), which included a charge of $1,440 for ‘Supply & install engine speed limiter’.  Along with that invoice came a Department of Road Transport pro forma certificate relating to the engine (Exhibit D139), which had been signed by Hondow on behalf of Cavill (with which Trueline had subcontracted) and which set out some calculations, inter alia noting an ‘engine manufacturer’s rated engine speed’ of 1900 rpm, along with a specified gear reduction figure and a factor taking account of tyre size.  Those calculations purported to demonstrate that the maximum achievable road speed was 97.02 kilometres per hour. 

1. I infer from this document that the plaintiff, at least by then, had become aware that Trueline had procured the defendant to carry out works on the truck so as to limit its speed and that Cavill had then provided Trueline with figures and calculations confirming a maximum speed setting which could be used in support of the interstate registration request.

2. I am unable to conclude that that document told the plaintiff much more than that; indeed, oddly, the invoice incorrectly represented that a speed limiter had been ‘installed’ in the truck when, plainly, all that had occurred was that Cavill had reset the engine rating, thereby controlling its output.

3. That matter is complicated further by the certificate suggesting the engine had been re-rated at 1900 rpm when, according to the relevant service report, it had, in fact, been set at 1800.   Not much turns on that latter point as, at least in theory, a rating set at 1800 would have limited the speed further, to a figure nearer 91 kilometres per hour.

4. Millowick says and I accept that, furnished with the Trueline invoice and the Department of Transport certificate but being unfamiliar with the techniques adopted for governing speed, he was not then alerted to the fact that the engine setting had been changed, nor as to any implications arising from that. 

5. What next happened was that the plaintiff presented the certificate to the authority and the truck was registered for interstate transport on 9 September 1994 (Exhibit P10). 

6. I should mention at this stage that the events I have just discussed led to a late amendment of the plaintiff’s claim, whereby it was asserted that the defendant had been negligent in altering the engine specification from 4444 to 5456.  That amendment application was made out of time but the plaintiff sought an extension of time to adduce it on the footing that it was not until trial, when his expert Potts saw the defendant’s Performance Analysis Report (Exhibit P77) and the other documents comprised in D139 and relating to that change, that he first appreciated the fact and significance of that alteration.  I will comment later on that allegation of negligence and Potts’ observations about it. 

7. I return then to the narrative.  Separately, the plaintiff had arranged to obtain a trailer from another source and that was completed on 20 September, so the company was ready to commence operations.  It began carrying freight on 21 September 1994, principally between Sydney, Perth and Sydney.  As I have noted, it anticipated obtaining an average rate of no less than $1 per kilometre and, on the basis of its records, it seems to have achieved that.

8. For reasons which were contentious, that pattern of haulage began to change by the end of 1994 and Melbourne trips and other ‘triangular’, or wayside, deliveries became interspersed.  Then from about mid-1995 north-south trips on the eastern seaboard of the country gradually increased and from about mid-1997 these became the principal routes travelled.

9. I will elsewhere describe the problems experienced by the plaintiff in operating the truck in the period between September 1994 and its final and successful repair in March 1997 but, broadly, they included perceived problems of low power and high fuel consumption, oil and coolant leakages, cracked cylinder liners, numerous failures within the air/fuel systems and failures of bearings, gaskets and dampers.  The engine was variously replaced, repaired or reconstructed on several occasions and it would seem that it was not until March 1997 that a final reconstruction restored it to a condition whereby it was able to operate effectively and without significant repairs for some three years, until it was ultimately sold in July 2000.

10. The plaintiff attributes most of those repairs to the defendant’s alleged misrepresentation about the engine having been rebuilt or otherwise to breaches of contract and negligence in and about advice given to it about repairs, or the workmanship involved in them, at all relevant times. 

11. The defendant disputes all or any liability for the alleged misrepresentation, the repair costs and their consequences and says, in particular, that the plaintiff adduced no evidence of loss of customer patronage, that its business projections were flawed, anyway, and that changes in transport routes were dictated by market conditions and no other cause. 

    5.     Factual Issues  

    5.1    Witnesses – Credibility Generally

    - Millowick

12. I have already commented on the particular difficulties that Millowick faced in seeking to represent the plaintiff and how I believed he generally sought to act with some measure of independence.  That is not to say, however, that his evidence was at all times satisfactory or reliable. 

13. Faced with the problem of being unable to call Parkinson, he purported to speak of his own knowledge about matters in which he plainly had no involvement and continually had trouble distinguishing between what he knew and what he had read or been told.

14. I have elsewhere discussed the several changes of position taken by the plaintiff with respect to the conversation and representations allegedly made on 1 August 1994 and they reflect somewhat on Millowick’s credit.  I take no account of the plaintiff’s failure to allege in its original Statement of Claim that there were any such representations because at that point it focussed upon different causes against each defendant, but once what I regard as the core representation relied upon against Cavill was pleaded (ie that it had informed Millowick and Parkinson that the engine had been rebuilt), the full account of what else was said at that time varied in the pleadings and evidence, with additional alleged representations that the truck had travelled ‘zero kilometres’, that the repair work had been carried out in chassis and that the work done was covered under warranty.  Additionally, there were varying and disputed allegations as to whether any of the representations of Cavill were made on its own behalf or that of Quinn and whether Hondow was then informed that Millowick and Parkinson were going to incorporate the plaintiff company. 

15. Whilst I have found that the core representation was, indeed, made by Hondow, I view with some misgivings the attempts by Millowick to expand upon the content of that conversation in subsequent amendments to the Statement of Claim, particularly those in which he was more personally involved, and in his evidence.  Indeed, the pleadings as to his and Parkinson’s expressed intention to incorporate the plaintiff company went beyond evidence he had previously given and was never later supported by him.

16. Separately, during his evidence Millowick on occasions sought to blame the defendant for particular engine problems and then, perversely, to also blame other repairers.  He acknowledged that he well knew that the other repairers were separate entities yet persisted with the contention that, in some manner that was never articulated, they were agents for and represented the defendant.  Save for the commonality of their collective relationships with Caterpillar, there was not a shred of evidence supporting that.

17. His position with respect to the defendant’s liabilities for problems with the Jacobs brake and the Horton fan, for the cost of the Millowick loan and for expectation losses extending beyond the year 2000 fluctuated throughout the trial but in the end he stubbornly persisted with them in the face of contradicting evidence from his own experts.  As well, he persisted with the contention that the plaintiff’s business had operated satisfactorily after 1997 when, on all the financial evidence, it had not done so.

18. Finally, and perhaps most importantly, there was the issue of other drivers of the truck.  He failed to instruct McPharlin as to the expenses incurred with respect to the several persons (apart from Parkinson) so employed and, indeed, when ultimately the issue came to light, could produce no records relating to their employment or engagement.  None of them were called as witnesses, no satisfactory explanations were advanced for this and, consequently, McPharlin was obliged to estimate their expenses. 

19. Quite apart from the capacity of these persons to speak of their employment terms, it could be expected that some, if not all, of them would have been able to give evidence about the truck’s operating problems and various of the interstate repairs.  This evidence became of critical importance given the absence of Parkinson overseas, the paucity of what he had said on those topics in his tendered statement and the plaintiff’s failure, with one exception, to call interstate repairers.  The potential significance of their not being called was made known to Millowick during the course of the trial but he still chose not to do that. 

20. Quite aside from the conclusion I elsewhere draw that their evidence would not have assisted the plaintiff’s case, this whole issue, along with those other matters I have mentioned, caused me to have serious reservations about Millowick’s credibility. 

    - Potts

21. Potts confronted a very difficult task in this matter.  He was furnished with bundles of repair accounts from interstate repairers which, of necessity, had to speak for themselves and which were, in many cases, unhelpful in terms of identifying and separating customer complaints and mechanical diagnoses and, as well, details of how and why certain repairs were carried out under warranty.  He had not had the opportunity to inspect any of the configurations of the truck engine and had simply had to work on the documents provided and the instructions received from Millowick, which themselves were largely based on hearsay.  Further, it emerged that he had an imperfect understanding of Caterpillar practices and specifications. 

22. When first confronted with all the material in 2001, he did not clearly identify a cause of the numerous problems which had been experienced with the truck between September 1994 and March 1997.  Indeed, he appeared to refer to the same engine as having been ‘rebuilt’ five times when, on his own characterisation of that term, it clearly had not and when, in reality, the evidence disclosed that two short engines had been involved.  His original report focussed upon the propositions that a rebuilt engine was one in ‘pristine’ condition, that the engine as acquired by the plaintiff was not in that condition, hence that it was not rebuilt, that it had therefore needed frequent repairs over that time, that it had been poorly repaired on occasions and that all these costs were generally a consequence either of its poor state on acquisition or of inadequate repairs undertaken since then. 

23. He identified problems of recurring cracking of No. 1 cylinder liner, low power, high fuel consumption and difficulties with the Jacobs brake and Horton fan. 

24. He concluded that:

    … the firms that serviced the engine have applied inappropriate technology to its maintenance and repair (and have) … repaired in a piecemeal fashion.  They should have restored to pristine condition the engine and its components as a whole – in the spirit of the claims made in the document ‘Reman Products for Caterpillar Engines’.

25. Those were very broad statements to make when the works carried out over that period varied widely in nature, related to two separate short engines and were carried out by several different repairers.

26. In that same report, Potts spoke of potential causes for the various malfunctions but did not seek to isolate a particular cause.

27. He reported again in March 2002, referring to additional problems the truck had experienced and involving the fuel system settings.  He argued that because it had failed on numerous occasions after being acquired in August 1994, it could never have been rebuilt in the first place.  He then embarked upon a lengthy discussion of all the subsequent repairs and failures that had occurred, addressing them as part of a continuum of repairs to the engine and not appearing to fully appreciate that in March 1995 the plaintiff, having received expert engineering advice, had opted to purchase a new short engine.  He regarded the repairs, both before and after that time, resulting from complaints of low power, high fuel consumption and engine failure, as due to a combination of worn parts, inappropriate fuel settings and timing, and a poorly repaired cooling system. 

28. In some manner he again sought to relate all engine problems subsequent to April 1995 and occurring up to 1997 to the original representation that the engine had been rebuilt, when in reality the engine had, with expert advice and oversight from the plaintiff’s perspective, been rebuilt, within the meaning of that term that all credible witnesses would accept, in March/April 1995.  As I observe elsewhere, the chain of causation with respect to the original representation must necessarily have ended by then and, indeed, it can probably be said the engine was rebuilt again before its final repair, yet he speaks only of several altered engine ‘configurations’ over that time. 

29. I considered that particular report to have adopted an argumentative and less than objective tone, and it focussed upon instructions as to anticipated levels of fuel consumption that had no expert backing and were never borne out.  Most importantly, it did not at any stage identify a real cause of the truck’s problems, but in a general way attributed its failures to the original state of the engine and to numerous ineffective repairs and adjustments to it.

30. When Potts was cross-examined he had what he described as his ‘ah-ha experience’.  He commented upon it in his report of 9 August 2008 (Exhibit P165) and it is worthwhile quoting from paragraphs 1.1.2 to 1.1.6 of that report:

    1.1.2In Report S/02/01112C of the 18^th March, 2002, this author opined that an engine described as “rebuilt…no kms” had been rebuilt incompletely with worn parts being retained, which parts subsequently either failed or else were set out of specification and it was the combination of failed or mis-set components that led to the series of engine breakdowns.

    1.1.3It was during 5 days of cross examination in February 2008 that this author became aware that in conjunction with engine components being out of specification, the engine was producing in excess of the manufacturer’s rated power.

    1.1.4While this author’s initial reports linked the phenomena of worn parts and maladjustment to the incidence of failure, a chain of cause and effect was not established, only a correlation.  During cross examination, to this author were discovered documents that showed detail setting changes and power development in excess of the manufacturer’s specification.  (my emphasis)

    1.1.5The “ah-ha” experience during that cross examination was the discovery of what this author claims is evidence of excess power and hence excess cylinder pressure that is consistent as a mechanism of failure pursuant to what this author claims were items of maladjustment and retention of worn parts.

    1.1.6In this author’s understanding, the primary complaint is the lack of integrity of the engine components and settings.  The secondary complaint is that excess cylinder temperature and power pursuant to the condition of parts and settings, provided a mechanism of failure.

31. The entire basis for those remarks lay in his discovery during cross-examination that the defendant had, in August 1994, reset the engine to the 5456 specification. 

32. I have elsewhere discussed the evidence relating to the 4444 and 5456 specifications and will not repeat it here, but what was significant about that report (P165) was his concession that he had not previously been able to establish a cause and effect between the state of the engine in July/August 1994 and its subsequent failures; all he had seen was a ‘correlation’, but he was now able to pin the responsibility on the lack of integrity between parts and settings and overpowering and overheating of the engine due to the ‘incorrect’ and ‘inappropriate’ 5456 setting.  Even so, he still suggested that the July 1994 works had in some ill-defined way contributed to all subsequent problems.

33. That theory about incorrect engine setting proved to be a false one and, ultimately, Potts had to concede that and accept that he had not fully apprised himself of the full range of available Caterpillar settings.  That was a major blow and, in the context of his intervening concession that he had been otherwise unable to establish a causal connection or connections between the various engine malfunctions and either the state of the engine in August 1994 or any subsequent interventions by Cavill, left the plaintiff without firm support for its contentions as to causation.  But, faced with that inevitability, Potts then sought to focus his criticism on the defendant’s, and indeed other repairers’, failures to properly adhere to and record the tolerance ranges for the various setting adjustments appropriate to the 5456 rating.  These, he considered, created a real risk of the engine operating outside of tolerance and he suggested that the realisation of that risk is what might have produced the various engine failures.  That was, of course, no more than a possibility.  He also then sought to continue a dispute as to the necessity for a speed-limiting device that no longer had any relevance.

34. I had limited confidence in his evidence overall.  He too readily identified himself with the plaintiff’s cause and when one theory as to the cause of failure was discredited he sought to find another. 

35. He first sought to support the plaintiff’s complaints of low power but later argued, for the reasons just discussed, that the engine was actually overpowered. 

36. During the course of his evidence, he developed a theory that the cause of No. 1 cylinder failure was connected with engine block distortion and he spoke of the dynamics of how engine mountings might contribute to that.  In the end, he was obliged to retreat from that position. 

37. Separately, he advanced a theory that there was a likelihood of greater heating adjacent to the No. 1 cylinder liner but he later conceded that that was not maintainable. 

38. At another point he was ready to adopt the theory of the plaintiff’s original engineering adviser, Winsor, that the cylinder lining had failed because of an incorrectly engineered installation chamfer on the top of the engine block, but later he conceded that he was wrong in that. 

39. He relied upon the accuracy of the dynamometer test (Exhibit P38) in advancing his view as to engine overpowering, but ultimately Casey established to my satisfaction that that test was necessarily and badly flawed because of the inevitability of incorrect placement of an external temperature sensor. Even in the face of that very persuasive response, he vainly sought to uphold its validity.

40. He relied upon the plaintiff’s instructions that the fuel consumption of the engine was higher than it should have been but there was no independent evidence showing that to be so and he himself did not bring forward any supporting material.  Instead, when challenged, he sought to retreat to an argument based on a statistical analysis of actual fuel usage, a discipline in which he had not qualified himself as an expert.

41. I became concerned during the course of his evidence at its discursive and emotive tone.  He referred variously to being ‘worried’ (T/S 876), ‘astonished’ (T/S 1225), ‘pleased’ (T/S 949), feeling ‘weak at the knees’ (T/S 1225), he spoke about discoveries ‘strik(ing) terror into my heart’ (T/S 958) and used many other similar expressions in discussing aspects of the engine’s operation.  I found them unhelpful.  I specifically invited him to be more precise in his observations and to ‘draw the thread(s)’ together (T/S 1017).  That request resulted in the production of a ‘Summary’ document (Exhibit P134) but I am obliged to say that document did little to achieve that object.

1. Ultimately and notwithstanding the propositions he had advanced at an earlier stage, he conceded that the various repairs effected to the Jacobs brake system and the Horton fan were not directly relevant in the matter.

2. All in all and notwithstanding his obviously deep knowledge of diesel engines and the pains to which he went to explain their workings, I felt I could not rely upon his evidence in any significant way as advancing the plaintiff’s case.

   - Hondow

3. I have elsewhere discussed Hondow’s evidence but some general observations as to his credibility are appropriate.

4. He was the party who dealt with Millowick in the original discussions about the engine and, indeed, in most of the plaintiff’s subsequent dealings with Cavill. 

5. I found him to be a less than impressive witness.  Whilst I accept that he did not purport to give a false and conflicting account of the conversation of 1 August with Millowick, his evidence and involvement in what subsequently transpired do him little credit.

6. I have found that there must have been numerous discussions with interstate repairers and with Caterpillar about the various warranty repairs carried out on the engine by Cavill and others, yet he claimed no recollection of them.  In the context of everything that occurred, including threats of legal action, I simply do not accept that claim and the more so in the absence of any person from Caterpillar being called to give evidence on the matter. 

7. It was likewise with respect to the warranty documentation, which I am satisfied was generated in connection with at least some of those repairs but which was never produced because it had been destroyed by Cavill in 1998, notwithstanding the obviously contentious nature of its dealings with the plaintiff.  I am satisfied that at relevant times Hondow had some control over their provenance and preservation.

8. I have commented upon the seeming conflict between his fairly liberal understanding of what the word ‘rebuilt’ meant and then his rejection of the likelihood that he told Millowick that this particular engine had been rebuilt.  His evidence on that topic was less than convincing.

9. I regarded with some misgivings the very specific attack, in cross-examination, upon Millowick’s account of the 1 August conversation with Hondow in the face of Hondow’s later claim to have no specific recollection of what was then said.  It necessarily reflected upon the latter’s credit.

10. I will deal separately with the accounting evidence but otherwise I do not see the need to comment on the credibility of the remaining witnesses who gave evidence.

    5.2    The Pleadings

11. Elsewhere I discuss the conflicting evidence as to the true meaning of the word ‘rebuilt’.  Even so, there was a general measure of consensus that the works carried out by the defendant on the truck engine for Quinn in July 1994 could never have been characterised as a ‘rebuild’. 

12. By the time the action came on before me, the plaintiff had settled his claim against Quinn but, putting aside for the moment what was said between the plaintiff’s promoters and Quinn, I would have had little difficulty in finding that the advertisement placed by Quinn in The Advertiser on 30 July 1994 and in which it described the engine, inter alia, as ‘rebuilt … No kms’ was misleading and deceptive and constituted a misrepresentation.  For reasons best known to the plaintiff, it nonetheless settled its claim against Quinn at the pre‑trial stage for the sum of $30,000 plus costs. 

13. The focus of attention before me was then the plaintiff’s assertion that on 1 August 1994 Hondow represented to Millowick and Parkinson that the truck engine had been rebuilt, was under warranty and had travelled no kilometres since.   The defendant’s plea in response is that no such representations were ever made by it or by Hondow.  I will come to discuss that in a moment but further, says the defendant, I should regard the plaintiff’s allegations as to these matters with serious misgivings because of the manner in which they found their way into the pleadings.

14. It must be said at this point that the plaintiff’s pleadings have had a confused and unhappy history.  As at the commencement of trial, the relevant Statement of Claim was in its fifth version but by the time the trial was completed a ninth Statement of Claim had been filed, albeit that in the intervening time the plaintiff had been represented by Millowick personally.

15. There is no doubt that the initial pleadings sought to hold Quinn accountable for the alleged misrepresentations and, separately, Cavill in negligence and contract for various works performed on the truck after its purchase.  At that point there was no allegation that Cavill had engaged in any misrepresentation or misleading or deceptive conduct in connection with the plaintiff’s purchase of the truck.

16. By the time of the first amendment that position had changed and the plaintiff was asserting that Cavill, through Hondow, had misrepresented to Millowick that the engine had been rebuilt and was under warranty.  Damages were then sought against Cavill under the FTA, albeit that no separate plea of inducement was raised.  That document said nothing about any agency or any representation as to ‘zero kilometres’ and Parkinson was not mentioned as a party to that conversation.

17. The Further Amended Statement of Claim then added a plea that that misrepresentation had been made on behalf of Quinn, but went on to say, by way of alternative, that it separately induced the plaintiff to complete the purchase. 

18. Subject to changes elsewhere discussed, that remained the state of the pleading on those matters right through to the time of the Ninth Further Amended Statement of Claim.  At that point three amendments emerged: first, an allegation that Parkinson had been present at the time of the representation (by that time I had received into evidence the statement of Parkinson in which he had made that assertion); secondly, an allegation that Millowick and Parkinson had at that time told Hondow that they were going to use the truck in a transport business that they were about to incorporate; and, thirdly (reverting to the plea in the Amended Statement of Claim) that Hondow’s representation was as well made on behalf of Cavill.

19. The defendant was critical of the fact that whilst Millowick had said in evidence that he actually showed Hondow the Quinn advertisement, that matter was not pleaded.  I am not much persuaded by that particular criticism.  It was a matter of evidence and I am not satisfied it had to be pleaded. 

20. Even so, I have carefully considered that pleading history and the defendant’s criticisms of it.  Whilst I have commented upon its impact on Millowick’s evidence, I am not satisfied that it reflects adversely on the plaintiff’s overall position.  True it is that the initial Statement of Claim did not allege misrepresentation, nor misleading or deceptive conduct, against Cavill but those allegations very soon emerged in the Amended Statement of Claim.  Of course, they underwent several later changes but it can be fairly said that the core allegation of Hondow’s misrepresentation (that the engine had been rebuilt in July 1994) was made at a very early stage of the proceedings.  The later assertions about warranties, zero kilometres and Parkinson being present at the time and the consequential amendments to that effect do not, as I find, substantially detract from that core assertion.  Furthermore, even on Hondow’s account, Parkinson was indeed present at that meeting.

21. Nor am I satisfied that much turns on the omission, at any point, of a reference to zero kilometres.  The plaintiff had only ever pleaded that representation against Quinn and it did not emerge in this matter until Millowick referred to it in his evidence as having been said by Hondow.  I do not regard the matter as of particular significance beyond reflecting on Millowick’s tendency to put a gloss on his evidence.  Plainly, the truck had just been worked upon by Cavill for Quinn and it remained in their workshop, so it had not travelled any distance, anyway.  I do not think Millowick’s evidence on this issue is significantly tainted by any lack of correspondence with the plaintiff’s original pleadings.

22. The more recent allegation that Millowick and Parkinson told Hondow on 1 August 1994 that they were going to incorporate a proprietary company to operate the truck is, on the other hand, a very late one.  It was not spoken of by Millowick in his evidence-in-chief and I am not satisfied it was said.  Even so, I am satisfied that Millowick did introduce himself and Parkinson as representatives of GP Transport and there is no doubt on all the facts that incorporation of the plaintiff company was then well under way.  I discuss the significance of that question elsewhere but it represents to me another instance of Millowick exaggerating his evidence.

23. It seems to me that the focus of the plaintiff’s claim is upon the alleged representation by the defendant that the engine had been rebuilt.  Whether or not the defendant also said it had travelled zero kilometres or was under warranty might go to the question of credit but really does not enlarge upon or detract from the nature of the alleged representation. 

    5.3    The Conversation of 1 August 1994

24. I turn then to the evidence as to the events of 1 August 1994.

25. At transcript 38, 39 and 680 Millowick gave a full account of the meeting with Hondow on 1 August 1994, and I have already described it. 

26. Millowick was cross-examined at length over that evidence, his instructions to his solicitors and the plaintiff’s pleadings generally.  He was further challenged over the amendments in various Statements of Claim relating to reliance and inducement.

27. As often occurs with challenges to pleadings, he was not alert to the significance of any difference between what might be said in a statement or in evidence or in instructions provided to his solicitors, on the one hand, and what might ultimately be pleaded in a Statement of Claim, on the other.  Having reviewed his evidence at transcript 674 to 696, I should say, however, that I am satisfied he responded to challenges on those matters by adhering to his claim that Hondow then told him the engine had been rebuilt and by saying that, in completing the purchase, he was in part influenced by what Quinn had told him and in part induced by Hondow’s confirmation of the fact that the engine had been rebuilt and the vehicle had travelled no kilometres (T/S 679): 

    A.  … the inducement to purchase the vehicle was on the confirmation - the information supplied by Mr Hondow that really induced us to buy the vehicle. He convinced us that the advert that we originally answered was correct.

    Q.  He convinced you, did you say.

    A.  Yes, by what he - the information that he imparted to us when we met him. Let me think what else. From the conversation my understanding was that what Mr Quinn had told me was accurate.

28. Ultimately, his position was that he had told his solicitors everything and he was unable to explain why the pleadings had developed in the way they had.  He had relied on his barrister and solicitors (T/S 690):

    I’m assuming that the lawyers know what they’re doing, they’re preparing the statement of claim.  I can only give them the information …

29. He conceded that there was no allegation in the pleadings that Hondow had told them that the vehicle had travelled zero kilometres but neither did he see any particular difference between a statement in August 1994 that the engine had just been rebuilt and a statement it had just been rebuilt with no kilometres  (T/S 694).  It appears to me that the worst criticism that can be made of his evidence on this point is that he reconstructed and converted an assumption to a recollection.  Either way, it added nothing to the nature of the principal representations and subtracted only minimally from his credit.

30. The other evidence on this topic came from Hondow and from the statement of Parkinson.  Hondow was asked (T/S 1539) whether he was aware of the July 1994 work carried out on the truck.  His answer was that he ‘would have (been) as workshop supervisor’.  He was then asked (T/S 1540) about the alleged conversation on 1 August 1994 and he said ‘I don’t recall a specific discussion with Mr Millowick’ or Parkinson about the truck but he ‘wouldn’t have said’ that it had been rebuilt. 

31. In short, Hondow was not claiming any specific memory of what work had been done on the truck for Quinn in July 1994, nor of any specific conversation with Millowick or Parkinson on 1 August 1994.  He was simply reconstructing and proffering the suggestion that he would then have been aware of that work and would thus not have made the alleged representation to Millowick and/or Parkinson because the work had not comprised a rebuild.  His evidence goes no further than that.

32. I turn then to the statement of Parkinson (P172).  Whilst I held that statement to be admissible, outstanding questions remain as to what weight I should attach to it or portions of it, particularly when there are matters over which there are very direct conflicts in the evidence.  In paragraph 6 he says:

    I again inspected the truck, with Cliff, at Cavill’s premises on the 1^st August 1994.  On this occasion Mr Terry Hondow (“Hondow”) was also present.  On this occasion Hondow said that the truck had had a full engine in chassis rebuild and had never been driven and that it had a full Caterpillar warranty.

33. I am obliged to say that I am not prepared to attach significant weight to that part of Parkinson’s statement.  As the defendant rightly observed, it is not in direct speech and his statement carries the flavour of having been written for him to sign.

34. Even so, I am disposed to give it limited weight and I am satisfied that it does, in some measure, corroborate what I accept as Millowick’s own account of that same conversation.

35. All in all and despite my misgivings about other aspects of Millowick’s evidence, I am satisfied and find that Hondow did meet with Parkinson and Millowick on 1 August 1994 and that in the course of their discussions he did tell them that the truck engine had been rebuilt.  So much was Quinn’s claim in its advertisement and, indeed, the Cavill repair documents of July 1994 prepared by Edwards (P90) refer to instructions to ‘rebuild’ the engine.  Hondow can recall nothing now but plainly had access to those documents and, on the basis of what Edwards said in his evidence about the expression ‘rebuild’, I have little doubt that if then asked he would have told Hondow the engine had been rebuilt. 

36. I am persuaded that Hondow was prepared to confirm to Millowick and Parkinson that the engine had been rebuilt as the advertisement claimed and as, indeed, a conversation with Edwards or a limited review of Cavill’s documents (P90 in particular) might have told him, albeit that he neither knew, recalled or carefully enquired into just what had been done to the truck. 

37. I make that finding not just on the basis of the evidence of the parties but because it is consistent with what I consider in all likelihood would have happened, anyway.  Quinn had told Millowick and Parkinson that the truck engine had been rebuilt by Cavill and that the truck was there.  It seems to me highly likely that, when visiting Cavill to inspect the truck, Millowick and Parkinson would have been interested in having Hondow confirm that such works had, indeed, been undertaken by Cavill.  It is just the sort of enquiry that one would have expected that they might make and had they received a negative response to it, it seems highly unlikely to me that they would have pursued the transaction.

38. As I have already observed, whether or not Hondow also represented that the vehicle had travelled zero kilometres and/or that it was under warranty is hardly to the point – the inference was inescapable that it had not left the workshop. 

39. As to whether something was said about the warranty, again I am not concerned as to whether it was represented by Hondow or just assumed as an ordinary incident of Caterpillar engine rebuild.  Plainly on the evidence, some form of warranty did attach to the July 1994 works, anyway.

40. On all the evidence, I am satisfied not merely that the defendant then represented to Millowick and Parkinson that the engine had just been rebuilt by it but, as well, I am satisfied that that representation (even absent the other alleged representations), along with the same representation made by Quinn, induced the plaintiff to complete the purchase of the truck.

41. I am further satisfied, and accept the evidence of Millowick, that they then informed Hondow at that time that they were representing GP Transport, albeit that I am not persuaded either of them said the plaintiff was then in the course of formation. 

42. The incorporation of that company was then well in train; indeed, it occurred only 14 days afterwards. 

43. I am further satisfied that Hondow’s representation that the engine had been rebuilt was made on the defendant’s behalf and was false and misleading, albeit not, for his part, deliberately so.

    5.4    The Meaning of the Word ‘Rebuild’ 

44. There were considerable differences at trial as to the precise meaning of that expression and not all the expert mechanics could agree upon it.  Even so, the question of what it might mean to an expert mechanic is perhaps less important, as the real questions are what the defendant effectively conveyed to the plaintiff and whether that constituted a misrepresentation of the facts. 

45. I will start by examining what each witness said about the expression.

    -  Millowick

46. Millowick claimed no relevant expertise or experience in the area but on his account a rebuilt engine was a ‘new’ engine.  At T/S 306-7:

    QIn mid-1994 did you have an understanding as to what was done to a motor to rebuild it.

    AYes, I did.

    QCan you tell us what your understanding was.

    AMy understanding of a rebuilt engine was that you would have a short engine which consists of a block, your crankshaft, the con rods, pistons, rings, and they would be in a state or equivalent to being brand new.  If one looks at the Caterpillar re-manufacturing brochure now, what it basically says is “We have rebuilt this old engine block into the same state as you would expect as if you went out and bought a brand new one” and that was my understanding.

47. At T/S 366.27:

    Q     You knew it wasn’t a new engine, didn’t you.

    AIt was a new engine.  At the time that I’m speaking to Mr Hondow it was a new, rebuilt engine, zero kilometres, pristine.  Yes, it was a new engine.

48. In discussing the repairs carried out by WesTrac on 28 November 1994, he described those works as a:

    complete rebuild … All liners, pistons assembly etc. were removed from the block.  The block was then re-surfaced, counter-bored.  The liners - I don’t know if they were old or new, that is something we don’t know.  Our understanding was that the engine was then rebuilt with a new manufactured head back to the same state that it was in our understanding July 1994.

    (T/S 405).

49. Then again, in discussing the repair work carried out in March 1995, the following passage occurs (at T/S 447.33):

    Q    You were not contemplating obtaining a remanufactured engine from Cavill Power in March/April, were you.

    AYes, I was.

    QThe correspondence indicates that you were going to purchase a short motor and that was then going to be worked on by Cavill Power.

    AHang on, hang on.  What do you think they are doing?  We can use different words.  They were going to rebuild it.  They were going to remanufacture it.  They were going to put it together.  I don’t care what word we use but it is saying the same thing.  It is going to be remanufactured as an entity.  It now exists as a working engine.

    Then at T/S 448.35:

    Q    I put it to you that a rebuilt engine, that is an engine rebuilt by Cavpower, is different from a remanufactured engine produced by Caterpillar.

    AMy understanding is that a remanufactured or a rebuild – we will talk about an in-chassis rebuild or an out-of-chassis rebuild my understanding it means the same.  I may be wrong.

    QDid you believe that in 1995.

    AYes, I did.

    QDo you believe it now.

    AYes, I do.

    QEven after looking at this document you believe there is no difference between a rebuilt engine and a remanufactured engine.

    AReading this document now, other than an exercise in semantics, yes, I do believe that they are the same.

    -  Parkinson

1. The material fact relied upon and first articulated on 29 August 2008 was that the plaintiff’s expert Potts had not come into possession of evidence relating to the changed engine settings (from 4444 to 5456 and then back to 4444) until documents were put to him during cross-examination in February 2008 and that he had then advised the plaintiff that these changes had led to over-fuelling and overpowering of the engine. 

2. Whilst ultimately his theory was abandoned, I am satisfied it was a fact material to the plaintiff’s case and that the plaintiff first learned of it at about that time, that is, February 2008.

3. Its foreshadowed amendment to plead negligent misstatement (the draft Sixth Further Amended Statement of Claim) was submitted to the court on 18 April 2008, albeit that it was not until the Ninth Further Amended Statement of Claim that the material fact was asserted.  The plaintiff nonetheless relies upon that advice as the relevant material fact.

4. Whilst I am satisfied that that advice qualifies as a material fact, notwithstanding it was later shown to be incorrect, I am not persuaded that it would be just in all the circumstances to grant the sought extension, and for these reasons:

   (1)In Napolitano v Coyle (supra) Bray CJ observed, at 569:

   There is no requirement of due diligence. The material facts are those relating to the plaintiff's case, not to his cause of action. There is no reference to what might have been discovered by taking appropriate action. There is no specification of what are material facts and there is no requirement that they should be decisive or such as would have had a determining influence in the decision of a reasonable man to take proceedings.

   I infer, therefore, that none of these things is necessary. A plaintiff may still be entitled to ask the Court to extend the time under the section, notwithstanding that he has been supinely inactive and notwithstanding that the material facts might easily have been ascertained earlier and notwithstanding that their nature is not such as to be decisive of the success of the action or even such as to have in his mind weighed down the balance in favour of litigation. All these matters, of course, are relevant to the discretion, and it seems to me that the South Australian Parliament, having made one qualifying condition, which in some cases, may not be of great significance, has left all the rest to the discretion of the court. In Lovett v. Le Gall [(1975) 10 S.A.S.R. 479, at p.486] Wells J. said:

   "It is true, … that an applicant seeking an extension of time, might qualify under the opening passage of sub-s (2) of s 48 by relying on facts that are technically of the required description but are of little real importance. The short answer is that to qualify is not to succeed; there is ample scope in the discretionary power conferred by the concluding passage of sub-s (2) to reject applications that are without real and honest merit."

   Judge White, whose judgment was approved by the Full Court, said at pp. 491-492:

   "Many possibilities were put to me, including the possibility that minute facts might be "discovered" belatedly and artificially, which would be relevant to the plaintiff's case and therefore material in this lesser sense; that, it was argued, would give an unfair advantage to unworthy applicants; further, it might lead plaintiffs and their advisers to avoid early investigation in future so as to leave open the chance of late discovery of minor qualifying material facts to guard against actions becoming statute-barred; and so on. In my view, all of these imagined possible difficulties can be taken care of at the discretion stage, when the judge is considering the nature of the ascertained facts and the plaintiff's conduct together with all other relevant factors."

   (2)In Sola Optical Aust Pty Ltd v Mills (supra) the court observed, at 636:

   There is no warrant for writing into the Act a further qualification that, to attract the operation of s 48(3)(b)(i), there must be some interaction between the material fact and the plaintiff's decision to sue. It is materiality to the plaintiff's case that must be shown. This is a broad general requirement that is capable of satisfaction by objective inquiry. To introduce notions, related to the decision to sue, that would require an examination of the subjective workings of the plaintiff's mind would complicate the court's task and impede rather than advance the purpose of the Act. A fact is material to the plaintiff's case if it is both relevant to the issues to be proved if the plaintiff is to succeed in obtaining an award of damages sufficient to justify bringing the action and is of sufficient importance to be likely to have a bearing on the case. The Shorter Oxford English Dictionary defines the word "material", inter alia, to mean "Of such significance as to be likely to influence the determination of a cause". Although a definition attributed to the sixteenth century, in our opinion it provides an apt guide to the intention of the legislature in choosing to refer, without any elaboration, to "facts material to the plaintiff's case".

   (3)Early in the trial I referred to the potential availability of a claim in negligent misstatement (T/S 702 and 1338) and on the latter occasion suggested Millowick take legal advice about it.

   (4)It was after that time that Potts developed his theory about overpowering.

   (5)None of the plaintiff’s sixth, seventh and eighth draft Further Amended Statements of Claim asserted reliance upon the Potts advice as a material fact relevant to their pleas of negligent misstatement.

   (6)According to Millowick, he learned of the material fact during Potts’ evidence in February 2008 (T/S 2728) and that led to the amendment at paragraph 21 of the Ninth Further Amended Statement of Claim.

5. Whilst Sola Optical rejects the need to prove a nexus between the discovery of the fact and the ‘decision to sue’, I should say I am nonetheless satisfied that the amendment to plead negligent misstatement was likely prompted by comments made by me early in the course of the hearing and before the alleged ‘fact’ arose or came to the plaintiff’s attention.  That may not of itself disqualify the plaintiff from relying on it but against the other matters of background, including the lateness of the amending plea in paragraph 21, I am not persuaded it would be just to grant the sought extension of time.

6. For all the above reasons, however, I am persuaded the plaintiff should be permitted to pursue its claim based on Cavill’s negligent misstatement because an extension of time is not, in all the circumstances, required.

   7.     Summary of Findings

7. For the reasons expressed above I am satisfied and find:

   1.As to the claims based upon the FTA and negligent misstatement:

   1.1that at their meeting on 1 August 1994, Millowick and Parkinson introduced themselves to Hondow as representatives of ‘GP Transport’, albeit that they did not then inform him, as was the fact, that they were the promoters of the plaintiff company, which was then in the course of formation;

   1.2that the defendant did at that meeting, through its servant or agent Hondow, represent to Millowick and Parkinson that the truck engine had been rebuilt;

   1.3that at the time and in the circumstances in which that representation was made, Cavill:

   1.3.1was acting in trade or commerce; and

   1.3.2by virtue of the circumstances in which it was approached by Millowick and Parkinson, owed to them, and through them to the plaintiff, a duty of care not to mislead them as to its accuracy;

   1.4that the representation that the truck engine had been rebuilt was false and misleading and the defendant:

   1.4.1thereby breached s 56 of the FTA;

   1.4.2knew or ought to have known that it was such and was thereby negligent in stating it;

   1.5that Millowick and Parkinson, and through them the plaintiff, relied upon that representation, albeit that they also relied upon the same representation made by Quinn, and the plaintiff was thereby induced to purchase or ratify the purchase of the truck;

   1.6that the plaintiff’s claims in negligence and/or under the FTA being for economic loss, time did not begin to run against them until the plaintiff’s discovery of the falsity of the representation, which I am satisfied occurred in March 1995;

   1.7that the plaintiff’s entitlement to recover damages pursuant to sections 54 and 56 of the FTA is statute barred and I am not persuaded that the justice of the case merits the grant of an extension of time to maintain it pursuant to s 48(1) of the LAA;

   1.8the plaintiff’s claim for negligent misrepresentation, first asserted in April 2008 and otherwise articulated in its Ninth Further Amended Statement of Claim filed on 1 September 2008, was prima facie out of time but I am satisfied that:

   1.8.1although it was not specifically pleaded in the Amended Statement of Claim filed on 25 September 2001, the substratum of facts upon which it was founded was, and that allows the plaintiff to pursue it;

   1.8.2the order of court dated 28 August 2001 permitting the filing of the Amended Statement of Claim of 25 September 2001 related back to and took effect from the date proceedings were instituted and, as of that date, a claim based upon the same or substantially the same facts as the negligent misstatement claim, was one brought within time;

   1.8.3if I am wrong in concluding 1.8.2, I would in any event be disposed to extend to 25 September 2001 the time for bringing a claim based on that same conduct because I am satisfied that facts material to it were not ascertained by the plaintiff until about 24 April 2001, when the plaintiff became aware of the facts disclosed by Potts’ opinion of that date, and that in all the circumstances it would be just to grant that extension;

   1.9that the plaintiff has in consequence of the defendant’s negligent misstatement suffered a loss which is to be measured by the difference in the value of the truck as purchased and its value had it in fact then contained a rebuilt engine, together with any losses suffered by the plaintiff arising out of the misrepresentation and incurred prior to March 1995, when it discovered the falsity of the defendant’s representation, and any consequential losses;

   1.10that all or any losses based on this head of claim became crystallised as of March 1995, when the misrepresentation was discovered and the plaintiff elected, after receiving engineering and legal advice, to replace the engine.  The plaintiff’s claims based upon all subsequent problems it experienced with the truck, insofar as they are founded upon the original misrepresentation, cannot succeed.

   2.As to all or any claims based in contract, I am not satisfied any have been made out, and for the reasons:

   2.1that the plaintiff did not enter into any contract with the defendant prior to purchasing the truck;

   2.2that although the plaintiff complains of various breaches of contract by the defendant in the numerous repairs contracted for with the defendant and other repairers after March 1995 and up to 1997:

   2.2.1it has not proven any agency relationship between the defendant and any other repairers who performed them;

   2.2.2where the defendant itself carried out such repairs, it has not proven any such breach because:

   2.2.2.1the evidence of its expert Potts has simply not supported any of these claims;

   2.2.2.2insofar as it relied upon the March/April 1995 repairs, they were undertaken against a background of legal and engineering advice obtained by the plaintiff and it has not been shown that they were carried out negligently or in breach of contract; 

   2.2.3no other evidence supports any breach in connection with them and the defendant is in any event exempted from liability by the liability exclusion provisions included in the credit agreement of 30 March 1995.

   3.As to all remaining claims based in tort, I am not persuaded any have been made out, and for essentially the same reasons identified in paragraph 2.2 immediately above.

   4.As to the plaintiff’s claim under the MA, I am not satisfied, for reasons expressed above, that it is maintainable.

   5.The plaintiff’s claim under the TPA was likely abandoned but, in any event, was doomed to failure as it was brought out of time and time could not at relevant times have been extended.

8. I must then proceed to assess the damages referred to in paragraph 1.9 above.

   8.     Assessment of Damages

9. As I have said, the plaintiff adduced no direct evidence as to the difference between the value of the truck as represented and as acquired.  I am thus left in some considerable difficulty in attempting to assess the ordinary measure of loss arising from the defendant’s negligent misrepresentation.  I am, however, mindful of a duty to do the best I can in assessing the loss if there is some credible evidence going to the question. 

10. The evidence discloses that the truck, as acquired, did not have a rebuilt engine but I am satisfied, having regard to its then state, the nature and extent of repairs carried out to it after then and up to March 1995 and, indeed, the defendant’s own proposals to rectify it at that time, that it was thereby of lesser value.

11. I am further satisfied on the evidence that the March 1995 repairs amounted to the installation in the truck of an engine that could properly be described, on the evidence I have accepted, as rebuilt.

12. The plaintiff would, of course, argue otherwise and contend the engine still failed numerous times afterwards, but I am not persuaded as to that, and for the reasons that:

    (1)the March 1995 works came about as a result of an arm’s length commercial negotiation, in the course of which the plaintiff had legal and engineering advice and which resulted in the installation of a ‘short’ or  ‘complete engine’ (P35, P36), which I find met with the description of having been rebuilt;

    (2)it was unable to adduce any expert or other evidence supporting the claim that later engine failures were caused by or resulted from any works carried out at that time.

13. Whilst the cost of that repair cannot be treated as the proper measure of damages, I am persuaded that it provides some guide as to the difference in value between the engine as represented and as acquired.  The defendant might contend that its own proposal in the March 1995 negotiations would have achieved the same outcome as the plaintiff got and for less money but that proposal was, I am satisfied, put on conditions and in the context of resolving a dispute and I cannot conclude it necessarily reflected the true cost of those works necessary to restore the engine to rebuilt status.  Even so, it offered to provide a short engine free of charge and estimated that associated labour costs to the plaintiff would be $6,108.

14. What sort of guide then does the plaintiff’s expenditure provide?  It can reasonably be said that by rectifying a damaged object one can increase its value and that the cost of rectification can, in some circumstances, reflect the amount of that increase.  The plaintiff purchased the truck for $70,000 and the March repairs, involving an ‘out of chassis rebuild’ (P33), cost $22,608.41.  Even so, the truck had by then been used for some six months.  The intervening repair costs provide little direct assistance in this regard because, whilst the same cylinder liner twice cracked and was replaced, none of those repairs could on the evidence be said to have resulted in a rebuilt engine, some were quite unrelated to the engine per se and none appear to have been very successful. 

15. Against that very limited evidentiary background, I have taken a broad axe but conservative approach and find that the likely value differential was of the order of $12,000.

16. I have found, too, that the plaintiff is entitled to recover the cost of repairs arising from the representation and undertaken at a time when it was unaware of its falsity and, as well, any losses associated with its loss of use of the vehicle during such repairs.  Additionally, I am satisfied it ought to recover the cost of the expert advice of Winsor it reasonably sought out in March 1995 and in the sum of $2,115.

17. As to those repairs, there is no doubt the plaintiff expended substantial sums during that time in numerous and different repairs, but its expert Potts could not link any particular ones to the misrepresentation:  as I have found, he could point to no more than a correlation between it and the repairs, save for the valve bridge fault, which the defendant accepted at $196. 

18. Even so, I have found myself satisfied that the three instances of cracked No. 1 cylinder liners were likely attributable to the fact that the engine had not been rebuilt, as represented in 1994. 

19. Having found that, it has to be acknowledged that the cost of the first two of those repairs was not borne by the plaintiff, anyway, and cannot form part of its loss. The third failure was the one that led to the March repairs, which restored the engine, as I find it, to a rebuilt state.

20. Whilst the actual cost of a replacement truck during those final repairs was not in issue, it cannot form part of the plaintiff’s damages because it was by then alert to their proper measure, or ought to have been, and I disallow it.  For the same reason, it cannot recover damages for any consequential losses arising from those March 1995 repairs.

21. Similar considerations arose in the case of Burns v MAN Automotive (Aust) Pty Ltd[34], where there was a strikingly similar factual background involving a truck purchase but, importantly, one in which the plaintiff succeeded only upon contractual grounds.  It sought additional damages for lost profits incurred as a result of further attempts to exploit the defective vehicle after its discovery of the defendant’s breach of warranty.  The High Court disallowed them variously upon grounds that they were too remote and that, in the particular circumstances, the truck was destined to operate unprofitably, anyway, and the plaintiff ought not to have continued aggregating its losses.  Whilst the decision is thus not directly on point, it reflects the decision the plaintiff ought to have made in March 1995, namely, to fix its losses there and then and sue for the value differential and intervening losses (see also Slinger v Southern White Pty Ltd[35]).

    [34] (1986) 161 CLR 653.

    [35] (2005) 92 SASR 303, [88]-[92]

22. Returning to a claim for loss of use of the truck during the first two cylinder repairs, I am satisfied that the truck was off the road for 17 days as a result of them. 

23. For the purposes of this calculation I am prepared to accept as valid, for at least the 1995 financial year, McPharlin’s estimate of an achievable rate of 36 trips per year and therefore that the plaintiff was deprived of two round trips to Perth of 8,400 kilometres each or 16,800 kilometres in all. 

24. If I were to use McPharlin’s assumptions and calculations but scale down his ‘but-for’ distance calculation from 235,480 kilometres to 207,421 (16,800 + 190,621) to reflect this downtime and, as well, the affected overheads, the difference between the losses the plaintiff would normally have accumulated and those it would have faced had it been able to work the vehicle over those days, suggest it would have been better off using the vehicle for those 17 days by a margin of $6,810.

25. But Holmes took a different approach to that.  He had separately calculated in July 2007 (D145), without having the wages adjustments before him but assuming the McPharlin fuel rates, that the expectation losses (as McPharlin and he characterised them) attributable to downtime in the cylinder repairs of November 1994 were $1,681 and in February 1995, $1,884, a total of $3,565.  Those figures had not been separately assessed by McPharlin.  Once wage adjustments were accounted for and actual fuel rates were taken into account, however, Holmes’ original observation (Exhibit D144) became confirmed, namely, that the plaintiff losses actually reduced when it did not operate the vehicle at all, that is, no loss or additional loss resulted from its downtime.  That was a highly significant conclusion and it eroded altogether the plaintiff’s expectation loss claim.

1. I am obliged to say I found Holmes’ evidence and his approach to the calculation of losses more persuasive than those of McPharlin, and I accepted it for these reasons:

   (1)It appeared to me that McPharlin’s opinion had proceeded uncritically on the basis of the several assumptions I have outlined above and which I found not proved.  Of course, he had been asked to assume those matters, but I consider he ought to have expressed stronger reservations about their reliability given:

   (a)his own acknowledged lack of expertise in the area; and

   (b)the facts that none of them were supported by other evidence, all assumed a static business model and all flew in the face of the plaintiff’s actual experience on the road.  It oversimplified matters to simply attribute the latter factor to the performance of the truck engine.

   (2)McPharlin’s original figures took no account of the actual costs to the plaintiff of employed drivers and, indeed, no attempt was made to factor these costs in until well into the trial.  It appeared that the financial details provided to him by the plaintiff had never contained that detail but even so I would have expected that, in the context of the disclosed operations of the truck, his attention would have been alerted to this inadequacy in the figures that were proffered.  It was certainly a matter which struck Singh, who raised it in his report of 13 December 2007 and, indeed, it had been commented upon in Holmes’ earlier report of 2 July 2007. 

   It may have been that by that time McPharlin was being directly retained by the plaintiff and had not been immediately provided with Singh’s report because neither of his further reports of 1 January and 6 March 2008 referred to the issue, but I am surprised that notwithstanding Holmes’ mention of the matter (and of Singh’s views about it) in July 2007, McPharlin did not address the question in his further reports of August 2007 and March 2008 and only visited it late in the trial.  The figures involved were significant, indeed, in reducing the scale of the asserted losses. 

   (3)Of course, McPharlin was to a degree bound by his instructions, limited by the information provided to him and was otherwise obliged to assume that the so-called reliance losses would be established, but with minor exceptions they were not.

   (4)I was further assisted by two analyses conducted by Holmes and which were not considered by McPharlin, namely:

   (a)he carried out a careful analysis of ‘lost days’ and other downtime in the truck’s operations which noted significant periods when it was not in use for reasons unconnected with repairs.  Overall, those figures ranged between 34% and 55% and actually increased after 1997 when, on any account, all significant repair delays had ended;

   (b)he further reviewed individual customer response following periods when the truck had not been available due to repairs and showed there was no evidence of lost custom attributable to any such delays.  The plaintiff contended otherwise but adduced no evidence at all as to that.

   (5)I was mindful of the fact that, put at its highest, the plaintiff’s claim was never for lost profits as such but rather for exacerbated losses, but I was not persuaded that it ever reached even those dimensions.  Holmes’ original opinion that any exploitation of the truck would likely exacerbate the plaintiff’s losses rather than reduce them was prescient, it remained constant throughout, was strengthened by the introduction of the driver expenses and was ultimately reflected in the figures which he produced in Appendix 13 of his final report, Exhibit D173, and which I prefer and accept over that of McPharlin (Revised Appendix 13 of P169).

2. Although in view of my preference for the Holmes opinion it is unnecessary now to decide it, I should say that all the evidence I accepted led me to conclude that:

   (1)the plaintiff’s business model was doomed from the outset because it was ill informed and static and did not even reflect the existing market, let alone the need to adapt to the realities of a dynamic market;

   (2)irrespective of the numerous problems experienced with the truck’s operations, the plaintiff’s business structure was destined always to operate at a loss, the level of which increased over time to the point where the business necessarily had to be abandoned.  Indeed, Holmes’ Appendix 13 (Revised (5^th) – Actual Rates) attached to his report D173, amply demonstrated his conclusion that but for repair interruptions, the plaintiff’s losses would in reality have been greater.

3. It follows that I reject any calculation of consequential losses based upon the McPharlin approach and I further reject claims for consequential losses arising out of the two interruptions in 1994 and 1995 which I have discussed. 

4. Accordingly, I am not satisfied that the plaintiff has established any losses directly attributable to the defendant’s misrepresentation and occurring in the period between when it was made and March 1995.

5. It should recover the two amounts of $196 and $2,115 referred to above, but simply in negligence.

6. Otherwise, I have found against the plaintiff’s claims in tort or contract with respect to the March 1995 and all subsequent repairs.  I cannot otherwise attempt to assess the asserted damages, anyway, because:

   (1)such repairs were numerous, of a different nature and on occasions involved different aspects of the truck’s operation;

   (2)any assessment of allegedly resulting losses would necessarily have to isolate or separate a cause and effect for each individual item and there is no evidence of this discrete kind.  At best, Potts’ evidence sought to attribute many of these faults, in a global way, to engine overheating but that thesis necessarily fell away once he was obliged to accept that the 5456 engine setting was an available one.

7. Insofar as any later repairs related to the operations of the Jacobs brake or the Horton fan, any nexus was expressly rejected by Potts.

8. The plaintiff’s damages are therefore assessed at $14,311.

   - Interest

9. I have assessed the plaintiff’s damages at $14,311.

10. McPharlin observed and Holmes agreed those losses should attract simple interest and they applied the former Supreme Court Third Schedule Rules to their calculations. 

11. Without the benefit of recent interest figures and without going into precise calculations, I am minded to fix a sum in lieu of interest which would generally reflect those considerations and a commencement date of 1 August 1994.

12. I award the sum of $15,000 in lieu of interest.

    - Adjustment of damages

13. Having assessed the plaintiff’s damages at a total of $29,311, I have then considered whether or how to take account of the plaintiff’s settlement of its claim against Quinn for the sum of $30,000 plus costs.  As of the time of the trial the quantum of those costs had not been resolved, nor any satisfaction made.

14. The plaintiff’s claim against Quinn had been based upon the FTA, the MA and in contract.  Insofar as that settlement sum might have reflected an agreed assessment of the plaintiff’s claims under the FTA and the MA, it might well be that it cannot recover against Cavill any further sum reflecting the same conduct and the same measure of loss, but I must keep in mind that there was also well available to the plaintiff a claim in contract against Quinn arising out of the August 1994 transaction and that the proper assessment of such damages was a necessarily different process and may have resulted in quite a different award.  In the absence of any evidence on the matter I cannot be satisfied that the plaintiff’s settlement with Quinn was not concluded on an assumed or apprehended contractual liability.

15. Further, I am mindful of the evidence at trial that that settlement had not been carried out.

16. Accordingly, I am not disposed to reduce the plaintiff’s expectation losses by any amount reflecting the terms of its settlement with Quinn.

17. There will be judgment for the plaintiff in the sum of $29,311, inclusive of interest, and I will hear from the parties as to costs.