Phoenix Security P/L v Papas Transport Eng. P/L No. DCCIV-97-746

PHOENIX SECURITY PTY LTD
v
PAPAS TRANSPORT ENGINEERING PTY LTD
[2000] SADC 61

Judge Robertson
Civil

Summary of the Claim and Counterclaim

In August 1994 the Plaintiff was awarded the waste disposal contract at the Adelaide Produce Markets at Pooraka (“the Market”) for a period of two years commencing on 1 October 1994. For the sole purpose of fulfilling its obligations under the waste disposal contract at the Market the Plaintiff purchased a waste disposal vehicle from the Defendant. The waste disposal vehicle consisted of a Leyland truck and chassis (“the Leyland”) with a large compactor bin fitted to the chassis. I will refer to the compactor unit consisting of the Leyland and the compactor bin as “the waste vehicle”. The Plaintiff’s claim for damages arises out of the sale and purchase of the waste vehicle.
In the first instance the Plaintiff seeks damages for breach of Section 52 of the Trade Practices Act 1974 (“the Trade Practices Act”) and damages pursuant to Section 7 of the Misrepresentation Act 1972 (“the Misrepresentation Act”). The Plaintiff alleges that the Defendant, through its director Mr Chris Papas, orally represented, prior to entering into the contract for sale, that the compactor bin would have the capacity to take the waste contents of the fifty waste bins used at the Market on each occasion the Plaintiff collected the Market waste. It is the Plaintiff’s case that the compactor bin did not have such a capacity on each occasion. There are two further misrepresentations that the Plaintiff relies upon in seeking damages for breach of Section 52 and Section 7. I will refer to these later.
In addition the Plaintiff claims that it was an express term of the contract that the compactor bin would have the capacity to take the waste contents of the fifty bins on each occasion the Plaintiff collected the Market waste.
The Plaintiff also claims that the waste vehicle was beset with mechanical problems from the time it commenced to use the waste vehicle in October 1994. It is the Plaintiff’s case that those mechanical problems continued throughout the two year period of original waste disposal contract and for the subsequent two years after the contract was renewed. The Plaintiff claims that the mechanical problems were suffered by both the Leyland and the compactor bin. As a result of these mechanical problems and some design and construction faults alleged to have existed in the waste vehicle the Plaintiff seeks damages for breach of implied terms in the sale contract of “reasonable fitness for purpose” and “merchantable quality”. The Plaintiff alleges the terms were implied by the provisions of Section 14 I and Section 14 II respectively of the Sales of Goods Act 1895, (“the Sale of Goods Act”), and also Section 71(1) and (2) of the Trade Practices Act.
The Plaintiff also seeks damages for negligence on the part of the Defendant relating to the problems which occurred with the functioning of the waste vehicle.
I should end this brief outline of the Plaintiff’s claim by mentioning that the Plaintiff’s Statement of Claim contained a number of other causes of action. Some were abandoned at the commencement of the hearing and others were abandoned during the hearing.
The nature and quantum of the Plaintiff’s damages are:
·....... Loss on sale of the waste vehicle                   $40,800
·Repairs to waste vehicle  $48,890
·....... Cost of replacement contractors used when
the waste vehicle was off the road for repairs        $16,215
The Defendant has counterclaimed seeking damages. The Defendant seeks an amount of $7,247.50 for work done and material supplied in partly refurbishing the waste vehicle in December 1996 and January 1997. The Defendant also seeks payment of two outstanding accounts, one for repair work and the other for the supply of hydraulic oil, totalling $268. Finally the Defendant seeks damages amounting to $928.40 for damage to overhead electrical equipment in its workshop which it claims was caused by the negligent driving of an employee of the Plaintiff when the waste vehicle collided with the equipment in the Defendant’s workshop.
Description of the Waste Vehicle
Having briefly summarised both the claim and the counterclaim I shall now describe the waste vehicle and its function in a little more detail. The truck and chassis were manufactured by Leyland. It had two wheels at the front of the vehicle and two sets of two wheels towards the rear of the chassis. The first set of rear wheels were supported by an axle containing a differential. It is through the differential that the wheels attached to that axle were driven. The second set of wheels were supported by what is described as a “lazy axle”. The wheels attached to the lazy axle did not turn as a result of any power distributed through the differential. The lazy axle did not have a differential. The two wheels attached to a lazy axle turned by following the two wheels attached to the axle containing the differential.
There was a compactor bin which was attached to the chassis. It had a nineteen cubic metre capacity. Waste material was deposited into the compactor bin through an aperture at the top of the compactor bin. Attached to the sides of the compactor bin were two arms which were hydraulically operated. The function of those arms was to engage a bin containing waste and elevate the bin over the top of the cabin of the truck and deposit that waste through the aperture into the compactor bin. At the rear of the compactor bin was a large door which was irregular in shape but convex in nature. The door contained a cavity which allowed compacted waste to be deposited inside the cavity.
Inside the compactor bin was a compactor blade which was situated at the opposite end of the rear door, in other words, adjacent to the cabin of the truck. This compactor blade was operated by a hydraulic ram or actuator which would drive the blade along a set of rails situated on the floor of the compactor bin. When the blade was operated it would compact the waste contained in the compactor bin towards the rear door. It was the cavity in the rear door which would receive the first compacted waste material. Upon the compactor blade having compressed the waste it would then be retracted along the rails to its original position. This compacting process would be repeated from time to time upon the reception of more waste material into the compactor bin. The removal of the waste material from the compactor bin was through the opening at the rear of the compactor bin after the rear door had been opened.
The walls of the compactor bin consisted of two separate skins or walls of metal. Structural members were attached to the outside of the inner skin or wall. The outer wall played no functional role in the operation of the compactor bin. Its sole purpose was to give the compactor bin a better appearance. The outer skin was attached to the structural members which were attached to the outside of the inner wall. There was a cavity between the outer wall and the inner wall of the compactor bin.
Having described the waste vehicle it is appropriate to now consider the evidence. However before doing so, I should express my opinion concerning the credit of some of the major witnesses.
Evaluation of the Witnesses
The two most significant witnesses were Mr George Daskalakis, a director of the Plaintiff, and Mr Chris Papas, a director of the Defendant. They were both engaged in the negotiations leading up to entering into the contract for the sale and purchase of the waste vehicle. They were also involved with some of the problems which arose with the waste vehicle after it was delivered to the Plaintiff. Regrettably, I was not so impressed by either witness that I could rely on his evidence in its entirety. It was clear that time had eroded the memories of each of them. Unfortunately, many of the relevant events took place as long ago as 1994.
Mr Daskalakis made it obvious that he felt aggrieved about the problems relating to the waste vehicle. I gained the impression that he felt that he had purchased, to use a colloquial phrase, “a lemon”. This attitude to some extent affected parts of his evidence manifesting in a tendency to exaggerate on occasions. I felt at times that Mr Daskalakis was not relying upon his memory but engaging in impermissible reconstruction. By that I mean he gave the appearance of relying upon his memory whereas in fact he was not doing so but reconstructing the facts about which he was giving evidence. However, I did not gain the impression that he was doing this consciously. At times I gained the impression that he gave an answer without fully comprehending the question. I felt that in giving his evidence he generally tried to tell the truth except with respect to one topic where his evidence gave me cause for concern. I will refer to this later. His tendency to exaggerate and engage in reconstruction from time to time has led me to the conclusion that I cannot accept him as a reliable witness on all subjects. There are some parts of his evidence upon which I felt I could rely and other parts which I have concluded I cannot rely upon.
My view of the evidence of Mr Papas to a large extent mirror those I have formed about the evidence of Mr Daskalakis. He made it obvious that he also felt aggrieved. It was clear that he resented the perceived attitude of Mr Daskalakis that the Defendant had sold “a lemon”. He laid the problems entirely at the feet of Mr Daskalakis. I felt that at times he overzealously set about defending what he perceived were the unjust and unfair assertions by Mr Daskalakis. This approach resulted in a tendency to exaggerate on occasions. He, like Mr Daskalakis, suffered from the disadvantage of giving evidence of events which had taken place such a long time ago. Again, like Mr Daskalakis, he was being asked to recall events and conversations which not only took place a long time ago but were not of great significance to either of them when they took place. I felt that he too tended to engage in impermissible reconstruction at times. In my view, it was not done consciously. I consider he tried to tell the truth. However, because of the matters to which I have referred, I am unable to accept him as a reliable witness on all topics. As with Mr Daskalakis there are some parts of his evidence upon which I felt I could rely and other parts which I cannot rely upon.
Mr Arthur Gelios was the Plaintiff’s first driver of the waste vehicle. He drove the waste vehicle from October 1994 for a period of approximately one and a half years. I felt that Mr Gelios was a truthful and generally a reliable witness.
Mr Colin Meares, the operations manager of the Market in 1994 and later, was a truthful witness. I reached the conclusion that the passage of time had certainly dimmed his memory, although I concluded that I could rely upon his evidence on a number of topics.
Mr Dennis Turner, is the manager of Trueline Wheel Aligners (“Trueline”) which undertook many of the repairs to the waste vehicle from 1996 onwards. He gave evidence regarding the mechanical repairs undertaken by Trueline. He also gave opinion evidence relevant to some of the repairs undertaken. I found him to be a truthful witness, whose evidence I can generally rely upon. I am also satisfied that I can rely upon his opinions on topics where he was properly qualified as an expert.
Finally, Mr Paul Jones was a driver for the Plaintiff during part of 1997 and part of 1998. I thought he was a truthful witness whom I can generally rely upon although like all the other witnesses his memory had, to some extent, been eroded by time.
Events Leading up to the Sale of the Waste Vehicle
I now come to the evidence. Mr Daskalakis first became associated with the Market about ten years ago. Initially his association with the Market arose when the Plaintiff contracted to provide the security services to the Market. Later, the Plaintiff entered into a contract with the Market to perform the road sweeping requirements at the Market. The Market was an extensive complex situated at Pooraka. It serviced two hundred growers and fifty wholesalers of fruit and vegetables. The complex included a number of substantial buildings together with a road system which allowed access to various parts of the Market. The Market operated on Mondays, Tuesdays and Thursdays of each week.
Prior to the Plaintiff obtaining the waste disposal contract at the Market, the waste disposal work was undertaken at separate times by Consolidated Waste and Pacific Waste Management. The waste disposal contract was due for renewal in October 1994. Mr Meares said that the practice was that about four months prior to the expiration of the current waste disposal contract, the Market management would seek tenders for the new contract. Mr Meares said that as the Plaintiff was already involved in the road sweeping contract he suggested to Mr Daskalakis that he may like to also tender for the waste disposal contract. Until that time neither the Plaintiff nor Mr Daskalakis had ever been involved in the disposal or management of waste at the Market or at any other place.
The nature of the waste created by the Market activities was generally fruit and vegetable waste and used packaging. The packaging waste included plastic, polystyrene, cardboard and timber; the latter arising from broken pallets and crates. Most of the waste was deposited in fifty waste bins each with a capacity of 1.5 cubic metres. Clusters or groups of these bins were distributed strategically about the Market complex close to the operators’ stalls. The waste contractor was required to dispose of the waste contained in the fifty bins each day except Sunday. During the summer each of the fifty bins would be generally full. This was brought about mainly by the influx of summer fruits . The quantity of waste to be removed during the winter was less than in the summer. Furthermore, there was less waste to dispose of on the days when the Market was not open for business. The waste contractor at the Market was required to provide a waste disposal vehicle and also to supply the fifty waste bins.
At the time Mr Meares invited Mr Daskalakis to tender for the waste contract, Mr Daskalakis had no experience in the waste disposal industry. I accept that he was not a mechanically minded person and had no association with industrial equipment prior to acquiring and operating the road sweeper. Even then, he did not become involved with the mechanical operation of the road sweeper. At this time, Mr Daskalakis was aware, in general terms, of the waste disposal methodology used by the then current waste contractor at the Market as he had observed the waste disposal operation whilst he carried out his security duties.
Mr Daskalakis understood that if he was successful in obtaining the waste disposal contract he would need to acquire a waste disposal vehicle and fifty waste bins. He therefore set about reading books and magazines in which waste disposal vehicles were advertised for sale. I accept that his only knowledge of such vehicles was that which he gained by observing the waste disposal procedure adopted by the Market’s earlier waste disposal contractors.
On 11 July 1994 the Plaintiff furnished a written tender to the Market for the waste disposal contract for the ensuing two years. As part of the tender the Plaintiff undertook to supply fifty waste bins (“the fifty bins”). The tender was for a fixed rate of payment of $7,500 per month for the disposal of the waste contained in the fifty bins each day from Monday to Saturday. The Plaintiff’s tender included a rate of $6 for each additional waste bin, above the fifty bins, which may be required during a day to complete the disposal of the entire waste on that day. Based on past experiences it was anticipated that on some days the total waste would be greater than the capacity of the fifty bins. The Plaintiff’s tender was accepted by the Market by letter dated 15 August 1994. There were other tenders lodged by experienced waste disposal contractors. The Plaintiff’s tender price was significantly less than the next lowest tender price.
In the course of his search for the plant and equipment necessary to enable the Market contract to be undertaken, Mr Daskalakis attended the business premises of the Defendant. The Defendant at that time carried on the business of a manufacturer and seller of large waste compactor bins both stationary and mobile. Its business also included the repair of waste equipment, the sale of second hand waste compactor bins and equipment. The Defendant operated its business throughout Australia. Included in the business was also the manufacture of the smaller waste bins to be used in association with waste disposal vehicles. Part of the business of the Defendant included the establishing of hydraulic systems used in the operation of the waste disposal vehicle. Mr Papas was and still is a director and shareholder of the Defendant. He is a qualified boilermaker/welder and a hydraulic fitter. His hydraulic qualifications qualified him to set up hydraulic systems, test and operate them.
It seems that Mr Daskalakis was directed to the business of Mr Papas by Trevor King, a waste disposal operator. There is a dispute between Mr Daskalakis and Mr Papas regarding when Mr Daskalakis first attended at the business premises of Mr Papas and spoke to Mr Papas. Mr Daskalakis said that he first visited the premises prior to lodging his tender document on 11 July 1994. I think Mr Daskalakis is mistaken about this. I prefer the evidence of Mr Papas that the first meeting took place some time in the first part of August 1994. The quotations which emanated from the Defendant following the meeting tend to support the evidence of Mr Papas. There is also a dispute between Mr Papas and Mr Daskalakis regarding what Mr Daskalakis was seeking when he first attended the premises. It is unnecessary to resolve that dispute because it is clear that during the course of the first conversation between them a discussion took place about waste disposal vehicles and the smaller waste bins to be used in conjunction with waste disposal vehicles. Mr Daskalakis indicated to Mr Papas that he was hoping to obtain the waste disposal contract at the Market. At that time Mr Papas had some knowledge of the waste disposal operation at the Market due to the Defendant’s association with a previous contractor at the Market. During the course of that conversation a number of options regarding the appropriate waste disposal methodology which could be used at the Market were raised by Mr Papas and discussed.
I pause here to mention a number of important features which provided the backdrop to this discussion and subsequent discussions between Mr Daskalakis and Mr Papas. The first is that I accept that Mr Daskalakis’ knowledge of waste disposal operations and methodology and the equipment used in waste disposal at that time was superficial and limited. I have mentioned the extent of that knowledge earlier. Furthermore, I find that Mr Papas was made aware by Mr Daskalakis during the course of the discussion how very little he knew of waste disposal operations and the type of plant and equipment used in the waste disposal industry. He made it clear that he was seeking Mr Papas’ expert advice. I find that Mr Papas had expertise regarding the production of waste disposal vehicles and waste disposal systems. I also find that Mr Papas understood from the outset that Mr Daskalakis was seeking his expert advice and that he would rely on the advice that was given to him by Mr Papas. Mr Papas, in his evidence, clearly acknowledged that he understood that Mr Daskalakis had limited knowledge and was relying upon him for advice and direction regarding the type of plant and equipment required for the waste disposal needs of the Market.

Finally, as a further backdrop to that first conversation, it is important to recognise that Mr Papas had some knowledge of the waste disposal operation at the Market at that time. The Defendant had previously repaired waste disposal vehicles operated by Consolidated Waste, an earlier contractor at the Market. He knew that Consolidated Waste had nineteen cubic metre capacity compactor bins attached to what is described as a 4 x 2 truck and chassis. He explained that a 4 x 2 is one where the truck has a front axle with two wheels attached and a rear axle with two wheels attached. Mr Papas was also aware that Consolidated Waste had at times overloaded their waste disposal vehicles in carrying the waste from the Market. In other words, that the weight of the payload in the compactor bins was above the weight which the waste disposal vehicle was legally entitled to carry. Mr Papas was also aware that the type of waste at the Market was generally fruit and vegetables and packaging material of various kinds.
There is a dispute on the evidence regarding what was discussed and what took place at the first meeting and whether a subsequent meeting was held on the same day. I have already found that the first meeting took place some time in the early part of August 1994. It is not important to resolve the issue of whether there was more than one meeting held on that day. It is clear that at least one meeting was held on that day and there were subsequent meetings between Mr Papas and Mr Daskalakis later on where the supply of the waste vehicle was discussed.
Whether there was one meeting or two meetings on the day when they first met, I make the following findings regarding what took place on that day. Mr Daskalakis informed Mr Papas that he was hoping to obtain the waste disposal contract for the Market. Reference was made to the Market waste disposal procedures operating at the Market at that time. In the course of that discussion Mr Papas was made aware that there were fifty bins at the Market in which the users of the Market disposed of their waste and that the contract involved the collection of that waste and its disposal at a waste disposal depot. A roll-on/roll-off system of waste disposal was discussed. Mr Daskalakis was shown a new compactor bin and following a brief discussion on price, he indicated that he did not have the financial capacity at that time to acquire a new compactor bin.
Furthermore, on that day Mr Papas showed Mr Daskalakis two second hand compactor bins which were situated in the Defendant’s yard. Each of these compactor bins had a load capacity of about thirty to thirty-one cubic metres. One compactor bin disposed of the waste inside the bin by use of the compactor blade pushing the waste through the rear door. By contrast, the waste was removed in the other compactor bin by a tipping process similar to the process of removing contents from the tray of a tip truck. Both of these compactor bins had been languishing in the Defendant’s yard for about two to three years.
At the time, Mr Papas explained to Mr Daskalakis the difference in the methodology used for the removal of waste from each of the compactor bins. Mr Daskalakis climbed onto the roof of one of the compactor bins. He made reference to the rust which could be readily observed on both compactor bins. Mr Papas indicated that it was only surface rust. Of the two compactor bins, Mr Papas recommended the compactor bin which removed the waste through the use of the compactor blade as he was of the opinion that the “tipper” compactor bin was potentially dangerous. Mr Papas also pointed out that both compactor bins were too large and if one was chosen then it would need to be reduced in size.
There was also discussion regarding the type of vehicle that would be needed to carry the compactor bin. Mr Papas indicated that if either of the second hand compactor bins was selected then Mr Daskalakis would need a truck and chassis with two rear axles. He recommended this type of truck and chassis as he was aware that Consolidated Waste was only using a single rear axle and that they had carried loads from the Market which were overweight. It was Mr Papas’ intention to reduce the size of the compactor bin selected to nineteen cubic metres which was similar in capacity to those of Consolidated Waste.
It was Mr Papas’ evidence that on the day that the two compactor bins were inspected that Mr Daskalakis chose the one which removed the rubbish by use of the compactor blade to push it out. Mr Daskalakis said that he chose the compactor bin after four meetings were held between he and Mr Papas. I do not accept the evidence of either of them. It is not in dispute that there were subsequent meetings between Mr Daskalakis and Mr Papas regarding the supply of a waste disposal vehicle. It is unnecessary to determine how many meetings took place before Mr Daskalakis made his decision but I certainly do not accept that he made it on the day of the inspection. In any event, the day when Mr Daskalakis indicated that he would acquire the waste vehicle is not critical to any of the issues in the trial. However, it is likely that Mr Daskalakis indicated on the first occasion some degree of interest in what was being suggested by Mr Papas regarding the purchase of the second hand truck and a modified second hand waste compactor bin. It is also likely that Mr Daskalakis indicated that he would accept Mr Papas’ advice that the compactor bin which used the compactor blade to remove the waste was the preferred one. The direction of the discussion towards a second hand truck and compactor bin occurred because Mr Daskalakis made it plain that financial restrictions would not permit him to purchase a new unit.
Within close proximity to the day when the two compactor bins were inspected at the Defendant’s premises, Mr Papas visited the Market alone and made observations regarding the nature of the contents of the fifty waste bins which were used by the operator at the Market. The state of the evidence does not allow me to be more specific than that regarding the time when this occurred. Later he undertook a further visit to the Market in company with Mr Daskalakis. There is a conflict regarding whether this latter inspection took place before the agreement was reached for the Defendant to supply the waste vehicle or after. I prefer the evidence of Mr Daskalakis on this issue and therefore find that the visit took place prior to 23 August 1994. The inspection of the Market in company with Mr Daskalakis and in particular those parts of the Market relevant to the waste disposal system took some considerable time. I find that Mr Meares, the operations manager, was only present with Mr Daskalakis and Mr Papas for a short time. I do not accept the evidence of Mr Daskalakis that he was present during most of the inspection. This evidence is contrary to that of Mr Meares and I accept the evidence of Mr Meares on the point.
Whilst walking around the Market on that occasion Mr Daskalakis pointed to where the smaller waste bins were located and inspection of the contents of some of the bins took place. Discussion of the methodology used by the current contractors for collecting the waste contained in the bins and its disposal also took place. Although these matters were discussed on that occasion it was Mr Papas’ evidence that he knew what equipment was needed by the Plaintiff to undertake the waste disposal contract at the Market by the time he had completed his own inspection at the Market earlier.
As I mentioned earlier, for the Defendant to supply the complete waste compactor unit to the Plaintiff it was necessary to obtain a truck and chassis suitable to carry the nineteen cubic metre compactor bin which Mr Papas had in mind. I have also mentioned that Mr Daskalakis made Mr Papas aware that his funds were limited although I do not accept Mr Papas’ evidence that Mr Daskalakis said he had a budget of $80,000. Mr Papas set about making inquiries regarding the availability of a truck which would be suitable. I find that Mr Daskalakis also made some inquiries. Some time later Mr Papas discovered the Leyland truck and chassis which he thought would be suitable for carrying the modified compactor bin. The Leyland was for sale at the premises of a company called Air-ride Pty Ltd (“Air-ride”). The Leyland was brought to the premises of the Defendant at Parafield Gardens. Mr Daskalakis inspected the Leyland at the invitation of Mr Papas and indicated his approval. I find his approval was made following the recommendation by Mr Papas that it would be suitable.
The Sale of the Waste Vehicle
I find that all this took place prior to 23 August 1994. That was the date when a written quote was forwarded by the Defendant to the Plaintiff for the supply of the waste vehicle together with the supply of fifty bins with a capacity of 1.5 cubic metres. The quote identified the cost of the second hand compactor bin and the cost of the second hand Leyland. It also included additional costs for the packer ram, painting the Leyland, inserting an extra leaf in the front suspension and repairing the steering of the Leyland. The total price for the waste vehicle and the fifty bins was $79,050.
The evidence does not allow me to identify when the contract for the sale and purchase of the waste vehicle was made by the parties. A written quotation by the Defendant dated 23 August 1994 for the supply of the waste vehicle and the supply of the fifty bins was admitted into evidence. The evidence also discloses that the Defendant commenced work on the waste vehicle about that date. The Plaintiff obtained finance through Australian Guarantee Corporation Limited (“AGC”) to fund the cost of the waste vehicle. The finance was provided by AGC by means of an Asset Purchase Agreement dated 30 August 1994. This method of finance required the Defendant to agree to supply to AGC the waste vehicle for $48,800 and to supply the fifty bins for a price of $30,250. The Defendant furnished an Invoice to AGC dated 25 August 1994 in which it recorded that the total price for the waste vehicle and bins was $79,050. It also recorded that a deposit of $16,050 had been received leaving a balance of $63,000 payable. The effect of the transaction between AGC and the Plaintiff was that AGC became the owner of the vehicle and it hired the waste vehicle and the fifty bins to the Plaintiff which was required to pay a regular hire fee. The Asset Purchase Agreement contained a provision that upon the Plaintiff paying the total rental payments the Plaintiff would become the owner of the goods.
It is clear from the manner in which the transaction was financed that AGC became the legal owner of the waste vehicle. However, it is also clear that for the finance transaction to take place there must have been an agreement reached between the Plaintiff and the Defendant for the sale and purchase of the waste vehicle. All of the documents I have referred to and the other relevant evidence indicates that the Plaintiff must have accepted the quotation dated 23 August 1994 and before the quotation dated 25 August 1994 was sent to AGC. I therefore find that the contract between the Plaintiff and the Defendant for the sale and purchase of the waste vehicle was made about 23 August 1994. I should add, that the trial was fought by the parties on the basis that there was an agreement between them for the sale and purchase of the waste vehicle. In my opinion, that approach properly reflected the reality of the situation that the parties had reached an agreement prior to the introduction of AGC as the financier.
The Defendant was required to fit the compactor bin to the chassis of the Leyland. Before doing so the Defendant cut 1.7 metres from the length of the bin and refitted the rear door. The effect of this was to reduce the capacity of the compactor bin to about nineteen cubic metres. In addition, the Defendant fitted a new compactor ram to the compactor blade, a new hydraulic pump and constructed two drain sumps to release liquid. Other work as outlined in the Quotation needed to be completed and it was done. The Defendant did not replace or repair any of the other hydraulic equipment on the compactor bin other than the compactor blade ram. The Plaintiff took possession of the waste vehicle in September 1994.
The Trade Practices Act and Misrepresentation Act Claims
Having spent some time dealing with the evidence leading up to the sale and purchase of the waste vehicle it is now convenient to consider the specific claims made by the Plaintiff. I first, turn to the claim for damages for misleading or deceptive conduct in contravention of Section 52 of the Trade Practices Act and the claim for damages for misrepresentation pursuant to Section 7 of the Misrepresentation Act. The commencement point is to identify the misrepresentations for which the Plaintiff seeks damages pursuant to those provisions.
The Plaintiff, in paragraph 5 of its Statement of Claim, outlined the misrepresentations upon which it relied. However, the pleading in Paragraph 5.3.1 was expressed in such general terms that it provided very little assistance in identifying precisely what were the alleged misrepresentations to which that pleading was intending to refer. At my request, Dr Salu, counsel for the Plaintiff, identified the misrepresentations to which he said Paragraph 5.3.1 referred. As I understood him those misrepresentations are:-
·....... that the compactor bin would have the capacity to take the waste contents of the fifty bins at the Market on each occasion the Plaintiff collected the Market waste
·that the waste vehicle would last four to five years without major cost
·....... that the refurbishment of the waste vehicle would be effective.

In addition to these alleged misrepresentations Dr Salu indicated that the Plaintiff also relied upon the misrepresentation pleaded in Paragraph 5.3.2 of the Statement of Claim:-

“That the truck had a double bogie.”

The remainder of the pleas in Paragraph 5 were abandoned.

Before I consider the evidence relevant to the alleged misrepresentations, I wish to make some brief comments regarding Section 52 of the Trade Practices Act and Section 7 of the Misrepresentation Act. For a corporation to contravene Section 52 its conduct must be misleading or deceptive. It is not necessary to establish that the corporation intended to mislead or deceive. All that is required to establish a contravention is that the corporation has been guilty of conduct which is misleading or deceptive. Misrepresentations, whether express or implied, can be misleading or deceptive conduct pursuant to Section 52. The section is not confined to misleading or deceptive conduct which takes the form of a misrepresentation (see: Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 at 93). However in this case, the claim for breaches of Section 52 are the alleged misrepresentations previously mentioned. It is important to recognise that the Section does not itself provide a remedy for breach. Remedies are found in other provisions of the Trade Practices Act. Sections 82 and 87 provide for relief by way of damages. Section 87 also provides for other forms of relief. Like misrepresentation at common law, for damages to be awarded pursuant to the Trade Practices Act the party seeking damages must have relied upon the misrepresentation and was induced thereby to enter into a contract (see Pappas v Soulac Pty Ltd (1983) 50 ALR 231).
Section 7(1) of the Misrepresentation Act provides that where a party is induced to enter into a contract by a misrepresentation which is not fraudulent then the measure of damages is the same as if the misrepresentation was fraudulent. The Section is designed to overcome the common law position that damages are not available for innocent misrepresentation. It is relevant in these proceedings as the Plaintiff does not allege that the misrepresentations were made fraudulently.
I now turn to consider the evidence relating to the first alleged misrepresentation. Mr Daskalakis said that when he commenced his investigations for the purpose of purchasing a waste disposal vehicle his objective was to acquire a vehicle which could carry the waste contained in the fifty bins at the Market and transport the waste to a waste disposal depot. He said that at a lunch meeting at the Intercontinental Hotel, Mr Papas informed him that the waste disposal vehicle would need to have a sufficient capacity to take the waste contained in the fifty bins at the one time for purpose of transporting the waste to the waste disposal depot. Mr Daskalakis said that Mr Papas stated that if the contents of the bins could not be taken at the one time then that would involve him in extra dumping fees. He said that prior to that meeting he had obtained the fees for dumping from the waste disposal depot situated at Wingfield at the suggestion of Mr Papas. Prior to the occasion when this conversation took place, Mr Daskalakis said that Mr Papas had indicated that either one of the two compactor bins seen in the Defendant’s yard, when modified, would have the capacity to do the job at the Market.
Mr Papas, in evidence, said that he may have said to Mr Daskalakis that the compactor bin had the capacity to take fifty bins of waste. However, he said that he would have qualified that statement by indicating to Mr Daskalakis that whether the compactor bin was able to take the contents of the fifty bins at any one time depended upon the nature of the waste contained in the bins and the time of the year. He said that when referring to the time of the year he mentioned that in summer there would be more fruit waste and this would result in the compactor bin not having the capacity to take the total contents of the fifty bins at one time.
It was not in dispute that the compactor bin could not on every occasion take the contents of the fifty Market bins. Mr Gelios, the first driver the Plaintiff employed, said that there were occasions when the waste in the fifty bins could not be fitted into the waste vehicle’s compactor bin. He said that the capacity of the compactor bin depended on the nature of the waste. Mr Gelios said that sometimes he could fit in excess of the contents of the fifty bins into the compactor bin. However, he said that there were occasions when he could not fit fifty bins into the compactor bin. Mr Gelios recalled one occasion where he was dealing with tomatoes, that the compactor bin could not take more than the contents of twenty bins at one time.
The effect of the evidence of Mr Daskalakis is that Mr Papas indicated that the modified compactor bin proposed had the capacity to take the contents of the fifty bins on each occasion the Plaintiff needed to collect the Market waste and transport it to the refuse depot. I do not accept Mr Papas’ evidence that he qualified any statement regarding the capacity of the compactor bin in the manner he stated in his evidence. I found his evidence on this topic to be unsatisfactory and unconvincing. I formed the view that this evidence was a reconstruction of the impermissible kind. My impression was that his evidence was not based upon an independent recollection of a conversation or conversations with Mr Daskalakis. I accept the evidence of Mr Daskalakis regarding the conversations he said took place on the subject and the representations I have referred to.
Apart from the view I have taken of the evidence of Mr Papas there is one other factor which tends to suggest that the qualifications were not stated by him. It has become clear from the evidence that he did not have a complete understanding of the make-up of the waste emanating from the Market. He was of the opinion that the majority of the waste was packaging and not fruit and vegetable waste. By contrast Mr Gelios estimated the Market waste to be ninety percent fruit and vegetable and the balance packaging. I accept the make-up of the nature of the waste was about that estimated by Mr Gelios. He was well qualified to make the estimate. He had been directly involved in the disposal of the waste from the Market for about one and a half years.

Before I leave this topic, I should mention one final matter. It was never suggested to Mr Daskalakis during cross-examination that he had been informed by Mr Papas that the capacity of the compactor bin to take the contents of the fifty bins depended upon the nature of the waste in the bins at the time.
I find that the statement made by Mr Papas was a representation of fact. It was not an opinion expressed by Mr Papas. He was the expert. The effect of the representation was that after the Plaintiff had modified the compactor bin selected it would have the capacity to take the contents of the fifty bins on each occasion. As it turns out it was a misrepresentation. It did not have that capacity. The misrepresentation was made innocently. There was never any intention on the part of Mr Papas to deceive.
I find that Mr Daskalakis relied upon the representation. He wanted a waste disposal vehicle which would take the contents of the fifty bins on each occasion. One benefit was that there would only be one set of waste disposal fees required. These fees were not an insignificant amount of money. The fact that he was only required to pay one set of fees each day was relevant to his assessment of whether to purchase the waste vehicle. I, therefore find that the Plaintiff was induced to enter into the contract for the purchase of the waste vehicle by the misrepresentation. Accordingly I find that the Defendant has contravened Section 52 of the Trade Practices Act.
The Plaintiff also seeks damages pursuant to Section 7 of the Misrepresentation Act for this misrepresentation. Towards the end of his Submissions in Reply Mr Crocker, counsel for the Defendant raised for the first time the defence provided by subsection (2) of Section 7 of the Misrepresentation Act. The defence was not pleaded in the Defence. No objection was taken by Dr Salu to Mr Crocker raising it at such a late stage of the proceedings. The submission made by Mr Crocker was very brief. No reference was made to the evidence. Mr Crocker simply submitted that if I find that the fifty bin representation was made, then for me to conclude that Section 7 applied I would need to find that Mr Papas did not have reasonable grounds to believe nor did he believe the representation was true. In my opinion the onus is upon the Defendant to establish the defence provided in subsection (2). The Defendant did not attempt to discharge that onus. Accordingly, in my opinion, the defence under the subsection is not made out. It follows from my findings that the Plaintiff is also entitled to damages assessed pursuant to Section 7 of the Misrepresentation Act.
The second misrepresentation claimed by the Plaintiff arises out of the alleged representation by Mr Papas that the waste vehicle would last for about four to five years without major costs. The Plaintiff alleged that the statement was a misrepresentation because of the substantial refurbishment required of the compactor bin towards the end of 1996 and the beginning of 1997. The Plaintiff also alleges that the statement was a misrepresentation because of the defects which the Plaintiff says existed in the Leyland and in the hydraulic system of the compactor bin. It is not disputed by the Defendant that during the period of the Plaintiff’s possession of the waste vehicle that the Leyland required repairing from time to time, as did the compactor bin. It is further not disputed by the Defendant that the compactor bin required refurbishment by December 1996. However, the Defendant says that such repairs were brought about by misuse of the waste vehicle by the Plaintiff and errors by the Plaintiff’s drivers in operating the waste vehicle.
Mr Daskalakis said in evidence that he was concerned about the length of time the waste vehicle would last, particularly when he saw that the Defendant had painted over the rust which he observed on the compactor bin on the occasion he inspected it in the Defendant’s yard. He said that Mr Papas informed him that it would last four to five years, because of the small number of hours that the waste vehicle was required to work each day. He said that the statement was made by Mr Papas after the work on the waste vehicle had been completed. The evidence of Mr Daskalakis was not challenged in cross‑examination. There is no evidence of Mr Papas indicating that he did not make that statement. I find that the statement was made by Mr Papas.
During the course of their respective addresses neither counsel addressed the question of whether that statement was a representation of fact or an expression of opinion. In any event it is unnecessary to consider that question. Even assuming that the statement is misleading or deceptive conduct within the meaning of Section 52 or is a misrepresentation to which Section 7 of the Misrepresentation Act applies, the Plaintiff’s claim cannot succeed. I mentioned earlier that one of the essential elements in seeking relief is that the Plaintiff must have relied upon the alleged misrepresentation. The evidence of Mr Daskalakis indicates that the statement was made after the contract for the sale and purchase of the waste vehicle had been entered into and the work on it had been completed. It follows that the Plaintiff, through Mr Daskalakis, was not induced to enter into the contract by relying upon the statement made by Mr Papas. Accordingly, there is no causal connection between any loss claimed to have been suffered by the Plaintiff and the conduct of the Defendant for the purpose of Section 52 of the Trade Practices Act (Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 512-513). It also follows that the Plaintiff is not entitled to damages pursuant to Section 7 of the Misrepresentation Act.
The final misrepresentation which Dr Salu submitted arose from the general pleading in Paragraph 5.3.1 of the Statement of Claim was that Mr Papas orally represented that the refurbishment of the waste vehicle by the Defendant would be effective. I understood Dr Salu to be referring to the modifications made by the Defendant to the compactor bin and the Leyland in 1994 when he used the expression “refurbishment”. I sought an explanation from Dr Salu regarding what was meant by the work “effective” in that allegation. Unfortunately he did not provide an explanation which I felt assisted me in fully understanding the alleged misrepresentation. In any event, there is no evidence of any such representation or any statement closely resembling the alleged misrepresentation. It follows that the Plaintiff’s claim with regard to this alleged misrepresentation fails.
The only other extant claim for damages for breach of Section 52 of the Trade Practices Act and damages pursuant to Section 7 of the Misrepresentation Act is contained in Paragraph 5.3.2 of the Statement of Claim. In that paragraph it is alleged that Mr Papas orally represented to Mr Daskalakis that the Leyland had a double bogie. To understand this claim it is necessary to first identify what is meant by the term “double bogie” as it applies to a truck and chassis. I find that the term “double bogie” refers to a truck which has two rear axles each with two wheels attached to each axle, and each axle contains a differential through which power is transferred to turn the two wheels attached to the axle. This is to be contrasted with a truck and chassis which has two rear axles one with a differential and one without. The one without the differential is described as a “lazy axle”. As I stated earlier, the lazy axle and the wheels turn as a result of following the two wheels which are driven through the differential contained in the front axle. The cost of a truck and chassis with two rear axles each containing a differential is greater than a truck and chassis which has two rear axles only one of which contains a differential.
Mr Daskalakis said that when he inspected the Leyland at the premises of the Defendant, before the compactor bin was attached to it, the vehicle had four wheels at the rear. He said that on that occasion Mr Papas described the Leyland as having a bogie drive. Mr Daskalakis said that he did not know what a bogie drive was at that time. He said he did not ask Mr Papas what was meant by the term “bogie drive” as he was not interested in knowing at that time.
It was Mr Papas’ evidence that on the occasion he called Mr Daskalakis to his premises to inspect the Leyland, it did not have the lazy axle attached to it. In other words, it only had one rear axle at that time and it contained a differential. Mr Papas said that the lazy axle was later fitted by Air-ride. Mr Gilsmore, the managing director of Air-ride, said in evidence that the lazy axle was attached to the Leyland at the time that Air-ride first purchased it and that it remained on the Leyland. In other words it always had two axles at the rear. In my view the weight of evidence suggests that Mr Papas is mistaken when he said that a lazy axle was not attached to the Leyland at the time that it was inspected by Mr Daskalakis. I prefer the evidence of Mr Gilsmore and Mr Daskalakis to that of Mr Papas.
Mr Papas said that at the time of the inspection it would have been his practise to refer to a truck which had two rear axles as a bogie. He said that he did not use the expression “double bogie” to refer to a truck with two axles. I am not prepared to accept the evidence of Mr Daskalakis that Mr Papas used the expression “bogie drive”. I accept Mr Papas’ evidence that it was not his method of expression to refer to two axles as “double bogie”. I also note that in the Plaintiff’s pleading it refers to the term “double bogie” whereas in his evidence Mr Daskalakis used the term “bogie drive”. I am satisfied that the only expression Mr Papas would have used on that occasion, if he was referring to two axles would have been “bogie”. If that expression was used then there is no evidence to suggest that it was a misrepresentation. In any event, even if I accept that Mr Papas used the expression “double bogie” or “bogie drive”, the Plaintiff’s claim cannot succeed. Mr Daskalakis said that he did not know the meaning of the expression. Furthermore, he said he was not interested in ascertaining the meaning of the term. It therefore cannot be said that the Plaintiff was induced to enter into the contract to buy the waste vehicle. The essential element of reliance is absent. It follows that there is no causal connection between any loss claimed to have been suffered by the Plaintiff and the conduct of the Defendant. There is also no misrepresentation to which Section 7 of the Misrepresentation Act applies. Accordingly, the Plaintiff’s claim fails.
The Breach of Contract Claim
The Plaintiff also seeks damages for breach of an express term of the contract. It is the Plaintiff’s case that the following representations became terms of the contract:-
·....... that the compactor bin would have the capacity to take the waste contents of the fifty bins used at the Market on each occasion, the Plaintiff collected the Market waste.
·that the Leyland and chassis would be fitted with a double bogie axle.
Whether a pre-contract representation has become a term of a contact depends upon the intention of the parties. The representation must also be promissory in nature for it to become a term of the contract. In Hospital Products Limited v United States Surgical Corporation (1984-85) 156 CLR 41 Chief Justice Gibbs (at 61-62) made the following observations regarding the exercise of ascertaining the intention of the parties:-
“The intention of the parties is to be ascertained objectively; it ‘can only be deduced from the totality of the evidence’: Heilbut, Symons & Co v Buckleton. In other words, as Lord Denning said in Oscar Chess Ltd v Williams:
‘The question whether a warranty was intended depends on the conduct of the parties, on their words and behaviour, rather than on their thoughts. If an intelligent bystander would reasonably infer that a warranty was intended, that will suffice’.
The intelligent bystander must however be in the situation of the parties, for ‘what must be ascertained is what is to be taken as the intention which reasonable person would have had if placed in the situation of the parties’: Reardon Smith Line v Hansen-Tangen.”
An important factor in ascertaining the intention of the parties is their relative positions, and their respective knowledge of the facts. Where one of the parties knowledge of the subject matter of the representation is greater than the other because of his particular expertise then that is a relevant factor in determining whether it was promissory in nature. (Dick Bentley Productions Ltd v Harold Smith (Motors) Ltd (1965) 1 WLR 623). Furthermore, the more important the statement in the context of the proposed transaction then the more likely it would be that the parties intended that it should become a term of the contract. (Couchman v Hill (1947) 1 KB 554; Gardiner v Grigg (1938) SR (New South Wales) 524).
In the context of the transaction in which the Plaintiff and the Defendant were negotiating the capacity of the compactor bin to take the contents of the fifty bins on each occasion was very important. The waste removal system at the Market operated upon the basis that the contents of at least fifty waste bins was required to be removed from the Market on each of the days of the week except Sunday. Mr Papas had informed Mr Daskalakis that if the compactor bin was unable to take the contents of the fifty bins at one time then that would result in extra dumping fees having to be paid. It was Mr Papas who indicated that the compactor bin would need to be nineteen cubic metres in capacity. The subject of the compactor bin’s capacity was within the expertise of Mr Papas. Mr Daskalakis had, as I earlier mentioned, very little knowledge of waste disposal procedures.
For all those factors which I have mentioned, I am of the opinion that the statement regarding the fifty bins was promissory in nature and the Plaintiff and the Defendant intended it to be a term of the contract. As the evidence discloses that the compactor bin did not have the capacity to carry the total waste from the fifty bins on each occasion it follows that there has been a breach by the Defendant of an express term of the contract. It is unnecessary to consider the classification of the term as a condition, warranty or other recognised classification as the Plaintiff’s claim is founded in damages.
With respect to the other express term which the Plaintiff alleges was breached by the Defendant, I have already found that Mr Papas did not use the expression “bogie drive” in discussion with Mr Daskalakis. The evidence does not indicate that at anytime Mr Papas stated that the Leyland and chassis would come with a double bogie axle. Accordingly, I find that the contract did not contain a term that the Leyland and chassis would be fitted with a double bogie axle.
The Sale of Goods Act Claims
In addition to the claim for breach of express terms of the contract, the Plaintiff claims damages for breach of implied terms of “reasonably fit for purpose” and “merchantable quality”. It is the Plaintiff’s case that they were implied terms of the contract by reason of Section 14 of the Sale of Goods Act 1895 (as amended) (“Sale of Goods Act”). The Plaintiff also claims breach of implied terms arising by reason of Section 71 of the Trade Practices Act. Section 71 is in similar language to Section 14. I will deal with that aspect of the Plaintiff’s claim later.
The relevant part of Section 14 of the Sale of Goods Act provides:-
“14. Subject to the provisions of this Act, and of any Statute in that behalf, there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows:-
I... Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description which it is in the course of the seller’s business to supply (whether he be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose;
II. Where goods are brought by description from a seller who deals in goods of that description (whether he be the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality: Provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed:”
Neither of the provisos are relevant to the issues in this case.
I mentioned earlier that the Plaintiff complains that the waste vehicle suffered from regular mechanical problems during the time it operated the waste vehicle. The Plaintiff also claims that the waste vehicle also suffered from significant construction and design faults. It is with respect to the mechanical, construction and design problems that the Plaintiff bases its claim for breach of implied terms. Whilst I have not found it easy to identify each problem upon which the Plaintiff bases this part of its claim I understand the Plaintiff’s claim relates to the following alleged defects in the waste vehicle:-
·....... the hydraulic system
·the power take off and gear box
·....... the state of the body of the compactor bin, both inside and outside
·the rear door of the compactor bin
·....... the compactor blade
In addition, the Plaintiff claims that with respect to damage suffered first to the power take off (“PTO”) and the gear box and secondly the overhead door rams that the waste vehicle was not reasonably fit for the purpose required because the Defendant was obliged to provide written instructions relevant to the use of the PTO and the use of the door opening rams when they were operating in conjunction with the compactor blade ram. It relies on the decision of Vacwell Engineering Co Ltd v BDH Chemicals Ltd (1971) 1 QB 88 for this aspect of its claim.
Before I turn to consider the evidence relevant to this part of the Plaintiff’s claim I should make some general observations about the relevant legal principles relevant to the Sale of Goods Act provisions. Section 14 I of the Sale of Goods Act, if the conditions set out therein are met, imputes to the seller a contractual promise that the goods sold are fit for the purpose known to the seller. That Section, as does Section 14 II, applies to new or second hand goods. The first requirement for the Section to apply is that the buyer must expressly or by implication make known the purpose for which the buyer requires the goods (Henry Kendall and Sons (a firm) v William Lillico & Sons Ltd (1969) 2 AC 31 at 125). Furthermore, for the implied promise to be imputed to the seller it must be shown that the seller knew or a reasonable person in that position would know that the buyer was relying on the seller’s skill or judgment in entering into the contract (Dependable Motors Pty Ltd v Council of the Shire of Ashford (1959) 101 CLR 265 at 281). In addition the buyer must show that he relied on the seller’s skill or judgment. The goods must also be of a description which it is in the course of the seller’s business to supply.
The time for determining whether the goods are reasonably fit for purpose is when they are delivered, although the warranty is, for some time at least, a continuing one. This particular point was addressed by Lord Diplock in Lexmeade (Basingstoke) Ltd v Lewis (1982) AC 225 at 276:-
“The implied warranty of fitness for a particular purpose relates to the goods at the time of delivery under the contract of sale in the state in which they were delivered. I do not doubt that it is a continuing warranty that the goods will continue to be fit for that purpose for a reasonable time after delivery, so long as they remain in the same apparent state as that in which they were delivered, apart from normal wear and tear. What is reasonable time will depend upon the nature of the goods ....”

Fitness is to be judged by the reasonable and competent use of the goods (Hardwick Game Farm v Suffolk Agriculture Poultry Producers Association (1969) 2 AC 31 at 115).

For there to be an implied term of merchantable quality, pursuant to Section 14 II of the Sale of Goods Act, the goods must have been sold by description. Specific or ascertained goods which can be viewed by both buyer and seller may still be goods sold by description (David Jones Ltd v Willis (1934) 52 CLR 110). The description must indicate some attributes to which the goods must correspond. A useful question to ask is whether the buyer purchased the goods on the understanding that they would correspond to the description. It is necessary that the seller deals with the goods of the description under which they are sold.
There has been much debate and differing opinions regarding the meaning of the expression “merchantable quality”. There is not one meaning which has been universally accepted. One definition of “merchantable quality” which has received wide approval is that expressed by Dixon J in Grant v Australian Knitting Mills Ltd (1933-34) 50 CLR 387 where he said (at 418):-
“The goods should be in such a state that the buyer, fully acquainted with the facts, and therefore, knowing what hidden defects exists and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms”.
Another helpful explanation of the term was expressed by the High Court in George Wills & Co Ltd v Davids Pty Ltd (1957) 98 CLR 77 at 89:
“The expression ‘merchantable quality’ in relation to goods the subject of a contract of sale, must, obviously, constitute a reference to their condition or quality. Consequently, goods are said to be of merchantable quality ‘if they are of such a quality and in such a condition that a reasonable man, acting reasonably, would, after a full examination, accept them under the circumstances of the case in performance of his offer to buy them, whether he buys them for his own use or to sell again”.
Where the goods have only one particular use then if goods are not fit for their purpose then they will not be of merchantable quality (David Jones Ltd (supra); Grant v Australian Knitting Mills Ltd (PC) (1935) 54 CLR 49). In determining whether the goods are of merchantable quality the standard to be applied is that of the reasonable man or reasonable “... buyer fully acquainted with the facts” (Grant (supra) at 413). By contrast the test for determining whether the goods are reasonably fit for purpose is subjective. It is the buyer’s purpose that the goods need to meet.
Before leaving consideration of the principles I wish to deal with one further topic. The waste vehicle here was a combination of used goods. The Leyland had been used previously; so had the compactor bin. This is a factor which must be taken into account in considering “fit for purpose” and “merchantable quality” implied terms. The comments of Pincus J in Atkinson v Hastings Deering (Queensland) Pty Ltd (1986) 8 FCR 481 at 486 to be apposite:-
“It is my view that the applicant has to show, so far as the Sale of Goods Act is concerned, that the machine was not reasonably fit for the purpose for which it was bought, having regard to the fact that it was bought as a machine which had seen much service, and was therefore more likely to be subject to deficiency due to wear and tear and the like”.

It seems to me that such a comment is equally applicable when dealing with the issues here.

I turn to the evidence relevant to the claims under the Sale of Goods Act and negligence. The waste vehicle was ready for collection shortly before 1 October 1994. Mr Daskalakis attended at the Defendant’s premises with his driver Mr Gelios to collect it. At this time Mr Papas’ brother assisted Mr Gelios in familiarising himself with the functions of the waste vehicle. This familiarisation period took no more than an hour. During this time Mr Papas’ brother showed Mr Gelios the various hydraulic levers in the cabin of the waste vehicle. These levers activated the hydraulic functions of the compactor bin. Mr Gelios activated the various hydraulic functions by use of the levers in the presence of Mr Papas’ brother who was instructing him. Mr Gelios was shown how to pick up a small waste bin, to lift it over the cabin of the Leyland and tip it for the purpose of depositing its contents into the compactor bin. Mr Gelios was also shown how to approach a bin for the purpose of inserting the lifting arms into the side lifting pockets of the small waste bin. At the conclusion of the familiarisation the Plaintiff, through Mr Daskalakis, took possession of the waste vehicle.
The Plaintiff commenced its waste disposal contract with the Market on 1 October 1994. Mr Gelios was employed by the Plaintiff as its driver. On the first day of operation, the rear door of the compactor bin “popped” open, to use the expression of Mr Gelios, at the time he was compacting the waste in the compactor bin. The rear door burst open and some of the waste fell to the ground. According to the evidence of Mr Gelios that was the forerunner of further problems encountered with the waste vehicle. Mr Gelios said in the early days he had problems opening the rear door. When this problem arose he said he could not open the door without using the blade to push the rubbish against the rear door thus causing it to partially open. Mr Gelios was shown how to do this after the problem of the rear door failing to open, arose. He said that on these occasions the door needed to be partially opened in this manner before the overhead hydraulics on the door would operate to complete the opening of the doors. It is the Plaintiff’s case that other problems with the hydraulics on the waste vehicle emerged. The Plaintiff also said that as it continued to use the waste vehicle additional mechanical problems arose.
As I mentioned a moment ago, there were problems with the waste vehicle’s hydraulics. The Plaintiff says this led to the incurring of costs to repair the problems. The Plaintiff claims that the defective hydraulics on the waste vehicle had wider implications than simply the damage which occurred from time to time to the hydraulics. The Plaintiff says that the defective hydraulics led to damage to the PTO and may have in turn caused damage to the gear box. It is the Defendant’s case that problems with the hydraulics arose as a result of an employee, or agent or somebody on behalf of the Plaintiff increasing the hydraulic pressure in the hydraulic system to an unacceptable level. The Defendant also says that it was the impermissible increase in the operating pressure of the hydraulic system which led to the problems with the PTO and gear box. Furthermore, the Defendant asserts that the increase in pressure was directly associated with the damage which occurred to the inside walls, floor and roof of the compactor bin and the other damage which the Plaintiff claims was suffered by the waste vehicle.
The Defendant does not dispute that the Plaintiff experienced mechanical problems with the waste vehicle. However, as I mentioned earlier, it is the Defendant’s case that the problems which arose were due to misuse of the waste vehicle by the Plaintiff and its drivers. It is the Defendant’s case that it supplied a second hand waste vehicle consisting of a previously used compactor bin and a previously used truck and chassis. Taking into account that both the truck, chassis and the compactor bin were second hand, the Defendant says that the waste vehicle was at the time of delivery perfectly adequate to perform the work required of it at the Market.
The Hydraulic System Issue
I need to first consider the issue relating to the hydraulic system. In determining this issue it will be necessary to give consideration to the evidence of expert witnesses called by both parties. However, before turning to the expert evidence, I should spend some time describing the hydraulic system in a little more detail than I have done so far.
There were five functions of the waste vehicle which operated hydraulically. The first was the cover or lid over the opening at the top of the compactor bin. It was through this opening that the waste was deposited inside the compactor bin. The opening and closing of the cover was hydraulically operated. The second function of the waste vehicle hydraulically operated were the lifting arms which were attached to the side of the compactor bin. The function of the arms were to extend in front of the waste vehicle, and hook into the lifting pockets attached to a waste bin such as one of the Market bins. After that function was completed the arms would lift the bin over the cabin of the Leyland and deposit the waste through the opening at the top of the compactor bin. The third function of the hydraulic system was to operate the compactor blade. This is the blade which is situated inside the compactor bin. As I stated earlier, it commenced its movement from that part of the compactor bin nearest to the cabin of the Leyland and moved towards the rear door of the compactor bin. Its function was to compact the waste inside the compactor bin. The fourth function of the hydraulic system was to open and close the door at the rear of the compactor bin. The final function of the hydraulic system was to hold the rear door in a closed position. It was through this door that the waste in the compactor bin was released at the waste deposit depot.
Each of the functions I have described occurred as a result of the activation of what are described as hydraulic rams or actuators. I will hereafter refer a ram or actuator as an “actuator". There is one hydraulic actuator used to open and close the cover at the top of the compactor bin. There was a hydraulic actuator on either side of the compactor bin which were activated to operate the two lifting arms. There was a large actuator which operated the compactor blade and was situated directly behind the blade. There were two small actuators situated on either side on the top of the compactor bin which opened and closed the rear door. There were two small actuators situated on the underside of the compactor bin, on each side, which were used, at least in part, to secure the rear door after it was closed.
Each of the hydraulic actuators were operated by the introduction of high pressure oil into a cylinder which formed part of the actuator. The oil could be either introduced into the back of the cylinder or the front. If it was introduced into the front of the cylinder then the high pressure oil was forced against the piston and retracted or pulled it back into its sleeve. If the high pressure oil was introduced from the back of the cylinder then the pressure acted against the piston and pushed the piston out of the actuator. In other words, the piston operated in a similar fashion to a hypodermic syringe.
The hydraulic oil was sourced from a reservoir attached to the waste vehicle. There was a hydraulic pump which sucked out oil from the reservoir and placed the oil under pressure. The function of the hydraulic pump was then to pump oil under pressure through a valve block. The valve block distributed the high pressure oil into the particular actuator or actuators to which the operator had directed it, through the use of a specific lever in the cabin of the waste vehicle.
The power to drive the hydraulic pump was taken off the engine gear box, by means of the PTO. The PTO was attached to the gear box of the Leyland. There was a shaft emerging from the gear box into the PTO. It was through this shaft that power was taken off so that the hydraulic pump could function.
The driver of the waste vehicle operated each of the hydraulically driven functions from a bank of levers which were situated in the cabin of the waste vehicle. Mr Gelios, the first driver of the Plaintiff, said that the levers were situated on a pedestal on the left hand side of the driver. He said one lever would operate the cover on top of the compactor bin. Another lever was used to manoeuvre the arms for the purpose of hooking the arms into the small bin lifting pockets. A further lever would be used to operate the lifting function of the arms. In addition there was a lever which was used to open and close the rear door. There was also a lever to move the compactor blade forwards and backwards for the purpose of compacting the waste. Mr Gelios said that to operate any of the hydraulic functions of the waste vehicle, the first step would be to engage the PTO. He said that the more pressure you applied to a lever the faster the particular hydraulic function would operate. He also said that level of engine revolutions of the waste vehicle would also have effect on the speed of the hydraulic function which was being operated.
In the course of modifying the compactor bin, the Defendant supplied and fitted a new actuator to operate the compactor blade. This was a large actuator. The actuator was acquired by the Defendant from a hydraulics company. With the actuator came a relief valve. The relief valve was part of the hydraulic system and its role was to keep the hydraulic system at its pressure setting. In other words, it limited the amount of pressure injected into the hydraulic system to that at which the system had been set. When the system reached that setting the excess oil was returned to the reservoir.
Mr Papas said that on delivery of the compactor actuator and relief valve, the supplier had set the relief valve at 2000 pounds per square inch. This is known as “psi”. The level of pressure at 2000 psi was selected by Mr Papas. Mr Papas said that in this case the level of 2000 psi was selected because it was a standard setting generally used on other compactors produced by the Defendant. Mr Papas said that in choosing that level the Defendant needed to take into account what weight the arms would be required to lift and also the nature of waste which the compactor blade was required to compact. Mr Papas also said that the maximum working pressure recommended by the suppliers of the actuator which operated the compactor blade was 2500 psi. In addition to the supply of the compactor actuator, the Defendant supplied and fitted a new hydraulic pump. The size of the hydraulic pump was determined by the Defendant.
Having described the hydraulic functions of the waste vehicle it is now appropriate to consider the Defendant’s claim that the Plaintiff, through an employee, agent or authorised third party, increased the hydraulic pressure which resulted in damage to the hydraulic system and other parts of the waste vehicle. This issue was one of the central issues in the trial. It will be seen later that it is necessary to deal with this issue before considering the Plaintiff’s claim.
Mr Papas said that hydraulic leaks appeared in the valve bank during the first two weeks the Plaintiff began to operate the waste vehicle. He said that he initially thought these were teething problems. He said that he became concerned about the problems and measured the pressure. Mr Papas said he would have measured the pressure in the first week after delivery. He said that he, in conjunction with other employees, measured it quite a few times. On the occasions he measured the pressure it was between 3,000 and 3,500 psi.
It was Mr Papas’ evidence that the hydraulic pressure could not increase from the originally set 2,000 psi without someone adjusting the pressure. I accept that evidence. He said one effect of increasing the pressure was to increase the capacity of the blade to compact the waste thus increasing the amount of waste which could be carried. He also said that by increasing the pressure this would allow the lifting arms to lift greater weights.
Mr Papas said he became concerned when he discovered the increase in pressure because the system was not designed to operate at that pressure. He said that he spoke to Mr Daskalakis a number of times regarding the increase in the pressure and that Mr Daskalakis’ response was that the Plaintiff had not increased the pressure.

100 Further evidence regarding the increase in pressure came from Andrew Steggles, who was employed by the Defendant at the time. He was an apprentice fitter and turner. He commenced his apprenticeship in 1993 and completed it in July 1997. Mr Steggles said most of his work during his apprenticeship was involved with hydraulics. He was familiar with the waste vehicle. He said that it had returned to the Defendant’s premises on quite a few occasions for repairs and those repairs were mainly associated with the hydraulic system. He said that on one occasion, during the first three months after the Plaintiff took possession of waste vehicle he measured the hydraulic pressure and found that it was just short of 4000 psi. He said he reported this reading to his supervisor, Mr Cox.

101 The only other direct evidence regarding the topic of increase in hydraulic pressure came from Mr Paul Jones who drove the waste vehicle from 1 August 1997 to 4 April 1998. By this time the association between the Plaintiff and the Defendant had ended in acrimonious circumstances. Mr Jones said that towards the end of his period of time as a driver he had a discussion with Mr Daskalakis about attempting to compact more waste into the compactor bin. There had been some discussion earlier with Mr Daskalakis concerning the extra costs brought about by more than one visit to the waste disposal depot each day. It was following this first conversation, said Mr Jones, that Mr Daskalakis raised the idea of attempting to compact more waste into the compactor bin. Mr Jones said he agreed to undertake enquiries to determine if there was a way of compacting more waste in the compactor bin.

102 Mr Jones said that after speaking to Trueline he was directed to Bosch Hydraulic Systems (“Bosch”). Mr Jones raised the problem with Bosch employees and was informed that the only way that the compaction process could be improved was to increase the hydraulic pressure. It was pointed out to him by Bosch that if this was done then this may lead to damage to parts of the hydraulic system. Mr Jones said that he relayed this information to Mr Daskalakis who told him to instruct Bosch to increase the pressure. He then took the waste vehicle to Bosch and the pressure was increased to 2700 psi. Mr Jones said apart from that occasion, he had never been involved in increasing the hydraulic pressure. The evidence does not disclose when this took place. All that can be said about it, based on Mr Jones’ evidence, is that it occurred some time towards the end of his period as a driver.

103 Mr Daskalakis said in evidence that he never increased the hydraulic pressure on the waste vehicle. He said that he had learnt from Mr Papas that the hydraulic pressure could be adjusted. However, Mr Daskalakis said he did not know what was required to adjust the pressure. In referring to the period when the waste vehicle was being taken to the Defendant for repairs he said that he had never asked anyone to adjust the hydraulic pressure. In one part of his cross-examination he said that Mr Papas had stated that he thought the system was operating at too great a pressure. Shortly after, he said that Mr Papas had never told him the pressure was too great. He said, however, that Mr Papas had told him that the reason why he was having so many problems with the waste vehicle was that his driver was playing with the hydraulic pressure. Mr Daskalakis said that he spoke to Mr Gelios, who was the driver at the time, and he denied that he was playing around with the hydraulics. Mr Daskalakis denied that he told his driver Mr Jones to instruct Bosch to increase the hydraulic pressure.

222 It was also submitted by Dr Salu that I am entitled to make an order pursuant to Section 87(2)(b) of the Trade Practices Act. I have had some difficulty understanding the submission. However, I believe that the submission is that pursuant to the power provided in that subsection, I should vary the contract for the sale of the waste vehicle, which would have the effect of repaying to the Plaintiff the profit earned by the Defendant. Whilst Dr Salu did not develop the submission, it seems to me that what he was submitting was that I should vary the purchase price by reducing it by an amount equal to the profit made by the Defendant and order that that amount be repaid to the Plaintiff. Once again it is unnecessary to consider whether the proper construction of the sub-section would permit me to make the order sought as I am not satisfied that the Plaintiff has discharged the onus of proof in establishing the amount of the profit earned by the Defendant. It follows that I am not prepared to make the orders sought by the Plaintiff.

223 I should say before leaving these submissions on Section 87 that there is one further matter which stands in way of the Plaintiff obtaining the orders sought. Nothing in the pleadings indicated that the Plaintiff was seeking orders of this nature. Section 87 of the Trade Practices Act was not mentioned. The first time it was raised was in the final address of Dr Salu. It was argued by Dr Salu after it was pointed out to him that the Plaintiff may have difficulties in establishing its capital loss due to the lack of valuation evidence. It was clear that the Defendant was caught by surprise when the submissions were made. The Plaintiff did not seek to make any amendment to its Statement of Claim. In my view this was the type of claim which needed to be pleaded specifically. The pleading in the Statement of Claim focused on the Plaintiff’s loss. The two claims under Section 87 focus on the Defendant’s gain. Gain-based claims are of an entirely different character than claims which focus exclusively on the Plaintiff’s loss. Accordingly, in the absence of any amendment to the Statement of Claim, I am not prepared to entertain relief of the nature sought by the Plaintiff under Section 87 of the Trade Practices Act.

Damages for Breach of Contract

224 The Plaintiff also claims damages for the capital loss arising from the Defendant’s breach of the express term contained in the contract for the sale of the waste vehicle. I mentioned earlier that the measure of damages for such breach, is the difference between the value of the waste vehicle purchased by the Plaintiff and the value of the waste vehicle if it had met the warranty. Dr Salu conceded that no valuation evidence was provided by the Plaintiff which could assist in assessing damages for breach of the express term. As a result of the Plaintiff failing to provide any valuation evidence, the Plaintiff has not proved its claim for damages for breach of contract under this head.

Damages under the Sale of Goods Act and Negligence

225 The Plaintiff has claimed damages for breach of the implied terms of reasonably fit for purpose and merchantable quality. Section 52 of the Sale of Goods Act provides the remedies available to a buyer where there has been a breach of warranty by the seller. Section 52 provides as follows:-

“52(1) Where there is a breach of warranty by the seller, or where the buyer elects or is compelled to treat any breach of a condition on the part of the seller as a breach of warranty, the buyer is not by reason only of such breach of warranty entitled to reject the goods; but he may -
......... (a) set up against the seller the breach of warranty in diminution or extinction of the price; or
(b)maintain an action against the seller for damages for the breach of warranty.
(2) The measure of damages for breach of warranty is the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty.
(1) In the case of breach of warranty of quality, such loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty.
(2) ...”

226 It should be observed that Section 52 draws a distinction between breach of warranty of quality and other breaches of warranty. The implied warranties of reasonably fit for purpose and merchantable quality are warranties of quality to which Subsection (3) of Section 52 applies. That Subsection provides that the measure of damages is the difference between the value of the goods at the time of delivery and the value that the goods would have been if they had answered the warranty. However, it is important to recognise that the subsection provides, in effect, that the loss is prima facie the difference between those two values. In some circumstances, that measure of damages may not be the appropriate one. It must be acknowledged that Subsection (2) of Section 52 sets out the measure of damages generally for breach of warranty. Where the measure of damages provided by Subsection (3) for breach of warranty of quality is not appropriate then the more general measure of damages provided by Subsection (2) will apply.

227 For a breach of the implied warranty of reasonably fit for purpose or merchantable quality the Plaintiff seeks damages for the loss on the sale of the waste vehicle, repairs to the waste vehicle and costs of replacement of contractors brought in whilst the waste vehicle was off the road for repairs. For the present, I will deal with what has been described as the capital loss following the sale of the waste vehicle. It is clear from Section 52 of the Sale of Goods Act that the measure of damages cannot be the difference between what the Plaintiff paid for the waste vehicle and what it was sold for some four years later as the Plaintiff asserts. The Plaintiff has not produced any evidence of valuation that would assist in assessing damages, in the manner described in Subsection (3) of Section 52. As a result no loss of diminution of value has been proved under this heading. It is the buyer who must establish the difference in value. (Atkinson v Hastings Deering (Qld) Pty Ltd (supra) at 493-494; Bernstein v Panison Motors (Golders Green) Ltd (1987) 2 All ER 220 at 231). It was not suggested, as I mentioned earlier, that this was the type of case where appropriate valuation evidence could not be produced (Ted Brown Quarries(supra)). The Plaintiff therefore fails with respect to this head of damage.

228 The Plaintiff also seeks the cost of repairs incurred by the Plaintiff during the time that it operated the waste vehicle as damages for the implied terms. The total amount of the repairs claimed is $48,890. The claim for repairs can be divided into two parts. The first being repairs undertaken by the Defendant during the period from October 1994 until about January 1997. These repairs were completed by the Defendant and were paid for by the Plaintiff. The Plaintiff is, in effect, seeking to recover the cost of repairs which it has paid to the Defendant. No point was taken that this aspect of the Plaintiff’s claim is brought in this manner. I have therefore proceeded on the basis that, if I find that the amount of repairs undertaken are the result of a breach of either of the implied terms, then the Plaintiff is entitled to such amounts by way of damages. The second part of the Plaintiff’s claim is for the cost of repairs undertaken by Trueline. Most of these repairs were incurred from 1997 onwards.

229 With respect to the repairs performed by the Defendant twenty-three Invoices were admitted into evidence. These Invoices record work undertaken by the Defendant on the waste vehicle from March 1995 to January 1997. The Invoices described various repairs, which included repairs to hydraulic leaks, repairs to the rear door, repairs to hydraulic hoses, repair to the compactor blade and the supply of hydraulic oil. Some of the details in the Invoices of the type of work performed were brief and limited in description. Some of the invoices contained repairs to more than one part of the waste vehicle. The Plaintiff did not produce any evidence to expand upon and explain in more detail the nature of the work undertaken relevant to a particular Invoice. The failure to do so has presented some difficulties.

230 During his address, Dr Salu abandoned the Plaintiff’s claim with respect to one of the Invoices. He accepted that it represented repairs brought about by wear and tear. The remaining twenty-two Invoices totalled $6263. The last Invoice is dated 28 January 1997. With respect to most of the cost of repairs represented by those Invoices I consider they are recoverable as damages resulting from breach of the implied terms of reasonably fit for purpose and merchantable quality. They are damages which fall within the terms of Section 52(2) of the Sale of Goods Act. Furthermore, in my opinion, they are damages which may be recovered as a result of the negligence of the Defendant.

231 Many of the Invoices relate to repairs to various parts of the hydraulic system. Whilst no evidence was called to elaborate upon the brief description of the work described in these Invoices I consider it reasonable to infer that these hydraulic repairs were brought about as a result of the Defendant’s failure to design an effective hydraulic system. Some of the repairs were for damages to the overhead rear door opening actuators. I have found that the Defendant’s liability for those repairs arises as a result of the Defendant’s negligence in failing to provide an appropriate notice to the Plaintiff warning of the potential damage if the overhead hydraulics were not operated simultaneously with the compactor blade actuator when its assistance was required to open the door.

232 The defendant is liable for the costs of the “body pockets for drainage”. These became necessary when the original drainage sumps were found not be adequate. I accept the evidence. None of this would have been necessary if the design of the compactor bin had not included an interior wall and an exterior wall. The Defendant’s liability for repairs to the compactor blade arises from its failure to replace the worn compactor blade in September 1994.

233 I am prepared to allow the costs of repairs to the back door brackets and hinges. Whilst there has been no elaboration on the nature of those repairs described in the Invoices I am of the view that it is reasonable to infer that the repairs were brought about by the Defendant’s failure to provide a compactor bin compatible with the forces which arise in the compacting process.

234 However, I am not prepared to allow the amount of $566 described in Invoice No 5151 dated 9 June 1995 as “Repairs to damaged back door”. No evidence was called to describe the nature of the damage. Without such evidence I cannot identify the nature of the damage and what part of the back door was damaged. There could be other causes for the damage not associated with the defects I have found with the waste vehicle. The same can be said for the repair to the PTO cable recorded in Invoice No 5248 dated 21 August 1995. There was no evidence of the role played by the PTO cable and the nature of the damage. The description in the Invoice does not allow me to associate the repair with my finding regarding damage to the PTO. Accordingly, I disallow one half of the total amount of $64 claimed in the Invoice.

235 After making the deductions I have referred to, I allow the sum of $5,507.

236 The Plaintiff also claims damages for cost of repairs to the waste vehicle undertaken by Trueline. Most of the repairs performed by Trueline were completed after 1996. Approximately fifty four Invoices recording repairs performed by Trueline were admitted into evidence. During the course of his submission Dr Salu abandoned a number of these, accepting that they evidenced repairs for ordinary wear and tear. Some difficulties arise from lack of detail with respect to these Invoices. The Plaintiff called Mr Turner of Trueline but no attempt was made during this evidence to have him explain in greater detail the work recorded in the Invoices.

237 During cross examination Mr Turner divided the Trueline Invoices into “Usual Repairs” and “Unusual Repairs”. By “Usual Repairs” Mr Tuner explained that they were repairs which he would have expected arising from maintenance and wear and tear. He said the Invoices in the “Unusual Repairs” were repairs which were not as a result of ordinary wear and tear. In considering the claim for damages arising out of the Trueline Invoices I am only prepared to consider those Invoices which Mr Turner indicated recorded Unusual Repairs, except for one exception, which I will refer to shortly. He was a mechanic with many years experience who had substantial knowledge of the waste vehicle. He was an impressive witness. I accept his evidence that, with one exception the repairs recorded in the “Usual Repairs” Invoices were the result of maintenance and wear and tear.

The Defendant’s Claim of Failure to Mitigate

238 However, before the need arises to consider this part of the Plaintiff’s claim it is necessary to deal with the Defendant’s assertion that the Plaintiff has failed to mitigate its losses after March 1997 and is therefore not entitled to damages beyond that date. The relevance of March 1997 in this submission is that that was the time when the Plaintiff received the Report of Mr Maddern. In that Report Mr Maddern concluded that the compactor had “... serious symptoms of structural failure and design deficiencies.” He also stated that due to the structural failures and rusting “... remedial measures are likely to have quite a doubtful prognosis.”

239 It was Mr Crocker’s submission that upon receiving the Report the Plaintiff should have ceased using the waste vehicle to perform the Market contract. He said that by doing so the Plaintiff would have terminated the need for continuing repairs. Mr Crocker submitted that there were then a number of alternatives available to the Plaintiff including the sale of the vehicle, obtaining a substitute waste disposal vehicle and in the meantime employing replacement contractors to ensure the Market contract was maintained. A further alternative, said Mr Crocker, was to sell the vehicle and terminate (wrongfully) the Market contract thus incurring a liability in damages for breach of contract.

240 A useful statement of the principle of mitigation, for the purpose of this case, is that found in Driver v War Services Homes Commissioner (1923) 44 ALT 130 where Irvine CJ at 134 said:-

“It is sometimes said that it is his duty to do what is reasonable to mitigate his damages. This expression, I think, does not mean that he is under any duty in the ordinary sense, towards the party breaking the contract, but that he cannot be said to have really incurred any loss which might have been avoided by his taking such steps as a reasonably prudent man in his position would have taken to avoid further loss to himself: and the best test is, what would such a man do to avoid further loss to himself, supposing that, from insolvency of the other party, or from some other reason, he could not get any damages.”

See also: TCN Channel 9 Pty Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 per Priestly JA at 161-162.

241 In my view the claim for damages in the nature of the cost of repairs after March 1997 flow directly and naturally from the breaches of the implied warranties. The onus is upon the Defendant to demonstrate that the Plaintiff has not mitigated its losses in the sense explained in Driver. There is no satisfactory evidence that the Plaintiff had the financial capacity to purchase a replacement waste disposal vehicle. Apart from that, I doubt whether that would be a step a reasonably prudent person would take to avoid further loss. Nor am I satisfied that wrongfully terminating the Market contract and bearing the loss resulting from the breach would be a reasonable step in mitigation. In any event there is insufficient evidence to support the proposition that it was a reasonable step for the Plaintiff to take.

242 Mr Crocker cited the High Court decision of Burns v MAN Automotive (Australia) Pty Ltd (1986) 161 CLR 65 in support of his submission that the Plaintiff had failed to mitigate its loss. The claim in that case was for loss of profits for breach of a warranty that the engine of a prime mover was fully reconditioned. The owner of the vehicle discovered that it was not fully reconditioned in July 1978. Gibbs CJ at 660 held that the plaintiff had failed to mitigate his loss by continuing to operate the prime mover and continuing to suffer losses of profits after July 1978.

243 In my opinion that decision turned on its own facts. The plaintiff was not involved in an on-going contract which placed him under a contractual obligation to continue to use the vehicle. Furthermore, the Plaintiff continuing to operate the prime mover resulted in him continuing to suffer losses.

244 In my view this decision is distinguishable from the case at bar. The Plaintiff here was contracted to the Market under the waste disposal contract. Whilst the Plaintiff continued to fulfil its obligations under the contract it was continuing to earn income pursuant to the contract. The Plaintiff is not claiming losses as a result of it continuing to perform its contractual duty. Furthermore, it has not been demonstrated that the cost of repairs and costs of replacement contractors exceeded the income earnt by the Plaintiff in continuing to perform its obligations under the contract. Even if it could be so demonstrated that would not be the end of the matter. It would need to be shown that the Plaintiff should have anticipated with some degree of accuracy that the cost of repairs and replacement contractors would have exceeded the returns from fulfilling its obligation under the contract. Even then that would, in my view, be only, the starting point. There would need to be other factors that would need to be considered. Among those would be the effect that terminating the contract with the Market would have had on the Plaintiff’s chances of obtaining business contracts with the Market in the future. In my opinion, the decision in Burns does not support the Defendant’s contention that the Plaintiff failed to mitigate its loss.

The Defendant’s Claim that Damages are too Remote

245 I should mention one final matter raised by Mr Crocker before I turn to consider the quantum of damages. Relying on the decision in Burns Mr Crocker said the damages for cost of repairs and replacement contractors were too remote. He did not elaborate on the submission. In Burns Wilson, Deane and Dawson JJ (at 668-669) held that the losses after July 1998 could not be said to have been within the reasonable contemplation of the parties as flowing from the breach. In my opinion the repairs and cost of replacement contractors must have been in the contemplation of the parties as flowing from the breaches that I have found. I reject the Defendant’s submission that the damages after March 1997 were too remote.

246 In my opinion, the Plaintiff was entitled to complete the Market contract with the waste vehicle, attending to the necessary repairs as they arose. I reject the Defendant’s submission that the Plaintiff failed to mitigate its loss.

The Claim for Cost of Repairs

247 Having rejected the Defendant’s claim that the Plaintiff failed to mitigate its loss or that the damages claimed are too remote, it is now necessary to consider the Trueline Invoices relevant to the claim for cost of repairs. With respect to the Invoices described by Mr Turner as “Unusual Repairs” I will need to consider each one separately. Invoice Number 27334 dated 6 December 1996 relates to repairs to the chassis. Mr Turner said these repairs arose from overloading. I have not found that the Defendant is liable for any damages resulting from overloading so this amount is not recoverable.

248 Mr Turner said that the three items of Invoice 27582 dated 10 January 1997 are referrable to wear and tear. He said the last item records the first gear box and PTO replacement. I have found the Defendant liable in negligence in failing to provide an appropriate written warning to the Plaintiff regarding driving the waste vehicle whilst the PTO was engaged. I therefore allow the sum of $2,205, which sum includes the cost of hydraulic oil and gear box oil.

249 Invoice Number 28795 dated 20 June 1997 related to repairs to the compactor blade. Mr Turner said that these repairs were as a result of runners in the bottom of the blade becoming worn. In view of the classification made by Mr Turner as being “Unusual” then the condition of the runners were not the result of ordinary wear and tear. I have earlier found that when the Defendant was modifying the compactor bin, Mr Papas concluded that the compactor blade should have been replaced but failed to do so. In my view it is a reasonable inference that these repairs were brought about by that failure and as a result I allow the sum of $1,570.

250 I am not prepared to allow any amount in Invoice 28800 dated 23 June 1997. It was Mr Turner’s evidence that the PTO needed repairing because it had broken off the transmission case as a result of an external source. Furthermore, I am not prepared to allow any amount for the repairs recorded in Invoice 29040 dated 23 July 1997 as none of the repairs are associated with my findings against the Defendant. In his address, Dr Salu abandoned this Invoice except for a small amount for hydraulic oil. I will deal generally with the cost of hydraulic oil later. I am also not prepared to allow any part of the cost of repairs recorded in Invoice 29748 dated 30 October 1997. Mr Turner said that most of the repairs were maintenance or wear and tear. With respect to the packing between the body and the chassis, he said that this arose as a result of previous work Trueline had undertaken. None of this work arose as a result of any liability on the part of the Defendant.

251 Invoice 29888 dated 20 November 1997 related to repairs to the rear door, ram mounts and areas adjacent to the door. Mr Turner said that Trueline was called out to the Wingfield waste disposal depot as the rear compactor door had broken away from the hinge area at the top. In my view, it is a reasonable inference that such repairs resulted from the failure of the Defendant to supply a compactor bin which was fit to withstand the forces applied to it. Accordingly, I allow the sum of $1,970.

252 In my opinion, the same can be said for Invoice 30263 dated 19 January 1998 which related to the repair of the loader cross arm. Mr Turner said that in part, the damage could have been caused by age. However, I earlier made findings on the state of the corrosion of the compactor bin at the time of delivery and the increase in corrosion during its use by the Plaintiff. In my view it is a reasonable inference that those repairs were brought about by the condition of the compactor bin as I have found it. It is not an answer to these repairs to simply say this was a used compactor and such repairs were to be expected. I allow the sum of $1794.

253 Mr Turner included Invoice 30330 dated 28 January 1998 in the “Unusual Repair’ category. It related to the left hand fork arm. He said that there were a number of possible causes of the damage. On reflection he felt he should have included it in the Usual Repairs category. Without any further evidence I am not satisfied that the repairs in this Invoice can be laid at the feet of the Defendant. I therefore disallow it.

254 Invoice 30498 dated 17 February 1998 related to repairs resulting from the failure of the PTO and the gear box. I earlier referred to Mr Turner’s evidence in which he provided his opinion of the cause of the PTO and gear box failures. I accepted this evidence. However, in relation to this failure, Mr Turner was of the opinion that it was caused by the hydraulic pressure being too great. He pointed to the twisted pump drive shaft to support his opinion. I have accepted Mr Jones’ evidence, that on instructions from Mr Daskalakis, he arranged for Bosch to increase the hydraulic pressure. Mr Jones left the employ of the Plaintiff in the first week of May 1998. His evidence was that he gave instructions to Bosch. The evidence indicates that such instructions occurred sometime towards the end of his employment as a driver. This evidence together with the evidence of Mr Turner leads me to the conclusion that it is more probable than not that this damage occurred as a result of the increase in pressure. I therefore disallow the claim with respect to this Invoice.

255 Part of the repairs recorded in Invoice 30711 dated 20 March 1998 are the costs of welding repairs to floor cracks. In my view, it is reasonable to infer that these repairs are a result of the floor of the compactor bin not having the capacity to withstand the forces exerted on it. I have found that the hydraulic pressure had been increased towards the end of Mr Jones employment. There is no evidence that cracking would have occurred by the time these repairs were performed as a result of the pressure being increased to 2700 psi. I am satisfied, on the balance of probabilities that these cracks arose for the same reasons I referred to earlier in these Reasons when considering cracks to the interior of the compactor bin. I allow $210.

256 The final Invoice is 310401 dated 12 May 1998. This invoice relates to damage to the arm assembly due to a full size pallet being caught in the system. Accordingly, I disallow any claim for the costs of repairs recorded in this Invoice.

257 As a result of my findings I have allowed the following amounts by way of damages with respect to the Trueline Invoices:-

Invoice 27582  $2205
Invoice 28795  $1570
Invoice 29888  $1970
Invoice 30263  $1794
Invoice 30711  $210
TOTAL  $7749

258 Dr Salu submitted that many of the Invoices categorised by Mr Turner as Usual Repairs were also recoverable. I do not accept that submission. As I said earlier, I accept the evidence of Mr Turner that such repairs arose from wear and tear and general maintenance. Whilst his assessment was not made with the benefit of my findings I still consider his assessment to be valid. However, I am prepared to allow a modest amount for the cost of replacing hydraulic oil for the period from January 1997 to January 1998. The evidence of Mr Maddern and Mr Turner was that there appeared to be more hydraulic oil supplied than would be expected in the normal course. Some of this excess quantity can be attributed to problems with the actuators and other parts of the hydraulic system arising from matters I have referred to earlier in these Reasons. The Invoices for the relevant period disclose the total cost of hydraulic oil, where the particular cost of the oil can be identified, as approximately $1000. There are a number of Invoices which refer to the supply of hydraulic oil but the cost cannot be identified. I am prepared to allow $500 for loss of hydraulic oil associated with defects in the hydraulic system of the waste vehicle for which I have found the Defendant liable.

The Claim for Cost of Replacement Contractors

259 The final head of damages claimed by the Plaintiff is $16,215 being the cost alleged to have been incurred by the Plaintiff for engaging replacement contractors whilst the waste vehicle was off the road for repairs. It was Mr Daskalakis’ evidence that from the beginning of 1997 the Plaintiff employed other contractors to remove the waste from the Market on those days when the waste vehicle was off the road for repairs. The contractors charged $4.50 per bin. Invoices of the contractors were admitted into evidence recording the occasions when such services were performed by the particular contractor.

260 In my view, the Plaintiff is entitled to the cost of replacement contractors whilst the waste vehicle was off the road being repaired where I have found the Defendant liable to meet the cost of those repairs. I have allowed the cost of repairs indicated in Trueline’s Invoice dated 10 January 1997. However, there are no Invoices from any contractor for services rendered to the Plaintiff closely associated to that date. With respect to the cost of repairs allowed in the Defendant’s Invoice dated 28 January 1997 there are three contractor’s Invoices dated 22, 23 and 24 January 1997 respectively amounting to $513. These Invoices are proximate in time to the repairs recorded in the Defendant’s Invoice. I am therefore prepared to allow the sum of $513.

261 With respect to Trueline’s Invoice dated 20 November 1997 there is a corresponding contractor Invoice for the period 18 to 20 November inclusive. I am prepared to allow the costs of $706.50 for those three days. Trueline Invoice of 19 January 1998 has a corresponding Invoice indicating services provided on 20 and 21 January 1998. I will allow those two days amounting to $648.

262 There are no contractor’s Invoices recording services proximate to the repairs recorded in Trueline’s Invoices of 20 June 1997 and 20 March 1998. Therefore, no allowance can be made for contractor’s fees with respect to those repairs.

263 I therefore allow the sum of $1867.50 by way of damages for the costs incurred by the Plaintiff in employing a contractor to perform its Market work on the days I have referred to.

264 By way of summary I indicate that the Plaintiff is entitled to the following amounts by way of damages for repairs and replacement contractors:-

Cost of repairs undertaken by the Defendant $5507
Cost of repairs (including hydraulic oil)
undertaken by Trueline $8249

Cost of replacement contractors $1867.50
TOTAL $15623.50
The Defendant’s Counterclaim

265 I turn to the Defendant’s Counterclaim. The first part of Counterclaim is a claim for the sum of $7,247.50 for work done and material supplied arising from the partial refurbishment of the compactor bin. I mentioned earlier that about October or November 1996 it was agreed between the Plaintiff and the Defendant, that the Defendant would undertake a refurbishment of the compactor bin. The price agreed was $13,250. I also stated earlier that the work was not completed as the Plaintiff failed to return the waste vehicle for further repairs to be undertaken, following a dispute which arose between Mr Daskalakis and Mr Papas. Until that time the Defendant had been performing the work on a part time basis on weekends to avoid the necessity of taking the waste vehicle off the road. Mr Papas said that at the time work ceased, the Plaintiff had resheeted most of the floor of the compactor bin, partly resheeted the internal walls and most of the outside walls had been resheeted.

266 Mr Daskalakis said that the work was required because the compactor bin leaked “... like a spaghetti strainer”. He said that the waste disposal contract for the Market had been renewed for a further two years from October 1996. Mr Daskalakis said his purpose of having the compactor bin refurbished was to eradicate the problems that were then being experienced. It was Mr Papas’ evidence that the repairs needed to be undertaken because of the wearing of the sides and floor and the tearing of the internal walls. He said the outer walls needed repairing because there was fractures in the internal skin which had allowed juices to enter the cavity between the two walls, which had caused rust. Mr Papas said that the repairs to the interior of the compactor were required because the compactor had been operated at above 2000 psi.

267 I have previously rejected the claim by the Defendant, through Mr Papas, that the fractures or cracks to the various parts of the interior of the compactor bin resulted from the operation of the compactor at a pressure above 2000 psi. I have also found that at the time of delivery of the waste vehicle in September 1994 that the interior of the compactor bin was suffering from deformation and corrosion. Furthermore, I have found that the internal structure of the bin was not in such a condition, as a result of those problems, that it could effectively withstand the considerable forces which were exerted during the compacting process. The result was that cracking of the interior structure occurred. I have also found that the design of the compactor bin was not suitable for the nature of the waste at the Market and this contributed to corrosion occurring.

268 In my opinion, the refurbishment work agreed to be undertaken by the Defendant was largely as a result of its failure to supply a compactor bin which was fit for the purpose required. No doubt there were some fractures of the interior due to some hard material waste being deposited into the compactor bin. Both Mr Maddern and Mr Gilsmore said this was expected. However, the work undertaken was largely the result of the damage occurring for the reasons just explained. In those circumstances, the Defendant is not entitled to recover the costs of partially completing the refurbishment work where that work was brought about by the Defendant’s breach of contract for the sale and purchase of the waste vehicle and the Defendant’s negligence.

269 The second part of the Defendant’s Counterclaim seeks the recovery of two unpaid accounts each dated 18 January 1997. The first relates to the sum of $105 for top up of the hydraulic tank. The second is for the sum of $163 for the repair of the packer blade. With respect to the issue of the supply of hydraulic oil I have made an allowance in the Plaintiff’s claim for the cost of oil brought about by the defects I have found existed. However, there is no reason why the Defendant should not recover the sum of $105 for the supply of the hydraulic oil recorded in that Invoice. There is nothing to suggest that oil was required as a direct result of the defects I have referred to. Accordingly, I allow the claim. With respect to the claim for repairs of the packer blade, I refer to my previous finding that the compactor blade should have been replaced at the time of the contract for sale and purchase. The evidence did not disclose what was the nature of the repairs the subject of this Invoice. In view of my previous finding regarding the compactor blade I am not prepared to allow this amount. Without any evidence specifically identifying the repairs it is reasonable to infer that the repairs were necessitated as a result of the poor state of the compactor blade at the time of delivery of the waste vehicle.

270 The final part of the Defendant’s Counterclaim is for an amount of $928.40 being the cost of repairs to electrical equipment in the Defendant’s workshop. The damage was a result of the waste vehicle, driven by an employee of the Plaintiff, entering the Defendant’s workshop with its lifting arms in a raised position and colliding with some overhead electrical equipment. The Defendant seeks damages and founds its claim in negligence. The evidence does not disclose the precise day of the accident. Mr Papas said that the waste vehicle had come to the Defendant’s premises with a problem. The waste vehicle was parked outside the main entrance door to the Defendant’s workshop. The driver was requested to drive the waste vehicle into the workshop. The waste vehicle entered the workshop with the arms raised and they collided with some barriers and a box containing the Defendant’s electrical equipment for its main power supply in the workshop. This equipment was above the entrance door of the workshop.

271 Mr Daskalakis gave evidence that at the time of the collision he was told by the driver that at the time he was being directed into the workshop by an employee of the Defendant. The driver was not called. Mr Daskalakis’ evidence is hearsay. Mr Papas, who was present, denied that at the time the waste vehicle was driven into the workshop the driver was being directed by an employee of the Defendant. I accept Mr Papas’ evidence regarding the manner in which the collision occurred.

272 In my view, the Plaintiff, through its employee driver owed the Defendant a duty of care when driving the vehicle into the workshop. It was reasonably foreseeable that in a workshop such as the Defendant’s workshop, that there would be overhead equipment and that if the waste vehicle was driven into the workshop with its lifting arms raised that contact might be made with such equipment. The evidence did not disclose that it was necessary that the waste vehicle was required to enter the workshop with the arms raised. To ensure against the possibility of making contact with the overhead equipment all that the driver needed to do was to lower the arms. His driving into the workshop with the arms of the waste vehicle raised was negligent. Furthermore, he was negligent in failing to keep a proper lookout.

273 The amount of the Defendant’s Counterclaim relates to the cost of electrical work performed by Tristar Electrical Services in repairing the damaged electrical equipment. The Defendant repaired the other damage at its own cost. The Defendant does not seek the cost of those repairs. It was not suggested that the cost of repairing the electrical equipment was not reasonable. Accordingly, I find that the Defendant is entitled to recover from the Plaintiff the sum of $928.40 damages as a result of the Plaintiff’s negligence.

274 With respect to the Counterclaim the Defendant is entitled to recover the following amounts by way of damages:-

Cost of supply of Hydraulic Oil  $105
Repairs to electrical equipment  $928.40
TOTAL  $1033.40
Conclusion

275 There will be judgment for the Plaintiff on its claim for $15,623.50 damages.

276 There will be judgment for the Defendant on the Counterclaim for $1,033.40 damages.

277 I will hear the parties on interest and costs.

[2000] SADC 61

25 May 2000