BELZ v OSLOB PTY LTD OSLOB PTY LTD v BELZ SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL SAMUELS, CLARKE and KIRBY P 15 December 1989 [1989] NSWCA 19 DAMAGES — damage to motor car — prima facie the measure of damages is the cost of repairs. Samuels JA In 1984 the respondent through the agency of its proprietor, Mr Daniberg, lent a motor car to one or other or both of the appellants. It seems to have been agreed between the parties, and it is not challenged here, that there was a gratuitous bailment of the car, subject possibly to what has been described as a condition, although not a contractual one. My first impression upon reading the evidence was that the bailment had been made to the first appellant on the understanding that the second appellant, her daughter, would drive the motor vehicle, because the purpose of the transaction was to supply the second appellant with a car while her own was undergoing repairs. The first appellant, I should add was, at the time, an old friend of Mr Daniberg. However, having heard Mr Graham QC's argument for the appellants, I have come firmly to the conclusion that the learned judge was correct in determining that the bailment was to both of them. It is really a difficult matter to distinguish between them. The first appellant seems to have made the request, but it was understood that the second appellant would use the car, as indeed she did. While driving the car a day or so later, she had an accident with a Government bus in Victoria Road, Bellevue Hill. The learned judge who tried the matter, Judge McCredie, in the District, came to the conclusion that the accident was caused by the second appellant's negligent driving. The circumstances were, according to the second appellant, that while she was travelling uphill at a slow speed, a car pulled out from the kerb in front of her. She, in an effort to avoid it, applied her brakes, swung to her right and collided head-on with a Government bus coming down the hill which she had not seen before impact. The judge took the view that she had failed to keep a proper lookout and in those circumstances I am far from satisfied that his conclusion was wrong. It is unnecessary, I think, to pursue the interesting question of what precisely is the duty owed by a gratuitous bailee to the bailor, but at least it cannot be less than the duty to exercise reasonable care in the preservation of the chattel bailed. Accordingly, there was a breach of that duty and the two bailees in the present case are liable in damages. As I have said, there appears to be no doubt, indeed it is conceded, that during the discussion, in the course of which the arrangement was made, Mr Daniberg stated that the vehicle was uninsured. He said that he told his friends that they had to insure it which the second appellant denied. But the learned judge accepted Mr Daniberg and it is quite easy to infer that compliance with that condition was a term of the bailment. However, it was not satisfied. 2 UNREPORTED JUDGMENTS The condition, as I have said, is not pleaded in contract, as I understand the statement of claim, but in the circumstances it does not seem to me to matter. Had the condition been fulfilled, the consequence would simply have been to introduce a further fund from which any award of damages could be satisfied. There is no other particular claim for damages specified. So, in my view one can proceed to the next stage in the matter without pausing to consider further the question of the effect of the failure to insure. The next stage is the measure of damages. This vehicle was constructed by means of a kit using a fibreglass body, a Volkswagen frame, and an engine from another source. So, it was, in every sense, a custom built vehicle. The evidence was that Mr Daniberg had purchased two of them; a blue one and a black one, for $84,000. The evidence of the extent of the damage to the vehicle was not as clear as one would have expected. Mr Daniberg's own evidence differed fairly considerably from the evidence of a mechanic, a Mr Zarfati, who saw the vehicle at the scene of the accident and whose evidence does not suggest that it was very extensively damaged. We have seen photographs which were taken, however, some years later, ie. just before the trial which commenced on 26 May 1988. Those photographs suggest that the vehicle was very badly damaged. But, as Mr Daniberg conceded, no attempt had been made to repair it in the four years or so which had elapsed between the accident and trial. It had been stored in various places and during that time it had deteriorated. Accordingly, the photographs must be rejected as any evidence of the damage caused by the collision. Similarly, various estimates of costs of repairs and value differed considerably. There is a figure of $4,000 to $4,500 for repairs. It is said that a similar vehicle could be put together for $10,000 or $20,000. Finally, there is evidence which is the evidence of damage which his Honour adopted, that the other vehicle was sold to a purchaser for $45,000, of course some years after the accident occurred. The problem in the case is that it seems to me that the learned trial judge misconceived the proper measure of damages. In Hoad v Scone Motors Pty Ltd (1977) 1 NSWLR 88 at 99, in a dissenting judgment which, however, was not the subject of dispute upon this point, I said: "A convenient starting point from which to approach the present problem is the statement made in Halsbury's Laws of England, 4th ed, vol 12, at 456, par 1163, 'The basic rule is that the measure of damages in the case of damage to a chattel is the cost of repair but if it is unreasonable from the business point of view to repair the article, or if the article is damaged beyond repair, then the basic measure is the cost of replacement in an available market. If there is no available market and it is reasonable to take steps to have a substitute made, the cost of the substitute may provide the measure of damages.' In my opinion, that proposition, for which there is ample authority, is correct; and I add only two comments. The use of the terms 'market price' or 'market value' in this context is misleading, because they tend to suggest as a measure the value of the chattel destroyed or the price for which the plaintiff could have sold it. But it is the market price of a replacement which is the primary amount recoverable. Secondly, the proposition itself indicates that the measure may vary with the circumstances of the case." Accordingly, prima facie, the correct measure of damages in this case was the cost of repair. If the cost of repair produced an uneconomic figure, then the alternative was the price at which a comparable vehicle could be obtained in the market. If there was something special about the vehicle which would justify URJ BELZ v OSLOB PTY LTD OSLOB PTY LTD v BELZ (Kirby P) 3 restoring it rather than buying a replacement, though uneconomic by comparison, the replacement cost may be awarded. If neither the cost of repairs nor the cost of going into the market to obtain a comparable vehicle are available, then it may be necessary to estimate what it would cost to manufacture a comparable vehicle. In the present case, however, the learned judge, although he had evidence before him about the cost of repair, at no stage approached the matter by regarding that as the amount which he should take into account. Indeed, he says at one point, dealing with the cost of constructing such a vehicle, or the various estimates of that cost, "I do not get any assistance from the question of cost", meaning the cost of construction. He then goes to what he considers to be the real question, which was whether the evidence of value of the vehicle based upon the sale at $45,000 was acceptable. I am afraid that that was not the correct test and, as a result, the judge misdirected himself on the law. The judgment, therefore, cannot stand. The further question is; what should this Court do about it? To order a new trial in a matter of this kind would be, as such an order very often is, a misfortune. But, it is impossible, in my opinion, for us to discriminate among the various figures given, because to do so would involve an estimate of credibility, which is one thing that in most cases, including this one, an appellate court cannot undertake. It is true that there is evidence of the cost of repairs by Mr Zarfati, but the learned judge appears not to have viewed his evidence with any degree of approval. We could not substitute our own view upon that matter for the judge's approach. Hence, it seems to me that, unfortunate though it is, there is nothing for it but to send the case down for a new trial on the issue of damages. So far as the cross-appeal is concerned, the question of interest must remain a live matter and the issue raised by the cross-appeal cannot now be finally determined. That being so, the orders that I would propose are that the appeal is allowed with costs and the cross-appeal is dismissed with no order for costs. The judgment below must be set aside, save for judgment for the plaintiff on liability and the order for costs must stand. The matter must go down for a new trial on the issue of damages. Kirby P I agree. Clarke JA I agree. Kirby P The orders of the Court are as Mr Justice Samuels has proposed, with an additional order that in respect of the costs of the appeal, the respondent, if so qualified, has a Certificate under the Suitors Fund Act, 1951. The appeal is allowed with costs and the cross-appeal is dismissed with no order for costs. The judgment below must be set aside, save for judgment for the plaintiff on liability and the order for costs must stand. The matter must go down for a new trial on the issue of damages. In respect of the costs of the appeal, the respondent, if so qualified, is to have a certificate under the Suitors Fund Act, 1951. Counsel for Appellant: PR Graham QC with McNally Solicitors for Appellant: Lane and Lane Counsel for Respondent: P Kennedy-Smith 4 UNREPORTED JUDGMENTS Solicitors for Respondent: Weiss and Co