Vautin v BY Winddown, Inc (formerly Bertram Yachts) (No 4)

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FEDERAL COURT OF AUSTRALIA

Vautin v BY Winddown, Inc. (formerly Bertram Yachts) (No 4) [2018] FCA 426

File number(s): NSD 546 of 2016
Judge(s): DERRINGTON J
Date of judgment: 10 April 2018
Catchwords:

CONSUMER LAW - Sale of goods – Acceptable quality – Motor vessel – Defective construction of hull and superstructure – Goods with latent risk not of an acceptable quality

CONSUMER LAW - Sale of goods – Acceptable quality – Right to reject – Whether rejection period expired – Whether nature and extent of breach of warranty had become “apparent” – Complexity of nature of defect

CONSUMER LAW - Sale of goods – Fitness for purpose – Defects generating risk in the use of a vessel – Not fit for purpose

CONSUMER LAW - Sale of goods – Manufacturer’s warranty – Statutory guarantee – Non-compliance

DAMAGES – Value of vessel at date of supply – Adequacy of evidence – Sale price less cost of repairs

DAMAGES – Loss of use of a vessel as part of general damages – Measure of loss – Rate of depreciation whilst vessel not able to be used
Legislation:

Competition and Consumer Act 2010 (Cth)

Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law)

Trade Practices Act 1974 (Cth)

Consumer Guarantees Act 1993 (NZ)
Cases cited:

Admiralty Commissioners v SS Chekiang [1926] AC 637

Admiralty Commissioners v SS Susquehanna [1926] AC 655

Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109

Anthanasopoulos v Moseley (2001) 52 NSWLR 262

Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Payments Corp [1985] 1 NSWLR 561

APS Satellite Pty Ltd (formerly known as “Sky Mesh Pty Ltd”) v Ipstar Australia Pty Ltd [2016] NSWSC 1898

Australian Competition and Consumer Commission v Valve Corp (No 3) (2016) 337 ALR 647

Awad v Twin Creeks Properties Pty Ltd [2012] NSWCA 200

Baltic Shipping Co v Dillon (1993) 176 CLR 344

Baxter v Obacelo Pty Ltd (2001) 205 CLR 635

Blatch v Archer (1774) 1 Cowp 63

Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1

BY Winddown Inc v Vautin (2016) 249 FCR 262

Consort Express Lines Ltd v J-Mac Pty Ltd (No 2) (2006) 232 ALR 341

Currie v Dempsey (1967) 69 SR (NSW) 116

Deal v Father Pius Kodakkathanath (2016) 258 CLR 281

Devenish v Jewel Food Stores Pty Ltd (1991) 172 CLR 32

Dimond v Lovell [2002] 1 AC 384

Distillers Co (Bio-chemicals) Ltd v Thompson [1971] AC 458

Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575

Ferraro v DBN Holdings Aust Pty Ltd [2015] FCAA 1127

Fink v Fink (1946) 74 CLR 127

George Zaravinos v Dairy Farmers Co-operative Ltd (1985) 7 FCR 195

Hope v Bathurst City Council (1980) 144 CLR 1

Jackson v Spittall (1870) LR5CP 542

Jones v Dunkel (1959) 101 CLR 298

Leeks v FXC Corporation (2002) 118 FCR 299

Luckins (Receiver and Manager of Australia Trailways Pty Ltd) v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR…

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Details
Case
[2018] FCA 426
Decision Date

CaseChat Overview and Summary

This case involved a dispute between the plaintiff, Mr Vautin, and two respondents, Bertram Yachts and Eagle Yachts. Mr Vautin purchased a yacht from Eagle Yachts, which was manufactured by Bertram Yachts. The dispute centred around the defective construction of the yacht's hull and superstructure, which led to the vessel being unfit for its intended purpose. The central issues in this case were the extent to which the defective manufacture of the vessel had rendered it unfit for its intended purposes, the nature of the remedy to which Mr Vautin was entitled, the quantum of any damages payable, and the identity of the party liable to Mr Vautin.

The court was required to determine whether the vessel was of acceptable quality as per the Australian Consumer Law (ACL), whether Mr Vautin had the right to reject the vessel, whether the rejection period had expired, and whether the nature and extent of the breach of warranty had become apparent. The court also had to decide on the fitness for purpose of the vessel, the manufacturer's warranty, statutory guarantee, and non-compliance. Additionally, the court had to determine the value of the vessel at the date of supply, the adequacy of evidence, the sale price less the cost of repairs, the loss of use of the vessel as part of general damages, and the measure of loss and rate of depreciation while the vessel could not be used.

The court found that the vessel was not of acceptable quality and was unfit for its intended purpose. The court preferred the conclusions reached by Mr Dovell, an expert witness, over those of Messrs Stanyon and Hutchings. The court determined that the total costs to ensure that the vessel was of an acceptable quality was $2,995,505.70. The court also found that the contractual clause limiting Eagle Yachts' liability for breach of a term or warranty was void to the extent that it excluded, restricted, or modified the effect of the remedies provided in the ACL. The court concluded that Mr Vautin was not entitled to recover damages from Bertram in respect of the diminution in the value of the vessel because he had not sustained any loss.

The court ordered that the plaintiff have judgment against the first respondent in the sum of $986,474.56, against the second respondent in the sum of $5,220,275.59, and that the second respondent have judgment on its cross-claim against the first respondent in the same sum. The parties were to be heard as to the amount of interest to be awarded and on the question of costs.

Orders

Orders of the court

1. The applicant have judgment against the first respondent in the sum of nine hundred and eighty-six thousand, four hundred and seventy-four four dollars and fifty-six cents ($986,474.56).

2. The applicant have judgment against the second respondent in the sum of five million two hundred and twenty thousand, two hundred and seventy-five dollars and fifty-nine cents ($5,220,275.59).

3. The second respondent have judgment on its cross-claim against the first respondent in the sum of five million two hundred and twenty thousand two hundred and seventy-five dollars and fifty-nine cents ($5,220,275.59).

4. The parties are to be heard as to the amount of interest to be awarded and on the question of costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The respondents do not assert that Mr Vautin is not entitled to some form of remedy. However, they dispute the nature of the remedy to which he is entitled; the quantum of any damages payable; and, the identity of the respondent whom ought to be liable to Mr Vautin. A central issue is the extent to which the defective manufacture of the vessel has rendered it unfit for its intended purposes. Mr Vautin asserts that all of the defectively manufactured shell of the vessel requires rectification to make it comply with a relevant specification. The total cost of doing so is in the vicinity of $2.975m. The respondents, on the other hand, assert remediation need only occur in the areas of the vessel where the defects have, to date, resulted in delamination. As an alternative, they submit the remediation can be limited to the hull area of the vessel. The facts Some of the issues in this matter arise as a result of the residency of the parties. Mr Vautin is a resident of Australia. Eagle Yachts is incorporated in Australia and has carried on business as a seller of boats here. Bertram, on the other hand, is an American company, incorporated in Delaware and engaged in the manufacture of motor vessels in the State of Florida. The relationship between Eagle Yachts and Bertram was, effectively, governed by an exclusive dealership agreement. In summary, that consisted of a written agreement entered into in May 2005 between Bertram and Eagle Yachts whereby the latter became the exclusive supplier in Australia of “pleasure yachts” manufactured by Bertram. That agreement was entitled “Bertram Yacht, Inc Dealer Agreement 2005-2008”. By its terms that agreement terminated on 31 August 2008. However, it is accepted as between Bertram and Eagle Yachts, that the parties continued to be bound by and continued to perform the terms of the agreement (exclusive of the termination clause) subsequent to that nominated termination date. On 28 October 2013, Eagle Yachts provided two months’ written notice to Bertram that it would terminate the agreement. Consequently, on 27 December 2013, the agreement came to an end. The terms of the exclusive dealership agreement and the manner in which they were carried out are important in the context of the question of whether Bertram was carrying on business in Australia. They are discussed in detail below. Mr Vautin enjoys boating in motor yachts, including engaging in marlin fishing. Prior to acquiring Revive, he had been the owner of four other vessels, all of which were made by Bertram, the last of which was a 63ft vessel. He had purchased that vessel from Eagle Yachts and, at the time of buying it, he had indicated to Eagle Yachts that he wanted to use the vessel for recreational deep-sea fishing and to use it to fish for marlin during the North Queensland marlin season. In or about mid July 2010, Mr Vautin received a telephone call from Mr Brad Rodgers who was the sales manager with Eagle Yachts and who had sold him the 63ft vessel. Mr Rodgers called to offer to Mr Vautin a larger vessel; being one in the Bertram 700 series. The particular vessel offered was especially attractive to Mr Vautin as it had an enclosed flybridge.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The experts further agreed as to the best measure of fitness for purpose for the design and construction of a pleasure boat such as Revive in the following terms:The best measure of fitness for purpose for the design and construction of a pleasure boat similar to REVIVE is the application of an appropriate and accepted standard of which the CE directive 94/25/CE as amended by directive 2003/44/CE is one. Agree PS, CCH. ACD.Conclusions concerning the veracity of the expert opinions There is no doubt that all of the experts who gave evidence concerning the defects in the sandwich core panels of Revive, Messrs Dovell, Stanyon and Hutchings, were qualified in the area of expertise. To the extent to which they differed in their opinions, I preferred the conclusions reached by Mr Dovell to those expressed by Messrs Stanyon and Hutchings. Mr Dovell’s prepared report and evidence caused me to conclude that he was a more careful and thorough expert. He was more able to clearly explain his conclusions and his observations and assertions withstood cross-examination. In the “hot-tubbing” process he was, generally, prepared to give direct and clear answers and displayed a willingness to consider all views. Messrs Hutchings and Stanyon were far more reluctant to do this. In his written and oral submissions, Mr Vautin was critical of Mr Hutchings and the manner in which he gave his evidence. Those criticisms are not without merit. Under cross-examination Mr Hutchings was somewhat evasive and sought to avoid making admissions which were contrary to Bertram’s contentions. He often did so by resorting to theoretical possibilities which were lacking in reality. For instance, it became apparent from the various inspections and testing on the vessel that it had not been constructed in accordance with any known standard for a vessel of a sandwich core construction. Mr Dovell identified in his report the manner in which the panels on Revive did not meet the standards required of the ISO Standard, which he identified as the reasonable minimum structural design and construction standard for this type of vessel. He opined that “boats designed and built in accordance with accepted good practice would, at a minimum, meet the ISO Standard”. There did not appear to be any serious disagreement with these points. In answer to this, Mr Hutchings suggested that the ISO Standard did not necessarily apply and that some other standard might be applicable (ts.283). Whilst it is theoretically possible the construction of the vessel might have complied with another standard, if one did exist, Mr Hutchings did not identify it. It appears that none of the experts were aware of any standard for the sandwich core construction of vessels that permitted leaving the kerfs unfilled and Mr Hutchings could not identify one despite applying his 20 years of knowledge, study and expertise which he drew upon for the purposes of giving evidence (ts.350). In the context of the ISO Standard being the minimum standard, Mr Hutchings hypothesis that the construction might satisfy another standard, without identifying it or even suggesting that one existed, was somewhat facetious. That response gave the appearance that he was not being entirely impartial in his answers nor attempting to assist the Court to reach the correct conclusions in relation to the factual matters under discussion.

Ratio Decidendi

Legal Principle Established

It follows that the total costs which will be incurred to ensure that Revive is of an acceptable quality within the meaning of that term as it is used in s 54 of the ACL is $2,995,505.70. If Mr Vautin had not returned the vessel he would be entitled to that amount.Operation of ss 64 and 64A of the ACL Eagle Yachts submitted that any claim for damages by Mr Vautin was limited by cl 8.8 of the agreement for the purchase of Revive. That clause purported to limit Eagle Yacht’s liability for breach of a term or of a warranty to repair the vessel, to payment of the costs of repair, its replacement or paying the cost of replacement. However, s 64 of the ACL renders such contractual clauses void to the extent to which they might exclude, restrict or modify the effect of the remedies provided in the ACL. Eagle Yachts further submitted that the exclusion clause in the contract of sale was saved by the proviso in s 64A of the ACL. However, that proviso only applies in relation to goods which are other than those acquired for personal, domestic or household use or consumption. In this case Revive was acquired for personal use with the result that the agreement does not fall within the proviso. It follows that to the extent to which it might otherwise have applied, cl 8.8 is rendered void and the entitlements of Mr Vautin under the ACL are not diminished by it.Damages entitlements against Bertram Mr Vautin’s entitlement to damages against Bertram, which have been occasioned by the failure to comply with the statutory guarantees in s 54 and 59, is provided by s 272. That section provides: 272 Damages that may be recovered by action against manufacturers of goods(1) In an action for damages under this Division, an affected person in relation to goods is entitled to recover damages for:(a) any reduction in the value of the goods, resulting from the failure to comply with the guarantee to which the action relates, below whichever of the following prices is lower:(i) the price paid or payable by the consumer for the goods;(ii) the average retail price of the goods at the time of supply; and(b) any loss or damage suffered by the affected person because of the failure to comply with the guarantee to which the action relates if it was reasonably foreseeable that the affected person would suffer such loss or damage as a result of such a failure.(2) Without limiting subsection (1)(b), the cost of inspecting and returning the goods to the manufacturer is taken to be a reasonably foreseeable loss suffered by the affected person as a result of the failure to comply with the guarantee.Reduction in value As has been discussed above, Mr Vautin became entitled to reject the vessel and he did so. That being the case, title to it vested in Eagle Yachts and he became entitled to recover the full amount of the purchase price. On that basis, Mr Vautin is not entitled to recover damages from Bertram in respect of the diminution in the value of the vessel because he has not sustained any. As he is entitled to recover the purchase price the fact that Revive is worth less than the price he paid for it, causes him no loss.