. "JUDGMENT No. 7/6 (2 eter CATCHWORDS TRADE PRACTICES - misleading or deceptive conduct - sale of motor vehicle - representations by seller as to condition of vehicle - whether misleading or deceptive - measure of damages. Trade Practices Act 1974, ss.52, 53, 82 Gould v. Vaggelas (1984) 56 A.L.R. 31 Gates v. The City Mutual Life Assurance Society Ltd (1986) 160 C.L.R. 1 Remedios v. Kentucky Homes Pty. Ltd. (1987) A.T.P.R. 40-799 ARTHUR CHARLES McINTYRE v. E_MOTORS .-_LTD. No. VG 129 of 1985 CORAM: Fox J. " igh 18 DEC 1997 Bf 9 November 1987 . / } Melbourne NN va IN THE FEDERAL COURT OF AUSTRALIA ) VICTORIAN DISTRICT REGISTRY No. VG 129 of 1985 GENERAL DIVISION BETWEEN: ARTHUR CHARLES McINIYRE Applicant AND: FUTURE MOTORS . LTD. Respondent NUTE OF ORDER JUDGE: FOX J. DATE OF ORDERS: 9 November 1987 14 December 1987 THE COURT ORDERS THAT: 1. Judgment be entered for the applicant in the sum of $13,521.05, with costs. 2. By consent, proceedings be stayed for one month. 3. Liberty to apply. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIAN DISTRICT REGISTRY No. VG 129 of 1985 ~ew www GENERAL DIVISION BETWEEN : ARTHUR CHARLES McINTYRE Applicant AND: FUTURE MOTORS PTY. LTD. Respondent CORAM: FOX J. DATE: 9 NOVEMBER 1987 REASONS FOR JUDGMENT EX TEMPORE FOX J. These proceedings are brought by the applicant principally in reliance upon s.52(1) and s.53(a) of the Trade Practices Act 1974 (the ""Act"). Reliance is also placed on breach of warranty, negligent misrepresentation and fraud. In the event it is not necessary to proceed beyond the claims under the Act. The relief sought is by way of damages under s.82 of the Act. The matter concerns an Aston Martin motor vehicle which the respondent, a car dealer, sold to the applicant on or about 2 April 1983 for the sum of $16,900. It is claimed that the respondent was guilty of misleading and deceptive conduct in connection with representations made by its officers or servants at or about the time of the sale and of representations coming within s.53(a). A sales document dated 9 April 1983 was entered into and it is said that somewhere in the small print on the back of it the respondent was to be relieved from liability in respect of any representations or warranties previously made, some deference being shown to the Act. The agreement is dated several days after Mr McIntyre took possession and it was signed in the place "Signature of Trader" by a Mrs Andre. Mr Davis does not know how this happened, unless she had signed as a witness, but in the wrong place. The applicant buyer alleges that it was represented that the vehicle was then in "beautiful condition" or "mint condition" or "magnificent condition" or "outstanding condition", or, one imagines, some similar language. The buyer was and is a solicitor and although professing a fondness for prestige sports cars has himself little mechanical knowledge. The representations are said to have been made by Mr Keith Davis who is managing director of the respondent, and additionally on one or two occasions by Mrs Andre who is alleged to have been an employee of the respondent acting in the course of her duty. There is no doubt about the status of Mr Davis but that of Mrs Andre is in question. It appears that she was a friend of the applicant as well as knowing Mr Davis and that she had some hand in persuading the applicant to purchase the car. It is not necessary, however, to come toa final conclusion about the responsibility of the respondent for what she said, other than in Mr Davis' presence and hearing and with his apparent approval. Although the matter is in dispute it seems to me that Mr Davis did represent the condition of the car in excessively favourable terms - terms upon which reliance could be and was in fact made. Although his business is largely in the sale of prestige cars, Mr Davis does not admit to using any persuasive selling terms at all. His evidence was to the effect that the car was fit for reconstruction, which he stated to the applicant and which he advised would be expensive. The applicant plainly relied upon at least some of the things he was told about the condition of the car and although he went in a short drive with it, was not himself in a position to assess its mechanical condition. It undoubtedly looked to be in good condition. No case has been made in argument in reliance on default in compliance with s.30(1) of the Motor Car Traders' Act 1973 (Vic), or on s.41 of that Act which provides for limited statutory warranties. Section 41 was originally pleaded but is not relied on in the amended statement of claim. Sections 40 and 42, as well as ss.30 and 41, were mentioned during the proceedings. The matter has been the subject of a considerable body of evidence but I accept in its vital respects the evidence for the applicant. In my view, there is no doubt that the respondent through Mr Davis was guilty of misleading and deceptive conduct and made relevant representations in relation to the condition of the car. [I do not accept the evidence of Mr Davis to the effect that he did not, by at least some favourable language as to its mechanical condition seek to sell the car at all. The fact is that the car was very far from being in good condition. Externally, as I have said, it looked to be in good condition, and the leather work and interior appearance was for the most part good. As I understand, it gave the appearance of a good used car. However, it was mechanically seriously defective and on examination some of its underbody was in a sad condition, due largely to rust. It was recognised at the time of sale that there were some minor matters that might need to be attended to and a report was obtained from the Victorian Automobile Chamber of Commerce (V.A.C.C.), which referred, to these, among other defects. Mr Davis received the report inan envelope marked confidential and addressed to Mr McIntyre and he posted the report to Mr McIntyre without opening it. The report itself has apparently been lost and secondary evidence was given as to its contents or part thereof. The report was, in general, favourable, but it listed many matters requiring attention. Mr McIntyre rang the respondent and gave a verbal account of the report to Mr Davis. (Mr McIntyre said that he subsequently sent the report to the respondent in the motor vehicle on the occasion when it was returned to the respondent, although Mr Davis denied every having seen the report). Mr Davis had promised to have the work indicated by this report as being necessary, or at least that part dealing with roadworthiness, done at the expense of the respondent and so far as the applicant was concerned he did at the time seem to carry out this promise. Shortly thereafter serious defects became apparent in the running of the vehicle and Mr McIntyre sought to have them attended to. He went to the respondent which declined to give him any satisfaction. The applicant arranged for the car to be inspected by the Royal Automobile Club of Victoria (R.A.C.V.) whose report dated 10 June 1983 is in evidence. Subsequently he went to BMK Motors to have a list made of all the matters that needed repair. At the time of both reports, the statutory warranty had run out and Mr Davis declined to do any major work on the vehicle. The BMK Motors report (dated 20 July 1983) disclosed that the car was in far worse condition that could be accounted for by use since purchase. At the time of the purchase the vehicle, according to the odometer, had done 50,432 miles although Mr Davis had, in ink, written in the appropriate place on the sales note "presumably 150,432 miles". It is now shown as having done some further 10,000 miles. This figure seems to represent the distance travelled after Mr McIntyre's purchase of the car. The notation I have mentioned of 150,432 miles is doubtless associated with the fact that the odometer only goes to 5 figures. It appears to be inconsistent with evidence given as to the history of the sale and use of the car. It is possible that the odometer was defective, although strangely it is not one of the many matters about which comments or complaints have been made. Mr McIntyre had the vehicle himself from 1983 to 1986, and used it for part of that period. For much of that time it was in a garage for repairs or inspection. There is correspondence about the R.A.C.V. and BMK reports and the condition of the car, the short effect of which is that Mr McIntyre was asking that the car be put in order and the respondent was refusing todo so. The car was repaired to some extent by a Mr Taylor, the applicant's usual garage serviceman, and he gave evidence as to its condition. Finally, in February 1986, the car was left with Mr De Gouvea, a skilled mechanic, who had experience with Aston Martin motor cars. The car has been there since, with Mr De Gouvea and his assistants working on it one or two days a week. The delay has, in some degree, been due to difficulty in obtaining parts. There is no doubt that what was revealed in Mr De Gouvea's examination was a car which was in a seriously defective condition. The report prepared by BMK Automotive on 20 July 1983 showed 49 items which needed attention. At the time of leaving the vehicle with Mr De Gouvea, Mr McIntyre gave him a list of 77 items, not all of which could be related to its sale condition. Part of the trouble was severe rusting which had affected the underside of the car and had, amongst other things, rendered the wheels almost immovable from the wheel hubs. Other major matters which were apparent included the excessive use of oil and its scattering around the engine, an excessive use of water, and defective brakes. Whilst attention has been drawn to the use of the car made by Mr McIntyre, it has not been suggested that he used it recklessly, or negligently. With the exception of minor matters and a small degree of wear and tear the car can be taken as being in the same condition in February 1986 as it was in April 1983. Insofar as any further deterioration occurred, it was a consequence of the condition of the vehicle as sold. I have no doubt that there was misleading and deceptive conduct for which the respondent is liable and that representations were made in breach of s.53(a) of the Act. There then comes the question of damages. A schedule has been submitted. It shows the cost of labour for the work performed to be $6,413.58 to date, the cost of parts $2,168.20, the cost of outside labour sub-contracts §960, and an estimate of the work remaining to be performed as $5,000. The total is $14,514.78. In relation to the cost of labour it has been agreed that this is $27 per hour. The cost of the parts is also agreed, although not the necessity for them. The respondent criticises this summary on two substantial grounds. One is that it is not a proper way of estimating the damages recoverable. The other is that some, at least, of the work and materials supplied was by way of reconditioning a motor vehicle and not simply by way of repairing it. I think there is some substance in this latter criticism but it is very difficult to determine where and how the line should be drawn. Leaving aside the work to be performed, it seems to me that a fair basis is to deduct 12 1/2 per cent from the figure submitted. As to the work performed, this is only an estimate, but it seems to be a sufficiently fair and sound basis for it to be accepted, with the same deduction of 12 1/2 per cent. As to the challenge to the basis of awarding damages, it is submitted that this should simply be a comparison between the sale price and value at time of sale or alternatively, between sale price and value, some allowance being made for the cost of work to overcome effects. This latter figure has not been quantified. There is evidence that the vehicle if and when in good condition, but making some reasonable allowance for wear and tear, has a current value of $35,000. This is not because it has become a vintage car, but because prestige cars of which it is one, tend to hold their value. The market may also have improved. One witness called to establish the figure of $35,000 was Mr Nelson who although very experienced in the sale of cars is not a mechanic. Probably for this reason he seemed to me to go too far, indeed much too far, in assessing the current value of the vehicle, treating it as if it were virtually in a position to be put on the road. The car is in fact in Mr De Gouvea's workshop largely disassembed with its engine out and parts dispersed. Mr Nelson was not in a position to see what the condition of the car had been or to form a view as to what work remained to be done. I did not find his evidence satisfactory. A similar criticism can be made of the evidence of Mr Porter, who was, however, mechanically qualified. As to the comparison of price with value, this is sound in many cases, but not appropriate in a case such as the present. If Mr McIntyre made a good bargain this is his good fortune but he is enitled to damages flowing from the misleading and deceptive conduct and misrepresentations. In this case the damages, inmy view, are best represented by the cost of the repairs, discounted as above, and incidental expenses. The amount by which the applicant was worse off by reason of the respondent's representations proving false, can most fairly be arrived at in this way. He paid the price and took delivery of the car. It proved unroadworthy, which was inconsistent with its represented state, and the applicant has spent money to put it in an acceptable, perhaps what may be described as a good condition. The amount he paid originally has to this extent been lost. Another way of putting the matter is to say that the car had less value by reason of the cost of the work which had to be done. The measure of damages under the sections in question for a case such as the present has been assimilated to that appropriate for fraudulent misrepresentation (one of the claims in this case is for fraud), but there is flexibility in the way damages are worked out in a particular instance (see Gould v. Vaggelas (1984) 56 A.L.R. 31 at 35-37, Gates v. The City Mutual Life Assurance Societ td. (1986) 160 C.L.R. 1, at 12-13, Remedios v. Kentucky Homes Pty Ltd (1987) A.T.P.R. 40-799). There is not necessarily a sharp, if any, contrast with the amount that would be payable if the measure for a case of contract were applied. There is is then the claim for the cost of Mr McIntyre's hire of cars and taxis whilst the vehicle was under repair or being inspected. He claims to be entitled to $600 for the period between 1983 and 1986 for hire cars and $200 for the same period for taxi fares. I found the proof in relation to these matters 10. rather nebulous. While Mr McIntyre makes reference to the necessity to hire cars, I am not quite clear as to the circumstances and not at all sure as to what alternatives were available to him. He does seem, for a period, to have had no car, other than the Aston Martin. On the whole I do not think that this claim should be allowed beyond an amount of $300. There is also a claim for damages by way of interest. This is allowable, (see s.51A Federal Court Act). In my view interest should be payable at the rate of 14 per cent per annum on the amounts paid for the relevant repairs, (duly discounted, as above) from the dates on which they have respectively been paid. No allowance for interest should be made in respect of the estimated cost of the work to be performed. I will therefore order in due course that there be judgment for the applicant, with costs. I am not in a position to make the precise computations. What I will do is reserve liberty to apply, but I would expect the parties to be able to arrive at the respective figures themselves unless there is something not now apparent which looks as if it is going to make that impossible, or too difficult a task. I certify that this and the nine (9) preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Fox. Associate: S nu Date: 9 November 1987 he ll. 14 December _1987 In accordance with the agreement of the parties, the amount for which judgment is to be entered is $13,521.05, which includes $520.62 for interest. The parties have also agreed that there be a stay of proceedings of one month, and I _ order accordingly. I certify that this is a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Fox. Associate: S hoclbar Date: 14 December 1987 Counsel for the Applicant: Mr J. Delany Solicitors for the Applicant: Arthur McIntyre Counsel for the Respondent: Mr W Shand Solicitors for the Respondent: Messrs Meerkin & Apel Dates of hearing: Melbourne: 2,4,5,6 November 1987 Date judgment delivered: Melbourne: 9 November 1987