QVe TATCHBAOARDS TRADE PRACTICES - claim against manufacturer - whether claimed horsepower attained - use of S.A.E, testing code - reasonableness of modifving engine - "consumer". Trade Practices Act ss.52, 53, 74C(1) GRAHAM W. NEWTON wv. MERCURY POWER AUSTRALIA PTY. LIMITED formerly known as MERCURY MARINE PTY. LIMITED OLB G85 of 1985 PINCUS J. BRISBANE LL June 1986 IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G85 of 1985 GENERAL DIVISTON ) BETWEEN: GRAHAM W. NEWTON Applicant AND: MERCURY POWER AUSTRALIA PTY. LIMITED formerly known as MERCURY MARINE PTY. LIMITED Respondent DATE OF HEARING: 29, 30 May 1986 DATE JUDGMENT DELIVEPFED: 11 June 1986 COUNSEL: for the applicank Mr. K. Varlev instructed by Seattini Riaby and Grav for the respondent Mr. R. Gotteson instructed bv Henderson Lahev Trout Bernavs J. A, LYONS ASSOCIATE TO PINCUS J. Re) 11 June 1984 IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD G85 of 1985 GENERAL DIVISION \ BETWEEN: GRAHAM W. NEWIDON Applicant AND: MERCURY POWER AUSTRALIA PTY. LIMITED formerly known as MERCURY MARINE PTY. LIMITED Respondent MINUTES OF ORDER JUDGE MAKING ORDFR: PINCUS Jd. DATE OF ORDER: 11 June 1984 WHERE, MADE: BRISBANE THE COURT ORDERS THAT: l. The Respondent pay the Applicant the sum of $3,900.20, 2. The Respondent pay the Applicant's coasts of and incidental to the proceedings, to be taxed. 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 y QD G85 of 1985 GENERAL DIVISION ) BETWEEN: GRAHAM W. NEWTON Applicant AND: MERCURY POWER AUSTRALIA PTY. LIMITED formerly known as MERCURY MARINE PTY. LIMITED Respondent PINCUS J. 11 JUNE 1986 EEBASONS FOR JUDGMENT This 13 a small application for damages under the Trade Practices Act relating to a Mercury marine enagine, called a "MerCruiser", bought 1n 1987. The respondent imported the engine into)6this country From the United States, where if was manufactured bv a company which has no place of business in Australia. The statement of claim alleges that in various wavs the engine was represented to be a 260 horsepower engine. That was stated te be so on the engine itself. in an advertising brochure and in the manual supplied with the engine. Although the defence filed does not admit that the representation was made, 1t is clear that it was. The statement of claim alleqes Ehat the engine did not produce 260 horsepower but only about 200. The only issues are whether that is so and what are the damages, if the applicant is to succeed. The applicant's case depended upon the evidence of Mr. R. LL. Richards who 1s an experienced but (apparently) not Rechnicallv qualified engine mechanic who has done a lot of work in engine testing and modification. Mr. Richards tested the enaqine in question to 4000 r.p.m. and it ran at about 200 horsepower "uncorrected",. The purpose of "correction" is to comply with standards laid down by the Societv of Automotive Enagineers ("S.A.E."), an American institution. The factors which are taken into account in achieving the correction are the induction air temperature, the water vapour pressure and atmospheric pressure. Mr. Richards said that, applying the correction, the horsepower came out at 205, 55 horsepower less than the representation. A criticism was made of Mr. Richard's test aun that he did not take the engine above 4,000 r.p.m.; according to the brochure and manual referred to above, its full throttle operating range ais 4,200 - 4,600 r.p.m. However, I accept that runnina the engine harder would not have achieved anv significant increase. as ran be seen from the araph of the level of horsepower achieved with increasing r.p.m.; that agraph had practically flattened out when Mr. Richards desisted. He did so because the engine was showina sians of distress. Evidence was called on behalf of the respondent from Mr. K.W. Clarke, the national service manager of the respondent, a qualified mechanic anda man with qreat experience relating ta engines of the type in issue in the case. A theory put forward by Mr. Clarke was that the explanation of the results obtained by Mr. Richards was simply that ('perhaps due to minor damage in handling) what is called the secondary air valve in the carburettor must have been closed. That would. of course, have obstructed the flow of air to the engine. In support of his theory, Mr. Clarke tested another similar engine with the secondary air valve closed and got results quite similar to those abtained by Mr. Richards. Although the theory I have just mentioned has a superficial attraction, I do not accept it. Ta do so would involve the assumption that Mr. Richards had made a rather basic error in his testing procedures. He gave evidence that he was aware that, because of sticking linkages, the valves in question might not open. He said that he checked to make sure thev were operating properlv, and on the whole I think he did so. The case for the applicant relied to some extent an the proposition that the respondent was given a vreasonable oepportunitv, after complaint was made. to test the engine itself, or see it tested, and did neither. At the time of the test, the applicant had a pleasure boat in the course of construction into which 1t was intended to fit the engine. He accepted the result ef the test done by Mr. Richards. and because he wanted a 260 horsepower motor, instructed Mr. Richards to make modifications to the engine to make it reach 260 horsepower, The questions whether that was a reasonable step and whether the damages can include the cost of doing so are discussed below. For present purposes, the importance of the performance of the modification was that it made it impossible for the respondent, from the time the modification was done, to duplicate Mr. Richards' test. There was some dispute as to whether the respondent had unreasonably declined or failed promptlv to attend to the applicant's complaint. On that issue I favour the applicant's case, but it is unnecessarv to reach any definite conclusion with respect to it: for whatever reason, the only test of which there 1s evidence before me, relating to the particular engine sold, is that of Mr. Richards. The principal case for the respondent, based on the evidence of Mr. Clarke. was that all endines of the type in question are, and have for some years been, tested at the place of manufacture. The test which is done is not on a dynamometer. To each engine a specified load is applied. and the enqine 15 run to see 1f it will, under that load. reach the required r.p.m. - in the case of the engine in question. between 4,200 and 4,600 r.p.m. Some engines are taken out of the production line and subjected to a thorough dynamometer test, but that technique is applied to only a small proportion of them, and it is therefore unlikely that the applicant's engine was so tested. It was pointed out by Mr. Clarke that although the "fixed load" test to which the engines are subjected on the production line does not qive a horsepower reading, it is a check on horsepower, which can be calculated from the known load and the r.p.m. There 1s. however, some uncertainty as to what the test reallv measures, Mr. Clarke said of the MerCruiser 260 engines, "They are tested at between 4,000 and 4,600." He later referred to "between the 42 or the 46". indicating that he meant between 4,200 and 4,600. One difficulty about the technique used is that if the peak horsepower is only 4,200 r.p.m., it appears that the particular engine tested may, for that reason, be below the advertised brake horsepower. For example, on Mr. Clarke's second test of a 269 engine, the graph shows the horsepower as still climbing fairly steeply as the endgine passes 4,200 r.p.m. But a more sianificant problem is: to what horsepower does the standard production line test take the engine? I do not think Mr. Clarke knew. He suaqgested at one stage that factorv tests allow a tolerance of 15% from the nominal horsepower; that would allow an engine producing onlv 221 horsepower to get by the production-line test. IT take it that statement was based on an S.A.E. small engine code, discussed below. Later, after referring to a document, he said that the manufacturer's horsepower tolerance 1s only 7.5%. The evidence was that the manufacturer rates engines such as the 260 in accordance with the S.A.E.'s small spark ignition test code. Mr. Clarke explained that that is so because the manufacturers as a qroup would have to all move together to adopt another code. Mr. Richards said, and it seems to he right, that the small engine test code is inappropriate, being applicable only to engines of less than six brake horsepower. The small engine code used provides that "production engines, when shipped, will develop not less than 85% of the maximum power", Me. Clarke did not tell me to what horsepower the leading used in the standard production line test corresponds at 4,290 or 4,600 r.p.m, or, e.g., the midpoint of the range. If it corresponds to 221 horsepower (1.e 85% of the advertised maximum power) at 4,400 r.p.m. then that would be only 211 horsepower 'not far from the fiaure given by Mr. Richards) at 4,700 r.p.m. What I have iust said is intended to point up the basic difficulty in the respondent's case. Although Mr. Clarke seemed fo me an honest and impressive witness, I am not satisfied that he was sufficiently familiar with the details of the standard test done in the factory to enable me to relv on that test ta controvert the test results obtained on the enqine in question by Mr. Richards. The conclusion just mentioned is enough to decide the principal issue in the case, but it 1s desirable to discuss two other aspects of the facts relating to the horsepower claim. One is that Mr. Clarke relied, as an explanation of Mr. Richard's results. upon the view that the engine is supposed to be tested with systems of carburettion and exhaust different from the standard. He did engine tests showing the improvement caused by fitting the former, He explained, in effect. that the reason for this is that in use the exhaust system derives an advantage at peak power from the "neqative pressure" at the exhaust outlet caused by the propellor. I accept that that is so. Mr. Varlev, counsel for the applicant, arqued that the natural meaning of the representation made was not that the engine would reach 260 horsepower with different svstems of carburettion and exhaust from those supplied, I agree, but am of the view that the representation would mot be falsified 1f it were shown that the modification made for the purposes of the test were such as to make proper allowance for the fact that the test is done ona fest bed, not while the engine is in a boat moving at high speed in the water. However, in the result, it does not appear that this point is eritical, because on Mr. Clarke's figures the carburettion and exhaust modifications which he says should have been done by Mr. Fichards would not have closed the aap between the claimed and tested horsepowers - or gone close to doing so. It is also necessary to mention that in my view the small spark ignition engine test code - S.A.E. J607a - cannot assist the respondent in this case, insofar as it may be relied oan to justify the claiming of horsepower rating higher than that actually achievable by the engine as shipped. That is so because IT do not accept that running in the engine in question further would have got it to the claimed horsepower. More importantly, the code in question is simply not the appropriate one. If (as seemed to be accepted by the respondent) the S.A.E. codes are, in general, the right ones to fallow, then the correct, and not an inappropriate, code should be relied on. The evidence was that there 15s and has for some vears heen a_ testing code in force so expressed as to apply to engines like the 260. There appears to be no rational justification for aiving the respondent the benefit of reliance an a code which. in its terms, is applicable oniv tao engines of less than 6 horsepower rating. Commercially there mav, as Mr. Clarke implied, be sound reasons for sticking to the inappropriate code, namely that other manufacturers are doing so. But in a legal contest, it is impossible to allow the respondent a mode of horsepower measurement derived from use of a code put out by the S,A.E. but which is. an its face, inapplicable to the engine in question. I gather that a reason for reluctance to use the appropriate code is that i1t would require statement of the horsepower at the propeller shaft, which 1S necessarily lower than that at the crank-shaft, the latter point of measurement being permissible when testing small engines. Mr. Varley arqued that because the claim of 260 horsepower is based on application of the wrong §S.A.E. code it 1s. for that reason alone, misleading. There is substance in that, but I do not have to base mv conciusion on it. I am satisfied that the engine was incapable of reaching the claimed horsepower, either precisely or substantially. The legal bases of the claim were, firstly, that the statements made bv the respondents as to horsepower fell within s.52 or %3 of the Trade Practices Act; secondly, it was alleged that the case was within one of the provisions of Division 2A of Part V. It seems to me sufficient to deal with the latter claim. The aoods were sold to the applicant by description, namelv as a MerCruiser 260 meaning, of course, 260 horsepower. They did not correspond with that description, for the reasons qdiven above. Wnder s.74C(1), then, the respondent is "liable to compensate the consumer for the loss or damage" which is suffered "by reason that the qoods do not correspond with the description". Because the price of the goods was less than $15,000, the applicant 1s faken to be a consumer (s.4B)., the enqine not having heen acquired for a purpose mentioned in s.4Bil}la). The cost of working on the enaine to get it from 200 to 260 horsepower (without increasing capacity) was $3,900.20. or well aver half the purchase price. Mr. Richards said, in effect. that the maximum power would rarely be used and would not make much difference to a private owner's enjovment of his boat. On the evidence. andas a matter of judicial notice, Mercury marine engines are very widely used throughout the world and are of high reputation. I was inclined to think that it was 10, not a reasonable step, on behalf of the applicant, to have such expensive modifications performed bv Mr. Richards to the standard enqine as supplied, Mr. Richards being a person whose expertise must be less than that of the engine's desianers. Nevertheless, with considerable hesitation, I have come to the view that the applicant is entitled to the amount he has' spent in qettinag the enaine up to 260 horsepower, He had a boat in the course of construction which was intended to take the 260 horsepower motor to achieve a desired speed. The respondent did not, in mv view, show any qreat interest 1n the complaint which he had made, or make any offer likelv to remove the cause of his complaint. In the result there will be judqment for the applicant for $3,900.20 with costs. i certify that this and the g preceding ™, ga a true cory of the reasons for Jutty os. herein of His Honour M- Justice Pincus 7 nn A gre Cunt wee . Associate Dated ville 1566 | uu ad are a