Instant Colour Pty Ltd v Canon Australia Pty Ltd

[1997] FCA 203

IN THE FEDERAL COURT OF AUSTRALIA   )
  )    No.  WAG.144 of 1996
WESTERN AUSTRALIA DISTRICT REGISTRY )
  )
GENERAL DIVISION                   )

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:INSTANT COLOUR PTY LTD (ACN 009 300 501

First Appellant

BRIAN IVEY

Second Appellant

MATTHEW FERGUSON

Third Appellant

NEVILLE CHARLES QUATERMAINE

Fourth Appellant

and

EDWIN BENNETT IVEY

Fifth Appellant

AND:CANON AUSTRALIA PTY LTD (ACN 005 002 951)

First Respondent

and

CANON FINANCE AUSTRALIA LTD (ACN 003 637 116)

Second Respondent

CORAM:WILCOX, TAMBERLIN and LEHANE JJ

PLACE:    PERTH
DATE:     20 MARCH 1997

EXTEMPORE REASONS FOR JUDGMENT

THE COURT: This is an appeal against a judgment of a Judge of the Court dismissing a claim for damages. The claim depended on numerous representations said to have been made on behalf of the respondents. The learned trial Judge held that some of the representations were proved and that they were made fraudulently, negligently or in breach of s 52 of the Trade Practices Act 1974. He also found the appellants relied on the representations. Having regard to those findings, it came as an immediate surprise that the proceeding was dismissed.

It was also a surprise that the appellants based their case for an award of damages primarily upon the argument that his Honour ought to have awarded them exemplary damages, rather than compensatory damages.  While we accept that there may be commercial cases in which it is appropriate for a Court to award exemplary damages, regardless of the position concerning compensatory damages, such cases will be rare.  In order to justify an award of exemplary damages a Court must be satisfied that the wrong-doer has been guilty of "conduct showing a conscious and contumelious disregard for the plaintiff's rights":   see Brennan J in XL Petroleum (NSW) Pty Limited v Caltex Oil Australia Pty Limited (1985) 155 CLR 448.

We do not think this can properly be said of the present respondents' conduct.  We appreciate that the trial judge found fraud, but this was because the evidence showed the respondents lacked a basis for honest belief in their representations, which primarily concerned the number of copies that could be obtained between service calls, and the quality of the copy "every time".  His Honour did not find the respondents set out deliberately to deceive the appellants and the evidence provides no basis for such a finding.  In our opinion, this is clearly not a case for exemplary damages.

We asked counsel for the appellants whether there was material that would support an award of compensatory damages, even one that involved an element of overall judgment rather than a detailed assessment:  see Enzed Holdings Limited v Wynthea Pty Limited (1984) 57 ALR 167 at 182‑185. Counsel said there was, and referred to a report that contained a summary of the periods during which the various machines acquired by the appellants from the respondents were not operational. He said this reality was in conflict with the respondents' representations regarding the number of copies obtainable between service calls, and invited us to conclude that such a degree of disruption must have caused his clients significant loss.

There is no doubt that, if the situation was as suggested in the report summary, the appellants would have suffered heavy losses justifying a very large award of damages, however difficult it might be to quantify them.  However, after considerable time was spent in argument relating to the report, it turned out that this document was never tendered in evidence; only an amended version was admitted, which showed a lesser incidence of breakdowns.  Even so, the problem of breakdowns remained significant.

An analysis contained in the amended report shows that a service call was needed on average after every 840 copies.  This compares with a representation made to the appellants by representatives of the respondents that a service call would be necessary only every 5,000 to 10,000 copies.  In other words, service calls were 6 to 12 times more frequent than represented.  The problem was that a breakdown effectively rendered the whole shop unproductive until the copier was fixed.  Taking into account the delay that occurred before the technician arrived, and then the necessary repair time, this ordinarily took some 4 to 5 hours.

There was evidence of the practical effect of these problems, primarily given by people who worked in the shops and had to cope with the problems.  They spoke of lengthy customer queues, customers going away dissatisfied and lost sales.  The trial judge held there was abundant evidence of these matters being drawn to the respondents' knowledge over a period of 15 months.  But nothing much happened, possibly because no easy solution was available.

In considering the matter of damages it is important to bear in mind the trial Judge's observation that the appellants' case was not one resting only, or principally, on problems arising from service calls.  It was a case that depended on allegations of false representations concerning the extent of necessary servicing.  His Honour accepted that this representation caused the appellants to acquire the machines, and thereby embark on a business that ultimately proved financially disastrous.

If it was shown that all the business losses stemmed directly from the misrepresentations, they would all be recoverable as consequential losses.  But the evidence does not permit such a conclusion with any degree of confidence.  What can be said - and it is the minimum position, from the appellants' point of view - is that the predicament in which they found themselves because of the false representations was exacerbated by revenue losses flowing from continuing breakdowns.  To the extent that machines were rendered inoperable, revenue was lost.  To the extent that the degree of inoperability was a function of breach of a representation, that was a loss directly related to the breach.

Counsel for the respondents emphasised evidence that the appellants became aware of the problem of frequent service calls before taking up all the machines and before deciding to open shops in the eastern States.  This is a matter of some significance, but must be considered in the context of continuing assurances by representatives of the respondents that a new photo-sensitive drum had been developed and would shortly be available in Australia.  It seems the new drum effected some improvement; nonetheless, service calls continued to run at a rate several times the represented rate.

The difficulty is in quantifying the extent of the loss.  The evidence does not permit any calculation.  It would be pretentious to suggest that we can do more than make a largely impressionistic judgment.     Having regard to the number of machines involved (10), the duration of the problem (nearly 2 years), and our understanding of the effect of a breakdown in each shop where it occurred, it seems to us that it is reasonable to estimate the appellants' total loss at a figure of $200,000. 

We allow the appeal and set aside the orders made by the trial judge.  In lieu thereof we order that judgment be entered in favour of the first appellant, Instant Colour Pty Limited, against the respondents in the sum of $200,000.  As it is not clear that the second to sixth appellants loss of their investments was a direct result of breaches identified by the trial Judge, we make no order in their favour.  The respondents must pay the first appellant's costs of the appeal. 

Having regard to the course indicated above, it is not necessary for us to deal with the respondents' notice of contention. 

As to the costs below, the Court orders that the respondents pay the appellants' costs of the trial.

I certify that this and the preceding six (6) pages
are a true copy of the Reasons for Judgment
of the Court.

Associate:

Dated:    20 March 1997

APPEARANCES

Counsel for the Applicant:       E H S Szabo and B H Taylor

Solicitors for the Applicant:        Karp & Monoghan

Counsel for the Respondent:      R Macau QC and D J Martino

Solicitors for the Respondent:    Clayton Utz

Date of hearing:                 20 March 1997