Re Lorenzo Cassisi and Felice Cassisi v CFC Holdings Pty Ltd; Paganelli Engineering Pty Ltd; Angelo Paganelli and Centurion Transport Co Pty Ltd [1990] FCA 329 (31 August 1990)

FEDERAL COURT OF AUSTRALIA

Re: LORENZO CASSISI AND FELICE CASSISI
And: C.F.C. HOLDINGS PTY. LTD.; PAGANELLI ENGINEERING PTY. LTD.; ANGELO
PAGANELLI and CENTURION TRANSPORT CO. PTY. LTD.
No. WA G89 of 1987
FED No. 465
Trade Practices - Contract

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Lee J.(1)

CATCHWORDS

Trade Practices - misleading or deceptive conduct - failure to inform - whether duty to disclose relevant facts.

Trade Practices - implied conditions in contract with credit provider - Trade Practices Act 1974 ss.70-73.

Contract - collateral warranty - whether representations promissory in nature.

Federal Court of Australia Act 1976 s.51A

Trade Practices Act 1974 ss.52, 53, 68, 69, 70, 71, 72, 82, 87; sub-ss.4(1), 4B(1) and (4), 70(1), 71(1) and (2), 73(2) and (14), 75A(1); para.66(1)(c), 75A(1)(d)

Vehicle Standards Regulations 1977 (W.A.) sub-reg.125(2)

Lindgren, Carter and Harland, Contract Law in Australia Swanton, "The Convergence of Tort and Contract", Syd Law Rev., Vol. 12 (1989), 40

Andrews v. Hopkinson (1957) 1 QB 229

Beale v. Taylor (1967) 1 WLR 1193

Collier v. Electrum Acceptance Pty. Ltd. (1986) 66 ALR 613

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

Gates v. The City Mutual Life Assurance Society Limited [1986] HCA 3; (1986) 160 CLR 1

George Wills and Company Limited v. Davids Proprietary Limited [1957] HCA 6; (1957-59) 98 CLR 77

Gould v. Vaggelas (1985) 157 CLR 215

Heilbut, Symons and Co. v. Buckleton [1912] UKHL 2; (1913) AC 30

Henjo Investments Pty. Ltd. v. Collins Marrickville Pty. Ltd. [1988] FCA 40; (1988) 79 ALR 83

Howard Marine and Dredging Co. Ltd. v. A. Ogden and Sons (Excavations) Ltd. (1978) QB 574

F. Jones and Co. Pty. Ltd. v. C.G. Grais and Sons Pty. Ltd. (1961) 78 WN (NSW) 955

Kaze Constructions Pty. Limited v. Housing Indemnity Australia Pty. Limited (1990) ATPR 41-01

Mihaljevic v. Eiffel Tower Motors Pty. Ltd. and General Credits Ltd. (1973) VR 545

Munchies Management Pty. Ltd. v. Belperio (1988) 84 ALR 700

Musca v. Astle Corporation Pty. Ltd. (1988) 80 ALR 251

Netaf Pty. Ltd. v. Bikane Pty. Ltd. [1990] FCA 35; (1990) 92 ALR 490

Rhone-Poulenc Agrochimie S.A. v. UIM Chemical Services Pty. Ltd. (1986) 12 FCR 477

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

Wells (Merstham) Ltd. v. Buckland Sand and Silica Co. Ltd. (1965) 2 QB 170

Wheeler Grace and Pierucci Pty. Ltd. v. Wright (1989) ATPR 40-940

Yorke v. Lucas [1985] HCA 65; (1985) 158 CLR 661

HEARING

PERTH
31:8:1990

Counsel for the Applicants: Mr W. Martin

Solicitors for the Applicants: Robinson Cox

Counsel for the First Respondent: Mr P. Nisbet

Solicitors for the First Respondent: Sly and Weigall

Counsel for the Second and Third Respondents: Mr P. McGowan

Solicitors for the Second and Third Respondents: Phillips Fox

ORDER

1. Applicants to submit a minute of judgment in the application to give effect to these reasons.

2. Second and third cross claimants to submit a minute of judgment in the second and third cross claims to give effect to these reasons.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

DECISION

In about May 1983, the applicants, as partners, commenced the business of L. and L. Transport supplying water spraying services to a quarry operator. Mr Cassisi had not gained any experience in driving trucks before he started driving the water tanker at the quarry.

2. In April 1984, the applicants acquired a new Hino tip-truck under a hire-purchase agreement and used the truck to deliver quarried rock in, and about, the metropolitan area of Perth. Mr Cassisi drove that truck.

3. In about April 1985, the applicants altered the Hino truck to a prime mover and trailer by replacing the tipping assembly and tray with a turntable and by acquiring a 40-foot trailer under a hire-purchase agreement.

4. The applicants commenced the business of long-distance hauliers using the Hino semitrailer. In June 1985, they became subcontractors to transport contractor, Centurion Transport Co. Pty. Ltd. ("Centurion"). The Directors of Centurion and the persons with whom the Cassisis dealt were Carl and Frank Cardaci. They were also the Directors of the first respondent, C.F.C. Holdings Pty. Ltd. ("C.F.C."), which carried on business as a dealer in trucks.

5. In about August or September 1985, Mr Cassisi made it known to Frank Cardaci that he was interested in purchasing a truck that could haul large loads in a "road-train" configuration - a prime mover and two trailers.

6. That discussion led to a transaction in early October 1985 in which C.F.C. paid out the balance due by the applicants under the hire-purchase agreement relating to the Hino truck and purchased the truck from them. C.F.C. then sold to Esanda Limited ("Esanda") a Mack prime mover truck ("the Mack truck") and a trailer and converted dolly trailer ("trailer and dolly") all of which Esanda then leased to the applicants.

7. The Mack truck had been "rebuilt" by the second respondent, Paganelli Engineering Pty. Ltd. ("Paganelli Engineering"). The controller of Paganelli Engineering and the person through whom that corporation acted at all material times was the third respondent ("Paganelli"). Paganelli Engineering also carried on business as, or was associated with, the business known as Paganelli Mack Truck Wreckers.

8. Centurion had obtained possession of the Mack truck under a hire-purchase agreement with Custom Credit Corporation Limited ("Custom Credit") in July 1985. C.F.C. and F. and C. Cardaci were guarantors of that agreement. The Mack truck was sold to Custom Credit by Paganelli Engineering. How title in the Mack truck was obtained by C.F.C. in October 1985 was not made clear, but apparently nothing turned on the point as far as the parties were concerned.

9. After the Mack truck was leased to the applicants, Centurion arranged for an experienced driver of Mack trucks to accompany Mr Cassisi on his first two trips. Thereafter Mr Cassisi was the sole driver of the truck.

10. Between October 1985 and March 1987, the Mack truck underwent repairs on frequent occasions. Some of the repairs were of a substantial nature and as a result the truck was unavailable for work for a number of days.

11. The first breakdown occurred on 17 October 1985 whilst the Mack truck was being driven from Karratha to Port Hedland. A short distance out of Karratha, Mr Cassisi felt a loss of engine power and noticed white smoke coming from the exhaust. He was able to arrange for the Mack truck to be transported to Centurion's yard in Karratha from where it was loaded on another truck and returned to Perth. Paganelli Engineering carried out repairs to a damaged cylinder and piston apparently caused by a collapsed valve. After Mr Cassisi had discussed this matter with both Carl Cardaci and Mr Paganelli, Paganelli Engineering agreed to carry out the repairs provided that the applicants paid for the cost of labour.

12. On his next trip with the vehicle, on 28 October 1985, Mr Cassisi noticed that it was very difficult to steer the truck in a straight line. He had to stop on several occasions to re-tighten U-bolts holding a spring to the front axle. Upon return to Perth, Mr Cassisi took the truck to Paganelli Engineering for further repairs. The front spring assembly was dismantled to reveal that a centre bolt had snapped. Mr Cassisi said that he noted that the snapped ends of the bolt were rusty. Mr Paganelli's evidence was that the break in the bolt appeared to be of recent origin. On that same occasion Mr Cassisi had also experienced problems with the clutch brake plate which caused difficulties in getting the truck in and out of gear. The clutch brake plate was replaced by Mr Paganelli during the course of these repairs.

13. Mr Cassisi was still not satisfied with the operation of the clutch during his next trip in early November 1985. Again the truck was returned to Paganelli Engineering for further attention and clutch adjustment. On this occasion, according to Mr Cassisi, Mr Paganelli told him that Paganelli Engineering would refuse to "foot the bill" for any more of the repairs or labour required on the Mack truck.

14. In late February or early March 1986 whilst returning from a trip to Darwin, Mr Cassisi continued to experience problems with gear engagement and noticed an oil leak from the gearbox. He decided not to drive the truck any further and it was transported back to Perth. Mr Cassisi said that when he approached Paganelli Engineering to repair the vehicle, Mr Paganelli was aggressive and abusive. Mr Cassisi decided to have the repairs done by Tranparts, a truck repair firm he had used previously.

15. At the Tranparts yard the gearbox of the Mack truck was removed. It was discovered that the input shaft was badly worn and the stop clutch broken. Tranparts experienced difficulties in obtaining a new input shaft. Eventually the required part was obtained for Tranparts from Sydney by Paganelli Engineering after Mr Cassisi had taken the removed shaft to Paganelli Engineering to show the extent of its wear. Apparently Mr Paganelli found no fault with the input shaft and offered to buy it from Mr Cassisi.

16. On his next trip with the Mack truck in late March 1986, Mr Cassisi felt the truck cab move to one side as the truck crossed a cattle grid. When he stopped he found that the cab was loose on the right-hand cab mount. As he continued on the trip he noticed cracks developing in the panel work near the right-hand side door pillar. Upon returning to Perth he took the truck to Tranparts. The proprietors of that business, Messrs Mills and Davenport, each gave evidence that upon raising the cab it was discovered that the cab mountings and steel door pillar were extremely rusty and had almost disintegrated. Mr Cassisi said that he was furious and rang Carl Cardaci who told him to speak to Mr Paganelli. Mr Cassisi duly telephoned Mr Paganelli who came out to see the truck. Mr Cassisi told him that he regarded it as "Paganelli's" responsibility to repair the vehicle. Mr Paganelli refused. Mr Cassisi, again, rang Carl Cardaci and explained what happened. It was agreed that he would have the repairs done by Tranparts but that C.F.C. would partially reimburse him in spare parts to the value of $500 to be ordered from Paganelli Engineering on the account of C.F.C. Tranparts arranged for replacement cab mountings to be manufactured and the truck was unavailable for nine days.

17. The respondents contended that the cab mounts were standard parts which could have been purchased and installed with less loss of operating time for the truck than resulted from Tranparts' method of repair. I accept that it was both reasonable and prudent for Tranparts to have the parts manufactured in heavier material and in dimensions that differed from the standard parts.

18. On 24 April 1986, Tranparts replaced a leaking hub seal.

19. In May 1986, in the course of a trip to the North of the State, the tachometer and speedometer ceased to work. Mr Cassisi had these two items replaced upon his return from Perth.

20. In June 1986, Mr Cassisi experienced leakage from the seals in the gearbox and the power steering assembly. Again, on returning to Perth, he took the truck to the Tranparts workshop for repairs.

21. In late September 1986, Mr Cassisi noticed excessive wear in one of the tyres on the truck. The truck was taken to the Tranparts workshop for inspection of the king pins which had displayed abnormal movement. It was Davenport's evidence that the king pins were excessively worn and required replacement and that the bushes were completely worn out. The degree of wear indicated much greater age and use than would be expected in such a part installed as new in 1985 or 1984 and it should not have required replacement in the ordinary course of events.

22. In October 1986, Tranparts was instructed to repair a leaking water pump on the truck. That work revealed that the pump was entirely corroded and that the housing had been partly eaten away. The pump had to be replaced. Mr Davenport stated that water filters had been regularly changed and that the degree of wear in the pump strongly indicated age.

23. The problems continued into 1987. In mid-January 1987 Tranparts repaired damage that had been done to the cab by the collapse of the cab mountings and also severe cracking in the roof of the truck which appeared to have been repaired on an earlier occasion and then repainted.

24. In March 1987, in the course of doing other work on the truck, Mills and Davenport each noticed that the brake linings were worn and that the brake drums had been reconditioned or "skimmed", an event inconsistent with new parts being installed in 1985 or 1984.

25. On about 28 March 1987, the truck was impounded by officers of the Criminal Investigation Branch of the Western Australian Police Force and the registration plates and compliance plate, attached to the vehicle, were removed. No issue arose in the course of these proceedings as to the power of the police so to act.

26. The Mack truck, trailer and dolly were then either surrendered to, or repossessed by, Esanda and sold.

27. The applicants alleged that C.F.C. and Paganelli Engineering made certain representations about the Mack truck prior to the applicants entering into the lease agreements with Esanda, thereby inducing them to do so, which representations, the applicants alleged, were false. The applicants seek relief principally pursuant to s.82 of the Trade Practices Act 1974 ("the Act") by way of an order for compensation for loss, or damage, suffered by conduct of the respondents done in contravention of the provisions of ss.52 and 53 of the Act. The applicants also plead, inter alia, breach of a collateral contract and of warranties implied by sub-s.73(2) of the Act.

28. Before dealing with the circumstances in which the applicants acquired the truck on lease and their claims with respect to the problems they encountered with it, it is appropriate to look at some of the history of the dealings between Centurion, C.F.C. and Paganelli Engineering.

29. In October 1983, Centurion acquired a Mack prime mover from Paganelli Engineering. The vehicle was registered as a new 1983 model truck. At the time it was licensed, the vehicle did not have affixed to it a compliance plate as required by sub-reg.125(2) of the Vehicle Standards Regulations 1977 (W.A.). The chassis number on the vehicle corresponded with the chassis number on a Mack truck assembled and sold as a new truck in January/February 1981. In cross- examination, Paganelli conceded that the differential and gearbox housings and the chassis of the truck were not new. In correspondence with the Police Department prior to the licensing of the vehicle, Paganelli, on behalf of Paganelli Engineering, described the vehicle as a new vehicle and sought registration of it notwithstanding that the vehicle did not have a compliance plate. The correspondence explained that the truck had been built by Paganelli Engineering from "genuine new Mack parts".

30. Paganelli Engineering was not authorized by the Australian Motor Vehicle Certification Board (AMVCB) to affix a compliance plate to any vehicle it manufactured.

31. Paganelli Engineering's request was successful and it was granted dispensation from the requirement for the truck to be fitted with a compliance plate subject to it providing a statutory declaration attesting to the fact that the vehicle had been constructed from all new and genuine Mack truck parts. By letter dated 20 October 1983, the Police Department advised Paganelli Engineering that departmental staff would examine the truck and assess its conformity with the Design Rules and Vehicle Standards Regulations but advised Paganelli Engineering that any other vehicle assembled from component parts for resale by that company would be subject to the requirements of the AMVCB by which was meant that the truck would be required to be fitted with an appropriate compliance plate for which Paganelli Engineering had appropriate authority to affix to a truck.

32. In February 1985, Centurion acquired a Mack prime mover from Paganelli Engineering. The vehicle was registered as a new 1985 model Mack prime mover. At the time of registration it was noted that the vehicle had been so registered upon an assurance that the vehicle had been built-up using all new Mack component parts. Before the vehicle was registered, Paganelli Engineering approached the Police Department seeking dispensation from the requirement that the truck have a compliance plate affixed with the authority of the AMVCB. In its letter to the Police Department dated 15 January 1985, Paganelli Engineering applied for such dispensation stating:
"We obviously cannot supply a compliance plate

for the unit because of the fact that we used individual new
component parts."

The vehicle was accepted for registration after examination but Paganelli Engineering was informed by the Police Department that:

"It must be clearly understood that should you
seek to assemble other new vehicles in the future then it
will be necessary to obtain low volume compliance through
the Australian Motor Vehicle Certification Board."

33. In July 1985, Centurion acquired a third Mack truck from Paganelli Engineering. It was the Mack truck the applicants acquired on lease through Esanda in October 1985. The records of the Police Department show that the vehicle was registered as new. It was recorded as a 1984 model Mack truck.

34. The value of the truck upon which stamp duty was assessed was $35,000. Paganelli Engineering provided a receipt to Centurion signed by Paganelli which stated that Centurion had paid the sum of $35,000 for a "1984 Mack Truck (Rebuilt)". The evidence of the respondents was that the agreed price for the Mack truck was $84,000 and that part of that price was offset by the cost of a damaged truck bought by Paganelli Engineering from Centurion or C.F.C. for a price of $26,000. The Mack truck was purchased from Paganelli Engineering by Custom Credit Corporation Ltd. for a sum of $73,000. The respondents stated that the sum, $15,000, being the difference between $73,000 and $58,000, was applied in reduction of C.F.C.'s and/or Centurion's running account with Paganelli Engineering for work done or materials supplied.

35. A compliance plate was attached to the cab of the Mack truck. Amongst other data, that plate showed the date of manufacture of the truck to be "1-84".

36. Business records relating to the sales of new Mack trucks established that the serial numbers of some of the parts installed in the Mack truck corresponded with the serial numbers of parts installed in several other Mack trucks sold some years earlier. The front and rear differential housings were part of a new Mack truck sold to a general carrier in April 1981; the transmission housing was part of a new Mack truck purchased by the same general carrier in December 1978. The chassis number identified the chassis as part of a Mack truck sold to that general carrier in October 1977.

37. The compliance plate affixed to the vehicle purported to show that the truck had been manufactured by Mack Trucks Australia Pty. Ltd. ("Mack Trucks") and had been affixed with the approval of the AMVCB. Those representations were false as were the representations of other data endorsed on the plate by stamped indentations.

38. The plate bore the number "MSR7357". The letters "MSR" denoted "Mack Specification Requirement". The letters and number "MSR7357" were applied by Mack Trucks to the 1981 model Mack truck sold to the general carrier referred to above and were endorsed on the compliance plate affixed to the cab of that vehicle. Forensic evidence established that all alpha and numerical data stamped on the compliance plate other than "MSR7357" had been made with the one set of dies. Paganelli admitted that he had stamped the Vehicle Identification Number (VIN) A11049 on the compliance plate. I find that he also stamped the numbers "1-84" which purported to denote the date of manufacture of the truck. The records relating to the Mack trucks sold in Western Australia showed that VIN A11049 was applied to the truck sold in October 1977 with the chassis referred to above.

39. Mr Cassisi said that shortly after Centurion took delivery of the Mack truck in July 1985, it was inspected by him as one of several trucks Centurion offered to sell to him. He said that he was shown the truck by Frank Cardaci who said that it was a 1984 model Mack which had been "fully rebuilt from the ground up" with a new motor, new gearbox, new differential, new bonnet and new sleeper box. Mr Cassisi said he asked whether "rebuilt" meant "new rebuilt" or "brand new" and was told by Frank Cardaci that it was "brand new out of a crate". Mr Cassisi could not recall inspecting the compliance plate on the vehicle but said it would have been common practice for him to do so. Mr Cassisi was informed that the price of the truck was $90,000. Frank Cardaci said that he would arrange to introduce Mr Cassisi to Esanda to apply for finance to acquire the truck and would arrange to take over the Hino at a price to be fixed. Mr Cassisi asked whether there was a warranty on the brand new motor, gearbox and differential to which Frank Cardaci replied that it would be necessary to have a talk to Mr Paganelli about warranty details.

40. Mr Cassisi made application to Esanda to lease the Mack truck and trailer. The application was considered for a number of weeks before the applicants were advised that Esanda was prepared to provide the finance required to purchase the truck and establish the leasing arrangements. Meanwhile, the applicants continued to operate the Hino carting general freight cargoes to the North-West as subcontractors to Centurion.

41. After being advised that leasing arrangements would be provided, Mr Cassisi and Frank Cardaci visited Mr Paganelli at the premises of Paganelli Engineering in late September or early October 1985. Mr Cassisi said he was introduced to Mr Paganelli as "the one buying the latest Mack". Mr Cassisi said that he asked Mr Paganelli to confirm that the Mack truck had a new motor, gearbox and differential and asked if it would be covered by some sort of warranty. Mr Paganelli replied that the truck had been fully rebuilt and that the motor was "out of a crate" and that other parts on the truck were brand new.

42. Frank Cardaci's evidence as to that meeting broadly corresponded with that of Mr Cassisi.

43. With regard to the warranty, Mr Cassisi said that Paganelli responded that if Mr Cassisi had the truck serviced by Paganelli Engineering, he (Paganelli) would "look after him".

44. After that meeting, the applicants entered into the lease agreements in respect of the Mack truck, trailer and dolly and sold their interest in the Hino truck to C.F.C.

45. Paganelli's version of the meeting with Cardaci and Cassisi was that the discussion was limited to the question of a warranty. Mr Paganelli said that there was a short conversation in which he said that out of respect to Centurion he would carry on the verbal warranty of six months that he had given to Centurion. Other than his volunteered advice to Mr Cassisi that he would have a lot of problems if he had to learn how to drive a Mack truck, Paganelli said that was the end of the conversation.

46. I was impressed by Mr Cassisi as a witness and noted that the import of what he had to say was largely supported by Frank Cardaci. I found Mr Paganelli to be an unconvincing witness and preferred Mr Cassisi's evidence whenever it differed from that of Mr Paganelli in any material respect. Mr Paganelli gave a clear impression of willingness to mould his evidence to suit his cause.

47. In answers to interrogatories verified on oath by Mr Paganelli in May 1989, he maintained a statement that he had made in other declarations previously that the chassis installed in the Mack truck was a new chassis obtained from a distributor of Mack truck parts. When he gave evidence he resiled from that position and conceded that the chassis had been part of the 1977 Mack truck identified by the number on the chassis. He said that he had become aware in June or July of 1989 that he had mistakenly described the chassis as new but proffered no explanation as to why he had failed to inform the applicant of the erroneous answer to the applicant's interrogatory.

48. A similar disposition to gild his statements was demonstrated in correspondence with the Police Department when Paganelli, on behalf of Paganelli Engineering, stated that Paganelli Engineering was a representative of Mack Trucks and understood that its application for authority to affix compliance plates was "shortly to be approved" by the AMVCB. Neither statement was true nor explicable by other than a loose approach by Paganelli to matters of fact. His preparation of the false receipt also bore adversely upon his credit.

49. As a result of his discussion with Frank Cardaci, Mr Cassisi accepted that the Mack truck was a 1984 model and that it had been rebuilt from brand new parts. Those representations were made on behalf of the person Cassisi understood to be the owner of the vehicle and either an experienced operator of such trucks or a dealer in such vehicles. It may be inferred that the representations carried some weight as far as Cassisi was concerned. It would not be to the point that Mr Cardaci's representations were founded upon representations made to Centurion by Paganelli Engineering. It was not C.F.C.'s case that it disclaimed any responsibility for the repetition of the representations of Paganelli Engineering as a mere conduit of information provide by another. (See Yorke v. Lucas [1985] HCA 65; (1985) 158 CLR 661 at p 666.)

50. Furthermore, the fact that Mr Cassisi, on behalf of the applicants, also relied upon the subsequent conduct of Paganelli Engineering in deciding to enter into the leasing agreements offered by Esanda, did not dissipate the effect of the previous representations made by Frank Cardaci on behalf of C.F.C. It was the combination of the conduct of C.F.C. and Paganelli Engineering that caused the applicants to decide that they should complete the bargain and bind themselves to the agreements for lease.

51. I am satisfied that Mr Paganelli reaffirmed that the Mack truck was a 1984 model and that it had been rebuilt from brand new parts. In addition to positive conduct of that nature, Paganelli Engineering failed to inform Mr Cassisi that the Mack truck had been licensed with a compliance plate that had been affixed without authority and, furthermore, that the compliance plate affixed to the truck was false in that the truck had not been manufactured by Mack Trucks in January 1984 or at all, the plate had not been affixed by Mack Trucks in that form, and that the data on the plate had been improperly inserted by Paganelli Engineering.

52. Although Mr Cassisi could not recollect directly that he had sighted the compliance plate, I accept his evidence that it would have been common practice for him to do so. In any event, Paganelli Engineering possessed the knowledge that the plate was improperly affixed and was false in its content, and would have known also that the applicants, as prospective lessees of the Mack truck, would have understood the vehicle to be duly licensed with a properly affixed compliance plate and that any knowledge to the contrary would have been of cardinal importance to the formation of a decision to enter any lease agreement in respect of the vehicle.

53. The failure of Paganelli Engineering to inform Mr Cassisi of those relevant facts at the time Mr Cassisi was introduced to Mr Paganelli as a person engaged in acquiring that vehicle and seeking confirmation that it had been rebuilt from new parts or an assurance from Paganelli Engineering that the warranty it had provided to Centurion would continue, involved conduct that had the capacity to seriously mislead the applicants and, in fact, did so mislead.

54. The particular knowledge of the truck held by Paganelli Engineering and the likelihood of the applicants relying on any assurances of Paganelli Engineering by its statements, or its silence, obliged Paganelli Engineering to disclose what it knew as a matter of fair dealing by that corporation.

55. By February 1985, Paganelli Engineering was aware that unless it obtained authorization to affix its own compliance plate it would be unable to build, or rebuild, vehicles able to be licensed. The false compliance plate represented that that vehicle had been manufactured by Mack Trucks and averted any enquiry as to Paganelli Engineering's involvement in the construction of the truck. However, as Paganelli Engineering should have known, the consequence of that conduct was that the vehicle was liable to be impounded or ordered off the road, a contingency that later became a fact.

56. In all the circumstances, there was an obligation, or duty, upon Paganelli Engineering to disclose that the compliance plate had not been duly affixed prior to the registration of the vehicle and was false in its content. (See Henjo Investments Pty. Ltd v. Collins Marrickville Pty. Ltd. [1988] FCA 40; (1988) 79 ALR 83; Collier v. Electrum Acceptance Pty. Ltd. (1986) 66 ALR 613 at pp 639-641; Rhone-Poulenc Agrochimie S.A. v. UIM Chemical Services Pty. Ltd. (1986) 12 FCR 477.)

57. Having found that C.F.C. and Paganelli Engineering were involved in conduct that constituted a contravention of the provisions of s.52 of the Act, it is equally clear that the provisions of s.75B of the Act applied to Mr Paganelli as a person knowingly concerned in the contravention committed by Paganelli Engineering. Mr Paganelli was the organ through which Paganelli Engineering acted and he possessed full knowledge of all relevant facts that made the corporation's acts a contravention of s.52 of the Act. (See Wheeler Grace and Pierucci Pty. Ltd. v. Wright (1989) ATPR 40-940.)

58. As the measure of the loss recoverable pursuant to s.82 of the Act would be at least as extensive as that applicable to the measure of damages recoverable for any tortious conduct (Gates v. The City Mutual Life Assurance Society Limited [1986] HCA 3; (1986) 160 CLR 1; Henjo Investments Pty. Ltd. v. Collins Marrickville Pty. Ltd. (supra)), it is unnecessary to consider the alternative pleadings in fraud and negligence when, as in this case, a failure to establish misleading conduct would necessarily entail a failure to sustain the alternative pleadings.

59. However, the applicants have also pleaded breaches of contract and seek the recovery of a different measure of damage under that head. It is, therefore, necessary to deal with those alternative pleadings.

60. The applicants plead that the discussion between Frank Cardaci and Mr Cassisi in July 1985 in respect of the Mack truck contained express, or necessarily implied, warranties on behalf of C.F.C. that the Mack truck was a 1984 model that had been fully rebuilt using brand new parts. The applicants also relied upon representations allegedly contained on the face of the compliance plate and in the licensing of the Mack truck as a 1984 model to support such a collateral contract.

61. It may be accepted that in circumstances where C.F.C. stood to sell its vehicle to Esanda if the applicants entered leasing arrangements with that company, the necessary elements of a collateral contract between the applicants and C.F.C. may have been present if a promise or undertaking had been tendered to encourage the applicants to enter such leasing arrangements. (See Andrews v. Hopkinson (1957) 1 QB 229; Mihaljevic v. Eiffel Tower Motors Pty. Ltd. and General Credits Ltd. (1973) VR 545; Wells (Merstham), Ltd. v. Buckland Sand and Silica Co., Ltd. (1965) 2 QB 170; F. Jones and Co. Pty. Ltd. v. C.G. Grais and Sons Pty. Ltd. (1961) 78 WN (NSW) 955.)

62. However, representations alone do not establish a collateral contract. There must be an intention on the part of the maker of a statement that the statement be relied upon and there must be reliance on the part of the person to whom the statement was made. Most importantly, there must be the foundation for a legal relationship enforceable as a collateral contract in the nature of a promise or a guarantee as to the truth of the statement. (See J.J. Savage and Sons Pty. Ltd. v. Blakney [1970] HCA 6; (1970) 119 CLR 435.)

63. The distinction between misrepresentation and collateral contract has been clearly drawn. It is because of such differences that legislation, such as the Act, has been introduced.

64. Although the applicant has shown conduct in the form of statements upon which the applicants may have relied in deciding to enter leasing arrangements with Esanda, it does not follow, necessarily, that C.F.C. either intended its statements to be relied upon as undertakings or that it guaranteed the truth of its statements or made a promise to stand by them. There is an absence of any evidence that would permit an inference to be drawn that the statements were accompanied by an intention to guarantee or warrant the truth of the statement or were intended to stand as promises or undertakings. Although the statements were representations of fact which played some part in inducing the applicants to enter other contractual arrangements, they were incidental statements made as to the quality of the Mack truck. They were not responses to any request by Mr Cassisi for a binding commitment or warranty to that effect. There was no surrounding material to elevate the representations to collateral warranties. (See Heilbut, Symons and Co. v. Buckleton [1912] UKHL 2; (1913) AC 30; Cutts v. Buckley [1933] HCA 21; (1933) 49 CLR 189.) The representations were a volunteered statement as to the quality of the truck but were not accompanied by any indication of warranty, promise or guarantee to such effect.

65. Although the fact that a party has been induced by a representation may be evidence to be considered in determining whether the representation was to be a binding warranty, proof of the former is not necessarily proof of the latter. In its defence, C.F.C. contended that if the statements were warranties the statements had been made in innocence of their fault and C.F.C., therefore, was not bound by them. Lack of knowledge of the falsity of the statement cannot absolve liability under the warranty if the statement is intended to act as a promise or undertaking. If a statement is promissory in nature and understood by the promisee to be so, the contractual nature of the statement will stand. (See Lindgren, Carter and Harland, Contract Law in Australia, para.611.)

66. The statements made by Frank Cardaci were introductory remarks to Mr Cassisi when indicating that the Mack truck was one of several vehicles Mr Cassisi was entitled to inspect. Although the remarks were part of a process that induced Mr Cassisi to enter into contractual arrangements in respect of the vehicle some two or three months later, they did not stand on their own as a separate contractual arrangement between the applicants and C.F.C. (See Gates v. The City Mutual Life Assurance Society Limited (supra); Howard Marine and Dredging Co. Ltd. v. A Ogden and Sons (Excavations) Ltd. (1978) QB 574.) It follows, therefore, that this part of the applicants' claim must fail.

67. It is now necessary to consider the claim that C.F.C. was liable to the applicants pursuant to the terms of sub-s.73(2) of the Act.

68. By ss.69-72 certain warranties and conditions are implied in every contract for the supply of goods (s.69) or contracts for the supply of goods in the course of business, other than by way of sale by auction (ss.70-72) made by a corporation with a consumer. Section 68 of the Act prevents such contracts excluding the warranties and conditions implied by ss.69-72.

69. By sub-s.73(2) the Act, where a corporation supplies goods to a "credit provider" which enters into a contract with a consumer for the provision of credit in respect of the supply of those goods by way of lease, and the consumer suffers loss or damage as a result of a breach of the conditions implied in the contract between the consumer and the "credit provider" by ss.70, 71 or 72 of the Act, the amount of that loss or damage is recoverable from the corporation which supplied the goods to the "credit provider" and not from the "credit provider" unless the "credit provider" took physical possession of the goods before they were delivered to the consumer. In sub-s.73(14), a "credit provider" is defined as a corporation providing, in the course of its business, credit to consumers in relation to the acquisition of goods. Sub-section 4(1) of the Act includes the taking of goods on lease within the meaning of the word "acquire" and the supply of goods by way of lease within the meaning of the word "supply". There appears to be no intended difference in meaning between "provision of credit in respect of supply" and "provision of credit in relation to acquisition". It was not submitted that Esanda did not provide credit to the applicants in relation to, or in respect of, the lease of the Mack truck nor that Esanda had taken physical possession of the goods before they were delivered to the applicants. Sub-section 4B(1) of the Act states that a person shall be taken to acquire goods as a consumer if the goods consisted of a commercial road vehicle which, in sub- s.4B(4), is defined as "a vehicle or trailer acquired for use principally in the transport of goods on public roads".

70. All of the necessary elements appear to have been satisfied for the implied conditions to apply to the contracts of lease made between Esanda and the applicants.

71. Pursuant to sub-s.70(1), the lease contracts between the applicants and Esanda were subject to an implied condition that the goods would correspond with the descriptions in the leases. The description of the goods in the lease for the Mack truck was as follows: "1984 Mack R612 Prime Mover - Used". Pursuant to sub-s.71(1) of the Act, there was an implied condition in the lease for the truck that the Mack truck was of merchantable quality and, pursuant to sub-s.71(2), an implied condition that the truck was reasonably fit for the purpose it was being acquired, namely for use in the business of long-distance haulage made known to C.F.C. in the course of antecedent negotiations. Paragraph 66(1)(c) of the Act describes antecedent negotiations in relation to a contract for the supply of goods to a consumer as a reference to any negotiations or arrangements conducted or made with a consumer by another person in the course of a business carried on by the other person whereby the consumer was induced to make the contract or which otherwise promoted the transaction to which the contract relates.

72. I now turn to whether there was a breach of any of the implied conditions and whether the applicants suffered any loss or damage as a result.

73. Whether or not the Mack truck was properly described as such upon its manufacture from various parts by Paganelli Engineering, it certainly did not meet the description of a 1984 model Mack truck. It was an assemblage of parts of chequered history, various ages, and degrees of use. The chassis was from a 1977 model truck; the transmission housing from a 1978 truck; and the differential housings from a 1981 truck. If the compliance plate used by Paganelli Engineering was the plate attached to the used cab incorporated in the rebuilt truck, the cab would have been originally part of a 1981 model truck.

74. In addition to these matters, I am satisfied by the evidence of Davenport, the experienced mechanic who carried out work on the Mack truck at material times, that various other parts displayed greater signs of age and wear than could reasonably be expected of a 1984 model truck, in particular, the input shaft of the clutch, king pins, brake drums, rusted air valves on the starting and braking systems, blocked relay valves, and a corroded water pump. Davenport gave his evidence in a straightforward and competent manner and was an impressive witness. The age of the cab was well demonstrated by the way in which it broke free from its mounting on the chassis within six months of the applicants acquiring it. It did so because the cab mounts had completely rusted away indicating longstanding use in rigorous conditions.

75. There was a clear breach of the implied condition that the Mack truck leased to the applicants was a 1984 model Mack truck. (See Beale v. Taylor (1967) 1 WLR 1193.)

76. The description "1984 model Mack" means, at least, that no part of the truck constructed by Paganelli Engineering had a history of use prior to 1984. In the present case, a significant number of parts, and significant parts, had a history of use over a number of years prior to 1984.

77. With regard to the implied condition that the goods were of merchantable quality, it is necessary to show that as goods of that description or character they were defective. Proof of unfitness for a particular obvious purpose may or may not establish that the goods were defective. (See George Wills and Company Limited v. Davids Proprietary Limited (1957- 59) [1957] HCA 6; 98 CLR 77 at pp 88-89.) In that decision, the Court accepted that the goods were of merchantable quality if "they are of such quality and in such a condition that a reasonable man, acting reasonably, would, after a full examination, accept them under the circumstances of the case in performance of his offer to buy them, whether he buys them for his own use or to sell again" (p 89). The character of goods acquired in the present case was that of a prime mover, and the description applied to it, was a 1984 model.

78. Having regard to the degree of wear and deterioration in the cab mounts, the need for the replacement of the input shaft clutch, the degree of wear in the king pins, the rusting out of air valves and the corrosion of the water pump, I am satisfied by the totality of these matters that a reasonable man, after full examination, would not have accepted that these items sufficiently performed the requirement to supply a 1984 model prime mover in a condition appropriate to that description. The combination of defects made the truck unmerchantable as described and characterized.

79. In respect of the implied condition that the truck was fit for the purpose of hauling a road train in long-distance haulage, I am satisfied that the applicants made that purpose known by obvious implication in the antecedent negotiations. There were no circumstances to show that the applicants did not rely on the skill or judgement of C.F.C. or that it was unreasonable to so rely on that skill or judgement as provided by sub-s.71(2) of the Act. On the facts as found in this case, it would follow that there has been a breach of the implied condition that it was reasonably fit for the nominated purpose. Part of that implied condition of fitness for purpose must include fitness of the truck to be and remain licensed and available for use on public roads as it was presented in the promoted transaction.

80. It is now necessary to turn to the question of the measure of damage for breach of the implied terms and to quantify the loss recoverable for contravention of the provisions of s.52 of the Act.

81. It is not argued that the appropriate measure of damage for contravention of s.52 was other than a measure in deceit (see Gates v. The City Mutual Life Assurance Society Limited [1986] HCA 3; (1985-86) 160 CLR 1) although it was not suggested in that case that such a measure was the immutable method of assessment of loss for the purpose of s.82 of the Act. (See Henjo Investments Pty. Ltd. v. Collins Marrickville Pty. Ltd [1989] FCA 246; (1989) 89 ALR 539; Munchies Management Pty. Ltd. v. Belperio (1988) 84 ALR 700.) As stated in Gould v. Vaggelas (1985) 157 CLR 215, although the general rule for the measure of damages in deceit will be the difference between the real value of the property at the time of purchase and what was paid for it, a plaintiff is entitled to recover as damages a sum representing the prejudice or disadvantage suffered in consequence of alteration of position under the inducement of fraudulent misrepresentation made by a defendant. It is unnecessary to venture any views upon the extent to which the measure of damages in tort and contract may appear to be converging. (See Swanton, "The Convergence of Tort and Contract", Syd Law Rev., Vol.12 (1989), 40.)

82. Firstly, the applicants seek to recover the cost of various repairs as an item of loss or damage. The costs are sought to be recovered as part of the measure of damages for breach of implied conditions or as consequential loss recoverable pursuant to s.82 of the Act for a contravention of s.52 of the Act. With the exception of three items relating to the replacement of seals and adjustment of the clutch in November 1985, April 1986 and June 1986, I accept that each of the remaining items involved expenditure properly recoverable in the amounts stated. It was suggested that Mr Cassisi's lack of driving experience may have caused the damage to the cylinder and piston and that lack of application of due maintenance to the vehicle had caused or contributed to the breakdowns related to the water pump and clutch. There was no evidence of any lack of driving skill and I am not persuaded that any initial lack of experience on Mr Cassisi's part had any bearing on the subsequent malfunctions of the truck. I also accept the evidence of Mr Cassisi and Mr Davenport that the applicants duly applied proper care and maintenance to the vehicle whilst it was in their possession. It may be said that the repairs relating to the damaged piston and the cost of replacement of the speedometer and tachometer involved defects that could have occurred in any such vehicle at any time, but in the circumstances I am satisfied that the chain of occurrences in this case spoke eloquently of a defective vehicle and that the costs incurred should be treated as items of loss occasioned by the lease of this particular truck and not as part of the ordinary expenditure on maintenance of the vehicle. It was contended by Paganelli Engineering that abnormal time was spent in replacing the input shaft. However, I accept that the time involved in which the truck was unavailable for work was not unreasonable in the circumstances.

83. The sum recoverable under this heading is $5631 being $6,131 less $500 for the value of parts provided to the applicants by C.F.C. in part compensation for the cost of repairs.

84. In addition to the above, the applicants sought to recover a sum of $3,000 described as the cost of additional unspecified repairs associated with the "operation of an older truck" relating to tyre wear, seals, burning of oil, air leaks and general repairs. I am not satisfied on the evidence that the applicants should recover any part of that sum.

85. Interest was sought on the whole of the sum of $5,631 from a suggested median date for the commencement of interest - 1 July 1986. The respondents did not demur that if interest were to be calculated, an appropriate rate would be 15 per cent. The applicants sought a rate of 18.5 per cent on this item, but I am satisfied the 15 per cent is the appropriate rate in the circumstances.

86. Having regard to the apparent taxation benefit received by the reduction of the partnership income by the claim for costs of repairs in each financial year 1985 and 1986, particularly the latter year, it is appropriate for the calculation of interest to commence no earlier than 1 July 1987.

87. The applicants are entitled to recover, as an item of damage for breach of an implied condition or as an item of consequential loss recoverable under s.82 of the Act for a contravention of s.52, earnings of their business forgone as a result of the vehicle being unavailable whilst under repair and unavailable after being impounded by police order in March 1987. It is appropriate to calculate the loss of earnings in this period as a consequential loss when the business had to meet, or had met, regular outgoings in respect of that period. In respect of the latter event, the applicants only seek to recover the lost earnings of the business until 30 June 1987. The applicants commenced other earning activities on 1 July 1987 and the period between 27 March 1987 and 30 June 1987 is a reasonable period for the calculation of such a loss of earnings.

88. C.F.C. adduced evidence from an experienced accountant that the average earnings of the applicants' business, after deduction of variable costs, was $307 per day subject to any adjustment to be made for the above findings. The applicants contended that the earnings were $330 per day after taking into account public holidays. There was evidence that the truck would have been used on public holidays and I consider it reasonable to allow only one-third of those days as non-working days. After adjusting the variable costs to include the claims for costs of repairs disallowed and adding back the number of days of downtime disallowed, the daily loss of earnings of the business was $300.

89. With respect to the period between 27 March 1987 and 30 June 1987, it was agreed that the fixed costs avoided after the impoundment of the truck and to be deducted from the calculated loss of business earnings in that period of 67 days, $20,100, amounted to $12,755. The remainder is $7,345. Interest at the rate of 15 per cent was sought on that sum from 1 July 1987 but if interest were calculated on the entire sum of $7,345 it would provide interest on a component included to compensate for the future imposition of taxation and it would not be appropriate for interest to run on an item not yet expended. (See Kaze Constructions Pty. Limited v. Housing Indemnity Australia Pty. Limited (1990) ATPR 41-017 at pp 51,318-51,319 and pp 51,323-51,324 per von Doussa J.) In the circumstances of this case where there is a paucity of evidence as to the likely impact of taxation, the appropriate and fair result may be to calculate interest from 1 July 1988.

90. The applicants claimed that the vehicle was unavailable for subcontract work for 47 days as a result of the various repairs undertaken on the vehicle. In respect of those repairs, for which I have allowed the recovery of the costs incurred, the applicants claim that the vehicle was unavailable for 44 days. Having regard to evidence that work for the vehicle may not have been available nor sought on all of those days and to the opportunity the downtime provided for Mr Cassisi to enjoy some time with his family which he may have been expected to take in any event, I consider the calculation of loss should be limited to a period of 30 days.

91. The loss of earnings of the business resulting from 30 days downtime on the truck, is $9,000. For the reasons set out above, interest should be allowed on that sum at a rate of 15 per cent from a notional commencement date of 1 July 1988 to judgment.

92. The applicants also sought to recover the amount of their liability to Esanda under the lease agreements. Esanda has made demand upon the applicants for the balance of rebated rentals due under the lease agreements after crediting the sale price of the Mack truck, trailer and dolly. The values of the chattels recorded in the lease agreement for the Mack truck were structured to provide the applicants with funds to pay out a mortgage and thereby provide better security to Esanda in respect of the lease obligations. The applicants accept that any liability of the respondents in respect of the lease agreements is limited to that part of the rental payments attributable to the actual values of the Mack truck, and dolly and trailer. The following figures refer to those liabilities so calculated. In respect of the Mack truck, the amount owing to Esanda under the lease agreement after the sale of the Mack truck was $35,533.79. Interest has accrued on that sum since 15 December 1987 at the rate of $14.60 per day. In respect of the trailer and dolly, the amount owing to Esanda, after sale of those items, was $7,511.36 and interest has accrued on that sum since 12 August 1987 at the rate of $3.60 per day.

93. The applicants are entitled to recover that sum from Paganelli Engineering and from Paganelli as an item of loss caused to the applicants by Paganelli Engineering's contravention of s.52 of the Act in failing to disclose to the applicants that the truck bore an improperly affixed and false compliance plate. It was that element of misleading and deceptive conduct that rendered the vehicle liable to impoundment and led directly to the applicants suffering loss in being required to complete their obligations under the lease agreement without any counterbalancing opportunity to earn income to offset those commitments. The devastating effect of the impoundment of the vehicle can be seen from the fact that after Esanda recovered possession of the truck from the Police Department in April 1987, it took Esanda six months to be able to have the truck relicensed as a 1977 model with exemption from the need for a compliance plate to be affixed. It was not argued that the applicants should have been able to do better than Esanda in getting the truck back on the road.

94. Similarly, the applicants are entitled to recover that sum from C.F.C. pursuant to sub-s.73(2) of the Act as part of the damage flowing from the breach of the statutorily implied condition that the Mack truck was fit for the purpose made known in the antecedent negotiations.

95. It was submitted by C.F.C. that the financial position of the applicants was such that repossession of the goods pursuant to the lease agreement was a likely event and that the impoundment merely accelerated the inevitable.

96. However, such a submission failed to take into account the fact that the impounding of the vehicle immediately denied the applicants any opportunity the applicants had to continue their business and that the business had been adversely affected by consequential losses occasioned by the breaches of the implied conditions.

97. The applicants were required to meet the cost of repairs at the commencement of the lease and were likely to have been required to meet the cost of further repairs over and above the costs of ordinary wear and tear for a 1984 model truck throughout the remainder of the lease. In addition, because of the breaches of the implied conditions, the truck had not been available to earn income for the business for a significant period. Despite these setbacks the business operated at a marginal profit and was surviving. Although the applicants did, on occasions, move into arrears with respect to rental payments due under the lease agreement, they managed to meet their obligations and they resisted the proposition that their business was doomed to failure at the time the Mack truck was removed from their possession. At the time of impoundment of the Mack truck the applicants were not facing repossession of the leased equipment.

98. At the date of trial, the applicants had not discharged their liability to Esanda. Esanda agreed to stay its claim pending the outcome of the applicants' proceedings against the respondents. In those circumstances, it may have been appropriate for the applicants to obtain an order that they be indemnified by the respondents in respect of their liability to Esanda under the lease agreements but questions would then arise as to the obligation of the applicants to defend Esanda's claims and as to the defences to be raised. There may also be a need to identify what part of the applicants' liability to Esanda the respondents were bound to indemnify. In the circumstances, I propose to order that the respondents pay the sums as calculated inclusive of interest to the day of judgment, there being no argument by the respondents that the applicants have no liability to Esanda in those amounts. It was not submitted that the applicants had failed to mitigate the loss suffered in consequence of the breach by their failure to exercise any right they may have had under sub-s.75A(1) of the Act to rescind the leases or, alternatively, that the applicants had rescinded the leases pursuant to para.75A(1)(d).

99. All of the above amounts are recoverable from C.F.C., Paganelli Engineering and Paganelli.

100. In addition, the applicants seek to recover from C.F.C., for breach of the implied condition of fitness for purpose, the loss of a benefit represented by the loss of equity the applicants would have gained in the Mack truck, trailer and dolly by due performance of the lease agreements. The leases were due to be completed in October 1989.

101. It is to be remembered that the lease agreements provided the applicants with no right to acquire the truck or trailer and dolly at the termination of the leases. However, at the same time it would be a realistic assessment of the situation to acknowledge that the applicants had a preferred position in which they may have had the opportunity to purchase those chattels at, or near, the residual values set in the lease agreement rather than at market value. There was evidence which indicated that as at October 1989 the market value of the chattels would have exceeded the residual values contained in the lease agreements by approximately $30,000.

102. The applicants accepted evidence adduced by C.F.C. that the notional worth of that equity as at March 1987 was approximately $24,000 in respect of the truck and $10,000 in respect of the trailer and dolly and that it was appropriate to calculate the worth of the equity in that way. However, such a notional calculation cannot be directly translated into a measure of the damage suffered by the loss of the benefit of a bargain. That calculation has to be an assessment of the prospective worth of the chance to acquire an equity at the completion of the lease having regard to various contingencies, not the least of which may be the ability of the lessees to maintain and adhere to the terms of the lease agreement and to be in a financial position to complete the acquisition. Other important factors would be the risk of major damage to, or destruction of, the leased equipment. Having regard to all these factors, I consider an appropriate sum to represent the worth of the lost opportunity to be a sum of $10,000. That sum includes the consideration of any entitlement to interest pursuant to s.51A of the Federal Court of Australia Act 1976.

103. In respect of the claim for recovery of loss caused by the respondents' contravention of ss.52 of the Act, the applicants also sought to recover losses of the applicants' business said to be represented by part of the amount of a loan from Esanda and the amount of a fully drawn overdraft applied to meet costs of repairs and the running of the business. Having identified components of income of the business that were denied to the applicants by reason of inability to use the Mack truck as items of loss resulting directly from such contraventions and having recompensed the applicants for costs expended on repairs, it would be inappropriate to add a right of recovery for such items described as "accumulated losses of the business". (See Netaf Pty. Ltd. v. Bikane Pty. Ltd. [1990] FCA 35; (1990) 92 ALR 490 per Sheppard and Pincus JJ. at pp 493-495.) Furthermore, there was evidence that the business was accruing debt as a matter of policy.

104. The applicants also sought exemplary damages from Paganelli Engineering and Paganelli. (See Musca v. Astle Corporation Pty. Ltd. (1988) 80 ALR 251 at p 262.) In so far as the Court's powers to award compensation under ss.82 and 87 of the Act are concerned with a contravention of s.52 of the Act, there is no scope to award the payment of a sum in the nature of punitive damages. To that extent, the amount of loss recoverable under the Act may fall short of the damages recoverable for the tort of deceit and to award exemplary damages it would be necessary to make a finding in deceit. However, the elements that would be required to ground such an order are not present in this case. Paganelli Engineering engaged in misleading conduct by an act of omission which, although a serious omission and one attracting the remedial provisions of the Act, fell short of a contumelious positive act calculated to inflict detriment on the applicants or to win an undue profit for Paganelli Engineering, being conduct that would merit punishment in addition to compensation to the applicants. The amount of loss assessed as recoverable by the applicants is sufficient to provide adequate restitution and there would be no need for an award of exemplary damages had there been a finding in deceit.
Cross Claims

105. On 3 June 1988, judgment was entered in the cross claim of C.F.C. against Centurion ("the first cross claim") and Centurion was ordered to indemnify C.F.C. in respect of any damages or costs payable to the applicants by C.F.C.

106. The foundation of C.F.C.'s judgment against Centurion was that it was a term of the contract between C.F.C. and Centurion for the sale and purchase of the Mack truck that Centurion would indemnify C.F.C. in respect of any liability resulting from C.F.C.'s sale of the truck to a third party. The pleading of the first cross claim alleged that the Mack truck had been sold by Centurion to C.F.C. as a 1984 model truck and the reference in the pleading to liability resulting from resale of the Mack truck was apparently intended to include liability resulting from any renewed representation or warranty that the Mack truck was a 1984 model truck and any liability imposed on C.F.C. by the Act for the consequences of the breach of any conditions implied by the Act.

107. In two other cross claims, C.F.C. ("the second cross claim") and Centurion ("the third cross claim") separately alleged that Paganelli Engineering had, inter alia, contravened the provisions of s.52 of the Act and caused the cross claimants loss. C.F.C. and Centurion sought orders that Paganelli Engineering and Paganelli as a person knowingly concerned in the alleged contravention, indemnify C.F.C. in respect of any liability that C.F.C. may have to the applicants and indemnify Centurion in respect of any liability that Centurion may have under the judgment entered against it by C.F.C. pursuant to the first cross claim.

108. In their defence to the third cross claim, Paganelli and Paganelli Engineering admitted that in July 1985 Centurion agreed to buy the Mack truck but denied that, as alleged, Paganelli Engineering represented or warranted to Centurion that the Mack truck was a 1984 Mack truck rebuilt with new parts. Paganelli and Paganelli Engineering pleaded that in December 1984 Centurion requested Paganelli Engineering to rebuild a late model Mack truck and that at all times thereafter Centurion was aware that the Mack truck was being rebuilt from a variety of new and used parts. Why that should have been so was not made clear.

109. Whatever took place in December 1984, I am well satisfied by the evidence that in July 1985, at the time the agreement was made between Centurion and Paganelli Engineering for the sale and purchase of the Mack truck, it was represented by Paganelli Engineering that the Mack truck was a 1984 model, rebuilt to meet that description.

110. The chain of events which followed that conduct involving Centurion and C.F.C. repeating representations made by Paganelli Engineering and C.F.C. engaging in conduct in contravention of s.52 of the Act and promoting a transaction which led to C.F.C. being liable for the consequences of the breach of implied conditions imposed by the Act, was sufficiently direct or proximate to the breach of the Act by Paganelli Engineering for an order to be made that Paganelli and Paganelli Engineering pay to Centurion any loss occasioned to Centurion pursuant to the judgment that it indemnify C.F.C.

111. Pursuant to s.87 of the Act, the appropriate order on Centurion's cross claim is that Paganelli and Paganelli Engineering indemnify Centurion in respect of the whole of Centurion's liability to C.F.C. under the order of indemnity C.F.C. has obtained against it.

112. In those circumstances, it is unnecessary to deal with the cross claim commenced by C.F.C. against Paganelli and Paganelli Engineering.

113. I will receive submissions from counsel as to the appropriate orders for costs and a minute of the judgment to be entered pursuant to these reasons.