T R & K R Shipton Pty Ltd v Zhao
[2022] TASSC 18
•18 March 2022
[2022] TASSC 18
COURT: SUPREME COURT OF TASMANIA
CITATION: T R & K R Shipton Pty Ltd v Zhao [2022] TASSC 18
PARTIES: T R & K R SHIPTON PTY LTD
v
ZHAO, Hongbing
ZHOU, Hanlu
FILE NO: 3055/2016
DELIVERED ON: 18 March 2022
DELIVERED AT: Hobart
HEARING DATES: 3, 4 August 2021
JUDGMENT OF: Blow CJ
CATCHWORDS:
Trade and Commerce – Competition, fair trading and consumer protection legislation – Consumer protection – Misleading or deceptive conduct or false representations – Character or attributes of conduct or representation – Statements as to future matters and promises – Promise that tractor would be made in Italy – Engine assembled elsewhere – Some components made elsewhere – Incorrect representation that particular front end loader could be fitted in Australia.
Australian Consumer Law, ss 4, 18(1).
Aust Dig Trade and Commerce [1068]
REPRESENTATION:
Counsel:
Plaintiff: G O'Rafferty
Defendants: In person
Solicitors:
Plaintiff: Terracall and Associates
Judgment Number: [2022] TASSC 18
Number of paragraphs: 108
Serial No 18/2022
File No 3055/2016
T R & K R SHIPTON PTY LTD v HONGBING ZHAO and HANLU ZHOU
REASONS FOR JUDGMENT BLOW CJ
18 March 2022
This case relates to the sale of a tractor. The plaintiff company, T R & K R Shipton Pty Ltd routinely sells tractors in the course of its business. On 2 June 2015 it entered into a contract to sell a Duetz-Agroplus tractor to the defendants, Hongbing Zhao and Hanlu Zhou, for $54,835. They were running an organic farm, and decided to buy the tractor for use on that farm. The contract required them to pay a deposit of $5,000, and they promptly paid that deposit. The tractor was delivered to them on 12 January 2016, but they have refused to pay the balance of the purchase price.
In March 2016 the plaintiff sued the defendants in the Magistrates Court for the balance of the purchase price, amounting to $49,835. The defendants pursued a counterclaim for an amount that exceeded the jurisdiction of the Magistrates Court. As a result, the proceedings were transferred to this Court. There were proceedings in relation to a magistrate's decision to strike out the counterclaim rather than transferring it: Zhou v T R & K R Shipton Pty Ltd [2016] TASSC 54; Zhou v T R & K R ShiptonPty Ltd [2017] TASFC 5.
The claim and the counterclaim went to trial before me in August 2021. The plaintiff was represented by counsel but the defendants were not. Both defendants attended the trial but the second defendant, Ms Zhou, took no active part in it. Their case was conducted by her husband, Mr Zhao, although strictly speaking he did not have the right to represent his wife in the proceedings: Co-operative Property Developments v Mount [1980] Tas R 7.
The plaintiff company's primary claim in the proceedings is for the balance of the purchase price plus interest. In the alternative, it seeks the return of the tractor and an award of damages.
The defendants pleaded their case in an amended defence and counterclaim that is 33 pages long. It is very difficult to identify the issues in dispute by reference to that document. It contains a great deal of unnecessary commentary, as well as material relating to grievances that cannot have any impact on their rights and liabilities. The same can be said of written submissions that they provided at the beginning and end of the trial. Their principal contentions, as I understand them, are as follows:
· That the plaintiff breached the contract for the sale of the tractor by failing to deliver it within a reasonable time.
· That the plaintiff breached a term of the contract that required the tractor to be made in Italy.
· That on the day the tractor was delivered it was orally agreed between Mr Zhao on behalf of both defendants and the plaintiff company's employee Andrew Schmidt that the contract for the sale of the tractor would be cancelled, that the company would take the tractor back, that the defendants would purchase a different tractor from the company, and that the $5,000 deposit would be applied towards that purchase.
· That the plaintiff engaged in misleading and deceptive conduct in that its employee Andrew Schmidt made false representations to the effect that a Stoll front end loader could be fitted to the tractor after its arrival in Australia.
· That Mr Zhao made known to Mr Schmidt the particular purposes for which the tractor was required, showing that he relied on Mr Schmidt's skill and judgment, and the tractor was not reasonably fit for those purposes.
· That the defendants have suffered damage because the tractor delivered to them could not be fitted with a Stoll front end loader and was of no practical use to them.
The defendants advanced other contentions, which I will deal with later.
Much of the evidence at the trial was presented in the form of affidavits. The plaintiff's evidence included affidavits from Andrew Schmidt, a director of the company named Trevor Shipton, and the Italian export sales manager of Deutz-Fahr, Matteo Oreni. Mr Schmidt and Mr Shipton also gave oral evidence. Both were both cross-examined by Mr Zhao. I also received a number of affidavits sworn by Mr Zhao, two affidavits of Ms Zhou, and an affidavit of a man named Robin Dance, who was present when the tractor was delivered. Mr Zhao gave oral evidence and was cross-examined.
Before the trial, the plaintiff and the defendants each filed written lists of objections to their opponents' affidavits, stating the grounds thereof. Unfortunately the grounds of objection stated by the defendants were not based on the law relating to evidence. They consisted almost entirely of contradictions and arguments as to the facts. I will not strike out any of the affidavit evidence of the plaintiff's witnesses because the defendants' objections are misconceived. To the extent necessary, I will deal with the plaintiff's evidentiary objections later in these reasons. To the extent that there were objections, I received the evidence de bene esse. In the course of the trial I heard argument and reserved my decision in relation to an application by the plaintiff to amend its statement of claim so as to rely on certain provisions in the Sale of Goods Act 1896.
The sequence of events
In May 2014 the plaintiff company was represented at Agfest, a large agricultural show held annually in northern Tasmania. Mr Schmidt was there as a sales representative employed by the plaintiff company. He was approached by the defendants. Mr Zhao made enquiries about purchasing a new tractor. Arrangements were made for Mr Schmidt to visit the defendants' farm at Ranelagh to discuss their needs.
During June 2014, after a visit to the defendants' property and discussions with Mr Zhao, Mr Schmidt provided Mr Zhao with a written quote for an Indian-made Deutz Agroplus tractor, together with a front end loader and a backhoe.
The Deutz-Fahr group of corporations has factories in Germany, Italy, India, China and Turkey. The tractor referred to in the June 2014 quote was a cheaper version of a similar tractor from Deutz's Italian factory.
The defendants did not accept the quote. There were also discussions between Mr Zhao and Mr Schmidt about a Korean-built tractor, but the discussions came to an end and the defendants did not purchase a tractor that year.
Mr Zhao got in touch with Mr Schmidt again during May 2015. They discussed the defendants' needs. As a result of their discussions, Mr Schmidt emailed a quote for a new tractor to Mr Zhao on 22 May 2015. The quote was dated the previous day. The total price quoted was $67,100. The goods referred to in that quote were described and priced as follows:
" Qty Description Unit Price 1
1
1
New Deutz Agro Plus F 410DT ROPS 4wd tractor on 420/70 R24 rear and 320/70R18 front tyres with 3 sets of rear remotes and a syncro shuttle 30x15 transmission
set of front weights
Stoll FE750P level lift front end loader with 1600mm Bucket, soft ride loader suspension and 3rd service$51,443.00
$900.00
$12,679.00
"
That quote was not accepted. Mr Zhao asked Mr Schmidt to provide another quote for a tractor without the front end loader. As a result, Mr Schmidt emailed a fresh quote to Mr Zhao on 25 May 2015. The total price quoted was $54,835. The quote included a description of the tractor and calculations, as follows:
"
Qty
Description
Unit Price
Amount
1
New Deutz Agro Plus F 410DT ROPS 4wd
$51,443.00
$51,443.00
tractor on 420/70 R24 rear and 320/70R18
front tyres with 3 sets of rear remotes and a
syncro shuttle 30.15 transmission
1
set of front weights
$900.00
$900.00
1
freight from Melbourne via Devonport to
$1,900.00
$1,900.00
Ranalah [sic]
-1
Less your no trade discount
$4,393.00
-$4,393.00
Price includes all assembly, delivery and
operator training price includes 2yr factory
warranty, a labour free 1st service where you
pay for parts and we pay labour
SUBTOTAL
$49,850.00
GST
$4,985.00
TOTAL
$54,835.00
"
Mr Zhao accepted this quote on behalf of the defendants. Mr Schmidt prepared a purchase order. The two men met on 2 June 2015. The plaintiff company had a standard form of purchase order, with "terms and conditions of sale" printed on the back. Mr Schmidt filled in the description of the tractor and the price calculation as set out in the final quote. At the request of Mr Zhao he wrote the following on the purchase order:
"TERMS – MADE IN ITALY.
– IF PRICE REDUCES WE WILL PASS ON".
Mr Zhao signed the purchase order form on behalf of both defendants, thereby making a contract for the purchase of the tractor. He signed under the following printed words:
"I acknowledge and agree with the above details and also with the terms and conditions printed on reverse of this document".
Deutz tractors of the type described in the quotes of 22 and 25 May 2015 are imported into Australia from the Deutz factory in Italy. In the course of their of pre-contractual discussions, Mr Schmidt told Mr Zhao at some point that it would be possible to order a Deutz Agroplus F 410DT ROPS tractor from Italy and to have a Stoll FE750P front end loader fitted to it after its arrival in Australia. I am satisfied on the balance of probabilities that that was said before Mr Zhao asked Mr Schmidt to provide a quote for the tractor without the front end loader. It later turned out that what Mr Schmidt said was incorrect. I am satisfied that he did not know that he was giving Mr Zhao incorrect information when he said that the front end loader could be fitted in Australia.
According to Mr Schmidt's affidavit, he was informed in or about June 2015 that the delivery date for the tractor was expected to be around November 2015, and that information was passed on to Mr Zhao.
In approximately September 2015 Mr Zhao contacted Mr Schmidt and said that he wished to purchase a Stoll front end loader for the tractor. Mr Schmidt obtained a price from a company named Burder Industries Pty Ltd which acted as the importer for Stoll loaders. On 28 September 2015, having obtained a price from Burder, Mr Schmidt emailed a quote for the loader to Mr Zhao. About three hours later, having realised that he had made a mistake, he emailed a cheaper quote to Mr Zhao. The material parts of that quote read as follows:
"
Qty
Description
Unit Price
Amount
1
New Stoll FE750P level lift loader fitted to
$14,305.00
$14,305.00
your Deutz Agroplus f410 tractor with
1600mm plain bucket, hydraulic 3rd service
soft ride loader suspension with free comb
frame and spikes
1
Combination frame with 1000kg pallet fork
in lieu of hay spikes
$190.00
$190.00
-1
less your discount
$1,695.00
-$1,695.00
Price includes all fitting and freight and
operator training on your property
SUBTOTAL
$12,800.00
GST
$1,280.00
TOTAL
$14,080.00
"
On or about 22 October 2015 Mr Zhao contacted Mr Schmidt and agreed to proceed with the purchase of the Stoll loader for $14,080. Mr Schmidt contacted Burder and placed an order. Some hours later, somebody from Burder contacted him and said that the company could not supply a fitting kit for the Deutz ROPS tractor, and that the only way to get the Stoll loader fitted to the tractor was to have it factory fitted in Italy. Mr Schmidt contacted the Australian agents of Deutz, PFG Australia. He was told that the defendants' tractor had commenced production, and had passed the point after which a Stoll loader could not be added.
On the morning of 22 October 2015 Mr Zhao emailed Mr Schmidt in relation to the inclusions in the price of the loader. Mr Schmidt responded at 5.37pm with an email that included the following:
"We do have a much bigger problem in that we have had notification that this Stoll loader will not fit the ROPS model Deutz only the Cab model. Burder have offered to supply the normally much more expensive Australian made Burder 6050XP2 loader with all the same features as the Stoll at the same price to you, this option will cost Shipton's more but we won't charge you any extra."
Mr Zhao did not accept that proposal. In his affidavit Mr Schmidt said that, as he understood it, Mr Zhao did not proceed because "he believed the Burder loader would be too heavy and would not be fit for the purposes he required it for".
On 22 October 2015 Mr Schmidt sent Mr Zhao an email giving him the tractor's serial number, but advising that it was running behind schedule and was due to reach the plaintiff company in January 2016. Mr Zhao responded the next day, 23 October, with an email demanding a refund of the $5,000 deposit. Ever since then he has remained unwilling to proceed with the purchase.
Subsequently there was an exchange of emails between Mr Zhao and Mr Shipton. There was an offer by the plaintiff company to lend Mr Zhao a tractor. According to an email from Mr Shipton, Mr Zhao agreed to that but then changed his mind. Then on 30 October 2015 Mr Zhao sent an email to Mr Shipton and Mr Schmidt proposing that they provide him with two tractors for use on his property on a temporary basis, as well as refunding the deposit and paying damages. Mr Shipton provided Mr Zhao with two second-hand tractors, but did not refund the deposit or make any other form of payment to the defendants.
Eventually the new tractor arrived in Tasmania from Italy. On 12 January 2016 Mr Schmidt travelled to the defendants' farm and the new tractor was delivered. The two second-hand tractors were loaded onto the vehicle that had transported it. Mr Zhao inspected the compliance plate on the new tractor's engine. It bore the name of the manufacturer "SAME DEUTZ-FAHR ITALIA S.p.A." Immediately below that it said, "PLANT SDF INDIA". The engine had been assembled in India.
Mr Zhao said words to the effect that he would not take the tractor because it was not made in Italy, and that he wanted the deposit back. Mr Schmidt said that he could not take it away because there was no room for it on the vehicle with the two second-hand tractors.
According to Mr Zhao's evidence, Mr Schmidt agreed at that time to cancel the agreement for the purchase of the tractor and to put the $5,000 deposit towards the purchase of another tractor, namely a "55hp Deutz tractor with a factory fitted Deutz front loader". According to Mr Schmidt's evidence, Mr Zhao made a proposal of that nature, but he did not have authority to agree to any such proposal, and said only that he would speak to Mr Shipton about it.
There is no suggestion that a purchase order for a substitute tractor was ever prepared or signed. There is no suggestion that Mr Schmidt or the plaintiff company did anything to implement the proposal for the purchase of a substitute tractor. A stalemate has existed ever since the delivery of the tractor in January 2016. The defendants have not used the tractor. The plaintiff has retained the deposit and sued for the balance of the purchase price. The defendants have denied any liability and counterclaimed damages.
Cancellation of the agreement?
It is appropriate that I first address the defendants' contention that the contract for the sale of the tractor was cancelled by mutual agreement on the day of its delivery. For the reasons stated below, I reject that contention. I will subsequently consider the defendants' contentions as to breaches of contract on the part of the plaintiff. After that I will address the defendants' other contentions which arise on their counterclaim.
In an affidavit sworn on 15 August 2017, Mr Zhao said, at par 29(4):
"Although on 12 January 2016 delivery day, Mr Schmidt admitted that he has introduced, offered and sold, and Mr Zhao of the Defendants have agreed to purchase 'the Tractor' that includes 'Deutz Tractor' fitted with 'Stoll loader' since beginning, and Mr Schmidt agreed to put $5000 deposit into buy a right tractor fitted with a right front loader."
In an affidavit sworn on 4 June 2020, Mr Zhao gave evidence as to the events of 12 January 2016 in par 58. That paragraph included the following subparagraphs:
"(7)Mr Schmidt cancelled the 'the Tractor' agreement and said to me that 'I put the $5000 into the next one.' And
(8)I said that 'yes ... yes.' ... and Mr Schmidt and I contracted another 55 hp Deutz tractor with a factor fitted Deutz front loader at a price around $28, 000 to $ 30, 000."
Robin Dance was present on the defendants' property on 12 January 2016 when Mr Zhao and Mr Schmidt were arguing about whether or not the tractor was made in Italy. He swore an affidavit in which he said the following:
"5I also saw and heard that Mr Zhao told Mr Schmidt if Mr Schmidt finds right tractor fitted with right loader and Shipton is the dealer offer fair price, Mr Zhao will definitely buy the tractor from Shipton, and Mr Zhao asked me to witness this promise, because Mr Zhao wants Shipton making profit. Mr Zhao said 'we really need you to refund the five thousand dollars ...' Mr Schmidt said that 'I couldn't fit it on that truck anyway because already two tractors on, we'd put the five thousand dollars into the next one.' Mr Zhao said: 'yes ... the tractor with the loader ...' Mr Shipton said: '... that one is bigger ...,'."
Mr Dance was not cross-examined. In my view he has described a discussion about a proposal to cancel the original contract and replace it with a new contract to buy a different tractor. He has not described a conversation in which the parties made an agreement whereby the original contract was cancelled.
Mr Zhao secretly recorded his conversation with Mr Schmidt, or at least part of it, on the day the tractor was delivered. The plaintiff contends that the recording of the conversation amounted to a contravention of s 5 of the Listening Devices Act 1991, and that the recordings are not admissible as evidence by virtue of s 14 of that Act and s 138 of the Evidence Act 2001.
It is clear that, until Mr Dance arrived on the scene, the recording was made unlawfully. Section 5(1) of the Listening Devices Act provides as follows:
"(1) A person shall not use, or cause or permit to be used, a listening device –
(a)to record or listen to a private conversation to which the person is not a party; or
(b)to record a private conversation to which the person is a party."
"Listening device" is defined in s 3(1) of that Act as follows:
"listening device means any instrument, apparatus, equipment or device capable of being used to record or listen to a private conversation simultaneously with its taking place".
That subsection also includes the following definition:
"private conversation means any words spoken by one person to another person or to other persons in circumstances that may reasonably be taken to indicate that any of those persons desires the words to be listened to only –
(a) by themselves; or
(b) by themselves and by some other person who has the consent, express or implied, of all those persons to do so".
Ordinarily, when any form of business meeting is conducted in private, the circumstances may reasonably be taken to indicate that the participants desire their words not to be listened to by anybody else: See v Hardman [2002] NSWSC 234 per Bryson J at [27]; Jebeli v Modir [2005] NSWCA 184 at [60]-[61] per Tobias JA, with whom Giles and McColl JJA agreed. Before the arrival of Mr Dance, Mr Schmidt and Mr Zhao were arguing about whether or not the tractor was "made in Italy". They were in the open air, but nobody else was present. It was a private business conversation. I am satisfied that the circumstances indicated that they did not desire their words to be listened to by anybody else at that stage.
A USB stick containing Mr Zhao's recording, or perhaps part of his recording, in digital form was annexed to one of his affidavits. I received it de bene esse. It was played during the trial for the purpose of my determining whether the evidence should be admitted. Mr Zhao also annexed to one of his affidavits an incomplete transcript of the recording. Nothing significant was omitted from the transcript.
It is clear from the recording that Mr Dance was not present at the beginning of the conversation between Mr Zhao and Mr Schmidt. However, about two minutes before the end of the recording, Mr Zhao can be heard to say, "Robin, you come have a look." The conversation between the two men continued in Mr Dance's presence.
In the presence of Mr Dance, Mr Zhao and Mr Schmidt discussed a proposal for the defendants to purchase a Deutz tractor built in India, with a loader, from the plaintiff company, and for the $5,000 to be applied towards that purchase. I infer that Mr Zhao and Mr Schmidt had no expectations as to privacy in relation to that part of their conversation. The circumstances no longer indicated that they desired their words to be listened to only by each other. Their conversation had ceased to be a private conversation for the purposes of the Listening Devices Act. All that was said in the presence of Mr Dance is admissible as evidence.
Mr Zhao's transcript of the last two minutes or thereabouts of his recording reads as follows:
"Zhao: I really need you to refund me the $5000 back, we just, if we want to buy another, he (Mr Robin Dance)[1] is the evidence we want to buy another tractor, I buy from you, I don't buy from anybody, I know it from Deutz tractor,
[1] The words in brackets were not spoken by Mr Zhao, but were apparently added by him for the benefit of the Court.
Schmidt: I put the $5000 into the next one
Zhao: yea, yes
Schmidt: yes
Zhao: yes, but the tractor is 55 HP India build with the loader
Schmidt: yes, I think they do a 70?
Zhao: no 70, not a fruit tractor
Schmidt: kynline one? What they called kynline one
Zhao: yes, just 24 wheel, like, can be like the big wheel
Schmidt: gear lift is in the middle
Zhao: year, year, similar size, they have loader in there
Schmidt: that's right
Zhao: around $28, 000 to $30,000
Schmidt: ao, that one, not fruit tractor
Zhao: but similar
Schmidt: it is bigger
Zhao: little bit bigger
Schmidt: I will grab my finger on it."
The recording that was produced as evidence ends at that point. I infer that there must have been further conversation before Mr Zhao and Mr Schmidt parted company. I do not know whether any further conversation was recorded or not. I do not know why the Court has not been provided with a recording of any further conversation.
Mr Schmidt was not a director of the plaintiff company. He was an employee. He was authorised to enter into contracts for the sale of tractors. I infer that he would not have agreed to the cancellation of a sale contract without authorisation from Mr Shipton. Cancellation of the contract with the defendants would have left the plaintiff company with the new tractor on its hands. It was a non-standard tractor that would probably have taken months to sell. Furthermore, the plaintiff company had paid a $5,000 deposit to the Australian agent of Deutz, and would be out of pocket by that amount until the rejected tractor had been re-sold.
No prudent salesman or company director in the position of Mr Schmidt or Mr Shipton would have agreed to the cancellation of the defendants' contract without finalising the negotiations for the sale of a substitute tractor and getting a purchase order signed. Those steps were not taken. Mr Schmidt and Mr Shipton were both experienced and prudent men of business.
I accept that there were discussions on the day of the delivery as to the possible cancellation of the original contract and a sale of a different tractor. However I am not satisfied on the balance of probabilities that the parties ever went any further than discussing that idea. I find that they did not enter into an agreement to cancel the contract that they had made on 2 June 2015.
Late delivery of the tractor
Mr Zhao began asking for the $5,000 back and making assertions that he and his wife were no longer bound to proceed with their purchase on 23 October 2015, the day after he was told that the delivery of the tractor was running behind schedule. In an email to Mr Schmidt on 23 October he said, "... If the tractor suddenly delayed the delivery from November to January, we have to refund the purchase because as we ordered we need the tractor on November. And we need refund the $5,000 paid and the costs of the interests." It appears that the defendants contend that they were not obliged to proceed with their purchase because of the delay in delivery.
The terms and conditions on the back of the purchase order of 2 June 2015 included the following:
"Delivery dates are approximate only and no liability is accepted for delay from any cause whatsoever. If delivery is hindered by any cause or reason beyond the Company's control, the Company may extend the time for delivery or if the Company is unable to complete the contract shall be voidable at the Company's option with no right to either party for any damage, loss, cost or expense or otherwise."
That was clearly a term of the parties' contract. No delivery date was specified in the purchase order. In his oral evidence Mr Schmidt was unable to recall whether an approximate delivery date was discussed. He said that "generally three months was the delivery time".
It is clear that the parties' agreement of 2 June 2015 did not include an implied term requiring the plaintiff to deliver the tractor within a reasonable time. That is because a term will not be implied if it contradicts an express term of the contract: BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 at 283. A term requiring delivery within a reasonable time would have been inconsistent with the express term set out above. The plaintiff company took more than seven months from the date of the contract to deliver the tractor, but that did not result in it having breached the contract.
Made in Italy
It is common ground that the tractor's engine was assembled in India, and that final assembly of the tractor took place in Italy. Mr Zhao gave unchallenged evidence that the rims of the tractor's wheels bore the words "MADE IN INDIA". A photograph taken by Mr Shipton shows that one component of the tractor bore the words "MADE IN SLOVENIA". I do not know what that component was.
Matteo Oreni, the export sales manager based at the Deutz-Fahr factory in Italy, said the following in his affidavit:
"3Outside of the Italian factory, Deutz-Fahr also have factories in Germany, India, China and Turkey. The Deutz-Fahr AgroPlus F 410 DT ROPS commenced being manufactured at the Italian Factory where I work in the year 2008. Deutz-Fahr do not make this model of tractor at any of our overseas factories.
4The parts used in the AgroPlus F 410 DT ROPS Tractor are sourced nearly entirely from Italy. As a component, the engine in this Tractor is assembled at our Indian factory where it is then shipped back to Italy to be installed with all other componentry in the manufacture of the AgroPlus F 410 DT ROPS Tractor.
5The gearbox relating to the AgroPlus F 410 DT ROPS tractor is assembled in Italy and each component in the manufacturing process is made in Italy.
6It is not possible to order an AgroPlus F 410 DT ROPS Tractor to be manufactured anywhere other than our Italian factory.
7...
8I have caused for a search of identification number ZKDP2802W0TD15115 to be undertaken and can confirm that this build plate and identification number relates to a Deutz-Fahr AgroPlus F 410 DT ROPS Tractor which we manufactured here at our Italian factory in 2015. As reflected above, I can confirm:
aThe engine was assembled at our Indian factory and then shipped to our Italian factory for installation into the Tractor;
bThe gearbox and all its internal componentry was manufactured and assembled at our Italian factory;
cNearly all other components and parts relating to this Tractor were made in Italy;
dThis particular Tractor passed all quality control checks before it was shipped to Australia for sale.
9...
10Our factory in Italy is ISO 9001:2008 Certified, hence the quality of our equipment and spare parts conforms to the current international standard.
11It is not possible to have a Deutz-Fahr F410 type Tractor made anywhere other than at our Italian factory, hence all Deutz-Fahr AgroPlus F410 type Tractors are made in Italy."
The identification number in par 8 of that affidavit is that of the tractor delivered to the defendants.
Mr Oreni was not available for cross-examination. I received his affidavit on the basis that I would have regard to his unavailability when assessing the weight to be given to his evidence. I have no reason to doubt the reliability of his evidence. He did not claim that every component or part used in the manufacture of the tractor originated in Italy. The fact that the wheels were made in India and the fact that another component was made in Slovenia do not contradict his assertion to the effect that nearly all parts for the tractor were made in Italy. In the circumstances, I accept Mr Oreni's affidavit evidence as correct.
It is clear that the parties intended it to be a term of the contract for the sale of the tractor that it would be "made in Italy". That is to say, the plaintiff made a contractual promise that it would deliver to the defendants a tractor that had been "made in Italy". The plaintiff contends that, although some components were made outside Italy and the engine was assembled outside Italy, the tractor was "made in Italy" within the meaning of the words in the contract. The defendants contend that the assembly of the engine in India and the use of some parts made outside Italy resulted in the tractor not being "made in Italy" within the meaning of the words in the contract.
In determining the meaning of a contractual term, a court must take an objective approach, determining the meaning that the parties intended the words of the contract to have by reference to the objective facts, rather than evidence of their subjective intentions: Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55, 218 CLR 471 at [34]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52, 219 CLR 165 at [40].
The meaning of the word "makes" for the purposes of a patent statute was considered by the Supreme Court of the United Kingdom in Schütz (UK) Ltd v Werit (UK) Ltd [2013] UKSC 16, 2 All ER 177. That case concerned a dispute as to whether or not a company had infringed a patent by making a particular type of container. Lord Neuberger P, with whom the other members of the court agreed, stated a number of propositions relevant to the construction of the word "makes", beginning with the following, at [26]:
"First, the word 'makes' must be given a meaning which, as a matter of ordinary language, it can reasonably bear. Secondly, it is not a term of art: like many English words, it does not have a precise meaning. Thirdly, it will inevitably be a matter of fact and degree in many cases whether an activity involves 'making' an article, or whether it falls short of that."
The Macquarie Dictionary contains dozens of meanings for the word "make". Significantly, one of those meanings is "to assemble something from constituent parts". To say that an item has been "made" at a particular place or in a particular area does not necessarily imply that the component parts have also been created at that place or in that area. The meaning of the word is a question of fact and degree.
We live in the era of a global economy. When a manufacturer produces a complex piece of machinery like a tractor, it is to be expected that the components will be sourced from several countries. That is especially so when a piece of machinery is manufactured in a country like Italy, where it would probably make good commercial sense to use components made in a number of other nearby countries.
Deutz was known by the parties to have factories in both Italy and India. They may have been aware of factories in other countries. They used the words "made in Italy" in that context. It would be absurd to think that they intended the plaintiff to have a contractual obligation to deliver a tractor that did not include any components made or assembled outside Italy. I am satisfied that the tractor was "made in Italy" in the sense in which those words were used in the parties' contract.
Fitness for purpose
The defendants contend that, during the pre-contractual negotiations, they informed Mr Schmidt and Mr Shipton that they required a new tractor and attachments to do certain jobs on the farm, and that the tractor that they subsequently agreed to purchase was not fit for the purposes that they made known.
Paragraph 4(2) of the defendants' amended defence and counterclaim reads as follows:
"(2)Mr Schmidt and Mr Trevor Shipton have known the Defendants have been seeking to purchase a new standard tractor fitted with a new front loader and new backhoe to do certain jobs ('the certain jobs') including:
(a)to transfer and lift the weight at 1200 kg fertilizer bag,
(ii)to transfer 4 apple bins at one load,
(iii)to transport soil to fill up many big holes in the orchard,
(iv)to transfer and remove huge among soil piles, clean drains, transfer and remove pruned tree branches and died apple trees, and
(v)to transfer and remove the soil and weed plants from land to build a new orchard etc."
Paragraph 13(9)(b) of that pleading reads as follows:
"(9)As a result, since on or about 02 June 2015, the Defendants have been misled or deceived or forced by the Plaintiff to have purchased, possessed and owned 'Deutz Tractor' without the 'Stoll Loader' that the Defendants have no use at all and will have almost no use at all in the future because:
(a) ...
(b) 'Deutz Tractor' cannot fit with a strong 'Stoll Loader' or any other strong front loader to do the certain jobs."
In par 22(2) of that pleading, the defendants counterclaim damages, relying on various provisions in the Australian Consumer Law ("the ACL"), including s 33.
The ACL is set out in Schedule 2 to the Competition and Consumer Act 2010 (Cth). It has effect as a law of the Commonwealth pursuant to s 131(1) of that Act. It also has effect as a law of Tasmania pursuant to s 6(1) of the Australian Consumer Law (Tasmania) Act 2010.
The defendants' reliance on s 33 of the ACL is misconceived. The section is concerned with misleading advertising to the public, but the plaintiff company is not alleged to have engaged in misleading advertising. The section reads as follows:
"A person must not, in trade or commerce, engage in conduct that is liable to mislead the public as to the nature, the manufacturing process, the characteristics, the suitability for their purpose or the quality of any goods."
However it is clear enough that the defendants are alleging facts which, if established, would give them contractual rights pursuant to s 19(a) of the Sale of Goods Act. They might never have heard of that Act, but they were not required to plead matters of law, as distinct from allegations of fact: Supreme Court Rules 2000, r 227; Konskier v B Goodman Ltd [1928] 1 KB 421; Creedon v Measey Investments Pty Ltd (1988) 91 FLR 318 at 320; Burch v Parkinson [2010] TASSC 42, 20 Tas R 52.
Section 19(a) of the Sale of Goods Act reads as follows:
"(a)Where the buyer expressly or by implication makes known to the seller the particular purpose for which the goods are required so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he be the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that in the case of a contract for the sale of a specified article under its patent or other trade name there is no implied condition as to its fitness for any particular purpose".
The defendants' relevant contentions are as follows:
· That during the pre-contractual negotiations they made known to Mr Schmidt the particular purposes for which a tractor and a front end loader were required.
· That they did so in such a way as to show that they relied on the skill and judgment of the company that he represented.
· That the goods were of a description which it was in the course of the plaintiff's business to supply.
If those facts are established, the agreement for the purchase of the tractor contained an implied condition that it would be reasonably fit for the purposes made known to Mr Schmidt. Even though the purchase order specified a particular model of Deutz tractor, the proviso at the end of s 19(a) is not relevant. That proviso only applies when a buyer orders goods under their trade name in such a way as to show that he or she does not rely on the seller's skill or judgment: Baldry v Marshall [1925] 1 KB 260.
I am not satisfied that s 19(a) helps the defendants. For the reasons stated below, I am not satisfied that it was made known to Mr Schmidt in pre-contractual discussions that they wanted machinery that would transfer and lift a 1,200 Kg fertiliser bag, or machinery that would transfer four apple bins as one load. I accept that the defendants made it known that they wanted machinery that could be used to move soil, pruned branches, dead trees, weeds and the like, but it has not been established that the tractor that was ordered and delivered was not reasonably fit for those purposes.
Fertiliser bags
It is clear from Mr Zhao's evidence that he and his wife routinely purchased fertiliser in 1,200 Kg bags for use on their organic farm.
In his oral evidence, Mr Schmidt explained that bulk fertiliser bags have straps on top of them, enabling them to be lifted by pallet forks so that they can be undone and emptied into a spreader. He was familiar with 1,000 Kg bags of fertiliser, but not with 1,200 Kg bags. He gave evidence to the effect that he and Mr Zhao did not discuss fertiliser bags when Mr Zhao was explaining the work for which he wanted a new tractor. In his affidavit he said that Mr Zhao told him around 22 May 2015 that he "needed a loader to lift fruit boxes and fertilizer", but he did not say that bags of bulk fertiliser were mentioned at that stage.
It is clear from the two quotes of 28 September 2015 that the purchase of a pallet fork was discussed at about that time. Each quote included a reference to a 1,000 Kg pallet fork. The first of the two quotes included a note reading, "for 1500 kg fork tines add $260 + gst".
When Mr Zhao cross-examined Mr Schmidt, he did not put to him that he made it known in the pre-contractual negotiations that he wanted something that could be used to transport fertiliser in 1,200 Kg bags or bags of a similar size. Mr Zhao asserted in his affidavit material that Mr Schmidt and Mr Shipton both knew that he was seeking to purchase a loader to do "the certain jobs", including transferring and lifting 1,200 Kg fertiliser bags. However, early in his cross-examination, he confirmed that he had not discussed lifting fertiliser with Mr Schmidt until after signing the purchase order of 2 June 2015.
Mr Schmidt was an experienced and obviously competent tractor salesman. He had no reason to sell a customer equipment that was unsuitable for the customer's needs. He was aware of the system by which bulk fertiliser bags could be transported using a pallet fork and, I infer, familiar with pallet fork attachments for tractors. If Mr Zhao had made it known during the pre-contractual negotiations that he needed to be able to transport 1,200 Kg fertiliser bags, I am sure that Mr Schmidt would have made provision for the inclusion of an appropriate pallet fork attachment in a quote, but he did not do that.
That being the state of the evidence, I am not satisfied that the defendants made it known to the plaintiff in pre-contractual discussions that they required machinery for the purpose of transporting 1,200 Kg fertiliser bags.
Apple bins
As I have said, Mr Schmidt said in his affidavit that "around 22 May 2015" Mr Zhao, amongst other things, "said he needed a loader to lift fruit boxes ...". He said nothing in his affidavit about Mr Zhao making it known he wanted machinery capable of lifting a certain number of fruit boxes or apple bins at once. When Mr Zhao cross-examined Mr Schmidt, he did not ask any questions about apple bins.
In his affidavit material, Mr Zhao asserted that Mr Schmidt and Mr Shipton knew that he wanted machinery capable of doing all the "certain jobs", one of which was lifting four apple bins at once. He also asserted that the Deutz tractor was not capable of lifting four apples bins at once. However he did not give or adduce any evidence as to Mr Schmidt's and Mr Shipton's means of knowledge in relation to the lifting of apple bins, nor any evidence as to the capacity of the Deutz tractor to lift apple bins. I have received evidence as to the maximum front axle load of the Deutz tractor, and as to the maximum static lift capacities and safe working loads of Stoll and Burder loaders, but I am unable to determine whether Mr Zhao's assertions in relation to lifting and carrying capacity are correct.
In the absence of more detailed evidence from Mr Zhao, and without the benefit of cross-examination of Mr Schmidt on the point, I am not in a position to make a finding that it was made known to Mr Schmidt that the defendants wanted to be able to transport four loaded apple bins at once. The evidence of Mr Shipton establishes that he was not privy to pre-contractual discussions with Mr Zhao as to his needs. I am therefore not satisfied that it was made known to the plaintiff company that the defendants wanted to be able to move four laden apple bins at once.
Further, I am not in a position to make a finding as to the capacity of any machinery to move four laden apple bins at once without evidence of the weight of a full apple bin.
Soil, pruned branches, dead trees, weeds etc
In his affidavit Mr Schmidt said that "around 22 May 2015" Mr Zhao "said he needed ... for the tractor to be capable of pushing up prunings in the orchard after pruning season". I have no reason to doubt that Mr Zhao also mentioned a desire to transport soil, dead trees, weeds and so forth. There is no suggestion that Mr Zhao made it clear that he wanted to be able to transport any particular quantity of any such material in a single manoeuvre. Both the Stoll loader that Mr Zhao wanted to order and the Burder 6050XP2 loader that he was offered on 22 October 2015 were capable of moving substantial quantities of such things. That particular model of Burder loader had a maximum safe working load of 800 Kg. The evidence falls short of establishing that the Deutz tractor was not reasonably fit for any particular purpose made known by the defendants in relation to the transportation of soil, pruned branches, dead trees, weeds or other material.
Conclusion as to s 19(a)
The evidence does not establish that the plaintiff company breached a condition of the sale contract that was implied pursuant to s 19(a) of the Sale of Goods Act.
Breach of contract – conclusion
As I understand the defendants' case, they do not contend that the plaintiff breached the June 2015 contract otherwise than in respect of late delivery, the tractor not being made in Italy, or fitness for purpose. I am not satisfied that the plaintiff company breached that contract in any way. It is therefore necessary now to address the defendants' other contentions.
Misleading and deceptive conduct
The defendants rely on s 18(1) of the ACL. That subsection provides as follows:
"(1)A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive."
A contravention of that provision can result in a liability to pay damages pursuant to s 236(1) of the ACL. That subsection reads as follows:
"(1)If:
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against the other person, or against any person involved in the contravention."
Made in Italy
The plaintiff's contractual promise that the tractor would be "made in Italy" constituted a representation with respect to a future matter that was made in trade or commerce. By virtue of s 4(1) of the ACL, if a person makes a representation with respect to any future matter, and does not have reasonable grounds for making the representation, the representation is taken to be misleading for the purposes of the ACL. By virtue of s 4(2), in proceedings concerning a representation made with respect to a future matter by a party to the proceeding, that party is taken not to have had reasonable grounds for making the representation unless evidence is adduced to the contrary.
Counsel for the plaintiff made submissions based on s 255 of the ACL which, amongst other things, relates to representations that goods were made in a particular country. That section does not apply because it relates only to representations as to past facts, whereas Mr Schmidt made a representation as to a future matter.
Mr Schmidt gave evidence to the effect that he had sold and delivered imported Deutz tractors in the past, that they had always been made in Italy, and that they contained engines that were assembled in Italy. He said he had been working for the plaintiff company as a salesman since 2008. He said that he learned that Deutz were having engines assembled in India only on the day that the tractor was delivered.
When the parties entered into their contract on 2 June 2016, the tractor had not been made. It was necessary for Mr Schmidt to place an order that would be passed on to the manufacturer, namely Deutz. The contractual promise that the tractor would be "made in Italy" was therefore a representation with respect to a future matter. I am not satisfied that that representation was misleading or deceptive or likely to mislead or deceive. In the ordinary sense of the word "made in Italy", those words do not imply that every part used in the manufacture of the tractor will be made in Italy, or that every assembled component of the tractor will be assembled in Italy. If I am wrong as to that conclusion, then I am satisfied that Mr Schmidt had reasonable grounds for representing that the tractor would be made in Italy since he had experience of Deutz tractors being made in Italy with engines assembled in Italy, and nobody had told him that those arrangements had been changed, or were likely to be changed.
The plaintiff company did not contravene s 18(1) of the ACL by promising that the tractor would be made in Italy.
The Stoll loader
When Mr Schmidt told Mr Zhao during the pre-contractual discussions that the Stoll front end loader could be fitted to the Deutz tractor after it arrived in Australia, he was acting as the agent of the plaintiff company. His conduct was the conduct of the plaintiff company, and it was conduct in trade or commerce. He had no intention of misleading or deceiving Mr Zhao, but conduct can be misleading or deceptive for the purposes of s 18(1) of the ACL even when there is no intention to mislead or deceive: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre (1978) 140 CLR 215 at 223, 234. The words "mislead" and "deceive" simply mean "to lead into error": Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198; Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2000] FCA 1572, 104 FCR 564 at [63]-[64]. Mr Schmidt's representation, which he did not know to be incorrect, therefore amounted to a contravention of s 18(1) by the plaintiff company.
When the defendants decided to order the Deutz tractor without including a front end loader in the order, I am satisfied that they were relying on Mr Schmidt's representation. It may be that they intended at that time to order a Stoll front end loader later. Alternatively, it may be that they had not decided what brand of front end loader they would order, and were keeping their options open, placing reliance on Mr Schmidt's representation. It is necessary to consider what loss or damage, if any, was suffered by the defendants as a result of reliance on that representation. The defendants, as claimants, bear the burden of proving on the balance of probabilities that they have suffered loss or damage: Sellars v Adelaide Petroleum NL (1994) 174 CLR 332.
In my view it is significant that, after learning that the Stoll loader could not be fitted to the Deutz tractor that had been ordered, the defendants did not take any step to avoid any loss or damage that might result from the arrival of the ordered tractor without a front end loader. The defendants contend that they suffered very substantial losses of business profits as a result of the plaintiff's conduct. To recover damages under s 236(1), they need to establish that they suffered losses that resulted from the unavailability of a Stoll front end loader. However the evidence relating to that issue is insufficient for me to make a finding to that effect.
To establish the causation of business losses, it would have been appropriate to adduce evidence as to the following matters:
· The availability, cost and capabilities of front end loaders other than the desired Stoll loader.
· Alternative methods of doing the things for which they would have used the Stoll loader, and the cost and feasibility of those alternative methods.
· The availability, suitability and cost of machinery other than a front end loader.
· Steps taken, or able to be taken, by the defendants to maintain productivity in consequence of the Deutz tractor being delivered without a front end loader.
However hardly any evidence was adduced as to any of those matters.
It is clear that, apart from borrowing the two second-hand tractors made available by Mr Shipton, the defendants took no steps to maintain productivity. They did not use the Deutz tractor because they believed, wrongly, they were entitled to reject it and get their deposit back. Mr Zhao gave evidence to the effect that there was a substantial decline in productivity in the organic farm because he decided to devote less time to farm work, and to give priority to the litigation relating to the tractor. He had decided to conduct that litigation himself because he did not trust lawyers, and spent a great deal of time familiarising himself with aspects of the law and other matters relevant to the litigation.
I have evidence as to the capacities of different models of Burder front end loader, but no evidence in relation to other brands of front end loader. In Mr Schmidt's email of 22 October 2015, the defendants were offered a Burder 6050 XP2 loader for the same price as the Stoll loader. The plaintiff asserted that the Burder loader could have done everything that the Stoll loader could have done, but the defendants contend otherwise. Specifications published by Stoll show that the loader that the defendants wanted had a lifting capacity of 1,210 Kg. Specifications in a Burder brochure show that the 6050 XP2 had a safe working load of 800 Kg. However, from the evidence before me, I cannot tell whether or not those figures can be used to make an apples-with-apples comparison.
I have no evidence as to the availability of fertiliser in quantities other than 1,200 Kg and 1,000 Kg. I have no evidence as to how fertiliser can be loaded into a spreader otherwise than by the method described by Mr Schmidt involving the use of a pallet fork. There is so little evidence as to what the defendants could have done once they learned of the unavailability of the Stoll loader that I cannot be satisfied that they suffered a loss of business income as a result of reliance on the representation that the loader could be fitted in Australia.
Other conduct
As I understand the defendants' case, they do not assert that they lost income or suffered other damage as a result of misleading or deceptive conduct other than the representation that the tractor would be made in Italy and the representation that the Stoll loader could be fitted in Australia. The evidence does not establish a liability on the part of the plaintiff to pay damages in respect of any contravention of s 18(1) of the ACL.
Defendants' other contentions
The defendants have sought orders that the plaintiff be fined for contravening various provisions of the ACL and a provision in the Personal Property Security Act 2009. This Court has no jurisdiction to impose fines in these proceedings. Fines can only be imposed in proceedings commenced in the Magistrates Court.
The defendants have sought orders based on ss 20 and 21 of the ACL, which relate to unconscionable conduct. As I understand their case, they contend that there was an inequality of bargaining power between the plaintiff and themselves, and that they were in a position of disadvantage because of Ms Zhou's inability to speak English and Mr Zhao's limited ability to speak English. The inequality of bargaining power was no different from that in any ordinary transaction between a company that sells tractors and a couple of farmers that want to buy one. It is true that Ms Zhou speaks no English, but Mr Zhao's English has been good enough for him to conduct a complicated court case and to provide dozens of pages of written submissions, affidavits and the like. His knowledge of English is not ideal, but he was not so disadvantaged that it was unconscionable for the plaintiff company to deal with him as it did.
The defendants contend that they have suffered damage to their mental health as a result of the plaintiff's conduct, particularly its conduct in commencing and prosecuting a claim for the balance of the purchase price of the tractor. The litigation may well have had an impact on the mental health of each of them, but it has not been established that the plaintiff committed any tort or breached any statutory provision that could give rise to a claim for damages in respect of their mental health.
Conclusion as to liability
For the reasons stated above, I have concluded that every part of the defendants' counterclaim must fail. The plaintiff's primary claim for the balance of the purchase price of the tractor, amounting to $49,835, must succeed.
In reaching these conclusions it has not been necessary for me to address the plaintiff's application to amend its statement of claim. Nor has it been necessary for me to address any of its evidentiary objections other than in respect of the secretly recorded conversation on the day that the tractor was delivered.
Interest
In its statement of claim the plaintiff claimed interest from 12 January 2016 until judgment pursuant to s 34(1) of the Supreme Court Civil Procedure Act 1932. That subsection reads as follows:
"(1) Upon all debts or sums certain recovered in any action, or on the trial of and issue of fact, the jury, or (in cases where there is no jury) the judge, or (in the case of an assessment of damages) the jury, judge, officer of the court, judge of an inferior court of civil jurisdiction, or referee making the assessment, may allow interest to the party recovering such debt or sum at the prescribed rate –
(a) from the time when such debt or sum was payable if payable by virtue of some written instrument and at a date or time certain; or
(b) if payable otherwise, then from the time when demand of payment was made in writing, giving notice to the debtor that interest would be claimed from the date of such demand or any later date."
The purchase order of 2 June 2015 is a "written instrument". As to the time for payment of the balance of the purchase price, it included the words, "BALANCE DUE ON DELIVERY". That no doubt meant that the balance of $49,835 was payable on the day of delivery. Delivery occurred on 11 January 2016. The plaintiff has claimed interest from the following day. It is entitled to interest under s 34(1)(a). The power to award interest is discretionary, but there is no reason not to award interest. The plaintiff has been out of pocket, and the defendants have been on notice of the claim.
The rate of interest is fixed every six months under r 5A(2) of the Supreme Court Rules. The relevant rates appear in the calculation below. The interest payable on $49,835 from 12 January 2016 to the date of this judgment is $15,657.75, calculated as follows:
Period
No of days
Rate
Amount
12.1.16 – 30.6.16
171
6.00%
$1397.01
1.7.16 – 31.12.16
184
5.75%
1440.59
1.1.17 – 30.6.19
911
5.50%
6841.05
1.7.19 – 31.12.19
184
5.25%
1318.92
1.1.20 – 30.6.20
182
4.75%
1177.11
1.7.20 – 31.12.20
184
4.25%
1064.78
1.1.21 – 18.3.22
432
4.10%
2418.29
Total
$15,657.75
Conclusion
For these reasons I order that judgment be entered for the plaintiff against the defendants for $65,492.75 inclusive of interest, and that there be judgment for the plaintiff on the counterclaim.
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