Tony Tarzia and Ors v Spyglass Pty Limited Trading As Shepherd Ford Sca [1991] ACTSC 6 (15 February 1991)

SUPREME COURT OF THE ACT

TONY TARZIA and ORS v. SPYGLASS PTY LIMITED trading as SHEPHERD FORD
S.C.A. No. 1018 of 1985
Breach of Contract - Negligence

COURT

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

CATCHWORDS

Breach of Contract - contract of after-sale-service - proper and competent service.

Negligence - negligence as a bailee

HEARING

CANBERRA
15:2:1991

For the plaintiff: Mr C. Whitelaw

Instructed by Peter Smyth Burnett and Co.

For the defendant: Mr J.C. Hartigan
Instructed by Scott Campbell Shiels

ORDER

Judgment be entered in favour of the plaintiffs in the sum of $58,748.85.

The defendant pay the plaintiffs costs.

DECISION

In this action, the plaintiffs sue as partners to recover damages from the defendant company, which I shall refer to as Shepherd Ford, for alleged breaches of contract in December 1983 and January 1984. I shall refer to these allegations of breach in detail hereafter.

2. In 1983 and 1984, the plaintiffs operated a transport and haulage business, mainly delivering grocery goods on behalf of a wholesale grocer. The defendant was a dealer, inter alia, in commercial vehicles and, as part of its business, provided servicing and repairs to vehicles which customers acquired from it.

3. In August 1983, the plaintiffs acquired from the defendant a new Ford Cargo truck for use in their business. It was acquired by way of a leasing arrangement through a finance organisation, but nothing turns on this fact. Shepherd Ford undertook the servicing and repair of the vehicle as part of its usual arrangement with its customers.

4. A number of causes of action are pleaded in the plaintiffs' amended statement of claim but only two have been relied on. The first may be summarised as follows: it was a term of the servicing agreement that the servicing of the vehicle would be done in a proper and competent manner by persons appropriately skilled and using proper materials and equipment and that there was a breach of this term in that, in the performance of a service on 17 December 1983, it failed, when replacing a water filter, to tighten it sufficiently, with the result that it worked loose thereby occasioning damage to the engine of the vehicle through overheating, this occurring on 23 January 1984.

5. It is admitted that this work was done on that day but the failure to tighten the water filter sufficiently is denied, it being asserted by the defendant, on the contrary, that the overheating of the vehicle was occasioned by neglect on the part of the plaintiffs.

6. The second cause of action is for negligence as a bailee, it being asserted that the vehicle was placed in the care of the defendant after the overheating problem had occurred and that the defendant thereafter negligently caused the truck to be driven on 24 January 1984 whilst it was not in a fit condition to be moved under its own power thereby causing further overheating and further damage.

7. The plaintiffs claim the costs of the repairs which the vehicle required as a result of these alleged breaches, together with certain consequential losses and appropriate awards of interest. I shall refer to the details of these claims later.

8. The case has occupied three hearing days. It has, to a large extent, involved testimony as to events occurring seven years ago given from the recollection of witnesses called on both sides. In evaluating that testimony, I have been guided, to a not inconsiderable extent, by views I have formed as to the reliability of witnesses based upon my observation of them in the giving of their evidence.

9. It is convenient to deal with the facts relating to both causes of action together.

10. After the plaintiffs took delivery of the vehicle it was immediately put into extensive use in their business. From time to time, small matters were attended to by way of servicing by Shepherd Ford. These are of no significance otherwise than to indicate the existence of a servicing relationship between the plaintiffs and the organisation. The major services were not performed at the appropriate distances travelled. The 1500 kilometre service was not performed until the vehicle had travelled over 14,000 kilometres. The 10,000 kilometre service was not performed until more than 26,000 kilometres had been driven. At the time of the overheating incident the vehicle had travelled about a further 10,000 kilometres since the previous service which had taken place on 17 December 1983. The defendant relies upon the failure of the plaintiffs to have these services performed at the correct times as evidence of relevant neglect on the part of the plaintiffs. I am satisfied, however, from the expert evidence in the case, including that called by the defendant, that this had no bearing upon the overheating and consequent damage to the vehicle in respect of which the plaintiffs sue.

11. The vehicle was in fact due for service at about the time of the overheating incident, it being recommended that general servicing should take place of the engine in the plaintiff's vehicle every 10,000 kilometres. It is asserted by the defendant that the plaintiffs culpably refused to have this service performed on 21 January 1984. On this occasion the vehicle was being worked on by the defendant's mechanic at its premises pursuant to a recall program from the manufacturer. It was alleged that there was a suggestion to the plaintiff, either by the defendant's manager or mechanic, that the next service should also be performed that day and that this suggestion was met with a refusal by the plaintiff Mr Tarzia on the basis that the vehicle was required urgently for business purposes. It was further put that had the service been performed the defect which occasioned the overheating would have been detected and the damage prevented. I find that there is nothing in this assertion. I am satisfied on the evidence that the plaintiff Mr Tarzia would have been willing to have the service performed as he did not require the vehicle for the next day which was Sunday. It was not possible, however, for the defendant to perform the service at that time as there was no time available for this to be done on 21 January.

12. After the vehicle was re-delivered to the plaintiffs on 21 January it was used by them on 23 January for the purpose of transporting loads on that day, firstly to Goulburn and Crookwell from Canberra and then after its return to Canberra to Cootamundra. The second trip was commenced in the mid-afternoon. The plaintiffs' driver was a Mr Seckold who gave evidence in the case. I formed a most favourable impression of Mr Seckold as a witness, both as to his honesty and as to the reliability of his recollection.

13. Before dealing with his account of relevant events on 23 January and subsequently I must refer to an earlier matter. Mr Tarzia, whom I also considered to be generally reliable as a witness, gave evidence that after the last service performed on the vehicle, that which took place on 17 December 1983, he noticed that water would drip from the vehicle from a position under the driver's seat where the engine was situated. This clearly did not occasion any major water loss from the cooling system of the vehicle but as a routine daily matter he or the driver would add a cup or half a litre or sometimes more to the water filler tank of the vehicle in order to replenish it. This tank was made of plastic which was transparent. It was positioned outside the vehicle at the rear of the cabin and was connected to the water cooling system of the vehicle. The tank contained five to eight litres and the whole cooling system, including radiator, contained about 28 litres of water when full. The daily addition was therefore in the nature of a minor topping- up operation. Mr Tarzia stated that he complained of this water drip from time to time to employees of the defendant, his first complaint being made within a couple of days of the service in December. This is denied, mainly on the basis of absence of records in the defendant's record system of the making of any such complaints. I am satisfied that mention was made of the matter, although it is clear that no definite booking-in of the vehicle for attention to the problem was ever made. The impression that I clearly gain from the whole of the evidence on this topic is that it was not regarded as a particularly significant matter by the plaintiff, Mr Tarzia, or the driver and that when it was mentioned to the employees of the defendant, nothing was said by them to suggest that it was significant or needed urgent attention.

14. It is established that at the service on 17 December 1983 the water filter already referred to, which was attached to the engine, was removed and replaced. This piece of equipment was an integral part of the engine's cooling system. If it was not properly replaced and adequately tightened it could allow water to escape from the cooling system, especially when it was being pumped through the system under pressure with the engine in operation. This filter was not touched by anyone before the overheating incident of 23 January 1984.

15. I am satisfied from the evidence of Mr Seckold that this incident took place in the following circumstances. He had driven the vehicle to Goulburn and Crookwell and back to Canberra without any untoward incident or sign. He then drove to Crookwell. At Crookwell he had to perform some running repairs to a gear cable which required that he place his body in close proximity to, if not in contact with, the engine block after the engine had been running. He noticed no excessive heat in the block. He effected the repair and proceeded to drive back to Canberra. When near Harden he noticed a smell which he described as a burning smell. He had not observed any prior problem in the performance of the vehicle. He observed that the needle of the temperature gauge was rising rapidly towards the danger area although it had not reached it. He immediately drew to the side of the road and stopped the vehicle. It was then night time and he made observations with the use of a torch. He found that the water filler tank was empty and he could hear a gurgling sound from the engine. He concluded that it was out of water and that this had produced overheating. He went to a nearby dam with some empty containers and brought back water. This enterprise occupied some considerable time. When he returned the motor appeared to be cool. In accordance with proper practice he started the motor and poured water into the filler tank. He heard it trickling out. He investigated and found that it was, in fact, escaping from the seal area of the water filter attachment. This, instead of being tightly secured in its thread, was loose and nearly off. He tightened it by hand, having turned off the motor. He then restarted the motor and introduced more water into the filler tank. On this occasion the water did not come out past the seal of the filter attachment. He was not satisfied, however, that he should drive the vehicle.

16. He switched off the motor and checked the oil. He found it to be black in colour. He felt it was blacker than normal but could see no particles in it. He did not restart the engine which had only run for approximately two to three minutes. He decided that he should seek instructions from Mr Tarzia. He obtained a lift into the town of Harden where he made contact with Mr Tarzia by telephone. It is clear that Mr Tarzia then contacted Mr Shortland of the defendant company and it was agreed that the vehicle should not be driven but that it should be towed to Shepherd Ford in Canberra for attention.

17. Mr Seckold accordingly waited for the tow truck and, when it arrived, he returned to Canberra in it. It is clear that early the next morning the vehicle was taken to the premises of Shepherd Ford without the engine having been started in the interim. I am satisfied that although it was seen by employees of the defendant, Mr Seckold himself did not see it again until approximately 11.30 am that morning when he went to the premises of Shepherd Ford at the request of Mr Tarzia, who himself had not seen the vehicle.

18. The vehicle had been examined by employees of Shepherd Ford some time earlier that morning and was in the position where it had been left by the tow truck in the wash bay at the premises.

19. There is not inconsiderable conflict between the evidence of Mr Seckold and that of Messrs Cumberland and Combridge of the defendant as to the condition of the vehicle and its engine whilst at the premises and before it was driven away for further attention at the premises of Intermotors at Queanbeyan. This organisation specialised in the diesel engine which was fitted to the vehicle.

20. The defendant's witnesses assert that the engine was in a severely damaged condition, consistent with its being negligently driven in a severely overheated condition for some time. They say that the engine when started up at the premises of Shepherd Ford was markedly noisy, it blew oily smoke, there was considerable oil all over the engine, transmission and tray of the vehicle. They further said that there was virtually no oil left in the sump and no water in the cooling system. It was necessary to replace both.

21. Mr Seckold says that when he saw the vehicle it did not demonstrate these signs, but that they appeared when it was being driven later from the premises of Shepherd Ford to Intermotors, when he asserted a most serious overheating occurred leading to substantial damage to the engine involving its seizing and stopping.

22. Mr Seckold says that he was told when he arrived at Shepherd Ford that the vehicle had been started and the engine run and that it was fit to be driven. He says that he observed that at that stage there was no water in the filler tank and that on testing the sump with a dipstick he found a greyish mixture instead of the normal black. This indicated that water had entered the sump and become mixed in with the oil during the running of the engine. Expert evidence indicated that the grey colour of the contents of the sump would point to this having occurred. It is also clear from such evidence that water would enter the sump from the cooling system of the engine if certain seals called O-rings were heat damaged. The effect of Mr Seckold's evidence as to the events near Harden and the observations at Shepherd Ford would be to render it probable that the running of the engine in the morning at Shepherd Ford had produced the results observed by him.

23. It is of course seven years since these events. Clearly in such a period memories can fade and recollection can become distorted. I am satisfied that despite conflict in testimony, no witness has sought to mislead the court. Mr Seckold says that he pointed out the empty filler tank and grey mixture to Messrs Cumberland and Combridge, asserting that the vehicle could not be driven. He says that they treated him as though he was stupid. Mr Combridge says that he felt it was futile speaking to Mr Seckold as he was too tired from lack of sleep to be of assistance. It is possible that he was under some misapprehension in this regard and that this led to some failure of communication. There is no evidence that Mr Seckold was in fact in the condition of tiredness asserted by Mr Combridge.

24. There is further conflict in the evidence. The defendant's employees assert that they formed the view that the vehicle was already so badly damaged that it could suffer no significant further damage if it were driven to Queanbeyan rather than be towed. They say they were fortified in this view by a telephone conversation with representations of Intermotors in which they described the condition and performance of the engine and were advised that if it could be driven then it might as well be, as nothing much more could be done to cause it further damage. This does not accord with the evidence of Mr Webb from Intermotors, who testified that he was told only that the engine had overheated near Harden because of a water leak through the water filter. He further said that he in fact suggested that it be towed to his premises from Shepherd Ford, and that if it were to be driven, it would be at their risk. Expert evidence in the case also establishes to my satisfaction that the vehicle should not have been driven, either in the condition as described by Mr Seckold, or in that described by the defendant's witnesses.

25. It is clear that Mr Seckold, who was the vehicle's normal driver, and who was present and able to undertake that operation, was not prepared to drive it from the Shepherd Ford premises. In fact, he did not do so. It was driven by Mr Cumberland. This is consistent with Mr Seckold's stance in the matter. He accompanied the vehicle in his own car to observe matters. He says that the truck quickly exhibited signs of overheating, omitting grey smoke and oil. The colour of the smoke, on the expert evidence of the case, was consistent with there being a mixture of oil and water in the sump as a result of leaking through the damaged O-rings. The engine seriously overheated. Mr Cumberland says that he pulled to the side of the road and stopped the vehicle when he became aware of its overheating. Mr Seckold says Mr Cumberland told him at the time that the vehicle had itself come to a halt through stoppage of the engine. When the engine was stripped down and examined at Intermotors, to which it was ultimately towed, it was found quite clearly that the compressor pump had seized through overheating, with the result that the engine would have been denied fuel and stopped of its own accord. I am accordingly satisfied that Mr Cumberland's recollection is astray in this regard.

26. I shall not recite all the evidence bearing in this matter. I have taken it all into account, together with counsel's detailed submissions. I am satisfied on the balance of probabilities that the engine overheated near Harden because of the loss of coolant fluid through the insufficiently tightened water filter, and that Mr Seckold stopped the vehicle before major damage occurred. I am further satisfied that his efforts to replace the lost water were reasonable, and carried out in a recommended and safe manner, and that they did not further damage the engine.

27. I am satisfied that when he saw the vehicle the next day it had suffered further damage through the running of the engine, which had the effect of introducing considerable water into the sump through heat damage to the O-rings. I am satisfied the vehicle was not then in a driveable condition, and that further driving of it entailed obvious risk of further significant damage. The weight of expert testimony supports this view. I am not satisfied that the employees of Shepherd Ford drove it on the advice of any representative of Intermotors. It was in my view a risk they took upon themselves without the concurrence of the vehicle's owner.

28. In my opinion the plaintiffs have made out their case. I am satisfied by the expert testimony in the case that the water filter would not have become loose if it had been properly tightened when replaced by Shepherd Ford at the service on 17 December 1983. There was clearly a foreseeable risk of damage to the engine through loss of coolant if this task was not done efficiently. I am satisfied therefore that the primary overheating with whatever damage then occurred, was due to breach of duty in this regard on the part of the defendants. I am likewise satisfied that there was a relevant breach of duty involved in the further operation and driving of the vehicle towards Queanbeyan when it had come into the care of the defendants.

29. In these circumstances it is not necessary to apportion the damage between the two incidents. In my view, the defendant must be held responsible for the whole of the damage to the vehicle, and for recoverable consequential losses.

30. I am satisfied that the plaintiffs are entitled to recover as damages the following amounts. Firstly, a towing charge of $511.25, which was paid on 6 March 1984. Interest is claimed on this amount; the appropriate amount of interest is $578.17. I am satisfied that the plaintiffs are entitled to the cost of repairs, and a replacement of parts that was incurred in the making good of damage to the vehicle. This amount was $15,867.74, paid on 6 March 1984. The appropriate award of interest in respect of this amount is $17,947.51. It is established that the plaintiffs needed to borrow money in order to pay for the repairs, and achieve the return of the vehicle to its work in the business. They incurred interest charges of $4551.68. I am satisfied that in the circumstances of this case that amount is recoverable. It was incurred in respect of a period of loan from 5 March 84 to 30 July 85; the appropriate award of interest is $5150.01. A claim for leasing charges is not in my view sustainable, and is disallowed.

31. There is a claim for demurrage in respect of the period of time when the vehicle was off the road; and an associated claim for loss of profits for a subsequent period, during which there was a diminution in the business returns because of the necessity of restoring business contacts which had been lost during the period that the vehicle was off the road. I am satisfied however that the plaintiffs should not recover the full amount claimed in respect of these losses. I have been assisted by calculations made by a witness, an accountant, Mrs Piko, but I am not prepared to accept in full the assumptions on which those calculations were based. It is clear on the evidence that the plaintiffs could have increased their earnings if the truck had been available to them in the period it was off the road undergoing repairs. I am also satisfied that there was a period during which earnings were reduced after its return to use because of the necessity of recovering business contacts which had been lost during the first period. I consider that the basic figures underlying Mrs Piko's calculations should be reduced; as on the whole of the evidence that has been placed before me, they were in my view over-generous.

32. Doing the best I can, I accept as a reasonable estimate of earning loss during the period 23 January 84 to 6 March 1984, the period in which the vehicle was undergoing repairs, a figure of $3000. In respect of the second period I consider that a reasonable estimate of loss is the amount of $3500. These amounts total $6500 in all and the appropriate award for interest in respect of the first period is $3558.90 and in respect of the second $4083.59.

33. The total of the primary amounts and the interest awards comes to $58,748.85 and that is the appropriate figure for the plaintiffs' damages.

34. I therefore enter judgment in favour of the plaintiffs in that sum and I order the defendant to pay the plaintiffs' costs of the action.