Motium Pty Ltd v Arrow Electronics Australia Pty Ltd

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JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT :   THE COURT OF APPEAL (WA)

CITATION:   MOTIUM PTY LTD -v- ARROW ELECTRONICS AUSTRALIA PTY LTD [2011] WASCA 65

CORAM:   McLURE P

NEWNES JA
MURPHY JA

HEARD:   13 SEPTEMBER 2010

DELIVERED          :   18 MARCH 2011

FILE NO/S:   CACV 5 of 2010

BETWEEN:   MOTIUM PTY LTD

Appellant

AND

ARROW ELECTRONICS AUSTRALIA PTY LTD
Respondent

ON APPEAL FROM:

Jurisdiction              :  DISTRICT COURT OF WESTERN AUSTRALIA

Coram  :SCOTT DCJ

Citation  :MOTIUM PTY LTD -v- ARROW ELECTRONICS AUSTRALIA PTY LTD [2009] WADC 184

File No  :CIV 2346 of 2007

Catchwords:

Contract - Sale of goods - Respondent agreed to supply specified brand of electronic components to appellant - Appellant manufactured electronic equipment - Appellant incorporated components supplied by respondent in electronic equipment sold to third party - Components supplied by respondent were imitations of specified components - Electronic equipment delivered to third party replaced by appellant because of unrelated faults - Whether respondent liable in damages for failure to supply specified components - Appellant replaced some of the components in electronic equipment before delivery to third party - Whether entitled to damages for cost of replacement - Failure of appellant to prove damage

Trade practices - Misleading or deceptive conduct - Representation as to nature of product to be supplied - Whether representation as to future matter

Legislation:

Goods Act 1958 (Vic), s 16(3), s 18, s 59(2)
Trade Practices Act 1974 (Cth), s 51A, s 52

Result:

Appeal allowed in part
Appellant awarded nominal damages for breach of contract

Category:    B

Representation:

Counsel:

Appellant:     Mr A Metaxas

Respondent:     Mr D C Harrison

Solicitors:

Appellant:     Metaxas & Hager

Respondent:     Cooper Mills Lawyers

Case(s) referred to in judgment(s):

Adams v Classic Autocraft (Australia) Pty Ltd (1985) ATPR 40‑612

Auspac Trade International Pty Ltd v Victorian Dairy Industry Authority & Campberdown‑Glenormiston Dairy Co (Unreported, VSCA, 22 February 1994)

Baltic Shipping Co v Dillon [1993] HCA 4; (1993) 176 CLR 344

Bellgrove v Eldridge [1954] HCA 36; (1954) 90 CLR 613

Bence Graphics International Ltd v Fasson UK Ltd [1998] QB 87

Biggin & Co Ltd v Permanite Ltd [1951] 1 KB 422

Bill Acceptance Corporation Ltd v GWA Ltd (1983) 78 FLR 171

Burns v MAN Automotive (Aust) Pty Ltd [1986] HCA 81; (1986) 161 CLR 653

Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304

Commonwealth of Australia v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64

Concrete Constructions Group Ltd v Litevale Pty Ltd [2002] NSWSC 670; (2002) 170 FLR 290

Dexters Ltd v Hill Crest Oil Co (Bradford) Ltd [1926] 1 KB 348

Gerrard v Slamar [2004] WASCA 253

Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82

H Parsons (Livestock) Ltd v Uttley Ingham & Co Ltd [1978] QB 791

Hadley v Baxendale (1854) 9 Exch 341; (1854) 156 ER 145

Hammond & Co v Bussey (1887) 20 QBD 79

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Details
Case
[2011] WASCA 65
Decision Date

CaseChat Overview and Summary

Motium Pty Ltd (appellant) sued Arrow Electronics Australia Pty Ltd (respondent) for breach of contract and misleading or deceptive conduct. The appellant, a manufacturer of electronic equipment, contracted with the respondent to supply specific brand electronic components. However, the components supplied were imitations of the specified ones, leading to the appellant replacing some components before delivery to a third party due to unrelated faults. The primary dispute was whether the respondent was liable for damages for supplying the wrong components and if the appellant was entitled to damages for the cost of replacement. Additionally, the appellant claimed that the respondent's conduct was misleading or deceptive regarding the nature of the product to be supplied.

The court needed to determine whether the respondent's failure to supply the correct components constituted a breach of contract and if the appellant had suffered any loss as a result. The court also had to decide if the respondent's representations about the future supply of components were misleading or deceptive. The appellant argued that it was entitled to substantial damages, while the respondent contended that the appellant had not suffered any loss and thus was not entitled to any damages. Furthermore, the court had to consider whether the respondent's conduct was misleading or deceptive based on the representations made about the nature of the components to be supplied.

The court found that the respondent had breached the contract by supplying imitation components instead of the specified ones. However, the primary judge concluded that the appellant had failed to prove that it had suffered any loss as a result of the breach. The court also held that the representations made by the respondent were not misleading or deceptive as they related to future matters. Consequently, the court dismissed the appellant's claims for damages and costs. The court did not order nominal damages as the appellant's case was based on substantial damages, which it had failed to prove.

The court ordered that no substantive orders be made regarding the costs of the trial and the appeal. The parties were directed to file a minute of the orders they sought and submissions as to why those were the appropriate orders. The court did not grant the appellant's request for nominal damages, as it was not part of the appellant's case at trial or on appeal.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

JUDGMENT OF THE COURT: On 18 March 2011, we delivered reasons for decision in this appeal: Motium Pty Ltd v Arrow Electronics Australia Pty Ltd [2011] WASCA 65. It was the unanimous opinion of the court that the appellant had failed to make out any of its grounds of appeal. At the time the reasons for decision were delivered there remained for determination issues as to whether the appellant was entitled to an order for nominal damages and what orders should be made as to the costs of the action and the appeal. Accordingly, no substantive orders were made and each party was directed to file a minute of the orders it sought and submissions as to why those were the appropriate orders. The question as to nominal damages arose in the following way. At the trial in the District Court the appellant had claimed against the respondent damages for, among other things, breach of contract in supplying to the appellant imitation Vishay mosfets instead of the real Vishay mosfets it had contracted to supply. The appellant quantified its damages at $77,689.30. The primary judge found that whilst the appellant had established that the respondent had breached the contract, the appellant had failed to prove that it had suffered any loss as a result of the breach. The primary judge did not, however, consider whether, in light of his finding that the respondent had breached the contract, the appellant was entitled to nominal damages and no such order was made. It seems the subject was not touched upon below. On the appeal, the appellant failed in its contention that the primary judge had erred in finding that the appellant had suffered no loss. There was no ground of appeal contending in the alternative that the primary judge should have made an order for nominal damages. The respondent submits that no order should be made by this court for nominal damages. It says that that was not part of the appellant's case at trial or on appeal. The appellant's case was that it was entitled to substantial damages. It has failed to make good that case. The appellant, on the other hand, submits that as the primary judge found that the respondent had breached the contract, his Honour should have made an order for the nominal damages to which the appellant was plainly entitled, and this court should now make such an order. The debate is, unsurprisingly, not in truth over the amount the appellant would recover by way of nominal damages. It is the peg on which the appellant seeks to hang its application for the costs of the trial and the appeal: see Beaumont v Greathead (1846) 2 CB 494, 499 (Maule J). Nominal damages were described by Lord Halsbury in The Mediana [1900] AC 113 in the following oft‑cited passage:'Nominal damages' is a technical phrase which means that you have negatived anything like real damage, but that you are affirming by your nominal damages that there is an infraction of a legal right which, though it gives you no right to any real damages at all, yet it gives you a right to the verdict or judgment because your legal right has been infringed. But the term 'nominal damages' does not mean small damages (116).See, too, Baume v Commonwealth [1906] HCA 92; (1906) 4 CLR 97, 116 ‑ 117 (Griffiths CJ).

Ratio Decidendi

Legal Principle Established

Whether a representation is misleading or deceptive is to be judged at the time the representation is made: Bill Acceptance Corporation Ltd v GWA Ltd (1983) 78 FLR 171, 178 ‑ 179. Where it is alleged that a corporation made a representation as to an existing state of affairs the question is whether, at the time it was made, the representation was misleading or deceptive as to that state of affairs. Where, on the other hand, it is alleged that a corporation made a representation with respect to a future matter, the representation will be misleading or deceptive if, at the time it was made, the corporation did not have reasonable grounds for making it. Where such a case is alleged, the onus of establishing that it had reasonable grounds for making it lies on the corporation: s 51A. But a representation that a corporation will do something in the future will not be shown to be misleading or deceptive at the time it was made simply by showing that when the time came to do that thing the corporation did not do it: Bill Acceptance Corporation Ltd (179); Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82, 88; Concrete Constructions Group Ltd v Litevale Pty Ltd [2002] NSWSC 670; (2002) 170 FLR 290 [155]. It is clear, however, that a representation as to something which is to occur in the future may convey a representation of existing fact that is misleading: Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [36]. Thus in Westsub Discounts Pty Ltd v Idaps Australia Ltd (1990) 17 IPR 185, a representation that certain computer equipment and software would fulfil the requirements of the applicant's business was held to convey statements of fact about the system's capabilities and suitability for the applicant's purposes which were untrue. Similarly, in Adams v Classic Autocraft (Australia) Pty Ltd (1985) ATPR 40‑612, a quotation for the cost of restoring a car was held to convey an incorrect statement of fact as to the extent of work necessary to restore the car. In my opinion, the primary judge correctly found that the representations alleged by the appellant related to future matters, not to existing facts. Although the representation pleaded in par 8.1(a) is not worded as clearly as it might have been, in the context the plea that 'the [mosfets] to be supplied had been manufactured by Vishay' is explicable only as a plea as to a future matter. The appellant's claim was not based on a contention that the respondent's conduct was misleading or deceptive because, at the time the representation was made, the respondent did not in fact have in its possession mosfets meeting the description in the contract, or that the mosfets which were in the respondent's overseas warehouse were not in fact Vishay mosfets. The appellant's case was that the respondent's conduct was misleading or deceptive because it had represented that it would supply Vishay mosfets, but, contrary to that representation, it subsequently supplied mosfets which had been manufactured by someone other than Vishay: par 16.1 of the statement of claim. It was the respondent's conduct in supplying 'grey market' mosfets which it was alleged had caused the appellant to suffer loss and damage: par 17. That loss and damage was, in substance, the cost of replacing the power supply units because the mosfets which were supplied did not conform to the description in the contract.