Liddicoat v Spadaro Refrigerated Transport Pty Ltd

[2004] FMCA 523

EDERAL MAGISTRATES COURT OF AUSTRALIA

LIDDICOAT & ANOR v SPADARO REFRIGERATED TRANSPORT PTY LTD & ORS [2004] FMCA 523

TRADE PRACTICES – Misleading and deceptive conduct – whether reliance – damages – whether in trade or commerce.

Trade Practices Act 1974, ss.51, 71, 73(2), 75B

Pappas and Anor v Soulac Pty Ltd & Anor (1983) 50 ALR 231
Bill Acceptance v GWA (1983) 8 TPR 40408
Concrete Constructions NSW Pty Ltd v Nelson (1990) 169 CLR 594
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1
Marks v GIO Australia Holdings Ltd & Ors (1998) 196 CLR 494
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No1) (1988) 39 FCR 546; 79 ALR 83
Kabwand Pty Ltd v National Bank of Australia (1989) ATPR 40-950
Gurdag & Anor v Stillwell Ford Pty Ltd (1985) 61 ALR 689

Applicants: GERARD CRAIG LIDDICOAT and GAYLE ELLEN LIDDICOAT

Respondents: SPADARO REFRIGERATED TRANSPORT PTY LTD, IGNAZIO SPADARO and BECAB PTY LTD

File No: MZ 472 of 2002

Delivered on: 23 August 2004

Delivered at: Melbourne

Hearing Dates: 4, 5 and 6 December 2002

Judgment of: McInnis FM

REPRESENTATION

Counsel for the Applicants: Mr M Klemens

Solicitor for the Applicants: Roderick Smith

Counsel for the First and Second Respondents: Mr R Cameron

Solicitors for the First and Second Respondents: Madisons

Counsel for the Third Respondent: Mr R Squirrell

Solicitors for the Third Respondent:

Anthony P Sofra & Co

(until second day of hearing)

ORDERS

1. The first and second respondents shall pay to the applicants damages in the sum of $55,015.05 together with interest from 16 May 2002 to the date of judgment at the rate of 10.5% pursuant to Order 35 Rule 8 of the Federal Court Rules being an amount of $13,145.00.

2. The first and second respondents pay the applicants’ costs to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules based upon Schedule 1 of the Federal Magistrates Court Rules, including reserved costs if any.

3. Pursuant to Rule 21.15 of the Federal Magistrates Court Rules the Court certifies that it was reasonable for the parties to employ an advocate to appear in the proceedings.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ 472 of 2002

GERARD CRAIG LIDDICOAT and GAYLE ELLEN LIDDICOAT

Applicants

and

SPADARO REFRIGERATED TRANSPORT PTY LTD, IGNAZIO SPADARO and BECAB PTY LTD

Respondents

REASONS FOR JUDGMENT

Introduction

1. By an application filed on 5 July 2002 Gerard Craig Liddicoat and Gayle Ellen Liddicoat (the applicants) initially brought a claim against Spadaro Refrigerated Transport Pty Ltd (the first respondent) and the director and shareholder of that respondent, namely, Ignazio Spadaro (the second respondent), together with a claim against Becab Pty Ltd (the third respondent).  The proceedings against the third respondent were resolved after the hearing had commenced and orders were made by consent that the claim by the applicants against the third respondent be struck out with no order as to costs.  That order was made on the second day of the hearing.

2. The claim by the applicants for damages arises out of a contract for the purchase of a Kenworth T601 prime mover (the prime mover) which was the subject of a hire-purchase agreement between the applicants and Esanda Finance Corp Pty Ltd. The claim by the applicants against the first and second respondents alleges representations made in relation to the prime mover and an assertion that the representations were relied upon by the applicants when they entered into the hire‑purchase agreement with Esanda Finance Corp Pty Ltd. It is alleged that representations made were misleading and deceptive, or to the extent that they were representations made with respect to future matters, there were no reasonable grounds for making the representations. It is claimed that the respondents contravened s.52 of the Trade Practices Act. As a consequence the applicants suffered damages. It is claimed as against the second respondent that at all material times he aided, abetted, counselled, procured and was knowingly concerned and a party to the contravention by the first respondent of s.52 of the Trade Practices Act.

3. The first and second respondents deny the allegations and further had pleaded that prior to the hire-purchase agreement the first applicant, together with his father, were permitted to test drive the prime mover for a period of two days.  The respondents claim that by reason of the test drive and there being no complaint or dispute raised concerning the prime mover and its condition that the applicants exercised their own independent judgment in entering into the hire-purchase agreement with Esanda.  Disputes otherwise arose as to specific complaints regarding the prime mover made by the applicants which are the subject of these proceedings.

Background

1. By way of background, it is not in dispute and I find that the applicants are partners in a small trucking business which operates out of Port Pirie.  They had been engaged in business for approximately six years prior to these proceedings.  In the course of their business they became interested in obtaining an upgrade on the vehicle which they had been using and were prepared to undertake appropriate refinancing.  In response to an advertisement in a publication called "Deals on Wheels" in GM2000 the first applicant contacted the second respondent.  The advertisement contained the following details under a photograph:

   “KENWORTH T601

   (DC541-070-04) 1996.  Detroit S60 500hp,

   18 speed transmission, Eaton DS451 rear axles, air bag suspension, quad tanks,

   36" sleeper, Rubkin Wiley, alloy bull bar

   E/N06R0278284

   $145,000 (plus GST, if applicable)”

2. The advertisement for the prime mover appeared on a page with other advertisements by the first respondent.  It is claimed by the first applicant in his affidavit that he telephoned the number referred to in the advertisement and spoke to the second respondent to discuss the prime mover on a number of occasions during July 2000.  Specifically, the first applicant claims that he had conversations with the second respondent on 4, 6, 7, 8 and 9 July 2000.  It is alleged that during those conversations the second respondent told the first applicant the following:

   (a) the truck was in showroom condition;

   (b) the differentials and gearbox had been rebuilt and one of the differentials had been replaced.  Money had been spent on the motor and that the ball gearings of the fuel pump had been replaced;

   (c) anything on the truck, which needed replacing or repairing, had been done, and, for example, new brakes and bearings were replaced on the drive and two new steer dash tyres had been put on;

   (d) the truck was the cleanest truck around and no oil was leaking on the motor.

3. The first applicant claims that he was told by the second respondent that he should stop telephoning him and should come and see the prime mover in person.

4. It is claimed by the first applicant that he travelled to Shepparton in Victoria to visit the second respondent and examined the prime mover.  This occurred allegedly on 10 July 2000 when the first applicant in the company of his father, Trevor Liddicoat, claimed that further conversations occurred between the first applicant and the second respondent in the presence of the first applicant's father.  The first applicant claims that the following is the substance of what he had been told during conversations with the second respondent:

   (a) He asked us to note how crisp the engine sounded and how it had just been tuned up.

   (b) He said that the fuel economy was good and told me again about the rebuilds and replacements of the differentials, gearbox and engine.

   (c)He told me the truck was reliable and had never let him down.

   (d)The truck would require no major repair for at least two years.

   (e)He repeated the same representations which he had made to me over the phone regarding the gearbox, motor, ball gearing and fuel pump, brakes and bearings and the fact that anything that needed to be replaced or repaired had been done.

   (f)He said that the truck was so good that he sacked an employee for smoking in the truck and leaving ash all over the dashboard.

   (g) I told him that I did not want to buy a truck that was worse than my old one because I was having a good run out of it.  He said that the trucking game was hard enough and that we're all in it together without people doing dodgy things.

   (h)He told me on a number of occasions that the truck was in excellent condition and stated to me on more than one occasion that the brakes and bearings had been replaced on the previous Saturday and that the replacement of all components, which needed to be replaced, had been done. 

5. It is not disputed that the first applicant did test drive the prime mover.  It is also not in dispute that the applicants wished to trade in a Kenworth T600 vehicle and the second respondent offered to pay $50,000 for the trade-in vehicle. 

6. A further claim made by the first applicant was that he overheard a conversation between his father and the second respondent where the second respondent allegedly told the first applicant's father that the prime mover was in excellent condition and that if anything went wrong with it not to hesitate to contact him and he would help financially.  The applicants claim that reliance was placed upon the representations made by the second respondent and the hire-purchase agreement was then completed.  An agreement was completed at Jones Trucks where a conversation is claimed to have occurred between the first applicant and Peter O'Dwyer.  The first applicant claimed he told O'Dwyer that the purpose of the purchase of the prime mover was to undertake a trucking business in South Australia.  O'Dwyer is claimed to have told the first applicant that the prime mover was an immaculate vehicle and that Jones Trucks had worked on that vehicle as part of the fleet of the respondent.  He is claimed to have told the first applicant he could not find anything wrong with the prime mover.  Again it is claimed by the applicant that he was reassured by representations made by O'Dwyer and decided to proceed with the purchase, and in particular the hire-purchase agreement.

7. The main thrust of the applicant's claim is that the prime mover, contrary to the representations alleged, turned out to be what is colloquially described as a "lemon".  The first applicant claimed that after leaving Shepparton on 11 July 2000 and arriving in Echuca, a distance of some 73 kilometres, the first applicant's father noticed smoke and saw flames coming out of the left‑hand back drive wheel of the prime mover.  The fire was extinguished and the second respondent sent mechanics to the applicant to enable him to continue the trip.  Upon return to Adelaide the applicant claims to have had the brakes on the right side of the prime mover replaced.  The brakes were worn out.

8. The catalogue of repairs within a short period of taking possession of the prime mover included the following, according to the first applicant's affidavit:

   ·29/8/00 front and rear brakes on right side of the prime mover replaced at a cost of $419.26.

   ·7/11/00 engine of prime mover rebuilt at a cost of $19,825.95.

   ·23/11/00 condenser repaired and hoses on airconditioner replaced at a cost of $755.10.

   ·15/1/01 differentials and gearbox for the prime mover replaced at a cost of $26,885.10.

9. It is claimed that during the rebuild of the engine the applicants lost income in the sum of $2940.  This had originally been the subject of a claim of $8000 which was amended at the commencement of the hearing.  A further claim of hire of a substitute prime mover for four weeks amounted to $1200 per week, making a total of $4800.  A claim was made for an additional cost of $600 in diesel fuel said to be as a result of the fact that the hire substitute vehicle was smaller than the prime mover.

Applicants’ evidence

1. The first-named applicant adopted an affidavit sworn by him on 30 April 2002 and gave evidence.

2. The first applicant in his evidence‑in‑chief described in further detail the nature of the trucking business.  The business was mainly confined to journeys within the state of South Australia, although the prime mover had interstate registration.  The goods cartered include lead from Port Pirie to Adelaide and then groceries from Adelaide to Port Pirie.  It was noted that he wanted to update his old truck, which was a 1989 model, to the prime mover offered for sale by the respondents.  After consultation with the finance company he had determined that he had a capacity to spend between $130,000 and $150,000 on a new truck.  With repayments of approximately $2000 to $2200 per month compared with the then current finance arrangement for his old truck of $1400 per month. 

3. Prior to seeing the advertisement for the prime mover the first applicant stated that he had looked at approximately five or six other vehicles in the price range of $130,000 to $150,000 and all the vehicles had an average of 1 million kilometres.  He indicated that he had rejected those other vehicles because they did not appear to have been the subject of any engine work and he was concerned that given the kilometres they would be close to requiring work of a significant nature to be undertaken and he did not want to spend the extra money.  He agreed that he had contacted the second respondent on a number of occasions by telephone and that he was keen to find out as much as he could about the prime mover, although he denied the assertion of the second respondent that he had telephoned on at least "12 occasions".

4. He claimed that the test drive occurred when it was getting close to dark on 10 July and that the test drive lasted for half an hour.  He denies staying in Shepparton for two days and driving the prime mover around for "several hours on each day", as asserted by the second respondent.  He claimed to have been told by the second respondent that in relation to the differentials on the prime mover "one had been rebuilt and one had been replaced" and that the gearbox had been 're‑raced'.  It is noted that he had asserted that the second respondent told him the truck would require no major repair for at least two years, although the second respondent in his evidence simply referred to the prime mover not requiring major repairs for a "considerable time".

5. He claimed that if he had been told that the engine would have to be rebuilt or there would be significant work required on the differential and gearbox of the vehicle that he would not have bought the vehicle.  He otherwise confirmed the representations set out earlier in this judgment.  He agreed that the second respondent arranged his accommodation in a motel on the evening he arrived in Shepparton with his father.  Although not a mechanic, the first applicant confirmed that he undertook regular maintenance on the prime mover in the nature of replacing oil and filters, together with greasing the kingpins, steering knuckles and other parts of the vehicle.

6. Under cross‑examination the first applicant gave evidence that he started truck driving when he was 16 years of age.  He further gave evidence that his father had owned trucks at around that time.  He agreed that he had acquired a good working knowledge of engines and what is required to keep them going over a period of time as a result of his experience in truck driving.  At the time of giving his evidence the first applicant was 32 years of age and he indicated that whilst he undertook some repairs of trucks, he would refer anything major to a mechanic, including work which required pulling motors down and taking gearboxes apart. 

7. During the course of cross‑examination the first applicant was taken to the original copy of the advertisement (exhibit R1) and it was drawn to his attention that advertisements for two other prime movers on the same page had endorsements including in one advertisement the words "rebuilt engine".  He was then asked whether it occurred to him that it was unusual that there was no similar endorsement in the advertisement for the prime mover that he ultimately purchased.  This did not cause him any concern and he agreed that there was no reference anywhere to the prime mover having a rebuilt engine.  He agreed that he had not been told by the second respondent that the engine of the prime mover had been rebuilt, but rather that the truck was "in showroom condition".

8. Whilst reasserting that he had been told by the second respondent that the gearbox had been 're-raced', he acknowledged that did not appear in his affidavit.  He agreed that when he attended the respondent's premises he had a good look at the prime mover, both inside and around the outside, and also had a look at the engine and observed that it was a "very clean, tidy truck".  He did not observe any noises or whines or squeaks after starting the engine and agreed that it sounded good.  He then took the prime mover for a test drive which he claimed occurred over a period of "half an hour", although achieving speeds of up to 100 kilometres per hour.  During that journey he claimed he tested the brakes hard and that there was nothing wrong with them and nor did he observe any leaks.  The motor condition was clean and he agreed that as it was clean, then it would tend to show the likelihood of any oil leaks if it was leaking at the time.

9. The next day he checked the vehicle and again did not observe any oil leaks.  He did observe on the test run that there were two gauges or instruments not working properly, including the engine temperature light and "one of the diff gauges".  He did not raise those matters with the second respondent, nor did he think it was unusual that the gauges were not working and stated, "Because it's only wiring and it's not uncommon for them not to work".

10. In relation to the proposed loads for the prime mover, he claimed that he told the second respondent that he would be carting groceries on one journey and lead out of Port Pirie.  He denied that he had never mentioned lead to the second respondent, although it was agreed that he had not referred to lead or groceries in his affidavit.  He denied that there was no discussion about the gearbox.  Whilst not conceding any further test driving, he gave evidence that he again checked the bonnet and confirmed that it was nice and clean the next day.  Although as for the night before he did not get underneath the prime mover and look at the transmission, nor had he checked the levels of any lubricants in the oil on either occasion including brake fluids.  He concluded, however, that the prime mover looked like a "very well maintained truck".

11. At one point during cross‑examination the first applicant claimed that he was sure he had a conversation with the second respondent in September and then agreed that in fact the conversation occurred in November concerning a rebuild of the engine of the prime mover.  He agreed he had not referred to that conversation in his affidavit and when asked the reason stated, "No real reason."  He asserted, however, that during a conversation the second respondent told him he did not have $20,000 to give to the first applicant to rebuild the prime mover's engine.  The first applicant agreed that he found that be a "strange comment".

12. The first applicant was cross‑examined in relation to the details concerning the problems with the prime mover prior to authorising of the rebuild and specifically claimed that the problem with the gearbox was only apparent in "top gear".  He was referred to exhibit GL7 of his affidavit where it is noted that the repairer next to the item "replace gearbox" had inserted "noise in all gears".  The first applicant denied that the teeth of the gears were stripped prior to the time he took the prime mover to the repairer in January 2000.  He denied that the level of damage identified would cause a noise and disruption to the performance of the prime mover to a point where he could not drive it very far without being aware of what was going on.  It was in that context he confined the unusual noise as being only apparent in top gear.

1. He was further cross‑examined about any difficulties observed in relation to a wide range of matters when he first inspected the prime mover and effectively denied becoming aware of any difficulties at all.  He did claim, however, that there had been a noise in top gear from the gearbox.  However, he had no difficulty engaging certain gears or changing the way he engaged the gears.  He agreed the truck had performed in the same way with respect to the operation of the gearbox from the time he purchased it until he took it to the repairer on 15 January 2000.  He regularly checked the oil levels and agreed they were normal.

2. The first applicant stated that when he signed the hire-purchase agreement on 17 July 2000 he was not then concerned about the prime mover.  He did not consider cancelling the contract as a result of a fire which occurred after he travelled the short distance of 73 kilometres because he thought that the second respondent would pay for the repairs that had to be done.

Trevor Liddicoat

1. Mr Trevor Liddicoat (the applicant’s father) adopted the contents of an affidavit sworn by him on 19 November 2002 and gave oral evidence.  He gave evidence corroborating the first applicant’s version of events in relation to the representations on 10 July 2000 claimed to have been made by the second respondent.  He further gave evidence concerning a test drive of the prime mover which he claimed was for a period of half to three-quarters of an hour “at maximum”.  He specifically corroborated the first applicant’s evidence in relation to the representations (a) to (h) set out in paragraph 7 of this judgment.

2. The applicant’s father was cross-examined and it perhaps should be noted that his evidence was interposed and by video link.  He described inspecting the prime mover and stated that he observed the engine and described it as “clean”.  He could not see any oil leaks during the test drive.  He did not observe any irregularities or difficulties and indeed commented that "everything appears to be okay”.  In cross-examination he confirmed that the second respondent claimed that the prime mover “should not need any repairs for at least two years”.  When cross-examined further in relation to that issue the following exchange occurred:-

   “I suggest to you that never used the words that it wouldn’t require repairs for two years, did he? --- He did.

   You know yourself that trucks require repairs from time to time – don’t they? --- I know that.

   Didn’t that comment from Mr Spadaro – if he said it – strike you as a remarkable comment? – Yes, it did.

   Did you challenge him on that? --- No.

   Why not? – Well, I suppose I was there as an observer, wasn’t I?”

3. A further challenge was made to the evidence of Trevor Liddicoat and the following exchange occurred:-

   “I suggest to you he said nothing of the sort Mr Liddicoat.  Are you sure of that?---Yes.

   I also suggest to you that he didn't discuss the gearbox at all.  There was just no such discussion, was there?---Mr Spadaro said that the motor, gearbox and two diffs had been repaired and everything was in good order.

   What I suggest Mr Spadaro said was that one diff had been replaced and one had been repaired.  Do you recall that?---He said both diffs had been repaired.”

4. Trevor Liddicoat was asked questions about whether he considered suggesting to his son that he ought to have the prime mover checked by other experts and the following exchange occurred:-

   “Did you suggest to Gerard that he ought to have the truck subjected to a proper roadworthy or an examination by one of the expert mechanics, like Detroits or someone like that - or CMV or some equivalent?---No.

   Why not?---Well, we just had a look at it and bought it and, by Spadaro's recommendations, it was all in good other.  So why have it checked?

   Your son was spending a vast amount of money on this truck, wasn't he?

   ---Yes.

   There's a degree of logic in doing that, isn't there?---He bought it for his business.

   But it makes a lot of sense, doesn't it, to have it checked by someone who's an expert to make sure you're not getting a lemon?---We know that now.

   Did it occur to you then?---No, it didn't.”

5. During re-examination Trevor Liddicoat stated that it would be expensive to “pull it all to bits and have a look at it” when asked what would be required to undertake a proper thorough check of the prime mover.  Based on his experience of years of owning trucks he claimed “it is a big job”. 

David Charles Cock

1. Mr David Cock, a qualified mechanic and customer service coordinator for Detroit Diesel Australia gave evidence on behalf of the applicants.  He adopted an affidavit sworn by him on 29 November 2002 and gave oral evidence by audio link.  He had undertaken at the request of the first applicant a substantial overhaul of the recommendation carried out at the cost of $19,825.89.  He claimed that an examination of the vehicle indicated that upon testing it was found to have 14 inches of crank case water pressure which is well in excess of the normal maximum specification of approximately 3 inches of water pressure.  On examining the vehicle it was indicated that neither the turbo charger nor the air compressor, possible causes of excess crank case water pressure were at fault and “that the cause of the excess pressure was therefore most likely to have been general wear and tear”.  He further stated in his affidavit that “examination of the engine following disassembly also revealed substantial wearing of the valve guides and piston rings”.  He agreed in evidence in chief that substantial work in re-building an engine may occur anywhere between 800,000 and 2 million kilometres.

2. Mr Cock produced a tax invoice dated 17 November 2000 in relation to the total cost of repairs.

3. Under cross-examination Mr Cock disagreed with the suggestion that the life span of an engine would be in the order of 1.1 to 1.2 million kilometres.  Whilst it occurs on some occasions he stated that in his experience typically the range is 1.6 to 1.7 kilometres.

4. In relation to the time taken to undertake the repairs he indicated the vehicle was at his premises for approximately 8 working days and that normally the overhaul would take approximately 40 hours of work.  When asked why that would not be a 5 hour period rather than 8 he further explained that it was necessary to get the appropriate authorisation for repairs.  He agreed that the testing he undertook to determine the repairs required is also a test he has performed for people contemplating the purchase of trucks.

5. In re-examination when asked about tell-tale signs that an engine re-build is imminent he agreed that some vehicles showed more signs than others and it can vary dramatically.  He further agreed that there may be fairly minor telltale signs such as some blue smoke and that may be all and then once the engine is pulled apart the rebuilding is imminent.

6. In answer to a question from the Court he explained the reference to the vehicle being found having 14 inches of crank case water pressure and its significance in the following terms:-

   “It means that the space on the internal area of the engine is exceeding the pressurised by the crankcase pressure that is brought about by combustion.  When you have the piston come to the top of its strike and it fires by igniting the fuel which is analysed, you have some globulae going via the piston rings which were not sealing correctly, into the crankcase pressure, into the crankcase area, and also through the valve guides.  The valve guides were not sealing correctly, and this causes the engine to breathe excessively heavily.”

7. A further exchange occurred in relation to that topic as follows:-

   “In this case where you've got that significant disparity in water pressure from the recommended specification, can that happen to a vehicle overnight, or is that a matter that happens over a period of time?---One would think it would happen slowly over a period of time.”

Ian John Hosking

1. Mr Hosking, a Service Manager of CMF Trucks gave evidence on behalf of the applicants.  He adopted an affidavit sworn on 19 November 2002 and gave evidence by audio link.  He deposed that on 15 January 2001 the first applicant brought the prime mover to his premises for examination of noise in gearbox and differentials.  He described the type and extent of the noise observed as indicating some significant problems.  The gearbox had teeth missing from three gears in the head gear set and pieces of teeth were in the oil.  The rear differential showed severe pitting on the crown wheel and the bearing of the carrier had been spinning in its housing causing severe wear.  He described the housing of the rear differential showed an indicating of prior welding during a previous repair which in his view had not been carried out in a professional manner.  The welding of the housing was an unusual feature according to his affidavit and “indicated an existing fault at that earlier time”.  He described the welding as having the appearance of being carried out as a temporary repair and that proper repairs had never been carried out.  The front differential showed pitting on the crown wheel and the carrier bearings had started to disintegrate causing sufficient excess of movement in the carrier that the housing usually came into contact with in the main case.  It was the view of the deponent that this had almost certainly occurred “over a long period”.  A report was prepared on his observations.  In his evidence he agreed that the gearbox had been allowed to run low on oil at some much earlier time which weakened the gear structure and that the fault had not been adequately repaired.  He disagreed with the suggestion by one of the respondents’ witnesses that the wear had occurred shortly prior to January 2001 on the basis that if oil had simply been topped up in the gearbox then there would be a very “burnt smell of oil” and in this instance there was “no smell evident in the transmission”.  He stated that it would not have occurred in the previous three days or so because you would still smell the burnt pungent smell that comes off it.  He described the prior welding of the differential as being a repair of a kind not recommended by manufacturers and indicated that he would not undertake a repair of that nature.

2. Mr Hosking was cross-examined about the observations he made and in particular the lack of smell and when asked whether if someone had changed the oil just prior to bringing the vehicle into his workshop whether that would make a difference to his observations.  He stated, “There is nothing stopping them changing the oil, but the smell would not go away immediately”.  He further commented that “it usually takes three or four months”.  He denied that overloading would “blue the gears” if the oil level is at the correct level.  He agreed under cross-examination that the missing teeth would have only happened in the last day or two of operation before the prime mover was brought in for repair though the blueing of the gears was there for quite a while and was done at a previous stage.

3. During the course of his cross-examination Mr Hosking claimed that you would not hear anything different when the engine was idling in relation to the gearbox problem and nor would the driver experience difficulty changing gears.  He stated that you would possibly hear a noise from the differentials though would not necessarily hear it in the cabin whilst driving.

Respondents’ evidence

Ignazio Spadaro

1. The second respondent gave evidence and adopted an affidavit sworn by him on 2 December 2002.  He stated that he had been a transport operator, truck driver and mechanic throughout his working life over a period of approximately 30 years.  He explained an ownership and corporate history in relation to the prime mover though essentially the prime mover had been owned by Shepparton Cold Storage Pty Ltd (SCS) which was a company acquired by the second respondent and his company in 1999.  He referred to repairs by SCS of the prime mover and could not explain why there was a difference in the engine number of the prime mover as set out in the hire agreement compared with a repair invoice from Mr Keith Pick.  He claimed that selling the prime mover was part of his practice to rejuvenate his fleet of trucks when a prime mover is nearing three to four years or upwards of one million kilometres of travel.  He confirmed the admissions made in the defence referred to earlier in this judgment.  He consistently denied that the gearbox was ever mentioned in any of the conversations though admitted saying that one differential had been rebuilt and the bore gear of the engine had been replaced.  He agrees that the prime mover had travelled upwards of one million kilometres and that it was approximately four years old at the time of sale.  He otherwise confirmed the incident which occurred shortly after the first applicant and his father took possession of the prime mover and that he paid for a “new hub” which cost approximately $759.00 shortly after the first applicant had returned to Adelaide.

2. In his affidavit the second respondent stated that he believed the prime mover would not require major repair for a considerable period and whilst admitting that he had mentioned that one differential had been replaced and one differential had been rebuilt, he otherwise denied saying that the differentials and gearbox of the prime mover had been rebuilt.  He claimed that had that been the case and indeed had he rebuilt the engine then there would be no reason to sell it.  He agreed that he told the first applicant in the presence of his father that the prime mover was in excellent condition and a good clean truck.  He otherwise confirmed the attendance upon the first applicant when the vehicle broke down shortly after leaving Shepparton and stated that if there were any other problems with the vehicle the first applicant “should have had them seen to and sent me the bill which is what I had offered to do”.  He claimed that repairs to the front and rear brakes on the right side of the truck replaced on 29 August 2000 at a cost of $419.26 “were never brought to my attention”.  Presumably had that been brought to his attention he would have paid for the repairs.  He otherwise challenged the repair cost and duration of repairs.  Perhaps somewhat curiously in his affidavit he asserted that the first applicant and his father advised him that the prime mover “would be used for light haulage between Port Pirie and Adelaide”.  He then seems to assert that the prime mover would be fit for the job.  He states that both the first applicant and his father were aware that the prime mover had travelled one million kilometres and “they were not purchasing a new prime mover, they were paying for and bought a secondhand prime mover”.  He claimed to have given advice to the first applicant in July 2000 to have the prime mover thoroughly checked by CMV Trucks in Adelaide or Detroit Diesel and that he would “pay for it”.  He confirmed that in late 1999 in Adelaide and in Sydney the prime mover had the ball gears repaired (at Detroit Diesel Adelaide) and the differential repaired (at Automotive and Diesel Technics in Sydney) respectively.  He advised the first applicant and his father of those repairs.

3. During the course of his evidence the second respondent agreed that he had not produced any records from his workshop detailing the services and works done on the prime mover and stated in response, “Haven’t been asked for it”.  He agreed that the prime mover had been the subject of repairs costing approximately $68,000 in 1996 and that he did not mention that to the first applicant.  When asked the reason why it was not mentioned he said “Because it wasn’t my truck”.  The following exchange occurred –

   “I see.  So it wasn't your truck, so you decided that at that time, because it wasn't your truck, you wouldn't tell him about major repairs to the tune of some $68,000?---Yes, that's right.”

4. He denied that repairs in that order were not what would be described as “extensive repairs” or that they are “substantial” despite the fact that he bought the vehicle in 1998 for $170,000.  He denied that repairs equivalent to a third of the value of the prime mover would be substantial.

5. Significantly during the cross-examination he agreed telling the first applicant over the phone that anything on the truck that needed replacing or repairing had been done including new brakes and bearings had been replaced on the drive and there were two new steer tyres and that the prime mover was reliable and in excellent condition.

6. The following exchange occurred during cross-examination:-

   “The reality is that if this truck was in showroom condition and the type of truck you're suggesting it was, you would not have got rid of it.  You would have kept it.  What do you say about that?---No, because as soon as they get to a million kilometres - - -

   Yes?--- - - - we get rid of them and replace them.  Because we do market work, we've got to have 100 per cent reliability.”

7. He did refer to a further test drive (denied by the first applicant and his father) though could not explain why a second test drive would be required if it had already been taken for a test drive the previous night.

8. He agreed in evidence that he had told the Liddicoat’s that the truck would not require any major repairs for at least two years though continued to deny a reference specifically to the gearbox.  He agreed that he said something like anything that needed to be replaced or repaired had been done.

9. He did not deny that the applicant’s load of the vehicle was approximately 25 tonne one way and 20 tonne the other way with a 200 kilometre journey each way and did not dispute that the prime mover could handle about 45 tonne.  After some discussion about the load for this vehicle the following exchange occurred:-

   “The position is this:  that you were concerned about this truck being able to cope with its recognised 45‑tonne load because of its age and condition, and that's why you put that particular sentence in here - that he told you it was going to be used for light haulage - and you say, "On that basis my advice was that it would be right for the job"?---That's correct.

   You were concerned about this truck doing its normal load, weren't you, because of its age and condition?---Not at all.

   And that's why you got rid of it, or wanted to get rid of it?---Not at all.”

10. He did not dispute at one point saying to the first applicant something like “I don’t have 20,000 to spend on a rebuild” in the context of a discussion about the problems with the prime mover.

John Arthur Willard

1. Mr Willard gave evidence by audio link and adopted an affidavit sworn by him on 2 December 2002.  He deposed to being a qualified mechanic for 40 years and that the second respondent is known to him personally and he has repaired vehicles on behalf of the second respondent’s company. He is a director of Automotive & Diesel Technics Pty Ltd which is a company involved in heavy vehicle repairs and maintenance.  He claimed that it is acceptable trade practice to weld and machine cast iron gear and differential cases and disputed the evidence of Mr Hosking referred to earlier in this judgment.  He claims that repairs were undertaken in September 1999 after he was contacted by the second respondent and that three to six months after the prime mover had been repaired at his business the second respondent rang him from Melbourne claiming that the prime mover had struck further difficulty and that the second respondent said the differential had been drained and it had been found to contain pieces of metal.  He then drained the differential, pulled it out and checked it and found nothing wrong with it.  In relation to that issue the following exchange occurred:–

   “Now, you would agree that if the welding of the housing wasn't done 100 per cent properly, that could lead to the development of pitting and instability in the differential.  You agree with that, or don't you know?---If a welding was done - I mean, when you say "the welding", I have not seen the differential.  I do not know whether it was the welding that we actually did to that differential.”

1. After further questioning about what the manufacturer’s recommendation might be in relation to welding the witness again repeated that he had not seen the repair in question.  He did claim that any welding he undertakes would be according to manufacturer’s specifications.  He agreed that the work he undertook in September 1999 was for a Kenworth K100 and that that is a totally different truck to a T601.

Keith Pick

1. Mr Pick was called on behalf of the respondents.  He gave evidence by audio link and adopted an affidavit sworn by him on 4 December 2002.  He is a consultant employed by Transport Engineering & Management Pty Ltd and is a qualified expert in relation to heavy commercial automotive engineering.  He inspected the prime mover in November 2002 and produced a report.  He examined the vehicle for a few minutes prior to the hearing and agreed that that was a difficulty in making an assessment in this matter.  If the vehicle had indicated “heavy breathing of the engine” then he agreed that might be indicative of wear and tear ultimately resulting in an engine rebuild.  He stated that at a million kilometres or 1.1, 1.2 million kilometres one would be expecting it now to be in a critical stage of life.  He further agreed that a rebuild of the engine might occur between 800,000 kilometres and as much as two million kilometres.

2. Mr Pick agreed in evidence that the blueing of the teeth is consistent with low oil levels and extreme heat.

Thomas William Jones

1. Mr Jones gave evidence and adopted an affidavit sworn by him on 29 November 2002.  Although a director of the third respondent against whom the proceedings were discontinued he gave evidence when called on behalf of the first and second respondents.  He agreed that he was a friend of the second respondent who he had known for 5 or 6 years.  He could not recall sighting the prime mover.  He agreed that the blueing of gears indicates overheating which can be caused by low oil in the gearbox with subsequent overheating.  He agreed that “heavy breathing of the engine” is indicative of a need to rebuild the engine.  It is noted that he is a qualified mechanic and had been at the time of swearing his affidavit qualified for approximately 34 years with experience in the repair of trucks over that time.

Respondents’ submissions

1. It was submitted on behalf of the respondents that the critical issue for the court to consider are the conversations which are identified by the first applicant.  It was noted that the second respondent admitted telling the first applicant that a differential had been replaced and might have been rebuilt, together with work being undertaken on the ball gear.  They deny the gearbox was discussed.  It was submitted that that assumes critical significance in the facts of this case, both in terms of liability and quantum.  It was submitted that if the court were to find that the gearbox was not discussed but the differentials were discussed in the way as submitted by the first applicant, that may result in a finding consistent with partial recovery.

2. However, it was essentially submitted that the facts do not give rise to a cause of action in the way it is pleaded.  The issue which is of some relevance is the allegation that the prime mover would require no major repair for at least two years.  It was submitted that effectively the applicants are seeking to obtain a form of warranty or guarantee which is not appropriate for this type of purchase.  Any purchaser of a prime mover of this age must know, according to the respondents' submission, that it would require repairs and often major repairs which may arise unexpectedly.  It was submitted that even on the first applicant's analysis of the evidence, the effect of the comments were mere puffery.

3. The respondent referred the court to an extract from Heydon "Trade Practices Law" as follows where the learned author states at paragraph 11,550 the following:-

   “Under the general law a misrepresentation is not actionable unless it is of fact, and unless it is material.  A representation is material either when it is proved that it actually induced a contract, or where this cannot be proved, that it is of such a nature that it would tend to induce a contract, in which case it is inferred that the contract was induced by the representation.  The use of the term "material" has been criticised.  These rules, that the representation be of fact, and be material, are often loosely summarised in the maxim that a puff cannot be a misrepresentation.  Simplex commendatio non obligat.  Laudatory, overoptimistic, exaggerated, vague, commendatory sales talk is not the foundation of liability.

   In part this is because what is said is often a matter of taste or opinion.  In part it is because the buyer is expected to distrust the puffs of sellers.  'Exaggeration, puffing, boasting appear to be the very breath of salesmanship.  We never expect a detraction, always overemphasis’.  Then there may be difficulties of evidence.”

4. It was submitted that there needs to be a degree of realism attached to the context in which the conversations took place and the way they took place, together with an analysis of the words actually used in order to make a finding in accordance with the first applicant's evidence which was submitted at best could be regarded as evidence of mere puffery.

5. Reference was made to the decision of Fisher J in the Federal Court case of Pappas and Anor v Soulac Pty Ltd & Anor (1983) 50 ALR 231 at page 234‑5 where the court states, in adopting principles set out by the High Court in the Parkdale Custom Built Furniture case, the following:-

   “I adopt with respect what was said in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 42 ALR 1 by Gibbs CJ at page 7:  'The conduct of a defendant must be viewed as a whole.  It would be wrong to select some words or acts which, alone, would be likely to mislead if those words or acts, when viewed in their context were not capable of misleading.  It is obvious that where the conduct complained of consists of words, it would not be right to select some words only and to ignore others which provided the context which gave meaning to the particular words.  The same is true of facts.'

   It is important to appreciate that many of the statements alleged or admittedly made by Mr Spencer were wholly or in part statements of opinion, not capable of being objectively proved to be true or false.  They were also essentially the type of introductory comments, in the nature of puffery, made at the start of negotiations for the purpose of attracting the interest of a possible purchaser.  As such they became irrelevant or of little, if any, significance when detailed information is subsequently given a fortiori, to a potential purchaser with commercial experience.  To the extent that they are essentially puffery, it is proper to be reluctant to elevate them to the status of potentially misleading conduct.  The comments of Holmes J on this aspect, which he denotes as a rule of law in Denning v Darling 20 NE 107 at 108‑9, referred to in Donald & Heydon:  Trade Practices Law vol 2 p.539, are on point:  ‘The rule of law is hardly to be regretted, when it is considered how easily and insensibly words of hope or expectation are converted by an interested memory into statements of quality and value when the expectation has been disappointed.’”

6. A further issue in the present case is whether the applicants succeed in attracting liability under s.52 of the Trade Practices Act. It was submitted that when one views the evidence of the first applicant at its most favourable, that at the very best there is confusion in his mind which is not sufficient to attract liability under s.52. Again, reference was made to an extract from Heydon as follows at paragraph 11,380 where the learned author states,

   “Confusion in the sense of  'cause to wonder' not enough; confusion caused by erroneous pre-conceptions not enough.

   In the early days of s.52 there were authorities suggesting that it was infringed where the conduct of the respondent was merely confusing.  Thus McDonald's System of Australia Pty Ltd v McWilliam’s Wines Pty Ltd was a case in which Franki J held that the words 'or is likely to mislead or deceive' include confusing conduct in the sense that a significant number of persons would be caused to wonder whether there was some connection of a business nature between the respondent, a wine producer and the applicant, a purveyor of fast food under the name 'Big Mac', by reason of the respondent's use of those words in connection with red wine.  However, Franki J was reversed by the Full Court.  Smithers J said that the respondent's statements were about its wine; and the public knew this, they were not referring to the applicant's hamburgers.  Any reader who inferred from the words that there was a business connection between the applicant and the respondent would only do so because of the mistaken view that the words could only be used by the respondent with the applicant's permission.  They were misled, not by the advertising, but by their own error.  (To describe the view as mistaken is question-begging; the reason is circular.  This line of reasoning must be handled carefully, for conduct can offend s.52 even though it was only one of two causes of the consumer being misled, the consumer's own erroneous reasoning being the other.  Cases using such reasoning state no 'principle or dogma of general application'.  As Deane and Fitzgerald JJ said, the statements of Smithers J (and also Fisher J) about the 'erroneous assumptions' of the public were not formulations of general legal propositions, but 'no more than part of an exposed process of reasoning in the course of deciding [a] question of fact'.  The 'question of whether particular conduct causes confusion or wonderment cannot be substituted for the question whether the conduct answers the statutory description contained in s.52'”.

7. It was further submitted that even on a finding accepting the first applicant's evidence at its highest, this would represent only an opinion and because that opinion does not come to pass, it does not necessarily make the statement misleading or deceptive in breach of s.52. Reference was made to the decision of Lockhart J in Bill Acceptance v GWA (1983) 8 TPR 40408.  For convenience, an extract was referred to from the headnote of that case which provides as follows:-

   “... the mere fact that representations as to future conduct or events do not come to pass does not make them misleading or deceptive notwithstanding that the applicant has relied on them and has altered his position on the faith of them.”

8. It was submitted that at best the second respondent was simply expressing an opinion and it cannot be as an opinion and then translated into a cast‑iron guarantee effectively amounting to a statutory warranty that the prime mover was going to run for the next two years without the need for any repairs or anything of that sort, particularly given the circumstance of this case where it is common ground that the prime mover had travelled over a million kilometres.  It was submitted that is a critical aspect of the case and it could not realistically be expected that a truck having travelled that distance would not incur difficulties.

9. It was further argued by the respondents that the Court needs to consider whether if the statements made by the second respondent constitute an actionable misrepresentation whether they indeed constitute conduct in the course of trade or commerce which is an essential ingredient to attracting liability under s.52. Reference was made to the High Court decision in Concrete Constructions NSW Pty Ltd v Nelson (1990) 169 CLR 594 per Toohey J at 614 where His Honour states the following:-

   “Secondly the Applicant’s conduct was in trade or commerce within s.52(1).  If it is the trade or commerce of the Applicant with which we are concerned, it may said that the assurance given by its foreman was in relation to or in respect of that business.  But so to conclude does not answer the question whether that assurance was in the trade or commerce of the appellant.  In my view the conduct was not part of the appellant’s trade or commerce which was that of constructing buildings for others for reward.  It was at most incidental to that business.  If the question is whether the assurance was given in trade or commerce generally the answer must be no.  Again it may have been given in relation to or in respect of trade or commerce in the sense that it was incidental to a commercial activity.  But it was not given as part of trade or commerce in any general sense; rather it was given by an employer to an employee on for the purpose of the latter carrying out the work for which he had been engaged”.

10. It was submitted in the present case that the second respondent was in the business of a transport operator and not in the business of buying and selling trucks. Whilst it was conceded that there was evidence that the second respondent had sold and bought trucks, it was submitted that that is not sufficient to make a finding that this is sufficient to justify a finding that this was in trade or commerce. It was argued the Court should look at the activities of the corporation in the course of trade or commerce in order to impose liability under s.52 and not consider what it does incidentally but rather should identify the dominant or principal activity in trade or commerce performed by the corporation. It was submitted that for the respondent its dominant or principal activity was the operation of trucks not the buying and selling of them.

11. It was further submitted that in any event there is no evidence of reliance and accordingly no actionable misrepresentation or loss can be claimed.  It was submitted the numerous phone calls by the first applicant to the second respondent demonstrated that he was going to buy the prime mover regardless of what was said to him.  It was further submitted that notwithstanding the intervention of negotiations during the course of the telephone conversations that was not sufficient to constitute reliance.

12. On the issue of damages it was submitted that if the applicant paid for what he got then he suffered no loss (see Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1). Reference was also made to the High Court decision in Marks v GIO Australia Holdings Ltd & Ors (1998) 196 CLR 494 as follows:-

    “The loss or damage spoken of in ss 82 and 87 is not confined to economic loss. Section 4K makes that clear. But loss or damage caused by a contravention of the Act will often be economic loss. As was said in Wardley "[e]conomic loss may take a variety of forms". But central to them all, when it is said that the loss was, or will probably be, caused by misleading or deceptive conduct, is that the plaintiff has sustained (or is likely to sustain) a prejudice or disadvantage as a result of altering his or her position under the inducement of the misleading conduct.

    The bare fact that a contract has been made which confers rights or imposes obligations that are different from what one party represented to be the case does not demonstrate that the party that was misled has suffered loss or damage. The contrary view (which had been adopted by the Full Court of the Federal Court in Jobbins v Capel Court Corp Ltd) was rejected by the majority in Wardley.

    A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment to it than the course in fact adopted. Thus, the party that is misled will have suffered loss if a chose in action which was acquired was worth less than the amount paid for it. There may well be other ways in which it might suffer loss or damage. For example, consequential loss may be suffered. But no loss of that kind was alleged in this case and, putting that kind of loss to one side, we focus only on loss said to be suffered by the making of the contract.”

13. It was submitted that applying the reasoning in the decision of the High Court in Marks that the applicants in the present case paid for what they got namely a prime mover which had travelled over a million kilometres and it was further submitted that expert evidence referred to earlier in the judgment should be relied upon in determining the likelihood that a major rebuild would be necessary for a vehicle in that condition.  There was no evidence it was submitted that the applicants had paid more for the prime mover than might otherwise be the case and this normally may provide a basis upon assessing the measure of damages.  The expenditure incurred after purchase, it was submitted, would be the expenditure that one would expect to incur for a prime mover that had travelled over a million kilometres.

14. In general terms it was conceded that the findings it made about representations claimed to be in breach of s.52 were made then damages would need to be linked to those specific representations so that for example a finding made with respect to a representation relating to the gearbox would only lead to damages in relation to that item and not the claim in relation to the differential.

Applicants’ submissions

1. At the conclusion of the case damages were claimed to be $54,952.86.  After making a deduction for an amount of $1,300 previously claimed for the purpose of warranty which on the evidence was not expended after the rebuild of the engine, it was noted and I accept that there was no serious challenge as to the quantum of the damages for repair though clearly a challenge was made as to the time taken for repair and damages claimed for losses incurred during that repair time.

2. It was submitted that the liability of the second respondent arises from s.75B of the Trade Practices Act and it was claimed that he was the principal of the business and undertook negotiations and made the decision in relation to whether the prime mover would be sold or not.

3. In relation to the issue of trade or commerce, it was submitted that this is a clear case where the definition has been complied with and reference was made to the High Court decision in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594. It was submitted that in the present case the respondent is a dealer in trucks and is a very experienced person in the trucking business and hence it is a clear example of trade or commerce relationship.

4. In dealing with the submission relating to s.51A of the Trade Practices Act, Counsel submitted that the onus falls on the respondent to satisfy the Court on the balance of probabilities and adduce evidence to the contrary in relation to the issue of whether the corporation does not have reasonable grounds for making the representation. If the evidence is not forthcoming then it was submitted the representations are by virtue of s.51A deemed to be misleading. Accordingly in the absence of evidence from the respondents it was submitted that representations in relation to any representation dealing with future matters the Court should find that the respondent did not have reasonable grounds for making those representations and that the representations were therefore misleading.

5. Reliance was placed upon the decision of the Federal Court in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No1) (1988) 39 FCR 546; 79 ALR 83 as authority for the proposition that the fact that a person who has been the subject of a misrepresentation has been careless or could have discovered the misrepresentation had he or she made proper enquiries does not absolve the maker of the misrepresentation from liability for breach of s.52 of the Trade Practices Act. The decision of the Federal Court in the Henjo case was also relied upon for the proposition that silence may be relied upon to show a breach of s.52 when the circumstances give rise to an obligation to disclose relevant facts. Reference was made to the decision of Kabwand Pty Ltd v National Bank of Australia (1989) ATPR 40-950 where Lockhart J at paragraph 73 states the following:

   “For present purposes it is sufficient to say that a person claiming damages must show either that he has been induced to do something or to refrain from doing something which gives rise to damage or has been influenced to do or refrain from doing something giving rise to damage by the conduct contravenings.52: cf. Henjo Investments, supra, at 49,153-4, even if the issue of reliance may, as Lockhart J. indicated in Henjo, be more complex than the formulation of the test in terms of "influence" suggests.”

1. The Court was referred to the decision of Gurdag & Anor v Stillwell Ford Pty Ltd (1985) 61 ALR 689. It was claimed that the fact situation in that case was similar to or very close to the facts in the present application. In that case the applicants had purchased a used prime mover from the respondents for the purpose of carrying refrigerated food stuffs between Sydney and Melbourne. The applicants had been assured by a salesman employed by the respondents that the vehicle would be suitable for the purpose. The prime mover required repairs. It operated inefficiently and two loads of tomatoes carried in it were spoiled. It was held in that case that the representation that the vehicle was generally reliable, roadworthy and suitable for interstate transport were untrue and constituted misleading or deceptive conduct in breach of s.52 and damages to cover cost of repairs to the vehicle and loss of profits were allowed though not for modifications to the truck, the purchase of refrigerated container or to cover the spoilt loads of tomatoes.

2. The applicants claim against the respondents as pleaded also relies upon s.71 of the Trade Practices Act namely that there was an implied undertaking as to quality of fitness. It was submitted that the hire contract had implied terms by virtue of that section namely that the prime mover would be of merchantable quality and fit for the purpose. It was submitted that the implied terms had been breached and by virtue of the provisions of s.73(2) of the Trade Practices Act the first respondent as a supplier was liable in circumstances where there is a financier and that financier is not a linked credit provider.

3. Against the background of those submissions in relation to issues of law, it was submitted the Court should find that the first applicant is a truck driver who operates one truck.  He was described as a “simple man” not in a derogatory sense but rather in the sense of his working and life experienced discernible from his demeanour.  It was noted that he had purchased two previous trucks prior to the purchase of the prime mover and had never had them checked out but rather accepted what he was told by the seller.  Whilst it was conceded that some people might be more sceptical than that the Court was invited to conclude that the element of trust placed on the statements by the second respondent effectively as I understood the submission should not preclude the first applicant from relying upon the representations.  The Court should accept his evidence that the reason he did not purchase other trucks previously viewed was due essentially to budget restrictions.

4. It was noted that essentially there was no dispute on the representations made during the course of conversations save and except for reference to the gearbox.  Any vagueness in relation to the specific conversations in the circumstances would not alter the outcome in terms of finding and certain representations were made during the course of the conversations.  It was submitted that the representations in the present case could not on any interpretation be properly regarded as mere puffery.  It was submitted that the evidence falls well beyond the definition of puffery and the Court was invited to accept that both the applicant and his father were witnesses of truth or reliable witnesses. Any variation between their evidence strengthens the reliability of their evidence.  One difference in terms of the duration of the test drive namely whether it was half an hour or half an hour to 45 minutes was not of great significance compared with the evidence of the second respondent who suggested that the Liddicoat’s had arrived at 9 a.m. rather than 6 p.m.  The Court was invited to accept the applicants evidence in this regard.  The reliability of the respondents evidence was attacked on the basis that it was known the prime mover was involved in a collision in 1996 whereby approximately $70,000 worth of damage occurred.  It was submitted that the second respondent when asked why he did not provide information about that incident to the first applicant provided an unsatisfactory answer by stating “I didn’t tell him because I did not know the truck at the time “.

5. Further, the suggestion that that amount of repairs could not be regarded as “major repairs” also at the time given the vehicle was worth $200,000 it was submitted could not be a satisfactory explanation.  The involvement in an earlier collision was also relied upon as I understood it to some extent as supporting the submission in relation to misrepresentation by silence particularly when the respondent agreed that he was asked whether or not the prime mover had been “rolled”.

6. It was further submitted that no evidence was provided by the respondents relating to regular servicing of the prime mover to establish that it was well maintained and accordingly the evidence of the second respondent in relation to the maintenance of the prime mover was difficult to rely upon given that there was no corroboration from those who actually serviced or maintained the prime mover. The lack of documentation regarding the maintenance and service of the prime mover provided a basis upon which it could be submitted that there was no reasonable grounds for making the representations and that the respondent has therefore not satisfied the court by discharging obligations under s.51A. Specifically the representation that it was “the cleanest truck around” goes beyond mere cosmetics and evidence concerning work on the differentials was claimed to be unsatisfactory. Specific reliance was made upon the representation that the truck would require no major repair for at least two years and anything that needed to be replaced and repaired had been done. That was a representation that was claimed about future repairs and reliance was placed upon s.51A of the Trade Practices Act.

7. In relation to the issue concerning representations over the gearbox, it was submitted that the first applicant’s evidence corroborated by his father should be accepted over the evidence of the second respondent.

8. Some reliance was placed upon the evidence of the second respondent who seemed to place emphasis upon the light loads to be carried between Port Pirie and Adelaide by the prime mover.  It was submitted that this may provide evidence which would assist the applicants to the extent that the respondent in claiming that the vehicle would not require major repair for “a considerable period” introduced a qualification which was not uttered during the course of conversations.  It is noted in passing that in fact reference was made by the second applicant to his vehicles regularly travelling interstate so that the qualification seems somewhat unusual.

9. Particular reliance was placed upon the representations where the first applicant claimed he was told by the second respondent that the fuel economy was good and that he told “me again about the rebuilds and replacements of the differentials, gearbox and engine” and further reference to being told “the truck was reliable and never let him down” and that the prime mover “would require no major repair for at least two years”.  Those representations were submitted to be important representations and could not be merely dismissed as a matter of opinion not to be taken seriously as submitted by the respondent’s counsel.  It was submitted that one has to consider the first applicant and the fact that the same representations had been repeated to him again in person in a similar form to those representations made over the phone.

10. In this context it is noted that in evidence the first applicant indicated that if he had been told the vehicle would require significant work over the next year or two because it had done one million kilometres he would not have purchased the vehicle.

11. It was submitted that the repairs subsequently undertaken by the applicants in relation to the prime mover should be properly regarded as “major” despite the evidence of the second respondent that those repairs are not necessarily major.

12. It was also particularly relevant to have regard to the claimed representation that “anything that needed to be replaced or repaired had been done”.  This along with the other representations referred to appeared to be the key representations relied upon in this matter.

13. In relation to expert evidence it was submitted that there is no significant divergence whilst on the one hand a very good lifespan was expected to be given according to the evidence of Mr Cock.  It was submitted that essentially the engine overhaul is probably required anywhere between 800,000 and 2 million kilometres.  The Hosking evidence it was submitted was evidence that should be accepted by the Court and of particular importance was paragraph 5 of his affidavit which referred to the observations on examination of the gearbox which indicated “that the gearbox had been allowed to run low on oil at some much earlier time thereby weakening the gear structure and that this fault had not been adequately repaired”.

Reasoning

1. In this matter although there is a dispute over the precise words used in the representations alleged I am satisfied that representations were made by the second respondent for and on behalf of the first respondent of the kind alleged and set out in paragraph 7 of the judgment though I am not satisfied that specific reference was made to ‘re-racing’ of the gearbox.

2. It seems clear to me that the prime mover having travelled a distance of some one million kilometres had reached a stage where the second respondent was keen to sell it before incurring further expenses for repairs. I reject his evidence that repairs of almost $70,000 performed on the vehicle could be described as not substantial or significant given that those repairs at the time were equal to approximately one third the value of the prime mover. They were repairs known to the second respondent even though undertaken at a time when his company did not own the prime mover. It was relevant recent history which in my view ought to have been disclosed and to that extent the silence on the part of the second respondent in relation to that issue alone constitutes a grounds for breach of s.52 of the Trade Practices Act.

3. I am further satisfied and find that specifically a representation was made that the prime mover would require no major repair for at least two years.  In making that representation along with the other general representations I am satisfied that that goes beyond what might be described as mere puffery.  I am further satisfied and find that the second respondent did say to the first applicant both over the phone and in the presence of the first applicant’s father that the differentials had been replaced or rebuilt.  Again, that representation goes beyond puffery and specifically reassured the first applicant that the prime mover was in good mechanical condition.  I find that it is inconsistent on the part of the second respondent to on the one hand claim it was necessary to “get rid of” the prime mover when it had completed one million kilometres and then on the other hand notwithstanding his knowledge of major repairs in recent time and other concerns about its capacity to undertake interstate work that he would make the representations of the kind now alleged which I have found have been made in this case.

4. I am satisfied that in the circumstances the applicants relied upon the representations and would not have entered the hire purchase agreement but for the representations.  They induced the applicants to enter into the contract and to thereby suffer loss and damage.  It is not necessary for the applicants to investigate the representation and determine whether the representation was correct or otherwise. 

   
   

   I accept the applicable law set out by Lockhart J in the decision of Kabwand referred to earlier in this judgment.

5. I otherwise accept that the facts in the present case are very similar to those in the decision of the Federal Court in Gurdag.  In the present case the representations as to the reliability of the prime mover were untrue and were palpably untrue having regard to the events which occurred within a short period after the contract.  The catalogue of repairs to the prime mover indicate that it was what might colloquially be described as “a lemon” or at the very least was a vehicle which had travelled one million kilometres and should not have been the subject of the representations as to its reliability and fitness which I have found have been made by the second respondent.

6. In relation to the issue of the gearbox I had some hesitation in accepting that reference had been made by the second respondent to that item.  Whilst the term “re-raced” is not referred to in the affidavit of the first applicant he does state that in a telephone conversation he was told by the second respondent that “the differentials and gearbox had been rebuilt and one of the differentials had been replaced”.  To that extent I am satisfied that reference was made to the gearbox and that reference is corroborated by the first applicant’s father.  It is the corroboration of the evidence of the first applicant in that regard which encouraged me to make a finding specifically that at least the reference of a kind I have described was made to the gearbox albeit that I am not satisfied that the specific reference to it being “re-raced” occurred.  It is sufficient however that a reference specifically was made to one part of the vehicle and that combined with the other representations as alleged by the first applicant corroborated by his father and which substantially has not been disputed by the respondent encourages me to find as a matter of fact that the representations as alleged by the applicants were indeed made, and more importantly were relied upon by the applicants before entering into the contract.  As a consequence in this matter similar to the facts and circumstances in the Gurdag case it would follow that in circumstances where there is a breach of s.52 of the Trade Practices Act damages should cover the cost of repairs of the vehicle and loss of profits. It is not necessary in my view to further consider and make findings as to whether s.71 of the Trade Practices Act applies. I do formally find however that liability of the second respondent arises specifically from s.75B of the Trade Practices Act and that at all material times I accept that he was the principal of the business and undertook negotiations and made decisions as to whether or not the prime mover would be sold or not. I otherwise find that the definition of “trade or commerce” has been satisfied in circumstances where this is not a one off transaction and the respondents in part at least have clearly been involved in the sale and disposal of trucks. In part at least I accept that the sale of trucks and dealing in trucks is part of the business of the first and second respondent and is an example of a trade or commerce relationship of a kind required.

7. I otherwise reject the submissions of the respondents that in this matter the claim is tantamount to a warranty or a guarantee.  Normally without the representations a purchaser would be expected to make his or her own enquiries particularly in relation to a commercial vehicle which has travelled one million kilometres.  The difficulties in the present case have occurred solely as a result of the misrepresentations as found by the Court and made by the second respondent for and on behalf of the first respondent.  I have no doubt that the representation made was material and could not be simply dismissed as being a salesman type exaggeration puffing or boasting.  If the misrepresentation had simply been confined to a suggestion that this was a “excellent” or “good’ vehicle then the respondents submissions may have greater force. 

   
   

   I have found that the representations specifically alleged by the applicants were made and save for the “re-racing” aspect of the gearbox the specific representations were made in circumstances where they were clearly untrue and found to be untrue.

8. To the extent that the evidence of Mr Hosking and Mr Cock support the applicants’ case I prefer their evidence to the evidence of the experts called for and on behalf of the respondents.  I found both Mr Hosking and Mr Cock to be witnesses who had both the opportunity and expertise to make a proper assessment of the relevant issues. 

   
   

   I accept that the difficulties which occurred in relation to the prime mover would have occurred over a longer period of time as suggested by Mr Hosking.  I am further satisfied that the water pressure testing by Mr Cock reveals a significant problem which would have commenced prior to the purchase by the applicants.  His evidence in relation to the lack of telltale signs was also significant in rebutting the attack upon the first applicant as to observations made by him during the test drive and in the period shortly thereafter.

9. To the extent that the representations relate to a future matter, I am further satisfied and accept the submissions on behalf of the applicants that in the present case there is insufficient evidence from the respondents to satisfy the Court on the balance of probabilities that there were reasonable grounds for making the representation.  Accordingly I am satisfied that the representations in any event and specifically those relating to the vehicle requiring major repair work for at least two years should be deemed to be misleading.

10. As to the issue of damages I am satisfied on the expert evidence before me that the cost of the repairs directly relates to the misrepresentations and I am satisfied that the amount claimed by the applicants is fair and reasonable.   I have had regard to the criticism of the time taken to undertake the repairs though accept that that time should include not only the costs as indicated in the invoices but also the loss of income (as altered), the hire of a substitute prime mover and the additional cost of fuel.  Hence the claim which I am prepared to allow consists of the following:

    ·7/11/00   Rebuild of engine $19,825.95

    ·15/1/01  Differentials and gearbox for prime mover replaced at cost of $26,885.10

    ·Loss of income during rebuild of engine $2,940.00

    ·Cost of hire of substitute prime mover for a period of 4 weeks at $1,200.00 per week making a total of $4,800.00.

    ·$600.00 cost of additional diesel fuel.

11. Whilst some challenge was made to the various items I accept that on balance the applicants have established that each and every claim is fair and reasonable and I do not accept that the repairs should have been undertaken in a shorter time having regard to the evidence of the expert evidence who I prefer for and on behalf of the applicants.

12. I have not allowed the sum of $755.10 claimed for a condenser repair and hoses on the airconditioner on 23 November 2000 as I do not accept that this would logically or necessarily flow as a specific item of damage in relation to the representations which I have found.  Little evidence was given in relation to this item which would assist the Court to find the necessary connection.  Likewise, I am  not prepared to allow the sum of $419.26 for brakes as that may well be normal wear and tear.

13. In relation to the expert evidence I prefer the evidence of Mr Hosking who had an opportunity to examine and provide a report on the prime mover albeit that others in his employ perhaps had a better opportunity to perform the work.  It is somewhat surprising that the respondents did not provide evidence of work undertaken in the workshop of the first respondent in relation to the prime mover. 

14. The lack of evidence and unwillingness to convey to the applicants a past history of the prime mover including repairs of almost $70,000 leads the Court the conclude that the respondents have been less than frank in the information provided to this Court and have demonstrated in the desire to dispose of this vehicle a willingness to make representations which were clearly untrue at the time and should not have been made in the circumstances.  That is not to say that this case turns on an issue of credit but rather I have made findings as to the representations based on the corroborative evidence of the first applicant by his father combined with what I preferred to be the expert evidence called by the applicants compared with the less than satisfactory evidence including failure to provide documents by the respondents. 

1. It is regrettable that there has been some delay in the delivery of this judgment.  Had the matter involved significant findings of credit then the delay would cause greater concern.  It is nevertheless an unacceptable delay in matters of this kind which had required the Court to peruse carefully all the material and of course carefully review the transcript.  As I have indicated on a previous occasion in this Court it is my firm view that Courts must be given time to prepare judgments after a contested hearing.  The delivery of judgments in a timely manner is just as important as providing an early hearing date.  Whilst the delay between the issuing of the application and delivery of judgment has not been great compared to time frames in other courts the advantage of a hearing date within 6 months of filing the application has to some extent been lost by the delay in delivery of judgment. 

2. I shall hear the parties in relation to the precise form of the order though it is sufficient in the present case to indicate that the orders I propose making are as follows subject to submissions on the mathematical calculations:-

   (4)Judgment for the applicants against the first and second respondents in the sum of $55,051.05.

   (5)The first and second respondents pay the applicants’ costs to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules based upon Schedule 1 of the Federal Magistrates Court Rules.

I certify that the preceding one hundred and four (104) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate: 

Date:  23 August 2004