Miller v Karaman Pty Ltd
[2003] WASCA 249
•14 OCTOBER 2003
MILLER -v- KARAMAN PTY LTD & ANOR [2003] WASCA 249
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASCA 249 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:141/2002 | 9 MAY 2003 | |
| Coram: | MURRAY J PARKER J WHEELER J | 14/10/03 | |
| 11 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed | ||
| B | |||
| PDF Version |
| Parties: | DAVID WILLIAM MILLER KARAMAN PTY LTD (ACN 008 996 263) ROBERT WILLIAM CROWLEY |
Catchwords: | Sale of goods Sale of equipment as part of amusement park business Substantial maintenance required Whether implied conditions of fitness for purpose and that goods of merchantable quality |
Legislation: | Sale of Goods Act 1895 (WA), s 14 |
Case References: | Ashford Shire Council v Dependable Motors Pty Ltd (1959) 101 CLR 265; [1961] AC 336 Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441 Anthony v Esanda Ltd (1980) 32 ALR 627 Australian Knitting Mills v Grant (1933) 50 CLR 387 De Vries v Australian National Railways Commission (1993) 177 CLR 472 George Wills & Company Ltd v Davids Pty Ltd (1956-57) 98 CLR 77 McWilliams Wines Pty Ltd v Liaweena (NSW) Pty Ltd (1988) ASC 55-695 Uranerz (Aust) Pty Ltd v Hale (1980) 54 ALJR 378 Voulis v Kozary (1975) 180 CLR 177 Warren v Coombes (1979) 142 CLR 531 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : MILLER -v- KARAMAN PTY LTD & ANOR [2003] WASCA 249 CORAM : MURRAY J
- PARKER J
WHEELER J
- Appellant
AND
KARAMAN PTY LTD (ACN 008 996 263)
ROBERT WILLIAM CROWLEY
Respondents
Catchwords:
Sale of goods - Sale of equipment as part of amusement park business - Substantial maintenance required - Whether implied conditions of fitness for purpose and that goods of merchantable quality
Legislation:
Sale of Goods Act 1895 (WA), s 14
(Page 2)
Result:
Appeal dismissed
Category: B
Representation:
Counsel:
Appellant : Mr M J McPhee
Respondents : Mr N W McKerracher QC and Mr K Yin
Solicitors:
Appellant : Michell Sillar McPhee
Respondents : Rouphael & Associates
Case(s) referred to in judgment(s):
Ashford Shire Council v Dependable Motors Pty Ltd (1959) 101 CLR 265; [1961] AC 336
Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441
Case(s) also cited:
Anthony v Esanda Ltd (1980) 32 ALR 627
Australian Knitting Mills v Grant (1933) 50 CLR 387
De Vries v Australian National Railways Commission (1993) 177 CLR 472
George Wills & Company Ltd v Davids Pty Ltd (1956-57) 98 CLR 77
McWilliams Wines Pty Ltd v Liaweena (NSW) Pty Ltd (1988) ASC 55-695
Uranerz (Aust) Pty Ltd v Hale (1980) 54 ALJR 378
Voulis v Kozary (1975) 180 CLR 177
Warren v Coombes (1979) 142 CLR 531
(Page 3)
1 MURRAY J: In October 1999, the respondents sold their amusement park business conducted on leased land in Mandurah under the business name "King Carnival" to the appellant for $200,000. The company Karaman Pty Ltd was the vehicle by which Mr Crowley and a business partner conducted the business. It was a permanent fun fair comprised of a ferris wheel and various other rides and games including an octopus, a tilt-a-whirl (a ride in which the carriages in which the patrons sit rotate around a central shaft and, because of a tilting mechanism, whirl about the centre point of each carriage), a flying horse ride (where the patrons sit on horses suspended from a platform which rotates about a central axis), a Kiddie train (which, as the name suggests, is a train ride designed for small children), a Critter train (which again is a train ride for children who are seated in carriages designed to look like rather fanciful animals) and dodgem cars. There was other equipment. It was provided in the contract that, "All rides have current WorkSafe approved log books". The contract provided that Mr Miller was to pay $200,000 for the business, of which $105,000 was attributed to goodwill and the leased premises and $95,000 to the plant and other improvements on the premises.
2 A deposit of $60,000 was to be paid and the balance by instalments of $40,000 on 20 April 2000, $50,000 on 1 November 2000, $30,000 on 20 April 2001 and $20,000 on 1 October 2001. Mr Miller paid the deposit and went into possession of the amusement park. He paid the instalment of $40,000, but he has paid nothing since. Indeed, he has refused to do so, on the ground that plant and equipment sold under the agreement was defective.
3 It is unnecessary for present purposes to discuss the reason why both Karaman Pty Ltd and Mr Crowley are parties to this litigation. I shall refer to them as Karaman. They sued Mr Miller for damages for breach of contract. They assert that by breach of the agreement and by anticipatory breach in relation to some of the instalments, Mr Miller has repudiated the agreement, which repudiation they accept. They sued for damages for breach of contract, effectively the sum of $100,000 and interest.
4 By his defence and counterclaim, Mr Miller asserts that he has not repudiated the agreement. He pleads that he purchased the plant and equipment nominated in the contract:
" … for the operation of the business as a carnival so that, as was the fact, [Mr Miller] relied on [the respondents'] skill and judgment, and [the respondents] sold the goods in the course
(Page 4)
- of their business. In the premises, it was an implied condition of the said contract that the plant and equipment comprised in the sale, forming the basis of the carnival's operations, should be reasonably fit for the purpose."
5 The defence and counterclaim also asserted an implied condition that the plant and equipment should be of merchantable quality. It was asserted that those implied conditions were breached, requiring expenditure to make the equipment fit for the purpose for which it had been purchased. If it was held that Mr Miller owed Karaman any moneys, he sought to set off against the damages awarded the costs of repair or replacement of the defective equipment. A counterclaim was raised in relation to those costs, relying upon the asserted breach of the conditions implied in the contract of sale and Mr Crowley's representations in breach of the Trade Practices Act 1975 (Cth) s 52, that:
"The carnival rides are all WorkSafe compliant and have been maintained regularly. Maintenance has been done and all rides are in working order."
6 After a trial in the District Court, judgment was given for Karaman in the sum of $109,995. The counterclaim was dismissed. The trial Judge found that Mr Miller had repudiated the agreement because of what his Honour described as his unjustified refusal to pay the instalments due. His Honour held that Karaman was entitled as damages to be paid the sum of $100,000, being the balance of the purchase price. Interest was awarded from 3 January 2001, hence the sum of $9995.
7 No further consideration need be given to the counterclaim under the Trade Practices Act. The grounds of appeal do not raise any question concerning that claim. They focus attention upon the principal issue raised by the defence and counterclaim, the question of implied conditions as to fitness for purpose and that the goods were of merchantable quality, warranties which are alleged to be implied by the law in the form of the Sale of Goods Act 1895 (WA), s 14, which is in the following terms:
"Subject to the provisions of this Act, and of any Statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows: —
(Page 5)
- (i) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description which it is in the course of the seller’s business to supply (whether he be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose:
(ii) Where goods are bought by description from a seller who deals in goods of that description (whether he be the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality: Provided that if the buyer has examined the goods there shall be no implied condition as regards defects which such examination ought to have revealed:
(iii) An implied warranty or condition as to quality or fitness for a particular purpose may be annexed by the usage of trade:
(iv) An express warranty or condition does not negative a warranty or condition implied by this Act unless inconsistent therewith.
8 The grounds of appeal are:
1. His Honour erred in determining that the sales of equipment which needed to be repaired did not come within the provisions of s14(i) and (ii) of the Sale of Goods Act 1895 and in coming to a conclusion that notwithstanding their defects the goods were reasonably fit for the purpose of the operation of the business and they were of merchantable quality.
2. Further his Honour erred in coming to the conclusion that it was not in the course of the Vendor's business to supply the subject goods and that the vendor did not deal in goods of those descriptions; or that there was no evidence that Mr Miller relied upon the skill or
(Page 6)
- judgment of the Respondents (Plaintiffs) in deciding to purchase the business.
- 3. The learned Judge should have found:
(a) There was sufficient evidence, even on the evidence accepted by his Honour, to give rise to an inescapable inference that the Appellant (Defendant) relied on the skill or judgment of both the Respondents (Plaintiffs) or at least the skill or judgment of Mr Crowley, one of the Respondents (Plaintiffs).
(b) The evidence was overwhelming to the effect that at the date of the sale the goods the subject of the sale were not reasonably fit for the purpose of the operation of the business and they were not of merchantable quality.
(c) In those circumstances, the costs of repair and replacement of the goods the subject of the sale were entitled to be used to abate the contract price pursuant to the provisions of the Sale of Goods Act itself or the general principles of assessment of damages as applied by his Honour."
(Page 7)
10 The trial Judge found that the rides needed a considerable amount of maintenance and much of the work required would have been necessary when the business was purchased, but his Honour declined to find that the rides could not be operated until the maintenance was carried out. His Honour noted that none of the experts, including the departmental inspector who had inspected and reported on the rides, had required or suggested that they be shut down until the necessary repair and maintenance work had been carried out.
11 Nonetheless, although, as I have said, Mr Miller's counterclaim was dismissed, his Honour found that had it succeeded he would have regarded the cost of repairs and replacement of two dodgem cars to have been the appropriate measure of damages. His Honour said he would have allowed $66,500 for the cost of repairs and $16,000 for the cost of purchasing the two additional dodgem cars.
12 Central to the grounds of appeal in relation to the application of s 14(i) and (ii) of the Sale of Goods Act was Karaman's contention that s 14(i) did not apply because, although the contract could be regarded as a contract inter aliafor the sale of goods, the goods were not "of a description which it is in the course of the seller's business to supply", and that s 14(ii) did not apply for the similar reason that the goods, if bought by description, were not bought "from a seller who deals in goods of that description". Further, it was argued in relation to s 14(i) that Mr Miller, in purchasing the goods, did not rely on Karaman's skill or judgment.
13 As to those matters, his Honour's findings at [55] – [57] were as follows:
"In my view neither requirement is satisfied in this case. The sale took place because Karaman was ceasing to carry on business as an amusement park operator. It was not in the course of the business of either Karaman or Mr Crowley to supply amusement park machines or rides. Neither Karaman nor Mr Crowley carried on the business as suppliers of goods of that type and they did not purport to do so or accept an order for the supply of such goods in this case. They were selling the business to Mr Miller.
Nor do I accept that Mr Miller relied upon the skill or judgment of Karaman or Mr Crowley in deciding to purchase the business. In cross-examination Mr Miller agreed that his case was that he relied upon Mr Crowley's skill and judgment
(Page 8)
- in purchasing the business. However there was no direct evidence of such reliance apart from Mr Miller's evidence of Mr Crowley's representation that rides were WorkSafe compliant, which evidence I have concluded I do not accept.
I also do not accept that the machines and rides were not reasonably fit for the purpose supplied or not of merchantable quality. For reasons I have already expressed, while I accept that the rides required a considerable amount of maintenance I do not accept that this meant that they could not be operated until the maintenance was carried out."
14 At the hearing of the appeal there was much debate about and reference to the evidence of witnesses. The Court asked the appellant to provide a schedule of the material evidence upon which he relied. This he did and I have read all the evidence and perused the relevant exhibits, giving particular attention to those portions relied upon by the appellant. In my opinion, however, at the end of the day the evidence amply supports the views expressed by the trial Judge. Further, the conclusions to which his Honour comes really reflect his views, challenged in the grounds of appeal, about the proper interpretation of s 14(i) and (ii) of the Act. It is to those questions that I now turn.
15 In the first place it may, I think, be said immediately that the machines in question were "goods supplied under a contract of sale", so that s 14 might have application to imply a warranty or condition as to the quality or fitness for any particular purpose of the goods.
16 As to s 14(i), I think there would be no doubt on the evidence that Mr Miller, expressly or by implication, made known to Karaman the particular purpose for which the goods were required. They were part of the plant and equipment which constituted material by which the amusement park business was operated. The important question in this regard was whether the disclosure of the particular purpose occurred in such a way as to make it clear that Mr Miller was in fact relying upon the skill or judgment of Karaman, in the person of Mr Crowley. This I take to be the meaning of the phrase "so as to show".
17 As to each of the goods in question, they were obviously capable of being used in the running of the business of the amusement park, provided they were operable and capable of being used. I have mentioned that the trial Judge found that to be the case, despite the fact that they required maintenance and repair work. Nonetheless, it was
(Page 9)
- lawful to use them and they were in fact capable of being used for the purpose for which they were intended.
18 To approach the section in that way in the context of the facts of this case is to construe it in the way that the equivalent section of the NSW Act was construed in a case upon which the appellant relied, Ashford Shire Council v Dependable Motors Pty Ltd (1959) 101 CLR 265; [1961] AC 336. In that case, the question was whether there was an implied condition of fitness for purpose in relation to the purchase by the local government of a tractor for use in roadwork. It seems to me that on the basis that such a condition was to be implied in this case, the facts found by the trial Judge are tantamount to a conclusion that the implied condition was complied with. The goods were found to be reasonably fit for the purpose for which they were acquired.
19 However, as has been seen, the trial Judge concluded on two grounds that no such condition was to be implied in the contract of sale. As to the question of reliance by Mr Miller upon the skill or judgment of Mr Crowley, for Karaman, it is clear that under the section there must be actual reliance by the buyer on the seller's skill or judgment disclosed to the seller, expressly or by implication, at the time of entering into the contract of sale. This was the point upon which the Dependable Motors case ultimately turned. As was made clear in that case, the reliance must be as to the suitability or reasonable fitness of the goods for the purpose for which they were required by the purchaser.
20 In this case that amounted to the proposition that Mr Miller had to be shown to have relied upon the judgment of Mr Crowley, for Karaman, that the goods were, as the trial Judge found them to be, reasonably fit to be used for the purpose for which they were intended. That is, that they were in a sufficient or reasonable state of repair to be so used. That is not the same question as that posed by the trial Judge at [56] of his Honour's judgment, but it was relevant to note that Mr Miller asserted he relied upon a direct representation of the fitness for purpose and state of repair of the rides which, in the view of the trial Judge, he did not establish was made. I take that to be a finding that Mr Miller did not establish reliance upon Mr Crowley's skill or judgment as to fitness for purpose which was asserted and, as I have said, that was a finding which was undoubtedly open.
21 I consider that the approach that I have taken, that it was necessary to establish reliance upon Crowley's judgment, that the goods were in such a state of repair that they were reasonably fit to be used for the
(Page 10)
- purpose of the amusement park, is an approach supported by the judgments of members of the House of Lords in Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441.
22 Finally, of course, in relation to the question of the application of s 14(i), the trial Judge found against the appellant on the question whether the rides in question were goods "of a description which it is in the course of the seller's business to supply (whether he be the manufacturer or not)". As to that, I must say that I can do no more than rely upon the judgment of the trial Judge. During the course of the operation of the amusement park by Karaman, from time to time rides and other machinery would be sold. More modern or different rides would be purchased in their place. In my view, such a sale would not make the supply of the goods a supply within the course of Karaman's business, which was to operate the amusement park.
23 However, it was even more clear that that was not the case in relation to this sale because here the sale of goods occurred in the context of the disposition of the business itself. In my view, there is no more to be said. The trial Judge was right, in my respectful opinion, to find that there was no implied condition of fitness for purpose and, in any event, as I have said, if there was such a condition, the trial Judge's findings of fact, tantamount to a conclusion that there was no breach of any such implied condition, are unassailable.
24 I turn then to s 14(ii) and the question of an implied condition that the goods were of merchantable quality. The significance of this provision can, I think, be no better stated than by Prof Sutton in his work "Sales and Consumer Law" 4th ed, par 9.19:
"If goods are purchased for their normal and obvious purpose then, in the absence of anything to the contrary, the condition of fitness for that purpose is implied – the goods must be of merchantable quality. It is implied even though the buyer has done nothing specifically to indicate that he or she requires the goods for that purpose, and has done nothing more to show that he or she relies on the seller's skill or judgment than to buy them from a dealer. There is no need to rely on [s 14(i)] unless for some reason the condition as to merchantable quality cannot be implied."
25 In this case it may be taken, for present purposes, that the particular rides were goods bought by description in the sense that they were described in the contract of sale, so the question of the application
(Page 11)
- of this warranty or condition of merchantable quality was whether Karaman was "a seller who deals in goods of that description (whether he be the manufacturer or not)".
26 Again, it seems to me that the view of the trial Judge is, with respect, correct. Karaman and Crowley were not dealers in rides of the type under consideration although they would sell them in the circumstances to which I have referred. As it was put by Ld Wilberforce in Ashington Piggeries at 494, "a seller deals in goods of that description if his business is such that he is willing to accept orders for them." In that event, of course, a first sale of that kind will attract the operation of the section, but this is not such a case.
27 In my opinion, the claim made by Mr Miller in reliance upon s 14 of the Sale of Goods Act was rightly dismissed and I would dismiss the appeal.
28 PARKER J: For the reasons given by Murray J, I agree this appeal should be dismissed.
29 WHEELER J: I have had the advantage of reading in draft the reasons for decision of Murray J, with which I agree. I would dismiss this appeal.
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