CATCHWORDS TRADE PRACTICES - false representation as to model and engine of motor vehicle - measure of damages - Trade Practices Act 1974, ss.53, 82. Trade Practices Act 1974, ss.53, 82. A.R. SHEPHERD and G.M. SHEPHERD v. NOYES BROS.PTY.LIMITED QLD. G98 of 1983 CORAM: Spender J. Brisbane 4 July 1985 IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G98 of 1983 GENERAL DIVISION ) BETWEEN : ALAN RONALD SHEPHERD and GLENDA MAY SHEPHERD Applicant AND: NOYES BROS.PTY.LIMITED Respondent MINUTE OF ORDER JUDGE MAKING ORDER: Spender J. DATE OF ORDER: 4 July 1985 WHERE MADE: Brisbane THE COURT ORDERS THAT: There be judgment for the applicants against the respondent in the sum of $4,500.00. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALTA ) QUEENSLAND DISTRICT REGISTRY ) QLD G88 of 1983 GENERAL DIVISION ) BETWEEN : ALAN RONALD SHEPHERD and GLENDA MAY SHEPHERD . Applicant AND: NOVES BROS.PTY.LIMITED Respondent SPENDER J. 4 JULY 1985 REASONS FOR JUDGMENT This is an application for relief pursuant to s.82 of the Trade Practices Act ("the Act") arising from an alleged contravention of s.53(a) of the Act, which provides:- "A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connexion with the promotion by any means of the supply or use of goods or services - (a) falsely represent that goods are of a particular standard, quality, grade, composition, style or model or have hada particular history or particular previous use; The applicants, on about 16 June, 1983, purchased a Volvo F86 prime mover from the respondent for $9,995.00. There are two principal issues. The first 1s whether the respondent, contrary to s.53 of the Act, represented that the prime mover was a 1974 model and hada 210 h.p. motor. The second, if a contravention is established, 1s what are the damages properly to be awarded for such contravention. On Sunday, 6 June, 1982, the respondent advertised in the "Sunday Sun" of that date a Volvo F86 prime mover. Under the logo of the respondent, the advertisement set out the following:- "VOLVO F86 PRIME MOVER Single drive, 2190 turbo motor, highway diff, new paint. Factory rebuilt motor with warranty. FULL PRICE $9995 WILL TRADE CAN FINANCE Corner Sandgate & Zillmere Roads, VIRGINIA Phone: 265 1920 A/Hrs: 204 2864" I find that in response to that advertisement, Mr. Shepherd, on behalf of the applicants went to the premises of Noyes Bros. Pty.Limited and there inspected a Voivo F&5 prime mover. The Defence of the respondent admits that 1t caused to he published in the newspaper "Sunday Sun" of 6 June, 1982, the 'advertisement I have just referred to- and that 1t was an express term of the advertisement that that motor vehicle had a '210 turbo motor'. At the hearing it was admitted by the respondent that the vehicle sold to the applicants for $9995.00 was not a 1974 vehicle but was a 1970 vehicle and was equipped, not with a 210 h.p. motor, but with a motor of lesser horsepower. The question of liebility really comes down to a conflict between the evidence of the male applicant and one, Frank Curcio. Mr. Curcio, a salesman at the relevant time for the respondent, gave an account that the vehicle purchased by Mr. Shepherd was not the one advertised, but was a second truck which had been repainted, as had the vehicle advertised. If that account be correct, it is a curious feature that no documentation of any kind exists in relation to the sale of the vehicle advertised in the 'Sunday Sun". No information of any kind can be given as to the engine number of that vehicle, its registration number, its year of manufacture, the name of the purchaser, whether any order form or other document was used by the respondent in connection with that sale, or any written guarantee in relation to its engine. In particular, no record of 'any holding deposit Mr. Curcio said had been paid in respect of the sale of the advertised vehicle at the time of his dealings with Mr. Shepherd has been produced. 4. Particularly in the light of this extraordinary absence, I am satisfied that the vehicle which the respondent sold to the applicants was the vehicle represented in the advertisement of the "Sunday Sun" of 6 June. I am satisfied that that vehicle was represented to Mr. Shepherd by Mr. Curcio as being a 1974 model equipped with a 210 turbo motor. As to the model of the vehicle sald, Mr. Shepherd said in evidence that he indicated to Mr. Curcio at the time of purchase, "The year is not really relevant. It has to be a good truck and it has to be a smooth truck." One aspect upon which it is not necessary to dwell at any length is what occurred after Mr. Shepherd was aware that the vehicle had been fitted with a smaller engine. in this regard, I accept the. evidence of Mr. Curcio that he agreed to allow the vehicle to be traded in at its purchase price on the sale of a larger-powered vehicle If and when such a vehicle became available; that it was hoped that such a vehicle would become available aftsr Christmas but that that hope proved groundless; and that later an attempt was made by the respondent to sell the vehicle for $9,995.60 on Mr. Shepherd's hehalf. That account, I find, is to be preferred to what seems to me to be the inherently improbable account given by Mr. Shepherd. The second question involves what damages ought properly to flow from the contravention I find established in relation to s.53(a) of the Act. The applicants' claim contained a very large component for loss of profits. The respondent formally admitted 5, that the vehicle sold to the applicants was fitted with a TD70A motor, was a 1970 model, and that its value as at 31 January 1983 was $6,000.00. The applicant puts his claim for damages in this way. In addition to the diminution in value hetween the price for which it was sold and the value of the vehicle at the time of its sale, the applicant claims to be entitled to damages based ona notional loss of profits. This calculation was based on the assumption that the normal time for a Brisbane to Townsville trip is 18 hours, 16 hours of which was driving time, whereas with this underpowered vehicle the trip took 30 hours. If the vehicle had been as represented, it would have been possible, based on those assumptions, for the vehicle to have travelled an extra 16 return trips to Townsville in the 22 week pericd from July 1982 to December 1982. Those extra 16 trips were said to involve a net loss before income tax of $19,000.00. This calculation was based on the circumstance that, according to Mr. Shepherd, the revenue for the trip frm Brisbane to Townsville, with a back loading of $525.00, was $1,250.00. This made gross revenue of $1,775.00 per trip. The extra expenses said to be incurred in respect of those 16 trips were some $9,400.00. These figures were put into evidence by Mr. Magoffin. an accountant from Cooper, Booth & Associates; it was clear that his computations were based completely on information supplied by Mr. Shepherd. 6. Secondly, it was said on behalf of the applicants that 1n early December 1982, they had to modify an International 1950 truck for the purposes of undertaking the work that the Volvo vehicle was incapable of performing. This modification was said to cost $575.00 and was claimed to be properly allowable as an expense incurred by the applicants to mitigate their loss. Next it was claimed that there was loss of earnings from lst January 1983 to 31 March 1985. On the same assumptions as in the first exercise, it was calculated that in this 117 week period the vehicle could have been profitably employed for a total of 109 weeks. On the additional mileage if an average speed of 82 kms. per hour had been achieved, as compared with the 50 kms. per hour that the Volvo was able to achieve, there would have been 78 extra trips. This, it was calculeted, would have lead to an extca $138,450.00 revenue less extra expenses of $68,450.90, leaving a net amount before income tax for this period of $70,000.00. The premises on which the calculations ace based are open to serious attack. The calculation of loss of profits based on Mr. Shepherd's figures show that in respect of a vehicle purchased for $9,995.00, the earnings were something wn excess) of $41,000.00 p.a. net profit before tax, after allowing $400.00 per week for 48 weeks for wages. To abandon a vehicle as being 7. useless when 1t was able to make that sort of return is a consideration which highlights the unacceptability and unreliability of the factual premises which lead to such figures. I accept the evidence that in respect of the Volvo F8S86 truck there were only 2 turbo-charged engines which could be fitted to such a truck. These bore the labels TD70A and TD70B. The TD70B engine was more powerful than the TD70A. Tt was 207 horsepower on the DIN basis of evaluation compared with the horsepower rating of 185 on the DIN rating for the TD70A motor. Ona adifferent basis of comparison, using the output assessment based on the Society of Motor Manufacturers and Traders basis, the TD70A at 2,400 r/min. was 170 h.p. while the TD70B engine had an output at 2,406 r/min. of 192 h.p. I accept further that in trade circles and in the automotive community the horsepower rating is -rounded upwards to the nearest zera so that, based on the DIN rating, the TD70A is referred to as having a 190 h.p.engine and the TD70B as having a 210 h.p. rating. Furthermore, the evidence establishes that each vehicle fitted with either of those engines is governed so that the maximum revolutions are 2,400 r/min. In respect of a vehicle fitted with either of those engines, the maximum speed, I accept, 1s of the order of 52 m.p.h. The more powerful TD70B motor has a torque of 445 foot lbs. while the torque for the TD79A engine is 398 foot lbs. re 8. In the light of these figures, while I accept that a vehicle equipped with the more powerful motor would ke able to traverse thse journey from Brisbane to Townsville more quickly than a vehicle fitted with the less powerful engine, the crucial assumptions behind the assessment of notional loss of profits by Mr. Magoffin are not correct. Dr. Frank William Grigg, an engineer, gave evidence in very general terms the effect of which was that a truck fitted with the higher performance engine would be able to get through the distance much more quickly and with less driver fatigue than the vehicle with the lLower-rated engine. While one can accept the correctness of this very broad brush approach, in my view the evidence given by Christopher John Bleakeley,.a consulting engineer, was of much more assistance. I found My. Bleakeley a very impressive witness. He concluded that over a given trip the difference in time between vehicles fitted with the A motor and the B motor would he of the order of 10%. Moreover, he said that to complete the Brisbane t9 Townsville trip, which 15 of some 925 miles, in 16 hours driving time would require horsepower in excess of 300 h.p. and probably closer to 350 h.p. Since the gear ratio of the F86 Volvo vehicle limits that particular vehicle to a top speed of about 52 m.p.h., it 15 not suitable for long distance journeys. It would be unsuicable for such a journey regardless of which of the TD70 engines was fitted to it. 9. It follows, in my view, that the factual premises on which the applicants' claim for damages is based, are not made out. With the 210 h.p. motor the trip could be not done in anything like a driving time of 16 hours. That calls for a performance by the vehicle which is simply not attainable. There are other defects in the assumptions made by Mr. Magoffin. T indicate that, in the absence of any documentation, or indeed any acceptable evidence as to the sources and availability of work frem Brisbane to Townsville and of back loadings from Townsville to Brisbane, and im the absence of any satisfactory explanation for the absence of business records of the applicants' business bearing on the availability of work, remuneration or expenses of any such trips, I would not accept the unsupported evidence of Mr. Shepherd in chis regard. In addition, he admitted that no log books were kept by him during the period in which he drove the Volvo vehicle. Factually, the damages claimed have not been made out. There is, however, a more fundamental objection to the applicants' claim for damages. In my opinion, this approach to the assessment of damages pursuant to s.82 of the Act involves a gross misconception of the remedy given by the statute fora contravention of Part V of the Act. Section 82(1) provides:- "A person who suffers loss or damage by conduct of another person that was done in contcavention of a provision of Part IV cr V may recover the amount of the loss or damage by action against that other person or against any person tnvolved in the contravention." 10. In determining the proper approach under 3.82, reference to some observaticns in the cases is of assistance. In Brown v. Jam Factory Pty.Ltd., (1961) 53 F.L.R. 3406 at 351, Fox J. said:- "The correct way to approach the assessment of damages in this case in my view is to compare the position in which the applicants might have been expected to be if the misleading conduct had not occurred with the situation they were inas a result of acting in reliance on that conduct.' And he referred to Esso Petroleum Company Ltd. v. Mardon £1976] 1 Q.B. 801. He continued:- "This is the same, or analogous to, the general principle respecting the measure of damages in tort. There was not anything promissory in statements relied upon, and no basis exists for adopting the measure of damages applicable in contract. As an action based on s.52 18 more appropriately classified as one of tort, it is possible that the measure of damages will always, fundamentally, be based on principles affecting torts." In Gates v. City:-Mutual Life Assurance Society Ltd. (1983) 68 F.L.R. 101, the Full Court of the Federal Court consisting of Fox, Lockhart and Fitzgerald JJ., said at p.104:- ",.. the question is not how much better off (the applicant) would have been if the statements had been true but how much worse off he is by reason of having taken the steps which he did in reliance on the statements." And, more recently, Fitzgerald J. in Frith v. Gold Coast Mineral Springs Pty.Ltd. & Ors. (1983) A.T.P.R. 40-339, said at 44-082:- Li. "For the most part the decisions of this Court under the Act speak of the appropriate measure of damages as that applicable at common iaw in actions for deceit ..." Later, at 44-086, he said: " ... whilst common law rules as to the measure of damages in tort may, in appropriate circumstances, provide a useful quide, no justification exists for confining the demages which are recoverable under sec. 82 and 87 of the Act by reference to common law tests. ... the statutory right to damages now under consideration serves 4 wider purpose and is intended to have a broader ambit than the common law actions of tort or negligent misstatement." Later at the same page, he said:- "The broad statement of the appropriate measure of damages in deceit which was adopted in Dolby's case, (£1969) 2 QB 158), accords with the statutory test if, as I think, applicants who establish a cause of action under the Act are entitled to those losses which are the immediate result of the offending conduct and also to consequential losses if sufficiently direct" Dealing with the question of consequential losses in an action for deceit, in Gould v. Vaggelas (1984) 56 A.L.R. 31, Gibbs C.d. said at p.35:- "Unere may be cases in which the purchaser continues to trade, either because he has no real alternative or because he has not become aware of the nature of the fraud, and in those circumstances incurs losses which are not represented by the difference between the price and the value of the business. There is no reason an principle why the defrauded purchaser should not recover damages for all the loss that flowed directly from the fraudulent inducement (unless, possibly, the loss was not foreseeable). If a purchaser, besides paying more for the business than it was worth, has suffered additional losses which resulted directly from the fraud he ought to be compensated for them. Of course Ehe court must 12. be satisfied that the loss did result directly from the fraud and not from some supervening cause such as the folly, error or misfortune of the purchaser himself, and must ensure that no additional compensation is given for losses when those losses, or the probability of their occurrence, has already been taken into account in determining the value of the business." It seems to me that when one has regards to the words of s.82, two fundamental observations may be made. The requirement that the entitlement to damages 1s to "a person who suffers loss or damage" suqgests that the essential ingredient of the statutory cause of action 1s not of the non-attainment of a benefit or the non-realisation of a profit but the incurring of loss or damadae, inviting a comparison between the position of the applicant after the contravention with his position before the contravention. This is the "worse off" approach. The second important aspect of the statutocy formulation of the cause of action is that that loss or damage has to he suffered "by" the conduct of another person that constitutes a contravention of Part IV or V of the Act. This makes it plain that it is only loss or damage that is caused by the contravening conduct which can be recovered in the statutory cause of action. In this varticular case, Mr. Shepherd in evidence admitted that "it was quite clear onthe first trip that ut couldn't do the job properly". He says that it wasn't until November, after the purchase in June, that he realized that the 13. vehicle was equipped not with a 210 h.p. motor, but with the lesser-powered motcr. Nonetheless, he was aware of the fact of the underpowering and the unsuitability of the vehicle for his desired purpose from the very first trip. It seems to me in those circumstances that the loss or damage he has suffered is the difference between the price he paid for the vehicle and its value, as well as a small component properly to be taken into account for consequential losses. That could include an amount for the inconvenience and expense of acquiring and disposing of the vehicle, as well as any necessary losses incurred over a short and reasonable period until the applicants were able to dispose of it. The only evidence of value is the admission that ag at 31 January, 1983 the value of the vehicle was 56,000.00. At this time the vehicle had travelled something of the order of 54,000 miles over and above the mileage it had recorded at the time of its sale. It follows that its value at the time of sale was a figure somewhat higher than 56,000.00. Other than the amount the applicants are properly entitled to in respect at the difference in value between the price of the vehicle when sold and its value then, together with some small consequential losses, the applicants ar not entitled to damages for the amounts expended on converting another vehicle to perform the Brisbane to Townsville run. 14, Accepting that the vehicle purchased was underpowered for its intended purpose, the damages as claimed by the applicants do not flow from the misrepresentation concerning the power of the engine but from the applicants' choosing to continue to cperate the vehicle, aware of its limitations for the stated purpose. Such loss or damage, being the notional loss of extra profits, 1s not suffered "by" the conduct which contravenes Part V of the Act. There are difficulties and shortcomings in the material in this case on which to assess damages. Nonetheless, I accept that a court should not retreat from the assessment cf damages merely because the material is less than ideal or the assessment is otherwise difficult: Wheeler v. Riverside Coal Transport Co.Pty.Ltd. (1964) Qd.R. 113 and Fink v. Fink (1946) 74 C.U.R.127 at 143 per Dixon and McTiernan Jd. In my view, the loss or damage suffered hy the applicants by the conduct of the respondent in representing the F86 Volvo truck as it did, comprehends the diminution between the sale price and its value at the time of sale as well as an amount for the cost and inconvenience of acquiring and disposing of that vehicle, and a small component for lesses incurred until such a disposal could reasonably be secured. Pursuant to s.82 of the Act, in all the circumstances, I assess the loss or damage at $4,500.00. , ._.,, . 14 aus es bt A Tily IPO OE Foon beg Me