J & V Pesl v Ray Smith Tractors & Anor

[2007] NSWCA 74

Reported Decision: (2007) Aust Torts Reports 81-883(2007) Aust Contract Reports 90-252

New South Wales

Court of Appeal

CITATION:	J & V Pesl v Ray Smith Tractors & Anor [2007] NSWCA 74
HEARING DATE(S):	26 February 2007
JUDGMENT DATE:	2 April 2007
JUDGMENT OF:	Beazley JA at 1; Ipp JA at 2; Tobias JA at 3
DECISION:	Appeal dismissed with costs.; The respondent's cross-appeal also dismissed with no order as to costs.
CATCHWORDS:	TORTS – Negligence – Essentials of action for negligence – Duty of care – Vendor of goods – Reasonable foreseeability of damage – Heavy machinery – Failure to pass on updated safety warning from manufacturer – Passage of time since purchase longer than normal useful life of product – Magnitude of risk and degree of probability - TRADE AND COMMERCE – Trade Practices Act 1974 (Cth) s 52 – Misleading or deceptive conduct – Where representations factually true at time made, even though not true later
LEGISLATION CITED:	Trade Practices Act 1974 (Cth)
CASES CITED:	Clarke v Army & Navy Co-operative Society Ltd [1903] 1 KB 155 Elliott v Bali Bungy Co (2002) NSWSC 906 Lanza v Codemo [2001] NSWSC 845 Laundess v Laundess (1994) Aust Torts Reports 81-316(61,870) McPherson’s Ltd v Eaton (2005) 65 NSWLR 187 Rivtow Marine Ltd v Washington Ironworks (1973) 40 DLR (3d) 530 Vairy v Wyong Shire Council (2005) 223 CLR 422 Wyong Shire Council v Shirt (1980) 146 CLR 40
PARTIES:	J & V Pesl Pty Limited Ray Smith Tractors Pty Limited Ray Smith (Jnr) Pty Limited
FILE NUMBER(S):	CA 40014/06
COUNSEL:	A: J Glissan QC / L Ellison SC R: P Mahoney SC / G Young
SOLICITORS:	A: Rankin Nathan, Sydney R: Thorntons, Sydney
LOWER COURT JURISDICTION:	Supreme Court
LOWER COURT FILE NUMBER(S):	20269/00
LOWER COURT JUDICIAL OFFICER:	Bell J
LOWER COURT DATE OF DECISION:	16 December 2005
LOWER COURT MEDIUM NEUTRAL CITATION:	[2005] NSWSC 577

CA 40014/06
SC 20269/00

BEAZLEY JA
IPP JA
TOBIAS JA

2 April 2007

J & V PESL PTY LTD v RAY SMITH TRACTORS PTY LTD & ANOR

Judgment

1 BEAZLEY JA: I agree with Tobias JA.

2 IPP JA: I agree with Tobias JA.

3 TOBIAS JA: In or about February 1982 the appellant, J & V Pesl Pty Ltd (Pesl) purchased from the respondents, Ray Smith Tractors Pty Ltd and/or Ray Smith Jnr Pty Ltd (the Smith companies), a Rotavator Heavy Industrial Grass Slasher (the slasher) manufactured by Howard Rotavator Pty Ltd (Howard). Bolted to the metal housing of the gearbox of the slasher was a “U” shaped steel strap, 25mm wide x 56mm thick, described in the Owners Manual for the slasher published by Howard as a “Lifting Bracket”.

4 For the purpose of servicing the cutting blades beneath the chassis of the slasher, Pesl would attach a hook to the lifting bracket which in turn was attached by a chain to one of the teeth on the bucket of a front end loader which would then lift the slasher so that it was suspended at an angle of 45° to the ground. Although some of the weight of the slasher was taken by its wheels which remained on the ground, a significant part of that weight was taken by the lifting bracket attached to the gearbox housing.

5 On 25 March 1998 Mr Ivan Gherm (the plaintiff), in the course of his employment as a mechanic with Pesl, was servicing the slasher as it was suspended in the manner referred to. It would appear that whilst he was underneath the slasher servicing the rotary blades, one of the bolts attaching the lifting bracket to the gearbox housing gave way so that the slasher fell on the plaintiff causing him serious injuries.

6 The plaintiff commenced proceedings against Pesl claiming damages. Pesl instituted cross-claims against Howard as manufacturer and the Smith companies as the supplier of the slasher. The principal proceedings between the plaintiff and Pesl were settled and a consent judgment was entered in the plaintiff’s favour in the sum of $1,065,725, including workers compensation payments. The cross-claim against Howard was also settled.

7 Accordingly, the proceedings before Bell J, the primary judge, related to Pesl’s cross-claim against the Smith companies for contribution or indemnity.

The nature of Pesl’s cross-claims against the Smith companies

8 Pesl’s cross-claims against the Smith companies were for first, negligent misrepresentation; second, misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) (the TPA) and, third, negligence in failing to bring to Pesl’s attention a service bulletin received by the Smith companies from Howard in or about January 1993. The Service Bulletin was in the form of a safety warning with respect to the use of the gearbox lifting strap of the slasher as a means of support or for the purpose of lifting the whole slasher.

9 The first two claims were founded upon alleged representations relating to the use of the lifting bracket to support the weight of the slasher including when it was suspended from the ground for the purpose of being serviced. Relevantly, those representations were to the effect that the slasher was able to be lifted by means of a chain attached to a hook fed through the lifting bracket or strap bolted to the gearbox housing; the unit could then be lifted by means of a tractor bucket while its back wheels were chocked; and that the slasher could then be safely serviced by utilising that method to suspend it at a 45° angle to the ground with its wheels still on the ground.

The relevant findings of the primary judge

10 Mr Joseph Pesl (a director of Pesl) and Mr Raymond Smith (a director of each of the Smith companies), gave evidence before her Honour. She considered (at [9]) that both witnesses were doing their best to give truthful evidence and that there was nothing that reflected adversely on their credibility or reliability.

11 Between 1977 and 1999 Mr Smith operated the business of selling new and second-hand tractors and agricultural equipment trading under the name of Ray Smith Tractors. For all intents and purposes that business was operated by one or other of the Smith companies. Part of that business was the selling of agricultural equipment manufactured by Howard. The Smith companies acted as a distributor of that equipment from approximately 1977 to when it lost the dealership in 1996.

12 Pesl operated the business of a commercial contractor whose work included earth moving, concreting and post-hole digging. In January 1982 Pesl purchased a number of items of equipment from Ray Smith Tractors including the slasher. As the slasher was a heavy piece of industrial equipment, Mr Smith did not keep it in stock. Accordingly, he placed an order for the slasher with Howard who then arranged for it to be delivered direct to Pesl and for instructions to be given to Mr Pesl in its operation by the employee of Howard who delivered it. An issue arose before her Honour as to whether Howard or its employee who gave those instructions (and on which the representations alleged in the cross-claim were founded) was acting as agent for the Smith companies. She held (at [58]) that agency had not been established either at common law or in the extended form provided for in s 84(2) of the TPA.

13 Nevertheless, her Honour found that when Howard’s employee delivered the slasher, it was lifted by a crane on the tray of the delivery truck by means of a chain attached to a hook which passed under the lifting bracket. When the slasher was suspended from the crane at approximately 45° to the ground, the deliveryman informed Mr Pesl that the rear wheels should be chocked with a piece of timber and that it could be serviced in this position.

14 While the slasher was so suspended, its weight being taken by the lifting bracket, the deliveryman and Mr Pesl stood under it and the former explained to Mr Pesl how to service the blades attached to a bar at its base. This method of servicing the slasher – suspending it at an angle to the ground with the weight being taken by the lifting bracket – was the only method for servicing the cutter blades which was demonstrated.

15 Her Honour found (at [17]) that Mr Pesl had had considerable experience in the use of heavy equipment. Although he considered that it was dangerous to service the slasher whilst suspended in the fashion demonstrated by the Howard deliveryman, he relied on the instructions given to him and utilised that method for the purpose of changing the blades six times between its purchase and the time of the plaintiff’s accident, which was the seventh occasion on which the slasher blades were serviced by the adoption of this method of suspension.

16 The primary judge also found (at [18]) that it was also known to Mr Pesl that the slasher could be lifted from the ground by means of a three-point linkage system. However, Mr Pesl did not consider that raising the slasher by this method would elevate it sufficiently to allow a mechanic access to the blades.

17 Mr Smith’s evidence was that the slasher was a heavy piece of industrial machinery purchased mainly by large commercial contractors such as Pesl or councils. He was aware that both these types of purchasers engaged their own mechanics to service their equipment and that they were experienced in doing so. As far as Mr Smith was concerned, the only way to lift the slasher to enable the blades beneath it to be serviced was by use of the three-point linkage system. He denied that he had ever given a demonstration to any purchaser of the slasher by suspending it at a 45° angle to the ground by means of the lifting bracket attached to the gearbox housing. He considered that the three-point linkage method of lifting was the most appropriate as it was the strongest point on the slasher and able to take its not inconsiderable weight.

18 At no time over the 16 years between the time of its purchase and the date of the plaintiff’s accident did Pesl ever service the bolts attaching the lifting bracket to the gearbox housing. The bolts in question were found by her Honour (at [26]) to have a loading tensile strength of 3,380kg with an expected nominal failure load equal to 4,640kg. The overall weight of the slasher was 608kg, which was quite low compared to the expected failure load of the bolts. Nevertheless, after the accident, it was found that one of the bolts attaching the lifting bracket to the gearbox housing was in very poor condition with rust evident in its thread and obvious wear and mechanical damage. It was this bolt that had failed, causing the slasher to fall upon the plaintiff. The expert evidence was to the effect that the bolt that failed appeared to have partially failed some time before the accident, probably due to fatigue.

19 Between 1982 and 1993 there had been no contact between Mr Pesl and Mr Smith or his companies. Mr Smith was unaware as to whether Pesl was still operating in 1993 and he had no knowledge of the method of lifting the slasher adopted by Pesl for the purpose of servicing its blades. However, the Smith companies’ records dated back to 1982 and although he had not sold many industrial slashers, it would not have been difficult for him to identify past purchasers of this type of slasher had he wished to do so. Nevertheless, it was Mr Smith’s evidence that customers such as Pesl performed their own servicing of their own equipment and that industrial slashers of the type here in question, because they were utilised for the performing of heavy work, did not “last that long”: contractor slashers and council slashers changed them generally “every five years at the most”: Black 114 R-S; 122 K-L.

The receipt of Service Bulletin 37

20 In early 1993 Mr Smith received from Howard a document headed SERVICE BULLETIN 37. The stated purpose of these service bulletins was to update Howard dealers and their staff with respect to procedures in operations to enabling the servicing and repair of all models of Howard Rotaslashers to be carried out quickly and effectively. In this respect, the Smith companies were in possession of a Service Procedure Manual issued by Howard to its dealers which stated in its “Introduction” that because of Howard’s policy of continuous improvement, the Manual was always to be used in conjunction with the latest service bulletins, which were distributed to all Howard agricultural dealers when they were first printed, although back issues were available from the company on request. Service bulletins were to be retained in the back of the manual and a note added to the index of each section affected so that a convenient record of modification could be kept.

21 So far as purchasers of Howard Rotaslashers were concerned, they were provided with an Owner’s Manual, but there was no reference in that manual to it being updated by the service bulletins which, as the Service Procedure Manual made clear, were compiled for the benefit of Howard dealers and their staff for the purpose of enabling the servicing and repair of all models of Howard Rotaslashers. Furthermore, there was nothing in the Service Procedure Manual itself that would have suggested to its dealers such as the Smith companies that it was also provided by Howard or intended to be provided by Howard to the end purchasers of the equipment to which it related.

22 Critical to the determination of the present case was Service Bulletin 37 (the Service Bulletin). I therefore set it out in full:

ROTASHASHER BEARBOX LIFTING STRAPS

For safety reasons the gearbox lifting straps P/N 74905 and 74998 fitted to the HD and EHD Series Rotaslashers have been deleted.

Although capable of supporting the gearbox, the bolts attaching the bearbox lifting straps do not have the required design safety factors to qualify as ‘lifting equipment’ for the whole Rotaslasher, which is what they might be mistaken for. The risk of failure increases if service personnel replace the attaching bolts with damaged or weaker grade ones.


SAFETY WARNING


1. DO NOT USE the gearbox lifting strap to support the Rotaslasher.
2. REMOVE all gearbox lifting straps from existing machines.

23 Beneath the printed part of the Bulletin was a sketch of a slasher depicting a hook and chain attached to the lifting bracket. The chain and hook were contained within a circle with a bar across it. The diagram was found by her Honour (at [32]) to convey that lifting the slasher by suspending it from the lifting bracket was prohibited.

24 It was Pesl’s case with respect to its claim in negligence against the Smith companies, that their failure to bring the Service Bulletin or the substance thereof to Pesl’s attention was negligent.

The primary judge’s determination of the negligence issue

25 Pesl submitted that, in January 1993 when the Smith companies received the Service Bulletin, they came under a duty to warn Pesl that the slasher might be dangerous if lifted by the lifting bracket. On the question of whether such a duty should be imposed in circumstances where the sale of the slasher occurred 11 years prior to the Smith companies becoming aware of the potential danger referred to in the Service Bulletin, reliance was placed upon the judgment of the Supreme Court of Canada in Rivtow Marine Ltd v Washington Ironworks (1973) 40 DLR (3d) 530. It was Pesl’s submission that that case was authority for the proposition that there was a duty on the vendor/distributor of goods to warn of dangers in the use or operation of equipment sold years earlier when the distributor/vendor is seized with knowledge of the relevant danger.

26 It was further submitted by Pesl that on the authority of Clarke v Army & Navy Co-operative Society Ltd [1903] 1 KB 155, a duty arises independently of contract on the vendor of goods to take reasonable care to prevent injury to purchasers by warning of possible dangers of which the vendor is aware and of which, presumably, the purchaser is not. Her Honour (at [67]) considered that the duty identified by the court in Clarke, arising out of the relationship between vendor and purchaser, arose at the time of sale: whereas she was concerned with whether in the circumstances of the present case, a duty to take reasonable care to warn of the potential danger of the slasher was to be imposed 11 years after it was purchased.

27 Her Honour’s conclusion with respect to that issue was stated in the following terms:

“68 I consider that the Smith companies were not under a legal duty to warn Pesl of the dangers associated with the use of the lifting bracket to suspend the slasher when they became aware of the contents of Service Bulletin 37. The sale had taken place eleven years earlier. There had been no contact between Pesl and the Smith companies in the intervening years and the Smith companies’ had no knowledge of what, if any, use Pesl was making of the slasher. The Smith companies were not on notice that Pesl were using the lifting bracket to support the weight of the slasher while it was serviced. Assuming that a duty arises, I consider that the Smith companies were not in breach of it. In my view a reasonable person in the Smith companies’ position would not have foreseen that failing to pass on the manufacturer’s warning (which it received as a current supplier of the slasher) involved a risk of injury to persons who had purchased the slasher eleven years earlier. In coming to this conclusion I note that while Service Bulletin 37 conveyed that there was a risk associated with using the lifting bracket to support the slasher it did not put the reader on notice that persons were likely to service the slasher by standing under it when it was suspended in this way.”

The question of when a duty of care is owed by a vendor to a purchaser of goods

28 This issue was recently considered in some detail by this Court in McPherson’s Ltd v Eaton (2005) 65 NSWLR 187 where it was held that a non-manufacturing distributor of goods who is ignorant of a dangerous defect in those goods, does not owe the same duty of care as that of a manufacturer. There must be “something more”. The primary judge was unaware of this decision which, coincidentally, was published on the same day as that of her Honour’s, namely, 16 December 2005.

29 Ipp JA, with whom Mason P and Hodgson JA agreed, delivered the leading judgment. His Honour dealt with the question: Does a general duty of care arise merely because a retailer sells to the public? at 198 [59]–202[84]. He acknowledged that the leading case in this State on the liability in negligence of a retailer who is no more than a conduit of the manufacturer’s products was Laundess v Laundess (1994) Aust Torts Reports ¶81-316(61,870) where Mahoney JA, with whom Meagher and Powell JJA agreed, observed (at 61, 874):;

“In my opinion, a vendor of goods does not, as such, have a duty in negligence to a purchaser. There must be something more than a mere relationship of vendor and purchaser. The problem is to define what more is necessary and when the duty arises.”

Mahoney JA further said (at 61,876):

“I do not think that that additional factor can be stated in a simple formula of words. The circumstances in which a duty of care will be imposed upon a vendor of goods must in my opinion depend upon the nature of the goods, the risk involved and the circumstances of the case.”

30 Ipp JA then referred to a number of authorities including Clarke in which a duty of care was established and in each of which it was demonstrated that the vendor knew of the defect in or the cause of the danger relating to the particular product the subject of the sale. Thus in Clarke, the vendor of a tin containing disinfectant powder was held liable to a person who opened it. The ground of liability was that the vendor actually knew that the tin was likely to cause danger to a person opening it unless special care was taken. As Ipp JA noted (at 199 [63]), the decision rested on the actual knowledge of the vendor.

31 At 201 [77] Ipp JA referred to the decision of Wood CJ at CL in Lanza v Codemo [2001] NSWSC 845 where the learned Chief Judge said (at [171]):

“…the existence of the duty depends upon the nature of the goods sold, the risk involved and the extent to which that risk was known to, or should have reasonably been known, to the supplier.”

32 At 201 [78] his Honour referred to the decision of Young CJ in Eq in Elliott v Bali Bungy Co (2002) NSWSC 906 where the Chief Judge held that the general duty of retail dealers was to warn of dangers of which they knew or had reason to know but not of which they “should have known”. Ipp JA observed that he understood his Honour to use the phrase “should have known” in the particular context as meaning “duty-bound to know”.

33 As to the criteria governing the enquiry whether a person “ought to know”, Ipp JA at 203 [93] observed that that expression means

“the knowledge that a person, acting reasonably in all the circumstances of the case should know.”

I assume that his Honour intended by use of the word “knowledge” to refer to “facts and matters”.

34 When considering the “circumstances of the case” Ipp JA noted, inter alia, (at 203-204 [95]) that

“… a finding that a defendant ought to know of the risk of particular harm may lead to the existence of duties to take reasonable care, to investigate, to do research or to warn. Such a finding, and the existence of such duties are based to a significant degree, on reasonable foreseeability and depend largely on whether it is reasonably foreseeable that the risk that should be investigated, research or warned against might materialise.”

35 Mason P agreed with Ipp JA but ventured (at 189 [3])

“some propositions as to the framework of the issue presented in an attempt to describe ‘something more’ “.

36 After referring to a number of authorities and noting the difficulty in defining the nature or scope of any particular duty which depended on a particular relationship between the parties, the President observed (at 192 [17]):

“In my view, it is both feasible and just to impose a particular content on the distributor’s duty of care, confining it to one requiring reasonable care in the avoidance of personal injury by reference to what the distributor knows or has reason to know.”

37 His Honour noted (at 193 [23]) the distinction between the expression “ought to know” and “has reason to know” as explained in the American Law Institute, Restatement of the Law Second: Torts 2d at Chapter 401:

“The words ‘reason to know …’ are used to note the fact that the actor has information from which a person of reasonable intelligence or of a superior intelligence of the actor would infer that the fact in question exists or that such person would govern his conduct upon the assumption that such fact exists. The words ‘reason to know’ do not impose any duty to ascertain unknown facts, and are to be distinguished from the words ‘should know’.”

38 The President then observed (at 193 [24]) that this formulation of the content of the duty of reasonable care was preferable to describing it in terms of a “duty to warn”. For some situations, his Honour noted, warning would be an adequate response. Reasonable care with reference to some dangers might even require the product to be taken off the shelves. Of course, his Honour’s reference to a response to the duty relates to the issue of breach.

39 Finally, the President observed (at [25]) that there may be a need in some cases to distinguish between different categories of purchasers. He exemplified a child who purchases a flammable substance as generating a categorically different duty to that owing to an adult purchaser.

40 Accordingly, the issue before her Honour as to the existence of a duty of care needed to focus upon whether the Smith companies knew or should have known that it was dangerous for the slasher to be lifted off the ground by using only the lifting bracket attached to its gearbox housing. Absent actual knowledge of such a danger, then on Ipp JA’s formulation in McPherson, a duty to take reasonable care arose if in the circumstances of the case there should be imported to the Smith companies knowledge that lifting the slasher by the lifting bracket could be dangerous in that there was a reasonably foreseeable risk of harm to a person who was working underneath it. The answer to that question may depend upon whether it was reasonably foreseeable that that risk, unless investigated, researched or warned against, might materialise.

41 As I have indicted, the existence of such a duty of care on the part of the Smith companies depended upon their actual or imputed state of knowledge with respect to the use of the lifting bracket for the purpose of supporting the slasher at a 45 angle to the ground to enable access beneath it to the cutting blades.

42 If the duty did exist then its scope or content must be determined in the light of that knowledge. Whether there was a breach of the duty depended on the considerations referred to in the judgment of Mason J in Wyong Shire Council v Shirt (1980) 146 CLR 40 (Shirt) at 47-48.

43 In [68] of her judgment, the primary judge considered that the Smith companies did not owe a duty of care to Pesl on receipt of the Service Bulletin as first, the sale had taken place 11 years earlier; second, there had been no contact between Pesl and the Smith companies in the intervening years; third, the Smith companies had no knowledge of what, if any, use Pesl was making of the slasher; and fourth, the Smith companies were not on notice that Pesl was using the lifting bracket to support the weight of the slasher while it was being serviced.

44 With respect to her Honour, in the light of this Court’s decision in McPherson, the factors to which she refers may be relevant to the question of breach but are not, in my view, relevant to the question of the existence of a duty of care. However, in order to determine the duty issue, it is sufficient to consider the terms of the Service Bulletin on its face as to what it conveyed and Mr Smith’s reaction to its receipt. I now turn to his evidence on that issue.

Did the Smith companies owe Pesl a duty of care?

45 In his evidence Mr Smith agreed that Howard’s practice was to update its Service Procedure Manual with service bulletins. With respect to his receipt of the Service Bulletin the following exchange occurred (at Black 108 N-S):

“Q. When you saw that Howard was issuing this safety warning not to use the gearbox lifting strap to support the slasher, you must have appreciated that some people were using the straps that way; is that right?
A. Apparently, yes.
Q. And you must also have appreciated that that use was dangerous?
A. Yes. An operator would not lift on that, if you were working on a machine that size, and it weighs nearly a tonne, that slasher.”

46 After agreeing that the text under the words “Safety Warning” told people to remove all gearbox lifting straps from existing machines, and accepting that the Service Bulletin was a safety warning, the following exchange then took place (at Black 109 O-T):

“Q. You realise the warning instructed people to remove the lifting straps: do you see that?
A. Yes.
Q. And that’s something you were conscious of when you read the bulletin after the rep had handed it to you; is that right?
A. Correct.
Q. And you must have been conscious that there were people to who you’d sold slashers with those straps who would need to know what Howard was saying about the straps?
A. Yes.”

47 To the same effect was the following question and answer (at Black 113 V-X):

“Q. Once you were told by Howard that this method of lifting the slashers was being used, you must have appreciated that people’s lives could be in danger if they got underneath the slashers when they were lifted by this strap that wasn’t safe?
A. Correct.”

48 When it was suggested to Mr Smith that he would not let a man underneath the slasher while it was being lifted into the position described to him by using the gearbox lifting bracket in order to remove the bar and the blades, he responded (at Black 121 S-T):

“No-one could get in that position, not with a tonne of weight, no-one would do that, that is why I’m surprised Mr Pesl done it.”

49 The plain terms of the Service Bulletin and Mr Smith’s appreciation that it was warning of the danger to human life and limb of using the lifting bracket attached to the gearbox housing to lift the slasher to gain access to its underside, constituted actual knowledge on the part of the Smith companies that the slasher to which the Service Bulletin referred contained a defect which gave rise to a reasonably foreseeable risk of harm. The terms of the Service Bulletin further notified its readers that there might be purchasers or users of the slasher who, albeit mistakenly, were lifting the slasher by employing the lifting bracket for that purpose.

50 That state of actual knowledge on the part of the Smith companies was, therefore, the “something more” necessary to impose a duty of care on those companies to past purchasers of the slasher. The present case was not, therefore, one requiring an inquiry into what the Smith companies ought to have known. Accordingly, her Honour was in error in finding that there was no such duty of care.

51 The scope or content of that duty was governed by the nature and extent of the Smith companies’ knowledge of the defect and the safety risk it posed. In my opinion, the duty was one requiring reasonable steps to be taken by the Smith companies to avoid the risk of harm occurring to those customers who had purchased the particular slasher from them and who, in ignorance of the defect in the lifting bracket, might reasonably be foreseen to be using it in the manner now deemed to be unsafe. Whether there was a breach of that duty with respect to Pesl depended on a consideration of the Shirt factors in their application to Mr Smith’s knowledge with respect to Mr Pesl.

Did the Smith companies breach their duty of care to Pesl?

52 Mr Pesl’s evidence (at Black 29Y-30E) was first, that no one had told him prior to the accident that using a hook through the lifting bracket to hold the slasher up was not safe and, second, that had he been told that the lifting bracket was not to be used to hold the slasher up because it was not safe, he would never have used it for that purpose. However, as he was unaware of the safety issue in using the lifting bracket, he used it to lift the slasher for the purpose of servicing its cutting blades (see [16] above).

53 Of course, Mr Smith was unaware that Mr Pesl was servicing the slasher by this means. Further, immediately before and even after he received the Service Bulletin, he had no actual knowledge of any slasher previously sold by him being serviced by being lifted by the lifting bracket attached to the gearbox housing. He certainly did not lift it using that method: on the contrary, he used the three-point linkage system for that purpose (Black 108 I).

54 Mr Smith was taxed as to why he did not send out a copy of the Service Bulletin to those persons to whom he had sold a slasher and to which the Service Bulletin referred given that it related to a question of safety. In this context the following exchange took place:

“Q. But you didn’t send out to anyone you’d sold such a slasher to this safety bulletin?
A. No. Howard do them direct. We only get one sheet. Anything that’s like a recall or a safety issue Howard send them direct. We don’t come into that.
Q. Oh. Who told you that?
A. Howard.
Q. Did they? What man at Howard told you that?
A. I suppose you’d have to talk to one of the reps over there, but Howard just sent all this – like, a recall or anything like this comes back from Howards. It’s like a motorcar: if you’ve got a motor car, the manufacturer sends you the recall.
Q. A recall – but this wasn’t a recall, was it?
A. No.
Q. So the rep told you a recall Howard would communicate direct, did he?
A. A recall?
Q. Yes.
A. No, there’s no recall. It’s a safety warning.”

55 Mr Smith was then referred to the Service Procedure Manual for the slasher. In particular, he was referred to the first and second sentences of the “Introduction” which, for ease of reference I repeat:

“This manual has been compiled to give HOWARD dealers and their staff a procedure in operations to enable the servicing and repair of all models of HOWARD Rotaslashers, Rotacutters and Rotamowers to be carried out quickly and effectively.
Because of our policy of continuous improvement, this manual should always be used in conjunction with the latest Service Bulletins covering the Rotaslashers, Rotacutters and Rotamowers . These Service Bulletins are distributed by us to all HOWARD agricultural dealers when they are first printed, and back issues are available from us on request. Service Bulletins should be retained at the back of this manual, and a note added to the index of each section affected, so that it a convenient record of modifications may be kept.”

56 There then followed seven sections of the Manual, of which Section Four related to “Cutting Heads & Blades”. That section dealt with the removal of the two, three or four blade cutting head (depending on the slasher model) and its reassembly, of which the first step was stated as follows:

“(i) Raise machine on tractor hydraulics, for safety, support machine on wooden blocks.”

There was no suggestion that it should be supported by using the lifting bracket.

57 It was then put to Mr Smith that the passages in the “Introduction” to the Service Procedure Manual to which I have referred above, detailed the method Howard had adopted to get service bulletins out to customers, namely, by having the dealers distribute them. The following exchange then occurred (at Black 112 G-113 C):

“Q. I’m suggesting to you that Howard’s practice was to update with service bulletins the service manual; is that right?
A. That’s right, yes.
Q. And the way they updated it was to was to send the service bulletins to the dealers for the dealers to send on to customers?
A. An update?
Q. Yes.
A. If we sold 100 slashers, you’d never be able to get them out. Everything come from Howard on any update to a customer or to a dealer, we’d get that.
Q. But you see, Mr Smith, this is the manual that was normally given to the purchaser of the equipment; is that right?
A. Correct, that’s right .
Q. And you would have a copy of that manual in your---
A. A service manual, yes.
Q. Howard were telling all the people who were going to read this manual that there would be updates and that dealers would be sent them; is that right?
A. We’d get an update, yes.
Q. It doesn’t say Howard sending them directly to the customers?
A. That’s on recalls.
Q. No, this manual doesn’t say anything about Howard sending out updated service bulletins to customers, does it?
A. No.
Q. And one of the purposes of sending the updates was that you could then update the information for servicing, wasn’t it?
A. For our mechanics, yes.
Q. Or for the mechanics of the customer, if the customer was servicing the equipment?
A. We can’t – you cannot tell a customer what to do with their tractor. If anything goes wrong we finish up in court. No-one can tell anyone how to service a tractor or a slasher. All our manufacturers told us that. We cannot give advice on what to do.” (Emphasis added)

58 The answer given by Mr Smith in the above exchange which I have emphasised, is significant. As I have already noted, there were two different manuals. One was the Owners Manual which contained the manufacturer’s warranty and which was provided by Howard to the purchaser of the relevant equipment. It contained no reference to the Service Procedure Manual or to the service bulletins. As the passages from the “Introduction” to the Service Procedure Manual make clear, it was compiled for the benefit of Howard dealers and their staff. This notwithstanding, Mr Smith gave an affirmative answer to the suggestion that the Service Procedure Manual was normally given (inferentially by Howard as the manufacturer of the slasher) to the purchaser of the equipment to which it referred. Furthermore, he gave that evidence during his cross-examination by counsel for Pesl in answer to a question which itself asserted that the Service Procedure Manual was normally so provided.

59 It is therefore of particular relevance to the question of breach of duty that Mr Smith believed that Howard normally gave the Service Procedure Manual to the purchaser of the relevant equipment. If this was so, then it would follow, given the purpose of the service bulletins (that is, to be read with and form part of the Service Procedure Manual) that they would be forwarded by Howard to the purchasers of the relevant equipment to be placed with their copy of the Manual. This was in fact the case as her Honour found (at [40]).

60 It was probably in this context that in the exchange referred to in [54] above, when asked whether he sent out a copy of the Service Bulletin to anyone to whom he had sold a slasher to which the Bulletin referred, he responded “No, Howard do them direct”. This response was consistent with her Honour’s finding (at [41]) that Mr Smith was only provided with one copy of the Service Bulletin for the purpose of his own business and that there was no instruction in that Bulletin or, for that matter, in the Service Procedure Manual, for the dealers to distribute or otherwise bring its contents to the notice of their customers, past or present. It is also consistent with Mr Smith’s evidence that that Manual was normally given, inferentially by Mr Howard, to the purchasers of the slasher.

61 Given that Mr Smith was aware that commercial contractors such as Pesl engaged their own mechanics to perform their own servicing, it is not surprising that he agreed in his cross-examination that a copy of the Service Procedure Manual together with the service bulletins would be directly provided by Howard to the purchaser of a new slasher. He confirmed his knowledge of that practice by Howard when the cross-examiner, in referring Mr Smith to the “Introduction” to that Manual, asked (at Black 111U-X):

“Q. That was a method Howard used to get service bulletins out to customers, by having the dealers distribute them, wasn’t it?
A. The book comes with the new machine.
Q. Yes?
A. This is a service manual that is delivered with your new slasher.”

62 This evidence is to be contrasted with that given in chief by Mr Smith at Black 100X-101I, the substance of which was that when the Smith companies delivered the equipment itself, the Owners Manual or information book containing the manufacturer’s warranty was also delivered with it. However, that evidence did not detract from that given by Mr Smith in cross-examination in the context of a large piece of industrial equipment which was directly delivered by the manufacturer, Howard, to a customer such as Pesl who was an experienced commercial contractor who carried out its own servicing of that equipment.

63 It is in the context of the foregoing evidence that it is necessary to consider whether the Smith companies were in breach of their duty of care. The primary judge answered this question in the negative (at [68]) upon the basis that a reasonable person in the position of the Smith companies would not have foreseen that failing to pass on the manufacturer’s warning involved a risk of injury to persons who had purchased the slasher 11 years earlier. Further, she observed that while the Service Bulletin conveyed that there was a risk associated with using the lifting bracket to support the slasher, it did not put the reader on notice that persons were likely to service the slasher by standing under it when it was suspended in that way..

64 So far as her Honour’s primary reason for finding no breach is concerned, it cannot be the case that because the slasher had been purchased 11 years before the Service Bulletin was received, it could not be reasonably foreseeable that failing to pass on the manufacturer’s warning could involve a risk of injury to a person who had purchased the slasher at that time. In other words, of itself the fact that the slasher was purchased 11 years prior to the receipt of the Service Bulletin is of no consequence. On the other hand the passing of time may bear upon Mr Smith’s knowledge of the factors relevant to the Shirt balancing exercise.

65 In the light of Mr Smith’s evidence there can be no doubt that his reading of the Service Bulletin conveyed to him that use of the lifting bracket attached to the gearbox housing for the purpose of lifting the whole slasher constituted a danger to a person who sought to service the slasher from underneath given that by its very terms, the Bulletin stated that the bolts attached to the gearbox lifting strap did not have the required design safety factors to qualify as “lifting equipment” for the slasher, which is what it might have been mistaken for.

66 As Mr Smith was also conscious of the fact, contrary to his understanding of the proper method by which the slasher should be lifted, that some people were using the lifting bracket for that purpose, it was reasonably foreseeable that there was a risk of serious injury to those who did so. The question which then arose was whether a reasonable person in Mr Smith’s position would have foreseen that his failure to draw the terms of the Service Bulletin to the attention of those of his customers who had acquired the type of slasher to which the Bulletin referred involved a risk of injury to the class of persons to which the plaintiff belonged, namely, the mechanics of commercial contractors or councils who acquired this type of industrial equipment and who performed their own servicing of that equipment.

67 It is only if that question is answered in the affirmative that, as Mason J observed in Shirt (at 47), the Court must determine what a reasonable person would do by way of response to that risk. That response calls for a consideration of the magnitude of the risk, the degree of the probability of its occurrence as well as the expense, difficulty and inconvenience of alleviating action and other conflicting responsibilities which a defendant might have.

68 In the present case, given that Mr Smith had a record of Pesl’s acquisition of the slasher, it would not have been difficult for him to have ascertained that first, Pesl was still carrying on its contracting business; second, it was still using the slasher acquired from the Smith companies in 1982; and third, it was suspending the slasher at an angle of 45 to the ground by use of the lifting bracket attached to the gearbox housing in a manner which was arguably contrary to the safety warning contained in the Service Bulletin. The question, therefore, is whether he was in breach of duty in not taking these steps.

69 However, there was an antecedent question which her Honour was required to ask herself, namely, whether a reasonable person in Mr Smith’s position would have foreseen that his failure to distribute a copy of the Service Bulletin to contractors such as Pesl who had acquired a slasher from him prior to 1993, involved a risk of injury to their employees who were engaged to service that equipment and who might be using the lifting bracket to lift the slasher off the ground for that purpose.

70 As Mason J observed in Shirt (at 48), a risk of injury which is remote in the sense that it is extremely unlikely to occur, may nevertheless constitute a foreseeable risk. A risk that is not far-fetched or fanciful is real and therefore foreseeable. In this context, the test (as has been said many times) is an undemanding one. Even so, there is much to be said in the circumstances of the present case in favour of the conclusion that there was no such risk. This is primarily due to the fact that Mr Smith knew or at the very least understood that Pesl would have been provided with the Service Procedure Manual at the time of its purchase of the slasher and, therefore, would have received, and presumably noted, the safety warning contained in the Service Bulletin with respect to lifting the slasher by using the lifting bracket attached to the gearbox housing. On the foregoing basis there was no breach by the Smith companies of their duty of care.

71 However, let me assume that there was a risk which, although extremely unlikely, was not far-fetched or fanciful that Pesl’s employees engaged to service the slasher may not have been able to gain access to the Service Procedure Manual or the service bulletins which had been provided by Howard to Pesl at the time the slasher was delivered in 1982. On this basis the question posed in [70] above could be answered in the affirmative.

72 However, as Mason J then noted, the existence of a foreseeable risk of injury does not in itself dispose of the question of breach of duty. The magnitude of the risk and its degree of probability remain to be considered together with other relevant factors.

73 There is no doubt that in the present case the magnitude of the risk was high in that if one of the bolts attaching the lifting bracket to the gearbox housing failed whilst the slasher was suspended and there was a person servicing the blades beneath it, then that person would clearly be at risk of sustaining serious injuries. On the other hand, the probability of that occurring was remote in the sense that it was unlikely in the extreme that an experienced contractor such as Pesl would permit its trained mechanics, or that those mechanics would place themselves, in a position whereby there was a risk of the bracket failing when the slasher was suspended for the purpose of having its blades serviced. This is so notwithstanding that the Service Bulletin drew attention to the fact that the bracket might mistakenly be used for that purpose.

74 But the critical factors in determining the Smith companies’ reasonable response to the identified risk are the following:

(a) Mr Smith was aware that commercial contractors such as Pesl who acquired large pieces of industrial equipment such as the slasher not only carried out their own servicing of the equipment, but also engaged experienced and trained mechanics to do so;

(b) As those contractors carried out their own servicing it would be mere common sense that they would have needed access to the manufacturer’s Service Procedure Manual for the slasher. In the present case, the slasher was delivered direct by Howard to Pesl and, according to Mr Smith, with all necessary documentation which, it can be inferred, would include the Manual;

(c) It follows that as far as Mr Smith was aware, Pesl had received a copy of the Service Procedure Manual and, therefore, would also have received a copy of the Service Bulletin direct from Howard. His confidence in that knowledge would be confirmed by the fact that there was no suggestion in the Bulletin that its contents should be drawn to the attention of the dealer’s commercial customers who had acquired the slasher at any time prior to 1993;

(d) Mr Smith must also have been aware that the Service Procedure Manual expressly provided for the slasher to be supported on blocks when the cutting blades were removed for service (see [56] above). This is consistent with his evidence that the only way to lift the slasher to enable the blades to be serviced was by way of the three-point linkage system (see [17] above).

(e) As her Honour expressly found, Mr Smith was not given any instruction by Howard to distribute the service bulletins to past purchasers of the slashers with lifting brackets and was given only one copy for the purpose of his own business.

(f) Although Mr Smith was aware or at least understood that Howard distributed copies of its service bulletin direct to customers who had purchased the slasher, he was unaware of the fact, as found by the primary judge, that a copy of the Service Bulletin had not been provided to Pesl. This was because by 1993 Howard did not have records of purchases of its equipment for the period prior to 1986. Again, there was no suggestion in the Service Bulletin that its contents should be drawn to the attention of the dealer’s commercial customers who had acquired a slasher prior to 1986. This was a matter of particular significance.

(g) Finally, Mr Smith was unaware as to whether Pesl was still in business as he had not had any contact with Mr Pesl since 1982; he was unaware of the instructions given by Howard’s deliveryman when the slasher was first delivered to Pesl; and reasonably believed (there being not suggestion in the evidence to the contrary) that due to the heavy work which the industrial slashers performed for commercial contractors such as Pesl, it would have been replaced after five years “ at the most ”.

75 As I have noted in [68] above, I accept that on receipt of the Service Bulletin there would have been little, if any, expense, difficulty or inconvenience in Mr Smith ascertaining that Pesl was still operating its business; was still using the slasher; was servicing the cutter blades by lifting it using the lifting bracket for that purpose and that that method of lifting the slasher carried with it a risk of the bracket failing resulting in the slasher falling on top of whomever was underneath it.

76 At this point one must remind oneself that the inquiry as to the application of the Shirt considerations is, as Hayne J emphasised in Vairy v Wyong Shire Council (2005) 223 CLR 422 at 461 [124], prospective and that it would be wrong to focus exclusively upon the particular way in which the accident that has happened, whereby the plaintiff was injured, came about.

77 His Honour continued:

”…In particular, the examination of the causes of an accident that has happened cannot be equated with the examination that is to be undertaken when asking whether there was a breach of a duty of care which was a cause of the plaintiff’s injuries. The inquiry into the causes of an accident is wholly retrospective. It seeks to identify what happened and why. The inquiry into breach, although made after the accident, must attempt to answer what response a reasonable person, confronted with a foreseeable risk of injury, would have made to that risk. And one of the possible answers to that inquiry must be ‘nothing’. “

78 At 46 [126] his Honour further observed:

”When a plaintiff sues for damages alleging personal injury has been caused by the defendant’s negligence, the inquiry about breach of duty must attempt to identify the reasonable person’s response to foresight of the risk of occurrence of the injury which the plaintiff suffered. That inquiry must attempt, after the event, to judge what the reasonable person would have done to avoid what is now known to have occurred. Although that judgment must be made after the event it must seek to identify what the response would have been by a person looking forward at the prospect of the risk of injury.”

79 Of particular significance is the following observation of his Honour (at 462 [128[):

”If, instead of looking forward, the so-called Shirt calculus is undertaken looking back on what is known to have happened, the tort of negligence becomes separated from standards of reasonableness. It becomes separated because, in every case where the cost of taking alleviating action at the particular place where the plaintiff was injured is markedly less than the consequences of a risk coming to pass, it is well nigh inevitable that the defendant would be found to have acted without reasonable care if alleviating action was not taken. …”

80 I acknowledge, therefore, the prospective nature of the inquiry into the response of the reasonable person in the position of Mr Smith to the risk of injury to mechanics employed by a long past customer such as Pesl who, contrary to the warning in the Service Bulletin, may mistakenly be using the lifting bracket to support or lift the slasher off the ground. However, when one takes into consideration the factors to which I have referred above, in my opinion a reasonable person in the position of Mr Smith or the Smith companies would not have responded to the risk which I have identified in [70] above in the manner asserted by Pesl, namely, by seeking out Pesl and either providing it with a copy of the Service Bulletin or conveying its contents to Mr Pesl. As far as Mr Smith was aware, Pesl had been provided by Howard with a copy of the Service Procedure Manual and, therefore, would also have received the Service Bulletin. The only reason it did not was because, unknown to Mr Smith, Howard did not have a record of the purchasers of the slasher prior to 1986. Accordingly, it was reasonable for him one receipt of the Service Bulletin to do nothing.

Conclusion

81 It therefore follows in my opinion that although a duty of care arose in the Smith companies upon receipt of the Service Bulletin, there has been no breach of that duty and her Honour was correct to reject Pesl’s claim in negligence.

The s 52 claim

82 Little needs to be said with respect to this claim as it was properly conceded by Pesl that its strongest case was its claim that the Smith companies were negligent in failing to draw Pesl’s attention to the contents of the Service Bulletin. Although her Honour found that the representations relied upon were made, she rejected Pesl’s claims based on those representations upon the basis that first, the representations were true at the time they were made and, second, that they were not made by the Smith companies or any agent of those companies.

83 Furthermore, it is apparent that no safety issue arose with respect to the use of the lifting bracket for the purpose of suspending the slasher to enable its blades to be serviced until the Service Bulletin was issued in 1993. In fact the representations remained true for a period of 16 years until the accident occurred.

84 As the Smith companies submit, implicit in the representations was that the bolts attaching the lifting bracket to the gearbox casing which was the cause of the failure of the bracket, must be properly maintained and serviced so as to ensure that they performed their function. In this respect, the expert evidence which her Honour accepted was that the bolts had a loading tensile strength of 3,380kg with an expected nominal failure loading for the 4,640kg whereas the overall weight of the slasher was 608kg, which was quite low compared to the expected failure load of the bolts.

85 In these circumstances, in my opinion her Honour was correct to find that the representations were neither misleading nor deceptive nor negligently made.

86 In any event her Honour held that the representations were not made by an agent of the Smith companies. She held that neither Howard itself nor its employee who delivered the slasher to Pesl, and who made the representations, was an agent of the Smith companies at common law in the particular circumstances, especially when that employee had neither actual nor ostensible authority from Mr Smith to represent that the slasher could be lifted and suspended in the manner represented given Mr Smith’s evidence accepted by her Honour (at Black 114 C-D) that

“Nobody would lift by a strap. I told you before, it is on the three-point linkage. All implements are lifted by that.”

Further, there was no challenge to her Honour’s finding (at [55]) that there was no suggestion that the Smith companies had knowledge of or control over the content of the representations made by the deliveryman concerning the means of servicing the slasher.

87 Her Honour also held that Pesl was not assisted by s 84(2) of the TPA as the deliveryman did not make the representation either at the direction or with the consent or agreement, whether express or implied of Mr Smith. Accordingly, in my opinion her Honour was correct to reject Pesl’s claim under the TPA.

Disposal of the appeal

88 In my opinion Pesl’s challenge to the primary judge’s decision dismissing its cross-claim fails. Her Honour was correct to reject Pesl’s claims based on the TPA representation and, although she was, with respect, incorrect in rejecting any duty of care on the part of the Smith companies upon receipt of Service Bulletin No.37, she was in my view correct in finding that there was no breach of that duty.

89 For the foregoing reasons I would therefore propose that the appeal be dismissed with costs. The respondent’s cross-appeal should also be dismissed with no order as to costs.

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