Wakefield Trucks P/L v Lach Transport P/L No. Scciv-00-654

WAKEFIELD TRUCKS P/L & ORS v LACH TRANSPORT P/L
[2001] SASC 168
Full Court: Prior, Debelle and Williams JJ

PRIOR J: I agree with Justice Williams. The appeal should be dismissed and the cross appeal allowed for the purpose of substituting $132,306.62 in lieu of the amount of $118,306.62.
DEBELLE J. The facts are recited in the reasons of Williams J. They need not be repeated. The issues in this appeal and cross-appeal were whether the appellant had made a misrepresentation to the respondent which had induced it to enter into the transaction by which it acquired the Western Star prime mover, whether the respondent had suffered any loss in consequence and, if so, how that loss should be assessed.
The appellant represented to the respondent that the Caterpillar engine in the Western Star prime mover it eventually sold to it was achieving a fuel consumption rate between 4.5 and 4.8 miles per gallon in “actual fleets operating road trains of the same configuration, size and condition” as those of the respondent. The representation went on to calculate the cost of fuel saved. It was a representation as to an existing fact in that it stated that the rate of fuel consumption was in fact already being achieved by road trains of the kind being operated by the respondent. The representation was incorrect.
The evidence showed that the respondent relied on the representation. The effect of the evidence given by Mr John Lach, who was the managing director of the respondent at the relevant time, was that there was at least one other prime mover available which was capable of achieving a fuel consumption of 4.5 to 4.8 miles per gallon. That was a Scania prime mover. Three years later the respondent purchased two Scanias. The Scania had the same fuel consumption as that represented for the Western Star. Mr Lach said that the respondent did not look at the Scania in 1993 “because everything stacked up with the Western Star. There was no need to go shopping”. Thus, there was at least one other vehicle capable of achieving the represented fuel consumption. The respondent relied on the representation in that it did not make any further inquiry. It was induced by the representation to enter into the transaction to acquire the Western Star and did not look elsewhere.
The respondent grounded its claim on s 52 and s 82 of the Trade Practices Act 1974 (Cth). The following three propositions are established in Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494.
1.First, where a person has made a representation which contravenes s 52 of the Trade Practices Act, that person is not liable for damages unless it is established that the representation has caused loss or damage to another person: per Gaudron J at para 15 and per McHugh, Hayne and Callinan JJ at para 38.
2.A party that is misled suffers no prejudice or damage unless it is shown that that party could have acted in some other way (or refrained from acting in some other way) which would have been of greater benefit or less detriment to it than the course adopted: per McHugh, Hayne and Callinan JJ at para 48.
3.If it is established that the representation has caused loss, although the common law may assist in deciding what damages may be awarded, the amount that may be recovered under s 82(1) is not to be confined by analogy with actions in tort and in contract: per Gaudron J at paras 15 – 17; per McHugh, Hayne and Callinan JJ at paras 38 – 41; and per Gummow J at paras 100 – 103.
Mr Kourakis QC, who appeared for the appellant, submitted that the respondent had not proved that it would have purchased an alternative truck which would have achieved the same rate of fuel consumption. Relying on Marks, he contended that the respondent had not acted in some way which would have been of greater benefit or less detriment to it. The argument fails to have regard to the facts. The respondent intended to acquire another vehicle to replace an existing vehicle. It relied on the representation made by the appellant and decided to purchase the Western Star. The Scania prime mover was known to achieve the rate of fuel consumption represented for the Western Star. It was available for purchase by the respondent. The respondent did not investigate purchasing a Scania because the appellant’s representations induced it not to do so. Had it purchased the other vehicle, its fuel costs would have been lower. However, the respondent decided upon the Western Star because it relied on the representations as to fuel consumption which enabled it to satisfy itself that it could afford the required lease payments. The respondent could have acted in another way by purchasing another vehicle but did not do so because it relied on the appellant’s representations. In other words, because the respondent relied on the appellant’s representations, it did not investigate buying a different prime mover and as a result it incurred, among other costs, a higher cost of fuel, a loss which could have been avoided had it purchased the Scania. Thus, notwithstanding that the representation was expressly excluded as a warranty from the contract for the sale of the truck, the appellant was liable to the respondent for any damage suffered by the respondent in consequence of relying on the misrepresentation.
There was a suggestion in the appellant’s written submissions that the respondent was not entitled to recover its losses because it had made an overall profit of $313,420 as a result of buying the vehicle, using it, and selling it. That argument overlooks how much worse off the respondent was as a result of having altered its position by entering into this transaction induced by the appellant’s misrepresentation. The respondent is entitled to recover as damages a sum representing the prejudice or disadvantage it has suffered in consequence of altering its position by entering into the transaction in reliance on the appellant’s representations: Toteff v Antonas (1952) 87 CLR 647 at 650, Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 526; Marks v GIO Holdings Ltd at para 41. The cost of fuel is plainly a very significant component of the costs of running a transport business. The respondent directly incurred losses as a result of altering its position by entering into this transaction. They were the extra fuel costs, the interest on those costs, and the extra cost of financing the purchase of the Western Star. These losses caused the respondent’s profit to be less than it would have been had it purchased a Scania truck. This aspect of the appellant’s argument must therefore be rejected.
What then is the measure of the respondent’s loss or damage? The respondent claimed the cost of fuel over and above the cost of fuel at the represented rate of consumption. In addition, it claimed other losses. First, it claimed the additional interest cost incurred because it did not buy the Scania, which cost less than the Western Star. The respondent acquired the Western Star under a lease agreement which had a fixed rate of interest. It therefore claimed the additional costs incurred in leasing the more expensive Western Star. The respondent also claimed the interest incurred on its bank overdraft by reason of the increased cost of fuel. Finally, there was a claim for the cost of repairs to the Western Star.
The trial judge allowed the extra fuel costs and interest on those costs but did not allow the other losses claimed by the respondent. The appellant has appealed against the allowance of the cost of the extra fuel and interest thereon. The respondent cross-appealed on a number of issues including damages. There were two grounds of the cross-appeal relating to damages. The first was that the trial judge had incorrectly calculated the interest on the extra fuel cost and, secondly, that the judge should have allowed the added costs involved in leasing the Western Star.
The appeal by the appellant must fail. For the reasons already given, the respondent is entitled to recover the added cost of fuel for a reasonable period since that loss is directly caused by the misrepresentation. The claim is made for the period of the lease and, as leasing is a common form of acquiring vehicles used for commercial purposes and as the respondent was bound by the lease agreement to lease the vehicle for a fixed period, the period of the lease agreement is a reasonable period for which to claim. This loss is a direct consequence of the misrepresentation.
I turn to that part of the cross-appeal which relates to the interest incurred in respect of the extra fuel costs. The trial judge allowed $4,500, being the costs incurred to 14 February 1997, the date of the termination of the lease of the Western Star. The appellant appeals on the ground that the assessment is manifestly inadequate. The trial judge had failed to have regard to a schedule prepared by an accountant which had been tendered by the respondent. The schedule was not challenged. It calculated the interest only on the extra cost resulting from the increased fuel consumption and progressively as that cost increased. According to the schedule, the additional interest to 28 February 1997 totalled $24,449.20. There is also evidence from the respondent’s bank proving interest rates on overdraft accounts in the relevant period. The rates in the period of the lease ranged between 11.25 percent and 13.0 percent. From 1 July 1997 to the date of judgment, the effective rates ranged between 9.7 percent and 11.5 percent. The judge gave no reasons for not adopting the accountant’s calculations. The judge’s award of $4,500 results in an extraordinarily low rate of interest on the extra fuel cost. The rate is about 1.5 percent per annum. There is no reason why the accountant’s calculations should not be adopted. However, for the reasons which follows, the whole of the claim for interest on the excess fuel costs should not be recovered by the respondent company because the company had failed to mitigate its loss. In the financial years ending 30 June 1994 to 1997 inclusive, the current assets of the respondent included unsecured loans to Mr H. Lach, one of the directors, and to the W. & K. Lach Family Trust, a family trust of one of the directors. The loan to Mr Lach had been in existence for some years and it fluctuated in amount from year to year. The loan to the family trust began in 1995. It too fluctuated in amount from year to year. In all years except 1994 and 1995, the total amount of the unsecured loans was substantially less than the bank overdraft. However, as at 30 June 1994 the loan to Mr H. Lach was $128,189 and the bank overdraft totalled $93,808. The loan to Mr Lach had reduced to $15,456 by 30 June 1995 and at that time the bank overdraft was $122,192 and the total amount of loans to Mr Lach and the family trust was $16,893. The fact that such a substantial repayment was made suggests that the respondent company could have reduced its loss in 1994 by requiring repayment by Mr Lach of at least half of the loan and that may have reduced the loans to Mr Lach below the level of the overdraft. There is no evidence when in the year ending 30 June 1995 the loan to Mr Lach was reduced to $15,456. The respondent had the onus of proving its loss. It has failed to prove when Mr Lach repaid the loan. The directors had a duty to mitigate the loss to the company resulting from the increased cost of fuel. Drawing substantial loans did not mitigate that loss with the consequence that, for the period when the directors’ loans exceeded the overdraft, the company cannot recover interest for the increased fuel costs. Having failed to prove when Mr Lach substantially repaid the company’s loan to them, it is not possible to do other than proceed on the basis of what is shown in the balance sheet as at 30 June 1995. The respondent is therefore entitled to recover interest for the extra fuel costs from 1 July 1995 but not for the earlier period. The cross-appeal in relation to interest should therefore be allowed. I would set aside the allowance of $4,500 and substitute therefore an allowance of $17,927.14.
The other part of the cross-appeal as to damages complained that the trial judge had failed to allow the respondent the extra financing cost of buying the more expensive Western Star. The respondent contended that this is a direct consequential loss incurred by it as a result of relying on the representations of the appellant. It says that it was induced to enter into a contract to lease a more expensive truck and thereby incurred a higher expense in financing that debt. When considering whether loss has been caused by a person who has acted in breach of s 82, the common law practical and common-sense concept of causation will be adopted: Wardley Australia Ltd v Western Australia (supra) at 525. Applying that approach, it is clear that this loss was caused by the misrepresentation. It directly flows from the misrepresentation and should be allowed. The cost of the Western Star was $199,600. The interest under the leasing agreement was 11.75 percent. Had the respondent purchased the Scania, the cost would have been $154,500. The cost of the additional finance is the difference between the cost of the respective vehicles ($45,100) multiplied by the rate of interest, 11.75 percent, over a period of 43 months, the period of the leasing agreement. That results in a sum of $17,473.23, say $17,470.
For these reasons, it is necessary to increase the amount of the damages awarded to the respondent to $125,203.76, being
Additional cost of fuel  $89,806.62
Interest on the extra cost of fuel  17,927.14
Increased cost of acquisition  17,470.00
  ___________
  $125,203.76
___________
It will be necessary to add interest on that sum payable to judgment. I would fix a lump sum of $25,500 in lieu of interest. The total award for damages and interest would, therefore, be $150,703.76.
The Cross-Appeal
The respondent’s cross-appeal raised two other issues. The first was a cross-appeal against the order dismissing the claim against Mr Umphertson. The respondent abandoned that appeal.
The second was a cross-appeal against one of the orders as to costs. The trial judge had ordered that the respondent indemnify the appellant in respect of the costs payable by it to the third party, Cavill Power Products Pty Ltd (“Cavpower”). The trial judge heard argument but did not give any reasons for his decision. The question whether the respondent is liable to indemnify the appellant for the costs payable by it to Cavpower turns on the question whether, given the allegations in the respondent’s statement of claim, it was reasonable for the appellant to join Cavpower: Lombard Insurance Co (Australia) Pty Ltd v Pastro & Ors (1994) 175 LSJS 448.
Until late in the presentation of its case, the respondent’s claim had been advanced on two grounds. The first was the representation as to fuel consumption. The second was a representation as to the reliability of the Western Star. The respondent had alleged that the appellant had represented that the new Western Star would be more reliable than the Kenworth truck which the respondent was intending to sell. The respondent alleged that the appellant had made written representations as to the amount which could be saved by the respondent in the costs of maintenance and repairs if it purchased the Western Star. Significantly, the respondent pleaded that the Western Star had performed poorly from the outset: see para 16 of its initial statement of claim. That allegation was maintained in each of the subsequent amendments to the statement of claim. The appellant joined Cavpower as third party. The Western Star had been fitted with a Caterpillar engine and Cavpower carried out the pre-delivery inspection on the vehicle and undertook whatever adjustments were necessary. In its third party notice, the appellant alleged that, to the extent that the court found that the engine in the Western Star did not operate properly as alleged in the statement of claim, Cavpower had falsely represented to it when delivering the engine that the engine in the Western Star was operating properly. Given the allegation by the respondent that the truck had operated poorly from the outset, it was reasonable for the appellant to join Cavpower as a third party.
The respondent sought to avoid that issue by stating that the first occasion on which it had alleged that the Western Star had performed poorly had occurred on 9 December 1993, some five months after the truck had commenced operations. That was mentioned in a report tendered at the trial. The respondent contends that, in the light of that fact, the joinder of Cavpower was not reasonable. The flaw in this argument is that the respondent did not amend its claim to delete the allegation that difficulties had occurred from the outset of the operation of the truck. Furthermore, even if the respondent had amended its claim, there would have been issues as to whether Cavpower had undertaken all necessary pre-delivery tasks. In any event, notwithstanding the tender of the report, the respondent maintained until final submissions its claim based on the representations as to reliability. The respondent could have avoided the liability of indemnifying the appellant for Cavpower’s costs if it had decided earlier to abandon this aspect of its claim. It did not do so. There is, therefore, no ground for interfering with the order made by the trial judge.
Conclusion
For these reasons, I would make the following orders:
1. That the appeal be dismissed.
2.That the cross-appeal be allowed for the purpose only of increasing the award of damages.
3.That the order made by the trial judge be varied so that damages payable by the appellant to the respondent be increased to $150,703.76.
WILLIAMS J: The first defendant Wakefield Trucks has appealed against a District Court judgment by which $118 306.62 was awarded to the plaintiff under the Trade Practices Act 1974 (Cth) (“the Act”) as compensation for damages suffered by the conduct of the defendant in providing misleading information as to fuel consumption of a truck which the plaintiff (a long distance truck operator) purchased from the defendant. During the negotiations which preceded this purchase, this information was supplied to the plaintiff by the defendant Umphertson (who is a director of Wakefield Trucks) and by its sales representative Gare.
In late 1992 the plaintiff opened negotiations with Wakefield Trucks to purchase a new custom built Western Star prime mover with a Caterpillar 460 HP engine. The defendant company operated a dealership as local representative of Western Star, a Canadian truck building organisation. A written quotation under the name of Gare and Umphertson was given to the plaintiff on 13 December 1992; the quotation included a detailed specification for the proposed rig. Throughout the negotiations the plaintiff (by its director Mr John Lach) had made it known that fuel consumption was a critical consideration in the plaintiff’s selection of a vehicle.
As a result of a request from the plaintiff for information the defendant sent it a letter dated 11 February 1993 which included the following:[AB 2048]
“FUEL SAVINGS: THE NEW CATERPILLAR 3406C / 460 HP THAT WE QUOTING YOU IN OUR NEW TRUCK PROPOSAL IS RETURNING BETWEEN 4.5 AND 4.8 M.P.G. IN ACTUAL FLEETS OPERATING ROAD TRAINS OF THE SAME CONFIGURATION, SIZE AND CONDITIONS AS YOURS. TO ASSUME THE LESSOR OF THESE TWO FIGURES (4.5 MPG) THIS EQUATES TO $2,458 OF FUEL PER TRIP OR $10,652 PER MONTH.
A SAVING OF $564 PER TRIP OR $2,445 PER MONTH.”
This memorandum on its face shows that it was authorised by Gare and Umphertson.
The plaintiff had previously given the defendant (through Gare) access to its records in order to familiarise itself with the nature of the plaintiff’s operation.

The Trial Judge found:
“I find that the letter of 11 February 1993 confirmed in much greater detail what John Lach had understood the benefits to be obtained by purchasing the new Western Star. I accept his evidence contrary to Mr Breakwell’s evidence that although this document was primarily obtained for the benefit of Mr Breakwell to obtain finance it also had a second purpose as stated in the evidence of Mr Lach to confirm to him the economic advantages of the new vehicle and that he could afford to purchase it, operate it and be able to pay off the finance debts.”
(Breakwell was a finance broker whose services Lach secured for the purpose of obtaining finance for the truck purchase).
The Trial Judge found the abovementioned passage in the letter of 11 February 1993 to be misleading and also found that the plaintiff relied upon the statement [see Judgment pars 68, 69 and 72].
The plaintiff’s complaint at trial was that the vehicle in operation returned about 3.7 miles per (imperial) gallon whereas the effect of the defendant’s representation was that like engines in other fleets were returning between 4.5 and 4.8 miles per gallon when performing under the normal operating conditions experienced in the plaintiff’s business. This difference between actual and represented performance meant that the fuel consumption of the plaintiff’s vehicle was greater than expected to the extent of about 18% - 23%.
The defendant Wakefield Trucks P/L claimed to be only a conduit for information supplied to it by Mr Holliday of Caterpillar of Australia. However, the information supplied by Mr Holliday was only by way of report as to the experience of a Mr Singleton (another transport operator) in using the relevant engine in a “B configuration,” whereas the relevant configuration with respect to the Lach operation was a “C configuration”. The Trial Judge found that the details provided in the letter of 11 February 1993 by Wakefield Trucks to the plaintiff “is not as the information was given to Gare but is used in a wholly different manner.” Although the letter referred to claimed experience in “actual fleets operating road trains of the same configuration, size and condition” as the plaintiff, the only basis for this assertion was the abovementioned report with respect to one truck [Judgment pars 100 and 107-109].
The Trial Judge found that the plaintiff suffered a loss to the extent that the Western Star truck, when employed in the plaintiff’s business used considerably more fuel than had been “warranted” by the letter of 11 February 1993 and earlier conversations [see judgment par 133]. The Trial Judge assessed compensation at $89 806.62 together with interest (fixed at $4 500 to 18 February 1997 and $24 000 thereafter to date of judgment) - in all $118 306.62.
However, the Trial Judge treated this assessment as representing only “one arm” of the plaintiff’s claimed loss. His Honour rejected a further claim which compared the cost of an alternative vehicle with the subject vehicle and sought the difference in price and interest on borrowed funds. Although it is not entirely clear, it seems His Honour reached this conclusion upon the basis that the evidence was insufficient to justify an award based upon a supposed benefit from some other vehicle.
In this respect the Trial Judge said:
“I find that on the facts of this particular case it is not appropriate to assess damages as an assessment of an alternative transport system i.e. the Scania, as has been argued by the plaintiff.”
and
“...the total fuel loss was $89,806.62. The plaintiff only claims that as one arm of its loss and says that its damage is assessed by comparing the cost of an alternative vehicle which would have produced 4.45 miles per gallon, and in fact did, that is the Scania unit which they used for a considerable period and that there(sic) loss is the figure of $89,806.62 plus the difference in price between the Scania and the Western Star and then all of those amounts carrying with them interest payments at the appropriate rates.”
and
“I am not satisfied that the alternative method of assessing damages, that is by purchasing, at the relevant time, an alternative vehicle and using the evidence of what it produced to arrive at a figure[sic]. I am satisfied that the only loss is the total of fuel losses referred to in the summary of losses on page 6 in paragraph 5 of the report of Trevor Clark exhibit P2 which is $89,806.62 together with whatever interest is appropriate to apply to that amount.”
and
“I am therefore satisfied that Lach Transport suffered a loss as the Western Star truck used considerably more fuel than had been warranted by the letter of 11 February, and earlier conversations.”
Significantly, there is no finding that but for the misrepresentation the plaintiff would have purchased some other vehicle.
The plaintiff’s case as opened to the Trial Judge was that the plaintiff operated the truck for forty three months until it was able to dispose of the vehicle on 14 February 1997. The plaintiff sought and was awarded $89 806 in respect of the difference in estimated cost between the fuel actually consumed during the period and the consumption as represented.
The statement of claim was twice recast. In its original form the statement of claim alleged (inter alia) a breach of s 52 of the Act and claimed by way of damage:
“26.2Increased operating costs represented by the level of fuel consumption over and above what Wakefield Trucks represented would be the fuel consumption.”
This claim was substantially reproduced in the second version of the statement of claim but in its third and final form the basis of the claim was substantially modified and the claim in the recited par 26.2 disappeared.
The final statement of claim alleges opportunity losses which are said to have been suffered based upon a comparison with the purchase and operation of a Scania truck which the plaintiff might otherwise have acquired in July 1993. The plaintiff claims the additional profits which would have been available to it by operating an alternative truck from 23 July 1993 to 14 February 1997. Although the plaintiff claims in the final statement of claim that the fuel economy representations were false, this assertion is translated into an allegation of a loss of profits and payment of higher capital costs than would otherwise have occurred and payment of additional interest on “borrowed” funds and interest on outgoings (including fuel).
Upon the hearing of this appeal the appellant abandoned most of the extensive grounds of appeal and relied on only grounds 4 and 6.3. I will not recite these grounds which barely reveal the nub of the appellant’s real argument; the appeal notice disputes the finding that there was misleading conduct and asserts that the operation of the truck was profitable. The gravamen of the appellant’s argument upon appeal is that the compensation claimed in the statement of claim based on expectation losses is not sustainable as a matter of law in circumstances where the representation was expressly excluded as a warranty from the written terms of the contract for sale and purchase of the truck. The appellant in written argument says that:
(a)“An award coinciding with what would have been allowed in a contractual claim will only be made in those cases where the plaintiff can establish that, “but for the misleading and deceptive conduct he or she would have entered into a contract that would have returned the very benefit that was represented”.”
(b)“The respondent led no direct evidence as to what it would have done if the appellant had represented only that the operator Singleton had achieved the claimed fuel efficiency. The inference from the evidence as a whole is that it would still have proceeded with the purchase of the Western Star.”
(c)“The learned Trial Judge erred in awarding damages calculated as the difference between the fuel efficiency represented in the letter of 11 February 1993 and the actual fuel usage achieved. Such an award proceeds, as the learned Trial Judge himself acknowledged, on the basis that the letter “warranted” the fuel use referred to.”
(The appellant also submits that passages quoted by the Trial Judge from the statement of claim demonstrate that His Honour was not addressing the issues raised by the statement of claim in its final form).
In Gates v The City Mutual Life Assurance Society Ltd (“Gates”) (1985-86) 160 CLR 1 the High Court of Australia said, at 11-12:
“The Act does not prescribe the measure of damages recoverable by a plaintiff for contravention of the provisions of Pts IV and V. Accordingly, it is for the courts to determine what is the appropriate measure of damages recoverable by a plaintiff who suffers loss or damage by conduct done in contravention of the relevant provisions. Two established measures of damages, those applicable in contract and tort respectively, compete for acceptance. In contract, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the contract been performed - he is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure incurred, in reliance on the contract (reliance loss). In tort, on the other hand, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the tort not been committed (similar to reliance loss).
The differences and the similarities between the two approaches are best illustrated by contrasting the damages recoverable for breach of contractual warranty on a purchase of goods with those recoverable for a fraudulent misrepresentation inducing entry into a contract for the purchase of goods on the assumption that the contracts are identical except that in one case the representation amounts to a warranty and in the other it is merely a non-contractual representation. For breach of warranty the plaintiff is prima facie entitled to recover the difference between the real value of the goods and the value of the goods as warranted. In deceit the measure of damages is the difference at the time of purchase between the real value of the goods, and the price paid: Potts v Miller; Toteff v Antonas; Gould v Vaggelas. But this has been treated as a prima facie measure only, the true measure being reflected in the proposition stated by Dixon J in Toteff v Antonas in these terms:
“In an action of deceit a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage he has suffered in consequence of his altering his position under the inducement of the fraudulent misrepresentations made by the defendant.”
As his Honour then pointed out, it is a question of determining how much worse off the plaintiff is as a result of entering into the transaction which the representation induced him to enter than he would have been had the transaction not taken place. This entitles the plaintiff to all the consequential loss directly flowing from his reliance on the representation (Potts v Miller; Doyle v Olby (Ironmongers) Ltd, at least if the loss is foreseeable...”
In Marks v Gio Australia Holdings Ltd (“Marks”) (1998) 196 CLR 494 the joint judgment (McHugh, Hayne and Callinan JJ) includes the following at 514:
“The bare fact that a contract has been made which confers rights or imposes obligations that are different from what one party represented to be the case does not demonstrate that the party that was misled has suffered loss or damage. The contrary view (which had been adopted by the Full Court of the Federal Court in Jobbins v Capel Court Corporation Ltd) was rejected by the majority in Wardley.
A party that is misled suffers no prejudice or disadvantage unless it is shown that that party could have acted in some other way (or refrained from acting in some way) which would have been of greater benefit or less detriment...”
The present appellant relies upon these passages to argue that the respondent suffered no loss from the acquisition of the truck.
It is not in dispute that the vehicle was worth the amount of the purchase price and that it generated profits; the respondent’s complaint (says the appellant) is that the profits were smaller than anticipated. The appellant submits that there was not an alternative vehicle available in the market which but for the false representation the respondent could and would have purchased so as to establish a causal connection between the misrepresentation and some identified loss. The appellant submits that neither the fact that the representation induces entry into a contract nor the fact that it is a statement of the benefits flowing to the respondent under the contract is enough to justify compensation for expectation loss (see Gates at 15).
Gates and Marks are both cases in which the misrepresentation was as to the effect of the contract and the benefits flowing therefrom. In Gates the insurance company misrepresented the meaning of a policy of insurance with respect to the ambit of the risk; it was not shown that the plaintiff would have taken out a different type of policy if he had known the true position. In Marks GIO represented that interest falling due under loan contracts would be at fixed rates whereas the contract allowed a variation; as GIO was prepared to allow re-financing without penalty when the interest rate was about to be increased, no loss of a benefit could be identified arising from the entry into the loan contract upon a misunderstanding as to its terms. Each of these cases was one in which the terms of the contract itself conferred rights or imposed obligations different from the representation; that is the distinguishing feature of these cases. The ratio of Marks is:
“The bare fact that a contract has been made which confers rights or imposes obligations that are different from what one party represented to be the case does not demonstrate that the party that was misled has suffered loss or damage.” (See Marks at 514).
In Gates the High Court discusses the limited circumstances in which a loss associated with deprivation of an opportunity may appropriately lead the court in assessing compensation for misrepresentation to compare the benefits attaching to the contract itself with the benefits which a different contract would yield. At 13 the Court said:
“If that reliance has deprived him of the opportunity of entering into a different contract for the purchase of goods on which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation. This may well be so if the plaintiff can establish that he could and would have entered into the different contract and that it would have yielded the benefit claimed...”
Accordingly, the submission of the appellant is correct insofar as it calls in question the basis of assessment of damages claimed in the third statement of claim which is directed to alleged loss of profit. Upon the facts of this case (and as pleaded) no loss flows from the bare fact of the purchase of the new truck. The evidence does not suggest that the truck was not worth the purchase price; the findings of the Trial Judge do not identify an alternative contract which itself would have yielded an identifiable benefit of the nature which was pleaded.
The appellant is also correct in its submission that the representations made in the letter of 11 February 1993 should not be treated as a warranty; any warranty was expressly excluded from the agreement under which the appellant sold the truck to Lach Transport.
In my opinion despite the shortcomings of the statement of claim, the Trial Judge granted the relief which the evidence justified. It is clear from the way in which the case was opened that there was a claim for the amount eventually awarded even although it cannot be found in the third statement of claim. However, the Trial Judge’s reference to a warranty in the letter of 11 February 1993 gives rise to the appellant’s submission that the assessment is wrong in principle.
In my view applying the analogy of Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158 (approved in Gates at 12) the respondent is entitled to all consequential loss directly flowing from its reliance upon the representation. In this instance the respondent purchased the vehicle (under lease finance arrangements) and continued to operate the vehicle for forty four months until it managed to dispose of the vehicle. The evidence shows that the plaintiff used the vehicle (despite having become aware of its failings) as the pressures of its business required. However, other vehicles in the fleet were used so far as possible.
The vehicle was traded for about $130 000 (according to Mr Lach) after three years seven months. There appears to be no criticism at trial of the retention of the vehicle for this time. In dealing with the possibility of mitigation of damage the Trial Judge made a finding that there was no evidence to suggest that the plaintiff ought to have considered some modification to the vehicle with a view to lowering the fuel consumption. The defendant carried the burden of proof to demonstrate that the plaintiff ought reasonably to have taken particular steps by way of mitigation (see Simonuis Vischer & Co v Holt & Thompson (1979) 2 NSWLR 322 at 361). The course of the trial shows that the reasonableness of the plaintiff’s action in continuing to operate the vehicle was not an issue although the actual calculation of the fuel used and its cost was subjected to close scrutiny.
In my view, loss directly flowing from the plaintiff’s reliance upon the misleading representation was the difference between fuel consumption as represented and as properly achieved. This loss continued until the excessive rate of consumption was discovered (or ought to have been ) and thereafter for as long as it was reasonable for the plaintiff to continue to operate the vehicle. The plaintiff will be expected to act prudently and its damages will continue to run until it should “sensibly” have taken steps to put an end to the outgoings. (see per Winn LJ in Doyle v Olby at 168-169 and per Sachs LJ at 171). The plaintiff’s calculations were made upon the comparatively modest basis which assumed that the represented fuel consumption was 4.45 mpg until the vehicle was disposed of in the ordinary course. In my opinion that calculation (which was used by the Trial Judge) was an appropriate measure of the damage.
The use of 4.45 mpg as an expected consumption was a fair but conservative figure bearing in mind that the represented consumption was “between 4.5 and 4.8 mpg in actual fleets”. This figure of 4.45 mpg corresponded with the claimed consumption of a Scania vehicle but that fact is not relevant to the present assessment. [see judgment par 135].
In finding that the letter of 11 February 1993 was misleading and a deceptive statement within s 52 of the Act the Trial Judge said:
“I find that the letter of 11 February is stating, with certainty, a present state of facts and a future state relying on those facts and what the effect will be in the future.”
His Honour then cited authorities dealing with the effect of representations as to future events and predictions on the one hand and statements of existing or past facts on the other.
In my opinion the representations made on 11 February 1993 should be viewed as a report as to the performance record of the particular engine type (Caterpillar 3406C - 460 hp). The information supplied was as to an existing fact upon which was superimposed a simple arithmetical calculation as to the savings in money terms represented by the represented rate of fuel consumption.
The appellant’s criticism of the claim for expectation damages in terms of the third statement of claim is justified but it seems that the Trial Judge has rejected that approach. The Trial Judge has adopted an approach which is consistent with principle but in the absence of a warranty.

In assessing damages the plaintiff must give credit for any benefit which it has received (see Doyle v Olby at 167 per Lord Denning MR).
The appellant contends that advantages which the respondent derived from the use of the vehicle in terms of maintenance costs and capital resale value should be brought to account in reduction of any loss. However, it is my view that the loss made by the respondent is on its fuel account and that this foreseeable loss arises as a direct consequence of the misrepresentation. The matters relied upon by the appellant are (if established) collateral benefits disconnected from the transaction giving rise to the damage and are not to be brought to account. The relevant principle is discussed in Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (1991) 104 ALR 397 especially at 403-404 and at 412-423. In that case involving a compensation claim based upon a breach of s 52 of the Act Burchett J (after mentioning the principle of Doyle v Olby discussed the authorities which establish whether (as a question to be decided on the facts of the case) the so called mitigating transaction is to be treated as an independent or disconnected transaction. In a commercial dispute the subsequent transaction if it is to be taken into account by way of mitigation, must be one arising out of the consequences of the relevant breach and in the ordinary course of business (see British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673 at 690 per Viscount Haldane LC).
In the present case the respondent’s dealings and business operations are wholly independent of and unrelated to the impugned transaction. In my view, the operation of the respondent’s fuel account in respect of the Caterpillar 460 and the loss to be there identified should be isolated. The manner of conduct of the respondent’s business in accordance with the commercial judgment of its directors is in other respects generally unrelated to a loss which can be directly traced to the misrepresentation and the reliance placed thereon. Therefore there is no credit to which the appellant is entitled in the course of assessing compensation.
Lach Transport Pty Ltd has cross-appealed. Wakefield Trucks as defendant to the action joined as third parties, Caterpillar of Australia Ltd and Cavill Power Products Pty Ltd (Cavpower).
Cavpower was joined by reasons of allegations by Lach Transport which were not pursued at trial. The Trial Judge ordered that the plaintiff indemnify the defendants in respect of the costs of Cavpower. Although the plaintiff now complains about this aspect of the Trial Judge’s final order it seems to me that it was one which was within the discretion of the Trial Judge.
The cross-appeal also complains about the Trial Judge’s rejection of “an alternative transport system” as the basis for assessing compensation. This was the basis of assessment of damages which was put forward in the third statement of claim. I have already dealt with this. I disagree with the submissions of Lach Transport on this topic.
The respondent’s cross appeal also complains about the amount of $4500 allowed for interest accruing on the excessive fuel costs to 18 February 1997. The Trial Judge did not explain how he reached this figure.
Mr Clark, an accountant called as a witness by the respondent made an interest calculation upon a compounding basis at monthly rests to reflect his assumption as to interest which was accumulating upon the payments for this excessive fuel usage. His calculation totalled $24,449 to reflect the fluctuations in assumed overdraft interest rates - starting at 11.65 per cent in June 1993 and moving up to a high point of 13 per cent in January 1995 and thereafter falling to 11.5 per cent in January 1997. In fact these interest rates were somewhat higher than actual rates charged to the respondent by its bank. We were told by counsel for the respondent that during the relevant period his client was charged between 11.2 per cent and 12.5 per cent. Although the point is not entirely clear, it also appears that in fact the respondent during the relevant time was choosing to make its surplus funds available as interest free loans to its directors and their family trust and other associated entities rather than investing the monies commercially.
If these loans had been called in so as reduce the interest accruing on overdraft then Lach Transport would have been able to mitigate its loss. Debelle J has made an analysis which suggests that instead of $4500 the evidence supports an award of $17,927.14 for the relevant period. I am content to adopt that figure (say $18,000). The Trial Judge noted that proceedings were commenced on 4 June 1996 and he allowed a lump sum of $24,000 for interest from 18 February 1997 to the date of judgment (30 June 2000); I would increase that amount to $24,500.
Following the general approach of the Trial Judge, I would therefore award the respondent the following amounts in variation of those assessed by the Trial Judge:
Additional cost of fuel  89806.62
Interest to 18 February 1997              18000.00
         Interest thereafter to judgment              24500.00
132306.62
The total award for damages and interest should therefore be $132,306.62 (in lieu of $118,306.62 awarded by the Trial Judge).
A claim against Mr Umphertson was dismissed by the Trial Judge; the notice of cross-appeal complained about this dismissal but the point was not pursued.
I would dismiss the appeal and allow the cross-appeal for the purpose of increasing the award of damages and interest to $132,306.62.

[2001] SASC 168

24 May 2001