Van Halen & Anor v Dawildon Properties Pty Ltd [2002] FMCA 32 (8 May 2002)

Last Updated: 4 March 2003

FEDERAL MAGISTRATES COURT OF AUSTRALIA

VAN HALEN & ANOR v DAWILDON PROPERTIES PTY LTD

[2002] FMCA 32

TRADE PRACTICES - Misleading and deceptive conduct - false and misleading representation.

Trade Practices Act ss 51AB, 52, 53(g)

Applicants:

JETADIAH STANLEY VAN HALEN & LYN EDITH DEMECH

Respondent:

DAWILDON PROPERTIES PTY LTD

File No:

MZ 658 of 2001

Delivered on:

8 May 2002

Delivered at:

Melbourne

Hearing Dates:

14 & 15 February 2002

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicants:

Mr I Alger

Solicitors for the Applicants:

Victoria Legal Aid

Counsel for the Respondent:

Mr P Fary

Solicitors for the Respondent:

Abbott Stillman & Wilson

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE

MZ 658 of 2001

JETADIAH STANLEY VAN HALEN and LYN EDITH DEMECH

Applicants

And

DAWILDON PROPERTIES PTY LTD

Respondent

REASONS FOR JUDGMENT

1. This is an application by JETADIAH STANLEY VAN HALEN and LYN EDITH DEMECH ("the applicants") against DAWILDON PROPERTIES PTY LTD ("the respondent"). The applicants had commenced an action against ESANDA FINANCE CORPORATION ("the second respondent") and by leave the application against the second respondent was discontinued. It should also be noted that the name of the first respondent was amended from "B & J LEVETT PTY LTD" to "DAWILDON PROPERTIES PTY LTD" (ACN 002 041 063).

2. The claim arises out of the purchase of a motor vehicle, namely a Ford Econovan Maxi (the vehicle) which was purchased by the applicants from the respondent in May 1999.

3. There is no dispute that the applicants signed a contract of sale for the vehicle dated 8 May 1999, though there is some dispute about the precise dates when the agreement was finalised. The purchase price of the vehicle was $17,990 less a trade-in allowance on a Saab sedan ("the trade-in") of $3,990 making a total balance payable of $14,000. It is also common ground that there was some difficulty in the applicants obtaining finance for the purchase and they were only able to raise finance with the assistance of a broker contacted by the respondent who arranged finance in the sum of $13,000.

4. To assist in making up the shortfall of $1,000, being the balance payable under the agreement, the first respondent loaned to the applicants that sum. There is disagreement as to how and when the sum was to be repaid though it is noted that the contract has inserted on it the words "to be paid by 8/07/99". In addition to the $1,000 loan, it is also common ground that the respondent advanced to the applicants the sum of $126.30 being one month's comprehensive insurance on the vehicle required by the insurer. It is agreed that the finance would not have been advanced by the finance company had there not been evidence that the vehicle had been the subject of at least comprehensive insurance payable by two monthly instalments. Again, it is accepted that the applicants did not have a sufficient cash fund available to either complete the transaction for the vehicle or to even pay two months of the comprehensive insurance payable on the vehicle, and hence the assistance of the respondent was required to both complete the contract and to ensure that two months of insurance premiums had been paid prior to finalisation of the agreement.

5. The dispute in the present case is one which arises out of an allegation by the applicants that representations were made to them by Mr Bruce Levett of the respondent which in the amended Statement of Claim filed 7 November 2001 were referred to under the heading Particulars of Representation subjoined to paragraph 13 thereof as follows:

Particulars of representation

(1) The representation was made orally on or about 8 May 1999 by the First Respondent by its servant or agent whose precise identity is not presently known to the Applicants.

(2) It was represented that the motor vehicle would be covered by an "All States Warranty" which would cover the cost of any mechanical repairs which the motor vehicle may require provided the Applicants maintained their comprehensive motor vehicle insurance with the NRMA.

(3) The said servant or agent of the First Respondent purported to make a telephone call in the presence of the Applicants immediately after which the said servant or agent informed the Applicants that the said warranty had been approved.

6. At the trial of the action, it was agreed during the course of final submissions that it would be more appropriate to deal with the issue of quantum on a separate occasion if and when the court were to find that a representation had been made and if as claimed in the amended Statement of Claim the representation was false, relied upon by the applicants, and that it induced them to enter into the contract for the purchase of the vehicle. Reliance was placed on a breach of s.53(g) of the Trade Practices Act, together with a breach of s.51AB and s.52. Hence arguments were advanced that the representations, if made, constituted misleading and deceptive conduct and/or unconscionable conduct and/or breach of warranty.

7. Essentially there was a conflict of evidence as to whether or not any representation was made at all concerning an All States Warranty. The applicants do not pursue paragraph (3) of the Particulars of Representation subjoined to paragraph 13 of the amended Statement of Claim, but do pursue the claim based upon a representation that the vehicle would be covered by an All States Warranty.

8. It is also common ground that an All States Warranty did exist at the time of the purchase of the motor vehicle. The effect of an All States Warranty is that it is a form of insurance for which a premium is paid and which covers the repair cost of the vehicle for a period of time. The first-named applicant, Mr Van Halen, gave evidence that he decided to investigate the prospect of trading in his vehicle for a truck which would be suitable to transport his family's possessions to Victoria from the State of New South Wales and that he was interested in the vehicle which was in the car-yard of the respondent. He confirmed that in early May he had a discussion with Mr Bruce Levett and was told that the vehicle had been an ex-Budget vehicle and according to Mr Van Halen he thought the vehicle had very low kilometres for a truck which apparently had been used since 1994. It was agreed that the odometer reading of the vehicle was 128,937 kilometres. Mr Van Halen gave evidence that during the course of initial conversation he made it clear to Mr Levett that he had difficulty financing the purchase of the vehicle. It would appear to be common evidence that prior to the vehicle being purchased the price had been reduced by $1,000. It is alleged by Mr Van Halen that when it came to the discussion about finance, Mr Levett said something like "I may be able to help in getting finance, it costs nothing to have a look." It is alleged on that basis that the applicants decided to further consider the matter. It is significant that at the time there is no dispute that Mr Van Halen was then unemployed though he was hoping to be employed as a truck driver using the vehicle. His partner, the second applicant Ms Demech, was then in part-time employment and receiving some government benefits. There seems very little doubt that neither applicant was in a strong financial position at the time of the agreement.

9. It is also not in dispute that Mr Van Halen is illiterate. He was unable to read documents and had to seek the assistance of Ms Demech who read various documents to him which are relevant in this present application.

10. A crucial conversation which is alleged to have formed the basis of the representations appears to have occurred in the office of the respondent between Mr Levett of the respondent and the applicants. It is during that conversation that Mr Van Halen said that he told Mr Levett something like he was concerned that if something happened to the truck, there was no way there was any back-up and he was not able to afford the cost of repairs. He claims to have told Mr Levett this in the context of his own understanding that with diesel vehicles, they could be costly to repair in the event of a breakdown. It is claimed by Mr Van Halen that he said something like, "If it's a diesel and it blows up, it will cost me $10,000." He claims that Mr Levett then said something like, "Ever heard of an `All States'? It doesn't matter what State you're in, whether a wheel or muffler or any mechanical thing goes wrong." The first applicant said something like, "How does that work?" He was then shown a booklet which apparently referred to the All States Warranty and which was read to him by the second applicant.

11. In general terms, Mr Van Halen gave evidence that he was surprised to learn about the All States Warranty and particularly surprised to learn that this would be something which would only cost him about $5 per week according to information supplied by Mr Levett of the respondent.

12. There is some detailed evidence about what happened thereafter, though in brief terms it is sufficient to note that according to the evidence he decided to go ahead with the purchase and could only achieve finalisation of the purchase by accepting the $1,000 loan from the respondent, together with one month's premium for comprehensive insurance. In his evidence Mr Van Halen, in referring to the All States Warranty said, "That's what sold the truck to us, if it wasn't All States, I wouldn't have bought the truck."

13. At the end of May 2000 the vehicle, in Mr Van Halen's words, "blew up". He obtained a quotation for the repair of the vehicle from M & J Stewart Motors Pty Ltd in Morwell for the sum of $6,628.78. The only evidence in relation to obtaining the quote was a photocopy produced to the court. No other evidence concerning the reasonableness or otherwise of the quotation was provided. It is accepted however that since the vehicle broke down it has not been used and apparently has been stored. It is also noted that apparently there is a repossession notice which has been issued by the finance company over the vehicle, but no action has yet been taken to repossess the vehicle since May 2000. It is also not in dispute that the applicants have not made payments to the finance company on the vehicle since it broke down in May 2000, though they did make a payment prior to that date.

14. After the vehicle broke down, the applicant gave evidence that he contacted Mr Levett of the respondent to tell him the vehicle had broken down and he claims that when he asked about the "All States Cover" that Mr Levett laughed and said, "You never took it out." Mr Van Halen gave evidence that it was his belief that he was covered for mechanical breakdown with the All States Cover and agreed however that because he shifted from New South Wales to Victoria almost immediately after the purchase of the vehicle, he has not identified any documents which would provide written evidence of the cover being taken out in relation to All States Warranty. He also gave evidence that he contacted an officer of NRMA and was told that the All States Warranty is arranged by car dealers and is not part of NRMA comprehensive insurance cover. Hence it is clear that if the representation concerning the warranty had been made that the first applicant, in his evidence, asserts that he relied upon that representation to go ahead with the purchase of the vehicle and after so relying on that representation when confronted with a significant account for the repair costs to the vehicle, was unable to meet those costs and then as the vehicle was unable to generate any income, was unable to meet the cost of servicing the finance agreement for the vehicle.

15. During the course of cross-examination, the first applicant seemed to vary the extent to which the All States Warranty would cover the vehicle and made reference to it covering any problems which may relate to axles. He agreed he did not mention that at the beginning but insisted that this had been a part of the representation made by Mr Levett prior to entering into the contract for sale. He further agreed that he had spoken to another person which it would appear was the finance broker. He did not appear to have any significant knowledge of insurance requirements or cover such as "gap cover" or "breakdown cover". As indicated, he is unable to read and write and perhaps not surprisingly, unable to then assist in the interpretation of any documentation, including the contract of sale. He did acknowledge however that the contract of sale was signed by him and further, when shown the finance agreement dated 7 May 1999, he recognised his signature on that agreement.

16. The finance agreement does refer to insurance being undertaken with "Fortis Insurance Ltd" though it is noted that is next to the item "shortfall insurance (Lender's Mortgage Insurance)".

17. It is relevant to pause at this point in considering the documents to note that attached to the finance agreement is a document entitled "invoice" which bears the date 8-5-99 and has a stamp on the document which reads, "DAWILDON PROPERTIES PTY LTD TRADING AS OUTDOOR MOTOR VILLAGE, 173 PRINCES HIGHWAY, UNANDERRA 2526 DLN 9357". It was agreed by Mr Levett and his wife Mrs Levett who both gave evidence for the respondent, that that is the company name and that the document purports to be an invoice for the transaction. Curiously however Mr Levett, who is also illiterate, indicated that he did not deal with any documentation and did not sign documents, yet the invoice has next to the printed word "signature", a signature which purports to be a signature of a person named Bruce Levett who has the position of owner. When confronted with this document, both Mr and Mrs Levett indicated that the handwriting which purported to be Mr Levett's signature above his name was a forgery. It is noted that the spelling of the surname `Levett' on the invoice is incorrect. It is spelt `Levitt' whereas the correct spelling should be `Levett'. It is as I indicate curious to say the least that a finance company should advance finance relying upon proof of purchase of a vehicle by way of an invoice which is now said to be forged and not prepared or authorised by the car dealer. When this issue was raised it clearly had some impact upon the damages sought by the applicants against the respondent who at the hearing sought indemnity for any amounts which may be claimed by Esanda against the applicants and/or sought rescision of the contract. I expressed some doubts about whether a finance company advancing money based upon a forged document would be in a position where it may have other remedies which in turn could have an impact upon the right of the applicants to claim the damages to which I have already referred. Hence it was substantially for that reason that I decided to deal with the issue of quantum as a separate matter after dealing with liability.

18. The second applicant gave evidence which to a large extent corroborated the evidence of the first applicant insofar as reference was made to the All States Cover.

19. It should be noted at this point that the respondent through Mr Levett and Mrs Levett, together with another witness, a car salesman, Mr Strickland, confirmed that in the office there are booklets concerning All States Warranty. Mr Strickland confirmed that from time to time this would be referred to in the course of negotiations for the sale of a vehicle. Mr Levett was adamant that at no stage would he have made the representation as that was not his business and matters of that kind were dealt with by his wife as part of the office finance and insurance business. However, Mr Levett agreed that the booklets were available for people to look at and in response to questions asked by the court, when confronted with the facts which were common ground that he reduced the price of the vehicle and contributed by way of a loan of a further $1,000 to ensure its finalisation and even advance one month for the comprehensive insurance, that if concern was expressed about potential repair costs, in the normal course he would as a matter of logic be inclined to refer to the All States Warranty which may allay any fears the prospective purchaser would have. He denied however that even in those circumstances that he would make a representation of the kind alleged.

20. Mrs Levett likewise denied the representation was made, though largely confirmed the facts that had been set out as common ground.

21. The respondents through the evidence of Mr and Mrs Levett as indicated, denied vehemently that any representation was made on this occasion and in particular drew comfort from the fact that the All States Warranty did not cover vehicles over 2 tonnes which would effectively exclude the vehicle which was the subject of this purchase. Both agreed however that this particular transaction was very much a rare occurrence as they did not normally trade in trucks of this size.

22. Mr Strickland, called on behalf of the respondents, unlike Mr Levett did indicate that from time to time the All States Warranty would be mentioned to prospective purchasers as another factor in the negotiations.

23. In the present case I accept the evidence of the applicants that a representation was made of the kind to which they have referred, namely that in the event of mechanical breakdown the vehicle would be covered by All States Warranty. I am strengthened in this view by the surrounding circumstances of the negotiations which involved a reduction in the price, a contribution by way of loan to finalising the agreement, efforts to obtain finance and finally even the advancing of an amount of one month's comprehensive insurance premium. It is my view that in the circumstances where you have both an illiterate customer and an illiterate dealer, that it is more likely than not that conversations between the two would touch upon the issue of the All States Warranty.

24. I accept the evidence of both applicants that neither had heard of the concept of `All States Warranty' prior to the day of the negotiations with Mr Levett. I further find that booklets were then available for perusal by potential customers and that Ms Demech did in fact read out terms of a booklet to Mr Van Halen, who in turn relied upon the details in that booklet and the representation made by Mr Levett on behalf of the respondent when he entered into the contract.

25. I am satisfied the representation was a representation which was in a sense vague to the extent that it did not have a time limit fixed upon it, but rather included a provision where a payment would be made, thought by Mr Van Halen to be part of insurance, which would then in turn cover the vehicle for any mechanical breakdown of a kind which ultimately happened in May 2000.

26. I prefer the evidence of the applicants to that of the respondents. In particular both Mr and Mrs Levett in my view tended to dismiss the possibility of the representation simply on the basis of the exclusion of vehicles over 2 tonnes rather than on what I regard as a recollection of the evidence as it occurred on this particular occasion. I am satisfied that for whatever reason the respondent through Mr and Mrs Levett was anxious to finalise the transaction and the degree of anxiety is clear from the manner in which the price was reduced and direct financial assistance given to the applicants.

27. In my view it is clear that in those circumstances it is more likely than not that the representation was made of a kind suggested by the applicants. I have some reservations in relation to the duration of twelve months which would have meant that the incident occurred just outside that period, but on balance I am prepared to accept that a representation was made that the All States Warranty would apply and that this would cover mechanical breakdown during the period of time when the NRMA premiums were paid by the applicants for the vehicle. Although that is a mistaken belief given that the All States Warranty is a separate insurance to NRMA, I am satisfied the representation was made and in the circumstances having been made in accordance with the law in relation to s.52 of the Trade Practices Act, I am satisfied it constituted misleading and deceptive conduct. I do not need to consider whether it was unconscionable conduct, though I do accept that there has been a breach of s.53(g) of the Trade Practices Act.

28. It follows that I should now hear submissions and deal with evidence concerning any loss and damage and other orders which should be made following these findings.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 8 May 2002