Manildra Flour Mills Pty Ltd v Anderson Holdings (Qld) Pty Ltd (No.2)
[2005] FMCA 1042
•29 July 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MANILDRA FLOUR MILLS PTY LTD v ANDERSON HOLDINGS (QLD) PTY LTD (No.2) | [2005] FMCA 1042 |
| TRADE PRACTICES – Where respondent represents a car conversion will be completed within 10 weeks – where applicant purchases car and imports it – where applicant claims to rely on representation that respondent has an evidence package for the make and model imported – where the conversion took 18 months – whether applicant relied on representation – measure of damages. |
| Trade Practices Act 1974, ss.52, 82 Federal Magistrates Court Rules 2001 |
| Jones v Dunkel (1959) 101 CLR 298 Lam v Ausintel Investments Aust Pty Ltd & Ors (1989) 97 FLR 458 Karawi Constructions Pty Ltd v Bonefind Pty Ltd & Ors (1993) ATPR 41-265 BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1981 – 1982) 149 CLR 337 |
| Applicant: | MANILDRA FLOUR MILLS PTY LIMITED ACN 000 217 523 |
| Respondent: | ANDERSON HOLDINGS (QLD) PTY LIMITED TRADING AS MARACOONDA AUTOMOTIVE ABN 36 066 837 536 |
| File Number: | SYG 3597 of 2004 |
| Judgment of: | Raphael FM |
| Hearing dates: | 17 May, 20, 21 July 2005 |
| Date of Last Submission: | 21 July 2005 |
| Delivered at: | Sydney |
| Delivered on: | 29 July 2005 |
REPRESENTATION
| Counsel for the Applicant: | Mr J Turnbull |
| Solicitors for the Applicant: | Teece Hodgson & Ward |
| Counsel for the Respondent: | Mr T Macklin |
| Solicitors for the Respondent: | Simmonds Crowley & Galvin |
ORDERS
Respondent pay the applicant the sum of $38,694.70 damages for breach of s.52 Trade Practices Act pursuant to s.82 TPA together with interest thereon at the rate prescribed by the FMC Rules from 6 May 2004 until judgment.
Respondent pay the applicant’s costs including all reserved costs but less the costs thrown away by an adjournment granted on 20 July 2005 assessed in accordance with Part 21 Rule 21.02(2)(b) and Schedule 1 of the Federal Magistrates Court Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 3597 of 2004
| MANILDRA FLOUR MILLS PTY LIMITED ACN 000 217 523 |
Applicant
And
| ANDERSON HOLDINGS (QLD) PTY LTD TRADING AS MARACOONDA AUTOMOTIVE ABN 36 066 837 536 |
Respondent
REASONS FOR JUDGMENT
Introduction
In these proceedings the applicant company claims damages pursuant to s.82 of the Trade Practices Act 1974 (“TPA”) for breaches of s.52 TPA arising out of certain representations allegedly made by the respondents relating to the time it would take to complete the conversion of a motor vehicle from left hand drive to right hand drive and the engineering of the vehicle to meet all Australian design rules and design approvals applicable to the steering conversion. The applicant claimed that relying upon the representations it purchased an American motor vehicle, imported it into Australia and entered into a contract with the respondents for its conversion. It expected the work to be completed within approximately three months but the work took in excess of eighteen months. The applicant lost the benefit of having a new motor vehicle available, arranged for it to be sold by the respondents and claims as damages the cost to it of the importation conversion and sale together with interest.
The respondents deny that the alleged representations had the meaning ascribed to them by the applicant or that the applicant relied upon any representations. It also argues that the loss and damage claimed by the applicant is excessive. There is an additional claim by the respondent in the court’s accrued jurisdiction for breach of contract, which is similarly denied.
History and Evidence
There is little dispute between the parties as to the factual matrix within which the alleged representations were made. In 2002 Mr John “Dick” Honan, the chairman of the applicant company visited the United States where he is a director of a subsidiary. He stayed at two hotels managed by Four Seasons and in each was provided with the use of a Lincoln Town Car. He liked the car and determined that the applicant company should purchase one for his use. In November 2002 he put in train enquiries concerning the vehicle. Using the good offices of the applicant’s US subsidiary Mr Honan obtained specifications of the new 2003 model Lincoln Town Car Cartier L. Mr Honan knew that the car would need to be converted from left hand drive to right hand drive. Enquiries were made, which revealed that the respondent company was a specialist in this field. On 5 November 2002 the US subsidiary obtained a quotation for the purchase of the Lincoln vehicle (Exhibit C). The document is entitled “Buyers Order” but I believe it is accepted and I will so find in any event, that it was no more than an offer to sell at the price indicated.
On 12 November 2002 Mr Honan telephoned Mr Brian Greig of the respondent company. Mr Greig is the compliance manager. Mr Honan told Mr Greig that he wanted to buy a Lincoln Town Car and requested information concerning the cost of conversion and the time that such conversion would take. Mr Honan had his office fax to Mr Greig a copy of the detailed specifications of the vehicle (Exhibit BAA1 to the affidavit of Barbara Ann Anderson). On 13 November 2002 Mr Greig sent a facsimile to Mr Honan which contains the representations that the applicant alleges it relied upon. The full text of the facsimile is set out below:
“RE: Conversion to Right Hand Drive – 2003 Lincoln Town Car Cartier L Series.
Thank you for your telephone call and facsimiled information of yesterday.
We are happy to assist you by converting the vehicle to right hand drive. We have previously completed this style of vehicle, and have an evidence package for the make and model already in hand.
The industry as a whole has recently undergone some enforced changes introduced by the Federal Office of Road Safety, Department of Transport and Regional Services (FORS). As a result of these changes, all existing compliance approvals will lapse on 7 May 2003. Manufacturer’s such as ourselves now have the option of two schemes if they wish to continue trading.
The first is for used vehicles, and is handled under the ‘Registered Automotive Workshop Scheme’.
The second is for new vehicles, and controlled by the ‘Road Vehicle Certification Scheme’. The 2003 model Lincoln would be considered a new vehicle, provided it has not been previously registered. Transporting the vehicle from dealer to dealer etc is not considered as voiding the ‘new’ status.
Regardless of which system is used, the vehicle must first be eligible for importation under the ‘Specialist and Enthusiest Vehicle Scheme’. There is a range of options that allow a vehicle to be eligible, and the main one that supports importation of the Lincoln town Car is that the make/model of vehicle is not available in Australia from the original vehicle manufacturer.
The Import Approval Document is issued once the details have been conveyed to, and confirmed by, the FORS. The vehicle is then able to be imported and delivered to our workshop for conversion. The conversion process takes in the vicinity of eight weeks, then we undertake testing, and arrange an engineer’s inspection.
While this is underway, we lodge the new evidence package, but since we already have one together this aspect would not be expected to delay the vehicle being plated with its identification plate. FORS audit the evidence to ensure it adequately covers the vehicle in question, and meets all of the requirements of the Australian Design Rules. When they are satisfied, an inspection team will then inspect the vehicle to confirm what we recorded in our evidence package.
Following this, an approval to fit the compliance plate is then issued, and a plate is ordered and fitted to the vehicle. Registration can then be completed.
As to cost, we have a fixed price contract of $22000-00 plus GST, payable in progress payments as follows:
An initial Booking Fee of $1000-00 plus GST – payable when we issue the Letter of Compliance required to be forwarded with the Import Approval Application to FORS. This also enables the vehicle to be booked into our workshop roster against the next available time slot.
First conversion payment of $7333-00 plus GST (less initial booking Fee) totalling $6333-00 plus GST – payable when the vehicle is delivered to the workshop for conversion work to commence.
Second conversion payment of $7333-00 plus GST – payable when the major engineering process has been completed (entails new right hand drive steering box, and firewall and steering column support structures).
Third conversion payment of $7334-00 plus GST – payable when the conversion to right hand drive is completed, and vehicle is prepared reading for plating.
The contract price covers all engineering inspections and certifications, but excludes registration costs. We can assist with registration of the vehicle, however are limited to Queensland Registration.
Sorry if this seems like a rather long winded explanation, but this is the process involved and it is best to explain it up front.
If you would like to know any more information about our company, then you an look us up on the web at This gives an overview of our company, the style of vehicles we convert, as well as links to related websites.
We can also assist purchase and freight the vehicle from overseas if required, and you should contact our Sales Manager, Ann Anderson, in this regard.
Please do not hesitate to contact us if we can be of any further assistance.”
On 15 November 2002 Mr Honan sent another fax to Mr Greig attaching a list of options for the car and asking him to provide a price with these options on an FOB basis for the vehicle. The respondent provided a price which was in excess of the amount quoted by the dealer on 5 November (Exhibit “BAA5” to Affidavit of Ms Anderson). Mr Honan advised the respondent that he would not be using it for the purchase of the vehicle which he had decided he would buy from the company that had provided the 5 November quote. On 4 December 2002 an email was sent from the applicant to the respondent advising the respondent:
“I just wanted to confirm our telephone conversation that Mr Honan is going ahead with his purchase of the Lincoln and would like Maracoonda Automotive to make the conversions…”
On 5 December 2002 the Manildra subsidiary in the United States purchased the vehicle for US$50,918.69. On 16 December 2002 the respondent wrote to Mr Honan attaching its contract and requesting it that be signed and returned. This was done on 20 December 2002 (Exhibit “BAA12”). The cost of the conversion was $22,000.00 plus GST.
The respondent, at the request of the applicant, arranged for the importation of the vehicle into Australia. The vehicle that was shipped was the very vehicle for which the quotation had been given on 5 November. There was some problems with the paperwork. Originally the car had been intended to be registered in the name of the Mr Honan but this was changed to the company. The method by which the car was allowed to be imported also had to be clarified. It was imported as a test or evaluation vehicle and received approval on that basis on 20 January 2003 (Exhibit “D” to Affidavit of William Albert Alport). The vehicle arrived at the respondent’s workshop on 27 February 2003.
The process for obtaining approval from the Federal Office of Road Safety for the conversion of a vehicle such as the one involved in these proceedings is complex. If the vehicle has never been worked on before an evidence package has to be prepared. This indicates to the department that all the work that is to be done complies with Australian design rules. Compliance can be established by utilising parts that are already approved or by engineering bespoke parts and having them tested to the standards required. Obviously, the latter takes much longer than the former. If a model has been worked on previously the converter will have an evidence package already in existence. Provided the conversion that it undertakes is identical to the conversion for which it has an evidence package the procedures for obtaining approval can be dealt with speedily and during the course of the time that the engineering operation is taking place. If there is no evidence package and a new one has to be prepared then the time to be taken is very much longer. By all accounts from the evidence given by Mr Anderson, Mrs Anderson and the respondent’s expert Mr Grdusiak, a time between twelve and eighteen months can be expected.
The technical specifications of motor vehicles change from model to model but they do not all change between all models. It may be possible to obtain an evidence package for a new model motor vehicle based upon an evidence package obtained for a previous model in respect of those items which have not changed and the production of an evidence package in respect of those items which have changed. Mr Anderson gave evidence that it is not really possible, with a new model, to know exactly what work has to be undertaken for the engineering of a conversion or for the obtaining of an appropriate approval until the vehicle arrives at the workshop.
When this vehicle arrived at the workshop there was a delay before it was slotted in to be worked on. The evidence is that work commenced on the vehicle in about May but I accept that it may have been looked at by Mr Anderson before that time. When he did examine the vehicle he discovered that there were significant changes between this model vehicle and the last Lincoln Town Car he had worked upon which was a Town Car produced in 2000 that the respondent said was a 2002 model. One of the most significant changes was in the steering which had moved from a box system to a rack and pinion system. There were other significant changes that involved engineering work because the respondents were unable to source pre- approved parts. It would have been clear at this time that the conversion time for the vehicle was likely to exceed two to three months if one included the obtaining the necessary approvals.
An initial compliance application was lodged on 8 July 2003 with the Department of Transport. The final evidence submission was lodged on 16 October 2003 and then a lengthy process of discussion took place between the Department and the respondent on technical matters. During this time correspondence ensued between Manildra and the respondent concerning the delays. The conversion was eventually approved and the car became capable of being registered in May 2004. It was registered on 27 May 2004. By this time the applicant had decided that it did not wish to take delivery of the vehicle. The vehicle remained in the respondent’s workshop for a further few months until it was sold by the respondent for $135,000.00. The vehicle had received its compliance plate on 5 April 2004.
Discussion
The applicant’s claim is simple. It says that it communicated with the respondents and obtained from them first orally and then in writing assurances that the conversion process including testing, inspection and obtaining of approval would take no longer than three months. Significant representations to that effect are contained in the letter of 13 November 2002 in the following sentences:
“We are happy to assist you by converting the vehicle to right hand drive. We have previously completed this style of vehicle and have an evidence package for the make and model already in hand… The conversion process takes in the vicinity of eight weeks then we undertake testing and arrange for engineer’s inspection. Whilst this is underway we lodge the new evidence package, but since we already have one together this aspect would not be expected to delay the vehicle being plated with its identification plate. FORS audit the evidence to ensure it adequately covers the vehicle in question and meets all of the requirements of the Australian design rules. When they are satisfied an inspection team will then inspect the vehicle to confirm what we recorded in our evidence package.”
The applicant says that relying upon this facsimile and the representations it contained it ordered the motor vehicle and arranged its importation into Australia. Mr Honan gave evidence that he wanted a current model vehicle to drive around in within Australia. He said that had he known that the vehicle would take between twelve to eighteen months to convert and obtain approval he would not have ordered the vehicle. He stated that the vehicle when it was finished was useless to the company because two later models had already appeared. The applicant’s damages are based upon it being placed in the same position as it would have been had it never purchased the vehicle. All the costs involved with the purchase, importation, conversion and registration of the vehicle are totalled and from that is deducted the amount obtained on sale and an element added for interest.
The respondent sought to argue that the applicant did not rely upon any representations contained in the letter or alternatively that if the letter was properly read it did not make the representations alleged. The case for reliance seemed to have been based upon an assumption that Mr Honan had determined to purchase this vehicle come what may before he received the fax of 13 November. Emphasis was placed upon the notation on the document of 5 November as a “Buyers Order”. It was claimed to be significant that the very vehicle that was mentioned in the Buyers Order was the vehicle delivered. I am satisfied that this was not the case. It was clear that the Buyers Order was only a quotation. Mr Honan was attempting to get the best possible price. That is why he asked the respondents to quote. The respondent’s quote came after the fax. I accept Mr Honan’s evidence that he decided to go ahead with the purchase on the basis of the information provided to him in the fax that the conversion would take eight to ten weeks and with the other formalities a maximum of three months based upon the representation that the respondent had undertaken this work on this make and model vehicle before and already had an evidence package.
I accept that there are paragraphs within the facsimile that are indicative of changes that had been made by the Department of Transport but I do not think that they were significant enough to put Mr Honan on notice that the other representations were subject to qualification. In fact the later paragraph that I have quoted above seems to indicate that they would not expect any delays because of the existence of an evidence package. I accept Mr Anderson’s evidence that he would not expect the work to be done on this vehicle within that time but, regrettably, that was not communicated to Mr Honan or his staff. There was some communication later, although not as open as it might have been, but by then it was too late. Mr Honan could not be expected to abandon the vehicle mid way because he clearly could not obtain as much money for it in that state as he would have done if the conversion was finished.
The respondents did not have an evidence package available for this make and model vehicle. The representation to that effect was clearly false and misleading. They did have an evidence package for an earlier model and no doubt they believed that when the new model came in they would be able to adapt it in the manner in which I have previously described. As soon as they began to inspect the vehicle they discovered they could not do so because there were some substantive changes. But some of these changes had been flagged in the specification that had been delivered to the respondent the day before the facsimile. Mr Anderson agreed in questioning from me that the most significant matter, and one which caused a very substantial delay, was the change in the steering system. This was signalled in the specifications and he also agreed that even if the specifications did not detail exactly how much additional work might be needed it would be enough to cause a person who was quoting a time for completion to pause and be cautious. That did not happen.
These findings substantially accord with the claims made by the applicant. Mr Greig, the author of the representations, did not give evidence. He is still employed by the respondent and I can infer that nothing he might have said would have improved the case of the respondent had he given evidence; Jones v Dunkel (1959) 101 CLR 298.
The respondent sought to obtain comfort from the dicta of Gleeson CJ NSW as he then was in Lam v Ausintel Investments Aust Pty Ltd & Ors (1989) 97 FLR 458 at [75]:
“Where parties are dealing at arms length in a commercial situation in which they have conflicting interests it will often be the case that one party will be aware of information which, if known to the other, would or might cause that other party to take a different negotiating stance. This does not in itself impose any obligation on the first party to bring the information to the attention of the other party, and failure to do so would not, without more, ordinarily be regarded as dishonesty or even sharp practice.”
Lam was a case in which both the trial Judge and the Court of Appeal found that the applicant did not rely on representations made to him. At best it was a case of misrepresentation by silence or equitable fraud. The instant case is not like that at all. Very specific representations were made. I do not believe that the respondents can obtain any assistance from the view of the Court of Appeal however correct it might be. The respondents also sought aid from the views of Beaumont J in Karawi Constructions Pty Ltd v Bonefind Pty Ltd& Ors (1993) ATPR 41-265 at [41-570] where His Honour said:
“There may be cases under s.52 of the Act where, in considering whether, in all the circumstances, the conduct of the respondent was misleading or likely to mislead, a failure by the applicant to check or verify a representation may negate reliance. For instance, a consumer might reasonably be expected to look at a label on a large item of furniture, Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) ATPR 40-307 but that kind of case, which must depend on its own circumstances, is not apposite to the present case.”
I cannot see how that authority is apposite to this case either. Two bold representations were made. The respondent said that it had an evidence package for this vehicle and that with it it expected the time for the conversion to take place would be eight to ten weeks. Mr Honan’s evidence is that the time representation was made in response to a query from him. Mr Greig was not called in evidence to refute that. What was the applicant expected to do? Phone up some other company and ask them whether the estimates put forward by the respondent were fair and reasonable? In the absence of any indicator that there might have been something wrong with the representation why should Mr Honan have been placed on notice that it was incorrect? The TPA was passed for the very purpose of ensuring that corporations were responsible for their representations. It would be negating the purpose of the Act to require the representee to check a representation made in these circumstances, even if it is reasonable to expect a representee to take notice of information provided by the representor which contradicts the representation. There was no such information here. I cannot find any assistance to the respondent in the authority.
The respondent did not really quibble with the assessment of damages made by the applicant. There was some suggestion that registration of a vehicle there is an automatic reduction in its value and that this would have happened anyway and should be reflected in the damages. Firstly, no evidence was called about this and secondly whilst common knowledge would indicate that new cars do drop in value the moment a purchaser drives them out of the showroom this loss is recompensed by the value to the driver of having the car in his possession and enjoying its use. The applicant did not have that advantage. In the circumstances I am not prepared to make any reduction on this basis.
Because of my finding on the breach of s.52 it is not necessary for me to consider the question of breach of contract. If I was required to I would indicate that I accept that the contract should have implied into it a term that the work of conversion would be completed within a reasonable time; BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 52 ALJR 20 and Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1981 – 1982) 149 CLR 337. What that reasonable term might be should be informed by the evidence of the negotiations between the parties. They cannot be based purely upon the evidence now produced by the respondent through Mr Anderson and its expert that the reasonable time in all the circumstances would have been twelve to eighteen months; Codelfa supra 348.2. The applicant concedes that pleaded damages for breach of contract may be less than those which would be imposed for breach of s.52. But in view of my findings it is not necessary to consider this matter further.
The applicant’s assessment of damages is contained at paragraph 6 in the Statement of Claim.
“Particulars of Loss and Damages
Contract price of the Applicant’s vehicle (including cost $130,395
of freight, import duty)
Plus costs of conversion $ 24,533
Plus registration costs $ 1,916
$156,844Plus interest on purchase cost from due date for
completion of works on 5 May 2003 to date of
compliance completion on 5 May 2004 at 8.35% $ 13,333
$170,177Plus GST $ 12,273
Less amount recovered on sale of the Applicant’s $135,000
vehicle
Total loss $ 47,450I find that the applicant is entitled to the amount claimed save for the amount of GST for which it would have received an input credit. But by the same token it will be required to pay GST on the damages awarded, so that should be paid by the respondent. The calculated figures are therefore net cost $170,177.00 less amount recovered on sale of applicant’s $135,000.00, total loss $35,177.00 plus GST $3,517.70, total $38,694.70. Interest on that sum is payable from 6 May 2004 until judgment.
I order that the respondent pay the applicant’s costs including all reserved costs but less the costs thrown away by an adjournment granted on 20 July 2005 assessed in accordance with Part 21 Rule 21.02(2)(b) and Schedule 1 of the Federal Magistrates Court Rules.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
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