Re Alan Victor Brownbill and Fredericka Kathleen Brownbill v Kenworth Truck Sales (Nsw) Pty Ltd; Mcgrath Equipment Company Pty Ltd [1982] FCA 11; (1982) 59 FLR 56 (11 February 1982)

FEDERAL COURT OF AUSTRALIA

Re: ALAN VICTOR BROWNBILL and FREDERICKA KATHLEEN BROWNBILL
And: KENWORTH TRUCK SALES (NSW) PTY. LTD.; McGRATH EQUIPMENT COMPANY PTY. LTD.
[1982] FCA 11; (1982) 59 FLR 56
No. G63 of 1979
Illegality - Trade Practices
3
(1991) 31 FCR 153

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH DISTRICT REGISTRY
GENERAL DIVISION
Sheppard J.(1)

CATCHWORDS

Illegality - action for breaches of some provisions of Part V Division 1 of Trade Practices Act 1974, for negligent misrepresentation and breach of collateral contract - vehicle acquired by applicants from respondent on faith of allegedly false representations and promises - vehicle regularly driven in overloaded condition contrary to State legislation - vehicle acquired by applicants knowing that this would probably be the case - whether illegal conduct of applicants deprived them of their remedy - whether such conduct should be taken into account in the assessment of damages.

Trade Practices - Action for breaches of provision of Pt V Divn 1 - Negligent misrepresentation and breaches of collateral contract - Vehicle acquired on basis of alleged false representations - Illegality - Defence raised by trial judge - Vehicle repeatedly driven in contravention of State legislation limiting load sizes - Whether illegal conduct deprived applicants of their remedy - Whether such conduct relevant to assessment of damages - Trade Practices Act 1974 (Cth), Pt V Divn 1 - Federal Court Rules, O. 29, r. 2 - Main Roads Act, 1924 (N.S.W.), s. 51 - Local Government Act, 1919 (N.S.W.), ss. 575, 576, 577, 578, 579. The applicants sued the first respondent for damages for alleged breaches of the provisions contained in Pt V Divn 1 of the Trade Practices Act 1974, for a breach of an alleged collateral contract and for negligent misrepresentation arising out of the acquisition by the applicants of a large prime mover used in their long distance haulier business. The applicants alleged that the prime mover was defective. During the cross-examination of the first applicant it emerged that the vehicle had been repeatedly driven in contravention of New South Wales legislation limiting the loads carried by vehicles on the State roads. His Honour raised the issue of illegality as it was not raised in the pleadings and posed the question as to whether the applicants could recover damages for loss of profits which could only have been made if the vehicle was used in this illegal manner. Counsel for the first respondent sought and was allowed to amend the defence to raise the much wider issue as to whether there could be any recovery of damages for any cause of action upon which the applicants relied due to the illegality. It was agreed that this issue should be determined before the trial proceeded further.

Held: (1) The causes of action for breaches of the Trade Practices Act and for negligent misrepresentation are not to be taken away by reason of the illegal operation of the vehicle as the enterprise is intrinsically lawful and capable of lawful operation.

Alexander v. Rayson, (1936) 1 KB 169; Pearce v. Brooks (1866), LR 1 Ex 213; Cowan v. Milbourn [1848] EngR 492; (1867), LR 2 Ex 230; McCarthy Bros. (Milk Vendors) Pty. Ltd. v. Dairy Farmers' Co-operative Milk Company Ltd. (1945), 45 SR (NSW) 266; St. John Shipping Corporation v. Joseph Rank Ltd., (1957) 1 QB 267; Archbolds (Freightage) Ltd. v. S. Spanglett Ltd., (1961) 1 QB 374; Yango Pastoral Company Pty. Ltd. v. First Chicago Australia Ltd. [1978] HCA 42; (1978), 139 CLR 410; Henwood v. Municipal Tramways Trust [1938] HCA 35; (1938), 60 CLR 438, distinguished.

(2) However, the amount of damages which the applicants may recover will be affected because they will not be permitted to recover loss of earnings if that loss has only come about as a result of their inability, due to the respondent's wrongful acts, to operate the vehicle unlawfully.

Smith's Newspapers Ltd. v. Becker [1932] HCA 39; (1932), 47 CLR 279; Neal v. Ayers [1940] HCA 21; (1940), 63 CLR 524, applied.

LeBagge v. Buses Ltd., (1958) NZLR 630; Mills v. Baitis, (1968) VR 583, not followed.

HEARING

Sydney, 1981, October 26-30; November 2-5; 1982, February 11. 11:2:1982

The facts appear in the ruling of Sheppard J.

J. Farmer and F. Stevens, for the applicants.

C. Gee, for the first respondent.

Solicitor for the applicants: C. Chapman.

Solicitors for the first respondent: Dunhill Morgan & McGready.

J.J. ISLES

ORDER

1. The causes of action for breaches of Trade Practices Act and negligent misrepresentation are not affected by the applicants' illegal conduct.

2. The action is to proceed. (For details of Court's rulings see pp.28-29).

DECISION

On 18 December, 1981, I announced my decision in respect of certain submissions made by counsel for the first respondent ("the respondent") that the applicants should fail because goods acquired by them from the respondent had been acquired for an illegal purpose. I reached the conclusion that the respondent's submissions should be rejected. What follows are my reasons for that conclusion.

The action is one in which the applicants sue the respondent for damages. The causes of action are for alleged breaches of some of the provisions included in Part V Division 1 of the Trade Practices Act 1974, for a breach of an alleged collateral contract and for negligent misrepresentation. The subject matter of the causes of action is a large prime mover acquired by the applicants in their business of long distance hauliers for the purpose of hauling trailers of various kinds. The applicants complain about a number of alleged defects in the vehicle which they say they were induced to buy upon the faith of certain representations made to them on behalf of the respondent. They also say that they entered into a lease of the vehicle in consideration of a promise by the first respondent that the vehicle was of merchantable quality. They further say that representations made by the respondent in relation to the quality of the vehicle were made negligently. The causes of action based upon breaches of the Trade Practices Act are plainly within the jurisdiction of this Court. There remains a question as to whether the other causes of action relied upon are within its jurisdiction. For the purposes of this decision I have assumed (without deciding) that they are.

After the hearing of the matter had proceeded for some days it emerged from the cross-examination of the first applicant that he had driven the vehicle over a lengthy period when it was in a substantially overloaded condition. The vehicle was repeatedly driven in contravention of New South Wales legislation limiting the loads which vehicles may carry on New South Wales main roads. To the detail of the evidence in this respect and to the legislation I shall later refer.

After this evidence had been given I raised with counsel the question of whether the applicants could recover damages in respect of loss of profits which could only have been made if the vehicle were used in this illegal way. I referred them to Smith's Newspapers Limited v. Becker [1932] HCA 39; (1932) 47 C.L.R. 279. I took this course because I conceived it to be my duty to do so, a question of illegality having arisen in the course of the evidence. There was no pleading by either party which raised the matter but, for the reason I have given, I raised it of my own motion.

After he had considered the matter further, counsel for the respondent announced that he wished to make submissions about the question of illegality although the entirety of the evidence in the proceedings had not concluded. He took the course he did because the litigation is complex and expensive and will, if it proceeds, last approximately a further three weeks. It was agreed that no further evidence would be given on the question by either party.

Counsel has raised the point without any matter in the respondent's defence relating thereto. He has, however, offered to formulate an amendment to the defence in order to raise the point that he has argued. On reflection I think the defence should be amended to raise the point specifically. I am particularly of that view because the point argued by counsel for the respondent is far more fundamental than that raised by me. Furthermore, it does not necessarily arise, as the point on damages in my opinion arises, on the face of the proceedings. When the defence has been amended to raise the point I shall make an order pursuant to Order 29 Rule 2 of the Rules for the decision of the question raised separately from other questions in the proceedings and direct that that question be determined first. That formality and the formality of amending the defence can be attended to after the publication of these reasons.

The point relied upon by the respondent is that the applicants acquired the vehicle for the avowed purpose of using it illegally on New South Wales roads in a business venture that depended for its success upon such illegal use. It is the respondent's submission that in those circumstances there can be no recovery by the applicants of damages for any of the causes of action upon which they rely. Their remedies, so it is contended, are taken away. In order to deal with the point which is relied upon it is necessary to refer in a little detail to the relevant New South Wales legislation and to the evidence of illegal conduct which there is.

Shortly before they acquired the prime mover the applicants also acquired a trailer which was capable of carrying grain, soil and other bulk loads. It was their intention to tow the trailer with the prime mover acquired from the first respondent. The applicants had complained also of defects in the trailer. That was the reason for their action against the second respondent. That action was settled shortly before the hearing began.

The evidence establishes that for approximately four months after the acquisition of the prime mover the first applicant drove it hauling the trailer in a substantially overloaded condition. For the main part his loads consisted of grain of various kinds but he also carried sand, soil and blue metal. The prime mover was acquired late in March 1977. From about the end of July 1977 the nature of the loads/carried changed to commodities of a more general kind. Although there is some evidence of overloading, it does not disclose the very substantial overloading which occurred in the first four months of operations.

The unladen weight (the tare weight) of the prime mover and trailer was 16 tonnes. Pursuant to powers conferred by the Main Roads Act 1924 (N.S.W.)s.51 and the Local Government Act 1919 (N.S.W.) ss.575-579, the Governor in Council has made Ordinance No.30C. It provides for the maximum weight of loads on vehicles on main roads and on bridges forming part thereof. Clause 2 of the Ordinance defines "loaded weight" to mean the total weight, determined in accordance with the Ordinance of any vehicle and its added load. "Added load" means the movable load carried by any vehicle, that is the payload. Clause 7 of the Ordinance provides for the maximum loaded weights for vehicles and the sum of the axle loads of groups of axles thereon. For present purposes it is only necessary to refer to the provisions which limit the maximum weight which may be carried by vehicles. It is not necessary to refer to the sum of the axle loads of groups of axles. Clause 7 provides that a person shall not drive or draw or cause to be driven or drawn on any main road any pneumatic tyred vehicle if the loaded weight of the vehicle exceeds the loaded weight prescribed according to the distance between the extreme axles of the vehicle as set out in a table which is appended to the clause. The relevant distance is established as being 13.63 metres. The vehicle (including the trailer) was fitted with six axles. The table provides that where the distance between the extreme axles of a vehicle exceeds 13.5 metres but does not exceed 13.8 metres and the vehicle has six axles its loaded weight must not exceed 35.6 tonnes. It follows that the maximum weight or payload which the vehicle in question could lawfully carry was 19.6, say 20, tonnes.

The payload in fact carried by the vehicle for the first four months of its life was usually 10 or more tonnes in excess of 20 tonnes. There were occasions when it was only two tonnes or thereabouts overweight, but these were few. On many occasions the overload was of the order of 12 to 14 tonnes and on one occasion 52 tonnes of black dirt were carried, an overload of 32 tonnes.

In substance the first applicant said that in the business of carting grain, sand or soil in 1977 it was impossible to operate profitably unless the vehicle was continually driven in an overloaded condition. He said that he had adopted the same practice in carrying on business prior to the acquisition of the subject vehicle. He had driven his previous vehicle in a similarly overloaded condition.

The first applicant readily agreed with a suggestion put to him that "the set up" after he acquired the vehicle and trailer was a set up which worked on the basis that he would cart about eight to ten tonnes overload of grain on the relevant journey. After that concession the following appears, "That is the way you set it up - that is correct yes". He went on to concede that in order to carry grain economically he needed to run overloaded and that if he did not he could not make anything out of it. He added, "You would exist, but you did not make anything out of it". Later he made it clear that his claim was that he and his wife were forced out of the grain business because of defects in the vehicle. The inference is that they would have continued to haul grain if it had not been for the defects in the vehicle which developed.

Although that is the tenor of the first applicant's evidence, there is a difficulty about accepting it at its face value at this stage of the case. That is because of cross-examination of him designed to show that he left the grain haulage business, not because of a defective vehicle but because of a fall off in the availability of such work. That is an issue upon which more evidence is to come and upon which I have not as yet heard counsel.

Evidence of weights carried by the first applicant after he gave up the grain haulage business is scant. Moreover, he did not often use the McGrath trailer which he had used previously. More usually he hauled an assortment of trailers for various master carriers. It is not possible, therefore, to come to any conclusion as to whether the first applicant continued to drive a grossly overloaded vehicle after the end of July 1977. That is because there is no evidence of the distance between the extreme axles of any vehicle made up of the prime mover in question and a trailer other than the McGrath trailer which the applicants had acquired.

The two matters to which I have referred may, in my opinion, be significant for the point here to be decided. If the applicants left the grain haulage business because it was unprofitable, and if, after July 1977, they carried on their business lawfully, the legal position may well be different from what it would have been if they had been engaged from first to last in a totally unlawful enterprise. I put these matters on one side for the time being. I can now go to a consideration of the submissions of law made by counsel.

The primary submission of the respondent was that although the contract and other transactions whereby the vehicle had been acquired were perfectly legal the underlying purpose of the applicants in acquiring the vehicle was an illegal one with the result that they were denied any curial remedy. In support of this proposition counsel relied on a number of authorities, the first of which was Alexander v. Rayson (1936) 1 K.B. 169. In that case the plaintiff was a landlord who wished to deceive a rating authority as to the ratable value of the premises. It was not unusual for lessors and lessees to enter into two agreements, one being an agreement for a lease and the other being an agreement for the provision of services. In the case in question, however, both agreements, subject to a minor exception, obliged the landlord to provide the same services so that, subject to that exception, the agreement for services conferred upon the defendant no benefit other than that which was conferred by the agreement for lease. The plaintiff brought an action to recover the amount due under the agreements. A plea of illegality was raised and upheld. The court found that the plaintiff had attempted to perpetrate a gross fraud upon the rating authorities and, through them, upon the Inland Revenue. In the course of its judgment the court said (p.182):

"It is settled law that an agreement to do an act that is illegal or immoral or contrary to public policy, or to do any act for a consideration that is illegal, immoral or contrary to public policy, is unlawful and therefore void. But it often happens that an agreement which in itself is not unlawful is made with the intention of one or both parties to make use of the subject matter for an unlawful purpose, that is to say a purpose that is illegal, immoral or contrary to public policy. The most common instance of this is an agreement for the sale or letting of an object, where the agreement is unobjectionable on the face of it, but where the intention of both or one of the parties is that the object shall be used by the purchaser or hirer for an unlawful purpose. In such a case any party to the agreement who had the unlawful intention is precluded from suing upon it. Ex turpi causa non oritur actio. The action does not lie because the Court will not lend its help to such a plaintiff. Many instances of this are to be found in the books."

The Court went on to refer to a number of authorities including Pearce v. Brooks L.R.(1866) 1 Ex. 213 and Cowan v. Milbourn [1848] EngR 492; L.R. (1867) 2 Ex. 230. The former case concerned an action by a coach builder who let out a brougham on hire to a prostitute and was held not entitled to recover the hire. The second case concerned premises which were to be used, unknown to the defendant at the time of the letting, for blasphemous purposes. The defendant refused to allow the rooms to be used and it was held that the plaintiff had no right of action for breach of contract.

After referring to these authorities the Court in Alexander v. Rayson continued (pp.183-184):

"It will be observed that in all these cases the plaintiff was endeavouring to enforce by action an agreement, or a clause in an agreement, which was tainted by the unlawful intention of the plaintiff, or the unlawful intention of the defendant known to the plaintiff, as to the purpose for which the subject matter of the agreement was to be used. To such an action the maxim, ex turpi causa non oritur actio applies. But the maxim does not require, nor does the language of it suggest, that a completely executed transfer of property, or of an interest in property, made in pursuance of such an agreement must be regarded as being invalid."

The latter statement was important for the Court's resolution of the problem in Alexander v. Rayson but it is not relevant to the present problem.

The Court went on to discuss some further authorities and reached the conclusion that the plaintiff could not succeed. It said (p.188) that in reality there was only one transaction. The splitting of it into two documents was a device essential for the success of the plaintiff's fraud and both documents would be regarded as equally fraudulent in purpose.

Alexander v. Rayson was applied by the Full Court of the Supreme Court of New South Wales in McCarthy Bros.(Milk Vendors) Pty. Limited v. The Dairy Farmers' Co-operative Milk Company Limited (1945) 45 S.R.(N.S.W.) 266. There the plaintiff sued the defendant to recover rebates alleged to be receivable by it under an agreement to purchase from the defendant milk required for its business as a milk vendor. The defendant pleaded, inter alia, that the plaintiff was not authorised to carry on its business of milk vendor by a certificate of registration as required by the Milk Act 1931. On demurrer it was held that since the business was carried on without the authorising certificate it was an illegal business and the plaintiff was precluded from suing upon the agreement. In the course of its judgment (delivered by Sir Frederick Jordan C.J.) the Court cited the two passages from Alexander v.Rayson earlier cited in these reasons.

In Mason v. Clarke (1955) A.C. 778, although Alexander v. Rayson was distinguished, it was treated as correctly stating the law; see Viscount Simonds at p.793 and Lord Reid at p.805.

An alternative submission relied upon by counsel for the respondent was that at the least the applicants' claim for damages must be seriously affected by the illegality which was involved in the purpose for which they acquired the truck. Certainly, so he submitted, the applicants ought not to be entitled to recover anything for loss of profits. This submission was along the lines of the point raised by me with counsel. Although the submission was put, it was made clear by counsel that it was to be regarded very much as "second best". It was, so he said, the very least to which his client was entitled.

Counsel for the applicants emphasised the fact that the causes of action in the present case were not, except in one instance, for breach of contract. They were either statutory causes of action based upon alleged breaches of the Trade Practices Act or a cause of action in negligence. He submitted that as regards these causes of action it was inappropriate to have regard to the authorities relied upon by counsel for the respondents. He submitted that so much was clear from the decisions of the High Court in Smith's Newspapers Limited v. Becker (supra) and Neal v. Ayers [1940] HCA 21; (1940) 63 C.L.R. 524. The former was an action for defamation and the latter an action for deceit. In a similar category was another defamation case, Kings Cross Whisper Pty. Limited v. Ray (1972) 72 S.R. (N.S.W.) 339. So far as the count in contract was concerned counsel submitted that there was nothing in the provisions of the Ordinance of which the applicants were in breach which indicated that it was the intention of the draftsman that civil rights should be affected by any breach thereof. Reliance was placed, inter alia, upon St. John Shipping Corporation v. Joseph Rank Limited (1957) 1 Q.B. 267, Archbolds (Freightage) Limited v.S. Spanglett Limited (1961) 1 Q.B. 374 and Yango Pastoral Company Pty.Limited v. First Chicago Australia Limited [1978] HCA 42; (1978) 139 C.L.R. 410.

I deal first with the applicants' submission that, whatever the position may be in contract, considerations such as were relied upon by the respondent's counsel have no place in the field of civil wrongs.

In the Smith's Newspapers case the plaintiff was a doctor of medicine of a German university. He had attempted unsuccessfully to register himself as a medical practitioner under the law in force in South Australia where he lived. Nevertheless he practised medicine and in contravention of the legislation held himself out as qualified to practice. The defendant published an article about him in its newspaper. The plaintiff complained that the article described him as a person with a discreditable past, who treated patients in an incompetent manner and with a reckless indifference to the dangerous character of a particular drug which he prescribed. It was held that a person who pursues an unlawful vocation or engages in unlawful acts or transactions could not maintain an action for libel regarding his conduct in such vocation, acts or transactions, but that that did not deprive him of his absolute right to his personal character and professional reputation unaffected by defamatory statements. The defendant could not therefore rely upon the plaintiff's illegal acts as affording a defence to the action because the libel affected the plaintiff not only in the vocation he was illegally carrying on but in his private character also. It followed that the question of illegality was relevant in relation to the amount of damages which the plaintiff was entitled to recover but it did not take away his right to sue. In the course of his judgment Rich J. said (p.288) that the plea of illegality, however relevant on the question of damages, must fail both because the libel was not confined to conduct arising in the course of committing the unlawful acts or to disparaging a reputation derived from unlawful practices. He added that it was not defamatory merely because it reflected upon the plaintiff in the way of his trade or vocation. It would seem to follow from what his Honour said that if the defamatory matter had reflected only upon the plaintiff in relation to "a reputation derived from unlawful practices", he would have been held not entitled to recover any damages. But it may be that his Honour did not intend to say that the cause of action could not be relied upon; rather the damages would have been nominal only. To the same effect is the judgment of Dixon J.(as he was). He said (pp.298-299):

"The unlawful conduct of which the respondent was guilty consisted, not in the performance of medical workd for reward, but in advertising and holding himself out as being a doctor of medicine, doctor, or medical practitioner. It is true that the habitual practice of attending, advising and prescribing for the sick for remuneration will seldom occur without an unlawful holding out, but the Legislature does not treat them as inseparable and penalizes only the representation. . . . . . . . . . . . The libel is not confined to statements about or observations upon the conduct of the respondent in infringing the law, or upon what may be described as the actions which constitute the parts and details of that conduct or are naturally associated with it. The more serious imputations are concerned with things which would be as likely or as unlikely to occur whether he did or did not violate the Medical Practitioners Act 1919 in the course of his practice in the treatment of diseases. Accordingly, the unlawful conduct of the respondent does not afford a defence to the appellants. It goes to damages only."

To the like effect is the judgment of Evatt J. (pp.311-312). I refer also to the judgments of McTiernan J. (p.315) and Starke J. (p.293).

In Neal v. Ayers (supra), which, as I have mentioned, was an action for deceit, the plaintiff sued the defendant in respect of the purchase from the defendant of the lease, licence, goodwill and furniture of a hotel. The plaintiff alleged that she was induced to enter into the contract upon the defendant's false representation that the hotel takings were about 100 pounds a week of which at the most the takings derived from after-hour trading were 15 or 20 pounds a week. The trial judge non-suited the plaintiff because, in his view, the action was based on illegality. The High Court held that the cause of action was not founded on illegality. The representation was material as an inducement to a purchaser buying the hotel rather for the sake of lawful than unlawful trading. The subject matter of the contract was the sale and purchase of the hotel in the ordinary course of business. The fact, known to the vendor, that the plaintiff intended to continue for a time the practice of unlawful trading was not enough to stamp the whole transaction with unlawfulness. Starke J. referred to Pearce v. Brooks (supra) and some other authorities. He continued (pp.528-529):

"But was the purpose or object of the agreement in this case to violate the law? Its real purpose and object was the sale and purchase of a hotel in the ordinary way of business. The disposition of the property was not made to enable the plaintiff to violate the law nor was the purpose of the plaintiff himself to acquire a hotel so that she might violate the law. No doubt the defendant had contravened the provisions of the Liquor Act in her conduct of the hotel, and the plaintiff was unwilling or unable wholly to alter that method of conducting the hotel, as both the parties to the agreement knew. But it is not, I think, a right conclusion that the disposition of the hotel property was for an illegal purpose because liquor would be sold in the hotel during prohibited hours or that other offences against the liquor laws might be committed. The acquisition of hotel property lends itself to contraventions of the liquor laws. Such contraventions are common incidents in the conduct of hotel businesses in New South Wales and the other States and always taken into account, I should think, in negotiations for the sale and purchase of hotels. But the purpose of the disposition and acquisition of the hotel property in this case was not for any illegal purpose but for the ordinary business purpose of acquiring and conducting a hotel."

In their joint judgment Dixon and Evatt JJ. said (p.531):

". . . . . . . if the subject matter of the contract was itself unlawful it might well be that none of the money expended for the purpose of obtaining it could be recovered, even against a fraudulent wrong-doer. In order to bring the case under this head it "was contended that part of the subject matter of the contract of sale was a goodwill founded in some degree on illegality. It was said that to some extent the expectation that customers would resort to the site for the purchase of liquor after hours increased the price which the plaintiff agreed to pay. Even so we do not think that the contract of sale could be regarded as unlawful or as relating to an unlawful subject matter. It is after all a contract for the sale and purchase of the lease, licence and furniture of a hotel. These are assets of an ordinary character, and the fact that the vendor during her period of possession did break the licensing law and the purchaser intended during her period of possession to follow her example could not make the subject matter of the contract an unlawful one."

Later they referred (p.531) to a number of authorities including Pearce v. Brooks and Alexander v. Rayson and continued (pp.531-532):

"The substantial purpose of the contract was to transfer the property on which a business was carried on and was to be continued. The fact that on and from the property the purchaser intended for a time to exceed the limits within which she could lawfully trade, could not invalidate the whole transaction, notwithstanding the vendor's knowledge of her intention. Her intention to continue for a time the practice of unlawful trading does not go to the substance of the transaction. It is an incident which provided none of the inducement for her to enter into it, if her evidence is to be believed. It appears to us to be extrinsic to the dealing which forms the foundation of the contract and of the inducing causes and therefore not to corrupt the contract."

After I had reserved my decision I came across two further authorities which I regard as relevant. Through my associate I notified counsel of these authorities. Written submissions were made about them.

The first is Le Bagge v. Buses Limited (1958) N.Z.L.R.630. In that case the plaintiff brought an action under fatal accidents legislation for financial loss suffered by her and the children of a marriage with the deceased who had been killed in an accident negligently caused by the defendant. A number of matters are dealt with in the judgment. Relevantly, for present purposes, it is to be noted that transport licensing regulations provided that it should be a condition of every licence for a goods service that the licensee should not drive or cause or permit any person employed by him or subject to his orders to drive any vehicle used under the authority of the licence so that the driver had not at least 24 consecutive hours for rest in any period of seven days. The deceased employed no labour and himself had driven his truck for seven days each week for the purpose of fulfilling his milk contract which occupied him for about 3 1/2 hours each morning. It was held by the Court of Appeal in New Zealand that as the plaintiff did not in any way seek to enforce the contract in her action and she did not have to make the illegal earnings part of the cause of action but as she merely referred to such earnings in aid for their evidentiary value as to the earnings of the deceased, her cause of action, being distinct from any right possessed by the deceased, was free and unaffected by any illegality arising from the fact that the deceased in the performance of the contract infringed the regulation. The defendant had asked for a direction as to damages. This was refused and held by the Court of Appeal to have been rightly refused.

The second case is Mills v. Baitis (1968) V.R. 583, a decision of the Full Court of the Supreme Court of Victoria. The plaintiff claimed damages in respect of loss of earnings in carrying on the business of an automotive engineer at premises situated within a residential zone under a planning scheme in force in the area. The action was for negligence. The Court held that the plaintiff's activities were not prohibited generally, but only in the particular area. It said there was no casual connection between the unlawful conduct of the plaintiff's business and the defendant's negligence and there was nothing in the statute to indicate an intention to disentitle the plaintiff from recovering damages for loss of such earnings. Public policy did not, therefore, require that the plaintiff should not be entitled to recover damages for loss of such earnings and the plaintiff's loss of earnings were proper to be considered by the jury when determining the damages to be awarded.

Neither Smith's Newspapers Limited v. Becker nor Neal v. Ayers was referred to in the judgments in the two cases. It would seem that in both cases the fact that there was not to be discerned any legislative intention to prevent the recovery of charges made by the deceased in the one case and the plaintiff in the other was largely determinative of the outcome. The decision in the St. John Shipping Corporation case (supra) is referred to in the New Zealand case and that decision along with the Archbolds (Freightage) Limited case (supra) is referred to in the Victorian case. In that case reference was also made to Henwood v. Municipal Tramways Trust [1938] HCA 35; (1938) 60 C.L.R. 438. That was a case where a passenger in a tram, contrary to a regulation made in that behalf, lent over a guard rail. He was killed when his head came into contact with a stanchion. His widow was held entitled to recover because there was no discernible intention on the part of the legislature to bar recovery in such a case.

These cases, as well as the later decision of the High Court in the Yango Pastoral Company case (supra), are in my respectful opinion in a different category from cases of this kind. They were concerned with the construction of particular legislation in order to determine whether it was the intention of the legislature to deprive a person guilty of a breach of it of redress for a breach of contract or, in the Henwood case, for negligence. Here no such question arises. What the respondent says is that the underlying purpose of the applicants in acquiring the vehicle was an unlawful one, namely to use it for the unlawful purpose of carrying loads in excess of those permitted by law. No question of the construction of Ordinance 30C for the purpose of determining whether a person in breach of it is deprived of a cause of action arises. The position would be otherwise if the applicants were suing a customer for freight earned on one of their unlawful journeys. But here the problem is to determine what flows from the evidence that the vehicle was acquired, at least in part, for the purpose of unlawful operation on New South Wales roads.

The distinction between the two classes of case is, I think, pointed up in a dictum of Jacobs J. in the Yango Pastoral Company case. He said (139 C.L.R. at p.432):

"In other cases the prohibition against carrying on a business may not be able to be construed as either an express or implied prohibition against the making of a particular contract. Nevertheless in such a case the courts may not enforce such a contract but, if they do not, it is not because the contract itself is directly contrary to the provisions of the statute by reason of an express or implied prohibition in the statute itself but because it is a contract associated with or in the furtherance of illegal purposes, for instance, the purposes of a business being carried on illegally; McCarthy Bros. Pty. Ltd. v. Dairy Farmers' Co-operative Milk Co. Ltd. One then enters the field of contracts not themselves unlawful but made for an illegal purpose. Of these the classic case is Pearce v. Brooks. The refusal of the courts to regard such contracts as enforceable stems not from a legislative prohibition but from the policy of the law, commonly called public policy."

In my opinion the relevant authorities are the Smith's Newspapers case and Neal v. Ayers. These establish that in a case such as the present an applicant or plaintiff suing for a civil wrong - I am not yet dealing with causes of action in contract - will not be deprived of his remedy or have his damages reduced to a nominal sum, if the enterprise which he has acquired or carries on is intrinsically lawful and capable of lawful operation. He may be prevented, as was the position in the Smith's Newspapers case, from recovering such portion of his damages as depends upon the unlawful carrying on of a profession or business. But, subject to that qualification, he retains his right to remedies in respect of wrongful conduct which has adversely affected the subject matter of the contract, for example, the hotel in Neal v. Ayers or the prime mover in the present case. Furthermore, I think it follows from what was decided in the Smith's Newspapers case and Neal v. Ayers that, to the extent that he does in fact carry on the business lawfully and his profits are shown to have been affected adversely by the defendant's wrongful conduct, he will not lose his right to damages in respect of that head of claim.

Here there are two heads of damage which, subject to other matters in issue in the proceedings being decided in their favour, the applicants are entitled to claim. There may be others as well. As earlier mentioned there is no evidence of illegal conduct after the first four months of operation of the vehicle. If, as a result of wrongful acts on the part of the respondent, the applicants have suffered losses of profits after that initial period, there is in my opinion no reason, based on considerations of illegality, why the applicants should not recover damages in respect of such loss. Then it should be mentioned that one of the claims arises out of a representation alleged to have been made by the respondent as to the value of the vehicle. It is alleged by the applicants (although denied by the respondent) that the respondent said that the vehicle would be a good investment because it was being acquired cheaply and could be expected to hold its value. In my opinion no illegal purpose for which the applicants may have acquired the vehicle could defeat a claim for damages for the alleged falsity of that representation. It was lawful for the applicants to acquire the vehicle and it was lawful for them to have it in their possession and to operate it. The purpose for which they acquired it, whether unlawful or not, is an irrelevant consideration when one comes to consider this head of claim.

My conclusion so far is that the causes of action for breaches of the Trade Practices Act and for negligent misrepresentation are not taken away by reason of the illegal operation of the vehicle nor by admissions made by the first applicant that he intended to use the vehicle for the illegal carriage of grain. I am of opinion, however, that the amount of damages which the applicants may recover will be affected because they will not be permitted to recover loss of earnings if that loss has only come about as the result of their inability, due to the respondent's wrongful acts, to operate the vehicle unlawfully.

My conclusion in this regard may run counter, I think, to the decisions in Le Bagge v. Buses Limited and Mills v. Baitis. Those decisions provide support for the view, not only that the causes of action are not taken away, but also for the view that damages may be recovered in respect of the carrying on of an unlawful activity. To the extent that the two cases so decided, they are contrary, in my opinion, to the Smith's Newspapers case and probably also to Neal v. Ayers, both of which cases are binding upon me. My reservation in relation to Neal v. Ayers arises because of the terms in which some of the dicta therein are expressed. But the court was not concerned with the question of damages. It was only concerned with the question of whether the plaintiff had a remedy. The plaintiff had been non-suited at first instance so that all that the High Court could do was to order a new trial. Notwithstanding the way in which the judgments are expressed, no intention is revealed to depart at all from what was said in the Smith's Newspapers case which was referred to in argument (63 C.L.R. at p.526).

It remains to consider the cause of action for breach of a collateral contract. In my opinion the respondent is on much firmer ground when one comes to consider the submission it makes in relation to the cause of action based on contract. But for two reasons I do not propose to express a final view on the matter at this stage. Firstly, the matter may never arise. Collateral contracts or warranties are never easy to establish. The applicants may, in the end, fail to persuade me that there was here made any such contract or warranty. Secondly, a determination of the matter now would involve my reaching some final conclusions on the dominant purpose and object of the applicants in acquiring the vehicle. The evidence on that aspect of the matter is probably complete, but to the extent that it becomes necessary for me to consider what finding should be made, it is a matter which I consider best left to be dealt with at the end of all the evidence. Resolving the contract question now will not lead to the overall resolution of the litigation which will need to proceed, in any event, on the remaining causes of action. If I had taken a different view in relation to the causes of action based on breaches of the Trade Practices Act and negligent misrepresentation, the same problem would have arisen. It exists because of the evidentiary difficulty to which I have referred on p.8 of these reasons. This was not a matter much canvassed in counsels' submissions. If I had been against the applicants on the principal argument, I would not have been prepared to dispose of the matter without hearing counsel further on this question.

For the reasons I have given, the primary submission made by counsel for the respondent was rejected. When I announced my decision to this effect on 18 December, 1981, I said that the matter would proceed to a final hearing on all issues. I also said that I would make no formal order giving effect to my conclusion. Thus no time for appeal has or will run until final judgment in the proceedings is entered.

Since the announcement of my decision the further hearing of the proceedings has been fixed to commence on 15 March, 1982.