he las (NOT FOR DISTRIBUTION) IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY No. VG 202 of 1986 GENERAL DIVISION MARK TIMBERLAKE Applicant and CONSULTECH AUSTRALIA PTY LTD Respondent MINUTES OF ORDER COURT: Woodward J. DATE: 26 March 1987 PLACE: Melbourne THE COURT ORDERS THAT: There will be judgment for the applicant in the sum of $7074 with costs. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) No. VG 202 of 1986 ) ) GENERAL DIVISION BETWEEN: MARK TIMBERLAKE Applicant and CONSUILTECH AUSTRALIA PTY LTD Respondent COURT: Woodward Jd. DATE: 26 March 1987 PLACE: Melbourne REASONS FOR JUDGMENT This case arises from the sale of a personal computer, a Minder PC 8088, which was an acknowledged Taiwanese imitation of a well-known brand. The applicant alleges that, before he bought the computer from the respondent, several oral or implied representations were made to him which were misleading or deceptive within the meaning of s.52 of the Trade Practices Act 1974. As the trial developed, the only representations which remained significant were: (i) that the computer would be serviced and maintained during its 3 months warranty period by Datronics Corporation Ltd ('Datronics') and (ii) that the computer was capable of being serviced and maintained, in the sense that spare parts and technical diagrams were available for the purpose. In the event, the respondent did not deny the making of the first representation in the course of discussion between the parties. It said that it did in fact have an arrangement with Datronics for that company to do the relevant work. The second representation was said by the applicant to have been implicit from the nature of the proposed transaction and the discussions about servicing. There was some evidence that a mini-computer could not be serviced properly without replacement parts and detailed circuit diagrams being available. The respondent did not agree that the diagrams were necessary for most repairs. However it accepted that diagrams were necessary for some more difficult repairs and claimed that adequate diagrams were available a few days after the applicant rescinded the contract. It agreed that spare parts were necessary for servicing, as it was usually better to replace a faulty computer board than to try to repair it. It said that spare parts were always available in this case by 'cannibalizing' other computers. These statements about the diagrams and spare parts are not entirely consistent with the full and frank letter written by the respondent to the applicant after he returned the computer. There it said, "Your criticism of our maintenance is something we must take responsibility for. Yes there was a delay in having your computer serviced while we waited for documentation and spare parts to arrive. There was however no question of the fact that the computer would be serviced, and because of the delay we made the offer to loan you a computer." The trouble arose in this case from the fact that the computer had some defects - which the evidence suggested was not an uncommon occurrence with new computers. When these first became apparent, the respondent company undertook the necessary repairs itself, but did not perform them to the satisfaction of the applicant. When he complained about continuing and further defects the respondent told him to take the computer to Datronics. He did so just within the warranty period. Datronics at first accepted the computer for service but, after making some inquiries, informed the applicant that it had no service contract with the respondent and it could not carry out the service without design drawings, which it did not have. The applicant, on receiving this information, decided to rescind the contract of sale and returned the computer to the respondent's office. The respondent maintains that no false representations, such as would entitle the applicant to rescind, were made; and it would have repaired the computer in accordance with its warranty had the applicant given it an opportunity to do so. In fact evidence was given that only a minor defect was found when the computer was returned, and that was fixed in five minutes. The computer in question was stolen from the respondent's premises shortly before the trial of the action. It has not been recovered. Having set out this general summary of what the action is about, it is necessary to make some more detailed findings of fact. In doing so it is appropriate at the outset to consider the credibility of the applicant. I do not find this easy, because his evidence was quite often difficult to follow, due to his lengthy and rather indirect manner of answering questions. However I was left with a distinct impression that he was inclined to exaggerate the seriousness and the frequency of the problems which he had with the computer. He was not prepared to make any concessions which might have seemed to weaken his case. In spite of these reservations I have about his allegations, I am prepared to accept the applicant's evidence (he having a degree in computer science) that the computer did have some significant problems. These consisted, at first, of intermittent interference on the video screen, making it hard to read, and a condition known as 'hanging' - a refusal of the computer to respond to normal instructions. There was also a difficulty in getting the special 'open access' facility on the computer to work. Although the computer had been purchased on 17 May 1985, the first complaint was made to the respondent in late July. The applicant explains this by saying that, at first, the problems were intermittent and he was able to overcome them by 'rebooting' - cancelling the process in hand and starting again. Since his main concern at that time was familiarization with the computer, he was not greatly concerned until the problems became more marked and more frequent. Thus it was not until late July, when he had had the computer for two months, that he first rang Mr Makella, the managing director of the respondent, who had sold the computer to him. In making that call, the applicant complained about his difficulty with the 'open access' facility, the interference and the 'hanging'. The applicant says that Mr Makella's response was that nothing could be done. I think it is possible that he used those words about some aspect of Mr Timberlake's complaints, but I do not believe that Mr Makella displayed the uncaring attitude that Mr Timberlake's evidence would suggest. It would have been a foolish attitude for any vendor to take and, having seen Mr Makella in the witness box, I do not believe he would have been so off-hand. He says himself that he remembers the phone call, which he would have placed in June but I think Mr Timberlake's recollection of the date is more likely to be accurate. All Mr Makella can now remember about it is that it related to function keys not responding to commands while operating 'open access', and to interference on the screen. Mr Makella said that he discussed these matters and gave some advice. In early August the Applicant rang Mr Makella again to say he was still having the same problems, particularly with interference, and there were fresh problems in that he could not format floppy disks on the computer (i.e. transfer instructions from the disks to the hard boards of the computer) and the 'real time' clock was not working properly. As a result of this call, Mr Makella said he would pick up the computer from Mr Timberlake's house and examine it. When he did so, he found that a cable leading to the disk drive had been cut, so that the cable presented two bare wires to the metal chassis. This could, in Mr Makella's view, have caused most if not all of the problems of which Mr Timberlake had complained. Mr Makella also gave evidence that he found the same cable to have been wrongly connected, in a way which could only have been done recently by someone tampering with the computer, because it could not work at all with the cable misconnected. Mr Timberlake denied that he had opened up the computer, the matter was not pressed, and I am quite unable to reach any conclusion about it. Mr Timberlake gave evidence that the computer still gave trouble after Mr Makella had repaired it. He said that it had the same problems but they were far more severe. The interference, in the form of a colour reversal of information on the screen was "a permanent fixture virtually". Any attempt to format floppy disks "would create enormous amounts of interference on the monitor". He also said, "I could not get the operating system itself to respond to its own command". The computer "was just basically unusable". It is at this point that I think Mr Timberlake was exaggerating his problems with the computer. I did not find his evidence to be either carefully given or persuasive. I think he was careless in his choice of words. However I am satisfied that he did still have problems. Mr Makella, who was about to go overseas, told him to take the computer to Datronics and they would service it. Mr Timberlake did so, leaving a note in the following terms (omitting parts not relevant for present purposes), "Could you please arrange to service this unit under the warranty agreement. In particular I wish to report the following problems. (1) Several times the system would just "Hang", ie if, for example, if still power on but not used for some time, the system would no longer 'respond' to any keyed in input, neither by way of echoing that command onto the monitor or performing any action or executing a function. Similarly, some programs eg "Open Access" which were supplied with the system, would on eccasion just "Hang" when invoked. (2) There has been considerable interference on the monitor, this is especially the case when I am "formatting" floppy disks. The interference is so severe that the system has to be 're-booted' to gain control of the monitor. Virtually, each time I format a disk I would have to re-boot the system. This problem is not restricted to formatting. I have left the system 'alone' for a while, when suddenly, the monitor would go into reverse video with blank on and the whole screen flooded with an apparent 'test pattern'. The system would have to be re-booted to regain control." I am prepared to accept this contemporary account, which could have been checked by the repairer, as accurately describing the state of the computer as it appeared to Mr Timberlake at the time. Iam not sufficiently impressed by his evidence to accept that there was anything else wrong with the computer or that the symptoms described were any worse than the letter recorded. Mr Timberlake, in my view, is not a person who would minimize any of his complaints, or fail to record them, when making his warranty claim. In particular I am not satisfied that the 'reboot' switch had ceased to function, as he claimed in his evidence, or that there was anything actually wrong with the 'real time' clock in the computer. The applicant's evidence on this last matter was confused and contradictory. I think it is most likely that he did not fully understand the procedure to transfer the time from the 'real time' clock to the 'systems' clock, as was described in other evidence. Within a few days of delivering the computer to Datronics, Mr Timberlake was demanding action and answers from that company. After about a week he was told that there was no service agreement between Datronics and the respondent. It was acting on this information that he purported to rescind the purchase agreement. He also immediately made outspoken complaints to the Trade Practices Commission and the Victorian Ministry of Consumer Affairs. Before considering whether he was entitled to rescind the agreement, it is convenient to consider the circumstance in which Datronics declined to perform the work. It is clear that, early in 1985, the respondent and Datronics were negotiating an arrangement whereby Datronics would service the Minder computer pursuant to warranties given by the respondent to customers. It should be noted that the respondent was the only company which imported this particular computer from Taiwan and, in the event, it only imported fifteen of them. Datronics asked for one of the computers so it could evaluate it, before committing itself to the arrangement. It carried out this evaluation, and it seems that some repairs were made to faulty workmanship at the same time, but the company expressed itself as willing to do the work provided it had the necessary circuit diagrams. There was some dispute in the evidence as to whether Datronics told the respondent the diagrams would be helpful or essential, but in my view nothing turns on this. Mr Makella sent to Taiwan for the diagrams which, if they were sent, never reached the respondent. Time passed and nothing else happened until August, except that Datronics may have repaired a computer in Sydney for the respondent, without charge, in addition to the one sent for evaluation. Mr Makella said he was waiting to be told by Datronics what he had to do to finalize the arrangement - by way of supplying serial numbers and paying charges. He kept thinking the circuit diagrams would arrive. He seems to have believed that he had at least an agreement in principle with Datronics to do the servicing. This is not disputed by the Datronics employee responsible for selling such agreements to retailers. It is also confirmed by Mr Makella's action in telling Mr Timberlake to take the computer to Datronics. However he can hardly have thought he had a firm agreement and it is significant that he carried out the first repair himself and would have done the second had he not been going overseas. He explains this by saying that he did the work as a favour to Mr Timberlake, to save him from having to take the - 10 - computer to Natronics, but I do not find this explanation entirely satisfying. The facts that no computers had been nominated for service, no details of warranty dates supplied, and that he had not paid anything towards the flat rate for each computer covered by the contract, must have alerted him to the incomplete nature of his arrangement. There was also the absence of the circuit diagrams. I think Mr Makella hoped, when he sent Mr Timberlake to Datronics, that that company would honour its tentative arrangement with him; but I don't believe he can have been entirely confident of it. In fact Datronics did not reject the job out of hand, and did try to get circuit diagrams from the respondent's office and from Taiwan, so that repairs could be effected. Mr Makella himself in fact obtained them in Taiwan and posted them but, by the time they reached Melbourne, the applicant had retrieved the computer from Datronics and returned it to the respondent. In any event, the only drawings which ever reached Datronics were annotated in Chinese and, according to Datronics, unsuitable for use for this reason. Mr Makella challenged this, saying that any serviceman familiar with the IBM computer on which Minder was based, could have followed the diagrams. Be this as it may, Datronics was clearly entitled to insist on full documentation, in English, from the respondent before embarking on any repair work. - Ll - One further matter has to be dealt with to complete the narrative. A few weeks after purchasing this computer, Mr Timberlake bought another similar computer in the name of his business. Its uses overlapped considerably with the Minder's, though each had some advantages over the other, and they would not necessarily have had interchangeable software. The significance of this purchase is that I believe that if the applicant had bought the other computer first, he would not have bought the Minder. By August he was in a position where he was glad of an opportunity to return the Minder and demand a refund. I think this goes some way to explaining why he acted so precipitately in returning it - not waiting for Mr Makella's return from overseas to discuss the matter with him, or giving him any opportunity to carry out the warranty. But that is not the whole picture. I accept that Mr Timberlake was genuinely concerned, in buying an Asian brand of computer not previously seen in Australia from a small and fairly new dealer, that the company which was going to carry out' the maintenance was well and favourably known to hin. If he had thought that there was any uncertainty about Datronics standing behind the warranty, I am sure he would not have purchased the computer. Given the problems he had encountered, and being told that Datronics had not even seen circuit diagrams of the computer, I believe he would have sought to rescind the contract even if he had not bought another computer. And in my view he was entitled to do so. In seeking and obtaining the assurances he did, he was not merely concerned that any necessary repairs would be carried -12- eut in accordance with the warranty. He was looking for a reputable firm which was prepared to give this Taiwanese computer its imprimatur. I think that the respondent took a calculated risk in assuring him that Datronics would perform all necessary services under the warranty. There could be no certainty that it would; it was not contractually bound to do so; and it refused to do so in the event. The drawings which Datronics had asked for were, at the date of the representations in May, months overdue. There was no reason to expect their early arrival. For these reasons I think the applicant was entitled to return the computer, thus mitigating the damages. The respondent would have been well advised to refund promptly the $5,500 demanded of it. In the event I am satisfied that the applicant is entitled to that amount, together with the interest reasonably paid by him to borrow those purchase monies, agreed at $1574, Although I have some sympathy with the respondent in this case, because I believe the applicant was a very difficult person to deal with, who behaved in a high-handed fashion over his perceived grievances, I can find no sufficient reason why costs should not follow the event. There will be judgment for the applicant in the sum of $7074 with costs. -~ 13 - I certify that the 12 preceding pages are a true and accurate copy of the Reasons for Judgment herein of The Hon Mr Justice Woodward fr Associate Dated: 26 March 1987 Counsel for the Applicant: Mr J. Isles Solicitor for the Applicant: Messrs Egan, Lobb and Walker Counsel for the Respondent: Mr R. Berglund Solicitor for the Respondent: Messrs Barretts