Millar, M. v Candy, J.W.J

[1981] FCA 239

Re: MARTIN MILLAR
And: JAMES WILLIAM JOHN CANDY (1981) 58 FLR 145
No. 33 of 1980
Negligence - Damages

COURT

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY
GENERAL DIVISION
Blackburn(1), Franki(2) and McGregor(3) JJ.

CATCHWORDS

Negligence - damages - economic loss consequent on physical damage to property - motor vehicle under hire-purchase agreement - whether amount due from hirer under such agreement recoverable as damages from defendant.

Damages - Tort against bailee - Property destroyed - Economic loss - Foreseeability - What economic losses recoverable - Hire-purchase agreement - Whether hirer can recover difference between market value and amount due under hirepurchase agreement.

Damages - Motor vehicle accident - Non-profit-earning vehicle destroyed - Whether damages for loss of use of vehicle recoverable.

HEADNOTE

In this appeal the appellant was liable to pay damages for negligent driving whereby a vehicle of which the respondent was the hirer under a hire-purchase agreement was damaged beyond economic repair. The issues on appeal were whether the respondent was entitled to recover for the loss of use of the non-profit-earning vehicle and whether he was entitled to recover the difference between the market value of the vehicle and the amount due by the respondent pursuant to the hire-purchase agreement.

Held: (1) Franki J. dissenting - The difference between the amount due from the respondent under the hire-purchase agreement and the market value of the vehicle was not damages flowing from the tortious act but a sum payable to the hire-purchase company because of the hire-purchase agreement.
Compania Financiera "Soleada" S.A. v. Hamoor Tanker Corporation Inc., (1981) 1 WLR 274; Caltex Oil (Australia) Pty. Ltd. v. The Dredge Willemstad (1976), 136 CLR 529, applied.

(2) Per curiam - The appeal as to the award for loss of use and enjoyment of the respondent's vehicle should be dismissed because damages for the loss of use of a non-profit-earning vehicle that was damaged or destroyed by negligence are recoverable and the amount awarded was not in dispute.

Berrill v. Road Haulage Executive, (1952) 2 Lloyd's Rep 490, followed.

HEARING

Canberra, 1981, March 26-27; December 15. #DATE 15:12:1981

APPEAL.

Appeal from the Supreme Court of the Australian Capital Territory (Sheppard J.) to the Full Court of the Federal Court of Australia on the question of quantum of economic damages recoverable in tort.

C. G. Gee, for the appellant.

G. P. Brzostowski, for the respondent.

Cur. adv. vult.

Solicitors for the appellant: Abbott Tout Creer & Wilkinson.

Solicitors for the respondent: Snedden Hall & Gallop.

E. F. FROHLICH

ORDER

1. The appeal is upheld.

2. For the sum of $1904.00 being the amount of the judgment awarded respondent, there is to be substituted $200.00.

3. Respondent is to pay the costs of the appeal.

JUDGE1

In this appeal there are two questions. The first is the amount of the respondent's loss. The second is whether the appellant is liable for such amount. The facts have been set out by Franki J. in his reasons for judgment, and I do not repeat them.

It was contended by counsel for the appellant that the respondent's loss was confined to the loss of the use and enjoyment of his vehicle - a non-profit-making chattel - between the time of the collision, which rendered the vehicle useless, and the time when the respondent acquired another vehicle. It was not disputed that $200 was an appropriate figure for this amount. Counsel for the appellant contended that the respondent suffered no further loss.

The respondent's loss may be analysed by stating his relevant assets and liabilities, both before and after the accident in which his vehicle was destroyed.

Before the accident, the assets were

(a) the possession of the car under the hire-purchase agreement, involving the use and enjoyment of it;

(b) two alternative rights -

(i) the right to acquire the unencumbered property in the car;

(ii) the right to return the car to the hirer.

(I note that under the Hire-Purchase Ordinance 1961, the hirer is entitled to statutory rebates in certain circumstances; see s.16. This may affect the calculation of damages, but not the question of principle. I do not consider it further in these reasons.) The relevant liability was the liability to pay the whole of the further sum due under the hire-purchase agreement (hereinafter called "the full balance"). This liability was unqualified (i.e. it was payable in any event) though the respondent had the option of paying it in a lump sum or by the agreed instalments.

After the accident, the respondent's relevant assets and liabilities were as follows. The assets were nil, since those mentioned above were all nullified by the accident. The liability was the same as before, to pay the full balance, and it could be said to have been somewhat increased by the fact that it was now payable in full at once, instead of being payable by agreed instalments.

It is thus apparent that the respondent's net loss, as a result of the appellant's tort, was

(a) the total value of the pre-accident assets, plus

(b) the increase in the amount of the pre-accident liability.

The law is clear that a bailee, even under the simplest possible form of bailment (for example a loan of goods on terms that they are to be returned on demand) is entitled to the market value of the goods if they are destroyed by the wrongful act of the defendant. Arbitrary that rule may be, but it is not disputed that this respondent was entitled to the benefit of it. This appeal, however, is concerned only with his additional losses. These were, first, the loss of two alternative rights - to acquire ownership of the car, or to return the vehicle to the hirer, and secondly, the loss of the difference between the full balance and the present value of the obligation to pay the full balance by the agreed instalments.

Of these losses, the first is beyond the reach of arithmetical calculation; the second is a matter of arithmetic, given an appropriate rate of interest; but in the aggregate they are perfectly capable of being represented by an award of damages. But I am clearly of opinion, with great respect to the trial judge, that that award should not be as large as the amount he awarded, namely the amount of the full balance. To see that this is so, one has only to remark that each of the two alternative rights described above was exercisable only on payment of the full balance. To award him the full balance as damages is therefore to award him a profit from the accident.

I turn to the second question, whether the defendant can in law be liable for the loss so calculated. I have had the advantage of reading what has been written by Franki J. on this subject, but with great respect I find it difficult to see Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad" (1976) 136 C.L.R. 529 (hereinafter called The Willemstad) as an authority which supports the liability of the appellant in the appeal before us. It seems to me that Gibbs, Stephen and Mason JJ., although they expressed themselves separately, were agreed in insisting that a condition for the liability of a defendant for economic loss arising consequently upon damage or destruction of property, was a relationship - a special relationship - which can be described in terms of "duty" and "proximity", between the plaintiff and the defendant. At p.555 Gibbs J. said
"The fact that the loss was foreseeable is not enough to make it recoverable. However, there are exceptional cases in which the defendant has knowledge or means of knowledge that the plaintiff individually, and not merely as a member of an unascertained class, would be likely to suffer economic loss as a consequence of his negligence, and owes the plaintiff a duty to take care not to cause him such damage by his negligent act."
At p.573 Stephen J. referred to
"the need, in cases of purely economic loss, for some further control of liability apart from that offered by the concept of reasonable foreseeability. . . "
At pp.576 and 577 his Honour set out the five factors which in the case before him established what he called "sufficient proximity to entitle the plaintiff to recover its reasonably foreseeable economic loss". I need not set out those five factors here. At p.593 Mason J. said
"A defendant will then be liable for economic damage due to his negligent conduct when he can reasonably foresee that a specific individual, as distinct from a general class of persons, will suffer financial loss as a consequence of his conduct."

These statements of the law are not identical, yet in my opinion all of them require this Court to reject the simple basis upon which the learned trial judge founded the liability of the defendant, namely that the defendant should reasonably have foreseen that the plaintiff might be the hirer under a normal hire purchase agreement in respect of the vehicle which he was driving. I note that the case of Patel v. London Transport Executive (1981) 1 Road Traffic Reports 29, was decided by the Court of Appeal in England on precisely the same ground, and in my respectful opinion, it was one which was explicitly rejected by Gibbs, Stephen and Mason JJ. in The Willemstad.

My brother Franki, however, puts the defendant's liability on the basis that there was a special relationship between the plaintiff and the defendant. The question which troubles me, however, is whether the evidence shows this. The defendant was an apprentice assigned to work under the plaintiff at an engineering or motor mechanical workshop. The defendant had been working for about three months in this capacity. The plaintiff was asked -
"Had you had any discussions with him (the defendant) regarding the car which is the subject of this claim?"
The plaintiff replied
"Yes, in general conversation just talking at lunch times etc. I had remarked how much the car had cost me - I was paying it off. He told me the same facts about his car. It was just normal conversation."
The plaintiff was then asked
"Do you recall - as accurately as you can, what was said about how you were paying off the car?"
And he replied
"Well it would have gone something like 'It cost me $7,000 and I am paying it off to Lombards'. It would have gone along those lines. I cannot recall the exact words."
The evidence showed that the place where this conversation occurred was at Kembla Street, Fyshwick. The accident occurred at a later time in Yamba Drive, Mawson.

In my opinion this evidence is not sufficient to bring the case within the principle propounded by the High Court in The Willemstad. In that case, the facts known to the defendant at the time of the tortious act were such as to impose the specific duty on the defendant which rendered it liable to the plaintiff; these facts included the existence and location of the pipe line and its associated establishments. But in the case before us there is no evidence whatever that at the time of the accident the appellant was aware of the identity of the car with which he collided, and of its driver, so as to create the necessary "duty" or "proximity" which would make him liable for the respondent's economic loss. I cannot take The Willemstad as authority for the proposition that a defendant who negligently damages the plaintiff's motor vehicle on the highway will be liable for consequential economic loss if it turns out that the plaintiff is a person about whom, and about whose motor vehicle he has previously had the appropriate information, but will not be liable if it turns out that the plaintiff is not such a person. I cannot believe that the law requires that the reasonable man driving a motor vehicle on the highway has a duty to keep a sharp lookout for those vehicles, and those persons, which are the subject of hire purchase agreements about which he has previously had some information.

It is for this reason, with great respect to Franki J., that I do not agree that the principle of The Willemstad is brought into play by the facts of this appeal. In my opinion the liability of the appellant for more than $200 is not established.

In my opinion the order of the Court should be that the appeal be allowed with costs and the judgment of the Supreme Court varied by substituting the amount of $200 for the amount of $1904.

JUDGE2

This is an appeal from a judge of the Australian Capital Territory wherein the appellant was held liable for certain damage arising out of a motor car accident. The matter came before the judge by way of appeal from the decision of a magistrate. No question of personal injury was involved. The facts of the matter were not in dispute. On 29 April 1978 the appellant was driving a motor vehicle which collided with a motor vehicle of which the respondent was the registered owner. The collision was due entirely to the appellant's negligence. The respondent's vehicle was damaged beyond economic repair. The appellant paid to the respondent $4,800 which was the market value of the respondent's vehicle immediately prior to the accident. At the time of the accident the respondent's vehicle was the subject of a hire purchase agreement with Lombard Australia Limited ("Lombard"). The agreement was dated 9 June 1977. It was common ground that there was nothing unusual in that hire purchase agreement. The agreement provides, inter alia, that until it is terminated the respondent "shall have no property in the goods and shall only be a bailee thereof".

Clause 2(b) of the agreement provides:
"I (the respondent) agree. . .
(b) To indemnify you (Lombard) against loss (the measure of which shall be the total rent stated in the schedule less rent instalments paid and less statutory rebates as at the time of my meeting this indemnity and less the value (if any) of the salvage) arising from the total or substantial destruction or loss (including lawful forfeiture of the goods);. . . "

Pursuant to Clause 2(b) of the agreement the respondent was required to pay Lombard the sum of $6,504, made up of $4,800, the market value of the vehicle immediately before the accident, together with an amount of $1,704.

The action had been brought to recover this sum of $1,704 but in addition to awarding the respondent this sum the learned trial Judge also awarded him the sum of $200 as damages for loss of use of the vehicle.

There are two issues which arise. The more significant one raises the question whether the amount of $1,704 falls within damages which are recoverable in the circumstances of this case. We were told that this case is in the nature of a test case. The second issue concerns the amount of the $200.

The issue concerning the $1704.

The questions in relation to this problem appear to be:

(a) Can the respondent recover damages as bailee of the vehicle?

(b) If the answer to question (a) is "yes", can the respondent recover damages beyond the market value of the vehicle at the date of the loss and, if so, can the respondent recover damages which arise from the terms of a contract under which the damaged property was held by him where the conditions of that contract are of a type usual for contracts of that nature?

(c) Does the answer to question (b) depend upon whether the appellant had knowledge or means of knowledge of the nature and perhaps the terms of the contract at the time of the accident?

Question (a).

There is no doubt that a bailee may sue for damage done to the property of which he is bailee. (Halsbury's "Laws of England", 4 Edn. par.1586.)

Questions (b) and (c).

The usual measure of damages for the loss of a non-profit earning chattel due to negligence is the market value of the chattel at the date of the loss (McGregor "On Damages", 14 Edn. par.1030.) These questions are concerned with the recovery of damages with respect to economic loss. I prefer to start by examining what was said by the High Court in Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad" (1976) 136 C.L.R. 529. This was an action brought to recover damages solely for economic loss. A pipeline, which was laid on the bed of a bay, was fractured by a negligent act. The pipeline, which carried oil from a terminal to an oil refinery, did not belong to the plaintiff Caltex Oil (Australia) Pty. Ltd. ("Caltex"). Caltex claimed damages for the economic loss which it had suffered because, as a result of the fracture, it could not use the pipeline which it did not own to convey oil during the period when the pipeline was being repaired and restored to service. Caltex was successful. Mason J. at pp.589-592 considered the judgment of the Privy Council in Overseas Tankship (U.K) Ltd v. Morts Dock & Engineering Co. Ltd. ("The Wagon Mound") (1961) A.C. 388 and at p.589 said:
"In The Wagon Mound it was held that direct damage sustained in consequence of a negligent act could not be recovered unless it was also damage of a kind that was a reasonably foreseeable consequence of the defendant's negligent act. All that the case actually decided was that directness was not a sufficient test of liability, not that it was not a necessary test of liability."
And at p.590:
"All this indicates that in England the foreseeability test which seemed to emerge after the decision in The Wagon Mound as the ultimate touchstone of liability in negligence, has not been accepted as an exclusive criterion of liability for economic damage."
And at p.591:
"On the other hand, economic damage is, no less than property damage, a very real detriment. Now that the recovery of economic damage not consequential upon property damage is recognized in the case of negligent misstatements, there is no sound reason for accepting the traditional rule that only financial loss which is consequential upon property damage can be recovered."
And at p.592:
"All this indicates that a more acceptable path to the solution of the problem is to be found through the duty of care."
Stephen J. at p.562 said:
"Accordingly, any doctrine of the law of negligence which would confine recoverable economic loss to that which is strictly consequential upon physical injury to the plaintiff's person or property must lead to a refusal of relief to Caltex."
Murphy J. at p.606 said:
"I do not accept the contention that economic loss not connected with physical damage to the plaintiff's property is not recoverable."
Gibbs J. (as he then was) at pp.555-6 said:
"In my opinion it is still right to say that as a general rule damages are not recoverable for economic loss which is not consequential upon injury to the plaintiff's person or property. The fact that the loss was foreseeable is not enough to make it recoverable. However, there are exceptional cases in which the defendant has knowledge or means of knowledge that the plaintiff individually, and not merely as a member of an unascertained class, will be likely to suffer economic loss as a consequence of his negligence, and owes the plaintiff a duty to take care not to cause him such damage by his negligent act. It is not necessary, and would not be wise, to attempt to formulate a principle that would cover all cases in which such a duty is owed; . . . "
Stephen J. at p.580 said:
"If loss-inflicting consequences of an act are reasonably foreseeable and the necessary proximity is shown to exist, the present state of the law of torts, unreformed by any fundamental departure from fault liability, suggests no reason why the tortfeasor should not bear the consequences of his conduct."
Mason J. at p.593 said:
"They should have known, if they did not know, that the pipeline carried refined petroleum products from the refinery to the terminal and that the oil was used by Caltex in its business operations as an oil company. Moreover, they should have foreseen, as the primary judge found, that negligence on their parts resulting in a severance of the pipeline would involve not only loss of oil from the pipeline but an interruption in supply which would necessitate the expense of making alternative transport and delivery arrangements, which included the expense of modifying the terminal.

In these circumstances both the dredge and Decca owed a duty of care not only to the owner of the pipeline but to Caltex whose oil, as Stephen J. in his reasons for judgment demonstrates, was flowing through the pipeline. It was a duty to take reasonable care to avoid damage, whether physical or financial, as might result from negligent navigation of the dredge in the vicinity of the pipeline. This duty was breached and Caltex sustained economic damage in the form of the expenditure which I have referred and which by agreement amounted to $95,000".
Jacobs J. at p.598 said:
"If the loss arises from the physical effect of an act or omission on the person or property of a plaintiff and that physical effect is one which was foreseeable and that foreseeability gives rise to a duty in the defendant to take reasonable care to avoid that physical effect, it is no answer to the plaintiff's claim for damages that his loss was pecuniary or economic."

I draw the following conclusions from the passages I have cited:

1. There is no reason why economic loss which is not consequential upon damage to the plaintiff's property should not be recoverable in the appropriate case.

2. To be recoverable economic loss must be the direct consequence of the negligent act and it must be of a kind which was reasonably foreseeable and the defendant must have knowledge or means of knowledge that the plaintiff individually and not merely as a member of an unascertained class will be liable to suffer economic loss as a consequence of the plaintiff's negligence.

It is necessary to examine the facts of the present case in the light of these conclusions. There is uncontradicted evidence that prior to the accident the respondent had discussed with the appellant, who was employed by the same employer, the fact that he had acquired the vehicle pursuant to a finance agreement and that he was paying off the cost of the car to Lombard. I do not think that the amount of $1,704 falls within what is often referred to as damage consequential upon the physical damage to the property. It is not a loss which arose from the damage to the car or from the vehicle being no longer available to the respondent but from the terms of a contract entered into before the accident with Lombard, a third party.

I consider that, so far as is relevant to the present case, a reading of the judgments in "Willemstad" leads to the conclusion that where damage is caused to a plaintiff by a negligent act of a defendant it is necessary to consider whether the damage was both a direct result of the act of the defendant and was foreseeable by the defendant. If economic damage is to be recovered beyond the value of the loss of the plaintiff's property and loss consequential thereto, it is necessary that there should be a special relationship between the plaintiff and the defendant sufficient to give rise to a duty of care not to cause the damage for which compensation is sought. The learned trial Judge took the view that the damage of $1,704 was foreseeable because hire purchase and leasing agreements were very common, and that the defendant ought to have appreciated, as the learned trial Judge said:
". . . that there may be contained in hire purchase agreements or leasing agreements provisions which, in the event of the destruction of a vehicle, oblige the person in possession of the vehicle to indemnify a finance company not only against the loss of the market value of the vehicle but also for the loss of the finance company's bargain. Such a provision is not, in my opinion, unreasonable or arbitrary in its effect. There may be provisions in other hire purchase or leasing agreements which are of a harsh and unconscionable kind. If such were the case one might well hesitate to draw the conclusion that a person in the position of the appellant here ought reasonably foresee that negligence on his part would involve the plaintiff in liability arising from such a provision. Furthermore, there may be policy considerations which would persuade one that the loss suffered was not recoverable. This is not a case of that kind."

His Honour took the view that the appellant's negligence triggered that part of the clause which gave rise to the liability of the respondent to pay Lombard the amount of $1,704. However, I consider that, in the case of economic loss not directly consequential upon the property damage, it is necessary to establish a particular duty of care upon the appellant to avoid conduct which will cause that loss and I think this requires that the appellant had knowledge or means of knowledge that a relevant contract in the nature of a hire purchase or time payment contract existed. I note the judgment in Patel v. London Transport Executive (1981) R.T.R. 29 which proceeded along lines compatible with the approach of the trial judge in the case before us.

Because of the acceptance in "Willemstad" that economic loss cannot be recovered in, for example, the case of a person cutting a power cable unless there is some special duty of care, I consider that it is necessary to draw the line at a point where the defendant has specific knowledge or means of knowledge that the plaintiff individually will be likely to suffer economic loss as a consequence of the defendant's negligence.

While the recent judgment of the High Court in Shaddock and Associates Pty. Limited v. The Council of the City of Parramatta (28 October 1981 - unreported) deals with liability for negligent mis-statements both Mason J. and Murphy J. cited "Willemstad". Mason J. said at p.20 "Finally, the rule, recently established by Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad" (1976), 136 C.L.R. 529, is that economic loss, not consequential upon property damage, may be recoverable from those whose negligence occasions it".

Since there is no suggestion that the terms of the hire purchase agreement were unusual, knowledge of those precise terms was not necessary. I consider that the amount of $1704 represented economic loss suffered by the respondent as a result of the appellant's negligence. I consider that the loss was a direct consequence of that negligence and that the appellant had knowledge, or at least means of knowledge, that the respondent individually would be liable to suffer such loss as a consequence of the appellant's negligence. I consider the respondent was entitled to be awarded the $1,704 under consideration.

The issue concerning the $200.

The question which was raised here by the appellant was whether or not damages for loss of use of the vehicle can be recovered where the vehicle concerned was a privately owned motor vehicle. No question was raised as to the quantum of the damages awarded. The question of the recovery of damages for loss of use of a non-profit earning chattel is dealt with in McGregor (supra) at pars. 1020-1023A. It seems clear from the case cited therein, and in particular from The Mediana (1900) A.C. 113 that damages may be recovered for the loss of use of a non- profit earning chattel. I see no reason why this principle should be limited to collisions at sea. I consider that it is also applicable to a privately owned motor car not used for a profit earning purpose.

I would dismiss the appeal and order that the appellant pay the respondent's costs.

JUDGE3

MARTIN MILLAR (Appellant) appeals against the decision of a Judge of the Supreme Court of the Australian Capital Territory in which he awarded $1,904.00 damages to JAMES WILLIAM JOHN CANDY (Respondent). The appeal is brought pursuant to Federal Court of Australia Act 1976 Section 24(1)(b).

The facts of the matter are not in dispute. Appellant became liable to pay damages for negligent driving on the 29 April 1978 whereby a vehicle of which the respondent was hirer under a hire purchase agreement was damaged beyond economic repair. Thereupon the appellant paid to the respondent the sum of $4800.00 being the agreed market value of the vehicle immediately before the damage, to compensate respondent for the loss of his vehicle.

The Hire Purchase agreement dated the 9 June 1977 said to be in a usual form, worded as addressed to the owner (Bombard) of the vehicle, read as follows -
"2. . . . . . . .
I (the respondent) agree . . . . . . . .
. . . . . . .
(b) to indemnify you against loss (the measure of which shall be the total rent stated in the schedule less rent instalments paid and less statutory rebates as at the time of my meeting this indemnity and less the value (if any) of the salvage) arising from the total or substantial destruction or loss (including lawful forfeiture of the goods);
. . . . . . . . . . . . "

In the events that happened and by the operation of this clause, it is acknowledged by counsel for the appellant that respondent was required to pay to the owner $6504.00 which payment it is agreed would be properly and lawfully made. In these proceedings the respondent has sought to recover $200.00 for the loss of use of the vehicle and also the difference between $6504.00 and $4800.00 viz. $1704.00. This latter sum is the difference between the amount due by the respondent pursuant to the said clause 2(b) to the hire purchase Company and the market value of the vehicle i.e. $4800.00. For these additional amounts the respondent sued the appellant in the Court of Petty Sessions; there was awarded to him the sum of $1704.00, the Magistrate not allowing any amounts as such for the loss of the use of the vehicle. Against that decision the (present) appellant appealed to a Judge of the Supreme Court of the Australian Capital Territory. Broadly speaking, the appellant had contended no sum beyond the market value (already paid) of the vehicle was recoverable; so the amount $1704.00 and any amount for loss of use of a non-profit earning vehicle should not form part of any verdict.

It was agreed between the parties before the Court that the motor vehicle itself was a non-profit earning chattel.

In his judgment, his Honour said -
"There can be no question but that in a case where a plaintiff such as the respondent here loses a non-profit earning chattel due to a defendant's negligence the measure of damages to which the plaintiff is entitled is usually the market value of the chattel at the date of the loss; see McGregor on Damges, 14 edn., para 1030 and cf. Hoad v. Scone Motors Pty. Limited (1977) N.S.W.L.R. 88. Damages for loss of use may also be recovered; see McGregor (ibid) para. 1020; the "Greta Holme" (1897) A.C. 596 and the "Mediana" (1900) A.C. 113, especially per Lord Halsbury L.C. at p.117."

His Honour also found that the fact that the vehicle was the subject of a hire purchase agreement would not in itself make any difference to the damages which a plaintiff in the situation of the respondent would ordinarily recover. In respect of this finding he said -
"The respondent, by reason of his possession of the goods, would have had the right to sue for damages, the measure being the value of the vehicle and an amount to compensate the plaintiff for the loss of its use. . . . . . "
He referred to authority previously cited. (Underlining is mine)

His Honour awarded the respondent the total amount which he was required to pay to the hirer plus $200 for loss of use of the vehicle. He said -
"The market value of the vehicle was $4800, but to him that was not a very relevant matter unless he were to return the vehicle. As things stood on the day of the accident he had an asset in his entitlement to retain possession of the vehicle and use it for his own purposes. He had a liability in that he had, in order to retain that possession, to continue to make the monthly payments provided for in the agreement. Immediately after the accident the position was quite different. The respondent had no asset whatever. By reason of the operation of clause 2(b) of the agreement he became under a liability to pay to Lombard $6,504. To him the market value of the vehicle in those circumstances was immaterial. He had no vehicle and was left with an obligation to pay out $6,504. In no sense could it be said that payment to him of the sum of $4,800 provided him with adequate compensation for his loss. The proposition that such a payment would provide him with adequate compensation is devoid of commercial reality and common sense. To award the difference of $1,704 does not offend the fundamental principle upon which the appellant relies."
And later -
"The liability of the respondent to Lombard arose by reason of the operation of the clause, but its operation was triggered, and only triggered, by the appellant's negligent act which had the effect of destroying the vehicle."

His Honour disposed of other submissions, e.g. that the damages were not foreseeable and that they were too remote. It is not necessary to repeat the arguments advanced or the basis upon which his Honour came to that decision in that regard. He said finally -
"In my opinion the loss here suffered was plainly consequential upon the material damage itself. I would add that to the extent that this is a case where damages for purely economic loss are claimed it is a case where the judgments in the "Willemstad" (136 C.L.R. 529 at p.553) would contemplate there being recovery."

Counsel for the appellant argued that the judgment showed that the value of the vehicle played no part in the reasoning of the Judge at first instance, that the award did more than judicially should have been done, i.e. that the victim (respondent) should have been put back so far as money can do it in the position he was as if the tort had not occurred but was not entitled to any further sum. He submitted that the position of respondent, save only for the fact that he did not now have a vehicle to drive, was precisely identical, after payment to him of the market value of the car ($4800) as before the tort. He contended further that there was nothing in the agreement following destruction of the vehicle requiring immediate payment to the hire purchase company; that if respondent chose he could have gone on paying the balance of the $1704.00 by instalments. But appellant disclaimed any intention to seek a reduction of the amount of $1704.00 referrable to any entitlement to pay only the present value of the instalments. The contention was that no part of the $1704.00 was payable; that the measure of damages was the pre-accident value of the goods and no more. We were not informed, in submission or by evidence, as to how the $1704.00 was made up; but Counsel in his submissions referred to it as -
"the remaining capital sum plus terms charges reduced by the statutory formula. . . . . . "
He did not identify the "statutory formula" in detail. He said it was "impossible to distribute the figure between those two characters of capital and terms charges."

He submitted that the authorities referred to in his Honour's judgment indeed supported his proposition; whereas the trial Judge awarded the whole difference between that value and the 'pay out figure.' He submitted there was no authority suggestive or persuasive for this approach. He referred to a quotation in Hoad v. Scone Motors Pty. Ltd. (1977) 1 N.S.W.L.R. 88 at 93C by Moffitt P. attributed to Widgery C.J. He argued that for a non profit earning vehicle tortiously put out of action there should be no award for loss of its use; though he drew attention to authority where, on the evidence, such an award was made, i.e. Berrill v. The Road Haulage Executive (1952) 2 L1.L.R. 490 at 493; Halsbury's Laws of England, 4th ed. vol.12, para. 1165, sub nom. "The measure of damages". He referred to the judgment appealed where the learned trial Judge, considering the entitlement of the respondent who was but a bailee to recover, said -
"Lombard might also have sued the appellant (tort feasor) for the value of the vehicle. But in the absence of a provision such as is contained in clause 2(b) of the agreement it would not in the circumstances of this case had any right to recover any monies from the respondent."
(Words in brackets are mine).

Counsel submitted this supported his contention that there is only one sum recoverable in circumstances such as these, viz. the value of the vehicle i.e. without the addition of charges. The award, he said, should not be judged by the accident of there being a contract between the victim of the tort and a third party. He referred to Rodocanachi Sons & Co. v. Milburn Bros. 1887 Q.B.D. 67 at p.76; Williams Bros. v Agius (1914) A.C. 510 at p.520. Though he agreed it referred to a different factual context he cited Neville v. London "Express" Newspaper Limited (1919) A.C. 368 at p.380 per Lord Finlay -
"It cannot be regarded as damage sufficient to maintain an action that the plaintiff has had to discharge his legal obligations or that he has incurred expenses in endeavouring to evade them."

He submitted that the indemnity which required payments by the respondent to Lombard came into existence not because of the tort but at the moment of execution, and because of, the hiring agreement; that the trial Judge drew the wrong conclusion from the notion that the tortious events triggered the operation of that pre-existing contractual obligation. For an analogous argument, he referred to the so called pension cases, e.g. National Insurance Company of New Zealand Limited v. Espagne (1961) 105 C.L.R. 569 and Paff v. Speed (1961) 105 C.L.R. 549 viz. that a plaintiff's damages should not be reduced by the existence of a contract which he has entered into, such as an insurance contract; nor should, so the argument ran, the plaintiff's entitlement to damages be increased by the accident of a contract with a third party; he submitted that in the circumstances of this case the tortious action did not cause the loss; and that the damage was not foreseeable or was too remote. As to remoteness, he referred to the "Liesbosch Dredger" v. s.s. "Edison" (1933) A.C. 449 at p.459. He argued also that the existence of the hire purchase agreement was the operative cause of the liability to pay $1704.00 (citing this passage) -
"In the varied web of affairs, the law must abstract some consequences as relevant, not perhaps on grounds of pure logic but simply for practical reasons. In the present case if the appellants' financial embarrassment is to be regarded as a consequence of the respondents' tort, I think it is too remote, but I prefer to regard it as an independent cause, though its operative effect was conditioned by the loss of the dredger."
See ibid. p.460.

Counsel for respondent submitted that the market value was not the appropriate measure of restitution; that the respondent being a bailee was under an obligation to indemnify the owner; that being virtually an insurer he could, by virtue of adoption of subrogation, sue for the amount of the indemnity he has to meet. He submitted that the real value as referred to in the Liesbosch Dredger case would justify the award of $1704.00. The tort, he argued, did cause the loss. He referred to The Winkfield 1902 P. 42; Caltex Oil (Australia) Pty. Ltd. v. The Dredge "Willemstad" (1976-1977) 136 C.L.R. 529, Dillingham Constructions v. Gresham Insurance (1968) Q.W.N. 30. He submitted that the loss the owner could have sued for was the "pay out" figure which would have included $1704.00; that this was also a measure of what respondent lost and should therefore recover.

It has not been attempted to do more than give a summary of the more important aspects of Counsel's arguments.

Our consideration of this matter starts with what we understand not to be in dispute between the parties, i.e. that a bailee, the hirer under a hire purchase agreement and the respondent in this instance is entitled to sue for destruction to the goods which are the subject of the bailment or the hire purchase agreement, assuming, as is clearly the position, that he was in possession at the time of the tortious action which destroyed the goods. See e.g. Mangan v. Leary (1878) 3 N.Z.J.R. (N.S.) C.A.10 and cases cited at p.13.

The more difficult aspect of the case is the quantum of damages which is then to be recovered.

I consider first the submission that where a non-profit earning vehicle is damaged or destroyed by negligence no damages should be awarded for loss of its use. This is conceded to be contrary to statements in Halsbury's Laws of England 4th ed. vol. 12 cited in para. 1165. For that proposition the learned authors cite "The Mediana" 1900 A.C. 113 to which the learned trial Judge also referred. That case concerned damage to a lightship which was replaced by one kept for such an emergency; and it was maintenance cost in respect of the lightship used as a replacement which was sought (and granted). That authority may not be entirely apt for the purpose of this case since the lightship was not non-profit earning in the same sense as a domestic vehicle. But Berrill v. Road Haulage Executive (1952) 2 Lloyd's Rep. 490 is clearly in point though the learned trial Judge found support from "The Mediana" and other sources to which he referred. In my view, such damages are recoverable; and there being no attack on the actual amount awarded, I would reject the appeal on this aspect and confirm inclusion in the judgment of the $200.00.

The more contentious issue between the parties is as to whether the appellant should be liable to pay as damages the difference between the amount due by the respondent to the owner under the hire purchase agreement and the agreed market value. We note that Counsel on either side was not able precisely to indicate or calculate for us how the amount of the difference, viz. $1704.00 was made up. It is therefore not possible to relate it to any specific number of instalments due under the agreement or interest or principal sums.

Counsels' research and our own investigation have not discovered any authority completely covering this situation. Authority to which his Honour referred and we have quoted earlier support that the measure of damage is the full or market value of the chattel at the date of the loss. See also the case which was cited in argument The Winkfield (1902) P.42 E.G. at 58 et seq: "Hire Purchase Law in Australia" (Dean) at page 138-139: "Hire Purchase Law" (Else Mitchell and Parsons) 4th Ed. p.141 : "Law of Torts" (Prosser) 4th Ed. at p.96: Clerk and Lindsell on Torts 14th Ed. para.1168. "Bailment" (Palmer) at p.177 supports the same measure of damages. See also the article "Tort Liability for Damage to Hire-Purchase Goods" (Fleming) (32 A.L.J. 267): cf 8 C.J.S. Bailments para. 39 p.424 et seq. para 55 p.563 et seq.

Under "Tort", sub-heading "Basic Pecuniary Losses: The Normal Measure of Damages", the author in "McGregor on Damages" 14th Edn. wrote (p.36) - "Where the plaintiff's goods have been damaged, the basic pecuniary loss is the diminution in their value which is normally measured by the reasonable cost of repair, and generally without making any deduction from the damages on account of the fact that after repair the goods are in better condition than they were before the tort. On the other hand, the basic pecuniary loss is the market value of the goods where they have been destroyed or misappropriated."
Authority cited for 'destroyed' was The Clyde (1856) Swab. 23, 24 wherein this passage appears in the Judgment of Dr. Lushington -
"As to the principle upon which the Court proceeds in these cases, there is, I apprehend, no doubt whatever. That has been laid down in The "Gazelle", namely, that wherever damage is done by one vessel to another, the parties are to be restored into the same state as they were before the accident; that is to say, they are to have the full value of the property lost; restitutio in integrum is the leading maxim. The value is the market price at the time of the destruction of the property, and the difficulty is to ascertain what would be its market price.
The case concerned the destruction of a schooner and the action was brought by the owners. Later, in "McGregor on Damages" there was also given a reference to the Liesbosch Dredger v. s.s. "Edison" (1933) A.C. 449. This passage appears (p.710) - "The importance of this case on the issue of remoteness of damage has overshadowed its importance as the leading case on the measure of damages for the tortious destruction of a profit-earning chattel."
So in that case at pp. 468-469 Lord Wright said -
". . . . . . the value of the Liesbosch to the appellants, capitalized as at the date of the loss, must be assessed by taking into account: (1.) the market price of a comparable dredger in substitution; (2.) costs of adaptation, transport, insurance, etc., to Patras; (3.) compensation for disturbance and loss in carrying out their contract over the period of delay between the loss of the Liesbosch and the time at which the substituted dredger could reasonably have been available for use in Patras, including in that loss such items as overhead charges, expenses of staff and equipment, and so forth thrown away, but neglecting any special loss due to the appellants' financial position. On the capitalized sum so assessed, interest will run from the date of the loss."
It is necessary to note that after the market price the ensuing damage heads relate to profit earning character of the dredge; matters which do not apply here. Lord Wright, having said earlier that the "true rule" was the "value of the ship to her owner as a going concern", was, in the passage cited, enumerating components of that value referrable to profiteering. I note that items such as "overhead charges" are included under the sub-heading "compensation for disturbance and loss in carrying out their contract".

In Halsbury's Laws of England 4th edn. Vol. 12 "Damages", the author, under the heading "The Measure of Damages in Tort" sub-heading "Chattels: the basic rule" wrote -
"The basic rule is that the measure of damages in the case of damage to a chattel is the cost of repair, but if it is unreasonable from a business point of view to repair the article, or if the article is damaged beyond repair, then the basic measure is the cost of replacement in an available market."
for which there is cited the Liesbosch Dredger case.

The author deals later, specifically, with the "loss of use of profit earning chattels."

It will be helpful to consider some texts and authorities in which the rights of bailees (including those who have possession as hirers under a Hire Purchase Agreement) have been discussed. I have suggested there are passages in "Bailment" by Palmer which bear upon this problem. In Chapter 4 headed "The Remedies of the Bailee" p.177, this appears -
"A bailee's possession entitles him to exercise any of the remedies to which possession is a prerequisite, or to which it is one of several grounds of potential qualification. His lack of full ownership does not preclude him, moreover, from recovering the full value of the chattel or the full cost of its impairment; the rule in such circumstances is that "as against a wrongdoer, possession is title". Thus if the goods are wrongfully taken from him or are damaged while in his possession, he may sue the wrongdoer in trespass, conversion or detinue just as if he were the bailor under a revocable bailment or an owner whose goods had never, before the wrongdoing, left his possession."

Mangan v. Leary (1878) 3 N.Z.J.R. (N.S.) C.A.10, was cited and summarised thus -
"A hired horse and carriage were damaged, while in the possession of the bailee, by the negligence of the defendant. The court allowed the bailee to recover the full cost of the damage, refusing to limit his recovery to the extent to which his own rights of enjoyment under the bailment had been impaired."
"The Winkfield" was mentioned earlier. After reference to an acknowledgment of its rule in cases cited by the author, to some of which reference is made below, it is said (181) in "Bailment" -
"A bailee in possession of a chattel may sue for any injury inflicted upon that chattel and may recover in full the cost of replacement or repair irrespective of whether the chattel has been destroyed or merely damaged, irrespective of whether he has suffered any personal loss as a result of the wrongdoer's misconduct; irrespective of whether the injury sustained by the chattel exceeds the value of the bailee's own limited interest; irrespective of whether he is answerable to the bailor for the damage or loss in question; and irrespective of whether he is a gratuitous bailee with "bare" possession, or a bailee for reward with a finite tenure of the chattel, still subsisting when the wrong occurred. The remedy brought by the bailee in possession can extend not only to trespass, case or conversion, but to negligence. . . . . . . . "
In "Law of Torts", Prosser, 4th Edition, under the heading "Conversion", there is consideration given to who may sue in such an action. It is apparent that more than a remedy for conversion in any restricted sense is contemplated; and the author distinguishes between the remedy of the owner with and without an immediate right to possession. At p.96 this appears -
"The important fact is that the man entitled only to future possession can recover, in whatever form of action, the full value of his interest in the goods which has been appropriated by the defendant, and no more.
. . . . . . . . . .
Complications arise when the converter is sued both by the bailee and by the bailor. They are not peculiar to conversion, and arise also in cases of negligent destruction of the chattel, or damage to it. The bailee, using the term in the general sense of one in possession when rights to possession are outstanding, is entitled to recover the full value of the chattel, being accountable to the bailor for any excess over the value of his own interest."

The author of "Hire Purchase Law in Australia" (Dean) in Chapter V111 considers loss or damage to goods hired; he does not deal explicitly with obligations the bailee might have, where the goods are destroyed, to the bailor owner. But he does say at p.124 in such circumstances (apart from agreement), though referring to a tort by the hirer -
"The owner's action would be for damages for conversion, when the value of the chattel at the time of the loss or destruction, less the defendant's interest therein, is the true measure of damages."
For this he cites Belsize Motor Supply Co. v. Cox (1914) 1 K.B. 244; Whiteley Ltd. v. Hilt (1918) 2 K.B. 808.

As to the hirer's right, the view is expressed that he has no proprietary interest at all in the goods. So he continued (referring again to the owner) -
"If so, the measure of damages is the actual value of the goods."

The author also considers the owner's right against third persons for detinue or conversion. He indicates that a determination of the hiring is necessary, and discusses what acts constitute conversion, and includes in this (p.131) destroying the goods or changing their quality. He said at p.133 -
"The general principle is that the amount of damages recoverable by the plaintiff is the value of the chattel at the time of the conversion."
As to when goods are subject to a hire purchase agreement which is still on foot and no breach has taken place he states (134) -
". . . . . . the owner must give credit for the amounts already paid by way of hire and in reduction of the ultimate purchase price."

In his section on Hirer's rights against the owner, he does not precisely deal with the problem here but states - (138-139)
"As has been stated above when dealing with the rights of the owner, conversion, trespass and negligence are regarded as injuries to possession rather than to ownership, and it is therefore only the person who is in possession or who is entitled to the immediate possession of goods who can sue. Therefore, what has been already said in respect of these causes of action applies to proceedings by the hirer."

The reference to authority is not to emphasise the bailee's right to sue - a matter beyond doubt - but to note the consistent reference to the measure of damages being the value of the (vehicle); or words to that effect.

None of these authorities or authors, in my view, support the respondent's arguments. They are, I consider, at least consistent with appellant's submission. Reference has been made to Caltex Oil Australia Pty. Ltd. v. The Dredge "Willemstad" 1976-1977 136 C.L.R. 529 (Willemstad). The effect of the judgment of Gibbs J. (as he then was) at p.551-552 is that a person committing an act of negligence is not liable for all economic loss foreseeable resulting from it; though the extent of claims for loss that is purely economic as opposed to that arising from physical injury is wider. His Honour (p.554) quoted from Professor Atiyah's article in the Law Quarterly Review Vol. 83 p.263 that "The Wagon Mound" (1961) A.C. 388 -
". . . . . . .merely decides that a plaintiff cannot recover for unforeseeable consequences even if they are direct; it does not decide that a plaintiff can always recover for foreseeable consequences even if they are indirect."
He said at p.555 =
"In my opinion it is still right to say that as a general rule damages are not recoverable for economic loss which is not consequential upon injury to the plaintiff's person or property. The fact that the loss was foreseeable is not enough to make it recoverable. However, there are exceptional cases in which the defendant has knowledge or means of knowledge that the plaintiff individually, and not merely as a member of an unascertained class, will be likely to suffer economic loss as a consequence of his negligence, and owes the plaintiff a duty to take care not to cause him such damage by his negligent act."

I interpolate that, in my view, little turns on the knowledge found to have existed in the tort feasor here as to the existence of the Hire Purchase Agreement; or that respondent's vehicle was the subject of such an agreement. Appellant had a duty anyway to the respondent, as he did to all road users, not to damage their vehicles, the content which did not suddenly vary when, at the instant of his negligent driving, he is confronted with the vehicle of his potential victim which he presumably then would have had to say was the subject of hire purchase. And the judgment in the case do support that the foreseeability test, "has not been accepted as an exclusive criterion of liability for economic damage" (cf. Mason J. at. 590). Mason J. continued -
"There are a number of reasons which tend to support this conclusion. Some of them have to do with the various types of financial loss which are denoted by the expression "economic damage" and with the wide variety of circumstances in which financial loss may be sustained. I may suffer financial loss because I lose a profit or the benefit of expenditure under a contract the performance of which is affected due to the negligence of another. Or my business may be adversely affected by supervening circumstances attributable to the negligence of another. (Weller (1966) 1 Q.B. 569). Or I may be put to additional expense because I have been deprived of a service or facility through another's negligence. In many of these cases the loss will be foreseeable, though the degree of its connexion with the negligence will vary."
And see his reference to the Wagon Mound and adaptation of the words there per Viscount Symons at p.591 -
". . . it does not seem consonant with current ideas of justice or morality that for an act of negligence, however slight or venial, the actor should be made liable for all the foreseeable consequences in terms of financial loss."
I should add that in my view the amount recovered by respondent here is not properly to be described as -
". . . . economic loss which is . . . . consequential upon injury to the plaintiff's. . . . . property."
See per Gibbs J. at p.555 (already cited).

So far authorities have alluded to economic loss or economic damage which may not be recoverable, depending upon the particular facts which are under consideration. I have an initial difficulty in accepting that the respondent here did suffer what is appropriately described as economic loss or damage. If he did, it was not the sum of $1704.00, which is a discounted substituted version of what he expected and had undertaken to pay anyway.

Finally, some assistance is available from Compania Financiera "Soleada" S.A. and Ors. v. Hamoor Tanker Corporation Inc. (1981) 1 W.L.R. 274, an authority which was not available at the time of the hearing of the instant case. There, in breach of agreement by which the defendants agreed to manage the ship "Borag" for the owners, they wrongfully allowed it to be arrested at Cape Town. The ship was released some weeks later, after the owners had provided a bank guarantee which was subject to heavy interest charges. In an arbitration, the owners claimed, inter alia, damages for the amount expended for the interest charges. The umpire refused to allow these charges; on a special case Mustill J. (1980 1 Lloyd's Rep. 111) (who seems to have dealt with the claim as one in contract; ibid p.121,125) held that the owners could recover the whole of the interest charges which were not to be regarded as expenditure recoverable as damages for a wrongful act but as money expended by way of mitigation. It was held in Court of Appeal that the owners' expenditure to obtain the release was to be regarded as damages and not mitigation, as to the interest charges, and was not recoverable. Lord Denning said at p.281, after citing the quotation from The Liesbosch Dredger case (1933) A.C. 449,460 set out earlier at p.10 -
"Although the overdraft interest may be a consequence of the initial unlawful arrest, is it such a consequence that ought to be visited in damages?

Upon this point - I do not care whether you call it "causation" or whether you call it "remoteness" - causation and remoteness are two different ways of stating the same question. Is the consequence sufficiently closely connected with the cause as to be the subject of compensation or not? To my mind causation and remoteness here are the same.

Mr. Johnson referred to the recent case of H. Parsons (Livestock) Ltd. v. Uttley Ingham & Co. Ltd. (1978) Q.B. 791. In that case I drew a distinction at pp.802-803 between loss of profit cases on the one hand and damage or expenditure on the other. This comes into the damage and expenditure line and not into the loss of profit line."
and at p.282 -
"It seems to me that the umpire directed himself properly. He thought that the interest charges were too remote, too unreasonable, too unforeseeable altogether to be properly counted as a head of compensation."

Upon a consideration of authorities, I conclude that the appellant's submissions are correct; that the amount payable to the Hire Purchase Company is not an item, properly to be included in the respondent's damages. I do not agree that the reasoning in the "Willemstad" would support its inclusion in the judgment. The propositions in the Liesbosch Dredger case enunciated by Lord Wright (supra) para. (3) one might consider would not allow inclusion of the sum in question, even though the dredger was a profit earning chattel.

The respondent's claim is for more than damages flowing from the accident; but for a sum which is referrable to a collateral matter, viz. a contract between the respondent and the Hire Purchase Agreement company. That the appellant knew of the Hire Purchase Agreement does not seem to me to be determinative of the matter.

In my view the discounted interest payment is not appropriately to be described in terms used by Gibbs J. (as he then was) as one of the "exceptional cases" viz. "economic loss as a consequence of his negligence. . . . " in fact, not economic loss at all, as far as the terminology of damages would decide. Principles which govern, generally, awarding of damages and the reasoning of the Court of Appeal in Compania Financiera "Soleada" S.A. and Ors. v. Hamoor Tanker Corporation Inc. (supra) seem to me to cover the situation.

The sum in contention is not damages flowing from the tortious act but a sum payable to the Hire Purchase company not because of any action of appellant but because of the Hire Purchase Agreement between plaintiff and defendant.

I would uphold this appeal. The order I propose is -

(a) The appeal is upheld.

(b) For the sum of $1904.00 being the amount of the judgment awarded respondent, there is to be substituted $200.00.

(c) Respondent is to pay the costs of the appeal.