Sheppard, A.R. v Noyes Brothers Pty Ltd

TRADE PRACTICES - false representation as to model and engine of

motor vehicle - measure of damages - Trade Practices Act 1974,

ss.53,

8 2 .

Trade Practices Act 1974, 55.53, 82.

A . R . SHEPHERD and G.M.	SHEPHERD v. NOYES BROS.PTY.LIMITEJ3
QLD. G98 of 1983

CORAM:	Spender J.
Brisbane

4 Ju ly 1985

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

)	QLD G98 of 1983

GENERAL DIVISION

)

BEXWEXN:

- -

ALAN RONALD SHEPHERD	and
GLENDA MAY SHEPHERD

Applicant

AND:

NOYES BROS.PTY.LIMITED

Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER:	Spender J.
DATE OF ORDER:	4 July 1985
WHERE MADE:	Brisbane
THE COURT ORDERS THAT:

There be judgment for the applicants against the respondent in the sum of $4,500.00.

Note: Settlement and entry of orders is dealt with in Order 36

of the Federal Court Rules.

I N THE F D E R I L COUKT OF

AUSTRALIA

)

-	OWXNSLAND DISTRICT FZGISTRY	)	QLD G'3R of 1983
GENERAL DIVISION	)

6 , T W E E N :

Applicant

'AND :

k J m S BROS.PTP.LINITED

Kespcndent

-	SFENDm J.
4 JULY 1985

RZASONSFOF. JUDGMENT

This is an application for re l ief pursuant to s.82 of the Trade Practices Act ("the Act"; arisinq fcom an alleged contravention of s.53(a) of the Act, which prov>des:-

"A corporation shall

not, in trade or commerce. in

connexion with the supply

or possible

supp ly of

goods or services or in comc-xlcln with the prosotion by any means of the supply or u s e of goods or services -

( a )

f a l s e l y

represent:

that goods are of a

particular

st ndard,

quallty,

grade,

composition, style or model

o r have

had a

particular history or particular previous

u5e;

...

The applicants, on about 16 June, 1983. purchased a.

Volvo F06 prime mover from the

respondenr. for $5,595.00.

There are two principal issues.

The first 1 s whether

the respondent, contrary

to s.53 of the Act, represented that the

prine mover was

a 1374 model and h3.d a 210 h.p. motor. The

second,

contravention is established,

1 s what ere the

damages properly to

be itwarded for such contravention.

On Sunday, 6 June, 1982, the respondent advertised

the "Sunday Sun" of that date

U Volvo F86 prime mover. Under the

logo of the respondent, the advertisement set

out the following:-

"VOLVO F86 PRJME

MOVER

Single drive, 211) turbo

motor, highway diff

, new

paint. Factory rebuilt

motor with warrentv.

. -

WILL TPADE CAN FINANCE

Corner Sandqate

& Zillmere

Roads,

V I R G I N I A

Phone: 265 1920

AIHrs: 204 2864"

I find that in response

to that advertlsemenc, Mr.

Shepherd, on behalf

of the applicants went to the premises

J!Ioyes

Bros. Pty.Limited

anci there inspected

a Voivn

F86 prime

mover.

The Defence of the respondent admits

that IC caused to be

3 .

published in the newspaper "Sunday

Sun" of

S June,

1982, the

advertisement I have just referred to. and that

It ;?as an express

term of the advertisement that	that motor vehicle had	a '210
turbo rllotot-'.

At the

hearing it was

admitted by the respondent that

the vehicle

so ld tc? the applicants for $9995.00 aas

not a 1974

vehicle but, was

3 1970 vehicle and was equipped. not with a 210

h.p. motor, but

wlth a motor of lesser horsepower.

The question of

liability

really

cones docm ti, a

conflict between the evidence

of the male applicant and one,

Frank Curcio.

Mr. Curcio, a salesman at the relevant time fcr

the respondent, gave

an account that the

vehlc1.e purchased by Mr.

Shegherd was not the one advertised, hut

was a second truck which

had been repalnted, as had the vehicle advertlsed.

If that account be correct, it is a

curious feature that

no documentation

of any kind exists in relatjon to the sale

the vehicle advercised in the 'Sunday

Sun".

No information of

any kind can be ylven as

to the engine number of that vehlcle,

Its registration number, its year of manufaccure, the name

of the

purchaser, whether any order form or rsther

document was used by

the respondent in connection

with that

sale, or any wrltten

guzrantee In relation to its engine. In particular, no record of 'any holding deposit Mr. Curcio said had been paid in respect of the sale of the advertised vehicle at the time of his deallngs with Mr. Shepherd has been produced.

Particularly in the light

of this extraordinary

abser.ce,

I am satisfied that the vehicle

which the respondent 50ld to the

applicants was

the vehicle represented in the advertisement

the "Sunday Sun" of 6 June. I am satisfied that t.hat vehlcle vas represented to Mr. Shepherd by Mr. Curclo as bemg a 1974 model equipped with a '210 turbo motor.

As to the model of the vehicle

mld. Mr. Shepherd sald

in evidence that

indicated to Mr. Curcin at the tlme of

purchase, "The year is not really relevant. It

has

to be a qoud

truck and it

has to be a smooth

truck."

One aspect upon which it

is not necessary to dwell at

any length is what occurred after Mr. Shepherd wac aware that the

vehicle had been fitted

~71th

a smaller enqlne. In this reqard, I

accept the. evidence of

M r . Curcio that he aqrfed to

all057 the

vehicle'to

be traded in at its purchase price on

the sale of a

larger-powered

vehicle If and when

such

vehicle

became

available; that It was hoped that such a vehicle would hecmne

available aftfr Christmas but that that hope proved groundless;

and that later an attempt 1.7.3s

made by the respondent to sell the

vehicle for $9,995.00 on

Mr. Shepherd's behalf. That account, I

find, is to be preferred to what seems to

me to be the ~nherencly

lmprobable account given by Mr. Shepherd.

The second question involves

what damages ouqht properly

to fl.03 from the contravention I find established in relatlon to

s.53(al of the Act.

The applicants' clalm contained a very large

component for loss of profits.

The respondent forrally admitted

that the vehicle sold to the applicants was fitted with a

T1370A

motor, was a 1970 model, and that its value as	at 31 January 1983
was $6,000.00.

The applicant puts

his claim for damages in this way.

In addition to the diminution

in value between the

pcice f o r

which it was sold and the value of the vehicle at the time of its sale, the applicant claims to be entitled to damaqes based on a notional loss of proflts. This calculation was 'Issed on the

assumption that the normal time icr

a Brisbane to Townsville trip

is 18 hours, 16 hours of which was driving time, whereas with

this underpowered vehicle the trip took

30 hours.

If the vehicle had been

a s represented, it

would have

been possible, based

on those assurr,pt:ons.

for the vehicle

t o

have treve.lled

an extra 16 return trips to Townsville in the

week pericd from July 1982 to December

1982.

Those extra

trips were said to involve

a net loss before Income tax

$19,000.00. This calculation was bised on the circumstence

that,

according to Mr. Shepherd, the revenue for the trip frm Brisbane

to Townsvllle, with a back loadlng of $525.00, was $1,250.00.

This made qross revenue

of $1,775.00 per trip. The extra expenses

said to he incurred in respect

of those 16 trips were some

$9,400.00.

These figures were

put into evidence by

Mr. Magoffin,

an accountant from Cooper,

Booth G Associates; it was clear that

hls computations were based completely	on information supplied	by
Mr. Shepherd.

c .

Secondly, it

was said on behalf

of the appiica-nts that

In early December 1282. they

had t o ntodlip an Internstlonsl 1Cl5(:1C

truck for

the purposes

of undertaking the

$?ark that the Volvo

vehicle was incapable

of performing.

This modlfication was s a d

to cost $575.00 and was claimed to be properly allowable 2 s an eypense incurred by the applicants to mitlgate their

loss.

Next it was claimed that there was

loss of earnings from

1st Janluary 1983 to 31 March 1985. On the same assumptions as In

the first exercise, it was calculated that in thls 117 week

period the vehicle could have	beer. profitably employed for a
total of 105 weeks.

On the additional mileaqe

if an average speed of 82 kms.

per hour had been Schieved, as conpared

with the 50 kms.

per hour

that the Yolvo

was able to achieve, there would have been 78

extra trlps. This, it was calculated, ~7ould

have lead to an extra

$138,450.00 revenue less extra expenses

of $69,450.00. ieavinq a

net amount before lncome

tax for this period

$70.000.00,

The premises on which the

calcu1at:ons are based are

open to serjous attack.

The calculation of

loss

profits

based

on Mr.

Shepherd's figures show that

respect of a vehicle purchased

$5,995.00,

the

arninss

were

something

excess

$41,000.00 p.a. net profit before

tax, after allowing

$ & O C . O O

per

week for 4s weeks for wages.

To abandon 3 vehicle as being

I .

useless when

It vas able to make that sort

of return is a

conslderation whlch highlights

the

unacceptabllity

and

linrellability of the factual premises which

1.ead to such fi.qures.

i accept

the evidence that in respect of the Volvo F85

truck there were

only 2

turbo-charged engines which could be

fitted to such a truck. These bore the labels TD70A and

TD7OB.

The TD70B

engine was more powerful than the TD70A.

was 207

horsepower on the DIN basis of evaluation compared witn the horsepower rating of 185 on the EiN ratjnq for the TD70A motor-. On a dlfferent basic of comparison, uslnq th- output assessment

based on

the Society of Motor Fanufacturers

find Traders basls,

the TD70A at 2,400 r/mln. was

170 h.p. while the TD70B enqzne had

an nutput at 2,400 rlmin. of

192 h.p.

I accept further that In

trade clrcles and

In the automotive communlty the horsepower

ratlng is .rounded

.+wards to the nearest

z e r @

so that, based on

the DIN rating, the TD7OA is referred to as havinq d l90

h.p.englne and the

TD70B as having

210 h.p.

t - a ~ i n g .

Furthermore, the widenc?

establishes thzt each vehlcls

fitted with either

of those engines is governed 50 that the

maximum revolutions are 2,400 rlmin.

In respct of 3 vehlcle

fitted with either of those englnes,

the maxlmum speed, I accept,

1s of the order

of 52 m.p.h.

The more powerful TD70B motor has

torque of 445 f a o t lbs. while the torque for the	TD7r)A engine 1 s
398 foot lbs.

0 .

In the light

these fjgures, wh:lle I accept that

vehicle equipped with the moce powerfd motor would

be able to

traverse the journey

from Brisbane

to Townsville more

qu1ckI.y

chan a vehicle fitted with the less powerful engine. Lhe cruclal	I
assumptions behmd the assessment of aotinnal loss of proflts by
Mr. Magoffin are not correct.

C r . Frank

Wllliam Grigg, an engineer,

gave evidence In

very general term2 the effect of which was that

a r.ruck fitted.

with the hlgher performance engine w x l d be

able to q p t through

the distance much more quickly and

with less driver fatigue than

the vehicle

with the lower-rated engine.

lJhile one can accept the correctness

of this very broad

brush approach, in

my vie57 the evidence

glrren by Chrlstopher #John

Bleakeley,.a consulting engineer, was of much more assistance. I found Mr. Bleakeley a very irrtpressive witness. He concluded that over a glven trip the difference in time between vehicles fitted

wlth the

A motor and the

E motor would he of the order of 10%.

Moreover, he said that to coinplete the Rrlsbane

t9 Townsvllle

trlp, which 1s of some 925

nlles, in 16 hours drivlnq tlme wguld

require horsepover in excess of 300 h.p .

and prcbably clQseL to

350 h.p. Since the gear rat10 of the F86 Volvo vehlcle limirs that partlcular vehicle to 2 tap speed of about S 2 m.p.h . ,

1t ~5

not sultable

for long distance journeys.

Ir. muld be unsuicable

for such a

~ o x n e g

regardless of ghich of the TD70 engines was

flrted to It.

It	follows, in my view, that the farcual premises on

which the applicants' clalm for damages

is based,

?.re not made

out. Mith the 210 h.p. motor the trip could be not done in anything like a driving time of 16 hours. Tr,at calls €or a

performance by the vehicle which

is simply not attainable.

There are other defects in the assumptions made by Mr.

Maqoffin. 1

indicate that, in the absence of any documentation,

indeed

any

acceptable

evidence

as to the sc'urces

and

availability of work from Rrisbane

to Toc~nsv~l:e and of

hack

loadinqs from Townsvllle to Brisbane, and It-!

th5 absence of any

satisfactory explanation €or the absence of

bus?ness records of

the applicants' business bearing

on the avJ.ilabillty of work,

remuneration or expenses of any

such trlps, I would not accept

the unsupported evldence

of Mr.

Shepherd in chis regard. In

addition, he

adnitted that no log books were kept by him dur~.nq

the period in which he drove

the Volvo vehicle. Factually, the

damages claimed

have not been made out.

There is, however, a more fundamental oblection to the applicants' claim for damages. In my opinion, this approach t.0 the assessment of damages pursuant to 5.82 of the Act involves a gross misconception of the remedy ylven by the statute for a contraventlon of Part V of the Act.

Section 82(1) provi.des:-

" A person who suffers loss ar damaqe by conduc;. of another person that was done in contravencion of a provislon of Part IV or V may recover the amount

of the l o s s or damage by action against that other person or against any person lnvolv.?d in L e

contraventlon.

10.

In determlning the proper approach under

5 . 8 2 ,

reference

to some observaticns in the cases is

of assistance.

Jn Brosn v . Jam Factorv Ptv.Ltd.,

[1381! 53 F.L.R. 340

at 351, FOX J. sa'ld:-

"The correct way to approach Eke assessment

damages in this case in

my view is to compare the

posltlon in which the app1icanl;s might have been expected to be if the misleading conduct had not

occurred with the sltuation they

were

in as

result of acting in reliance

on that conduct.'

And he referred to E x o Petroleum Company Ltd.	v. Mardon C19767 1
Q.B. 801. He continued:-

"Thls is the same,

or analogous to ,

the general

principle respecting the measure

of damages in

tort. There was

not

anything

promlssory

sr;stements relied

upon, and

no basis exlsts

f o r

adopting the measure

damages applicable in

contract.

As an action based

on 5 . 5 2 IS more

approprlately classified as

@ne of tort, it is

possible that, the measure of damages will always,

fundamentally, be based on prwclples affecting

torts.

In Gates

v. Citv.Mutua1 Life Assurance Society Ltd.

(1983) 68 F.L.R. 101, the Full Court of the Federal Court

consisting of Fox, Lockhart and Fitzgerald

JJ., said at p.104:-

" . . . the

question is not how

much better off (the

applicant) .i70Uld have been if the statements had been true but how much worse off he is by reason of having taken the steps which he did ir, reliance on the statements."

kr!d. more recently, F'itzgerald J. in Frith v . Gold Coast Mineral Sprinqs Ptv.Ltd. & Ors. (1983) A.T.P.R. 40-339, sz ld at 44-OR2:-

11.

"For

the most part the decisions of

rhls

ICgurt

under the Act speak of the appropriate measure of

damages

that

applicable

at common iau 111

actions for deceit

.. . "

Later, at 44-086, he said:

' I . . . G7h115t common law rules as to the measure of

damages In tort may, in appropriate circumstances,

prmide a useful

quide, no

justlficatton exists

for	cmfining the dsmages which are recoverable

under sec. 82 and 87 of t.he Act by reference	to
common law tests.

... the

statutory

right

darnages now

under

consideration

serves

ir wider purpose

and is

intended to hav? a broader ambit than the common

law actlons

of tort or negligent

misstatement."

Later at the same page,

he said:-

"The broad statement of the appropriate r.ea5uk-e of damages in deceit which was adopted in DOlbY'E case, !Cl9691 2 (?B 158), accords wlth the statutory test if, as I think, appllcallts who establish a cause of action under the Act, are

entitled to those

losses whlch

are the immed~ate

.result

the

offending

CmdLIct

and

also TO

consequential losses if sufficiently direcc"

Dealins ~7ith

the question

of consequentlal losses

i l l an

action for deceit, in Gould v. Vaqqelas (1984) 56 A.L.R. 31,

Glbbs C.J. said at p.35:-

"Tnere

may

cases

whlch

the

purchaser

continues to trade, either because

he has no real

alternatlve or because

he has not become aware

the

nature

of the fraud, and

those

c~rcumstances incurs losses which

are

not

represented by the difference between the price and. the value of the business. There is no reason In principle why the defrauded purchaser should

not recover damzqes for all the

loss that flowed

directly from the fraudulent inducement

(unless,

possibly, the

loss was not foreseeable).

If a

purchaser, besides paying more for

the business

than it was

worth, has suffered additional losses

which resulted directly from the fraud he ought to

be compensatad for them. Of course the court must

- .

12.

be satisfied that the

loss

did result directly

from the fraud and not from some supervenlng cause

such as the folly, error

or misfortune oi the

pxchaser himself,

and

must

ensure

that

additional compensation is given for

losses when

those

losses,

the

probability

thelr

occurrence, has already been taken into account

determlnlng the value

of the buslness."

It sems to me that when one has reqards to the words

5.82, two fundamental observations

may be made.

The requirement that t,he entitlement to darraqes 1 s co "a

person who suffers

loss or

damage" suugests that the ?ssentlal

ingredient of

the

statutory

cause

action IS not of the

non-attainment of

a benefit or the non-realisation of

J. profit

but the iccurring

of loss or damaqe, lnvitlng

a comparlsnn

between the positlon of the applicant after the

contravention

with his position before the contravention.	This is the "worse
off" approach.

The second important aspect

o i the statutor:? formulation

of the cause of

action is that that

loss

or damage has to be

suffered "by" the conduct of

another person that constitutes

contravention of Part IV or V of the Act. This makes it pkin that it is only loss or damage that is caused by the contravening

conduct which can

be recovered in ths statutory cause

of action.

thls

particular

case,

Mr. Shepherd

evidenc?

admitted that

"it was quite clear on the

flrst trip that It

coddn't do the ]ob properly".

tie says that

~t wasn't until

November, aFter che purchase in June, that he rea! ized that che

13.

vehicle

was equipped not

with

c 210 h.p.

motor, but wlth

C h e

lesser-powered motcr. Nonetheless, he was aware

of the

fact of

the underpowering and the unsuitability of the vehlcle for	his
desired purpose from the very first trip.

It seems to

m? in those circumstances that the loss of

damage he has suffered

is the difference betwee7 the pcice

paid f o r the vehlcle and its value,

a s well a5 a small component

properly to be taken into account for consequential lossss. That cguld include an amount for zhe lncunvenlence trnd expense of acquiring and dlsposinq of the vehicle, as well a s m y necessary

losses incurred over

a short and reasonable perlod until the

applicants were aLle to dispose of it.

The only

evidence of value is the admission that as at

31 Januirry. 1983 the value of

the vehicle was $6,000.00.

At this

time the vehlcle had travelled something of the order

of 54,000

miles over and abcve the mileage It had recorded

at che tire of

its sale.

It follows that its value

at the time of sale m s

a figure somewhat higher than

$6,000.00.

Other

than

the

amount

the

Rpplicants

are

properly

entitled CO

In respect

of the difference in value between the

price of the vehicle when sold

ancl its value then, toTether with

scme small consquential

losses, the applicants are not entitled

to damages for the amounts

expendefi on converting ano the r vehlcle

to perform the Brisbane to Tcwnsuille run.

14.

Accepting that the

vehic le

purchased

was underpowered

f o r

i t s

inrended

purpose,

the

damages

c l a i m 4

t h e

app l i can t s

f l ow

from

the

misrepresenta t ion

concern inq

the

power of the engine but

f rom

the

app l i can t s ' choos inq

to con t lnue

t o

c p e r a t e

t h e

v e h i c l e ,

a x x e of

i t a

l i m i t a t i o n s

f o r

t h e

s t a t e d

purpose.

%cl1

l o s s of darnage,

b e i n g

t h e

n o t i s n a l

loss

e x t r a

p r o f i t s ,

1s no t

su f f e red

"by" the

conduct

whlch

contravenes

Part

the Act .

T h e r e

a r e

d i f f i c u l t i e s

a n d

s h o r t c o m l n g s

i n

t h e

m a t e r i a l

i n t h i s

c a s e

whlch

t o assess damages.

Nonetheless,

I accept

that a

cour t

should

no t

re t reat

from

the

assessmeqt cf

damages

mere1.y

because

the m a t e r i a l

i s l ess than

i dea l

t he

a s ses smen t

i s

o therwise

f i i f f icu l t :

FJhee ler

Riverside

Coal

T r a n s p c r -

Co.Pty.Ltd,

(1964)

Qd.R.

113

and F

( 1 9 4 6 )

C.L.R.127

143

per- Dixon and McTiernan

JJ.

I n

view,

the

loss

damage

s u f f e r e d

l;g

t h e

a p p l i c a n t s by

the

conduct

the

respondent

I n

r ep resen t in?

t he

F86 Volvo t r u c k as It d i d ,

comprehends

the

dlminutlon

between

the

s a l e p r i c e a n d i t s v a l u e

a t

t h e

time

s a l e

vel1

amount

for t h e c o s t

and Iqconvenience of

a c q u i r i n g ar.d disposing cjf

that

veh ic l e ,

and

a small component f o r lcsses

incu r red u n r i l such a

isposa

could

reasonably

secured

Pursuant t o 5.82

the Act , i n all the c l r cuns t ences ,

a 5 s e s s	t h e	loss o r damage	a t $ 4 , 5 0 0 . 0 0 .	,	_.	I ,	/3
. .

[1985] FCA 311

4 Jul 1985