FEDERAL COURT OF AUSTRALIA Ruaro v Holcomm Marine Pty Limited [2008] FCAFC 174 TORTS – appellants' motor yacht was moored in Point Piper marina pursuant to a mooring agreement with the respondent – yachtdestroyed in severe storm when its mooring was cut by another vessel from same marina which had come loose from its own mooring – primary judge rejected appellants' claim for damages in negligence and breach of warranties implied by the Trade Practices Act 1974 (Cth) – appellants claimed primary judge erred by defining too narrowly the respondent's duty of care, failing to find the exclusion clause in the mooring agreement void for inconsistency with s 74 of Trade Practices Act 1974 (Cth) and failing properly to characterise quantum of damage – appeal answered by factual findings of primary judge on standard of care –no appellable error in factual findings – appeal dismissed Trade Practices Act 1974 (Cth) ss 68, 74(1), 74(2) Branir v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 applied Bryan v Maloney (1995) 182 CLR 609 applied E v Australian Red Cross Society (1991) 27 FCR 310 referred to Grant v Australian Knitting Mills Ltd [1936] AC 85 referred to Hawkins v Clayton (1988) 164 CLR 539 referred to Hughes v Lord Advocate [1963] AC 837 referred to New South Wales v Fahy (2007) 81 ALJR 1021 referred to Wyong Shire Council v Shirt (1980) 146 CLR 40 referred to Miller RV, Miller's Annotated Trade Practices Act (29th ed, Thomson Lawbook Co, 2008) Trindade F, Cane P and Lunney M, The Law of Torts in Australia (4th ed, Oxford University Press, 2007) MARK RUARO AND SECILIA RUARO v HOLCOMM MARINE PTY LIMITED (ACN 062 320 870) NSD 116 OF 2008 JACOBSON, SIOPIS & PERRAM JJ 31 OCTOBER 2008 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 116of 2008 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: MARK RUARO First Appellant SECILIA RUARO Second Appellant AND: HOLCOMM MARINE PTY LIMITED (ACN 062 320 870) Respondent JUDGES: JACOBSON, SIOPIS & PERRAM JJ DATE OF ORDER: 31 OCTOBER 2008 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellants pay the costs of the proceeding. 3. The cross-appeal is to be dismissed. 4. There be no order as to costs of the cross-appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 116 of 2008 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: MARK RUARO First Appellant SECILIA RUARO Second Appellant AND: HOLCOMM MARINE PTY LIMITED (ACN 062 320 870) Respondent JUDGES: JACOBSON, SIOPIS & PERRAM JJ DATE: 31 OCTOBER 2008 PLACE: SYDNEY REASONS FOR JUDGMENT JACOBSON & SIOPIS JJ: Introduction 1 On 24 August 2003 a valuable 65 year old wooden motor yacht known as "Seaquest" was totally destroyed during a severe storm on Sydney Harbour. 2 The "precise concatenation of circumstances" which resulted in the destruction of Seaquest (see Hughes v Lord Advocate [1963] AC 837 at 853, 856) may have been unusual and unforeseeable, but the learned primary judge, Emmett J, found that the relevant risk was known and foreseeable: Ruaro v Ferrari [2007] FCA 2022. 3 The risk was that another vessel in the marina would drag its moorings and collide with Seaquest. The risk eventuated during the late afternoon of 24 August 2003 when the vessel "Pavana" dragged its mooring over 100m colliding with Seaquest and eventually severing the rope which secured Seaquest to its mooring. Seaquest was then driven by strong winds across Rose Bay where it was battered to destruction against a jetty and a seawall. 4 On the date of the collision both Seaquest and Pavana were moored on swing moorings at the Point Piper Marina in Sydney Harbour. The marina was operated by Holcomm Marine Pty Limited ("Holmeport"). Seaquest was moored on its swing mooring pursuant to a licence agreement made in 1996 between its owners, Mr & Mrs Ruaro, and Holmeport. 5 A swing mooring is an anchoring mass consisting of a concrete block to which chains are attached. A rope is attached to the chain and the vessel is attached to the rope when it is moored. 6 There was evidence before the primary judge of a conversation between the manager of the marina and a contractor engaged by her some five months before the incident to consider the condition of the various moorings. The conversation, which took place in March 2003, was relevant to the question of the adequacy of Pavana's mooring. The evidence was that the contractor recommended that the outside moorings be upgraded from the existing one-tonne blocks to a weight of two tonnes. On the day of the storm, Pavana was secured on a one-tonne mooring, although she was not moored there when the contractor carried out his inspection. 7 The cost of an additional one tonne block would have been $400. However, rather than follow the advice of its contractor, Holmeport's manager said she would "take the risk". 8 Nevertheless, the learned primary judge was not persuaded that Holmeport failed to take all reasonable measures to ensure that Pavana's mooring was adequate. Thus, his Honour's critical factual finding was that Mr and Mrs Ruaro failed to satisfy him that Holmeport breached its duty of care. This alleged duty of care was described by the primary judge as "the secure mooring duty". It is the only claimed duty of care that was raised on the appeal. 9 His Honour rejected Mr and Mrs Ruaro's claim against Holmeport on four other relevant bases. First, he found that cl 4 of the contract between the parties operated "fortuitously in favour of Holmeport" to exclude a duty of care. Second, he did not consider that s 68 of the Trade Practices Act 1974 (Cth)rendered cl 4 of the contract void. Third and fourth, he found that there were no breaches of the warranties implied by s 74(1) and 74(2) of the Act. 10 Mr and Mrs Ruaro contend that his Honour erred in each of these findings. An important issue which arises in the claims of negligence and s 74(1) of the Act is whether the scope of services supplied under the contract was confined to the provision of Seaquest's mooring in isolation. Senior Counsel for Mr and Mrs Ruaro submits that the primary judge's finding in this respect (see Ruaro v Ferrari at [64] and [83]) was erroneous because the services were not limited to a single mooring but extended to the use of a mooring within the environment of the marina. 11 However, even if the primary judge was in error in confining the scope of the services to the provision of Seaquest's mooring, Mr and Mrs Ruaro cannot succeed on the appeal unless we are satisfied that his Honour was wrong to find against them on the issue of Holmeport's standard of care. That finding turned upon his Honour's assessment of expert evidence as to weather conditions and as to the adequacy of Pavana's mooring. 12 The question which arises in relation to s 68 of the Act is one of construction of that provision but it will not be necessary to answer that question unless we are satisfied that his Honour's findings on Holmeport's standard of care were wrong. 13 The issue under s 74(2) of the Act is whether his Honour erred in finding that Mr and Mrs Ruaro did not rely on the skill and judgment of Holmeport in selecting the mooring and whether it would have been unreasonable to do so. Again, if the primary judge's factual findings stand, this question need not be answered. 14 A further issue which arises on the appeal, if we are satisfied on the issue of liability, is the quantum of loss. The legislation 15 Sections 68 and 74 of the Act are contained in Division 2 of Part V. The purpose of that Division is to imply into all consumer contracts certain non-excludable conditions and warranties. It applies in relation to contracts for the supply of goods or services to a consumer: Miller RV, Miller's Annotated Trade Practices Act (29th ed, Thomson Lawbook Co, 2008); E v Australian Red Cross Society (1991) 27 FCR 310 at 352. It was not suggested that Mr and Mrs Ruaro were not consumers within the meaning of s 4B. 16 Nor was it suggested that the services provided under the Mooring Agreement were not "services" within the meaning contained in s 4 of the Act. 17 Section 68 provides, relevantly, that any term of a contract that purports to exclude, restrict or modify the application of s 74 of the Act or any liability of a corporation for breach of the warranties implied by s 74, is void. 18 Section 74(1) of the Act implies into every contract for the supply by a corporation of services to a consumer, a warranty that the services will be rendered with due care and skill. 19 Section 74(2) provides, relevantly, that where a corporation supplies services to a consumer and the consumer, expressly or by implication, makes known to the corporation any particular purpose for which the services are required, there is an implied warranty that the services will be reasonably fit for that purpose. 20 There is an express exception in s 74(2) so that no warranty is implied where the circumstances show that the consumer does not rely, or that it is unreasonable for him or her to rely, on the corporation's skill or judgment. Factual background: the making of the Mooring Agreement 21 The factual matrix in which the Mooring Agreement was made is set out in [4]ff of the judgment of the primary judge. 22 The facilities of Holmeport's Point Piper Marina include swing moorings in four separate areas of Rose Bay. The areas are referable to the size of the moored vessels, the largest vessels being moored in the area which is furthest away from the Point Piper jetty. That area is reserved for vessels such as Seaquest and Pavana which are greater than 37 feet. 23 Holmeport became the operator of the marina some time before March 1996. Seaquest had been moored at the marina from May 1993, originally under the operation of Holmeport's predecessor. 24 In March 1996 the general manager of Holmeport, Mr Campbell Holmes, asked Mr Ruaro to sign a written licence agreement. A conversation then took place between them, the terms of which are set out at [6] of the primary judge's judgment. The effect of what Mr Ruaro said was to express his concern that Holmeport would be exonerated from liability if it moved the Seaquest and damaged it. He pointed out that before Holmeport took over the marina, the operator moved another boat from a berth to a swing mooring and it dragged and hit the Seaquest. 25 Mr Holmes replied: Look you don't have to worry about that. That man is not here anymore. We are going to do things differently now. We are part of the Boating Industry Association and that's why you have to sign this form. All the paperwork has to be correct. We are going to be spending a lot of money and we're going to be making this place professional, world class. Look, your boat will be fine just there right where it is. The primary judge's findings about the decision to sign the agreement 26 The primary judge made the following findings about the matters to which Mr Ruaro had regard in his decision to sign the Mooring Agreement: [8] In deciding to sign the Mooring Agreement, Mr Ruaro had regard to the fact that Mr Campbell [Holmes] seemed to want to run a marina in a professional manner and the fact that he said he was going to upgrade all the facilities. Those facts and the maintenance were very important to Mr Ruaro. His main consideration was the safety of the Seaquest and the safety of the area that Seaquest was in. Mr Ruaro understood, from what Mr Campbell [Holmes] said, that everything would be improving, and that Seaquest would be safe. [9] In deciding to continue to moor Seaquest at the Point Piper marina from 1996, Mr Ruaro had regard to his observations that the marina was being upgraded and that maintenance seemed to be being carried out on a regular basis. He did not find anything that brought any concerns to him and he thought that Holmeport had the money to do a professional job. 27 There was a further conversation between Mr Ruaro and Mr Holmes in September 2000, that is to say some four and a half years after the Mooring Agreement was signed. His Honour found at [11] that the thrust of the concern expressed by Mr Ruaro at that time was that if he left the mooring to have Seaquest slipped on another slipway, he would lose the mooring which he desired to keep. The Mooring Agreement 28 The form of the Mooring Agreement, and its terms and conditions, are set out in detail by the primary judge at [12]ff. 29 As his Honour observed, the Mooring Agreement is a pro forma single sheet printed on both sides. It is headed "Marine Craft Berthing, Storage & Mooring Agreement". The front sheet contains blank spaces and boxes in which the name of the parties, a description of the services, particulars of the licensee's marine craft, the licence fee and the term of the licence were inserted. 30 The conditions of the Mooring Agreement were printed on the reverse side of the pro forma. The relevant conditions are set out at [16] of his Honour's judgment. We do not propose to repeat them. The primary judge's finding on s 74(1) 31 It was common ground before the primary judge that the warranty implied by s 74(1) was implied in the Mooring Agreement. What was in issue was the scope of the services to which the warranty applied. 32 The learned primary judge was of the view that the rights under the Mooring Agreement consisted of a non-exclusive licence to attach the Seaquest to the mooring. That right, his Honour said, was provided by Holmeport without hindrance; Seaquest's mooring held fast, although of course the rope which secured it was severed. 33 His Honour's critical finding on the claim for breach of the implied warranty under s 74(1) was as follows: [64] The rights conferred on Mr and Mrs Ruaro by the Mooring Agreement did not extend to the safekeeping of Seaquest. Indeed, the express terms of the Mooring Agreement provide to the contrary. I do not consider that the services provided under the Mooring Agreement, being the right to the use or enjoyment of the mooring under a non-exclusive licence, was provided by Holmeport otherwise than with due care and skill. Indeed, it is difficult to comprehend, in the present context, what care and skill would be entailed in the mere offering of a person to use a facility that, of itself, was sound. The position may be different, of course, if the mooring to which Seaquest was attached was inadequate to restrain Seaquest. That may have involved a failure to provide the relevant services with due care and skill. That, however, is not this case. There was no breach of the warranty implied by s 74(1). The primary judge's finding on s 74(2) 34 The primary judge accepted that Mr Ruaro made known to Mr Holmes the purpose for which Mr and Mrs Ruaro required the licence to use the mooring. However, he considered that the circumstances showed that Mr and Mrs Ruaro did not rely on Mr Holmes' skill and judgment. He also considered that it would have been unreasonable of them to so rely, in light of the terms of the Mooring Agreement. 35 His Honour made the following findings on the absence of reliance: [69] Seaquest had been moored at the Point Piper marina for several years before the Mooring Agreement was signed and before Mr Ruaro and Mr Holmes had their conversation in 1996. There was no suggestion, in 1996, that Mr Ruaro wished to take Seaquest away from the Point Piper marina. The only question is whether he would enter into a written agreement with respect to the use of the mooring. He wanted to ensure that he retained the same mooring. He had chosen Holmeport's marina as being convenient for his purpose. In the circumstances, I consider that it is clear that he did not rely on Mr Holmes' skill and judgment as to the adequacy of the mooring in question. He was apparently disappointed by the lack of professionalism shown by Mr Holmes' predecessor. That, however, had nothing to do with reliance upon Mr Holmes' skill and judgment as to the adequacy of the Seaquest mooring as a mooring for Seaquest. 36 The learned primary judge went on to find that Mr Ruaro read the Mooring Agreement sufficiently to notice the exclusion clause contained in cl 4 and to query it with Mr Holmes. His Honour also found that Mr Ruaro had read cl 11 under which he acknowledged that he had examined the facilities and relied on his own judgment in accepting them. The primary judge's finding that there was no duty of care 37 Mr and Mrs Ruaro contended that Holmeport owed them a duty to take reasonable measures to ensure that the moorings of boats "in the environment of Seaquest" were suitable for vessels such as the Pavana, which were attached to those moorings. 38 In determining whether Holmeport owed the alleged duty, his Honour considered the terms of the mooring agreement, construed as a whole. He placed particular emphasis on cll 3(b), 3(j) and 4. 39 Clause 3(b) provided that Mr and Mrs Ruaro indemnify Holmeport for any claims for which Holmeport may be liable in respect of loss or damage arising from the use of "the Facilities" (as defined in the Mooring Agreement). His Honour considered that this clause evinced a clear intention that Mr and Mrs Ruaro were to bear the risk of any liability that might be incurred by Holmeport arising out of the use of the facilities by Mr and Mrs Ruaro: see Ruaro v Ferrari at [81]. 40 The primary judge went on to say that this is emphasised by cl 3(j) under which Mr and Mrs Ruaro agree to take out and maintain adequate insurance. He considered cl 3(j) to be part of the overall scheme of the Mooring Agreement which is designed to limit the obligations of Holmeport. He was of the view that the exclusion clause in cl 4 of the agreement must be understood against that scheme. 41 His Honour's finding as to the effect of cl 4 was as follows: [83] In a sense, Condition 4 operates fortuitously in favour of Holmeport in the present case. Clearly enough, Condition 4 was intended to operate in circumstances where, by reason of some deficiency in the mooring assigned to Seaquest, Seaquest became adrift and suffered damage. Nevertheless, Condition 4 is applicable in its terms. As a matter of contract, Mr and Mrs Ruaro agreed that Holmeport would not be liable for any loss or damage suffered or incurred by or in respect of Seaquest, however caused. As a matter of contract, they have agreed not to hold Holmeport responsible for any loss or damage by or in respect of Seaquest. I do not consider that Holmeport owed the secure mooring duty to Mr and Mrs Ruaro as alleged. Accordingly, subject to the operation of s 68 of the Trade Practices Act, I do not consider that Holmeport has any liability in tort for breach of the alleged secure mooring duty. The primary judge's finding on the effect of s 68 42 The primary judge was of the view that s 68 did not render cl 4 void. He said at [85]: …I consider that the effect of s 68 is to render a term of a contract void only to the extent that it modifies the operation of, relevantly, s 74. Section 68 is not designed to strike down valid contractual arrangements except in so far as the arrangements are designed to exclude the benefits intended to be conferred by provisions such as s 74. A perfect storm: the primary judge's findings on the adequacy of Pavana's mooring 43 Although it was not strictly necessary for him to do so, the primary judge considered in some detail the question of whether Holmeport took reasonable measures to ensure that Pavana's mooring was adequate to hold that vessel in the conditions that would reasonably be expected on 24 August 2003. 44 Mr and Mrs Ruaro conducted the proceedings on the basis that the issue to be determined was whether the mooring to which the Pavana was attached ought to have been capable of holding her in weather conditions of a once in 50 years storm. 45 His Honour considered in detail the expert evidence which was adduced by the parties and the weather conditions that existed on the day. 46 The primary judge found that a swing mooring must be adequate to restrain the vessel moored to it, at least in the conditions that might reasonably be expected at the relevant location. His Honour observed at [125] that: (I)f a mooring is not adequate to restrain a vessel, damage, not only to the vessel, but to other property, may follow. 47 His Honour did not consider that a duty to ensure that a mooring could withstand weather conditions that might occur more frequently than once in every 50 years was the appropriate standard of care. He was of the view that, on the whole, the evidence of the adequacy of mooring No 60, on which Pavana was moored, was somewhat unsatisfactory. 48 Nevertheless, his Honour went on to say that it may have been foreseeable that if weather conditions that occur once every five to ten years prevailed, mooring No 60 may not have been adequate to restrain Pavana from dragging her mooring. His Honour found that it would be reasonably foreseeable if Pavana dragged her mooring, she might collide with another vessel in the vicinity. 49 Although his Honour considered that it was "unusually back luck" that resulted in Pavana cutting the mooring line of Seaquest, so as to allow that vessel to become adrift, he noted that Holmeport did not contend that the destruction of Seaquest on the Rose Bay sea wall was not reasonably foreseeable. As his Honour said at: Clearly enough, on the evidence, dragging of moorings is a risk that is known and is therefore foreseeable. 50 The primary judge's findings as to the weather conditions on the day were based upon the evidence of experts and upon eye witness reports. The reports included the observations of Mr Malcolm Turnbull, described by his Honour as a resident of Point Piper, who took a video of Seaquest adrift. His Honour also referred to the evidence of Mr Peeters, the contractor engaged by Holmeport in March 2003, who inspected Pavana's mooring after the accident. 51 His Honour's findings on the weather conditions were as follows: The winds recorded at Fort Denison and Wedding Cake West on 24 August 2003 were such as might be expected to occur at least once in every 5 or 10 years. On the other hand, the eye witness reports to which I have referred indicate that the weather conditions in Rose Bay on that day were fierce. The fact that Pavana dragged its mooring for some 200 metres appears to me to be quite extraordinary. There was no evidence to suggest that anything other than exceptional conditions could have led to that occurrence. Mr Hood's evidence was directed to that very question. Further, the fact that seven or eight vessels were stranded on the sand in Double Bay, on the other side of Point Piper from Rose Bay, suggests exceptional conditions, although there was no evidence as to the size or other dimensions of those stranded vessels. When Mr Peeters lifted mooring number 60, he found that all of its components were intact. The conditions must have been particularly exceptional for Pavana to have dragged the mooring as far as it did. 52 The primary judge observed that Mr and Mrs Ruaro sought to rely upon the conversation between the manager of Holmeport's marina, Ms Kearney-Hayes and Mr Peeters which took place in March 2003. In that conversation, Mr Peeters told Ms Kearney-Hayes that Holmeport should make the outside moorings as heavy as possible, saying that two one-tonne blocks was "the best" he could do and "(y)ou should put that down." 53 Following upon the conversation, Mr Peeters serviced mooring No 60 in May 2003 but, in accordance with Ms Kearney-Hayes' instructions, he added a half-tonne block to the existing block, amounting to a total of one tonne, rather than the two tonnes recommended by Mr Peeters. 54 At [133] of his Honour's reasons, Emmett J made the following critical finding about the conversation between Mr Peeters and Ms Kearney-Hayes: However, Mr Peeters was not expressing any view as to the adequacy of a mooring for any particular vessel. There was no vessel on mooring number 60 when Mr Peeters carried out his work and he did not suggest that one tonne was insufficient for a vessel of the dimensions of Pavana. The observations made by Mr Peeters, therefore, must simply be regarded as referring to the fact that the outside moorings are preserved for the biggest vessels. It cannot be construed as a statement that the mooring blocks that were in place were inadequate for the particular vessels that were using them… 55 The primary judge then referred to the evidence of an expert, Mr Hood, who was called by Holmeport. His Honour said that there was no evidence other than Mr Hood's concerning a mooring that would be sufficient to restrain a vessel of Pavana's dimensions. Mr Hood's evidence, to which his Honour referred earlier in his judgment at [109] – [117], was (at [117]) that: …mooring number 60 should have been adequate to hold a vessel of Pavana's specifications without dragging. It was for that reason that he concluded that the weather must have been so extreme and unusual as to cause extreme pitching of Pavana, thereby causing the mooring number 60 to drag. 56 The primary judge's conclusions on the question of negligence and fitness for the purpose are set out at [134]: I am not persuaded, on the balance of probability, that Holmeport did not take all reasonable measures to ensure that mooring number 60 was adequate for Pavana. Nor am I persuaded that the mooring to which Seaquest was attached was not reasonably fit for the purpose of mooring Seaquest. Accordingly, I would conclude that, if a warranty was implied by s 74(2), there was no breach of the warranty and that if Holmeport owed the secure mooring duty to Mr and Mrs Ruaro there was no breach of that duty. Whether Holmeport was negligent 57 The focus of Mr Applegarth SC's attack on the finding of the primary judge was that Holmeport had consciously decided to take the risk which eventuated. He placed considerable emphasis upon the conversation in March 2003 between Mr Peeters and Ms Kearney-Hayes. 58 The substance of Mr Applegarth's submission was that the primary judge's finding that he was not persuaded that Holmeport failed to take all reasonable measures to ensure that mooring No 60 was adequate for Pavana could not stand with his Honour's findings about the conversation. Counsel for the appellants, Mr Applegarth, referred to the well-known statement of principle of Mason J in Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47-48. 59 It is true that the "calculus", as the Shirt test is sometimes called, might point in favour of Mr and Mrs Ruaro; cf New South Wales v Fahy (2007) 81 ALJR 1021 at [6], [57] and [226]. The cost of placing an additional one-tonne block on mooring No 60 was only $400 and the magnitude of the risk, looking forward, might be thought to have been large. 60 Nevertheless, there are a number of barriers standing against a finding of negligence. 61 First, the Shirt principle is concerned with the question of breach of duty. Before answering that question, it is necessary to determine whether Holmeport was under a duty of care to Mr and Mrs Ruaro and whether his Honour was in error in finding that no such duty existed. 62 Second, even if Holmeport did owe a duty of care, his Honour's finding that there was no breach of the duty raises the question of whether he was in error in his factual findings about the evidence of Mr Peeters and Mr Hood and about the weather conditions at the time of the collision. 63 It was not argued before the primary judge that cl 4 of the Mooring Agreement was ineffective to exclude liability in negligence. Mr Applegarth accepted that it was not open to him to argue to the contrary on the appeal. The thrust of his argument was that s 68 rendered void the provisions of cl 4. 64 Putting aside the question of the effect of s 68, we can see no error in his Honour's view that, construed as a whole, and in particular in light of the terms of cl 4, Mr and Mrs Ruaro agreed not to hold Holmeport responsible for any loss or damage to Seaquest. 65 His Honour went on to say that it followed from the terms of the contract that Holmeport had no liability in tort for the alleged breach of duty. Again, subject to the question of s 68, we see no error in this. The High Court has recognised that the terms of a contract between the parties inform the existence, or nature, of any concurrent duty in tort: Bryan v Maloney (1995) 182 CLR 609 at 619-622; see also Trindade F, Cane P and Lunney M, The Law of Torts in Australia (4th ed, Oxford University Press, 2007) at 510-511; cf Hawkins v Clayton (1988) 164 CLR 539 at 579, 584. 66 If it were necessary to determine the question of whether Holmeport owed a duty of care in tort, that would have been governed by the ordinary principles of common law negligence, the damage being properly characterised as physical damage to Seaquest: Bryan v Maloney at 617. 67 There was force in Mr Appelgarth's submission that in determining the question of duty the factors to be taken into account extended beyond the adequacy of Seaquest's mooring considered in isolation. Other salient factors may well have included a consideration of the known risks in the surrounding environment of the marina to the extent that they bore upon the safety of Seaquest'smooring. 68 Whatever the force of these submissions, we do not see that it is necessary for us to determine them because in our view, his Honour's findings about the absence of a breach of duty provide a complete answer to the appeal. 69 There are three factual findings which underlie his Honour's conclusion on the question of the standard of care. First, his Honour found that the weather conditions in Rose Bay were "quite extraordinary", that is to say, more extreme than the one in five to ten years conditions experienced at Fort Dennison. 70 Second, and most importantly, his Honour accepted the evidence of Mr Hood that the Pavana's mooring should have been adequate to hold a vessel of Pavana's specifications without dragging in conditions that were foreseeable. 71 The third factual finding of significance was the view that his Honour took of the effect of Mr Peeters' evidence. His Honour did not consider that the statement made by Mr Peeters to Ms Kearney-Hayes to be a statement that a one-tonne block was inadequate for a vessel of the dimensions of the Pavana. 72 Consistently with the principles stated by Allsop J in Branir v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at [21]ff, we see no appellable error in these findings. Mr Peeters' statement may have provided a foundation for a finding of breach of duty but the primary judge was not satisfied on all of the evidence, taking into account in particular the views of Mr Hood, that the mooring was inadequate for the Pavana. 73 We see no inconsistency between this conclusion and the terms of the conversation, which his Honour accepted had taken place between Mr Peeters and Ms Kearney-Hayes. Rather, the effect of his Honour's finding was that the conversation was in general terms and was insufficient of itself to constitute a statement by Mr Peeters that mooring No 60 was inadequate for Pavana. Accordingly, nothing turned on Ms Kearney-Hayes' words that Holmeport would "take the risk". The effect of s 68 of the Act 74 As we said earlier, the learned primary judge was of the view that s 68 of the Act did not operate so as to render cl 4 of the Mooring Agreement void. He considered that the effect of s 68 is to render a term of a contract void only to the extent that it modifies the operation of a provision of Div 2 of Part V of the Act. We set out the relevant passage of his Honour's judgment at [42] above. 75 There was no dispute between the parties that cl 4 purported to exclude, restrict or modify the application of s 74 of the Act. There was, accordingly, no dispute between them that cl 4 was void, at least to the extent that it purported to have that effect. 76 However, senior counsel for Mr and Mrs Ruaro contended that the approach to the construction of s 68 taken by the primary judge was erroneous because it involved reading into the section words which do not appear in it, so as to achieve its purpose. 77 The effect of Mr Applegarth's submission was that the language of s 68 is clear; "void" means void, and words should not be introduced into the section so as to restrict its operation and thereby deprive Mr and Mrs Ruaro of the duty of care owed to them. 78 It is unnecessary for us to determine whether this submission is correct. The short answer to it is, as we have said above, even if Holmeport owed Mr and Mrs Ruaro a duty of care, we see no appellable error in the primary judge's finding that there was no breach of the duty. The implied warranty of care and skill under s 74(1) 79 The view we have reached as to the absence of error in his Honour's finding that there was no negligence also provides a complete answer to the claim under s 74(1) of the Act. 80 There was no issue that the warranty implied by s 74(1) could not be excluded. His Honour's error was said to be in taking too narrow an approach to the scope of the services supplied by Holmeport to Mr and Mrs Ruaro under the Mooring Agreement. 81 There was force in the submission that the services must be seen in their overall context as part of the marina environment conducted by Holmeport. 82 But whatever the force of the contention that the services were not to be viewed in isolation, the finding to which we have referred provides an answer. Once it is accepted on the facts that Holmeport was not in breach of any duty of care, there is no room for a claim of breach of the warranty implied by s 74(1) of the Act. The implied warranty of fitness for the purpose under s 74(2) 83 Once again, his Honour's factual finding that there was no negligence is an answer to the alternative limb of the claim under s 74(2). 84 It may be true, as was contended by Mr Applegarth, that the primary judge's approach to the question of reliance failed to pay sufficient regard to the overall circumstances in which the mooring agreement was to be considered. There was force in the submission that Mr Ruaro did not need to bring to Mr Holmes' attention in express words, his desire to have Seaquest moored in a safe environment; this may well have arisen by necessary implication: Grant v Australian Knitting Mills Ltd [1936] AC 85 at 99. 85 However, it follows from what we have said that even if the warranty under s 74(2) was implied, there was no breach of that warranty. Quantum 86 Although it was not strictly necessary for him to do so, the primary judge considered the question of the quantum of the loss. He concluded that value was to be assessed by reference to the fair market value of an equivalent vessel, and that the value of such a vessel on the East Coast of the United States of America was relevant to that question. 87 His Honour came to the view that the fair market value of the Seaquest at the relevant time was $US320,000 but he considered that the measure of loss was to be determined by deducting the cost of transportation from the United States. 88 The parties agreed that it was unnecessary for us to review, on the appeal, his Honour's factual finding as to the value of Seaquest. The only issue on the appeal was his Honour's approach to the cost of transportation. 89 Holmeport contended that his Honour was correct in deducting the transportation costs, whereas Mr and Mrs Ruaro contended that the transportation cost of $A116,000 should be added to the replacement value so as to restore them to the position they were in, as far as money can do so. They emphasised that the primary judge found that the Seaquest was their "pride and joy". They submitted that restoration would entail the purchase of a comparable vessel in the United States to which must be added the cost of transporting it to Australia. 90 In view of the conclusions we have reached as to the unavailability of the causes of action propounded at the trial we do not consider it necessary to decide the issue of quantum. Conclusion and Orders 91 It follows from what we have said that the appeal must be dismissed with costs. Holmeport cross-appealed on the issue of quantum in the event that Mr and Mrs Ruaro were successful on their appeal. Since the appeal is to be dismissed, the appropriate order on the cross appeal is that it should be dismissed with no order as to costs. I certify that the preceding ninety-one (91) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jacobson and Siopis. Associate: Dated: 31 October 2008 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 116 of 2008 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: MARK RUARO First Appellant SECILIA RUARO Second Appellant AND: HOLCOMM MARINE PTY LIMITED (ACN 062 320 870) Respondent JUDGES: JACOBSON, SIOPIS & PERRAM J DATE: 31 OCTOBER 2008 PLACE: SYDNEY REASONS FOR JUDGMENT PERRAM J: 92 I have had the advantage of reading in draft the reasons of Jacobson and Siopis JJ with which I agree. I wish to add just a few comments on the question of breach. At the trial the Appellants sought to demonstrate the inadequacy of the mooring by a three-step argument. First, they attempted to prove that the conditions obtaining at Rose Bay were ones which could be expected to occur much more frequently than every 50 years. Secondly, they pointed to the fact that the Pavana had dragged its mooring. Thirdly, they said that an adequate mooring would not drag in such conditions so that it should be deduced that the mooring was not adequate. There was therefore no attempt to prove directly whether a mooring of one tonne was adequate. Rather, its inadequacy was to be discerned from the severity of the storm on the day and the fact that the Pavana did, in fact, drag. 93 The Respondent called Mr Warwick Hood, a consulting naval architect of many years experience, to give evidence. Mr Hood examined directly the adequacy of a one-tonne mooring. By conducting tests, he came to the view that a drag force of approximately one tonne was needed to drag a one-tonne block along the sea bed. Allowing for wind gusts of up to 109 km per hour, he concluded that, given the size of the Pavana, it was unlikely that wind of that speed could have generated a drag force sufficient to cause the Pavana to drag its mooring. 94 That conclusion left unexplained why the mooring had dragged. The failure to explain the events which did in fact occur had a forensic tendency to support the Appellants' case that the mooring was not adequate. From a practical perspective, it was therefore necessary to give an explanation as to why it was that, given an adequate mooring and wind conditions of a kind that occurred every 5 to 10 years, the Pavana nevertheless dragged. 95 Mr Hood did not eschew this task. Assuming a steady wind speed of 70 km per hour (as opposed to gusts of 109 km per hour), a depth of water of 12 m and a "fetch" of 3 km, he concluded that the waves generated at the site of the Pavana would have been 76 cm in height with a period of three seconds. "Fetch" is the distance over which wind blows in order to make waves. While Mr Hood described the weather as being "extreme and unusual", his conclusion was not that these extreme or unusual aspects of the weather caused the mooring to drag. Rather, his view was that the period of encounter with the waves could have been close to the natural period of pitch of the yacht as a result of which the amplitude of pitch would have been increased because of natural resonance. Although he did not say it, on that view of things, what was exceptional at the site of the mooring of the Pavana was not the wind or the waves, but the unhappy coincidence between the period of the waves and the natural period of pitch of the Pavana. His ultimate conclusion was that it was: …likely that "Pavana's" natural period of pitch was in the region of the period of encounter with waves arising as a result of the wind. The yacht would, therefore, have pitched with significant amplitude. Having regard to the high tide occurring at about the time that "Pavana" dragged the mooring, in my opinion the yacht, pitching up and down at the bow (to which the mooring is attached), could have "bounced" the mooring across the bottom of the Harbour. 96 At an earlier part of this report Mr Hood had expressed the view that one of the reasons for the failure of the mooring was "the extreme and unusual weather causing extreme pitching of the vessel". It is apparent, however, when that passage is viewed in context that Mr Hood was not saying that the waves were unusually high or that the wind was stronger than the wind speed he had assumed (70 km per hour). 97 At this stage of the contest the parties were in similar forensic positions. The evidence suggested that the conditions at Rose Bay in terms of wind speeds were within that which happens every 5 or 10 years. It undoubtedly showed that the mooring had dragged. The Appellants theorised that this showed the mooring was inadequate. On the other hand, the Respondent theorised that the mooring had dragged to due to an unfortunate coincidence between the natural period of pitch of the Pavana and the period of the waves which had caused the mooring to "bounce" across the Harbour. Obviously, if Mr Hood's bouncing theory was incorrect then his evidence left unexplained why it was that the Pavana dragged. 98 It is then necessary to say a few words about the way in which the trial was conducted. Although Mr Hood's report was not about the extremity of the storm but was, rather, about the resonance of the Pavana, this was not the way the Respondent conducted the trial. Counsel for the Respondent cross-examined Mr Peeters, the Appellants' expert, to obtain from him a concession that, but for the storm, the mooring would have probably been adequate. It was not suggested to Mr Peeters that it was not the intensity of the storm but the period of the waves which was the causative factor. Consistent with that view, the Respondent also called a meteorologist, Mr Babakhan, and elicited from him evidence about the intensity of the storm. At the conclusion of that evidence the following exchange took place between counsel for the Respondent and the primary judge: HIS HONOUR: Mr Levingston, I want to be as fair as I can to everybody, but I just want to understand what we're doing. The question seems to be how fast are the winds on the day in question. MR LEVINGSTON: That's only part of it, your Honour. HIS HONOUR: Well, what else is there? MR LEVINGSTON: That this was a rare event. HIS HONOUR: I don't want to have the situation where I've got one written report, and then somebody's going to take me to what the witness says in oral evidence, which is – might be the same, it might be inconsistent, but it seems – it doesn't seem to go beyond, at the moment, what the witness was originally asked to address in his report. MR LEVINGSTON: Yes. HIS HONOUR: I'm giving you the opportunity now to tell me what further issue you want to get evidence about from this witness. MR LEVINGSTON: Well, it – the evidence that I'm hoping to get, your Honour, and on my instructions I should be able to get, though whether or not your Honour will allow it in light of what your Honour has just said, is the rarity of this storm. HIS HONOUR: What do you mean by the rarity, the witness has already given his opinion about that. He says the storm was a rare occurrence. He says, caused by the intense low. Represented wind speeds were those, based on the winds – the frequency of such storms are rare in records, and on average occur no more than 16 hours per year at three pm. Now, he's given that opinion. MR LEVINGSTON: Yes. HIS HONOUR: What further opinion do you want to get from him? MR LEVINGSTON: You're quite right, your Honour, I have no further questions. 99 In light of that statement, it is perhaps unsurprising that the Appellants' counsel at trial approached Mr Hood's evidence as if it were evidence about the severity of the storm. Counsel's cross-examination of Mr Hood, on this topic, was as follows: At paragraph 6.06 you find that despite the impact of the maximum gusts by your calculation the mooring should not have dragged?--- Correct. But given that the Pavanar did drag the calculation must be wrong, mustn't it?--- Not necessarily. You then say that the reason for the pitching - - - ?--- But bear in mind that my experiments – my Maritime Services Board experiments were based on one block and the evidence shows that the Pavanar's mooring was – consisted of two blocks coupled together. At paragraph 6.06, you refer to extreme and unusual weather, extreme pitching?--- Correct. You said: In my opinion, one of the reasons for the failing of the mooring to hold the Pavanar was the extreme and unusual weather causing extreme pitching of the vessel. ?---Correct. You don't actually know what the weather was like at the site of Rose Bay on that day from your own experience, do you?---I wasn't there. You say at paragraph 8.13 that you've been sailing around Sydney Harbour for more than 50 years?---Correct. You've seen a lot of Sydney storms, haven't you?---Yes. From your experience, it would have blown a gale at least every one or two years, wouldn't it?---I suppose so, yes. Did you experience a storm that was on 29 September –or I should say roughly round September probably, in terms of memory, 1996?---That's a long time ago. I can't remember whether I was out sailing that day or not. Thank you, your Honour. One moment please, your Honour. I've no further questions, your Honour. 100 It is apparent therefore that both parties conducted the trial on the basis that Mr Hood had given evidence about the extremity of the storm. As I have endeavoured to show, this was not the case. 101 The learned primary judge reasoned thus (at [132]): The winds recorded at Fort Denison and Wedding Cake West on 24 August 2003 were such as might be expected to occur at least once in every 5 or 10 years. On the other hand, the eye witness reports to which I have referred indicate that the weather conditions in Rose Bay on that day were fierce. The fact that Pavanna dragged its mooring for some 200 metres appears to me to be quite extraordinary. There was no evidence to suggest that anything other than exceptional conditions could have led to that occurrence. Mr Hood's evidence was directed to that very question. Further, the fact that seven or eight vessels were stranded on the sand in Double Bay, on the other side of Point Piper from Rose Bay, suggests exceptional conditions, although there was no evidence as to the size or other dimensions of those stranded vessels. When Mr Peeters lifted mooring number 60, he found that all of its components were intact. The conditions must have been particularly exceptional for Pavana to have dragged the mooring as far as it did. 102 Untutored in the manner in which the trial was conducted, there might appear to be difficulties with this reasoning, for it seeks to show that the conditions in Rose Bay were extreme. But as I have endeavoured to show, Mr Hood had not concluded that the dragging of the Pavana was caused by extreme conditions. He had assumed a constant wind speed of 70 km per hour and from that figure had deduced that there would be waves 76 cm in height. The Appellants' witness, Mr Morison, had concluded that during the afternoon the wind speed had moved up from strong winds (40-50 km per hour) from 3.00-4.30 pm peaking at gale force (63-75 km per hour) from 4.30-6.00 pm. 103 The primary judge concluded that the weather conditions were exceptional. That reasoning was supported by three propositions. The first was the fact that the Pavana had dragged its mooring was itself sufficient to show that the conditions were exceptional. However, that reasoning was circular. The critical question was whether the fact that the Pavana had dragged its mooring showed that the mooring was inadequate or whether, instead, it showed that Mr Hood's theory that the mooring bounced across the harbour was correct. It was not possible to choose between those two theories by recourse to the fact that the yacht had dragged because that fact was consistent with both theories. 104 The second was that Mr Hood's evidence showed that the conditions were extreme. This is how the parties conducted the case although it seems to me to imply a misunderstanding of his evidence. 105 The third was the evidence of independent witnesses who thought the weather was fierce. The evidence to this effect was the evidence of Mr Forsaith who described the weather as extreme and as generating the strongest wind gusts he could recall in his 30 years on the harbour. He saw seven or eight vessels stranded on the sand in Double Bay. The difficulty with this evidence is that it did not connect with Mr Hood's evidence. It was implicit in Mr Forsaith's evidence that, in his opinion, it was the extreme weather that had caused the seven or eight vessels to drag their moorings. Mr Hood's evidence, however, was explicitly that the wind was not the cause of the Pavana's drag. Nor was it likely that Mr Hood's bouncing mooring theory could explain the seven or eight other yachts on the sand in Double Bay. Indeed, the expert evidence about wind speed was not really in dispute. It was Mr Morison who gave evidence as to the wind speeds at Rose Bay at the relevant time. Mr Hood assumed the same speeds himself for the purpose of his report. In order to use Mr Forsaith's evidence, however, it was necessary to reject either the conclusions made by Mr Hood or the evidence as to wind speeds given by Mr Morison upon which those conclusions were based. However, once it is accepted that the parties conducted the trial as if Mr Hood's evidence had been about the extremity of the storm, it becomes impossible to attach much significance to this. 106 The language that Mr Hood used in his report to describe the cause of the pitching of the yacht as "extreme and unusual weather" was, no doubt, unfortunate and quite probably the source of the confusion which has occurred. However, it is plain that, closely read, that is not what the evidence meant. 107 On appeal before the Full Court, the Appellants identified only the primary judge's use of the fact of the Pavana's dragging as being an error. In my opinion, the circularity implicit in that use was an error in the requisite sense so that this Court's review function is enlivened: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424 at 435 [24] per Allsop J with whom Drummond and Mansfield JJ agreed. 108 The question then becomes: what should this Court's conclusion be? It seems to me that the matter has to be approached on the basis that Mr Hood's evidence is to be treated as evidence about the cause of the drag being the extremity of the storm. Although, closely read that is not its nature, the parties conducted the trial on the basis that it was. Further, no point was taken about the issue in this Court, no doubt because such a point could not have been raised in light of the way the trial was run. That being so, this Court should proceed on the basis that Mr Hood gave evidence of the cause of the drag being extreme weather, that there were seven or eight vessels stranded on the sand in Double Bay and that lay witnesses gave evidence as to the fierceness of the conditions. The only way those facts can be reconciled with the evidence as to the wind speeds given by Mr Morison is to conclude that there was a localised and extreme weather event that caused the mooring to drag. 109 It may be accepted that there is a high degree of artificiality in this conclusion but this is the result of the trial having been conducted on the basis that Mr Hood's evidence was other than it was. Its result is that the Appellants must fail on breach. Mr Hood's direct evidence was that the mooring was adequate in the known conditions on the day. Although the parties assumed Mr Hood was giving evidence about the cause of the drag being the extremeness of the weather event, there was no attempt by the Appellants to show that that event – as opposed to the general weather conditions – was something that the Pavana mooring should have withstood. Of course, any attempt to gauge the extremity of that theorised event might well have revealed that that was not the true nature of Mr Hood's evidence at all. However, the trial was a contest and the parties are bound by the way it was conducted. I agree that the appeal should be dismissed with costs. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram. Associate: Dated: 31 October 2008 Counsel for the Appellant: PDT Applegarth SC and GC Dempsey Solicitor for the Appellant: Cranston McEacher Counsel for the Respondent: J Levingston Solicitor for the Respondent: DLA Phillips Fox Date of Hearing: 20 August 2008 Date of Judgment: 31 October 2008