Edmund Charles Gooch and Lorraine Kerry Gooch v Byrt Ford Pty Limited; Ford Motor Company of Australia Limited and Hendrickson Manufacturing (Australia) Pty Limited [1988] ACTSC 42 (15 July 1988)

SUPREME COURT OF THE ACT

EDMUND CHARLES GOOCH and LORRAINE KERRY GOOCH v. BYRT FORD PTY LIMITED; FORD
MOTOR COMPANY OF AUSTRALIA LIMITED and HENDRICKSON MANUFACTURING (AUSTRALIA)
PTY LIMITED
S.C. No. 1757 of 1982
Contract - Damages

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Gallop J.(1)

CATCHWORDS

Contract - Breach of oral warranty - whether warranty made

Damages - measure of damages for breach of contract of bailment by loss of goods - whether loss of profits also recoverable

Andrews v. Hopkinson (1957) 1 QB 229

Brown v. Sheen and Richmond Car Sales Limited (1950) 1 All ER 1102

De Lassalle v. Guildford (1901) 2 KB 215

J.J. Savage & Sons Pty Ltd v. Blakney [1970] HCA 6; (1970) 119 CLR 435

Ross v. Allis-Chalmers Australia Pty Ltd (1980) 32 ALR 561

Cutts v. Buckley [1933] HCA 21; (1933) 49 CLR 189

T.C. Industrial Plant Pty Limited v. Robert's Queensland Pty Limited [1963] HCA 57; (1963) 37 ALJR 289

The law of Contract, Greig and Davis

HEARING

CANBERRA
15:7:1988

ORDER

There be judgment for the plaintiffs in the sum of $29,116.70.

DECISION

By writ of summons issued on 12 October 1982 the plaintiffs instituted proceedings against Byrt Ford Pty Limited (Byrt Ford) as supplier of a Ford Louisville 8000 Tipper truck on or about 1 September 1977. Proceedings were also instituted against Ford Motor Company of Australia Limited as the manufacturer of the said truck, and against Hendrickson (Aust) Pty Limited as the manufacturer of certain components of the said truck.

2. The plaintiffs' cause of action against Byrt Ford was for breach of an oral agreement entered into between the plaintiffs and Byrt Ford wherein it was expressly warranted and represented to the plaintiffs that the vehicle was:
(a) in proper and sound working order and free of

mechanical defects; and
(b) capable of performing the work of carrying loads
of soil and sand normally carried by the male
plaintiff, the requirements of which work having
been described to Byrt Ford Pty Limited by the
male plaintiff.

3. It was alleged that in reliance upon and pursuant to the said warranty and representation, the plaintiffs were induced to enter into the said lease agreement with Industrial Acceptance Corporation Limited on 5 September 1977. It was claimed that in breach and contrary to the said warranty and representation, the vehicle was not in proper and sound working order and free from mechanical defects, nor was it capable of performing the work of carrying loads of soil and sand as described and required by the male plaintiff. Particulars of mechanical defects provided were:

(a) multiple defects of the lubrication system
producing damage to four motors; defective
instrument gauges; defective air compressor and
water pump; defective tail light and mudguard
arms; and further defects, particulars of which
were to be supplied prior to trial;
(b) rear walking beam defectively cast; and
(c) rear walking beam of inadequate weight bearing
capacity and inadequate shock resistent capacity.

4. The damages claim brought by the plaintiffs against Byrt Ford was for the repair costs and loss of profits between taking delivery of the vehicle on or about 5 September 1977 and 7 July 1979 when the vehicle was involved in an accident on the Monaro Highway in the Australian Capital Territory as a result of which the vehicle was damaged and ultimately surrendered by the plaintiffs to Industrial Acceptance Corporation Limited. In addition, the plaintiffs claimed by way of damages the loss of the value of the truck as at the date of accident, the outstanding leasing charges due to Industrial Acceptance Corporation Limited and loss of profits during the anticipated working life of the truck.

5. The plaintiffs' causes of action against Ford Motor Company of Australia Limited and Hendrickson (Aust) Pty Limited respectively were in negligence.

6. On the second day of the trial of the action against all three defendants, Byrt Ford consented to interlocutory judgment against it in favour of the plaintiffs in respect of the mechanical defects referred to in (b) and (c) above relating to the rear walking beam. The plaintiffs consented to judgment for Ford Motor Company of Australia Limited and Hendrickson (Aust) Pty Limited against the plaintiffs. Accordingly Ford Motor Company of Australia Limited and Hendrickson (Aust) Pty Limited took no further part in the conduct of the trial, which was from then on confined to the issue of liability of Byrt Ford for the alleged breach of the oral agreement between the plaintiffs and Byrt Ford made on or about 1 September 1977, and in particular for breach of the warranties that the vehicle was in proper and sound working order and free of mechanical defects and capable of performing the work of carrying loads of soil and sand normally carried by the male plaintiff, which had been described to Byrt Ford Pty Limited by the male plaintiff.

7. I was at first concerned about the Court's jurisdiction to entertain the action because of doubts about where the oral agreement between the surviving parties was made. Those doubts were resolved to my satisfaction, particularly having regard to the fact that Byrt Ford entered an unconditional appearance to the writ of summons and did not raise any objection to the jurisdiction on the hearing of the action. I am satisfied on the evidence that the oral agreement entered into between the parties was made in the Australian Capital Territory and hence there is no difficulty about the Court's jurisdiction to entertain the action.

8. There was no dispute on the hearing of the action that, though not purchasers from Byrt Ford, the plaintiffs could enforce a warranty given by Byrt Ford having acted on the warranty by entering into the leasing agreement with Industrial Acceptance Corporation Limited (Andrews v. Hopkinson (1957) 1 QB 229; Brown v. Sheen and Richmond Car Sales Limited (1950) 1 All ER 1102). There was, however, a substantial issue of fact between the parties as to whether the warranty, as alleged by the plaintiffs, had ever been given by Byrt Ford or any servant or agent thereof on its behalf.

9. The facts giving rise to the oral agreement were given in evidence by the male plaintiff, Edmund Charles Gooch. He said that in August 1977 he attended the premises of Lawton Ford in Queanbeyan and looked at a Ford Louisville LNT 8000 truck which was on display at Lawton Ford on behalf of Byrt Ford. He spoke to one of the salesmen there and was referred to Mr Pat Donohue. As a result of a telephone conversation with Mr Donohue, he arranged to meet Mr Donohue at the plaintiffs' premises in Yarralumla. They discussed "the aspects of the truck and whether it would be suitable for the type of work that (he) was doing". It was arranged that a demonstration would take place to prove that the truck could do the type of work that he wanted it to do, namely carrying sand, soil, blue metal and gravel.

10. A demonstration was arranged at the Mugga Quarry. The truck was taken under the loading bins to see how it would go under the bins and what sort of weight it could handle. It was loaded with 18.6 tons of blue metal. It became apparent that the front of the truck was too high and would not fit under the bins. The truck was also tested around the Quarry and, as I understand the evidence, up certain hills in a loaded condition.

11. There was some discussion about whether a bigger motor would be available but Mr Donohue said that he could not supply the bigger motor. They then discussed the alterations and modifications that would have to be made to the truck to make it serviceable. Mr Donohue suggested that he would ring Byrt Ford in Wollongong and see whether the modifications could be done. He telephoned Mr Gooch a couple of days later and said that Byrt Ford would agree to the modifications. It was agreed that they would go ahead with the deal and they went on to discuss by telephone arrangements for finance to lease the truck through Industrial Acceptance Corporation Limited.

12. Mr Gooch maintained that during the demonstration at the Quarry Mr Donohue assured him that the truck was capable of doing the work that the plaintiffs required it to do. He said that he told Mr Donohue that he wanted something that was going to be reliable and capable of carrying out the work that he was doing without being off the road due to breakdowns. He said that he accepted what Mr Donohue told him about the capability of the truck. It was an agreed fact that Mr Donohue was a servant or agent of Byrt Ford at all material times.

13. On 5 September 1977 the plaintiffs entered into the leasing agreement with Industrial Acceptance Corporation Limited and a copy of the agreement was admitted into evidence (Exhibit 2). Mr Donohue was present at the office of Industrial Acceptance Corporation Limited when the agreement was completed. Following the completion of the agreement, arrangements were made for Mr Donohue to drive the subject truck down to Byrt Ford in Wollongong so that the required modifications could be done. The modifications were done over the next three days and Mr Gooch drove the subject truck back to Canberra.

14. It was submitted on behalf of Byrt Ford that it had not given the warranties alleged by the plaintiffs and that the only warranties given were those given by Ford Motor Company of Australia and by Caterpillar. Copies of those written warranties were in evidence (Exhibit B). It was submitted that Byrt Ford was a dealer in trucks and as such only a conduit between the manufacturer of the subject truck and buyers.

15. I am satisfied on the evidence that the written warranty given by Ford Motor Company of Australia was that it would, with respect to each new Louisville vehicle sold by Ford, for a period of 12 months, repair or replace free of charge any part of such vehicle (with certain exceptions) found to be defective in factory workmanship or materials under normal use and operation within Australia, subject to certain provisos. I am further satisfied that the Caterpillar warranty related to all new 328 engines sold by Caterpillar and the warranty was that such engines were to be free from defects in material and workmanship for 160,000 kilometres or 3,600 operating hours or 24 months, whichever occurs first after the date of delivery of the engine, subject to certain provisos. Both written warranties expressly excluded any liability for loss of time or other economic loss.

16. It was submitted on behalf of Byrt Ford that they were the only warranties which formed part of the transaction between the plaintiffs and Byrt Ford and that it would be inappropriate to find some additional warranties.

17. Although the denial by Byrt Ford that no warranty as alleged was given by it to the plaintiffs may appear to be inconsistent with its consent to interlocutory judgment based upon a breach of such a warranty in relation to the rear walking beam, it is not necessarily so and I do not infer from the submission to interlocutory judgment in that respect any admission that a warranty was given in the terms pleaded by the plaintiffs in respect of the sound working order and capacity of the subject truck.

18. In my view it is of particular significance in determining whether the warranty as alleged was ever given by Byrt Ford that when the plaintiffs had trouble with the Ford Louisville 8000 tiptruck it made claims under the warranties given by Ford and Caterpillar. They took delivery of the truck early in September 1977. As early as 1 October 1977 mechanical defects began to arise. These defects were various and a number of claims were made to both Ford and Caterpillar. The plaintiffs were not unnaturally becoming exasperated with the defects, and on 12 February 1979 they wrote a letter to Caterpillar and sent a copy to the Managing Director of Ford Motor Company setting out their unfortunate experience with the truck. The letter was in evidence (Exhibit D), and was clearly a plea to the manufacturers of the truck and engine to rectify the problems which they had experienced.

19. As a result of that letter there were a number of meetings between the plaintiffs, Mr Trevor Maxwell Heyne, the Warranty Administrator of the Ford Motor Company for New South Wales and South Australia, and a Caterpillar representative. At those meetings the plaintiffs' complaints were fully outlined to Mr Heyne and the Caterpillar representative and in due course Ford paid, pursuant to an agreement reached at the meeting, the sum of $368.40 as Ford's contribution to the resolution of the current problems. The payment was made with a letter of 19 April 1979 (Exhibit A). There was a reference in the letter to Caterpillar also coming to the plaintiffs' assistance. Mr Heyne's report to Ford setting out the details of the plaintiffs' complaints and the resolutions achieved at the meetings was also in evidence (Exhibit E). Agreement was also reached between the plaintiffs and Caterpillar that Caterpillar would supply a new engine and purchase the existing engine for $2500.

20. In cross-examination Mr Gooch agreed that he had received the written warranties from Ford and Caterpillar and that the plaintiffs had made claims under those warranties. He further agreed that resolution of his complaints had been achieved at the meetings with Mr Heyne and the representative of Caterpillar, that he had received the cheque from Ford and that he had agreed to sign a release from Caterpillar. The release, however, was apparently never signed by him.

21. It was no part of the resolution of the plaintiffs' complaints with Ford or Caterpillar that they were entitled to any economic loss.

22. On 25 May 1981 the plaintiffs caused their solicitors to send a letter to the Managing Director of Ford in which the solicitors detailed the long history of mechanical defects and breakdowns, and asked the Managing Director to come to their aid so as to avoid the necessity to resort to litigation. No claim was made in that letter for economic loss.

23. The plaintiffs have pleaded the warranties relied upon as part of an oral collateral warranty entered into by the plaintiffs and Byrt Ford by its servant or agent.

24. To create a warranty no special form of words is necessary. It must be a collateral undertaking forming part of the contract by agreement of the parties, express or implied, and must be given during the course of the dealing which leads to the bargain and should then enter into the bargain as part of it (De Lassalle v. Guildford (1901) 2 KB 215 per A.L Smith M.R. at 221). The requirements for establishing a collateral warranty were stated by the High Court in J.J. Savage & Sons Pty Ltd v. Blakney [1970] HCA 6; (1970) 119 CLR 435 at 442:

"The Full Court seems to have thought it sufficient
in order to establish a collateral warranty that
without the statement as to the estimated speed the
contract of purchase would never have been made. But
that circumstance is, in our opinion, in itself
insufficient to support the conclusion that a warranty
was given. So much can be said of an innocent
representation inducing a contract. The question is
whether there was a promise by the appellant that the
boat would in fact attain the stated speed if powered
by the stipulated engine, the entry into the contract
to purchase the boat providing the consideration to
make the promise effective. The expression in De
Lassalle v. Guildford that without the statement the
contract in that case would not have been made does
not, in our opinion, provide an alternative and
independent ground on which a collateral warranty can
be established. Such a fact is but a step in some
circumstances towards the only conclusion which will
support a collateral warranty, namely, that the
statement so relied on was promissory and not merely
representational."

That passage was applied by the High Court in Ross v. Allis-Chalmers Australia Pty Ltd. (1980) 32 ALR 561.

25. The plaintiffs would have to establish that the representation "was promissory and not merely representational" applying the test enunciated by the High Court in J.J. Savage & Sons Pty Ltd v. Blakney, supra, repeated in Ross v. Allis-Chalmers Australia Pty Ltd, supra. I refer also to what Dixon J., as he then was, said in Cutts v. Buckley [1933] HCA 21; (1933) 49 CLR 189 at 198:

"It would be necessary to find in the conversation
deposed to by the plaintiff an antecedent promise by
the defendant as to the correctness of his estimate of
the average house takings, given antecedently to and in
consideration of the plaintiff's entering into the
contract of purchase and intended to be collateral,
extrinsic or supplementary to the main contract as
distinguished from being part of it. The circumstances
narrated by the plaintiff support no such view of the
statement which the plaintiff attributes to the
defendant."

What Evatt J. said at p 202 is of assistance in listing some of the matters which would assist in discriminating between that which is promissory and that which is representational. He said:

"They were by way of inducement, I have no doubt, but,
having regard to the non-existence of the contract when
the alleged warranties were made, the time which
elapsed before the contract was made, the elaborate
provisions of the contract as to analogous matters, and
the complete absence of any suggestion that the
statement as to the takings was promissory in character
or was intended to be made part of the actual bargain,
I conclude that there was no evidence to support the
count of collateral warranty."

26. Mr Donohue did not give evidence and consequently the only evidence of the conversations between him and the plaintiffs is that of Mr Gooch. Accepting his evidence on the subject, it would nevertheless not be appropriate, in my view, to class Mr Donohue's assurances about the suitability of the vehicle for the plaintiffs' purposes and the demonstration of its capacity as amounting to the express warranty alleged by the plaintiffs. Those assurances and demonstration no doubt relate to the proper and sound working order of the vehicle and that it was free of mechanical defects, and further that it was capable of performing the sort of carrying work for which the plaintiffs intended to use the truck. It seems to me to be implicit in the transaction that so far as mechanical defects and capacity of the vehicle were concerned, Byrt Ford would simply rely upon the written warranties from Ford and Caterpillar. They would be the type of warranties to be expected in the purchase of a new vehicle and it would be unnecessary for Byrt Ford, as the vendor of the vehicle, to warrant additional warranties in the same or similar terms to the written warranties of Ford and Caterpillar. Especially is that so if the warranty extended to economic loss which was expressly excluded by Ford and Caterpillar in the written warranties. The plaintiffs' claim for economic loss is therefore dismissed.

27. I turn to the assessment of damages for personal injuries sustained by Mr Gooch in the accident on 7 July 1979, Byrt Ford having consented to interlocutory judgment against it in respect of the claim for personal injuries.

28. Mr Gooch was driving the vehicle when it rolled over on its side. He realised that he had broken ribs. The ribs gave him difficulty for six weeks. It hurt to breathe or laugh or move quickly. He consulted his general practitioner, Dr T. Middlemiss, on 10 July 1979 and was treated for small bruises on both shins, abrasions of the buttocks and right flank, tenderness over the site of the three fractured ribs, and bruising of the right acromio- clavicular area. Dr Middlemiss saw him again on 26 July 1979 and Mr Gooch returned to work on that day. There are no residual disabilities.

29. For pain and suffering, and the other matters that I am required to take into account on general damages, I assess the sum of $2,000.

30. The out of pocket expenses incurred in relation to the claim for personal injuries were agreed at $116.70.

31. Accordingly, in relation to the claim for damages for personal injures, I award the sum of $2,116.70.

32. I turn to the assessment of damages arising from the mechanical failure of the rear walking beam, which caused the vehicle to roll over on 7 July 1979.

33. Following the accident the vehicle was repossessed by Industrial Acceptance Corporation Limited and sold for $14,364. Mr Ian Patrick Freeman, sales director of Intermotors, Queanbeyan, gave evidence as an expert valuer of trucks and heavy vehicles, including Ford motor vehicles. Having recourse to a dealers' guide, Mr Freeman expressed the opinion that the subject truck was worth about $31,000 or $32,000 at the date of the accident.

34. Allowing for the sale price of $14,364, the plaintiffs claimed the difference in round figures of $17,000 for the loss of the truck. In addition, they claimed the agreed pay-out figure to Industrial Acceptance Corporation Limited, which was $8444.75 and loss of profits for the anticipated working life of the truck.

35. On the other hand it was submitted on behalf of the defendant that the plaintiffs are entitled only to the pay-out figure of $8,444.75. The submission was that, having lost the use of the subject vehicle, the plaintiffs could have leased another vehicle and claimed any increased leasing costs during the period of the lease to Industrial Acceptance Corporation Limited.

36. It is now clear law that the normal measure of damages for breach of a contract of bailment by loss of the goods is the value of those goods to the bailee. On receiving that amount he is put in the position in which he would have been had he not lost the goods (The Law of Contract, Greig and Davis).

37. It is also clear that where the plaintiff adopts as the amount the machine would have been worth to him if it had been warranted, the amount of the profits he would have made by using it to the point of exhausting its useful life, he is entitled to recover the whole amount of those profits, for those profits are what he was really buying when he bought the machine in reliance upon the warranty. The same result may be produced by claiming for recoupment for his capital outlay and in addition for the excess of the estimated profits over the amount of the capital outlay (T.C Industrial Plant Pty Limited v. Robert's Queensland Pty Limited [1963] HCA 57; (1963) 37 ALJR 289).

38. In my view, however, the plaintiffs are not entitled to recovery their expected loss of profits in the present case. I accept the submission on behalf of Byrt Ford that the plaintiffs had sufficient income, which on the evidence was in the order of $2,718 per month net, to meet lease payments of $1,207 per month under the lease from Industrial Acceptance Corporation Limited, and on the probabilities, could have leased another truck to replace the lost truck.

39. The plaintiffs did not claim any lack of capacity to lease another truck. Rather I am left with the impression that they were so disenchanted and disappointed with their experience with the lost truck that they decided to move out of the trucking business. I reject the claim for expected loss of profits over the expected working life of the lost truck, which was calculated at an agreed figure of $1,600 per month if the damages were to be assessed on that basis. Assuming a working life of the truck at 8-13 years from 7 July 1979, the amount claimed was $153,504. I reject that claim and award damages for the value of the truck at the date of the accident on 7 July 1979, less the sale value, which yields a figure of $17,000.

40. It is appropriate to award interest on the damages for personal injuries and damages for loss of the truck, totalling $19,116.70 at the usual rate of 14 percent since the date of the accident to date. The normal calculation would be to halve the amount for interest in respect of the damages for personal injuries on the basis that all the damage was not incurred at the one time, but I think that is a rather artificial approach in the circumstances of the present case. An interest rate of 14 percent on $19,116.70 from 7 July 1979 yields a round figure of $15,000. In my view it would not be just to award that sort of a figure for interest for the following reasons.

41. The writ of summons in this matter was not issued until 12 October 1982. Although there was no evidence on the subject, I am prepared to infer that the delay between the accident giving rise to the claim for personal injuries and the loss of the truck on 7 July 1979 and the institution of the proceedings by the issue of the writ of summons on 12 October 1982 was in some measure due to the negotiations between the plaintiffs and Ford about the defects of the truck, exemplified to some extent by the letter from the plaintiffs' solicitors to the Managing Director of Ford dated 25 May 1981. If the proceedings had been instituted promptly, the plaintiffs may not have been entitled to interest at all. The right to claim interest was provided by s.53A of the Statute Law (Miscellaneous Provisions) Act (No. 176 of 1981) which was assented to on 2 December 1981. In other words, if the proceedings had been instituted promptly the plaintiffs would not have had a right to claim interest under section 53A.

42. In the circumstances I think it is appropriate to order that there be a lump sum in lieu of a calculation of interest and I award the sum of $10,000.

43. There will be judgment for the plaintiffs in the sum of $29,116.70. I shall hear counsel on the question of costs.