Marco Engineering Pty Ltd v Gioia

[1997] QCA 463

IN THE COURT OF APPEAL	[1997] QCA 463
SUPREME COURT OF QUEENSLAND

Appeal No. 1795 of 1997

Brisbane

[Marco Engineering P/L v. Gioia]

BETWEEN:

MARCO ENGINEERING PTY. LTD. ACN 010 107 388

Appellant

AND:

PETER GIOIA

Respondent

Davies J.A.
McPherson J.A.

Thomas J.

Judgment delivered 19 December 1997

Judgment of the Court

APPEAL DISMISSED WITH COSTS

CATCHWORDS:	CIVIL LAW - MEASURE OF DAMAGES - appellant supplied to the respondent polycarbonate components that were unfit for the purpose for which they were required - whether damages awarded for breach of this implied term were excessive - whether the respondent should have taken greater steps to mitigate his loss.
Counsel:	Mr. M. R. Bland for the appellant Mr. G. J. Robinson for the respondent
Solicitors:	Bernard Pointing & Co., Southport, for the appellant Cranston McEachern for the respondent
Hearing Date:	1 December 1997

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND

Appeal No. 1795 of 1997

Brisbane

Before Davies J.A.
McPherson J.A.
Thomas J.A.

[Marco Engineering P/L v. Gioia]

BETWEEN:

MARCO ENGINEERING PTY. LTD. ACN 010 107 388

Appellant

AND:

PETER GIOIA

Respondent

REASONS FOR JUDGMENT - THE COURT

Judgment delivered 19 December 1997

The appellant is a company which fabricates moulded plastic components by designing and

manufacturing dyes and moulding such components in those dyes. The respondent is a maker of trotting

harnesses. He has no scientific or technical expertise but developed a facility for making such harnesses

through his interest in trotting horses and his ownership of one of them. He started making his own

harnesses and others asked him to make for them. That is how his business started.

Before dealing with the appellant, the respondent purchased nylon components for his trotting

harnesses from a company called Zilco. In August 1990 he showed Mr. Saunders, the appellant's

plastics manager, the Zilco components and asked if the appellant could make them. Saunders said they

could and produced samples.

The respondent was dissatisfied with the appearance of the nylon; it was, he thought, too dull.

He was then shown a compound, polycarbonate, which had a shiny appearance and which, Mr.

Saunders said, was very strong. He said it was almost unbreakable. There was also a demonstration

in which some of the material was put in a vice, twisted, jumped on and banged. On the basis of that

assurance and demonstration the respondent placed an order for 1,000 saddle trees, components of

trotting harnesses, in polycarbonate. This was in October 1990 and they were delivered on 21

November 1990.

The respondent incorporated the polycarbonate saddle trees into trotting harnesses which he

sold. Within a few months he heard reports that some of these saddle trees had broken. He told Mr.

Saunders about this and Mr. Saunders expressed incredulity. By the middle of 1991 further breakages

had occurred and the matter was discussed at a meeting between the respondent, Saunders and Mr.

Tonks, who was the managing director of the appellant. The suggestion was made at that meeting that

they revert to nylon. It is unclear who made that suggestion. Indeed Tonks at one stage said that he

made the suggestion and, at another, that it was the respondent who did. His Honour thought that it

seemed more likely that either Saunders or Tonks had made the suggestion to revert to nylon but said

that it did not seem to matter greatly who made it. Clearly his Honour did not construe what took place

as a recommendation by the appellant to abandon use of polycarbonate components in favour of nylon

ones and, in view of Tonks' uncertainty as to whether he or the respondent suggested reverting to nylon,

his Honour was plainly right.

In the meantime the respondent had apparently also ordered hobble joiners, another component

of harnesses, in polycarbonate and these had been delivered, incorporated into harnesses and sold.

Reports soon came back to the respondent that some of these had also broken.

The learned trial Judge accepted the respondent's evidence that at this stage, that is in the

middle of 1991 when the respondent ordered nylon components, there was still uncertainty existing as

to whether the polycarbonate itself was to blame for the breakages. That is not surprising. Saunders

was apparently expressing incredulity at that possibility.

He was still expressing such incredulity in late August 1992 by "insisting" that the breakages

should not have happened. This was at a meeting which led to examination and analysis of the

components by G. E. Plastics Australia.

It is unclear when the respondent ceased selling polycarbonate components. He conceded that

it was possible that he continued using it until he saw a report from G.E., to which we shall refer below,

which was on 3 November 1992. Again, in our view, that is not surprising. Up until then the appellant's

representatives had not resiled from their incredulity that polycarbonate could be to blame for the

breakages. Indeed even at trial Mr. Saunders would not agree that polycarbonate was unsuitable for

the purpose for which it was required. But it may well have been a little earlier than that, possibly by

the time of the August meeting referred to above, that the respondent ceased selling any polycarbonate

components and he said that he ceased selling polycarbonate saddle trees in July 1991. There does not

seem to be any factual basis for the finding by the learned trial Judge that the respondent continued to

use polycarbonate saddle trees until the end of 1992. On the other hand it seems probable that he

continued to sell polycarbonate hobble joiners until August or November 1992.

On 31 August 1992 Mr. Tonks took a broken hobble joiner from the respondent and submitted

it to G.E. Plastics Australia for analysis. Its report and another subsequent report established the

unsuitability of the polycarbonate for the chosen purpose.

That the components which the appellant supplied to the respondent were unfit for the purpose
for which they were required is not now in dispute. Nor does the appellant contest any longer that the

respondent relied on the appellant's skill and judgment. It was for breach of that implied term that the

learned trial Judge awarded damages totalling $66,269.60. The appeal is restricted to the amount of

those damages.

The learned trial Judge assessed damages on the basis that the breach was operative until

November 1992, that is, that losses which flowed from sales by the respondent of polycarbonate

harness components up to November 1992 flowed from that breach, but reduced the major part of the

amount, assessed on this basis, by 20 percent by reason of the respondent's failure to mitigate his

damage by not reverting to nylon more promptly. The appellant contends that the learned trial Judge

misdirected himself as to the proper test for mitigation; that he should have concluded that a reasonable

person in the respondent's position would have realised by July 1991 that polycarbonate components

for trotting harnesses were liable to break during normal use; and that consequently he should have

limited damages on the basis that the breach was not operative after July 1991.

Although the respondent ordered nylon saddle trees in June 1991 because of his concern about

the polycarbonate ones, he remained, as his Honour found, in a state of confusion because the

appellant's representatives "continued to assert the suitability of polycarbonate material". That finding

was attacked by the appellant but in our view it was correct. They did not continue to assert in terms

that it was suitable but they "insisted" that the breakages "should not happen" or that they "should not

have happened", thereby expressing incredulity at the possibility that it was the polycarbonate which was

at fault for the breakages.

The appellant's principal submission is that these statements of incredulity "must have become less persuasive as breakages continued to occur". In other words, the appellant submits, a reasonable person ought by mid-1991, or at least some time prior to the date to which the learned trial Judge

assessed damages, to have rejected the continued implied assertions of the appellant, upon whose

expertise the respondent had initially relied, that polycarbonate remained suitable for the purpose for

which he had required it.

That is, in our view, a difficult submission to sustain. No doubt a point may be reached in a

case such as this where, notwithstanding continued assertions of suitability by a vendor, a purchaser

ought reasonably in his own interest to reject those assertions and to act as if they were untrue. But

given the relationship between the parties in this case we do not think his Honour was wrong in failing

to conclude that the respondent ought to have ceased using polycarbonate components by July 1991

when nylon saddle trees became available or indeed that he ought to have done so on some other

specific date prior to November 1992.

On the other hand if, as his Honour thought, at some time prior to November 1992, at a date

which he was unable to find with specificity, the respondent ought to have rejected the appellant's

continued assertions that polycarbonate remained suitable, his Honour was entitled to make some

reduction from the amount which he had assessed on account of the respondent's failure to mitigate his

damages. But, because he was unable to specify a date by which the respondent ought to have rejected

the appellant's continued assertions that polycarbonate remained suitable for the required purpose, his

Honour was entitled to arrive at an approximate sum for this reduction. Having regard to the amounts

assessed by Mr. Frayne, upon which his Honour's assessment was based, we cannot be satisfied that,

in the circumstances, a reduction of 20 percent in the amounts allowed for loss of profits ($66,917) and

loss of value of tools ($10,920) was an inappropriate reduction for that failure.

The appeal in our opinion should be dismissed with costs.