Johnson v JMC Automotive Group Pty Ltd - [2010] FMCA 222

FEDERAL MAGISTRATES COURT OF AUSTRALIA

JOHNSON v JMC AUTOMOTIVE GROUP PTY LTD

[2010] FMCA 222

TRADE PRACTICES – Application under Trade Practices Act and at common law – car sold allegedly two cars – other defects alleged – misleading and deceptive conduct considered.

Trade Practices Act1974, ss.71, 71(1), 71(2), 82

Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445

Applicant:

DP & KA JOHNSON

Respondent:

JMC AUTOMOTIVE GROUP PTY LTD T/A JACKSONS

File Number:

LNG 19 of 2009

Judgment of:

Burchardt FM

Hearing date:

25 February 2010

Date of Last Submission:

25 February 2010

Delivered at:

Melbourne (via video link to Hobart)

Delivered on:

11 March 2010

REPRESENTATION

Counsel for the Applicant:

Mr B. McTaggart

Solicitors for the Applicant:

McGrath & Co

Counsel for the Respondent:

Mr D. Zeeman

Solicitors for the Respondent:

Butler, McIntyre & Butler

ORDERS

The Respondent pay the Applicants $11,577.49.
The Respondent pay the Applicants the sum of $1,700.00 as interest.
The Respondent pay the Applicants’ costs to be taxed in default of agreement pursuant to the Federal Court Rules on a party-party basis up until 22 January 2010, and, thereafter, on a solicitor-client basis.
Certify for counsel.

AND THE COURT NOTES:

For the convenience of the parties, the sums included in Order 1 are as follows:

Car $8,500.00;

Travel to Hobart for mediation $444.99;

(Paragraph 15, Ms Johnson’s affidavit)

Loss of Car Insurance $565.00;

Cost of new tyres $540.00;

Brianna Report $130.00;

Transfer fee on Registration $397.50;

Mr Broomhall’s witness expenses $400.00;

Mr Johnson’s travel to Launceston $100.00;

Damages for distress $500.00;

TOTAL $11,577.49.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

LNG 19 of 2009

DP & KA JOHNSON

Applicant

And

JMC AUTOMOTIVE GROUP PTY LTD T/A JACKSONS

Respondent

REASONS FOR JUDGMENT

By an application filed on 10 July 2009, the applicants, Mr and Mrs Johnson, seek damages pursuant to s.82 of the Trade Practices Act1974 (“the Act”), and also for breach of contract.
The case is all about a Holden Commodore sedan bought by the applicants from the respondent on 1 December 2007.
The statement of claim also filed on 10 July 2009 pleads the following. First, a purchase price of $12,990.00 of which $1,990.00 was attributable to a Hyundai vehicle traded in by the applicants. Second, it pleads that the applicants expressly told the respondent that the car was needed for transport and that the applicants relied upon the respondent’s skill and judgment. Third, it pleads the implied conditions that obtain in s.71 of the Act. Fourth, that the vehicle was unsafe, and various defects are pleaded. Fifth, that the respondent knew the vehicle was unsafe because these defects were identified when a Mr Jared Fox traded the vehicle back to the respondent in August 2007. Finally, in paragraph 8, damages were claimed, and those damages included loss of use of the vehicle and damages for distress.
A defence filed on 7 September 2009 essentially consisted of denials, although the purchase and its price were admitted. A subsequent, and rather late, application to join third parties was dismissed. I gave reasons for that at the start of the trial.
Turning to the evidence, I will deal with witnesses in the order in which they gave evidence. I am canvassing only the salient aspects or points of their evidence. The first witness called was Mr Robert Thompson. His affidavit explained that he was a transport inspector. He had received, on 29 October 2008, a complaint about the vehicle. He drove to the applicant’s home, not too far from Waratah, and drove the vehicle to Waratah where it was inspected. He formed the view that it was in fact two vehicles welded together with poor structural repair and would not be safe in an accident and, accordingly, issued a defect notice. He confirmed that substantial work would be required to make the vehicle roadworthy.
Under cross-examination, he said he himself had driven the vehicle, he had tested braking and steering and found no problems. He said that body filler had fallen off, and some looked as if it had fallen off “some time ago,” to quote his words. He said that the vehicle was cleared by Tasmania Transport (“Transport”) in 2004, and Mr Stewart, who later gave evidence from the respondent company, asserted from records that the vehicle had been produced from Queensland.
I should observe that that history is not entirely obviously consistent with exhibit R3, which are the service records of the car which show services in Tasmania going back to 2001, but I note that all parties agree that Transport cleared the vehicle as roadworthy in 2004.
The next witness called was Mrs Kerry Johnson. Her affidavit asserted that she bought the vehicle from Darryle Colbeck of the respondent and that she told him she needed the vehicle to drive to and from work at Burnie, this being a 130 kilometre round trip. She said that she had experienced steering problems with the vehicle which, after some time, had been sought to be ameliorated by the purchase of new tyres but this led to no improvement. Quite by chance, and it is certainly an extraordinary feature of the case, Mrs Johnson was stopped in Launceston on 20 September 2008 by Mr Fox who made various disclosures to her about the vehicle that caused her and her husband to go to her solicitors on 26 September 2008.
Brianna Bodyworks produced a report for Mr and Mrs Johnson, which is annexure C to Mrs Johnson’s affidavit. It shows that the cost of repairs exceeded the market value of the vehicle and it assessed it as a total loss. It also says that the repairs were not visible at the time of the original inspection as they were covered by body filler, sealer and deadener, and other concealing agents. I note, however, when the Brianna report refers to an original inspection, it is not entirely clear which original inspection that means; whether they are referring to the 2004 inspection by Transport or, presumably, to any inspection made either subsequently by the applicants or, indeed, by Mr Thompson.
Ms Johnson’s affidavit gave details of borrowings that she and her husband had entered into to buy the car and details of the loss. She said, and she annexed a relevant admissible document, that they had a quote for the car as a wreck of between $1,200.00 and $1,800.00. Under cross-examination, Ms Johnson confirmed that the odometer reading was 126,909 kilometres when bought and 175,000 or thereabouts now. She confirmed that the car was mainly driven on sealed roads. She confirmed that she could have got a refund of the registration since the vehicle was unroadworthy but she said that this was not possible in relation to the insurance as the vehicle was in fact partly a surety for the loans.
The next witness called was Clint Broomhall. His evidence concerned incorrect butt welding and the like. He said that the butt welding he observed on this vehicle was of a sort he would never himself perform. He said that that butt welding would not have been visible relevantly at the time of the roadworthy inspection in 2004 but he could himself see, just by walking by, poor bonnet work, poor work in relation to guard and door gaps, and this is at paragraph 7.5 of his affidavit. He said those defects could not have occurred in the 49,000 kilometres or so while the applicants had driven the vehicle. Paragraph 7.5 of his affidavit affirmed that the matters, to which I have just referred, showed that the vehicle was out of alignment. He said repairs would be $7,000.00 to $8,000.00 plus unforeseeable repairs, because some body filler and the like is still in the car. He said that the car was worth no more than $10,000.00. I should interpolate and say that

Mr Broomhall impressed me as an outstanding witness. This was a man who knows all about cars and their repair.
The next witness called was Jared Fox. He deposed that he bought the car for $16,000.00 on 27 May 2005, and had some problems driving it. It was ultimately serviced by him - well, let’s just say he entered it for a service on 22 August 2007. The report from the service is annexure A to his affidavit. It confirms that a new front end had been welded onto the vehicle. The vehicle was assessed as so dangerous by Motors, who did the service, that they only allowed Mr Fox to remove it if he signed a waiver in favour of Motors. He did so. He took the vehicle back to the respondent where he spoke to Mr Russell, who had arranged finance, and the head mechanic, whom he could only identify by his position. He gave the Motors report to these two people to look at, and they did so. This is attested to in paragraph 8 of his affidavit and it was not challenged in cross-examination. In paragraph 9 of his affidavit, he said that he thought there was a safety issue with the car. It was a write-off, and that he couldn’t sell it. In paragraph 10, he deposed that the vehicle was then traded in on the spot for another vehicle. I emphasise that none of these particular assertions were challenged.
Under cross-examination, he admitted that the odometer reading was about 94,000 kilometres when he bought the vehicle, and he drove it to the point where it was at 126,000 kilometres, or thereabouts. He said he had no complaints about handling the vehicle before the service to which I have referred. When he traded the vehicle back again, he bought a Kia for $19,000.00 and was allotted a $10,000.00 trade in for the Commodore. He did not leave a copy of the report from Motors with the respondent, but he confirmed he did show it to them.
The next witness called was Mr Darren Johnson, whose evidence was essentially corroborative of his wife’s. He corroborated problems with driving. Relevantly, he deposed to having to drive the vehicle to Launceston for testing, a distance of 243 kilometres each way.
The first witness called for the respondent was Mr Errol Stewart, who is the managing director of the respondent. He had no direct knowledge of any of the events concerning the car. His evidence was all based on admissible records. He deposed, and I accept, that he had never seen the report from Motors until this proceeding commenced. He agreed that Mr Fox had sold the vehicle back for $10,000.00. He deposed, on the basis of the company’s records, that once the vehicle was bought back from Mr Fox it was the subject of significant repairs, and a modest profit only was made on its resale to Mr and Mrs Johnson. He said that he would not have sold the vehicle if he knew it had a new front end. He said the vehicle had a value of some $4,000.00 to $5,000.00, and he confirmed that he would not condone the use of body filler in a vehicle in the fashion that has now emerged.
The final witness called was Mr Glen Tomkinson, who is the general service manager of the respondent. He said he sold the car to the applicants. He said there were minor repairs before it was sold, that a Mr Paul Wilson had inspected the vehicle, and that Mr Broos had done the repairs. It was Mr Tomkinson’s unchallenged evidence that

Mr Wilson was a licensed transport inspector.
I make the following findings on the facts. Firstly, the car was inspected by Tasmania Transport in 2004. Problems with the vehicle were not then visible because of body filler, paint and the like. Second, the vehicle was bought by Mr Fox for $16,000.00 on 27 May 2005. He drove it for approximately 30,000 kilometres until the service on

22 August 2007 by Motors. By then, problems had become clearly visible. The Motors report, which is annexure A to Mr Fox’s affidavit, makes that plain. The Motors report, annexure A, asserts, amongst other things:
“LH (LEFT-HAND) ENGINE MOUNT BENT DAMAGED,
LH STEERING RACK END LOOSE,
LH STRUT TOWER SEPARATED FROM GUARD REQUIRES URGENT ATTENTION,
DOOR PAN DAMAGED AND BENT.”
And here, and I emphasise this:
VEHICLE HAS HAD ANOTHER FRONT END WELDED ONTO CHASSIS (see exhibit).
There are a number of other matters, the subject of observation by Motors.
This vehicle was in such a bad condition that Motors would only let

Mr Fox leave their premises if he signed a waiver. It’s clear Mr Fox went straight to the respondent and made the remarks about the vehicle being a write-off, and that it was a safety issue, and I fully accept that he showed the Motors report to the people he spoke with at the respondent, although he did not ultimately leave a copy of it with them. He did not need to leave a copy with them, because the respondent gave him, in effect, his money back. He got $10,000.00 back on a car he had originally bought for $16,000.00 after two years worth of use and 30,000 kilometres of driving. At that point, the car was not safe to drive. Mr Fox, therefore, got $10,000.00 as a trade in on a $19,000.00 Kia. There is no evidence if the Kia’s price was reduced or otherwise influenced by the trade in and the circumstances.
To me, it is far more probable than otherwise that, first, the new front end was clearly visible, because Motors said so. Second, the respondent’s officers saw this and understood its effects. Third,

Mr Fox got his money back because it was clear that it was sold to him with major defects, albeit that they may have been unknown to the respondent at the time of sale.
I point out that Mr Broomhall said that what he could see when he inspected the car would not have happened in the 49,000 kilometres while the applicants drove it. In other words, it didn’t happen during their time. I note that the applicants’ driving was almost all on sealed roads. There was no submission and, indeed, no evidence to suggest that the applicants’ driving had caused the problems that the vehicle had.
Finally, the alignment was obviously wrong when Mr Fox brought the vehicle back. Mr Broomhall could see this just by walking past. This leads, inexorably, to the conclusion that the respondent’s servants did know that the vehicle was seriously structurally impaired when Mr Fox brought it back. It is more probable than otherwise that some body filler had already fallen out. That was the evidence of Mr Thompson. The vehicle was then the subject of repairs by the respondent. It is said, at least by one witness, to have been major, but they certainly did not correct the vehicle to the point where Mr Broomhall could not see defects simply by walking past it. The vehicle was un-driveable, according to Motors, in August 2007, and it was sold to the applicants for $11,000.00, effectively, in December 2007. It is clear that the vehicle was not of merchantable quality, and this attracts the operation of s.71(1) of the Act. It also, in my view, attracts the operation of s.71(2). The vehicle was not fit for the purpose which was expressly told to the respondent by Mrs Johnson, namely driving to Burnie. The applicants are entitled to damages for breach of contract.
I accept Mr Zeeman’s submission that s.82 of the Act does not apply to breach of the conditions implied by s.71 of the Act. But it’s clear that the respondent also engaged in misleading and deceptive conduct in contravention of s.52. The respondent, by its employees and officers, knew the vehicle had problems when Mr Fox returned it. What happened thereafter is not wholly clear. I cannot say whether it was repaired in the sense of being doctored by other employees of the respondent before it went to Mr Broos and/or Mr Wilson. What is clear is that the defects that the respondent knew of were not repaired, and were not made known to the applicants. In my view, it is clear that that amounts to misleading and deceptive conduct.
I should emphasise, I make no criticism whatsoever of Mr Stewart personally. His evidence was given with conviction. It was given honestly, and I accept that he was a witness of truth. The fact is, he did not know what his employees had done. But to answer counsel’s question, what more could the respondent have done, I’m afraid the answer is, either repair the vehicle properly, which Mr Broomhall and, it really seems, everyone else agrees was uneconomic, or not sell it at all and send it to the wreckers, as Mr Stewart said would otherwise have been done. This vehicle should not have been on-sold, and even less so for $10,000.00 without a clear implication it was free from the serious structural defects the respondent’s servants previously knew it had.
Accordingly, I move to the question of damages. I accept

Mr Broomhall’s estimate of $10,000.00, and I accept that the vehicle is now worth $1,500.00, this being the mid point of the $1,200.00 to $1,800.00 admitted through Mrs Johnson’s affidavit, not the subject of challenge. I note also that the purchase price was $12,990.00. The applicants had the vehicle for less than one year and, although it had been driven a reasonably substantial distance of some 49,000 kilometres, that’s really not a surprising figure given the 800 kilometre per week work driving that Mrs Johnson was doing. The price of $10,000.00 makes more sense than a drop to $4,000.00 to $5,000.00 asserted by Mr Stewart. The loss, therefore, in respect to the vehicle, I accept is $8,500.00.
The applicants have filed further and better particulars on 15 February 2010. Figures are given for the hire of a vehicle and other expenses involved in going to Hobart for the mediation, in paragraph 15 of

Mrs Johnson’s affidavit. I accept that the figures there set out for hire of the vehicle, the petrol and the food and accommodation, and the like, are reasonable.
So far as the claim for loss of the registration is concerned, I’m not minded to grant that, because it could have been reclaimed.
So far as the insurance is concerned, I accept Mrs Johnson’s evidence that this was not possible to re-claim, and, accordingly, I’ll allow that.

In paragraph 11.3 of Mrs Johnson’s affidavit, figures are given for the loss in respect of insurance and, in my view the figure of $565.00 is the appropriate amount to award under that heading. So far concerns the new tyres that were bought, those are annexure B, I think, to Mrs Johnson’s affidavit, I’ll allow half of the cost of the tyres which must still have some second-hand value. In doing the best I can, bearing in mind that the costs of installing and the like were thrown away, I’ll award $540.00 under that heading. The service of the vehicle on 17 September 2008 was not, in my view, thrown away, and I won’t allow it. I’ll allow the fee for the Brianna report of $130.00 and I’ll also allow the applicants to recoup the transfer fee on 13 December 2007 in the sum of $397.50 which has, in my view, been lost. I fixed Mr Broomhall’s witness expenses at $400.00, and they should be paid by the respondent.
Mrs Johnson has also claimed loss of leave to attend to matters related to the proceeding. In my view, it is not appropriate to make an award for that. This leave is not lost. It’s annual leave. It’s often described as personal leave in various industrial instruments. It has many uses, and preparing for a proceeding such as this, in my view, falls as one of them. So far as travel by the husband, Mr Johnson, to Launceston for inspection is concerned, I think that is a reasonable claim, but I think 40 cents per kilometre is excessive. I’ll allow a figure of $100.00 for that.
Turning to the question of damages for distress, contrary to my initial impression, I now accept that these are capable of being awarded even where there is no medical injury, provided that distress was reasonably foreseeable. Here they were. I quote the following passage from Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445 at 468, where the Court said:
“It was not in dispute that in a proper case damages of this nature could have been awarded in deceit and that the measure of damage, under s 52 and s 82, being akin to that in tort, permitted the recovery of such damages. See McGregor on Damages 15^th ed, para 1737 and cases there cited and cf Steiner v Magic Carpet Tours Pty Ltd (1984) ATPR 40-490 at 45,642. This is so at least if such damages are reasonably foreseeable.”

I should say that the current edition of McGregor on damages is still to the same effect. Zoneff, I should make mention, was upheld on appeal on this point. Mr Zoneff received an award of damages of $1,000.00 in 1990. Obviously inflation has changed that figure substantially but equally, Mr Zoneff suffered far more significantly than Mr and Mrs Johnson. But they have suffered, and it was foreseeable that they would suffer distress because of all the various difficulties that this vehicle has led to, and in my opinion, a sum of $500.00 is fair and reasonable as an award.
Interest has also been claimed. In substance, these are, by and large, liquidated sums even though the question of the amount of the loss to be attributed to the car was a matter of dispute. But what I mean by that is that the applicants have, in a sense, always been entitled to them. This is not like a personal injury case where the loss crystallises at the date of judgment. However, some sums are simply reimbursement of costs and are relatively recent.
The sum of $8,500.00 is what the applicants should have got back for their car. There should, in my view, be interest from the date of purchase, in other words, 1 December 2007. They were entitled to return the car and get that amount as at that date. That’s a period of two years and two months. I have power to fix interest, and I’m going to do that, and I’m going to allow interest at the rate of 10 per cent for the period of two years, which is a total of $1,700.00.
Relevant here is the uncontradicted evidence that the applicants borrowed the purchase price, and interest must have been, therefore, accruing on what they had borrowed. The interest awarded is above commercial rates, but the penalty interest rate in Victoria has been above 10 per cent at all times, as I understand it, with which we are concerned. If my Google searches are correct, Tasmania does not have an applicable penalty interest rate. I may be wrong, but I couldn’t find one and, in the circumstances, it seems to me that it was just and equitable that interest in the sum of $1,700.00 should be awarded.
Ultimately, therefore, the judgment will be for the sum of $11,577.49, which is the $8,500.00, together with the additional ancillary costs and expenses I have indicated. There will, additionally, be an award of $1,700.00 in interest, and I would see no reason why costs should not follow the event.
(Discussion followed about costs). My reason for making that order is that Mr McTaggart, I think, is right, ultimately. The applicants retain the vehicle in any event, so the reference to it takes the matter no further. And they have beaten the offer by in excess of 10 to 15 per cent without the addition of interest which, of course, would be added if one was being technical about it. In my view, it’s not necessary to rehearse all the reasons why Courts make solicitor-client orders where calderbank letters aren’t met. But their desirability, and the desirability of settlement, is well established on the authorities. So the order will be party-party up until the date of the calderbank letter and, thereafter, solicitor and client.

I certify that the preceding thirty-five (35) paragraphs are a true copy of the reasons for judgment of Burchardt FM

Associate: Ms B. Evans

Date: 11 March 2010