PC Upgrade Centre v Wiltshire
[2004] SADC 88
•10 June 2004
DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Minor Civil Review)
PC UPGRADE CENTRE v WILTSHIRE
Judgment of His Honour Judge Clayton
10 June 2004
CONTRACTS
MINOR CIVIL REVIEW - CONTRACT EXEMPTION CLAUSE
The defendant sold the plaintiff a hard drive for a computer and contracted to install the hard drive and transfer software and data from the old hard drive to the new. That work was not carried out satisfactorily. The magistrate found that the defendant was in breach of contract and that an exemption clause relied upon by the defendant had not been brought to the plaintiff's attention so that it did not apply.
On review held: Magistrate correctly found exemption clause had not been drawn to the attention of the plaintiff. Also the clause which purported to exclude liability for data loss could not exclude liability arising out of its failure to carry out the main purpose of the contract which was "data transfer". Magistrate's assessment of cost of placing plaintiff in the position he would have been in if the contract had been performed held to be excessive and reduced.
Judgment of Magistrate rescinded and judgment for lower amount substituted.
Glynn v Margetson & Co (1893) AC at 357; Cheshire & Fifoot's Law of Contract Sixth Australian Edition Paras 446, 451; Carter and Harland Contract Law in Australia Fourth Edition Para 760, considered.
PC UPGRADE CENTRE v WILTSHIRE
[2004] SADC 88
The plaintiff, Mr Wiltshire, is a management consultant at Burra. The defendant carries on business under the name “PC Upgrade Centre”. That name describes the business of the defendant.
The plaintiff claimed an amount of $5,088.00 alleged to be the loss suffered by reason of defective work carried out by the defendant on the plaintiff’s computer. The claim is fully itemised in a four-page letter from Mr Wiltshire to the manager of PC Upgrade Centre, which was appended to the Claim.
Ms P Eldridge SM heard the minor civil claim and delivered a judgment on 20 February 2004. Her Honour gave judgment for the plaintiff in the sum of $4,584.00 together with a filing fee of $60.00 and an attendance fee of $50.00, making a total judgment sum of $4,694.00. In essence, the alleged loss related to software and data that the defendant did not transfer to a new hard drive which the plaintiff purchased from the defendant.
An application to review the decision was lodged on 11 March 2004. The grounds upon which the review is sought include assertions that Mr Wiltshire knew about a disclaimer upon which the defendant relies, that Mr Wiltshire was “lying” when he said that the defendant undertook to backup data, that there is no proof that the plaintiff had any business-related files installed on his computer when he delivered it to the defendant, that the court wrongly assumed that backing up a computer hard drive is easy, that the data loss alleged to have occurred was not related to the defendant’s handling of the hard drive and that there was no proof that the defendant promised to backup the plaintiff’s data.
I have read the transcript of proceedings before the magistrate and Her Honour’s reasons. I have also heard submissions from Mr Wiltshire and Mr Cartier on behalf of the defendant.
I find that the defendant had contracted to carry out the work listed in its invoice No. 2003021906 which was:
“Qty Description 1 Hardware/Software troubleshooting @ $68 per hour 1 (Mouse or mouse software causing random errors) 1 30 gig hard drive, with trade in 1 Installation 1 Data transfer 1
Trio PCI video card”
The first item related to the correction of a problem apparently attributable to a replacement mouse which was causing the computer to freeze. The second item related to the replacement of an existing 2-gigabyte hard drive with a new 30-gigabyte hard drive. The “installation” item related to the new hard drive. The “data transfer” item could only have related to the transfer to the new disc of the data which was recorded on the old disc. The item “video card” related to the replacement of a defective video card which had an intermittent fault.
The charges for “installation” and “data transfer” in the invoice establish that the defendant did agree to install a new hard drive and to transfer data from the old drive to the new.
Mr Wiltshire gave evidence that Patrick Tapping, an employee of the defendant, told him that it was the defendant’s policy to back up data before the defendant worked on a computer and that the defendant would back up the data and then copy it over to the new drive so that, in Mr Tapping’s words, “it would be an identical clone of the old hard drive” except that Mr Wiltshire would have more disc space. I accept that Mr Tapping made such a representation and that the representation became a term of the contract.
Mr Wiltshire gave evidence that he had used his computer on the Sunday evening before he delivered it to the defendant and that the old drive was in working order and contained data relating to Mr Wiltshire’s business. I accept that evidence.
The work was to be completed in one day. Mr Wiltshire delivered the computer to the defendant’s premises on Monday, 17 February 2003. He said that when he delivered the computer Mr Tapping raised a job order, but no written quotation was provided to him. The job was assigned to an employee called Craig. He said that when he left the defendant’s premises he had not been given any documentation by the defendant.
The plaintiff intended to return to Burra that day. He telephoned mid-afternoon and was informed that the job would not be completed until the following afternoon. Mr Wiltshire then booked overnight accommodation in Adelaide.
On the morning of Tuesday, 18 February 2003, Mr Tapping phoned the plaintiff and advised him that he had fitted the new hard drive, but he had not transferred the data from the old drive. He indicated that the computer would be ready at approximately 4.30pm that day. Mr Tapping telephoned the plaintiff mid-afternoon and then advised that the computer would not be ready until the following day, Wednesday, 19 February 2003. Again Mr Wiltshire had to make arrangements to stay in Adelaide overnight.
On Wednesday, 19 February 2003, Mr Wiltshire telephoned to enquire when the computer would be ready. He was told the computer would be ready in approximately one hour. No mention was made of any problems.
When the plaintiff attended at the defendant’s premises at approximately 3.00pm on Wednesday. 19 February 2003, Mr Tapping set up the computer to demonstrate that it was working, but the computer would not work. Mr Tapping told the plaintiff he would look at the computer again and telephone when it was ready. At approximately 4.30pm Mr Tapping telephoned the plaintiff and advised that the computer was ready. When the plaintiff arrived at the defendant’s premises Mr Tapping told him that he would have to install Windows 95 again himself. That caused concern because Mr Tapping had given the plaintiff an assurance that all data and programs would be cloned to the new hard drive. Additionally, when Mr Wiltshire delivered the computer on 17 February 2003 he had given Mr Tapping the Windows 95 program and a floppy startup disc. Mr Tapping was not aware that software had been delivered, but he located it and installed it while Mr Wiltshire waited.
Having installed the software Mr Tapping then presented Mr Wiltshire with an invoice for the sum of $245.00, which he paid.
The fact that the Windows 95 software had not been installed was an immediate indication that Mr Wiltshire was not given a computer with a 30-gigabyte hard drive that was a clone of his old computer. The evidence suggests that the new hard drive had been fitted but little else was done. The Windows 95 software was installed in Mr Wiltshire’s presence but other programs and files had not been transferred. When they returned the computer to Mr Wiltshire the defendant’s employees must have known that the other programs and files had not been transferred. In those circumstances it was not appropriate for them to include a charge for “data transfer” on the invoice. That work had not been carried out.
To jump ahead, if the old hard drive was defective, as Mr Cartier claimed during the hearing of the review, that fact should have been obvious to the defendant’s employees when they attempted to carry out the “data transfer” for which a charge was made. If the old disc was defective, one would have expected the defendant’s employees to draw that fact to the attention of the plaintiff.
Another indication that the defendant experienced difficulty is the fact that the work took three days instead of one. The defendant has not explained why the work took so long; indeed the defendant has not produced any evidence of the actual work that it carried out.
I have no difficulty in finding that the defendant was in breach of contract.
There is a suggestion in the evidence of an expert from Macquarie University that the old hard disc may have been corrupted by the defendant. However, the evidence is inconclusive and it is unnecessary for me to make an enquiry into what the cause of the problem was.
For present purposes all that matters is that the defendant had not successfully carried out the work which it agreed to carry out and for which it had charged.
The defendant relies upon a disclaimer. A copy of the clause appears at the bottom of the invoice. It is in the following terms:
“PC UPGRADE CENTRE retains the title to the above-mentioned goods until paid in full and all funds are cleared. Under no circumstances PC UPGRADE CENTRE, its employees or agents will be responsible for any data loss. The invoice must be produced for any warranty claim. Physical damage, unauthorized service or removal of warranty stickers voids warranty. Software and related problems are not covered by the warranty.”
Mr Wiltshire gave evidence that he was not aware of the clause before he collected the computer. The magistrate accepted that evidence and accordingly did not give effect to the clause.
Mr Cartier, who represented the applicant (defendant) at the review, claimed that the defendant had warned Mr Wiltshire about the clause on four occasions. He said that Patrick Tapping told the plaintiff over the telephone that the defendant could not guarantee the data transfer. He said a quotation in the form of the invoice was provided. He said the sales staff are required to tell customers about the disclaimer. There was a suggestion that there was a sign in the shop bringing the clause to the attention of customers and, finally, the invoice included a copy of the clause.
The defendant was not able to produce a copy of any quotation which contained the disclaimer. Mr Wiltshire denies that he received such a quotation. The magistrate accepted the evidence of the plaintiff. I think she was correct in doing that.
In my opinion, the magistrate correctly referred to the law relating to the application of exclusion clauses. She referred to Cheshire & Fifoot’s Law of Contract Sixth Australian Edition at paragraph 446.
The magistrate found that the defendant was not entitled to rely on the exclusion clause because no copy of a quotation had been provided to the plaintiff at the time of delivery of the computer and the clause was not brought to the attention of the plaintiff at the time the contract was entered into. I think Her Honour’s finding was correct. I find that the defendant has not shown that it gave notice of the existence of the disclaimer clause to Mr Wiltshire.
Additionally, the defendant undertook to carry out “installation” and “data transfer”. The obligation to transfer the data was a fundamental obligation. It was the very thing which the contract obliged the defendant to do. Transferring the data was not ancillary to some other obligation. Accordingly, the defendant cannot rely on the exemption in respect of data loss.
Cheshire & Fifoot say at paragraph 451 “general words of limitation will not be applied literally if this would be ‘creating absurdity or defeating the main object of the contract’.” A number of authorities are cited to support that proposition.
In Glynn v Margetson & Co (1893) AC Lord Halsbury LC said at 357:
“Looking at the whole purpose of the instrument, and seeing what one must regard …. as its main purpose, one must reject words, indeed whole provisions, if they are inconsistent with what assumes to be the main purpose of the contract.”
Also if a breach of contract is so serious that an application of the exclusion clause to the breach would defeat the main purpose of the contract, the court will presume that the parties did not intend the exclusion clause to apply. See Carter and Harland Contract Law in Australia Fourth Edition, paragraph 760.
I find that the exemption clause cannot operate to protect the defendant from its failure to perform the very thing which the contract required, that is to transfer data from the old hard drive to the new.
Most importantly I am not satisfied that the defendant has shown that the clause was brought to the attention of Mr Wiltshire before the contract was formed.
The grounds of appeal annexed to the Application for Review assert:
“Security camera video and sound recording clearly shows plaintiff being told about the disclaimer and also plaintiff reading the disclaimer on his invoice which he took with him.”
The recording was not produced and there was no other evidence about such a recording. The ground set out in the Application for Review is not made out.
For the reasons, which I have stated, I agree with the magistrate that the defendant is not entitled to rely upon the exclusion clause. Even if the plaintiff was entitled to rely upon the clause the clause would be of no effect in this case because it related to data transfer which was the main purpose of the contract.
I reject any suggestion by the defendant that the computer was delivered to it in a faulty state. If that had been the case one would have expected the defendant to have immediately contacted the plaintiff when the job was commenced and advised there was no data to be transferred or the files on the hard drive were corrupted.
The defendant has not explained why it took three full days to carry out what should have been a relatively simple task. There is no evidence from the defendant which explains the work that was carried out to the computer.
After Mr Wiltshire had discovered that the data had not been transferred to his computer he took legal advice and purchased his old hard drive back from the defendant at a cost of $80.00. Mr Wiltshire said the data was no longer on the hard drive. His computer had been able to read the data on the Sunday night. The evidence does not explain what happened to the hard drive so that Mr Wiltshire was no longer able to retrieve the data from his old hard drive. Mr Wiltshire said that the hard drive had been formatted. I assume that formatting may have erased the data. Mr Cartier said that when the old hard drive was sold back it had “all the files intact on it”. He also said that “the files were compressed by Mr Wiltshire and encrypted by double space of drive spaces”, that before the computer was delivered to the store “Mr Wiltshire’s data was compressed by him by a standard Windows 95 utility called ‘double space’ and that made inaccessible to our staff - computers and word link”. He said “….. his original software was corrupted beyond repair. You can not do anything with it. It was compressed and encrypted. You can’t even read a single file. So that was that”. He denies that his firm interfered with the hard drive. He said “it would be impossible for us to damage his files during the only moment we actually worked with his old hard drive”. He said the data on the hard drive “was in my opinion corrupted beyond repair before he arrived in our store” and that the professional opinion of World-Link Peripherals “was the hard drive that was originally in the machine had been formatted for use as a drive space swap drive”. He said that experts from Macquarie University could later read most of the data which “wasn’t damaged, it was just encrypted and compressed”. He said Mr Wiltshire’s data was stored in a non-standard format, which meant that it could not be read.
Mr Cartier did not explain why Mr Wiltshire could access the data on the Sunday night, but could not do so when the hard drive was sold back to him.
Mr Cartier did not work on Mr Wiltshire’s computer himself. He did not give evidence before the magistrate. Accordingly, his submissions before this court have no evidentiary basis. Additionally, it is difficult to understand what inferences, if any, can be drawn from his submissions.
If the defendant had agreed to transfer the data from the old hard drive to the new and there were problems with the recording of the data on the old hard drive, the defendant should have brought that fact to the attention of the plaintiff. As I have said there is no explanation of what the defendant did with the computer during the three days that it was in its possession. The defendant did not install the Windows 95 software until the omission had been drawn to its attention.
The defendant had agreed to transfer the data to the new hard drive. It did not do that and accordingly was in breach of its contract.
The magistrate was entitled to find that a backup was not done by the defendant and the transfer of data from the old hard drive to the new hard drive was not achieved with files on the old hard drive being corrupted. She was also entitled to find that the defendant had breached the agreement between the parties as to the backing up of the data and that the defendant had failed to exercise the requisite degree of skill and care in transferring the data.
For those reasons the plaintiff was entitled to damages.
The magistrate correctly held that the general rule in assessing damages is that where a party sustains a loss by reason of breach of contract he or she is entitled to be placed in the same situation, in a monetary sense, as if the contract had been performed.
As I have mentioned, the magistrate assessed damages for the plaintiff in the sum of $4,584.00.
Her Honour allowed $68.00 charged for labour for troubleshooting. The troubleshooting was not carried out. The magistrate allowed $80.00 being the cost of purchasing back the old hard drive. If the data transfer had been carried out correctly it would not have been necessary for the plaintiff to buy back the old hard drive.
The magistrate allowed the sum of $200.00 for accommodation expenses. Time was not of the essence of the contract and that allowance was not appropriate or reasonable.
The magistrate allowed $160.00 for travel expenses. I think that allowance was reasonable. The plaintiff had to make trips from Burra to Adelaide for the purpose of correcting the problems with the computer. The magistrate allowed $300.00 for the cost of a diagnostic assessment by World-Link Peripherals. In the circumstances it was reasonable for the plaintiff to pay that amount for the purpose of determining whether data could be rescued. The magistrate allowed $26.00 for search fees, which was reasonable. Those items total $634.00.
The magistrate also allowed the sum of $3,750.00 being 75 hours at a cost of $50.00 per hour to re-enter lost data. I am troubled by that item.
The claim for this item in the plaintiff’s letter of 25 April 2003 is expressed as:
“Time involved to re-install software programs, driver, and necessary accounting data. Substantial amount of data was lost. 75 hours at $50 per hour $3750”
The claim was expressed in the same way in another document prepared by the plaintiff, which forms part of Exhibit P1. However, page 3 in Exhibit P1 contains details of a claim for $3,750.00 “own labour to reinstall software programs, drivers, accounting data and other data” and summarises the number of hours said to have been spent by the plaintiff in the months of March and April. A total of 162 hours is shown for March 2003, 53 hours is shown for the month of April and 60-65 hours said to be “continuing work to recover lost data as result of negligence…..” is shown for the period 24-30 June 2003. The document concludes with the statement:
“Claim is for $3;750 - Work required during March = 162 hrs, April = 53 hrs totalling 215 hrs equivalent to $17.44 hr which is less than a casual office workers wages of $23 ph.”
Mr Wiltshire told the magistrate that the actual time spent was 275 hours. He told Her Honour that he charges out his time on charge-out sheets for client work and that he “meticulously kept track of the amount of time”; but he did not have any of the sheets with him. He sought to justify the claim saying:
“I’m not arguing about the 75 hours - I’m quite happy to leave it at 75 hours, and bearing in mind these people (the defendant) are charging $68 for doing their work, I thought my charge for $50 an hour was quite reasonable.”
He said that a local tax accountant charged his staff out at $50 per hour for data entry. He said:
“So it was sort of an arbitrary amount, and then the rest of it - so there was $3,750 in labor which I’m claiming which is a pittance really for the amount of time, bearing in mind that it would have cost $3,300 anyway to reinstate the information.”
It is not without significance that Macquarie University had suggested that it was going to cost $3,300.00 to recover the lost information. The plaintiff appears to have used that figure as a measuring stick for the cost of reinstalling the lost information.
The fact that Mr Wiltshire claims to have spent 275 hours, but only seeks to be reimbursed for 75 hours, does not prove that he had spent 75 hours on the task. When one applies a little commonsense and analyses the task which had to be performed it is absurd to suggest that a total of 275 hours or approximately seven full weeks could have spent on the task.
The onus was on Mr Wiltshire to prove his claim. Mr Cartier submitted that he never produced any notes or diary entries to substantiate his claim that he spent 75 hours reloading the software. That submission is correct.
The 75 hours claimed to have been spent by Mr Wiltshire have not been identified. Page 3 of Exhibit P1 shows that on 5 March 2003 he spent five hours installing Windows 98 software and Attache Accounting Software and setting up of six charts of accounts. Initially he denied that the time spent loading Windows 98 had been charged for, but later he admitted that he had charged because his original accounting package had been lost and he had to buy a new package which would only work on Windows 98. The following dialogue occurred:
“HIS HONOUR: Why should they pay the cost of that?
MR WILTSHIRE: I haven’t. I have only claimed for 75 hours out of 275 hours.
HIS HONOUR: How do I know what 75 hours you have claimed?
MR WILTSHIRE: 75 hours was only data entry. It was only just purely -
HIS HONOUR: How do I know that? Do you have a time sheet?
MR WILTSHIRE: Yes. I handed all that up -
HIS HONOUR: Do you keep time sheets?
MR WILTSHIRE: My word I did.
HIS HONOUR: Where are the time sheets relating to this?
MR WILTSHIRE: That’s the evidence that I gave to Magistrate Eldridge on the day of the hearing.
HIS HONOOUR: Were there time sheets relating to this claim against -
MR WILTSHIRE: Yes, I kept time sheets and what it related to and she went into quite some detail into how it was done and that’s how she formed her opinion. The quote that I got for recovering all the data from this fellow at Macquarie University, which was way after the time, because I just simply didn’t know at that stage what the cost would be, other than the fact that the fellow said it was probably going to be prohibitive because his understanding was it would probably be $2,000 to $3,000 or more, depending on how much was on there. This is how, I think, Magistrate Eldridge came to the conclusion that the claim was a reasonable claim because the amount that Macquarie University wanted to recover all the data from that formatted hard drive was about $3,300. So, a figure around about that was on the mark. That’s why I simply left it at not claiming any more.
HIS HONOUR: Mr Wiltshire, your document, Exhibit 3, the bottom says:
‘Claim is for $3,750. Work required …. equivalent to $17.44 an hour.’
MR WILTSHIRE: Yes.
HIS HONOUR: ‘Which is less than a casual office worker’s wage of $23 per hour.’
MR WILTSHIRE: Yes, that’s correct. I am just trying to justify the figure in a number of ways to make it easy for the magistrate because it’s not always easy to pull figures out. I don’t know where this figure of $18 an hour comes from, but I got the figure of $50 an hour from our local accountant at Burra. The evidence I gave to Magistrate Eldridge was charging -
HIS HONOUR: The figure of 17.44 an hour comes from your own letter.
MR WILTSHIRE; Yes, that’s what I have reasoned. That it’s $17 an hour, in fact, if you work it on the 275 hours.”
Mr Wiltshire’s answers to me suggested that he had given his timesheets to the magistrate. I have already set out the dialogue between the magistrate and Mr Wiltshire about the timesheets, which were “meticulously kept”. He did not produce those timesheets to the magistrate as he suggested to me that he had.
If Mr Wiltshire had produced his timesheets he may have been able to identify what actual time had been spent by him reinstating data. As the evidence stands his claim of $3,750.00 appears to have been arrived at by reference to what Macquarie University may have charged to unload the data from the old hard drive.
If he had spent 275 hours reinstating the data why limit the claim to 75 hours? There is nothing to indicate on what days the time which makes up the 75 hours was spent or what work was performed during the claimed 75 hours.
I cannot accept that simply because the plaintiff has reduced his claim from 275 hours to 75 hours that the claim for 75 hours is reasonable. The onus rests with the plaintiff to prove his claim.
I also have doubts about the claimed hourly rate of $50.00. The appropriate hourly rate will depend upon the nature of the work which was being carried out. It may be that much of the work could have been carried out by a casual office worker at the rate of $23.00 per hour, which is referred to on page 3 of Exhibit P1. Mr Cartier claimed that a highly experienced data entry operator with five years’ experience in the Sydney CBD would be paid $18.00 per hour. He also claimed that the Macquarie University quote of $3,300.00 was excessive because he was able to find on the Internet people charging $880.00 to recover data from any hard drive or your money back. However, there was no reliable evidence of these matters and there is nothing to suggest that Mr Wiltshire should have been aware of the people on the Internet to whom Mr Cartier referred.
With some reluctance I am prepared to allow $50.00 per hour on the basis that is what the accountant charged. I am also influenced by the submission of Mr Wiltshire that the defendant charges $68.00 for that work.
Mr Wiltshire had been assured “that all the data and programs would be cloned to the new hard drive” and that the new hard drive would start in exactly the same way as the old one. If the contract had been properly performed that is what should have happened.
I cannot assess how much of the asserted 275 hours was spent to place Mr Wiltshire in the position that he would have been in if the contract had been performed. Clearly, not all of the items on page 3 of Exhibit P1 were necessary for that purpose. Had Mr Wiltshire produced the meticulous timesheets to which he referred he may have established what the time related to. Some work must have been necessary. However, I do not think that the evidence has established that more than 20 hours was necessary. As I have said Mr Wiltshire has not identified what work was done during the 75 hours to which he has “limited” his claim or indeed when that time was spent. I am not satisfied that Mr Wiltshire has established that he is entitled to be compensated for 75 hours.
On the basis of the evidence I think an allowance of $1,000 for the time involved in reinstating the computer is appropriate. The other items, which I have mentioned, total $634.00.
I therefore rescind the judgment of the magistrate and substitute judgment for the plaintiff in the sum of $1,634.00, plus $50 for the plaintiff’s costs of attendance at the hearing before the magistrate being a total judgment sum of $1,684.00.
Neither party has been completely successful on this review. Accordingly, I make no order as to the costs of the review.
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