KEITH GOODMAN USED CARS PTY LIMITED v NEEDHAM SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL Hope, CLARKE and MEAGHER JJA 21 April 1989, 21 April 1989 [1989] NSWCA 118 SALE OF GOODS — MOTOR VEHICLE — IMPLIED TERMS Sale of goods — second-hand motor vehicle — transaction effected through financier — sale to financier and lease to intended purchaser — implied terms as to fitness of vehicle to be driven on public roads and as to merchantable quality — Trade Practices Act — Motor Dealers Act 1974, s4(3) and s27 — Evidence as to defect existing at time of transaction — Reliance by defendant on expert evidence — Finding that defect existed based on acceptance of plaintiff's evidence and of evidence (including expert evidence) of witnesses called for plaintiff and doubts as to credibility of defendant's expert witnesses — Held trial judge entitled to reach finding in this way — findings affirmed — appeal dismissed. ORDER Appeal dismissed with costs. Hope JA The plaintiff was supplied with a Triumph Stag sedan motor vehicle by the defendant on 7 July 1980. The plaintiff did not buy the vehicle from the defendant but the sale transaction was effected through a finance company, Custom Credit Corporation Limited, which in turn leased the vehicle to the plaintiff. At the time of the trial the payments due to the financier had apparently been completed and the debt owing on the vehicle was fully paid. The plaintiff alleged that when the car was used after it had been so hired it was deficient in that it continually overheated. He accordingly took proceedings against the defendant basing his claim on three different grounds: first, upon an implied warranty under the general law as to the fitness of the vehicle for the purposes of being driven on public roads, more specifically, that the vehicle was in a fit and proper roadworthy condition and free from defects; secondly, upon an obligation arising from the provisions of the Trade Practices Act that the vehicle was of merchantable quality; and thirdly upon the provisions of s27 of the Motor Dealers Act 1974. His Honour Judge Graham, before whom the proceedings were heard, found against the defendant and held it liable to pay damages to the plaintiff in the sum of $6,000, together with interest, the judgment being in the sum of $11,175. In its appeal the defendant has challenged his Honour's conclusion as to the applicability of the Motor Dealers Act, but more importantly it has also challenged some of his Honour's findings, especially having regard to the expert or technical evidence which was called in the defendant's case. Having been referred to s4(3) of the Motor Dealers Act, counsel for the appellant has very properly conceded that his challenge to his Honour's conclusion as to the Motor Dealers Act was not well founded. s4(3) provides that for the purposes of the Act, where a dealer sells a motor vehicle to a financier in the expectation that the financier will sell that motor vehicle to a particular third person and the financier does so, the dealer shall be treated as having sold that vehicle to that third person. This provision clearly applies to this case. 2 UNREPORTED JUDGMENTS The question accordingly arises whether his Honour's conclusion that the plaintiff had made out its case as to a deficiency in the vehicle when it was supplied to him was correct. Shortly, the deficiency alleged by the plaintiff was an unspecified deficiency which led to the overheating of the vehicle which made it impracticable for use on public roads. The reply to this allegation by the defendant was that the overheating was not caused by any deficiency in the vehicle at the time when it was supplied by it to the plaintiff; it was caused by damage done to a cowling of a fan resulting from the way in which the vehicle had been driven by the plaintiff or by the plaintiff's wife. The plaintiff gave evidence himself, as did his wife, and Mr Barber, an employee of the NRMA who inspected the vehicle on or about 29 August 1980, was also called in support of his case. Amongst other things Mr Barber recorded in his report, and gave evidence, that the vehicle was overheating at the time he inspected it. He did not identify the cause of the overheating, save to say that a viscous fan was not operating as it should have done. The reason why the viscous fan was not operating was not identified by him, and he merely recorded that the nature and cause of the overheating should be investigated. The plaintiff, having established without doubt that the vehicle had overheated and that overheating resulted in its failing to satisfy the contractual and statutory obligations imposed on the defendant, an evidentiary burden was placed upon the defendant to establish that the deficiency was not due to something that existed in the vehicle at the time of the supply by it but was something which arose later, having nothing to do with anything for which the defendant was responsible. It did this by calling as witnesses a Mr Middleton, who was the person who carried out repairs regularly for the defendant; and a Mr Langham and a Mr Bryan, who were officers of the Consumer Affairs Department. The defendant relied upon the evidence of these persons to establish that the reason why the vehicle overheated was, on the probabilities, the denting or otherwise changing of the condition of the cowling which surrounded the fan to which I have referred. That fan was situated in the middle of and underneath one end of the vehicle, and the cowling surrounded it. Photographs which were in evidence showed that there were portions of the vehicle which were lower than this cowling, that is, closer to the ground, but nonetheless it is the defendant's contention that by driving the vehicle over objects such as a roadside kerb or some obstruction placed in a parking station to stop vehicles entering prohibited areas, the cowling was regularly dented and thus regularly interfered with the working of the viscous fan. It was claimed the vehicle was brought back to the defendant's premises from time to time, the cowling fixed and the vehicle sent away in good order, and later on it would be returned with the cowling again dented or otherwise damaged. His Honour rejected this evidence and concluded that he was not satisfied that the cowling was the cause of the overheating, save on one occasion. In arriving at this conclusion his Honour did not consider in detail the evidence which had been given by Mr Middleton, Mr Langham and Mr Bryan, but dealt with the matter on other considerations. First he concluded that he was satisfied that the plaintiff, Dr Needham, was an entirely satisfactory witness and that, although Mrs Needham was unsatisfactory in some respects, she was sufficiently satisfactory to enable a conclusion to be based on her evidence on the important aspects. His Honour also relied strongly on the evidence given by Mr Barber. Mr URJ KEITH GOODMAN USED CARS PTY LIMITED v NEEDHAM (Hope JA) 3 Barber gave evidence that at the time when he inspected the vehicle in 1980 he saw no interference of the fan by the cowling. The only thing he noticed was that the viscous fan was not operating. The rather unfortunate history of the vehicle is shortly this. After it had been delivered to the plaintiff it was taken back to the defendant's premises in July. It was again taken back to their premises on or about 15 August. 1 Again on 20 August it was taken back to the defendant's premises, the written records evidencing an overheating problem It was then sent to Mr Middleton's works and an invoice of his dated 28 August 1980 reveals the work which he carried out. It was on the next day that Mr Barber inspected the vehicle. The vehicle was again taken back to the defendant's premises on or about 7 September 1980 and further work was carried out by Mr Middleton. An invoice of Mr Middleton dated 7 September is in evidence, of which the first item is "Fit D/heating kit to motor" for which the sum of $330 was charged. Shortly afterwards there were complaints to the Consumer Affairs Department and inspections carried out by that department. On or about 22 October 1980 the vehicle was again taken to the defendant's premises with a complaint about overheating. On 6 November it was again taken to the defendant's premises, and it was again taken there on 19 November 1980 when the defendant refused to carry out any further work. Some months later, in March 1981, the vehicle was taken to a Mr Morgan for repair work, but at that stage the vehicle was in a very poor condition for reasons other than simply the overheating which had previously been complained about. Mr Morgan carried out work on it in respect of which he charged a sum of a little over $2,000 and the vehicle was returned to the plaintiff. However Dr Needham gave evidence that the vehicle continued to overheat notwithstanding the extensive work carried out by Mr Morgan. It is put for the defendant that, accepting his Honour's conclusion that Mr Barber's evidence was to be relied upon, it did not follow that the defendant or its expert witnesses should be rejected or that the conclusion at which his Honour arrived was a proper one. Although his Honour expressed doubts about the credibility of those witnesses, the defendant relies upon what it submits was a listing of the possible reasons for the overheating given in evidence by Mr Barber. For the plaintiff it is submitted that this list was not exhaustive and that there may have been other reasons for the overheating. What is submitted for the defendant is that an investigation was carried out by the three witnesses whom it called into each of six matters which were referred to by Mr Barber in his evidence, and their evidence was that none of those deficiencies existed and that the overheating was not caused by any of those six matters, leaving damage to the cowling as the probable cause. However it seems to me there are at least two answers to this submission on behalf of the defendant. In the first place, having regard to the whole of his evidence, I do not think that Mr Barber's list was exhaustive or was intended to be exhaustive. He was giving a list of the possible reasons for overheating. He had given six and then, quite understandably, he was asked by the cross-examiner to give evidence about particular matters to which he had referred, and at no time was he taken back to the list to see if he had finished. Perhaps more importantly, no evidence was led by the defendant or was obtained by cross-examination from Mr Barber as to the reason why the viscous fan was not operating properly in August 1980 when Mr Barber inspected the vehicle. It is not known what the reason was. The fan in due course did work but 4 UNREPORTED JUDGMENTS there is no evidence that it would not and did not from time to time break down and cause the overheating problem which had been complained of at the time when Mr Barber inspected the vehicle. In those circumstances I do not accept the submission which has been made on behalf of the defendant that his Honour was in error in a way which this court should correct in reaching his conclusion that the vehicle's overheating was not caused by some activity or manner of driving of the vehicle on the part of Dr Needham or his wife. The overheating existed from the time the vehicle was supplied to the plaintiff. It was obviously there when Mr Barber inspected the vehicle. A reason for the overheating at that time, namely, the non-operation of the viscous fan, was established by Mr Barber but no reason for the non-operation of the fan was given by anybody. His Honour accepted the evidence of Dr and Mrs Needham that the vehicle had not been used in the way in which the defendant's witnesses said it must have been used, and in my opinion he was entitled to come to that conclusion. It should be added that photographs of the fan and the cowling were in evidence and it is apparent from those photographs that any denting or other impact upon the cowling which would affect the operation of the fan would be readily visible to anybody who made the slightest inspection of the underneath part of the car. It would not be necessary to get under the car for that purpose; merely looking at the vehicle from one end would show the state of the cowling. In the circumstances I have concluded that the defendant has not made out its case that his Honour was in error in not dealing in detail with the expert evidence given by the witnesses called for the defendant. In my opinion the appeal should be dismissed with costs. Clarke JA I agree. Meagher JA I also agree. HOPE JA: The order of the court is the appeal will be dismissed with costs. Counsel for Appellant: J Thomson Solicitors for Appellant: Phillips Fox Counsel for Respondent: A Lidden Solicitors for Respondent: Scott Peters Plowman and Co