IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 175 of 1983 GENERAL DIVISION EX TEMPORE JUDGMENT BETWEEN: CHARLES GRECO and PETER GUSiSLI Applicants and. - - BENDIGO MACHINERY PTY. LTD. and : ERNEST ALFRED SENNINGS . Respondents JUDGE: Woodward Jd. DATE: 5 June 1984 REASONS FOR JUDGMENT This is one of those unfortunate cases - unfortunate in that it has to come before the courts - in which I am satisfied that decent and honest businessmen have had a falling out which did not involve any wrong doing on anybody's part, but as a result of it a number of commercial losses have been. incurred. If they had been able to reach som= compromise solution by way of sharing those losses they would not have been too aifficult for either to bear. In the event, of course, the losses have been considerably increased by the costs of litigation and I now have to decide on whose shoulders virtually the whole burden has to fall; because it is not open to the court to do anything other than find liability or no liability, and if liability 1s found then most of the damages that have been claimed would have to follow. That is the task that I now have to undertake, doing the best I can with the evidence that has been put before me, including the various accounts of events, which I am satisfied are substantially truthful on both sides. Naturaliy time has created difficulties about accurate memory, and there 1s no doubt that some things I have been told are not accurate. There is also, in a number of areas, room for honest difference of opinion as to causes of events. Not having been there to see them happen, I just have to do the best that I can on the evidence before me. It is clear that the applicants purchased the front end loader in question from the respondent company on 25 June 1983, at a cost of $30,000. Before that they had had an opportunity to inspect the machine when 1t was on a low loader some time earlier in June of last year. In doing so they noticed that there were some oil leaks present and these were drawn to the attention of the second-named respondent, Mr. Jennings, who no doubt had noticed them himself. I am satisfied that he then made a representation to the general effect that the machine would be thoroughly checked and that on delivery it would be in very good condition. I do not know exactly what words were used. He concedes that he himself believed it to be a really good machine and he admits that he wculd at least have said it was, or would be on delivery, in good condition. Counsel have bath-said that they see little difference between that and the particular representation alleged by the applicants that the machine was and would be in 'top condition'. . I am satisfied, having listened to the witnesses, that a representation as to the good quality of the machine was made, and it was made with some degree of enthusiasm on the part of Mr. Jennings, because that was his belief. I think that the applicants are the sort of people who would have pressed him, particularly because neither of them had any Kkmowledge of machines of this particular type, and they would know that they were not competent to determine its working capacity before purchase, and so I can well imagine that they would have pressed Mr. Jennings for something amounting to an oral guarantee of its good quality. I believe that a representation to that effect was given at the time of the inspection earlier in June. a I cannot be sure whether it was repeated on 25 June before a cheque was handed over, which is alleged by the applicants, and as to which Mr. Jennings says that he has no recollection of that being said, but there was a good deal of talk that day. I am inclined on balance to accept the evidence of the applicants that the representation was repeated on that day. * Before the sale took place on 25 June there was a demonstration for some period which was certainly upwards of an hour, but 'I think was probably a good deal less than the three hours which is the upper estimate that has been given. I think it probably lasted about one and a half or two hours, during which time the machine worked well, and the sale was then consummated. The following day, when the applicants came to make use of the machine for the first time, it worked for about one and a half pours after which time some quite serious oil leaks were apparent and the steering became inefficient. As a result of that, the applicants stopped using the machine, contacted Mr. Jennings, and, a day or two later, he sent a mechanic accompanied by his (Mr. Jennings') 18 year old son, out to the sand pit where the machine had been-working. They did what they could see required doing by way of checking the leaks and replacing oil seals and left. Shortly after that, perhaps the next day, the applicants used the machine again and the same thing happened. After perhaps an hour and a half of use, oil leaked badly again and the steering became deficient, and it was also noticed that the -Lifting arm, although working, was not working properly. Again assistance was sought from Mr. Jennings; the same mechanic and Mr. Jennings" son came out, and amongst other things they changed o11 filters and again did hat appeared to be necessary by way of replacing 'O rings' or seals, as they had done on the first occasion, in order, as they hared, to prevent any further serious oil leaks. Shortly after that there was an imcident in which the Machine became bogged, and after it had became quite seriqusly bogged, and attempts to extricate it had failed, there was again a serious oil leak which, when it hit hot parts of the engine produced a great deal of smoke and caused the applicant Mr. Guseli to desist from his strenuous efforts to get the machine out of the bog. On this occasion, "later in the day, Mr. Jennings came himself, again with his mechanic and his son, and they managed to get the machine out. Exactly how that was accomplished has been a matter of dispute, and is one point on which, I think, memories are defective. However I do not think it matters who is correct about that minor issue. Having got the machine out, it wes worked on again, filters were cleaned, hoses which had become defective in the sense that they were rotten or squashy were replaced, and Mr. Jennings and his employees left the scene. After that the machine worked for " some three or four hours, but then again started leaking. Once again the applicants complained to Mr. Jennings and it is obvious that by this time both sides were exasperated and there tas apparently some unpleasantness over the telephone. In spite of that, perhaps a few days later, Mr. Jennings agreed to take the machine back into his works and have it overhauled again, bot he required the applicants to pay the cost of transport for that purpose. - He kept it for about two weeks. When he returned it, apparently satisfied that it was in working condition, it was found by the applicafts to be still unsatisfactory, and this time they called in an independent company which they asked to look at the pumps with which the machine was fitted. After some communication with Mr. Jennings who agreed to pay for an initial test of the steering pump, but not other tests, a report was received from this firm, known as Oil Hydraulics Pty. Limited, to the effect that both the steering and the_lifting pumps were unserviceable and that they should be replaced with new pumps. It is against that background that I have to determine whether the machine was in the condition which it was represented to be at the time of the sale. It was said on behalf of the respondents that any defects in the pumps that were found by the independent expert, as I find Mr. Gibson to be - Mr. Gibson being the officer of Oil Bydraulics Pty. Limited who had control of the test - were caused by mishandling by the applicants rather than by ' — the defective condition of the machine in the first place. -I find this a difficult questian to resolve but on balance Io am satisfied that the applicants' case has been made out. _I say that for a number of reasons. In the first place the pumps were not tested by the respondents, as they might have been had they had the appropriate equipment, either before the sale, at any stage during the time when comolaints were being made, or during the final two weeks when they took the machiné back into their works before re-delivering it to the applicants. It seems, from the evidence of Mr. Gibson, 1t was clearly not in good working condition at this last stage and yet Mr. Jennings was content to pass it back to the applicants as if it .were in good working condition. I see no reason to differentiate between that delivery, after it had been in the workshop for two weeks, and the original delivery. Secondly, Mr. Gibson gave expert evidence to the effect that i1t would be very difficult to do any damage to the pumps by reason of any mishandling of the front end loader, and he did not believe that the condition that he saw was caused by any such mishandling, although he saw some evidence of over-heating- It appeared to him that the failure of the pumps to maintain pressure was due to ordinary wear and tear arising over a period of time. I do not believe that there was any significant misuse by the applicants of the front end loader, although I concede the possibility that that occurred. The next fact that influences me is "hat there were two breakdowns immediately after delivery, . deposed to by the applicants, which required the "attendance o= a mechanic even before the bogging incident occurred. 'Also, there were breakdowns even after the machine had been back into the respondents' workshop. So you have a consistent history of breaking down after several hours of operation. That is not inconsistent with the testing of the machine by Mr. Jennings before delivery and cn delivery, because of the evidence that, as the use continues, tne oil continues to heat over a period of hours and it of course becomes thinner. Then leaks that may not have been apparent or serious earlier in the day become first of all apparent, then quite possibly serious, as the day goes on. The next matter which I find significant is that both pumps were found to bé unserviceable by O11 Hydraulics uy. Limited and there is nothing to suggest that there was any usage by the applicants which could have caused the pump which supplies power to the lifting arm to degenerate. For all those reasons I-am satisfied that the machine was not in good order and condition at the time of sale; it was defective in a vital aspect. I do not think that that fact was known to the respondents. I think that Mr. Jennings honestly believed it was in-good condition, and indeed to the extent that he had tested it, he. had no reason to think otherwise. But the authorities are clear that a representation may be perfectly innocent, and yet amount to misleading conduct within the meaning of section 52 of the Trade Practices Act, entitling the applicants to damages under section 82 of the Act. I think that this is one of those cases in which, if the vendor of the machine takes it upon himsel£ to state that the machine is in good or very good condition, and then 1t proves not to be, he must bear the loss. That is to be contrasted with the case where all the vendor says is that he has carefully inspected the machine, and tested it, it seems to be working well and he can find nothing wrong. That was really the extent of Mr. Jennings knowledge here. If that had been the representation that had been made, it would not have given rise to damages, but because the respondents went beyond that and represented the equipment to be in good or very good condition, I must find that the case against them has been made out." - 10 - I come then to the question of damages. So far as the first item of claim is concerned, the cost of 400 litres of oil, it may be that the amount actually wasted was less than that, but so far as I can tell it may also have been mare. I do not see any reason to depart from the estimate which the epplicants have made, I think honestly, and which was not shown in cross-examination to be, inaccurate. So the amount of $470 claimed will be allowed "a - * under that heading. > ~The next item was the hire of the replacement machine. I am satisfied that that was made necessary: by the fact that the front end loader was not working as it shoul@ have been. I think it was a more efficient machine that was hired than the one it was replacing, but in doing that, of course, the epplicants would only be mitigating _ the damages, and that cannot be a matter for complaint. I accept the evidence that they would have used the front end 'Loader, if it had been available, to do the particular work for which the scraper was used. Although it would have been less efficient, it was on the spot, there would have been many times when it" was not required for loading up deliveries of sand, and I do not see the applicants as the sort of people who would have wilfully spent $2900 on the hire of another machine when they could have used their own. So I find thet item of $2892.50 established. -ll- The next question is the loss of contract sales while the Loader was out of action from time to time between 26 June and 13 September 1983. I have looked carefully at the amount claimed, and the average receipts of the business for sand and gravel delivered, particularly in months immediately following the return of the machine with its new pumps - that is to say, the second half of September and the months of October and November. I have . : . not had regard to anything after that period. I have assumed that over the period of July, August and the first half-of September (until the 13th when the repaired vehicle was finally returned by * - Oil Hydraulics), in the ordinary course o£ events, sales would have .been building up, the business being a new one, and would not have been as great as they became later in the year. On the other hand, there is uncontradicted evidence that the pit was open during July and August at a very wet time when a number of other competitive pits were closed, and that this would in fact have led to abnormally high sales. Doing the best E can, I think that those two factors cancel each other out and &E would approach the matter as being one in which I should look at the average sales for October and November and then assume that those same sales would have been available in July, August and the first half of September. I must then, of course, subtracc from any amount so obtained the sales that actually occurred in July, August and the first half of September. - Having carried out that exercise, I find that it comes to a sum significantly greater than the amount claimed of $3,500 and I therefore allow the claim of $3,500. ae ~1i2- The next item is the loss of use of labour. Here the sum claimed was $2500. However, I believe that, if the pit had been working to full capacity, substantial wage costs, either for the applicants' own time or for the time of an employee, would have been necessary to earn that sum of $3500 which I have just allowed. Those wage costs would have been at least as great as the amount of time which was lost by the applicants in having to attend to 'the difficulties arising from the faulty machine, I therefore believe that any allowance for their labour would introduce an element of double counting wich would not be justified. I therefore disallow entirely that head of claim. The last two items, for the repair to the machine and the transport for earlier repairs, are in the event not contested and these amounts of $1562.80 for repairs and $600 for transport will be allowed. All those amounts which I Rave found in favour of the applicants add up to $9025.30 and there will be judgment for that amount against both respondénts with costs to be taxed. I- have awarded judgment against both respondents because the second~named respondent 1s not a mere employee of the first-named respondent, he is its managing director, and it seems to me to be appropriate that the judgment should be Given against both respondents as I have indicated. I certify that this and the eleven (11) preceding pages are a true and accurate copy of the Reasons for Judgment herein of The -Hon. Mr. Justice Woodward Assogiate Dated: 5 June 1984