Russo v Belcar P/L & Maranello Imports P/L (Third Party) - [2010] SADC 155

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
RUSSO v BELCAR P/L & MARANELLO IMPORTS P/L (THIRD PARTY)
[2010] SADC 155
Judgment of His Honour Judge Clayton
16 December 2010
CONTRACTS - GENERAL CONTRACTUAL PRINCIPLES
SALE OF GOODS - CONDITIONS AND WARRANTIES - IMPLIED CONDITIONS AND WARRANTIES - QUALITY OR FITNESS FOR PARTICULAR PURPOSE - MERCHANTABLE QUALITY
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS
Plaintiff purchased a Ferrari 360 Modena F1 motor car from the South Australian distributor. Plaintiff alleged that in breach of the contract the vehicle which was delivered was not a new vehicle, was not of merchantable quality and was not fit for the purposes for which it was purchased. Additionally the plaintiff alleged latent defects in the engine and gear selection.
Plaintiff’s claim against defendant dismissed on the facts.
Third party proceedings against importer of Ferrari unnecessary.
Sale of Goods Act 1895 s 11(3), s 14(a); Trade Practices Act 1974 ; Fair Trading Act 1987 ; Misrepresentation Act 1972 , referred to.
Annand & Thompson Pty Ltd v Trade Practices Commission (1979) 25 ALR 91; R v Ford Motor Co Ltd (1974) 1 WLR 1220; Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387; Crowther v Shannon Motor Co (1975) 1 WLR 30; Thomson Reuters Laws of Australia 8.4.63, considered.

RUSSO v BELCAR P/L & MARANELLO IMPORTS P/L (THIRD PARTY)
[2010] SADC 155
Reasons for Decision

I have rejected the plaintiff's claim that the Ferrari 360 Modena F1 which the defendant delivered to him in December 2001 was not a new car.
I have found that while there were problems with the car the evidence does not establish that it was not of merchantable quality or that it was not fit for any purpose for which it was delivered.
I have concluded that there is no basis for a finding in favour of the plaintiff.
For the reasons which follow there must be judgment for the defendant against the plaintiff.
The Purchase, Manufacture and Delivery to Adelaide of a Ferrari 360 Modena F1
The plaintiff, Mr Bill Russo, is a businessman. He collects motor vehicles and owns about 40 including an E Type Jaguar, a Maserati, and several Ferraris. For daily use he has a Commodore utility.
Mr Russo gave evidence that Ferrari cars are his main focus. He spoke of “the power, the smoothness, the look of the vehicle and the performance”. He said driving a Ferrari filled him with great pleasure and a sense of achievement for the hard work that he has done. Since his first Ferrari he has tried to buy every new model that has come out.[1]
[1] T107 - 109.
The defendant Belcar Pty Ltd, which trades under the name "Prestige Formula", is the South Australian distributor for the Maserati and Ferrari marques. The managing director of the defendant and principal of the dealership is Mr Robert Corradini. Mr Corradini is the person who initiated the sale of the Maserati and Ferrari vehicles to Mr Russo.
The third party, Maranello Imports Pty Ltd, is the importer and distributor of Ferrari cars in Australia and New Zealand. Maranello is the name of a town in the district of Modena in Italy where the Ferrari factory is situated. By an agreement dated 30 September 1998 Maranello Imports appointed Belcar Pty Ltd to be a non-exclusive dealer for the sale and servicing of Ferrari cars in the State of South Australia.
There is a limit on the number of Ferrari vehicles that the factory exports for distribution in Australia and New Zealand each year. In turn there is a limit on the number of Ferrari vehicles made available to Prestige Formula for sale in South Australia. In some years the South Australian Ferrari quota has been as few as three vehicles.
In 1999 Mr Russo already owned a 308 Ferrari and a 355 Ferrari. Mr Corradini informed him of a new model, the Ferrari 360 Modena F1. Mr Russo gave evidence:
Basically on every car I owned, Bob’s actually approached me. He'd ring me and say "I've got this particular vehicle in stock. Are you interested as part of your collection".[2]
[2] T116.
The reference to Mr Russo's collection is said to give rise to a term of the contract that the Ferrari 360 would be a collectable car.
Mr Russo was interested in purchasing a Ferrari 360 and on 28 October 1999 he placed an order and paid the deposit of $5,000. There was a waiting list of about two years. The price of the car when it was manufactured was, subject to currency fluctuations, expected to exceed $380,000.
Mr Corradini provided brochures describing the new vehicle and the two men discussed its features. Mr Russo gave evidence:
…Basically the main feature of the vehicle that attracted me on the brochure and Bob explained to me was the actual new gear change. They actually had, I call it a pedal gearshift change on the vehicle which is partly automatic. You drive the vehicle as an automatic vehicle or switch it over to a manual pedal shift".[3]
[3] T119.
On 31 May 2001 Mr Russo provided the defendant with specifications for a vehicle to be manufactured in the month of September 2001. The Ferrari 360 Modena F1 is a two seat coupe powered by a V8 engine positioned behind the driver's seat. The letters "F1" refer to the F1 gear selection system. The designation "F1" was intended to imply some connection with the gear selection system used in formula 1 racing cars.
For the body colour Mr Russo chose Rossa Corsa (a traditional Ferrari red) and for the upholstery and carpet he chose Nero (black). Mr Russo specified Pirelli Tyres, a Challenger grill, front guard shields, red calipers and a six stack sound system.[4] The front guard shields were an integral part of the panels of the vehicle.[5] It was a bespoke vehicle.
[4] Exhibit P1-30.
[5] T123 - 124.
After manufacture, in accordance with the usual practice, the new vehicle was test driven in Italy by a Ferrari mechanic. It was then shipped to Maranello Imports in Sydney. On arrival in Sydney the odometer showed 99 km. An initial pre-delivery inspection of the vehicle including an inspection of the body and paintwork under lighting was carried out for Maranello Imports in accordance with the usual practice by Scuderia Veloce Motors on 20 November 2001. The odometer then displayed 100 km.
The National Service Manager of Maranello Imports is Mr Lenn Kench. He inspected the vehicle and on 3 December 2001 signed a Ferrari body sheet which recorded minor body damage including what was said to be a "dent" on the left-hand side of the bonnet.[6] On that body sheet Mr Kench acknowledged that in his judgment the condition of the vehicle was "acceptable".
[6] Exhibit P1-42.
The vehicle was transported from Sydney to Adelaide by TNT Automotive Logistics. The vehicle was taken initially to the TNT depot at Wingfield and then to the defendant's premises at Frewville. I mention that because the plaintiff has suggested that the vehicle may have been used inappropriately during the period between when it arrived at Wingfield and when it was delivered to Prestige Formula.
On 3 December 2001 an employee of Prestige Formula acknowledged receipt of the vehicle by signing a TNT consignment note which recorded minor body damage in a number of places.[7] Some of the entries on the copy of the consignment note which is in evidence are illegible. For present purposes what is important is that no body damage was recorded on the right rear quarter panel or the engine hatch cover.
[7] Exhibit P1-39.
Exhibit P1-41 is a Ferrari body sheet which was completed by Mr Tony Cocca at Prestige Formula. That form recorded "thin paint" at the top of the driver's door, a "visible repair" above the left rear quarter panel and a "chip" on the right front.[8] There is no note of damage to the right rear quarter panel or the engine hatch cover.
[8] Exhibit P1-41.
Of the defects listed in the body sheets completed in Adelaide and in Sydney it is only the "dent" on the bonnet that has assumed any significance in these proceedings.
On its face Exhibit P1-33 suggests that when the Consignment Note was signed on behalf of Prestige Formula on 3 December 2001 the distance recorded on the odometer was 100 km. I make no finding as to whether that is correct. There is a possibility that the distance of 100 km had been recorded on Exhibit P1-33 on 27 November 2001 before the vehicle left Sydney. When the vehicle arrived in Adelaide the battery was flat.
On 3 December 2001 employees of Prestige Formula noted that the vehicle’s dash odometer reading was not correct, that ”X” was shown on the visual display unit and that the SD2 would not communicate with the instrument cluster.[9] The "X" indicated that the visual display unit was inoperative. The odometer reading had changed from about 100 to 555,560 km which indicated a fault.
[9] Exhibit P1-37 Repair Order No. 205493.
A note was made of a missing screw in the luggage compartment and "various light scratches all over (the) car". Again there was no reference to any damage on the right rear quarter or the engine hatch cover.
The reference to "SD2" was a reference to "Systema Diagnostic 2”, a computerised system for analysing the performance of vehicles and diagnosing problems. Using the SD2 mechanics can download information from a vehicles on board computer.
On 5 December 2001 Mr Tomas Krznaric, the Service Manager of Prestige Formula, e-mailed Mr Kench at Maranello Imports advising that errors were noted on the instruments, that "X" was displayed and the odometer showed 555,560 km.
It is likely that the problems with the instrument panel were a consequence of the battery having gone flat. There was evidence that "spiking" which occurs when a vehicle is jump started can cause an instrument malfunction.
The Delivery of the Ferrari 360 Modena F1 by Prestige Formula to Mr Russo
The pre-delivery service of the vehicle was carried out on 6 December 2001 by Mr Tony Cocca, a mechanic employed by Prestige Formula.[10] At the conclusion of the pre-delivery service the vehicle was briefly road tested and filled with petrol.
[10] P1-43.
On 7 December 2001 the defendant provided Mr Russo with a tax invoice requiring payment of $400,000 in addition to the $5,000 deposit which had already been paid.
When the vehicle was shipped from Italy there was a protective plastic covering over the leather seats. On arrival in Adelaide the seats were removed from the car and the plastic covering removed. It was the practice of Prestige Formula to remove the seats so that the carpet and upholstery were not cut in the process of removing the plastic. The fact that the seats had a protective plastic covering is relevant. One of Mr Russo's complaints is that the leather on the driver's seat was worn at the time of delivery. Other remedial work was carried out on a door which did not close correctly.
Mr Russo had waited a long time for the delivery of the car. He regarded the car as his Christmas present and wanted to obtain the vehicle as soon as possible. Initially the defendant was not prepared to deliver the vehicle to Mr Russo until the problem with the odometer had been corrected.
During the course of December a replacement instrument panel was received from the Ferrari factory in Italy, but when it arrived the replacement odometer incorrectly showed 555 km rather than about 100 km. The factory had set the distance incorrectly.[11] There is no evidence which explains why the replacement odometer displayed 555 km. The second odometer was installed between 19 and 20 December 2001.[12]
[11] T129.
[12] T553.
Mr Dart, who appeared for the defendant, argued that the incorrect distance of 555 km shown on the odometer caused Mr Russo to believe that was the distance the vehicle had actually travelled at the time of delivery. He argued that Mr Russo combined the odometer reading with other signs of use of the vehicle, which I refer to below, to arrive at the conclusion that the vehicle was not new but had been used. Mr Russo's belief that the vehicle had been inappropriately used is the genesis of this action.
There is a dispute as to the date on which the vehicle was actually delivered to Mr Russo. The agreed documents include a "Contract For the Sale of a New Vehicle" dated 22 December 2001.[13] The contract was signed on behalf of the defendant but not by the plaintiff, although Mr Russo's name has been printed in the appropriate space.
[13] Exhibit P1-50.
The Warranty Card is dated 21 December 2001 and was signed by both Mr Corradini for Prestige Formula and Mr Russo.[14] The Warranty Card is an important document which states that the "delivery date and warranty start date" was 21 December 2001.
[14] Exhibit P1-52 - 53.
Mr Russo agreed in evidence that he signed the Warranty Card but said that he had no recollection of when he signed it. In evidence-in-chief he said that he assumed that he signed the book on the day that he collected the vehicle.[15] Later he denied having said that.[16] In cross-examination Mr Russo said that when he signed the book he "didn't really look at the date" and "I just signed it and that was because to me it was just a warranty book, nothing of main significance to me".[17]
[15] T128.
[16] T272.
[17] T279.
The Warranty Card sets out the Warranty Conditions. The first clause provides:
1.1 FERRARI guarantees the correct functioning of the vehicles they produce for a period 24 months from the date of first delivery and that it is as described in the conformity document which sets out the characteristics of its specification…
1.2 The warranty covers all and only the operations to repair or replace parts which in the opinion of the factory are necessary to restore the efficient operation of the vehicle…
The Warranty Conditions are important terms of the contract.
A Repair Order which evidences the vehicles first return to the Prestige Formula workshop in early January 2002, records the date of delivery and the registration date as 21 December 2001.[18]
[18] Exhibit P1-62A.
Mr Russo gave evidence that he did not receive the vehicle until after Christmas 2001. He said that he had received a phone call advising that the vehicle was ready to be collected, but then in another call, a couple of days later, was advised that the vehicle was not ready. Mr Russo said that Tomas Krznaric had called him and said "that the actual cluster in the vehicle had gone berserk and he said that the trip metre was showing 550,000 km or something like that, and so he said the vehicle had to get a new speedometer first before I could pick up the vehicle".[19]
[19] T125.
Mr Russo gave evidence that he took delivery of the vehicle on the day after the public holiday after Christmas, which would have been Thursday 27 December 2001.[20] As I have said the date of delivery is an issue in the case. The earlier that the vehicle was delivered to Mr Russo the greater opportunity he had to use the vehicle before it went back to Prestige Formula on 2 January 2002.
[20] T129.
Mr Russo's case is that he had hardly used the vehicle at all before he took it back to Prestige Formula. The defendant's case is that the vehicle had travelled about 650 km between the date of delivery to Mr Russo and 2 January 2002. I return to discuss the evidence later.
The parties agree that the settlement sum was paid on 24 December 2001.
Mr Jones said that Mr Russo had the car before Christmas.[21] So did Mr Newman.[22] Mr Corradini said that the paperwork (the warranty book) would have been done on the day of delivery.[23] The recollection of Mr Krznaric was that the vehicle was delivered prior to Christmas.[24] In his closing submissions Mr Heuzenroeder submitted that the most likely date of delivery was 24 December 2001.
[21] T425.
[22] T557.
[23] T781.
[24] T752.
I accept the evidence of the defendant’s witnesses. I find that the best evidence of the date of delivery is the date shown on the warranty card and that the vehicle was delivered on about 21 December 2001. Once the new odometer had been installed the vehicle was ready to be delivered and Mr Russo was eager to take delivery. I reject the evidence of Mr Russo that he did not take delivery until after Christmas.
At the time of delivery to Mr Russo the vehicle was fitted with the second odometer showing that 555 km had been travelled. The odometer overstated the distance travelled at the time of delivery by about 450 km.
The Plaintiff's Claim
The plaintiff claims that the vehicle that was delivered to him was not a new vehicle but had been used. He complains that there were many defects and he asserts that the vehicle was not of merchantable quality and was not fit for its intended purposes. He has called it a “lemon”.[25] The Further Amended Statement of Claim specifies many alleged defects and invokes a galaxy of causes of action.
[25] Plaintiff’s written submissions para 21.
In his final address Mr Heuzenroeder described the plaintiff's case as primarily "a new car case".[26] The alternatives which raise merchantable quality and fitness for purpose only arise if the plaintiff does not succeed on the primary case.
[26] T1141.
There is no dispute that the contract was for the supply of a new Ferrari 360 Modena F1 and there was a requirement that the vehicle would be of merchantable quality.[27] The defendant accepts that it was a sale by description and that the provisions of the Sale of Goods Act 1895 apply.
[27] Defence to Plaintiff’s Further Amended Statement of Claim paras 6.7 and 6.9.
I must first consider the condition of the vehicle at the time it was delivered. I must consider the allegations that it was not a new car, that it was not of merchantable quality and that it was not fit for its purpose at the time of delivery. Then I must consider the defects which became apparent after delivery.
The plaintiff asserts that the purposes for which the Ferrari 360 would be fit included the following:
a.     A vehicle as a reliable mode of transport;
b.     A collectable motor vehicle, including as a 2001 model concourse d’Elegance (or similar) condition Ferrari;
c.     A store of wealth;
d.     A vehicle to provide driving pleasure.[28]
[28] Plaintiff’s written submissions para 18.
The suggested purposes were not express terms of the contract. The purposes referred to in paras a and d can be implied. While the meaning of para b is confused, because the expression concourse d’Elegance is not an adjectival clause but the name of a certain type of event, I have no difficulty in accepting that there was an implied term that the Ferrari 360 would be a collectable motor vehicle.
I do not really understand the requirement referred to in para c or why such a purpose should be implied. The evidence does not establish that vehicles such as a Ferrari 360 are a store of wealth. The evidence is that a 2001/2002 Ferrari 360 Modena F1, in good condition, which cost about $400,000 in 2002 would today be worth less than half its original value. I do not understand how it could be said that a vehicle which depreciated in that way could be "a store of wealth". Nor do I understand the basis upon which it is said that it was a term of the contract of the vehicle should be "a store of wealth". I do not accept that para c was a term of the contract.
Mr Heuzenroeder summarised Mr Russo's case in the following terms:
The problems with it (the Ferrari 360) ranged from fundamental (eg the gear box, engine, defective repairs to the right rear quarter panel, misalignment of rear hatch and front bonnet), through to the blemish and "dimple" on the front bonnet, to issues that in themselves were not fundamental but had the potential to do damage to the vehicle (eg the thermo fans, and defective connection of the radiator hose), and to matters that standing in isolation were mere annoyances (battery going flat, poor adjustment of the headlights, hand brake and scratch near the bonnet lock).[29]
[29] Plaintiff’s written submissions para 21.

Not all of those "problems" existed at the time that the vehicle was delivered. It is necessary to consider the nature of each of the problems and the time when, and the circumstances in which, each of the problems first arose.
The plaintiff claims that whether the vehicle is valued at about the time of sale, or valued at the present time, the value of the vehicle has been reduced by between $40,000 and $50,000 because of problems with the vehicle. Today that would mean a reduction in value from $200,000 to $150,000.[30]
[30] Plaintiff’s written submissions paras 23-24.
Mr Heuzenroeder argued that problems which arose with the engine and gearbox after delivery were latent defects at the time of delivery.[31]
THE POSITION AT THE TIME OF DELIVERY TO MR RUSSO
[31] Plaintiff’s written submissions paras 27-28.
Mr Russo’s Claim that the Ferrari was not a new car
On the question of what is a new car counsel referred to the decision of Annand & Thompson Pty Ltd v Trade Practices Commission (1979) 25 ALR 91 at 111. The full Federal Court considered the authorities and concluded that the word "new" had five possible meanings when used to describe a vehicle. Those meanings are:
1.     That the vehicle has not been previously sold by retail, that is, that it is not a secondhand vehicle;
2.     That the vehicle is a current and not a superseded model;
3.     That the vehicle has not suffered significant deterioration or been used to any significant extent;
4.     The vehicle is of recent origin; and
5.     That the vehicle is one which has suffered a measure of damage but this damage has been quite effectively repaired or any damaged part replaced and the vehicle is otherwise new in every respect.
For the purpose of determining what constitutes a new car Mr Heuzenroeder also referred to the decision of the Court of Appeal in R v Ford Motor Co Ltd (1974) 1 WLR 1220 at 1227-1228. In that case the court observed that the use of the car must not be excessive and that a car ceases to be new once the mileage it has travelled under its own power significantly exceeds that to be expected as reasonably incidental to delivery. The court rejected a suggestion that a car ceases to be new as soon as it sustains significant damage. The court said that provided damage is "in practical terms perfectly repaired so that it can in truth be said after repairs have been affected that the car is as good as new" it would not be a false trade description to describe such a car as new. Relevantly the court said:
An example given in the course of the evidence was of the engine of a new car sustaining serious damage, for instance for lack of oil on its journey from the factory to the dealer’s premises. If the dealer removed the defective engine and replaced it with a brand new engine from the factory, we can see no reason in common sense why the resulting car should not still be described as a new car. So also if superficial damage to part of the bodywork is sustained but is perfectly repaired either by panel beating followed by respraying, or by replacement of individual panels with new panels: if a perfect result can be achieved, why, one may ask rhetorically, should the car no longer qualify to be described as new? Of course, the question whether the repairs which have been undertaken in any particular case have attained the necessary degree of perfection to entitle the car to be described as new must be a matter of fact and degree to be decided by the tribunal of fact before whom the question arises.
Mr Russo said that at the time he took delivery he did not make a close inspection of the vehicle. He walked around the vehicle and that was about it.[32]
[32] T245.
Mr Russo said he drove the vehicle from Prestige Formula to his own business premises, a distance which he estimated to be "around about 10, 20, 25 km". He parked the vehicle and went into his office to make telephone calls. About an hour later Mr Russo noticed an ex-employee, whom he referred to as Ross, standing near the car. Ross asked Mr Russo where he had been with the vehicle and said "It looks like you have been down the beach because there is actually a sand build-up on the actual sub frame".[33] Mr Russo had not noticed the sand himself. Ross pointed out the position of the sand and Mr Russo had a close look at it. The vehicle had been pressure cleaned and he could see where the pressure cleaner had cut the sand like a knife. The sand was a white yellow in colour, like beach sand.[34] It can be seen in a photograph.[35]
[33] T133.
[34] T133.
[35] Exhibit P4.
Mr Russo then arranged for City Tyre and Mag, a business in his complex, to raise the vehicle on a four poster hoist and for the wheels to be removed to provide a better view. Mr Russo said he "wanted to see if the vehicle had been used, if there was any evidence of it".[36] Presumably his suspicions had been aroused by the incorrect odometer reading.
[36] T134.
Mr Jones had at one time been an employee of the plaintiff. On the day in question he was working at City Tyre and Mag. He remembered Mr Russo purchasing the new Ferrari and remembered "the car turning up". He had been made aware that Mr Russo had purchased a Ferrari "for himself as a sort of Christmas present".[37] Mr Jones assisted to put the Ferrari on a four poster hoist and remove the wheels. Mr Russo's demeanour indicated that the he was not happy. Mr Jones observed Mr Russo and Mr Peter Slater inspecting the underside of the vehicle.
[37] T425.
Subsequently Mr Jones replaced the wheels and Mr Russo took the car away. Mr Jones learnt that new tyres had been ordered for the vehicle. He said that the new tyres arrived a week or two weeks later.[38] Mr Jones believes that the tyres arrived on the date of the invoice for them, 2 January 2002.[39] The original Pirelli Tyres were taken from the car and stored. They remain in storage.[40]
[38] T427.
[39] Exhibit P1-59.
[40] T429.
Mr Russo gave evidence that while the car was on the hoist he looked at the disks on the brakes and noticed the disks seemed to have "severe score marks", which he thought were excessive for the mileage.[41]
[41] T136.
Mr Russo said he then looked at the tyres "and to me there seemed to be no evidence that they were new, because normally most of the tyres we come across have what I call dimples on". The "dimples" are thin tube like strands of rubber called "vent spew" that protrude from the tread. After inspecting the tyres Mr Russo concluded that there were no "dimples" on any of the tyres.[42]
[42] T135.
Mr Russo also formed a view that the tyres were not new because they had what he called tyre sheen on them. He said that when he sold second-hand cars and wanted to make the tyres look new and glossy he painted them with sheen.[43]
[43] T136.
Mr Russo inspected the panel finishes and the paintwork generally. He had a brief look at the paintwork while the vehicle was on the hoist and noticed a few chips in what he called "the rear wind tunnel". The chipping was not severe but it should not have been there.[44] Significantly he did not notice any bodywork or paint defect on the right rear quarter panel or the engine hatch cover.
[44] T136 - 137.
In the floor mat there was a plastic or rubber section for the driver's feet. That section had also been painted with sheen.[45] Mr Russo had never observed sheen on a mat in a new vehicle.
[45] T137.
Alongside the accelerator there was a stainless steel plate. The driver’s foot rubs on the plate when the accelerator is used. Mr Russo said that the plate seemed to have a lot of smear marks where the driver's foot rubs on it.[46] Those marks also suggested to Mr Russo that the vehicle had been used.
[46] T138 - 139.
Mr Russo compared the driver's seat with the passenger’s seat. The driver's seat had crease marks which he interpreted as signs of wear.[47] The seats are shown in photographs.[48]
[47] T138.
[48] Exhibit P1-92 - 97.
Mr Russo found that the bonnet was very hard to close and noticed paint was missing in the area of the bonnet lock.[49]
[49] T146.
On the left-hand side of the bonnet, close to the windscreen, there was a patch about 10 inches in diameter which was darker in colour than the rest of the car. Mr Russo noticed a "dimple" in the bonnet which was poking upwards.[50] That “dimple” was in the same area as the "dent" which had been noted in Sydney.[51] I find that the "dimple" and the "dent" are one and the same. Mr Russo said that the bonnet did not line up properly.
[50] T147.
[51] Exhibit P1-42.
Mr Russo also gave evidence that he inspected the rear hatch which was not aligned correctly because the hatch was protruding further out than the rear of the fender, although the hatch did open and close. The rear hatch is a glass panel which covers the engine compartment. In evidence Mr Russo said:
… the first thing that caught my eye, the actual hatch was actually protruding farther out than the actual rear of the fender, it was sticking up. And once you actually looked at it then you would notice that one side of the hatch basically has got no clearance between the body and the actual hatch and the other side has got approximately, I would say a quarter of an inch clearance. It has got a proper clearance on one side and zero clearance on the other side. The side of the hatch that has zero clearance is the right-hand side of the vehicle.[52]
[52] T148 - 149.
Unlike other problems, that misalignment of the rear engine hatch was not mentioned by Mr Russo to the defendant immediately. The misalignment was not noticed by any of the people who inspected the bodywork of the vehicle at the time of delivery or immediately following delivery. I doubt the evidence of Mr Russo that the protruding hatch was noticed by him on his first inspection of the bodywork. If he had noticed the protruding hatch he would have mentioned it along with his other complaints.
There was red over spray on both black inner door pillars.
Other problems with the vehicle became apparent later. While some of the individual problems were by themselves of no great significance, they suggested to Mr Russo that the vehicle had been used. Having regard to the presence of the sand on the chassis, the other observations which Mr Russo made at that time and the odometer reading, it was not unreasonable for him to conclude that the vehicle had been used.
Mr Russo had paid the full price for a new vehicle. The first question is whether Prestige Formula delivered a new vehicle to Mr Russo. If the vehicle had been used as a demonstration car or had been taken for a joyride, then it did not satisfy the requirements for a new car and Mr Russo did not receive what he had ordered and paid for.
There is a question as to whether Mr Russo was entitled to rescind the contract, return the vehicle to Prestige Formula and recover the purchase price. That is what Mr Russo tried to do. For the reasons which follow I have found that Mr Russo has never had a right to rescind the contract or return the vehicle.
It is not possible to ascertain the true distance travelled by the vehicle at the time of delivery to Mr Russo because of the odometer problem. If there had not been a problem establishing the distance travelled before delivery should have been simple. The fact that the odometer was not working has added weight to Mr Russo's suspicions. He has suggested that the inoperative odometer provided an opportunity for unauthorised use of the vehicle.
The defendant's case is that at the time of delivery to Mr Russo the Ferrari had travelled just over 100 km, that is, the distance shown on the first odometer before it malfunctioned, plus a few kilometres for a brief road test after the pre-delivery inspection in Adelaide and a trip to the service station to be filled with fuel.
I reject the submission on behalf of Mr Russo that there are several days in Adelaide which remain unaccounted for between the time when the vehicle left Sydney on 27 November 2001 and when it was delivered to Prestige Formula on 3 December 2001.[53] There is no evidence from which it might be inferred that the vehicle was used inappropriately between the time when it left Sydney and when it was delivered to Prestige Formula.
[53] Plaintiff’s written submissions para 55.
While I can understand why Mr Russo formed the opinion that he did not receive a new vehicle, I find that each of the matters which he relied upon to arrive at that opinion has been explained by the evidence.
The evidence establishes that the vehicle had travelled about 99 km in Italy. All Ferrari vehicles are road tested by mechanics. The road testing takes place on different kinds of road surfaces, including dirt roads, in the district around the Ferrari factory. The mechanics vary the route to avoid the traffic police. Mr Kench gave evidence that when Ferrari vehicles arrive in Australia the odometers show around 100 km. There is no evidence that the distance travelled in Italy by Mr Russo's Ferrari was excessive or inappropriate.
There is evidence, which I accept, that road testing of a Ferrari in Italy can result in sand or dirt accumulating on the chassis. Mr Kench has seen other Ferraris arrive in Australia with sand on their chassis and dealers have reported the problem to him.[54] Mr Krznaric said it was a very common problem which was known to Ferrari mechanics.[55] The removal of road grime is normally attended to in the course of the pre-delivery service.[56]
[54] T847.
[55] T935, 944.
[56] T864, 936.
There is no evidence of any out of the ordinary use in Adelaide. There is no direct evidence that the vehicle had been used as a demonstration vehicle or that any person had taken it for a joyride.
Initially the plaintiff's case was that an inference should be drawn from the sand on the chassis, the absence of vent spew on the tyres, the sheen on the tyres and the floor mat, the creases on the driver's seat and the wear on the stainless steel plate by the accelerator. There is also the fact that the first replacement odometer showed 555 km. For the reasons which are set out below I have concluded that each of the facts said to give rise to an inference has been satisfactorily explained so that the necessary inference cannot be drawn. Also there is other evidence which negates the inference.
In July 2004 Mr Russo first made known to the defendant and third-party the presence of a blend line where two different shades of paint meet on the rear right quarter of the vehicle. It is now his case that the blend line and the misalignment of the engine hatch cover should be attributed to repairs caused by an accident which had resulted in the misalignment of the right rear section of the car. The plaintiff's case is that the accident occurred prior to delivery. [57] There is no evidence of any damage or repair to the right rear quarter panel prior to the delivery of the Ferrari to Mr Russo.
[57] Plaintiff’s written submissions para 35.
At the present time there is a blend line on the right rear quarter panel and pink spray putty can be seen under the right rear wheel arch. Those things indicate repairs, but there is no evidence as to the cause of the repairs or when they were carried out.
Mr Russo gave evidence that a matter of weeks after he had taken the car back for its first service he left the car parked outside his office. Mr Adam approached him in his office and asked him to go outside so that Mr Adam could point out where the vehicle had been repaired. Mr Adam pointed to the blend line in the paintwork. Up until that time Mr Russo had not noticed the blend line himself, but once it had been pointed out by Mr Adam he was able to see it. The blend line was made more obvious by the angle at which the sun was shining.
Mr Adam is an experienced crash repairer. He worked for Mr Russo for about 4½ years from about 1995. He gave evidence of the day when he first saw the Ferrari 360 Modena F1. He said it was a Saturday in late January.[58] He is obviously mistaken as to the year. He said it was the first example of the new shape Ferrari that he had seen and he went up to it to have a look. He noticed that the right-hand rear quarter panel was a lot darker on the rear half than the front half. He was surprised that nobody else had picked it but he picked it fairly easily.[59]
[58] T395.
[59] T396.
Mr Russo gave evidence that after inspecting the blend line with Mr Adam he telephoned Mr Krznaric and explained what he had found in the paintwork.[60] Mr Russo said that the blend line reinforced his position that the car was not new. Mr Krznaric gave evidence that if Mr Russo had complained about something with the car it was his responsibility to note it down. If Mr Russo had made complaints to him, irrespective of how minor they were, they would have been recorded.[61] He never made any note about the blend line.
[60] T176.
[61] T955.
The first reference to the blend line in any document is in a letter dated 2 August 2004 from Mr Kench to Mr Russo.[62] In that letter Mr Kench thanked Mr Russo for meeting with himself and a representative of Ferrari in late July 2004 and continued:
…It was a shame that on the day your 360 Modena was not available for inspection (as requested) especially in light of the new issue you raised during the meeting of the paint defect on the rear guard. I would be happy to inspect and address this problem at your earliest convenience". (my underlining)
[62] Exhibit P1-225.
Mr Kench gave evidence that he came to Adelaide on 15 March 2002, inspected the vehicle and had a meeting with Mr Russo but that on that occasion Mr Russo did not say anything about a blend line or damage to the right rear guard. If the blend line had been mentioned it would have been a matter of concern to Mr Kench because the vehicle had been inspected in his workshop and he would want to know why a significant blemish in the paintwork had not been detected. Mr Kench had never seen a vehicle come from the Ferrari factory with a blend line across a panel.
Mr Newman also gave evidence that the blend line was first raised at a meeting in July 2004.[63]
[63] T606.
On the basis of the statement in the letter of Mr Kench dated 2 August 2004 and the evidence of Mr Newman and Mr Krznaric I find that the plaintiff did not raise the presence of the blend line with the defendant until a meeting with Mr Kench and Mr Newman in July 2004, that is over 2½ years after the vehicle had been delivered to Mr Russo.
Mr Adam gave his evidence in a straightforward and matter of fact way and he gave no reason to question his credibility. However, he was clearly mistaken as to the date of his inspection and his evidence does not establish when the blend line was first identified.
In comparison with other complaints which Mr Russo did raise about the paint and bodywork the blend line was of greater significance. It is likely that Mr Russo would have raised the blend line with Prestige Formula at the earliest opportunity, particularly given that Mr Russo's strategy from the beginning was to return the vehicle. Evidence that the vehicle had been involved in an accident before delivery would have added another dimension to Mr Russo's argument that the vehicle was not new.
Mr Kench’s letter of 2 August 2004 is objective contemporaneous evidence that so far as Mr Kench was concerned the blend line was a new issue. It is significant that the plaintiff never replied to Mr Kench disputing the statement in the letter or suggesting that Mr Russo had raised the blend line previously.
The reason for the repair to the right rear panel and the blend line remains unexplained. Because there was no complaint to Prestige Formula or Maranello Imports about the blend line until over 2½ years after the vehicle was delivered to Mr Russo no inference can be drawn that the blend line was present at the time of delivery and Prestige Formula is not under any obligation to explain the existence of blend line.
If the blend line had been present prior to delivery of the vehicle to Mr Russo its existence was missed when the vehicle was inspected by Scuderia Veloce and Maranello Imports in Sydney and by Prestige Formula in Adelaide. The inspection by Scuderia Veloce included a full body inspection with proper lighting.[64] Other defects which were less obvious and less significant were detected and recorded on body sheets.
[64] T846.

Prestige Formula argued that the blend line was the result of the damage caused in its workshop in August 2002.[65] The plaintiff argues that the defendant’s explanation is untenable.[66] I do not accept the defendant’s explanation.
[65] Defendant’s written submissions para 45.
[66] Plaintiff’s written submissions Annexure D para 8.
I accept that some damage was caused in the workshop in about August 2002 when a spanner was dropped, but the evidence[67] shows that the damage caused by the spanner was on a horizontal section at the top of the rear quarter panel not the area on the rear quarter panel itself or the wheel arch, it does not explain the pink spray putty at the bottom of the wheel arch underneath the right rear panel, and would not have necessitated repainting such a large area of the vertical section of the right rear panel where the blend line appears.
[67] Exhibit C36.
I accept the plaintiff’s submission that the blend line is inconsistent with the size, location and nature of the damage that would have been caused by a spanner being dropped at the top of the rear quarter panel.
There is evidence of work carried out by a firm called Chips Away in August 2002.[68] I accept that was work to remedy damage caused by a dropped spanner. However the cost of the repairs including GST was $121. While that may have been an appropriate charge to repair a dent caused by a dropped spanner, it was not an appropriate charge for repairs involving the use of putty and repainting of an area of the rear quarter panel about 80 cm by 80 cm.
[68] Exhibit P1-107.
There is no evidence that blend line and repair to the right rear panel was present at the time the vehicle was delivered to Mr Russo.
Matters relied upon by Mr Russo as indications of inappropriate use of the vehicle prior to delivery
The Tyres
Mr Heuzenroeder argued that the main evidence of excess use prior to delivery was the wear on the tyres.[69]
[69] Plaintiff’s written submissions para 76.
When the Ferrari was delivered to Mr Russo it was fitted with the Pirelli Tyres which had been specified. Mr Russo replaced the Pirelli Tyres with a set of Kumho Tyres. Mr Russo said that the Pirelli Tyres "were taken off to preserve them for evidence down the track".[70]
[70] T285, 288.
Mr Russo had previously replaced the original Pirelli Tyres on his Ferrari 355 with Kumho Tyres. That may indicate that Mr Russo has a preference for Kumho Tyres, but it is not necessary for me to investigate that.
I accept Mr Russo's evidence that the tyre walls had been painted. However the fact that the tyre walls had been painted does not establish that the tyres had travelled any particular distance. The road testing in Italy may have resulted in the tyres becoming dirty and provided reason for the tyres to be painted. Alternatively the persons who carried out the pre-delivery service may have decided to paint the tyres to improve the vehicle’s appearance. Whatever the reason for painting the tyres was it does not establish inappropriate use of the vehicle.
Mr Russo took the vehicle back to Prestige Formula on 2 January 2002. Mr Russo gave evidence that the Pirelli Tyres had been replaced with Kumho Tyres at his workplace prior to the vehicle going back.[71]
[71] T314.
When the vehicle was taken back to Prestige Formula Mr Russo complained to Mr Krznaric about a number of matters. Mr Krznaric inspected the tyres and wrote the word "Normal" on the Repair Order card alongside the word "Tyres".[72] It would have been inappropriate for Mr Krznaric to do that if the Pirelli Zero Tyres had been removed and replaced by the Kumho Tyres.
[72] Exhibit P1-62A.
I reject the evidence of Mr Russo that the Pirelli Tyres had been changed before the vehicle went back to Prestige Formula on 2 January 2002. The invoice for the Kumho Tyres[73] indicates that the Kumho Tyres were not purchased until 2 January 2002.
[73] Exhibit P1-59.
Mr Slater had been working or in City Tyre and Mag for about 18 months when Mr Russo took delivery of the Ferrari. He has practical experience in examining tyres. He looked at the tyres on the Ferrari 360 Modena F1 when it was on the hoist at City Tyre and Mag. Mr Slater gave the following evidence:
…I expected to see - well I saw more wear than I would expect to see on a brand spanking - new tyres have the little pimples on the tyre, they can take anything up inform (sic) 500 ks to a 1,000 ks to get rid of. They were not visible. Then I went with the tread gauge which measured the tread. Now that I can't state exactly, I can't recall exactly how much tread was missing off of it. I actually made a phone call to our supplier which supplied Kumho, Pirelli and a couple of other brands and verified with them the tread depth which showed that it had a little bit more wear than-[74]
[74] T376,
Mr Slater expected to see little dimple marks all over the tyres on a brand new car. He said "These were not visible at all. As I have said even the last little dimple mark roughly takes 500 to 1,000 km to get rid of".[75]
[75] T376.
If the vehicle had travelled about 750 km by the time Mr Slater saw the tyres on 2 January 2002 that would have been sufficient to remove the dimple marks. Mr Slater assumed that he was looking at "brand spanking new" tyres and he did not know that the tyres had travelled approximately 750 km when he saw them. For reasons which are set out below I have found that on 2 January 2002 the vehicle had travelled about 750 km when Mr Slater saw the tyres.
The evidence of Mr Slater does not establish inappropriate use of the vehicle.
The tyres were also inspected by Mr David Southwell whom I accept to be an expert in the area of car tyres. Mr Southwell has relevant tertiary qualifications. He has the degree of Master of Engineering from the University of South Australia, he is a graduate of the "Firestone University" in the USA and in 2003 undertook Stahlgruber Foundation Tyre Inspection, Repair and Retreading training. He has extensive practical experience and has held senior positions with leading tyre manufacturers both in Australia and overseas.
In a written report prepared for the plaintiff’s solicitors Mr Southwell said that excessive or thick vent spew is considered an indicator of poor quality and most manufacturers go to significant lengths to minimise the amount of spew that is visible. He said that it "inevitably disappears from the tread area within the first few hundred kilometres of use".[76][77]
[76] Exhibit P9 p 4.
In the opinion of Mr Southwell the Pirelli Tyres had completed between no less than 500 km and no more than 1,000 km.[78] He agreed in cross-examination that a distance of 745 km would be most probable.[79]
[78] Exhibit P9 p 6 and T387.
[79] T389.
The evidence of Mr Southwell is consistent with the estimate that on 2 January 2002 the Ferrari had travelled approximately 750 km.
The Painted Format Floor Mat
The observations which I have made with respect to the painting of the tyres also applies to the floor mat.
The fact that the floor mat had been painted does not establish inappropriate use of the vehicle. It does no more than reflect the preference of the person who carried out the pre-delivery service.
There is no evidence of actual wear on the floor mat.
The Scratches on the Right-hand Kick Panel
The evidence does not establish what use of the Ferrari would have been necessary to cause the scratching on the kick panel. The scratches were removed by polishing.
The evidence of scratching on the kick panel at the time of delivery in isolation takes the matter nowhere. The evidence of scratching is not specific enough to establish what use of the vehicle was necessary to cause the scratching which is complained of. The evidence of scratching does not establish that the vehicle had travelled a greater distance than what can be accounted for.
The evidence of scratching does no more than establish that at the time of delivery to Mr Russo the vehicle had been driven.
The Sand on the Chassis Rail
There is no contest that there was sand on the chassis rail. It is obvious in photographs.[80]
[80] Exhibit P4.
I have referred to evidence that sand on the chassis of a Ferrari can be a consequence of factory testing in Italy. It was a common phenomenon. The presence of the sand has been explained and I am satisfied that while the evidence of the sand on the chassis at the time of delivery may have indicated poor pre-delivery procedures it did not establish inappropriate use of the vehicle.
The Driver's Seat
New leather was subsequently fitted to the driver’s seat and this complaint has been remedied. The significance of the suggested wear on the driver’s seat at the time of delivery is that it is relied upon as evidence that the vehicle was not new.
The evidence does not establish how much use was indicated by the condition of the driver's seat as at 2 January 2002. Furthermore the evidence does not establish whether the condition of the seat was a consequence of use of the vehicle or simply poor quality leather.
Photographs suggest that the problem with the seats was the poor quality of the leather and bad workmanship.[81] One of the photographs suggests that the leather was pulled too tight where it has been stitched. While they show imperfections none of the photographs demonstrate what might be classified as wear.
[81] Exhibit P2.
The evidence as to the driver's seat does not prove usage of the vehicle in excess of that which can be accounted for.
The Disc Brake Rotors
When the vehicle was taken back to Prestige Formula on 2 January 2002 the Repair Order recorded many matters, but there was no reference to the brakes.[82] Five other matters which Mr Russo relied upon to argue that it was not a new vehicle were recorded. The first reference to the condition of the brakes is in a letter which Mr Russo wrote to Ferrari on 29 July 2002.
[82] Exhibit P1-62A.
Mr Russo said in evidence that he raised the issue of the brake rotors with Mr Krznaric and Mr Corradini on the phone.[83] Neither Mr Krznaric nor Mr Corradini support Mr Russo's evidence.[84]
[83] T293.
[84] Mr Krznaric’s evidence T903, 955.
Mr Slater recalled the day when the vehicle was raised on the hoist. He said the wheels were removed by Stuart Jones. Mr Slater said he looked at the left front disc rotor and saw "very slight grooves, like dust grooves in the brakes. A little bit discoloured, that was about it".[85] He also said:
I wouldn't say it was excessive wear just as far as marks and heat looked like it had been overheated a little but as far as discolouring, being a grand new car you wouldn't expect - that's what I was looking at, I was looking at a brand new car. I didn't seem to think that was - a brand new car shouldn't have quite that sort of heat grazing or discovering.[86]
[85] T375.
[86] T375.
In cross-examination it was suggested to Mr Slater that he had said there was no excessive wear on the disc rotors and he replied "Not excessive, no. Just a little bit of discolouring… excessive heat, so heavy braking and stuff like that".[87] Mr Slater was not aware that the vehicle may have travelled 750 km. The evidence does not establish that what Mr Slater observed was inconsistent with the vehicle having travelled 750 km.
[87] T380.
Mr Scott Newman, the Service Manager of Prestige Formula, gave evidence that Mr Russo made no complaint about the disc brakes until the letter of 29 July 2002.[88] If a complaint had been made Mr Newman would expect to see some reference to it in the service records. Other complaints were recorded.
[88] T580.
Mr Krznaric could not recall Mr Russo complaining about the brake pads or disks and he said there was nothing recorded on any of the job cards to that effect.[89]
[89] T955.
On November 2002 Mr Kench wrote to Mr Newman dealing with a number of issues with Mr Russo's Ferrari 360 Modena. Mr Kench wrote that the first time he heard the complaint about disc wear was at a meeting on 7 November 2002.
I find that the evidence does not establish that the plaintiff had complained about the brakes prior to 29 July 2002.
Additionally I find that the evidence as to the condition of the brakes does not establish a greater use of the vehicle prior to delivery than can be accounted for. The evidence as to the brake wear is very vague. Even if the brakes did display the characteristics described by Mr Slater and Mr Russo, that does not establish inappropriate use of the vehicle. At most all that the evidence of Mr Slater and Mr Russo does is to establish that the brakes had been used.
Mr Slater thought he was looking at a brand new car which had not been used and his comments must be interpreted in that light. Mr Slater did not allow for the fact that the vehicle may have travelled 750 km. Mr Slater is not qualified to express an opinion as to what his observations of the disc rotors indicated. Taken at its highest the evidence of Mr Slater does not support the plaintiff's claim.
If evidence as to the use of brakes supported Mr Russo's claim for a replacement vehicle it is hard to understand why Mr Russo did not add the brakes to his list of complaints when he took the vehicle back to Prestige Formula on 2 January 2002. The suggested brake wear would have been at least as significant as any of the other matters which Mr Russo did raise.
In summary, the evidence as to brake use was vague and taken at its highest does not support the plaintiff's allegation that the vehicle had received greater use than can be accounted for.
Conclusion as to the Claim that the Ferrari 360 Modena F1 which was delivered to Mr Russo was not a New Vehicle
None of the matters relied upon by Mr Russo establish that the vehicle had travelled more than about 100 km at the time of delivery to him.
The original odometer showed that the vehicle had travelled about 100 km when it was dispatched to Adelaide. I find that was a correct record of the distance travelled at the time of delivery to Adelaide. The distance of about 100 km on the original odometer negates the possibility of incorrect use of the vehicle in Italy or in Sydney.
I find that the distance actually travelled by the Ferrari 360 Modena F1 at the time of its delivery to Mr Russo was about the distance indicated on the original odometer before it malfunctioned, that is slightly more than 100 km.
For reasons discussed below I have found that when the vehicle was returned to Prestige Formula in early January 2002 it had travelled approximately 750 km, all of which can be accounted for. The evidence does not establish any opportunity for the vehicle to have been used as a demonstration car or to have been taken for joyride.
I accept that Mr Russo genuinely and passionately believes that the Ferrari 360 Modena F1 that was delivered to him had been used. I suspect that neither Prestige Formula nor Maranello Imports doubt that Mr Russo is genuine in his belief, however they are both vehement in their contention that the belief of Mr Russo is wrong.
I can understand why Mr Russo formed the belief that the car had been used. However, all of the factors which caused Mr Russo to believe that the Ferrari 360 Modena F1 was not a new car when it was delivered to him in December 2001 have been satisfactorily explained.
The evidence of the witnesses from Prestige Formula establishes that prior to delivery to Mr Russo the vehicle was kept in the Prestige Formula workshop and the that the keys were kept in a safe. Mr Corradini was asked whether there was a possibility that the vehicle had been used in some way between the time when it was delivered to Prestige Formula and the time when the vehicle was delivered to Mr Russo. His response was "Absolutely not. Only to road test the car for 5 or 6 km as we do before handing the car over to the client to make sure everything works".[90]
[90] T784.
Mr Heuzenroeder suggested to Mr Corradini in cross-examination that the car might have been used without the knowledge or assent of the defendant and "There might have been somebody who came in from outside to take it for a spin". Mr Corradini replied " I have got to say definitely not. We have got very secure premises and there is no way that anybody would have taken the car".[91]
[91] T784.
I accept the evidence of Mr Corradini.
Exhibit D17, a record of the mechanics time clock entries, shows that the pre-delivery inspection was carried out on 4, 5 and 6 December 2001, that work was carried out rectifying the right hand door on 11 December and work was carried out on the faulty instrument cluster on 19 and 20 December. There was little opportunity for the vehicle to have been misused in any event.
The evidence of Mr Graham from the Ferrari factory, Mr Kench from Maranello Imports and the Prestige Formula witnesses all establishes that it was a new vehicle.
The onus is on the plaintiff to make out his case. The matters relied upon by Mr Russo to establish an inference that the vehicle had been used inappropriately have all been explained. There is no direct evidence which establishes the inappropriate use of the vehicle. There is no evidence that anybody had taken the Ferrari "for a spin" prior to its delivery to Mr Russo. On the contrary the evidence establishes that there was no inappropriate use of the vehicle.
I find that the Ferrari 360 Modena F1 which was delivered to Mr Russo in December 2001 was a new vehicle.
Was Prestige Formula in Breach of Contract or in Contravention of Statutory Provisions at the time the vehicle was delivered. Merchantable quality. Fitness for purpose
The defendant accepts that the contract was a sale by description and that the Sale of Goods Act applied. However the defendant denies that the evidence establishes that the vehicle was not of merchantable quality or was not fit for purpose for which it was supplied.
Defence counsel submitted that this is not a fitness for purpose case. I accept that submission.
The concept of merchantable quality was discussed in Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387 at 418 in the following terms:
The condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist 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 without special terms.
The relevant time is the time of sale. Crowther v Shannon Motor Co. (1975) 1 WLR 30 at 33.
I accept the submission of Mr Hoile that the Laws of Australia have distilled the authorities on merchantable quality to the following simple proposition:
…that the goods in the form in which they were tendered must be commercially saleable to some buyer or buyers under the description by which they are sold under the original contract of sale at a price not too far removed from the contract price.[92]
[92] Thomson Reuters Laws of Australia online (TLA) 8.4.63.
I find that there is no evidence that at the time it was delivered to Mr Russo the Ferrari 360 was not of merchantable quality or was not fit for a purpose for which it was supplied. The matters relied upon by Mr Russo do not establish that the Ferrari 360 was not of merchantable quality or was not fit for purpose.
There is no evidence that the Ferrari 360 is not a collectable car. It clearly is.
In the space of about 2½ years the Ferrari 360 was driven over 17,000 km. Notwithstanding problems with the gear selection I find that the plaintiff has not proved that the Ferrari 360 was not a reliable mode of transport or that it was not a vehicle which would provide driving pleasure.
Mr Dart referred to s 11(3) of the Sale of Goods Act and argued that the matters complained of can only be treated as a breach of warranty and that there are no grounds to reject the goods. I accept that submission. He argued the plaintiff cannot have a right to rescind if the dealer has fixed the problem.
The imperfection in the paint on the left rear of the bonnet, the sand on the chassis, the scratches on a foot plate and the creasing to the leather of the driver's seat were trivial complaints. They were capable of being remedied and in most cases were. Mr Russo first raised those matters for the purpose of arguing that the vehicle had been used. That is different from suggesting those complaints meant that the vehicle was not of merchantable quality or was not fit for an intended purpose.

There was no problem with the original Pirelli Tyres at the time the vehicle was delivered. The only complaint about the tyres was the absence of vent spew which was only relevant to the issue of the use of the vehicle.
The complaint about wear to the brakes is also only relevant to the question of whether it was a new vehicle or not. There is no evidence that the brakes were less effective because of the signs of wear. The fact that the brakes had been used does not mean that the vehicle was not of merchantable quality or was not fit for an intended purpose.
The evidence does not establish that the blend line on the right rear quarter panel and the misalignment of the engine hatch cover were present at the time of delivery. The vehicle cannot be said to have not been of merchantable quality at the time of delivery because of the blend line or hatch cover.
The engine in the vehicle was subsequently replaced, but there is no evidence that the original engine was defective at the time of delivery. Mr Russo complained that the original engine made rattling noise upon being started. That noise is recognized by the cognoscente as one which is common with the particular type of engine at low revolutions.
If there was any problem with the engine it was not present at the time the vehicle was delivered to Mr Russo. If I am wrong there was a problem that was cured by the installation of the new engine. The vehicle has travelled approximately 15,000 km without any problem since the engine was replaced.
I reject the plaintiff’s claim that the problem with the engine was a latent defect. There is no evidence of any actual defect in the engine.
More than six months after delivery the vehicle started to experience problems with the gear selection. However the evidence does not establish that any problem with the gear selection existed at the time the vehicle was delivered. I reject the plaintiff’s claim that at the time of delivery there was a latent defect in the gear selection and clutch. The fact that problems with the gear selection and clutch arose six months after the vehicle had been delivered does not by itself establish a latent defect at the time of delivery. In order to establish latent defect at the time of delivery the plaintiff must identify the particular defect and establish that such defect was latent at the time of delivery. The evidence does not do that.
Even if the evidence did identify a latent defect at the time of delivery I would not have found that the vehicle was not of merchantable quality for that reason. The problems which manifested themselves were capable of rectification under warranty and have been rectified.
Body Damage
When the vehicle arrived in Adelaide there were a number of minor blemishes. Most have been repaired.
The court inspected the vehicle on Friday 15 October 2010. To the untrained eye it is a most attractive vehicle in pristine condition. A number of features were pointed out at the inspection.
The area of a "dimple" or "dent" as it has been called at the rear on the left-hand side of the front bonnet was pointed out. At first that defect was not easy to see but on very close examination an area of paint about 10 cm in diameter which was a slightly different shade from the rest of the bonnet could be seen. The area corresponds with the "dent" referred to in shipping documents.
The blend line on the right rear panel was pointed out. Once it has been pointed out the blend line is apparent, but unless it is pointed out the blend line would go unnoticed by most people. The evidence does not establish that Prestige Formula is responsible for the blend line. The existence of the blend line does not support the plaintiff's claim. If the value of the vehicle has been reduced because of the blend line Prestige Formula can not be held responsible for that reduction in value.
There is red over spray on the black door pillars. That is likely to have originated at the factory. It is a minor matter which could be easily rectified if required.
Where required, remedial work to the body and paintwork has been carried out.[93] The one exception is the "dent" or "dimple" on the left of the front bonnet.
[93] For example the Prestige Formula internal invoice relating to the pre-delivery inspection (Exhibit P1-67) refers to paint repairs by "Chips Away" and Complete Paint Repairs. The defendants invoice number 205639 to the plaintiff dated 12 February 2002 (Exhibit P1-69) refers to, but makes no charge for, an adjustment of and rectification to the bonnet, rectifying a scratch mark on the inside of the front bumper and repairing a paint defect in the luggage compartment. A Chips Away invoice dated 4 January 2002 (Exhibit P1-71) charged $90 for removing and repainting flaking paint around the front luggage compartment.
Apart from the "dent" or "dimple" on the left front bonnet there is no other body damage which gives rise to an entitlement to relief. Maranello Imports has offered to attend to the "dent" or "dimple" as it has been called.
The gap between the rear engine hatch cover and the body is not equal on each side. It was only when the difference was pointed out with the aid of a key that it could be discerned. The key was able to fit into the gap on one side but not the other. The difference is a matter of a few millimetres. Nevertheless there is a difference.
The misalignment of the engine hatch cover is almost unnoticeable and is a trivial complaint. To the extent that the plaintiff attributes the misalignment of the engine hatch cover to an accident the evidence does not establish that the misalignment is the responsibility of the defendant. There is no evidence of an accident prior to delivery of the vehicle. The plaintiff’s case does not admit the possibility suggested by others that the misalignment might have been caused when the hatch cover was removed during the replacement of the engine.
I am unable to make any finding as to the cause of the misalignment of the engine hatch cover. If the misalignment of the hatch cover has resulted in a reduction of value of the vehicle Prestige Formula is not liable for the reduction in value. I am not satisfied that the misalignment of the hatch cover would result in a reduction in value. It is a trivial feature which would go unnoticed by most people.
Any other complaints about the bodywork or paint have been attended to. I find that there is nothing about the bodywork and paintwork of the Ferrari 360 Modena F1 which demonstrates that the vehicle was not of merchantable quality or which gives rise to any liability on the part of Prestige Formula for any other reason.
THE HISTORY OF THE VEHICLE AFTER DELIVERY TO MR RUSSO
The findings which I have made dispose of the plaintiff's primary claim that he did not receive the new car. They also dispose of any claim for breach of any contractual obligation or statutory provision based on the condition of the vehicle at the date of delivery.
Since taking delivery Mr Russo has made further complaints of differing importance. It is necessary to consider whether any of the circumstances giving rise to the subsequent complaints form a basis for relief.
The relevant events took place many years ago. Contemporaneous business records provide the history of the vehicle. They show the times when problems arose and the way in which the problems were dealt with. They also record the dialogue between the parties. There is no reason to believe that the history revealed by the documents is not accurate.
The Plaintiff's own use of the Vehicle prior to 2 January 2002
One unsatisfactory aspect of the plaintiff's case is Mr Russo's evidence of his actual use of the vehicle between delivery and the return of the vehicle to Prestige Formula on about 2 January 2002.
As I have mentioned Mr Russo maintained that he did not receive the vehicle until 27 January 2001. It was in his interest to push forward the date of delivery because the later the delivery of the vehicle to Mr Russo the less chance he would have had to use the vehicle.
Initially the plaintiff's case was that he picked up the vehicle on 27 January and did not use the vehicle other than for a very short period of driving.[94] In opening the plaintiff’s case Mr Heuzenroeder said "His (Mr Russo's) recollection is that it (the signs of use) was noticed pretty much on the same day that he got the car and he didn't drive it after that". The plaintiff's case was said to be that instead of getting a new car with no more than a hundred or so kilometres on the odometer he was given a car which had travelled as much as 1,000 km.[95]
[94] T44.
[95] T45.
When Mr Heuzenroeder opened the plaintiff's case he said that it was most likely that Mr Russo picked up the car from Prestige Formula on 27 December 2001 and that he drove it to his place of work. It was on that day that the sand on the chassis was noticed and the vehicle was placed on the hoist.[96] Counsel said that at that point the vehicle was driven to the "toy shop" where Mr Russo kept his collectable cars and it remained there.[97]
[96] T52.
[97] T55.
The evidence of Mr Russo was that up until the Kumho Tyres were fitted:
The only driving that got done was from Prestige Formula down to work, then obviously in the workplace which went to City Tyre Mag and I'm not sure, I may have used that night to go home or may not, but that's about it. I may have, which I doubt it very much.[98]
[98] T295.
On his evidence Mr Russo had driven the vehicle less than 100 km when he returned it to Prestige Formula on 2 January 2002.
Mr Russo did not acknowledge that he had driven the vehicle for about 650 km between when it was delivered to him and 2 January 2002. The evidence establishes Mr Russo had used at least one tank of unleaded fuel and some leaded avgas before the vehicle was returned to Prestige Formula. He was evasive when questioned on the topic.[99] On the topic of how the fuel tank came to contain avgas Mr Russo said that he "filled up the vehicle with avgas, accidentally, not realising it was the wrong fuel".[100] He did not acknowledge in his evidence-in-chief that the vehicle had used a tank of unleaded fuel. Nor did he give evidence of the way in which he used the vehicle.
[99] T151, 155, 156, 282, 293.
[100] T280.
Mr Russo's own use of the vehicle for about 650 km could explain some of the matters which he claims show that the vehicle had been used prior to delivery.
Because of the problem with the odometer, ascertaining the distance that the vehicle had travelled between the time of delivery to Mr Russo and January 2002 when the vehicle was taken back to Prestige Formula is not straightforward. However the task is not impossible.
There is evidence that the vehicle had travelled 100 km prior to being delivered to Adelaide. There is also evidence that at the time the vehicle was delivered to Mr Russo the first replacement odometer incorrectly displayed 555 km.[101]
[101] Exhibit P1-80.
On the defendants Repair Order 205639 which is dated 2 January 2002,[102] somebody has written in hand that the odometer reading was "1,200". The Repair Order is a working document prepared in the ordinary course of business. In the absence of other evidence there is no reason why the business record should not be accepted as an accurate record of the odometer reading at the time when the vehicle was taken into the Prestige Formula workshop on 2 January 2002.
[102] Exhibit P1-62A.
Prior to delivery of the vehicle to Mr Russo Prestige Formula had filled the tank with unleaded petrol. The tank contains about 100 L. It can be inferred that Mr Russo had driven the vehicle for at least a sufficient distance to consume the initial tank of 100 L of unleaded petrol before he filled the tank with avgas. The tank could have been refilled more than once but at least the initial tank of 100 L had been consumed.
When the vehicle was delivered to Mr Russo the odometer incorrectly showed that the vehicle had travelled 555 km. If the original odometer showed 100 km before it malfunctioned, the second odometer overstated the distance travelled at the time of delivery by approximately 455 km.
If the reading on the second odometer on 2 January 2002 of 1,200km is accurate, the vehicle had travelled approximately 650 km from the time of its delivery to Mr Russo to increase the reading from 555 km to 1,200 km. That is consistent with the quantity of fuel known to have been used. In addition the vehicle had travelled about 100 km before arriving in Adelaide. A distance of 650 km would not have been an unusual distance for the Ferrari to have travelled from the time of delivery to Mr Russo in late December 2001, whether that was before or after Christmas, until 2 January 2002.
I find that on 2 January 2001 the Ferrari had travelled at least 750 km since manufacture. As I have mentioned that distance could explain why the vent spew had been worn off the Pirelli Tyres at the time they were inspected and could explain other signs of wear complained of by Mr Russo.
Work carried out by Prestige Formula after Delivery
The vehicle was returned to Prestige Formula on 2 January 2002. The relevant events are recorded in the workshop Repair Order which notes the date of delivery and first registration of the vehicle as 21 December 2001.[103]
[103] Exhibit P1-62A - 62 Repair Order No 205639.
In addition to a complaint of lack of power which was attributed to the avgas and the five matters which were said to show that the vehicle had been used thirteen other miscellaneous problems were noted. Most of the problems were minor and typical of the minor adjustments that are required with any new car. The work included touching up paintwork. A minor problem with the thermo fans was detected by the mechanics and rectified, the bonnet was realigned and a scratch near the bonnet lock was repaired.[104]
[104] Exhibit P1-62A - 64, 164 - 165.
Apart from an engine rattle, which I discuss later, there were no residual problems after the vehicle had been serviced on 2 January 2002.
Mr Russo gave evidence that he raised the evidence of wear on the disc rotors on the telephone prior to taking the vehicle in but he did not raise the issue at the workshop.[105] No employee of the defendant has any recollection of the disc rotors being mentioned. As a consequence of my finding that it was a new vehicle, the suggested wear on the disc rotors has become irrelevant. They may have been an indicator that the vehicle had been used but they do not show that the vehicle was not of merchantable quality.
[105] T293.
A time clock entry shows that the mechanic carried out the 1,500 km service on 7 February 2002.[106]
[106] Exhibit D18.
On 20 February 2002 a second replacement instrument cluster was fitted. At the time that it was fitted the new odometer showed 99 km. On the basis of my earlier calculation the vehicle had actually travelled about 750 km on 2 January 2002. If no further distance was travelled from that time the distance recorded on the new (third) odometer at the time it was fitted was therefore at least 650 km short of the distance actually travelled. To the 650 km should be added whatever distance the vehicle travelled between 2 January 2002 and 20 February 2002. Using the SD2 Mr Kench calculated that the vehicle had in fact travelled 1,981 km prior to the new electronic dash being fitted on 20 February 2002.[107] The third odometer which displayed 99 km therefore understated the distance travelled at 20 February 2002 by about 1,880 km.
[107] Exhibit P1-138.
The consequence of replacing the odometer on 20 February 2002 was to replace the second odometer which overstated the distance travelled by about 450 km with the third odometer which understated the distance travelled by about 1,880 km. That understatement of the distance travelled by about 1,880 km has continued until the present time.
On 5 March 2002 Mr Krznaric inspected the vehicle and sent an e-mail to Mr Kench advising:[108]
I have inspected Bill Russo's Ferrari 360 Modena this morning, the following issues are outstanding.
a) Sand on chassis rail.
b) R/H seat leather wrinkled.
c) Tyres worn (pointed out shortly after delivery)
d) Smell from interior.
e) Rattle from engine upon start-up, (lifter noise evident, approx 5 seconds)
f) Fuel gauge inaccurate. (Have advised customer that factory working on solution)
Mr Russo is absolutely convinced that the vehicle was used prior to him taking delivery. I have done everything I possibly can to placate him, but he simply wants a new car. I have told him in no uncertain terms, "that it won't happen & it's just not possible", but he remains resolute. I have advised him that you are coming to Adelaide, and he has requested to meet with you.
[108] Exhibit P1-86.
The e-mail included photographs of the leather seats and the sand on the sub frame. There were no new issues at that time.
On 15 March 2002 there was a meeting between Mr Russo, Mr Krznaric and Mr Kench at City Dismantlers.[109] Mr Russo still wanted to return the vehicle.[110] Mr Kench was adamant that the vehicle was new. Mr Russo had no entitlement to return the vehicle at that time.
[109] Exhibit P1-86.
[110] T186.
On 22 April 2002 Mr Krznaric sent an e-mail to Mr Kench attaching further photographs of the driver’s seat leather.[111] He advised that the odometer reading was 1,648 km. If allowance is made for the understating of the distance travelled by 1,880 km the vehicle had travelled about 3,528 km in the first four months.
[111] Exhibit P1-92.
On 6 May 2002 the vehicle went back to Prestige Formula with complaints about the engine and driver’s seat leather.[112] Mr Russo said that when the engine was started from cold it rattled. It was thought that when the engine was not in use overnight the oil drained to the sump and that it took some time after starting the engine for the oil to be pumped to the valve lifters. The defendant had difficulty reproducing the problem but when Mr Krznaric went to the plaintiff's premises one morning for the specific purpose of listening to the engine when it was started from cold he did hear a noise.
[112] Exhibit P1-89 Repair Order No 206367.
The evidence does not establish that the engine was actually faulty. However it is unnecessary to consider the engine problem further because the factory replaced the engine, without cost, on 6 May 2002. There is evidence that the rattle in question is a common phenomenon with this type of Ferrari engine.
The factory replaced the original engine with another engine bearing the same engine number.[113] The same engine number avoids any suggestion that the value of the vehicle was diminished because the numbers did not match.
[113] Exhibit T34.
I find that the replacement of the engine, under warranty, by authorised Ferrari mechanics, satisfied any claim which Mr Russo may have had as a consequence of a faulty engine. R v Ford Motor Co Ltd (supra). The evidence does not identify any defect in the engine which could be categorised as a latent defect.
The Repair Order indicates that the right hand seat leather was "wrinkled" and replaced. The seat leather also ceased to be a problem in its own right when the leather was replaced.
In a lengthy letter dated 29 July 2002 addressed to "Ferrari Italy C/O Prestige Formula" Glen Osmond Road Frewville marked for the attention of Mr Corradini, the plaintiff set out in 4½ pages of single space typing the history of his complaints.[114] Mr Russo expressed his disappointment at having to wait while the problem with the instrument panel was rectified. He wrote that when he asked why the first replacement odometer was showing 500 km he was told that "Ferrari Italy was under the assumption that the vehicle had already done 500 km". He wrote:
I find this unbelievable when it was under Ferrari's instructions, that the brand-new vehicle could not be released originally with a faulty speedo. If the vehicle is brand-new and has not left the show room - why would they be under the impression that the vehicle had done 500 kms?
[114] Exhibit P1-102.

One can see how that line of thought reinforced Mr Russo's belief that he had not been given a new vehicle.
Mr Russo's letter referred to the sand on the engine cradle, the absence of vent spew on the tyres and the fact that the tyres had been painted. The letter also reported the complaints about the disc rotors, chipping on the wing tunnel, the rubber floor mat, the stainless steel kick plate next to the accelerator and the driver’s seat.
However there was no complaint about a blend line in the paint on the right rear quarter panel and there was no complaint about misalignment of the engine hatch cover.
Mr Russo complained that the bonnet was hard to close and an area of paint two inches by a quarter of an inch had been scratched off. This complaint is evidenced by the documents and I am satisfied that it is genuine. The problem was repaired under warranty.
Mr Russo wrote in the letter that he had telephoned Mr Krznaric, that he went over the issues with him and explained that he believed "that the car has been used (driven) quite considerably before I was allowed to pick it up. It makes me wonder if there was a problem with the speedo in the first place, or an excuse to be able to keep the vehicle in their possession longer".
The letter referred to the problem with the thermo fan, an odour from the carpets which Mr Russo believed was from something spilled on the carpet and a severe rattling from the lifters on first starting the car. He referred to a malfunction of the fuel gauge and the fact that he was told the problem with the fuel gauge was a problem with all Ferrari 360 models from the factory.
The letter refers to a visit by Mr Krznaric together with a person from Ferrari. That was the visit by Mr Kench on 15 March 2002. The letter refers to photographs and to a computer being plugged into the car "to show me that this vehicle had not done the mileage that I feel it has done". Mr Russo wrote:
This computer showed me how many kilometres that were done through the gears. I disputed the amount it showed having done in 1^st gear. He then pointed out that the computer cannot be 100% accurate because it works off a certain sensor and not the gearbox itself.
After numerous discussions with staff from Prestige Formula - re the lifter noise, they decided to replace the engine.
The computer which Mr Russo referred to was the SD2.
The letter referred to the fitting of the new engine and problems with the battery. Mr Russo said that for the first couple of weeks the new engine sounded "good", but after 1,000 km the lifter noise returned and was more severe than it was with the first engine.
The letter referred to an incident when the new engine had reached the 700 km mark. In his evidence Mr Russo said that he had taken the vehicle for a drive and upon stopping at Port Wakefield noticed coolant being discharged. He had the vehicle towed back to Adelaide. Prestige Formula traced the leaking coolant to a clip on a hose that had not been properly fixed. Presumably the hose had been replaced incorrectly after the replacement of the engine. The coolant loss problem was quickly remedied and can be ignored for the purpose of this case.
None of the matters raised in the letter up to that point gave rise to an entitlement to relief, because they were all resolved under warranty. However the letter raised for the first time a new problem with the F1 gear selection. Mr Russo wrote:
Quite often after reversing the vehicle, then selecting 1^st gear, to move forward, the instruments on dash show its still in reverse, go to accelerate and find that no gear has been selected, it is not in drive or reverse.
From the rear of the vehicle there is a thumping sound as if wants to select a gear but does not. This problem has happened quite a few times and nearly causing me to be involved in several accidents, by being stuck in the middle of the road with on coming traffic.
The vehicle had been used for about seven months without any problem with the gear selection. The distance travelled by the vehicle at the date of the letter, 29 July 2002, is not known but on 22 April 2002 the vehicle had travelled 3,528 km and 19 August 2002 it had travelled 4,694 km.
The letter concluded with Mr Russo expressing his disappointment. He pointed out this was his third Ferrari and that after paying $405,000 he would not have expected to have as many problems as he has had. He wrote:
My theory still applies that this vehicle has been considerably used without much care, causing the problems listed above.
I will be returning this vehicle back to your workshop and I expect that it will be replaced with a brand new 360 Ferrari or money refunded in full.
I have found that at the time of the letter Mr Russo did not have a right to return the vehicle. The gear selection problem remained to be rectified under warranty.
On 19 August 2002 the vehicle was again booked in to the Prestige Formula workshop.[115] The performance of the work described in the Repair Order continued until October 2002. The odometer reading was 2,814 km which indicated that the vehicle had travelled about 4,694 km. Amongst other things there was reference to complaints of an excessive engine rattle on start-up, the coolant leak, a problem with the adjustment of the handbrake, seat trim, an inappropriate battery and an inaccurate fuel gauge.
[115] Exhibit P1-113 and D20 Repair Order No 206983.
A section of replacement leather for the drivers seat, which had not been available earlier, was fitted. The engine rattle was investigated and diagnosed as normal. The problems with the handbrake, battery and incorrectly fitted heater, hose clip and fuel gauge were all resolved. None of those matters gave rise to any entitlement to relief.
The mechanic noted the nature of the problem with gear selection. The vehicle was dropping out of reverse into neutral and from first into neutral. The mechanic found that the fluid level was low and discovered a leak which was attended to. The "self learning" procedure was carried out and the system was checked with the SD2. The mechanic noted "Road tested vehicle several times - all appeared to be working okay - SN (Scott Newman) road tested vehicle two or three times”.
The problem with gear selection was not a trivial matter. This was the first occasion on which it was recorded by the workshop.
On 9 October 2002 Mr Newman wrote to Mr Kench.[116] Mr Newman was concerned that the problem with Mr Russo was not going to go away and he said he was looking for a way "to put this thing to bed for good". He recited the history of the vehicle noting the issues which had been dealt with on the five previous occasions when the vehicle was in the Prestige Formula workshop namely 3 December 2001, 2 January 2002, 6 May 2002 and 4 October 2002. Mr Newman noted that the outstanding issues at 9 October 2002 were:
1)     Gear selection issue…
2)     Drivers seat leather…
3)     Rattle in the rear of the vehicle at times.
4)     Engine noise during start-up…
5)     Hand Brake…
6)     Fuel gauge…
[116] Exhibit P1-130.
Mr Newman attributed everything to the fact that Mr Russo believed that the car had been used prior to delivery. He suggested a round table discussion.[117]
[117] Exhibit P1-132.
By October 2002 most of the other issues had either resolved or were on the way to resolution. Of the six issues noted by Mr Newman the most significant was the gear selection issue. The seat leather, the handbrake and fuel gauge problems were attended to. The engine noise during start-up was not a problem. The evidence does not reveal what happened with the rattle in the rear of the vehicle.
Exhibit P1-133 is a photocopy of Mr Newman's letter on which Mr Kench has written his comments. Alongside Mr Newman's observation that Mr Russo believed that the car had been used prior to delivery Mr Kench wrote the words "Not true was proven at my visit. 15 March 02".
The evidence of Mr Kench refers to his use of the SD2 system when he came to Adelaide on 15 March 2002, but the evidence does not establish precisely what was demonstrated. Whatever the diagnostic system did show on 15 March 2002 it obviously never satisfied Mr Russo that he had been provided with a new vehicle.
Mr Kench travelled to Adelaide for a further meeting with Mr Russo on 7 November 2002. Mr Russo prepared a document which listed the following nine topics for discussion:
1.     Left-hand Sunvisor mirror--badly scratched
2.     Left-hand scuff plate--blemished/stained
3.     Left-hand side top end of bonnet -- Dent and paint mismatched.
4.    Damage to lh wheels - (said to have been caused by Mr Russo having to push the car when the gears would not select and hitting the curb)
5.    When slowing down and dropping down gear, between 2^nd and 3^rd occasionally thumbs into gear
6.    On takeoff--occasionally kangaroo hops
7.    Rear part of roof where black paint meets tailgate bubbling and misaligned.
8.    Right-hand door jam and hinge area. Runs in paint and red still showing where should be black
9.     Headlights are not adjusted correctly...[118]
[118] Exhibit P1-137.
Of the problems which existed at the time of delivery the only one which remained was number 3, the dent of the left-hand side top end of the bonnet. Items 5 and 6 related to the gearbox and clutch, which had been the subject of an earlier complaint, but the other complaints described in Mr Russo's document are different from those discussed in Mr Newman's letter in October. Some of the matters raised at the November meeting were new complaints. The engine noise was no longer on the list.
Mr Russo’s list did not include a blend line on the right rear panel or misalignment of the engine hatch cover.
Mr Russo still wanted his money back or a new vehicle. That was something which the defendant would not even consider.
With the exception of the gearbox and clutch problems, the nine items listed in the document were relatively minor. None of the nine items which were listed gave rise to an entitlement to rescind the contract, but they were the medium used by Mr Russo to keep his demand for rescission alive.
In a letter to Mr Newman dated 13 November 2002 Mr Kench indicated that he was happy to pay for the repair of the dent or dimple in the bonnet (third item).[119] The dent in the bonnet is a relatively minor defect which has existed from the time the vehicle was delivered in Sydney until the present time.
[119] Exhibit P1-138.
In his letter Mr Kench set out the response of Maranello Imports to the matters raised in Mr Russo's letter of 29 July 2002 and the nine issues raised in the document for discussion at the meeting on 7 November 2002. Mr Kench's letter contains a convenient summary of the position of Maranello Imports at that time. Mr Kench noted that the meeting with Mr Russo on 7 November 2002 was the first time that he had heard of the complaint about wear on the disc brakes and paint chipping in the wind tunnel. Those matters were not included in Mr Russo's list for the meeting. Mr Kench wrote that the painting of the floor mats was a detailing matter.
Mr Kench wrote that he had inspected the driver’s seat leather and because of Mr Russo's concerns agreed to renew the leather on the right hand seat under warranty. However he wrote that he had advised Mr Russo that in his view the marks on the seat leather were normal and consistent with other leather seats he had inspected. Mr Russo's complaint about the seat leather had changed from an observation which indicated inappropriate use of the vehicle to a complaint about the quality of the leather.
So far as the problem with gear selection was concerned Mr Kench advised that he had spent time training a mechanic and was disappointed that Mr Russo had not arranged for the car to be available during his visit to Adelaide when it had been booked in one month in advance. Mr Kench made suggestions for dealing with each of Mr Russo's outstanding problems.
The vehicle was next booked into the Prestige Formula workshop on 30 December 2002.[120] The Repair Order recorded that the vehicle "thumps into gear when slowing down". In addition the vehicle was kangaroo hopping intermittently. They were not the same as the earlier complaints about gear selection. The F1 actuator was reset in accordance with instructions from the factory. An SD2 report was sent to Mr Kench. At that time the odometer reading was 6,435 km, which indicated a total distance travelled by the vehicle in its first year of about 8,315 km.
[120] Exhibit P1-148, 149.
On 11 March 2003 the Ferrari was taken back to Prestige Formula for a new battery.[121] The odometer at that time read 7,000 km so that the total distance travelled by the Ferrari would have been about 8,880 km. The vehicle had travelled approximately 550 km since the end of December 2002. There was no reference in that Repair Order to any problem with the clutch or gear selection.
[121] Exhibit P1-152.
Mr Kench came to Adelaide on 20 March 2003 with Mr Graham, the Technical Service Manager, of Ferrari.
In a letter to Mr Corradini, dated 2 April 2003, Mr Kench advised that an arrangement had been made for Mr Russo to bring his car in to be checked for the gear selection problem with the Ferrari representative, but Mr Russo did not arrive at the dealership or call to arrange a convenient time.
The vehicle was booked in to the Prestige Formula workshop on 19 June 2003 with the note "The vehicle won't select gears".[122] The mechanic noted that he checked vehicle for difficult gear change and found the selespeed reservoir empty.[123] A leak was detected and attended to. The vehicle was road tested and there were still problems changing gears. The mechanic had to bleed the hydraulic system several times to remove air. There was difficulty with the "self learn" and the mechanic had to repeat the process several times before it would complete the "self learn" procedure. Upon completion of the work the mechanic road tested the vehicle and noted "All appears to be okay now". The invoice for warranty purposes described the work carried as:
Vehicle won't select gears. Rectify oil leaking from selespeed pump to power unit oil pipe union at power unit end. Washed off and repair, refill oil and bleed system.[124]
[122] Exhibit P1-156, 157.
[123] Exhibit P1-156 Repair Order No 208953.
[124] Exhibit P1-174.
The odometer reading was 9,400 km indicating a total distance travelled of about 11,280 km. The vehicle had travelled approximately 2,500 km during the previous month. Any difficulty with the gear selection had not prevented the vehicle from being used.
There is a handwritten note on the Repair Order that Mr Russo wanted to discuss paint issues when he collected the vehicle.[125] The evidence does not disclose what those paint issues were or whether any discussion took place.
[125] Exhibit P1-156.
On 30 July 2003 the vehicle was booked into the workshop because "(illegible) after reversing - hard to select reverse?"[126] However the Repair Order is endorsed "Didn't show", although some words in the description of the problem have been obliterated the problem noted at that time was not the same as the earlier gear selection problems.
[126] Exhibit P1-176 Repair Order No 209276.
The vehicle was booked in for a 10,000 km service on 22 August 2003.[127] One record of the work done at that time noted "Gears won't select intermittently. Check faults - reset system - has moved since last set up".[128] Investigations were carried out using the SD2. The mechanic liaised with Mr Kench who contacted the Ferrari factory and arranged for the SD2 information to be checked. The odometer reading was 10,840 km which indicated a total distance travelled of 12,720 km. The vehicle had travelled about 1,400 km since 19 June 2003.
[127] Exhibit P1-177 Repair Order No 209469.
[128] Exhibit P1-181.
On 19 September 2003 the vehicle was returned to Prestige Formula because the F1 pump was inoperative.[129] The odometer reading was 11,285 km, indicating a distance travelled of about 13,165 km, an increase of about 445 km since 22 August 2003. The F1 pump was replaced. The vehicle was road tested and the mechanic noted:
…Checked auto trans operation on the road/test. Rechecked parameters and errors after the road test - all appears to be working ok and there is no error in the system…
[129] Exhibit P1-182 Repair Order No 209675.
On the basis of that note any problems with the gear selection had been resolved.
On 13 November 2003 Van Dissels, the plaintiff’s solicitors, wrote to The Manager, Ferrari s.p.a. summarising the plaintiff's position at that time. The letter set out the plaintiff's background and referred to the fact that he was the owner of three recent model Ferraris and had a fourth, a Stradale Challenger, on order.[130]
[130] Exhibit P1-196.
The letter asserted that the Ferrari 360 Modena F1 had been back to the dealer on three separate occasions since Mr Russo's letter in relation to transmission problems and that the dealer had failed to provide a remedy. The letter continued:
Our client is of the opinion that he has been sold a used and abused vehicle instead of a new, unused one. He is further of the opinion that if he were to have the vehicle examined by the local motor vehicle safety authority, the vehicle would be defected and classified unfit to drive. We doubt that this would enhance the reputation of your company's product in this country, especially if the local news media were to become involved.
Our client’s position is that he does not want to own this vehicle and intends to return the same to the local agent seeking a refund of the purchase price.
As our client already has a new Ferrari on order we suggest that one solution might be for you to instruct the agent to accept the vehicle back and credit its purchase price against the new one on order. This will avoid the cost and embarrassment to your company of taking this problem to the authorities and litigating the same in Court.
Mr Kench read the solicitors letter and advised Mr Graham of Ferrari:
…Yes he has had a few problems with the car and for me I think the biggest problem has been the lack of communication between the customer and the dealer. The problem of the transmission not selecting gears has been a problem mainly because the dealer has not been able to reproduce the fault. But I believe the customer has a problem because we also have had similar complaints of that kind here in Sydney. To date they have checked, adjusted and replaced many things in the F1 shifter trying to overcome this problem… (my underlining)[131]
[131] Exhibit P1-198.
On 27 November 2003 Mr Kench made a handwritten note of a discussion which he had with Ben Adams of Prestige Formula[132] who advised that he had been contacted by Mr Russo on 26 November 2003. Mr Kench summarised the discussion with the words:
…Still has same problem. Won't come in. Let lawyers sort it out. Want new car for nothing. Owns lemon from new.
[132] Exhibit P1-199.
On 18 February 2004 Mr Kench sent an email to Mr Graham referring to the fact that it was intermittently hard to select first and reverse gears.[133] He mentioned that it was the same car that Mr Graham was meant to inspect the previous year and noted "He (Mr Russo) was going to trade the car on his new 360 CS which he collected last month, but has now decided to keep the car".
[133] Exhibit P1-208.
The email to Mr Graham referred to a clutch problem. The evidence does not reveal how or when the clutch problem developed. The clutch problem seems to be something different from the problem with the F1 gear selection. Mr Kench commented that the parameters from the SD2 system showed that the clutch was dragging very badly to the point where the car wanted to pull away on flat ground in gear with no throttle. He asked whether the experts at Ferrari could offer a solution.[134] Mr Graham made suggestions which Mr Kench passed on to Prestige Formula. Prestige Formula followed up the suggestions and reported back to Mr Kench.[135]
[134] Exhibit P1-210.
[135] Exhibit P1-208.

On 25 February 2004 Mr Kench advised Mr Horvat at Prestige Formula that the Ferrari factory had reviewed the information which Prestige Formula had provided and in the opinion of the factory it was a mechanical problem. Mr Kench advised Mr Horvat to "Pull the gearbox" and made some suggestions as to what Mr Horvat should look for.[136]
[136] Exhibit P1-219.
Mr Horvat followed the advice of Mr Kench and on 26 February reported his observations as to the wear on the clutch and flywheel to Mr Kench. He emailed photographs.[137]
[137] Exhibit P1-220.
On 31 March 2004 the clutch was replaced under warranty.[138]
[138] Exhibit P1-201 Repair Order No 210867.
At that time the odometer reading was 13,689 km, which indicated a distance travelled of about 15,569 km, an increase of about 2,400 km since 19 September 2003.
Events since the replacement of the Clutch
In cross-examination Mr Russo agreed that on the last occasion the car was returned to him from Prestige Formula he was told "that it was all repaired" and "that the gearbox and everything was working correctly".[139] That was on 31 March 2004. There is no evidence of any problem with the clutch or gearbox since that time.
[139] T262.
On 8 July 2004 the plaintiff’s solicitors wrote again to Prestige Formula repeating their client’s claim.[140] They asserted:
Our client is of the opinion that your company has misrepresented the vehicle by selling it as a new vehicle. He believes that the vehicle was a used vehicle and one that had been used without a great deal of care.
[140] Exhibit P1-222.
The solicitors threatened that unless the purchase price was refunded proceedings would be issued.
I have already determined that the allegation that it was a used vehicle is not correct.
On 27 July 2004 Mr Graham wrote to Mr Kench referring to a meeting with Mr Russo the previous week.[141] Mr Graham wrote:
…The points or previous problems that the customer raised during our meeting with regards to the 360 Modena Chassis No. 126072 have all been resolved, and accepted in the normal warranty process.
It is fully understood by all parties that there has been some issues with the car that now have been repaired, but did take some time to fix and that was not the fault of the Importer or the factory.
Mr Russo felt the car was not supplied in a new condition, I can assure you that the car left the factory with 99 km’s on the speedometer. I can write a letter confirming that the car left in a new condition with this mileage… (underlining added)
[141] Exhibit P1-223.
It is significant that Mr Graham, following a meeting with Mr Russo, believed that the points or previous problems had all been resolved. If what he said in the letter is correct that should be the end of the matter. He had no reason to misstate the position. I accept the statement of Mr Graham as an accurate summary of the position at the end of July 2004. It is evidence that Mr Russo had accepted that the issues with the car had been resolved.
Mr Kench wrote to Mr Russo on 2 August 2004[142] referring to the meeting with Mr Graham a week or so earlier. He wrote:
…It was a shame that on the day your 360 Modena was not available for inspection (as requested) especially in light of the new issue you raised during the meeting of the paint defect on the rear guard. I would be happy to inspect and address this problem at your earliest convenience. (my underlining)
[142] Exhibit P1-225.
That letter is the first documentary reference to a paint defect on the rear guard. There is no evidence that Mr Russo disputed the statement by Mr Kench that the paint defect on the rear guard was "a new issue". Mr Kench’s letter then addressed other issues and offered a warranty extension.
The plaintiff’s solicitors did reply on 16 August 2004 saying that Mr Russo had not been asked to make his vehicle available for the meeting and that had he been asked it would have been made available.[143] As to the "paint defect on the rear guard" the solicitors advised that it was a mark where the paint appears to have been blended and has not matched perfectly. They said:
The fact that this mark is visible suggests that, at some time before the car was delivered, the rear guard has been repainted. This, combined with the fact that the bonnet and tailgate do not line up correctly, indicate that the vehicle was involved in an accident before being delivered to our client. Our client was not made aware that the vehicle had been involved in any sort of accident and these defects support our client’s opinion that the vehicle had been used prior to his taking delivery.
[143] Exhibit P1-229.
However the solicitor’s letter did not challenge the statement in Mr Kench’s letter that the paint defect on the rearguard was a "new issue".
There is no factual basis for the statement that the rear guard had been repainted "some time before the car was delivered". Nor is there any factual basis for the assertion that the vehicle had been involved in an accident. The assertion that the vehicle had been involved in an accident had never been made previously. It has now been developed as part of the plaintiff's case.
The solicitor's letter also contained the first suggestion that the bonnet and tailgate did not line up correctly.
The solicitor's letter referred to other issues which had been agitated previously and advised that "a new clutch has now been fitted in an attempt to rectify the gear selection problem. Our client has yet to have an opportunity to test the vehicle but doubts that this will rectify the problem". Importantly the letter made no assertion that the clutch or gear selection problems had not been resolved.
The mechanics who tested the vehicle after the work had been carried out on both the F1 gear selector and the clutch respectively recorded that the clutch and gearbox were working satisfactorily. There is no evidence of further problems with the clutch and gearbox since the end of March 2004.
The solicitors repeated that Mr Russo no longer wished to own the vehicle and they requested a full refund of the purchase price. Again legal action was threatened. The positions of the parties had become entrenched.
The Return of the Vehicle to the Prestige Formula Showroom on Consignment
On 12 July 2005 Mr Russo wrote to Prestige Formula advising "the vehicle has now been returned to your premises and you are hereby put on notice that I have this day rescinded the contract to purchase the vehicle".[144]
[144] Exhibit P1-236.
The vehicle was returned to Prestige Formula and placed on the defendant's showroom floor for sale with a price of $310,000.[145] Mr Corradini said that he agreed with Mr Russo that the defendant would take the vehicle on consignment. Mr Corradini denied that the defendant agreed to rescind the contract.
[145] Exhibit P1-242.
Mr Corradini gave evidence that every time Mr Russo said that he wanted to return the car Mr Corradini assured him that the car was a new car and the problems would be sorted out so they kept on working on the car to give him what he wanted. Mr Corradini said Mr Russo never told him "Keep the car, I don't want to take it back".[146]
[146] T760.
Mr Corradini gave evidence of a discussion with Mr Russo in relation to on selling his car. He said that Mr Russo decided to leave the car on consignment, Prestige Formula listed the car for sale, placed a schedule on the vehicle and tried to sell the vehicle. Mr Corradini recalled "seeing the car parked downstairs for a while and then it just disappeared and I assume that Bill obviously took the car back".[147]
[147] T763.
Prestige Formula never accepted the “rescission” referred to in Mr Russo’s letter of 12 July 2005. The purported rescission was ineffective.
The vehicle was removed from the defendant’s premises and is now stored at the plaintiff’s premises. The evidence does not establish the circumstances in which or by who the vehicle was taken back to the plaintiff's premises. In particular the evidence does not establish that Prestige Formula placed the Ferrari on a trailer and returned it to the plaintiff's place of business as alleged in para 75 of the Further Amended Statement of Claim. It is unnecessary to make any finding as to how the vehicle was returned to the plaintiff’s place of business. The vehicle has remained in the possession of the plaintiff ever since.
The Present Condition of the Vehicle
There is no evidence of problems with the gearbox and clutch after the repairs in March 2004. Between the replacement of the clutch on 31 March 2004 and 25 August 2010 when the vehicle was valued by Mr Panagaris the vehicle had travelled a further 1,694 km.
The Ferrari 360 Modena F1 is not Mr Russo's only form of transport. He uses other vehicles from his collection. His new Ferrari 360 Stradale Challenger was delivered in January 2004. Mr Russo said that the vehicle he uses most is a Commodore 202 utility.
The evidence does not establish that there are now any problems either with the clutch and gear selection or otherwise with the Ferrari 360 Modena F1.
If there had been problems the distance of 1,694 km which the vehicle has travelled since 31 March 2004 should have provided a sufficient opportunity for them to be identified.
Findings with respect to Events since the date of delivery
I find that the plaintiff has not proved that the vehicle was not of merchantable quality.
I find that the plaintiff has not proved that the vehicle was not fit for its intended use.
The odometer shows that the vehicle has travelled about 17,262 km from the time of delivery up until the time when Mr Russo stopped using it.
The vehicle was fit for the purpose of being a collectable car.
The evidence does not establish any engine problem.
The evidence establishes that there were difficulties with the gear selection and clutch, but those problems did not prevent the vehicle from being used. There is evidence that when the gear selection problem occurred the vehicle could be switched off for a short time and then restarted. Alternatively, the vehicle could have been used in the automatic mode. There is no evidence that the vehicle still has gear selection and clutch problems.
The only outstanding issue with respect to the body and paintwork is the area of about 10 cm on the bonnet in the area of the "dimple". The defect is very difficult to see and is a minor matter. Maranello Imports has offered to fix it.
The evidence does not establish any basis on which Prestige Formula could be liable for the blend line on the right rear quarter panel or the misalignment of the engine hatch cover.
There is no basis on which to find that Prestige Formula is in breach of any contractual or statutory obligation. The evidence does not establish a breach of the condition implied by s 14(a) of the Sale of Goods Act. The plaintiff is not, and never has been, entitled to rescission of the contract or to return the vehicle. It is therefore unnecessary to consider the consequences of the plaintiff’s conduct and continued use of the vehicle.
The plaintiff's claim must be dismissed.
Ancillary Matters
As a consequence of the findings which I have made there is no reason to consider the opinions of Dr Thomson, Mr Skothos and Mr Panagaris.
In addition to the claim for breach of contract and the claim based on the Sale of Goods Act the plaintiff's case purports to invoke the Trade Practices Act 1975, the Fair Trading Act 1987 and the Misrepresentation Act 1972. The evidence does not establish any basis for relief under those provisions. First, the plaintiff has not established any relevant representation or conduct. Secondly, the plaintiff has not established the falsity of any representation or that any particular conduct was misleading or deceptive or likely to mislead or deceive. Thirdly, the plaintiff has not established reliance upon any particular representation or conduct and finally, the plaintiff has not established damages as a consequence of reliance.
The plaintiff has not established an entitlement to relief under the Trade Practices Act, the Fair Trading Act or the Misrepresentation Act.
Mr Heuzenroeder also referred to estoppel. The question of estoppel only arises if the plaintiff was induced to refrain from exercising his rights as a consequence of some conduct on the part of the defendant. I find that the question of estoppel does not arise because the plaintiff never had any relevant rights which he refrained from exercising as a consequence of the defendant's conduct.
It is unnecessary to consider the interesting question of whether the plaintiff is entitled to Baltic Shipping damages for loss of enjoyment of the vehicle.
Paragraph 66 of the Further Amended Statement of Claim alleges that the vehicle had "various faults". For reasons which are already stated none of the faults listed give rise to an entitlement to relief. Any significant "faults" have been dealt with under warranty. The allegation in para 68 of the Further Amended Statement of Claim that the defendant has been unable to or has refused to take adequate steps to repair the faults identified in para 66 is not made out by the evidence.
There is a list of the problems in the plaintiff’s written submissions.[148] The only complaint of any substance which has been made out is the complaint about the clutch and gear selection. That problem has been resolved.
[148] Plaintiff’s written submissions para 21.
I have found the evidence does not establish that there was a problem with the engine and that the evidence does not establish that the defective repairs to the right rear quarter panel and misalignment of the engine hatch existed at the time of delivery.
Some complaints such as the thermo fans and problem with the radiator hose were minor and were quickly resolved under warranty. Other complaints of the plaintiff have either not been made out by the evidence, have been resolved or are so trivial that it is unnecessary to discuss them.
Mr Dart submitted that the plaintiff's case has established an elaborate legal framework, but when the facts are examined the case falls away. I respectfully agree with his analysis.
As between the plaintiff and the defendant there will be judgment for the defendant. I will hear the parties as to costs.
Conclusion as between Defendant and Third Party
The defendant sought an indemnity in respect of the plaintiff's claim. The plaintiff's claim has been dismissed. There is therefore no liability to be indemnified against.
I will hear counsel as to what order should be made in the third party proceedings and as to costs.

[77] T386.