O'HAGAN v Classic Cars Australia Pty Ltd
[2014] FCCA 749
•9 May 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| O'HAGAN v CLASSIC CARS AUSTRALIA PTY LTD & ANOR | [2014] FCCA 749 |
| Catchwords: CONSUMER LAW – Consumer protection – misleading or deceptive conduct – where conduct involved advertisement for motor vehicle and conversations with applicant prior to entering into contract – where respondent made representations about the condition of the car, how it drove and that it had genuine low mileage – where applicant entered into contract for purchase of vehicle sight unseen – where expert evidence that vehicle’s condition not consistent with mileage on odometer – where no evidence that respondent author of odometer reading, but where respondent passed on information about odometer – whether applicant relied on representations about mileage of vehicle – whether representations about mileage constituted misleading and deceptive conduct – where roadworthiness certificate not provided with vehicle – where experts agree that vehicle is not roadworthy – whether respondent represented that the vehicle was roadworthy – whether applicant relied on representations about roadworthiness – whether respondent’s conduct constituted misleading or deceptive conduct – where delay in bringing matter to court – where following an initial, unsuccessful attempt to resolve matter before New South Wales Department of Fair Trading, vehicle left on applicant’s lawn for approximately two and a half years – whether to void contract ab initio – consideration of damages – where experts gave differing opinions as to distance vehicle had travelled – where differences of opinion on cost to make vehicle roadworthy – assessment of damages. |
| Legislation: Competition and Consumer Act 2010 (Cth) s.18 of Sch. 2 |
| Awad v Twin Creeks Pty Limited [2012] NSWCA 200 ACCC v TPG Internet Pty Limited [2013] HCA 54 Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre Limited (1978) 140 CLR 216 Demagogue v Ramensky (1992) 39 FCR 31 Butcher and Another v Lachlan Elder Realty Pty Ltd (2004) 212 ALR 357 Johnson Tiles Pty Ltd (ACN 004 576 103) v Esso Australia Ltd (2000) 104 FCR 564 Re Arthur Charles McIntyre v Future Motors Pty Ltd [1987] FCA 458 Bell v. Lever Bros [1932] A.C. 161 Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31 Henjo Investments Pty Ltd and Others v Collins Marrickville Pty Ltd (1988) 79 ALR 83 Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41 |
| Applicant: | RICHARD O'HAGAN |
| First Respondent: | CLASSIC CARS AUSTRALIA PTY LTD ACN 126 565 062 |
| Second Respondent: | CHARLES CHELLIAH |
| File Number: | SYG 3023 of 2012 |
| Judgment of: | Judge Raphael |
| Hearing dates: | 3 & 4 March, 1 April 2014 |
| Date of Last Submission: | 1 April 2014 |
| Delivered at: | Sydney |
| Delivered on: | 9 May 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr E Chrysostomou |
| Solicitors for the Applicant: | Reuben George |
| Counsel for the Respondents: | Mr G McDonald |
| Solicitors for the Respondents: | Malcolm Johns & Co |
ORDERS
The respondents pay to the applicant damages pursuant to s.236 in the sum of $11,500.00 for breach of s.18 of the Australian Consumer Law.
The respondents to pay to the applicant interest on the damages in the sum of $329.39.
Respondents to pay the applicant’s costs, to be taxed if not agreed and paid at 80% of the Federal Court rates.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 3023 of 2012
| RICHARD O'HAGAN |
Applicant
And
| CLASSIC CARS AUSTRALIA PTY LTD ACN 126 565 062 |
First Respondent
| CHARLES CHELLIAH |
Second Respondent
REASONS FOR JUDGMENT
Introduction
What is the liability of a motor dealer in New South Wales to a customer in Victoria who purchases a thirty year old Rolls Royce motor vehicle, sight unseen, for statements made by himself and the dealership in its website and orally at the telephone prior to the customer entering into a contract to purchase that vehicle? If the court finds that, as alleged, the purchaser was induced to buy the car relying upon those statements do they constitute actionable misrepresentations under s.18 of Australian Consumer Law (Schedule 2 Competition and Consumer Act 2010, (Cth)) pursuant to which:
“Misleading or deceptive conduct
(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2) Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1).”
If the court finds for the applicant what is the appropriate form of relief that should be granted under Part 5-2 of the law applying the dicta of Allsop CJA as his Honour then was in Awad v Twin Creeks Pty Limited [2012] NSWCA 200 as extracted by Miller at [1828]:
“Relief under the TPA, s 87, should be viewed not by reference to general law analogues but by reference to the rule of responsibility in the statute that is directed against misleading and deceptive conduct: Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494 at 503-504, 510 and 528-529; Henville v Walker [2001] HCA 52; 206 CLR 459; Murphy v Overton Investments Pty Ltd [2004] HCA 3; 216 CLR 388 at 407; and see generally Bullabidgee Pty Ltd v McCleary [2011] NSWCA 259 at [64]- [72] and Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353 at 364-367. Involved in that rule of responsibility is the public policy of protection of people in trade and commerce from being misled, and the width of the powers given by the TPA that are apt to be employed in a manner conformable with the just compensation or protection of the representee. Whether or not to grant a form of rescission under s 87, or to limit a plaintiff to damages under s 82, is a question in the nature of a discretion to be approached by reference to the facts of the particular case, the policy and underpinning of the TPA and the evaluative assessment of what is the appropriate relief to compensate for, or to prevent the likely suffering of, loss or damage "by" the conduct: see Kizbeau Pty Ltd v WG & B Pty Ltd [1995] HCA 4; 184 CLR 281 at 298; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; 210 CLR 109 at 117-120 [19]- [29], 127-128 [52]-[57] and 142 [106]; and Akron Securities v Iliffe. An approach that is limited mechanically around a but for causation enquiry will be likely not to involve a full evaluative assessment of the appropriate relief.”
These are the matters which concern this court in the hearing of this claim. Although the matter took three days of court time including the calling of three expert witnesses there were not, in the end, significant differences on facts requiring the court to express determinative views as to the credit of the various witnesses. In these reasons the court will deal first with the history, will comment upon the pleadings, will provide its findings upon the evidence including the expert evidence and finally discuss the relief, if any, to be given.
History
Mr O’Hagan is a businessman who lives with his partner in Victoria. Some fifteen years prior to April 2011 he had owned a 1978 Rolls Royce Silver Shadow with which he had been very happy. In April 2011, suffering from severe back pain exacerbated by his daily commute to work, he decided to try and repeat the experience by buying another low mileage Rolls Royce. He made some enquiries of a classic car dealer in Brisbane who referred him to the first respondent Classic Cars Australia Pty Limited (Classic Cars) as a specialist in this type of vehicle. Mr O’Hagan telephoned Classic Cars on or around 29 April 2011 and spoke to Mr Chelliah, a principal of the company. In his affidavit, sworn on 23 April 2013, Mr O’Hagan deposes to a conversation with Mr Chelliah, the effect of which is to indicate that a contract between them was concluded without Mr O’Hagan having even seen a picture of the Rolls Royce. As the evidence developed and in accordance with the pleading, the existence of a website upon which the vehicle was listed was revealed, Mr O’Hagan said that he had had regard to it. However, there was no photograph of the vehicle in the extract from the website exhibited as [73] in the tender documents. The wording of the advertisement on the website was as follows:
“ROLLS ROYCE SILVER SHADOW 1979 PEACOCK BLUE
Rare peacock blue with complimentary (sic) beige interior and excellent woodwork, this car has low kilometres, looks drives and presents very well. A highly desirable series 2 with full Australian compliance … $31,000.00.”
There is no dispute between the parties that in the telephone conversation the following exchange took place:
10.
Mr Chelliah: I have a nice Rolls Royce Shadow 11 for sale. It is a 1979 model, registered, it is peacock blue in colour, and has a beige/cream interior. The Car drives very well and it is in very good condition consistent with its genuine low 114,500 kilometers. The Rolls Royce was delivered new in Australia by York Motors.
Mr O’Hagan: Is there any damage or mechanical issues with the vehicle?
Mr Chelliah: The car has been looked after – it’s just a nice Rolls Royce, however there is a small ding on the left hand rear door, the bonnet needs some paint work. [see O’Hagan para [5]; Chelliah para [13]-[14]].”
Mr O’Hagan deposes that there was more to the conversation than just this. He stated that he told Mr Chelliah that he would not be able to inspect the car due to work commitments. Mr Chelliah tells that he suggested to Mr O’Hagan that he come up and look at the car and other cars available at the showroom. Mr Chelliah said that he offered to pick Mr O’Hagan up from the airport and drive him back after this visit. There is some confusion as to when this offer was made, it being strongly suggested that if it was made at all it was after Mr O’Hagan had agreed to buy the car. Mr Chelliah deposes that:
“14(v)Richard initially agreed to come to Sydney and said that he would let me know once he had booked his flight.
(vi)Richard ultimately did not come to Sydney to inspect the vehicle and did not arrange for anyone to inspect the vehicle on his behalf. Instead, he requested that I send him photographs of the vehicle, which I did on 29 April 2011. A copy of the email in which I attached the photographs is at pages 3 and 4 of the Exhibit RJO1. Annexed hereto and marked “C-14” (pages 3-5) is an enlarged copy of the photographs that I sent to Richard.”
I have some difficulty in accepting this version of events because it is clear from the email that Mr Chelliah sent to Mr O’Hagan on 29 April that the photographs of the cars were attached. This is inconsistent with Mr Chelliah’s evidence of some time between the discussion and the sending of the photographs.
There are some other disagreements between Mr Chelliah and Mr O’Hagan about the conversation. Mr O’Hagan deposes to saying to Mr Chelliah:
“I’ll agree with your price on the conditions that the car be in good enough condition to be used for daily use, that you will deliver the car to R A Chapman in Melbourne so an LPG conversion can be done to the car and that you would ensure that all mechanical and cosmetic issues be fixed prior to delivery and within the price.”
Mr Chelliah deposes that Mr O’Hagan actually said:
“I understand that it is an old car and that old cars generally have a few maintenance and wear and tear issues but if it is basically a sound car it will probably suit me as I used to have one.”
Mr O’Hagan’s statement seems to be an attempt to tighten up contractual terms and Mr Chelliah’s to loosen them. The court is hard put to determine whether either statement is an accurate recollection of what was said some three years ago but in the event it is probably not of importance because of the way in which the representation’s case was put by the applicant.
What is clear is that Mr Chelliah agreed to deal with the “ding” on the left hand rear door and the bonnet paint work and also to have the car serviced. The mechanic who carried out the service found some problems with the carburettor and the vehicle’s brakes which Mr Chelliah instructed him to rectify and did some additional restoration work to the seats. The mechanical work cost $3,788.04.
On 29 April Mr Chelliah sent Mr O’Hagan an email:
“Hi Richard,
Nice speaking with you today, and congratulations on your purchase.
Please find herewith details of the vehicle together with banking details and deposit instructions.
1979 Rolls Royce Shadow 11 Peacock Blue Sedan. Australian Compliance date 09/1979 York Star delivery.
Vin Chassis Number SRH 37350 Engine Number SYL25305
Registration No BJ69KU
Distance travelled 114500 KLMS
Purchase Price $31000 inclusive of all paint work as discussed.
Full service will be undertaken prior to delivery.
A deposit of $5000 is required with the balance on delivery.”
On 2 May 2011 Mr O’Hagan sent the $5,000.00 deposit to Classic Cars’ bankers. Mr O’Hagan intended to finance the car through a novated lease. An invoice was sent on 17 May 2011 to a lease company. The leasing settlement was completed by 20 May. On 2 June 2011 the vehicle was collected from Classic Cars and was delivered to Mr O’Hagan in Melbourne on 7 June. On 8 June Mr O’Hagan sent a fax to Classic Cars:
“Re: 1979 Rolls Royce Shadow !! Peacock Blue Sedan. Australian Compliance date 09/1979 York Star delivery. Vin Chassis Number SRH 37350. Engine Number SYL25305 Registration no BJ69KU Distance Travelled 114500 KLMS Purchase Price $31000 inclusive of all paint work as discussed. Full service will be undertaken prior to delivery.
Hi Charles & Paul
The RR Shadow VIN-SRH37350 was delivered on Wednesday (07/06/2011) afternoon.
The following issues were identified upon delivery.
1. The registration expires on 27 June 2011.
2. There is no registration and change of ownership documentation provided.
3. No Road Worthy Certificate provided.
4. No owner’s manual or service booklet.
In relation to #4 above, I don’t recall if the absence of this documentation was discussed during conversation that led to the agreement to purchase, however the absence of these documents has a significant impact on the resale value of the car.
I appreciate that you have contacted the previous owner to request the documents and any service history. Please continue to engage the previous owner and advise of the outcome.
The following are also outstanding in relation to this transaction:
1. Refund of deposit has not been actioned;
Deposit of $5K minus the agreed 50% portion of the brake repair cost and transport to Melbourne was expected to be deposited to my account early this week. However, fit-for-purpose mechanical and brake repairs should be normal part of dealer obligations for sale and road-worthiness;
2.Provision of photocopy of report/receipt for mechanical service and break repairs (mentioned above);
3.Provision of photographs/digital images of paint repairs included in the purchase price;
4.Provision of ownership or service centre information to facilitate reconstruction of service records.
Please advise in relation to remediation of the issues and completing the outstanding matters above.
Cheers
Richard O’Hagan”
On 9 June Mr O’Hagan drove the car for the first time and on 10 June sent another fax to Classic Cars:
“Hi Charles
I drove the Shadow last night for 20 mins (first drive).
I’m very fussy about the condition of my cars and would not be happy with the RR until it was of concourse standard. Doing this to a Shadow is not economically sensible (I also just don’t have the time).
To sell the Shadow or trade up, I would need to pay out the least at a cost of $34,500 today! Add the $2,500 in mechanical and transport costs to date my total position today is minus $37,000.
So (hypothetically):
1.If I was to return the Shadow to you for sale, how much (approximately) could I realise for it? Maybe you could send me the number of the lady who was interested in it or you could contact her about a possible resale?
2.Approx change over figure for something that is special and exceptional.”
There was further communication between the parties. Of relevance are two emails between Mr O’Hagan and Mr Pace of Classic Cars:
“Tue, Jun 28, 2011
Hi Paul
Cosmetic, mechanical and (very necessary) providence stuff aside, the thing that has caused deep frustration and stopped me from the RR is the lack of delivery on agreements (from multiple conversations and email and fax correspondence) by Classic Cars Australia (CCA) to provide documentation.
The failure to provide the following has prevented my registering the vehicle to date:
1. the certificate of registration signed by the seller
2. vehicle inspection report (roadworthy cert)
Your Form 8 arrived (post-marked 22 June 2011) on 27 June – twenty days after the car was delivered. It is not executable due to an error (Distance Travelled is stated as in Mls – the Odometer is in KMs). Charles’ email copied below clearly states that its an Australian new car with 114500 KLMS…
The KLMS showing on the Odometer upon delivery was – 115,280 which is interesting because the car arrived in state that I would regarded as unsafe to drive for 780KLMs: Apart from the cosmetic stuff; the windscreen wipers were very feeble; the demister did not work; the left front carpet was saturated (water had entered via the ventilation system due to blocked drains); and the engine was running so rough and noisy that I was concerned that to drive it would cause serious damage.
The Form 8 refers to an Inspection Report (RTA) AM9138589 dated 07-05-2011. The inspection report has not been provided by to me by CCA.
While I appreciate your offer of $2000, it is not adequate on its own. I need the documentation issues resolved and there may be mechanical or roadworthy matters which should have been attend to before delivery –in-line with may agreement with Charles that I should be able to “not have to do anything and just drive it”.
Your offer also overlooks my deeper dissatisfaction and the business opportunity that it presents.
While the Shadow is magnificent and fundamentally appears sound, its just to old (I refer to the way it moves and style) and just does not suit my needs. I would not be keeping it and my investing in its improvement would be pointless. My buying it was a mistake based upon my enjoyment of one that I owned – 15 years ago (it was showing 85000 Miles and maintained to concourse standard.).
Charles and I discussed change-over and it was also the subject of at least one of my emails.
Macquarie Lease will not vary the lease asset or value once the lease is settled (payment made to the seller). The “base cancellation” mentioned by Tony from Enlist (Macquarie Lease’s agent) avoids my wasting over $4000 in early lease termination penalties and whatever else the State would steal from me in “stamp duties to register the car. It enables us to contact on something more suitable. E.g. The Espada; Silver Spirit; or some other special car that you may source soon.
I await your comment.
Cheers
Richard”
“Wed, Jun 29, 2011
Hi Richard
In reply to your email today, it seems inevitable that you would prefer to be out of the car in preference persisting with any further negotiations or efforts towards improving the same, as you cannot remove the memories of your previous vehicle in which you draw comparison.
We there for should begin some sort of dialogue towards your suggestion of recontracting the purchase of another more suitable vehicle.
In this regard we would suggest that in order to avoid any further stress to either party, that you take time to visit in person our showroom and pre inspect both the Espda and the Spirit 111 along with a number of other vehicles that may be of interest.
We would be pleased to assist in making this process more convenient for you and make ourselves available of a Sunday etc, and further more in view of the fact that you did not take up our offer at the $2000 rebate, pay for any return air fares for both yourself and your wife.
Notwithstanding the above we will immediately reprint the form 8 so it shows the distance travelled in kilometres and not miles, together with another copy of the previously attached road worth certificate.
We wait in anticipation for your reply, so that we can hopefully resolve this matter without any further unnecessary cost or inconvenience.
With regards
Paul”
At this time the car was registered but the registration ran out on 27 June 2011 and it was necessary for Mr O’Hagan to obtain registration in Victoria. It is also clear that for one reason or another he was dissatisfied with the car. He had received by that time some documents from Classic which should have been provided to him with the car at the time of sale. In particular he should have received a Form 8 under the Road Transport (Vehicle Registration) Act 1997 Regulations which is a form which is attached to every car that is sold over ten years old. The form is headed “No Warranty”. It gives particulars of the car including the distance travelled and its registration, the cash price and the date of expiry of registration and makes it clear that:
“THERE IS NO WARRANTY UNDER THE MOTOR DEALERS ACT 1974 IN RESPECT OF THE SALE OF THIS VEHICLE. ACCORDINGLY THE DEALER IS NOT REQUIRED BY THE ACT TO REPAIR OR MAKE GOOD ANY DEFECT WHICH MAY EXIST OR OCCUR IN THIS VEHICLE.”
It is perhaps unfortunate that a photocopy of this form was not sent to Mr O’Hagan before he purchased. It is a requirement of the Road Transport (Vehicle Registration) Regulation 1997 (NSW) that even though a vehicle is registered in New South Wales the dealer provides the purchaser with a roadworthiness certificate or “pink slip” that had been completed not more than ninety days prior to the sale. The bundle of documents included such a certificate described as an “e-safety check report”. It was dated 14 June 2011 and had an odometer reading for the vehicle of 113,245 kilometres. As the vehicle was in Victoria on 14 June 2011 and the odometer reading at the time of sale was 114,434 and by the time it reached Victoria was over 115,000 the court is satisfied that this e-safety check report was a falsified document. However, the court is satisfied that the most likely instrument of this falsification was Mr Pace and not Mr Chelliah.
Mr O’Hagan wrote to Classic Cars pointing out to them that there were problems with the Form 8 and Notice of Sale that had been provided because they referred to a distance travelled in miles and not kilometres and indicated his concern about the e-safety check report. Mr O’Hagan determined to find out exactly what the situation was with the vehicle and on 4 July it was collected by Mr Robert Chapman of R A Chapman Automotive Pty Limited. He undertook a road worthiness test and provided Mr O’Hagan with a list of defects as well as conducting a general mechanical condition inspection. Mr Chapman was one of the three expert witnesses to give evidence in this matter.
After receiving the report from Mr Chapman Mr O’Hagan wrote to Classic on 24 July 2011, the relevant parts for the purposes of these reasons are:
“The issues
Misrepresentation
Classic Cars Australia Pty Ltd misrepresented the condition of the car, the kilometres travelled, safety and fitness for purpose.
I was shocked to see the poor condition of the car.
I have tried to return the car to you, however, you have refused. Yu have returned the $2,000 that I have paid (in excess of the purchase price).
I have engaged RA Chapman Pty Ltd (Chapman) (a reputable Rolls Royce expert) to carry out an assessment of the car and provide a roadworthy inspection for Victorian registration.
Chapman advised that the car is unsound and is unusable (not fit for purpose) and it is not roadworthy. There are multiple serious issues with the suspension, brakes and engine. The tyres do not meet minimum tread requirements, the side walls are heavily cracked due to age and one tyre has serious damage exposing the cords.
The Chapman assessment includes inspection of the combustion chambers and engine inspection (tell-tale) holes. The report states that cylinders A1 and A3 are fouled with oil and there is water seeping from the block tell-tale holes, indicating failure of cylinder sleave seals.
Chapman’s opinion is that the car has travelled significantly more than the 114,500 kms represented in Mr Chelliah’s email of 29 April 2011. Chapman states “In my opinion the kilometres recorded on the odometer are not consistent with the mechanical condition of this vehicle; the condition is more consistent with a vehicle of this make and model having travelled very considerable more distance than current recorded.”
Breach of the Motor Dealers Act 1974 and the Road Transport (Vehicle Registration ) Act 1997
Classic Cars Australia has failed to provide a Notice of Sale and Inspection Report at or before the date of sale.
The Notice of Sale was received by me 20 days after Classic Cars Australia Pty Ltd delivered the car (via SMG Car Transport) and on the date that the NSW registration expired. The mail also included the Form 8. (The envelope was marked by Australia Post on 22 June 2011 and was delivered on 27 June 2011).
The Notice of Sale, together with the Form 8, remain unexecuted by me due to the dispute. Consequently, Classic Cars Australia remains the car’s registered owner on RTA’s records and the car is no longer registered.
The e-Safety-Check AM9136589 (Inspection Report submitted to RTA by Glebe Auto Repairs) attached to the Notice of Sale is based on false information submitted. The Inspection Report states the “Inspection Date: 14/6/2011”, a date that is 12 days after the car was collected from Classic Cars Australia Pty Ltd in Sydney by SMB Car Transport and 7 days after it was delivered to Melbourne.
The Inspection Report states that the odometer reading was 113245, while the Notice of Sale states 114,434 miles and Mr Chelliah’s email dated 29 April 2011 states 114500 kms. The actual reading on delivery was 115,300 kms.
Resolution Options
Classic Cars Australia has two pathways to resolution. My preferred solution is detailed below. The alternative is adjudication through the formal processes of the courts and other relevant organisations for motor traders.
Solution
I want Classic Cars Australia Pty Ltd to:
1. Reimburse me for my costs associated with the purchase.
2.Pay out the lease (refund the purchase price and pay any cancelation or settlement fees associated to Macquarie Lease or its agent Enlist Pty Ltd);
3. Collect the car as its expense.
My costs (in addition to the purchase price of $31000)
Contribution to brake and carburettor repairs
$2000
SMG Car Transport (Syd to Melb) charge (docket 076343 – delivery date 07/06/2011)
$500
Novated Lease $367.38 per week – 6 weeks to 30 June 2011
$2204
Novated Lease $367.38 per week – 4 weeks to 31-Jul-11
$1469
Insurance ($2/day x 75 days from 18-May 2011 to 31-Jul-11)
$150
RA Chapman report
$594
Loss of income having to take time off to deal with this matter. My current contract daily rate is $872: 1 day 28/06/2011; and ½ day19/07/2011
$1308
Total expenses
$8225
Less amount reimbursed on 08/07/2011
-$2000
Total outstanding
$6,225
I require the following by 5pm on 28 July 2011.
·Reimbursement of $6,225 to my bank account.
Commonwealth Bank of Australia
Account Name – Richard O’Hagan
BSD – 06 3000
Account number – 2800 3232·A clear and unambiguous statement (to me [email protected] copied to Enlist Pty Ltd – [email protected] and [email protected]) that Classic Cars Australia Pty Ltd undertakes to:
1.Accept the return of the 1979 Rolls Royce BJ68KU;
2.Accept and pay an invoice from Macquarie Lease (or its agent, Enlist Pty Ltd) for the sum of $31,500 (including $500 “Base Cancelation’ fee [1] for the cancelation of Loan Ref No EAN1684838; and
3.Upon payment of the above, immediately arrange the collection of the car from my address in Melbourne at its expense.
Adjudication by a court
The above solution only requires reimbursement of my cost. Should Classic Cars Australia not comply with the proposed solution by 5pm on 28 July 2011, I will consult my solicitor.
In addition to the amounts in the proposed solution, my claim will include compensation for stress and inconvenience and for Classic Cars Australia’ recklessly endangering my and my family’s life by selling me a car that is dangerous to drive. Classic Cars Australia Pty Ltd may also become liable for the full payout figure of the lease as well as penalties for breaches of the law.
I trust you will see the wisdom of settling this matter outside the court system.
Sincerely
Richard O’Hagan”
Mr O’Hagan did not take the proceedings he threatened, he went instead on 21 September 2011 to the New South Wales Department of Fair Trading. That department considered the complaint although it did not examine the car. It obtained submissions from both parties. There is a copy of the automotive inspector’s file notes found annexed to the affidavit of Mr Chelliah. It is in the following form:
Automotive Inspector’s File Notes
File No 5920435
Applicant: Mr Richard O Hagan
Respondent: Classic Car Australia P/L
Represented by: Manager Mr Charles ChelliahVehicle Details:
Make: Roll Royce [sic]
Model: Silver Shadow II
Vin No: Unknown
Year: 1979
Rego No: BJ 68KU
Odometer: 114,000km approx
Nature of Complaint
Complaint was received on the 21/9/11 and transfer to the Motor Vehicle Service Unit (MVSU) on the 6/10/11.
The applicant complaint was that he purchased the above vehicle and the vehicle had faults that make the vehicle unroadworthy.
10/10/11. The parties were contacted and meeting was arranged for the 26/10/11.
Discussion revealed the following:
The applicant reported that vehicle was misrepresented and in poor condition.
The applicant obtained a technical report that listed the faults with the vehicle.
The respondent reported that the applicant had been concerned about the paint work on the bonnet of the vehicle and this had been rectified prior to delivery. The vehicle had been sold with only a weeks registration to allow the applicant to drive the vehicle to appropriate repairer to have the vehicle inspected and register [sic] in Victoria.
Note: The respondent failed to supply the vehicle with a certificate of a RTA inspection when sold and the Form 8 form was not signed.
Conclusion:
The applicant the vehicle bought back and all his cost reimbursed.
The respondent offered to transport the vehicle back to Sydney and have his repairer rectify all the faults that affected the road worthiness of the vehicle, and then to transport the vehicle back to the applicant in Victoria. This he would do at no cost to the applicant.
The applicant rejected the offer.
[signed]
W Wynn
Automotive Inspector
Motor Vehicle Service Unit
26/10/11”
Following this attempt to resolve the matter Mr O’Hagan left the car on his property either on the hard standing by his car port or on the lawn where it remains. He did not commence any proceedings until 19 December 2012.
Pleadings
An Amended Statement of Claim was filed in this matter on 19 February 2013. In paragraph 5 the representations allegedly made by Mr Chelliah and in the website are set out:
“5. During the course of the negotiations the Second respondent and the First Respondent’s website made the following representations: -
a. The motor vehicle was a nice Rolls Royce;
b. The motor vehicle was in very good condition;
c. The motor vehicle had careful ownership;
d. The motor vehicle has a small ding on the LHR;
e. The motor vehicle had very straight panels;
f. The motor vehicle had a [sic] travelled a genuine 114,500 kms;
g. The motor vehicle had an Australian delivery date of 1979;
h. The motor vehicle was delivered to Yorkstar and had a partial history;
i. The purchase price was $29,000.00 plus an additional $2,000.00 for paint repair on the bonnet;
j. The purchase price included service and the second respondent would sort out issues in relation to pre delivery;
k The First Respondent’s Website described the motor vehicle as being “Rare Peacock blue with beige interior and excellent woodwork, this car has low kilometers looks, drives and presents very well. A highly desirable series II with full Australian compliance.”
In the applicant’s outline of submissions in paragraph 16 it is said:
“16.Accordingly, the material representations in respect of the vehicle were as follows:
(i) The vehicle has travelled a genuine 114,500 km;
(ii) Drives very well;
(iii)It is in very good condition/the car has been looked after;
(iv)A highly desirable series; and
(v)By implication of (ii) to (iv) the vehicle was roadworthy; [T 38.30]”
In paragraph 7 and 8 of the Statement of Claim the applicant asserts:
“7. At the time of making the representations, the first to third respondent knew or ought to have reasonably to have known that:-
a.The first to third respondent’s were relied upon to exercise all due care, skill and diligence in and about making the representations,
b.The applicant would or might act upon the representations,
c.If the applicant relied upon the representations and they proved untrue the applicant would or might suffer loss and damage in consequence whereof the first to third defendant owed a duty in making the representations to exercise all due care, skill and diligence.”
8.Induced by and acting in reliance on the representations the applicant purchased the motor vehicle on 2 May 2011 and settlement of the full purchase price of the motor vehicle took place on 20 May 2011.
And
“12. Furthermore, by making the representations the first to third respondent engaged in conduct that was misleading and / or deceptive or likely to mislead and / or deceive in breach of section 18(1) of the CCA.
13. Further and / or in the alternative the conduct of the second and third respondent in making the representation and / or allowing them to be made on behalf of the first respondent amounted to aiding, abetting, counselling or being a party to the contraventions of section 18(1) of the CCA pursuant to section 2 of the CCA.”
There are other matters pleaded in the Statement of Claim including one relating to the false pink slip but that was not pursued at the hearing. It is not disputed that Mr Chelliah was a person involved in any contravention that might be found.
Findings
Three expert witnesses were called. For the applicant Mr Chapman and Mr Carter gave evidence, and for the respondent Mr McDermott opined. The experts were given an opportunity to meet and discuss their reports and in particular their differences which enabled their evidence to be shortened considerably. All three agreed that the car was unroadworthy upon delivery. Although they had different views as to how unroadworthy the vehicle was, they all attempted to assist the court by setting out what needed to be done in order for the vehicle to obtain a roadworthiness certificate in the State of Victoria. Whilst it is fair to say that there were then differing views as to what further work needed to be done to the car the court has concentrated on their views in relation to obtaining the certificate for the reasons that will be found hereunder. It is also important that the court recognises that all three experts agreed that the vehicle had travelled more than the 115,000 kilometres indicated on the odometer. Their respective estimates were:
Mr Carter: At least another 100,000kms, in the region of 250,000kms.
Mr Chapman: Had no issues with Mr Carter’s evidence.
Mr McDermott: 150-160,000kms.
Each of the experts was asked how much in his opinion it would cost to obtain a certificate in Victoria. Their responses were:
Mr Carter: $10,000.00
Mr Chapman: $13,000.00
Mr McDermott: $4,593.60 [in report]
The court is not surprised that amongst experts these estimates may differ. It took the view from the evidence of Mr Chapman and Mr O’Hagan that Mr Chapman had taken a set against the car from the moment it was first delivered to him by Mr O’Hagan. He clearly thought it was a very poor example of the breed. It was revealed in evidence that there is some commercial competition between Mr Carter and Mr McDermott. The areas of disagreement between them sometimes approach the miniscule as when they both agreed that the exhaust system was corroded with holes in the pipes. Mr McDermott thought that there was only one small hole. Mr Carter felt that the rear right hand side tail lamp assembly was broken but Mr McDermott thought it was only the lens section. The court takes the view that given this large area of agreement between the experts, save for the cost of obtaining a roadworthiness certificate, it should do “the best it can” with the three estimates. The court takes the view that the estimate of Mr McDermott is probably conservative, that of Mr Chapman probably the top end of the scale and that of Mr Carter the one that it would find most acceptable.
The reason that the court does not believe that it should go down the path suggested by Mr Chapman and Mr Carter looking at every single fault in the vehicle is because of the nature of the representations. As submitted by the applicant the first of these was:
“The vehicle has travelled a genuine 114,500 kilometres.”
The court is satisfied that this is what Mr Chelliah did say to Mr O’Hagan. It is also satisfied that by the use of the word “genuine” Mr Chelliah intended to represent to Mr O’Hagan that the car had the particular quality of low mileage. Low mileage is a quality that influences persons in the purchase of motor vehicles and the court accepts that it influenced Mr O’Hagan. It accepts that he was looking for a low mileage vehicle and that is what attracted him to the vehicle which he purchased. Mr O’Hagan says that he relied on that representation and nothing in the evidence indicates that he did not.
Conduct will only be misleading or deceptive if it induces or is capable of inducing error; ACCC v TPG Internet Pty Limited [2013] HCA 54. The word “deceptive” does not necessarily require moral turpitude or trickery and intent is not relevant. The conduct must be tested objectively and the maker of the representation’s state of mind is immaterial; Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre Limited (1978) 140 CLR 216. The characterisation of the respondent’s conduct must be made through an appraisal of all of the circumstances: Demagogue v Ramensky (1992) 39 FCR 31.
The evidence in this case is that Mr Chelliah bought the car from Grays Online. He went down to their warehouse and looked at the car. He turned the engine over, sat inside himself, saw none of the warning lights were showing and listened to the engine. He did not make an inspection of the underside. He appears to have accepted the odometer reading as correct. He passed that information on to Mr O’Hagan and presented it as “genuine”. The fact that a person was not the author of the information is of no consequence unless the person makes it clear that he or she is merely passing on information and not vouching for its accuracy: see Butcher and Another v Lachlan Elder Realty Pty Ltd (2004) 212 ALR 357 per McHugh J, in dissent, at [115]-[123]. Mr Chelliah is responsible for this information and although the court could not find on the evidence that there was any intent to deceive or mislead the fact is that the information was incorrect but was relied upon by Mr O’Hagan as being correct and useful to make the purchase.
During the course of the evidence it was suggested that the main reason for Mr O’Hagan’s dissatisfaction with the vehicle was that his partner did not like the colour. The court is of the view that whilst this may have been an additional irritant and may have influenced Mr O’Hagan in his demand for a complete return of his money rather than accepting sufficient funds to make the vehicle roadworthy, it did not affect his conduct on the day the contract was entered into. It could not have done, he had not ever seen a photograph of the car.
Mr O’Hagan argues that the effect of the representations that were made, namely:
“The car drives well and it is in very good condition consistent with its genuine low 114,500 kilometres
and
“The car has been looked after it’s just a nice Rolls Royce.”
constitute a representation that the vehicle was roadworthy by which is meant, at the very least, that it was capable of obtaining a roadworthiness certificate. The respondent suggested that one cannot have implied representations.
In Johnson Tiles Pty Ltd (ACN 004 576 103) v Esso Australia Ltd (2000) 104 FCR 564, Beaumont, French, as he then was, and Finkelstein JJ considered the authorities on the characterisation of conduct that may be misleading or deceptive in relation to s.52 of the Trade Practices Act 1974 (Cth). Their honours opined at [64]-[65]:
“[64] Conduct may be misleading or deceptive because it involves an express representation which is false. In the statement of claim in such a case the representation will be pleaded as a fact as will the falsifying facts. The conduct may involve an implied representation conveyed by words or conduct or some combination thereof. Such a representation will be falsified in the same way as an express representation. But the identification of a representational element is not necessary, albeit it will be involved in most cases. Conduct is to be characterised by reference to its actual or possible consequences - Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 228 (Stephen J). This does not require demonstration that anyone has actually been misled - Annand & Thompson Pty Ltd v Trade Practices Commission (1979) 25 ALR 91 at 102 (Franki J) and 111 (Northrop J); Brock v Terrace Times Pty Ltd (1982) 56 FLR 464; Taco Co of Australia Inc v Taco Bell Pty Ltd at 202 (Deane and Fitzgerald JJ). It does require a capacity to mislead or deceive attributable to the conduct in question. There must be a logical causal connection between the conduct and some hypothesised error. But not every case involving a logical connection between conduct and alleged error will result in the conduct being regarded as misleading or deceptive for the purposes of s52. There is an evaluative judgment involved. As the Full Court said in SAP Australia Pty Ltd v Sapient Australia Pty Ltd (1999) 169 ALR 1 at 14:
"The characterisation of conduct as "misleading or deceptive or likely to mislead or deceive" involves a judgment of a notional cause and effect relationship between the conduct and the putative consumer's state of mind. Implicit in that judgment is a selection process which can reject some causal connections, which, although theoretically open, are too tenuous or impose responsibility otherwise than in accordance with the policy of the legislation."
[65] By way of example, it might be said that, strictly speaking, a causal connection exists between conduct and error where the error is based upon erroneous assumption derived from but not logically justified by the conduct. The conduct will not ordinarily be treated on that account, as misleading or deceptive in such a case. In McWilliam's Wines Pty Ltd v McDonald's System of Australia Pty Ltd (1980) 49 FLR 455 at 466, Smithers J said:
"It is difficult to think that conduct is truly misleading or deceptive if it tells the truth and is such that if it is observed by persons who have no false ideas concerning extraneous matters nobody will be misled."” [Emphases added]
In the instant matter the Court is of the opinion that a logical causal connection does exist between the conduct, taken as a whole, and the assumption, or, in the words of their honours, the hypothesised error that was made by Mr O’Hagan. That is, the Court is satisfied that in the context of Mr O’Hagan stating that he wanted a car for his daily commute, the representations that the car drove very well and was in very good condition meant that it is capable of driving very well on a road and therefore is capable of having a roadworthiness certificate. The Court is also satisfied that the conduct was likely to, and in fact did, mislead or deceive.
It is clear from the evidence that the car did not “drive well” because it neither had the roadworthiness certificate that was required in New South Wales to be given to a purchaser nor a roadworthiness certificate that was required to be obtained in order to drive it in Victoria after the NSW registration had expired. Although it is accepted that Classic Cars did arrange for quite a considerable amount of mechanical work to be done on the vehicle, that did not extend to the work required for a roadworthiness certificate. Whilst the Court believes that the statements by Mr Chelliah in this regard are misleading it does not accept that they went any further than suggesting that the vehicle was roadworthy. This is a not a case such as that considered by Fox J in Re Arthur Charles McIntyre v Future Motors Pty Ltd [1987] FCA 458[1] where the purchaser alleged that it was represented:
“That the vehicle was then in “beautiful condition” or “mint condition” or “magnificent condition” or “outstanding condition” or one imagines some similar language.”
[1] “McIntyre”
The Court in McIntyre found that a director of the respondent had represented the condition of the car in excessively favourable terms. There has to be some connection or, more accurately, disconnection between the representation made and the actual situation. It is not reasonable to expect that a thirty year old car would be in perfect mechanical condition. If the faults listed by the applicant in this instant case were all attended to the car would have that quality, it would be in mechanically “concourse” condition but the representations that were made do not suggest that and thus the loss or damage flowing from the car not having those qualities does not flow from the deceptive conduct.
The damage that does flow from Classic Cars’ conduct is twofold. It is the cost of putting the vehicle into a condition so that it could obtain a road worthiness certificate and be driven, and it is the difference in value between a vehicle that had done only 115,000 kilometres and one that had done between 150,000 and 200,000 kilometres. Whilst the Court accepts that it has the power to do what Mr O’Hagan asks, which is effectively to reverse the contract, it is reluctant to do this for the following reasons.
First, there has been considerable delay in bringing this matter to court. During that time the vehicle has remained out of doors. Mr O’Hagan would not be returning to Classic Cars the vehicle that he bought in the condition that he had bought it. He would be returning a 33 year old car and not a 30 year old one. While there is a divergence in the experts’ opinions, I believe the consensus is that during that period some deterioration would have occurred. Mr Carter gave evidence to the effect that the car had been in poor condition and remained in poor condition. But he believed that the car’s value or resale value would not have been affected by its treatment in the relevant period. Mr Chapman’s evidence was to the effect that the car would not be in a different state in regard to his report, noting that his report was related to the “roadworthy mechanical issues”. However, Mr Chapman agreed that deterioration of seals and gaskets can occur over time, including, to a degree, over three years. Mr McDermott’s evidence suggested that the treatment of the car in the three years after its purchase would have had a deleterious effect upon its condition. In particular, he states in his report that “the condition of the floors would have deteriorated significantly over the past 2½ years due to the car standing wet”, and in relation to the unroadworthy condition of the tyres he states that “this condition would have been significantly increased by the car standing in the weather for 2½ years”. He also found that the treatment had “definitely” had a negative effect on the car’s value.
Second, Mr O’Hagan bought the vehicle sight unseen after a very short conversation. There is no suggestion that he expected any form of warranty upon it and under the New South Wales legislation none was proffered. Mr Chelliah promised that the vehicle would be serviced. It was. Some problems that had not revealed themselves to Mr Chelliah on his inspection and drive home were found and dealt with. To reverse the trade would be to fly in the face of the doctrine of caveat emptor, which still exists even though heavily modified by the provisions of the Act.
For example, in the context of misleading or deceptive conduct through silence, echoes of Lord Atkin’s statement in Bell v. Lever Bros [1932] A.C. 161 (227) that:
“Ordinarily the failure to disclose a material fact which might influence the mind of a prudent contractor does not give the right to avoid the contract. The principle of caveat emptor applies.”
Can certainly be found in the recent judgment of French CJ and Kiefel J in Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31 at [22]:
“However, as a general proposition, s 52 does not require a party to commercial negotiations to volunteer information which will be of assistance to the decision-making of the other party. A fortiori it does not impose on a party an obligation to volunteer information in order to avoid the consequences of the careless disregard, for its own interests, of another party of equal bargaining power and competence”
And, whilst there is authority for the proposition that a failure to make reasonable enquiries on the part of an applicant will not mean that the maker of misrepresentations will avoid liability under s.18: Henjo Investments Pty Ltd and Others v Collins Marrickville Pty Ltd (1988) 79 ALR 83 at 95. There have also been several decisions which suggest that an applicant’s failure to take reasonable care may break the link of causation required for recovery under the Act. In Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112 Hill J considered the authorities, including Henjo and opined:
In Henjo on appeal (1988) 79 ALR 83 at 96, Lockhart J with whose reasons Burchett J agreed, referred to what was said by Wilson J in Gould v Vaggelas and to the decision of Pincus J in Neilsen where it had been held that the causal chain required for recovery of damages under s 82 of the Trade Practices Act had not been broken where the applicant failed to take reasonable care of his own interests by undertaking a proper investigation of the figures presented to it and commented: “These decisions support the view that recovery under s 52 is founded by the applicant's actual reliance upon the misleading or deceptive conduct of the respondent, although that conduct was not the only factor in the applicant's decision to enter a particular agreement, and although the applicant did not seek to verify the representations or did so inadequately and so failed to discover their falsity.”
A case may perhaps be imagined where an applicant is so negligent in protecting his own interests that there will be a finding of fact that the representation complained of was not in the circumstances a real inducement to his entering into a contract. In such a case the element of causation between misrepresentation and damage will have been severed by the intervention of the negligence of the applicant. However, in my view, the present cannot be said to be that case.
A somewhat similar view was recently expressed by French J in Kewside Pty Ltd v Warman International Ltd (18 January 1990, unreported) at 53 “The damages recoverable under s 82 of the Trade Practices Act for a contravention of s 52 are measured by the loss or damage suffered by reason of the contravention. The causal connection is not that of the strict logician, but is to be understood according to common sense concepts. Selection principles influenced by policy and not merely logic operate. Concepts such as contributory negligence and mitigation have no role as such in this process but analogous notions may apply to decide whether or not a claimed loss was truly caused by the contravention in question.” [citations omitted]
In the present case, the court is not of the opinion that Mr O’Hagan’s negligent acts broke the required causal connection between the misrepresentation and damage. In the factually similar circumstances considered in McIntyre, Fox J said at [20]:
“The amount by which the applicant was worse off by reason of the respondent’s representations proving false can most fairly be arrived at in this way. He paid the price and took delivery of the car, it proved unroadworthy which was inconsistent with its represented state and the applicant has spent money to put it in an acceptable and perhaps what may be described as a good condition.”
Whilst his Honour in that case gave the applicant most of the costs of repair less a 12½% discount he clearly tied that to the representations made. In the Court’s view the appropriate measure of damages, taking into account the representations made to Mr O’Hagan and his own conduct in not inspecting the vehicle or having it inspected for him by a reputable agency, is to combine the costs of repairs with the diminution in the value of the car due to it having been driven for more kilometres than those represented. I have already explained that I should accept Mr Carter’s view of the cost of the roadworthiness certificate matters of $10,000.00. The only evidence about the diminution in value of the vehicle as a result of it having covered somewhere between 150,000 and 200,000 kilometres was given by Mr Chelliah himself. That was that there would be no diminution in the value of a car that had done 150,000 kilometres instead of 115,000 kilometres, and there would be a diminution of approximately $3,000.00 if it had done 200,000 plus kilometres. I would award the applicant damages in the sum of $1,500.00 on this basis as the exact number of kilometres this vehicle has done is unknown. The total amount of damages awarded will therefore be $11,500.00.
Damages are claimed against both Classic Cars and Mr Chelliah who was both the guiding mind of the company and the person who made the representations to Mr O’Hagan. As was said in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41 at [42], [43] and [45] [as extracted at [56] in the applicant’s helpful written submissions]:
“Section 82 entitles a person who suffers loss or damage by conduct of another that was done in a contravention of any of a very large number of provisions of Pt IV … to recover the amount of that loss and damage. Section 82 can, therefore, be engaged in cases in which the contravener's conduct is intentional or even directed at harming the person who suffers loss and damage[18]. It can be engaged in cases … in which there was neither want of care nor intention to harm, but still a contravention of the Act.
Secondly, s 82 entitles a person who suffers loss or damage by conduct done in contravention of a relevant provision, to recover not only from the contravener but also from any person involved in the contravention. Persons involved may have acted intentionally or carelessly; they may have acted with or without intention to harm.
…
[Thirdly], s 82 is concerned only with the position of a person who has suffered loss or damage and only that person may rely on the section. By contrast, s 87 is concerned not only with cases where loss or damage has been suffered but also with cases where it is likely that it will be.”
The applicant is entitled to interest on his damages. As the damages awarded for bringing the vehicle to a roadworthy standard have been assessed based on estimates for repair of the vehicle in its current state, those damages should not attract interest. Interest will attach to the damages awarded for the difference in value of the car at the time of purchase due to the mileage discrepancy. Whilst there is an argument that because of the extensive delay on his part in commencing these proceedings that interest should be limited it is also the case that the respondents have had the benefit of not paying the damages for that time. Interest will be payable at the Federal Court rate from 7 June 2011, the date of delivery of the vehicle, to today. This amounts to $329.39.
The applicant has been successful in his claim. He should be entitled to his costs. These should be taxed if not agreed and paid at 80% of the Federal Court rates.
I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of Judge Raphael
Associate:
Date: 9 May 2014
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