Beaton v Moore Acceptance Corporation Pty Ltd [1959] HCA 59; (1959) 104 CLR 107 (27 November 1959)

HIGH COURT OF AUSTRALIA

BEATON v. MOORE ACCEPTANCE CORPORATION PTY. LTD. [1959] HCA 59; (1959) 104 CLR 107

Hire Purchase

High Court of Australia
Dixon C.J.(1), Taylor(1) and Windeyer(1) JJ.

CATCHWORDS

Hire Purchase - Sale of goods - Implied warranties - Excluded in preliminary agreement between dealer and buyer - Effect of terms of preliminary agreement on subsequent hire purchase contract between finance company and buyer - General fitness for known purpose - Reliance on seller's skill and judgment - Implied warranty that goods free from defects - Whether finance company liable for breach - Action by finance company for arrears - Counterclaim against dealer - Right of defendant to counterclaim to deliver counterclaim - Rules of the Supreme Court (Vict.) O.XXI, rr. 11-13.

HEARING

Melbourne, 1959, June 9, 10, 11, 12;
Sydney, 1959, November 27. 27:11:1959
APPEAL from the Supreme Court of Victoria.

DECISION

November 27.
THE COURT delivered the following written judgment:
In February 1954 the appellant, who is a farmer and land clearing contractor Acceptance Company) a piece of equipment described as a Fowler Challenger tractor "with Moore hydraulic dozer attachment". So constituted the unit was a "bulldozer" and there can be no question that the acceptance company knew, as the appellant alleges, that he required the equipment for the purpose of using it in the course of earth-moving operations. In the Supreme Court it was found that by reason of proved defects it was unfit for this purpose but, for reasons which will appear, the appellant failed in his attempt to recover damages on this and other grounds which were then advanced. However, before reference is made to the manner in which the appellant's claims were framed and to the reasons why they failed it is necessary to mention that the appellant assumed possession of the tractor pursuant to a hire purchase agreement under which he was the "hirer" and the Acceptance Company was the "owner" and to recount the circumstances in which that agreement came to be executed. (at p114)

2. Apparently the appellant first contemplated the purchase of a tractor of this description in September 1953. In that month he had discussions with one, Gamble, who was the representative at Hamilton of Moore Road Machinery (Vic.) Pty. Ltd. (hereinafter referred to as the Machinery Company). In the following month Gamble took the appellant to the premises of the Machinery Company at Port Melbourne where they met Longden, a salesman employed by that company. Together with Longden they inspected a Fowler Challenger tractor and the latter informed the appellant that the Machinery Company's designing division was then engaged in designing a blade for attachment to the tractor so as to produce a bulldozing unit. So equipped it would, he said, be suitable for bulldozing work and he recommended such a unit as suitable for the appellant's purposes which had been made known to him. At the conclusion of the discussion the appellant signed a document called "Offer to Purchase". This document was addressed to the Machinery Company and requested the supply of: "One only Model Challenger I Crawler Tractor assembled, tested and in good order and condition, complete with tool kit and Instruction Book (hereinafter referred to as the Equipment), ex your store at Melbourne for which I agree to pay you the sum of 4,500 pounds TENT. for the absolute purchase thereof". The abbreviation "TENT." indicated that the price was tentative only and the documents specified "Finance to be arranged". Further, the offer was "subject to satisfactory demonstration". It should also be mentioned that by an endorsed condition all conditions and warranties implied by law were negatived and the warranty on "each new equipment set out in the Manufacturer's Official Instruction Book" was expressed to be "the only warranty recognized". When leaving the company's premises after signing this document the appellant was informed that he would be notified when a blade had been fitted to the tractor so that a demonstration might be arranged. (at p114)

3. A demonstration, in fact, took place on 11th January 1954. On that day the appellant together with Longden and Gamble went to a property at Wonga Park and whilst there the appellant operated the tractor. In the course of its operation certain defects were observed including the slipping of the left-hand clutch which resulted in the tractor persistently pulling to the left. But Longden reassured the appellant by informing him that he would receive a new machine and not the demonstration model. Two new machines, he said, were then on the water and the appellant would receive one of these. After this reassurance the appellant returned to the offices of the Machinery Company where he signed two further "Offers to Purchase". The first of these was an "Offer to Purchase" a Challenger Crawler tractor and a "Moore H.D.I. Trailbuilder" (i.e. the blade) for a total sum of 4,750 pounds. The document provided for an initial payment of 1,800 pounds but it made no provision with respect to the balance of the purchase money beyond specifying that "Finance will be arranged at time of delivery with Moore Acceptance Corporation". There was a purported acceptance of this offer by M.R. Broughton, the manager of the Machinery Company. This was signified by Broughton subscribing his name at the foot of the document where there appeared the words "Moore Road Machinery (Vic.) Proprietary Limited hereby accepts the foregoing offer to purchase". The second "Offer to Purchase" related to an Oliver Crawler Tractor which was the appellant's own property and the specified purchase price was 1,800 pounds. An initial payment of 900 pounds was provided for and "finance" as to the balance was, again, "to be arranged at time of delivery with Moore Acceptance Corporation". Apparently what was contemplated was that the appellant should satisfy his obligation to make the payment initially required by the "Offer to Purchase" the Challenger tractor by trading in his own tractor and that he should then execute a hire purchase agreement with respect to it. On this occasion the appellant was told that any hire purchase agreement subsequently executed would be with the Acceptance Company and that he would be required to give references concerning his financial standing. (at p115)

4. No moneys passed at this stage and the appellant returned home. Thereafter, shortly before 4th February 1954, the appellant was notified that the tractor was ready for delivery and he returned to the premises of the Machinery Company where he again saw Longden and Broughton. He was shown a Challenger tractor fitted with a dozer blade and told that it was his tractor. It had been freshly painted and looked new. But he was told that the blade was the same blade as had been attached to the demonstration model at Wonga Park. However the tractor was the demonstration model itself but the applicant was unaware of this and he was led to believe that it was a new tractor. After seeing the equipment he was taken to Broughton's office where he executed two hire purchase agreements. The first of these was a hire purchase agreement in respect of the Challenger tractor and it called for an initial payment of 1,928 pounds 17s. 3d. to be satisfied by the trading in of the appellant's Oliver tractor and payment of an amount of 128 pounds 17s. 3d. in cash. Thereafter, twenty-four monthly payments of 121 pounds 17s. 6d. were to be made, the first of which was payable on or before 4th March 1954. Under the agreement the hirer was entitled to terminate the hiring at any time by returning the goods to the owner and upon performance of all the stipulations and conditions in the agreement the hiring was to come to an end and the goods were, thereupon, to become the property of the hirer. This agreement was executed by Broughton on behalf of the Acceptance Company. (at p116)

5. The second hire purchase agreement related to the appellant's Oliver tractor and that agreement called for an initial payment of 918 pounds and twelve subsequent monthly payments of 80 pounds 13s. 10d., the first of which was also to be payable on 4th March 1954. The terms of this agreement were in other respects similar to the first hire purchase agreement and again it was executed on behalf of the Acceptance Company by Broughton. (at p116)

6. It remains to be said that when the appellant concluded his business that day he loaded the tractor on to his own truck and drove it to a property near Dunkeld where he was engaged in carrying out earth-moving operations. Thereafter the appellant retained possession of the tractor and during the next eighteen months the Machinery Company repaired it at various times. Payments of hire were made by the appellant in March, April and May 1954 and again in December of that year and January 1955 but by November 1956 payments were in arrear to the extent of 2,307 pounds 19s. 8d. (at p116)

7. Investigation of the circumstances in which the hire purchase agreements were executed might well raise doubts concerning their validity : cf. Price v. Parsons [1936] HCA 5; (1936) 54 CLR 332 and Boydell v. James (1936) 36 SR (NSW) 620 ; 53 WN 227 . But no such question has been raised by the parties and in view of the manner in which the case has been presented there is no occasion to pursue this point. Accordingly we shall proceed to deal with the case on the assumption that the relevant instrument, that is the first of the two hire purchase agreements, was at all times valid and effective. (at p117)

8. Reference to the foregoing matters has been necessary because of the rather complicated nature of the proceedings which have led to this appeal. Initially, proceedings were instituted by the Acceptance Company in November 1956 to recover arrears of hire and interest to the date of the writ totalling, in all, 2,678 pounds 3s. 0d. In answer the appellant, in substance, alleged that there had been a breach of an implied term or condition that the equipment should be reasonably fit to be used as a bulldozer in the course of earthmoving operations, that the subject matter of the hire purchase agreement was a new tractor and that a second-hand tractor had been supplied and, finally, that the equipment was not of merchantable quality in that it was defective in certain specified particulars. There is a degree of confusion in the manner in which the various claims are made but it sufficiently appears that they rested upon the allegation that a second-hand tractor had been supplied instead of a new one and that its defects were such as to render it, at one and the same time, unmerchantable and unfit for the appellant's declared purposes. These allegations were relied upon by the appellant both as a defence to the Acceptance Company's claim and as the foundation of counterclaims against it for damages. But at the trial it was conceded, and rightly conceded, that the allegations made by the appellant constituted no defence to the Acceptance Company's claim for the outstanding hire. Accordingly, the learned trial judge entered judgment for the Acceptance Company in the sum of 2,678 pounds 3s. 0d. together with interest on part of that sum, 2,307 pounds 19s. 8d. at the rate prescribed by the hire purchase agreement, namely 10% per annum, from the date of the issue of the writ until the date of judgment. It was not suggested on this appeal that the Acceptance Company was not entitled to recover its arrears of hire but the notice of appeal raised the contention that as the appellant was entitled to damages in an amount in excess of the arrears of hire and was entitled to set off the amount of his damages, interest to the extent of 293 pounds 7s. 9d. should not have been allowed. There is, however, no substance in this contention for so long as the appellant retained the tractor he was bound to make the payments reserved by the hire purchase agreement and if interest became payable according to the terms of that agreement the Acceptance Company was entitled to recover it. Payments in accordance with the provisions of the hire purchase agreement constituted the price of his continued retention of the tractor and it was not subject to diminution by reason of the appellant's outstanding claim for damages. Accordingly the learned trial judge was right in refusing to reduce the amount of the Acceptance Company's claim. (at p118)

9. Before dealing with the claims made against the Acceptance Company it is convenient to mention and dispose of two further matters. The first of these is concerned with the fact that the appellant did not, by his defence, counterclaim only against the Acceptance Company ; he also claimed damages from the Machinery Company alleging, in substance, that he had agreed to buy the tractor in question from that company as a new tractor and that in purported performance of the agreement for sale the Machinery Company delivered to him a tractor which was not new but second-hand. The appellant failed in this claim and although the notice of appeal formally asks that the relevant part of the order of the Supreme Court should be set aside, no ground is advanced as a reason why this course should be followed. Nor, upon consideration of the case, does any reason sufficiently appear, for the appellant's claim was, at the most, for the breach of an agreement which, by common consent, was superseded by the hire purchase agreement in question and which, therefore, was never carried into effect : cf. Drury v. Buckland Ltd. (1941) 1 All ER 269 . No claim based on deceit was made against the Machinery Company nor was it alleged that any warranty collateral to the hire purchase agreement was given by that company and in the circumstances the appellant's claim against that company was rightly dismissed. (at p118)

10. The second matter which it is convenient to mention at this stage is that the Machinery Company is said to have been joined as a party to the proceedings pursuant to O. XXI, rr. 11-13, of the Rules of the Supreme Court. When so joined that company counterclaimed against the appellant to recover the sum of 115 pounds 9s. 5d. for work done and materials supplied in repairing the tractor. The Machinery Company succeeded in this claim and obtained judgment against the appellant in the amount mentioned. But objection is now taken on the ground that such a claim was not permissible pursuant to the rules. There is, we should think, the gravest doubt whether the rules permitted the appellant to raise his claim against the Machinery Company by way of counterclaim (Furness v. Booth (1876) 4 Ch D 586 ; Harris v. Gamble (1877) 6 ChD 748 ; and Times Cold Storage Co. v. Lowther & Blankley (1911) 2 KB 100 ) but since it was dismissed and no attempt is now made to resuscitate it we need not further consider the matter. It is, however, necessary for us to deal with the contention that the rules did not permit the Machinery Company to counterclaim against the appellant. This problem may be dealt with briefly for there is long-standing authority in support of the appellant's contention. We refer to Street v. Gover (1877) 2 QBD 498 and Alcoy and Gandia Rly. and Harbour Co. v. Greenhill (1896) 1 Ch 19 which clearly establish that the Machinery Company's counterclaim should not have been entertained. (at p119)

11. In these circumstances the next problem in the case is to determine whether there should be implied in the hire purchase agreement any term or condition capable of supporting any of the appellant's claims against the Acceptance Company. Before us and, apparently, in the Supreme Court there was considerable discussion whether the common law rules relating to the implication in a contract for the sale of goods of a general condition that the goods shall be reasonably fit for a specified purpose apply with equal force to a hire purchase agreement relating to goods. On principle there is, we think, no reason whatever for thinking that they do not and we agree generally with the observations on this point made by Jordan C.J. in Gemmell Power Farming Co. Ltd. v. Nies (1935) 35 SR (NSW) 469 ; 52 WN 162 and by Lowe J. in Woods Radio Exchange v. Marriott (1939) VLR 309 . But it must be remembered that a prerequisite to the implication of such a general condition at common law was that it should appear, in effect, that the buyer had bought on the seller's judgment that the subject goods would answer a particular purpose. This requirement may be thought to raise a difficulty in the present case for upon the facts it is open to doubt whether it is possible to say that the appellant relied upon the skill and judgment of the Acceptance Company in this connexion. All of his preliminary discussions and negotiations were with the Machinery Company and although there can be no doubt that he relied upon the skill and judgment of that company's salesman there is no evidence which would justify the conclusion that Longden was acting for or, indeed, that he had any authority to act for, the Acceptance Company. Nor is there any evidence from which it may be inferred that when the appellant came to sign the hire purchase agreement he relied upon the skill and judgment of the Acceptance Company. Of course, it may well be that the giving by the Machinery Company of a collateral warranty might have been established by evidence in appropriate proceedings but this was not such a case and we are not at liberty to consider this question. Yet, if the learned trial judge's conclusion concerning the defective condition of the tractor was justified, the difficulty adverted to does not, we think, preclude the appellant from recovering damages under one of his counterclaims. (at p120)

12. Before proceeding to indicate why we think this is so, it is, however, necessary to advert to the ground upon which the learned trial judge dismissed the appellant's claims, for the line of reasoning which he followed would, if valid, mean not only that the circumstances excluded the implication of a general condition of suitability or fitness but also that no warranty or condition of any kind should be implied and this, of course, would be fatal to each and every one of the counterclaims. The learned trial judge "accepted the view of the nature of the warranty to be implied in cases of bailment enunciated by Jordan C.J. in Gemmell Power Farming Co. Ltd. v. Nies (1935) 35 SR (NSW) 469 ; 52 WN 162 as qualified by Lowe J." in the later case to which we have referred (1939) VLR 309 , and then stated that "as a general rule, when one person for value supplies a chattel to another to be used for an agreed purpose or for a purpose indicated by the nature of the chattel, he impliedly promises in the absence of some provision to the contrary (which may be either express or implied from the circumstances surrounding the hiring) that it is reasonably fit for such use". But he refused to imply any such condition in the present case because, in his view, the circumstances of the case were such "that no warranty of fitness should be implied". The consideration which ultimately induced this conclusion was that the original "Offers to Purchase" signed by the appellant contained provisions excluding all warranties or conditions implied by law and he felt "that it would not be right to allow the defendant to obtain the tractor on more favourable terms than had been agreed upon between himself and Moore Road Machinery (Vic.) Pty. Ltd. simply because he had elected to deal with the Acceptance Company and to adopt a hire purchase agreement as the "method of financing his acquisition of the tractor". It was, he thought, "unthinkable that Moore Acceptance Corporation Pty. Ltd. should be regarded as having given by implication any warranty of fitness in relation to this machine". With deference to the learned trial judge this line of reasoning was, in our view, fallacious. No doubt, if the appellant had purchased the tractor from the Machinery Company the existence of such a clause would have operated contractually to exclude conditions or warranties which might otherwise have been implied. But in the events which happened the clause could not have any such operation in relation to the Acceptance Company's obligations. The learned trial judge does not, of course, suggest otherwise; on the contrary, he relies upon the existence of the clause merely as one of the circumstances surrounding the execution of the hire purchase agreement. But even if it may be so regarded what inference, if any, concerning the intentions of the parties to the hire purchase agreement can be drawn from this particular circumstance? Perhaps if one were permitted to guess it could be said that it is probable that the Acceptance Company had no desire to accept any higher responsibility than that which the Machinery Company had purported to accept under the terms of the relevant "Offer to Purchase". But this is far from saying that the existence of the excluding clause in the "Offer to Purchase" negatived the implication in the hire purchase agreement of conditions which might otherwise be implied by law. Indeed, there is no reason to suppose that the omission from that agreement of an excluding clause was accidental and the contention may well be open that its omission, in the circumstances, showed that the substance of the clause to be found in the "Offer to Purchase" was not to form part of the appellant's bargain with the Acceptance Company. However this may be the circumstance relied upon does not, in our view, show that the parties intended to exclude conditions or warranties which might otherwise have been implied by law but, since there are difficulties in the way of establishing that the appellant relied upon the skill and judgment of the Acceptance Company, the counterclaims, so far as they are based upon the alleged breach of an implied condition of general fitness or suitability for a known purpose, must fail. (at p121)

13. But it must be remembered that goods may be unfit for a specified purpose either because they are defective or because the specified purpose is foreign to the purposes for which they may be efficiently employed. For instance, timber of a particular description may be eminently fit and suitable for some building purposes but quite useless for others. But if, as timber of that description, it is defective it may be quite unfit and unsuitable for any building purpose: cf. George Wills & Co. Ltd. v. Davids Pty. Ltd. [1957] HCA 6; (1957) 98 CLR 77 The latter example, of course, illustrates the complaint made in the present case for the tractor is said to have been unfit for the appellant's purposes because of proved defects and his right to relief did not depend merely on proof of unsuitability or unfitness in the general sense; in substance, he claimed damages on the ground that it was an implied condition of the hire purchase agreement that the tractor should be free from defects and that it was defective in specified particulars. Clearly, we should think, it was, at the least, implicit in the transaction that the tractor should be free from such defects as would make it unfit for use as the major component in a bulldozer and, equally clearly, the appellant was entitled to damages if the existence of such defects was proved. It may be that any such condition did not extend to latent defects not discoverable upon reasonable examination but whether this was so or not is of no consequence for the major defect revealed itself at the time of the demonstration on 11th January 1954 and the Acceptance Company supplied the demonstration tractor to the appellant who accepted it pursuant to the hire purchase agreement in the belief that it was a new tractor. (at p122)

14. In spite of the somewhat inartistic form in which the appellant's counterclaims were framed it was, we think, open to him to rely upon such a condition at the trial and, accordingly, the only remaining question is whether the evidence established a breach or breaches which entitled him to damages. On this branch of the case we see no reason to disagree with the finding of the learned trial judge that the tractor was so defective as to be useless as a bulldozer. We have reached this conclusion after full consideration of the evidence relating to the defects which he found to exist and after taking into consideration the various attempts which were made, unsuccessfully, to rectify them. (at p122)

15. That being so, the appellant was entitled to damages and since he retained the tractor and became liable to pay the total amount of hire under the hire purchase agreement the measure of damages applicable must be taken to be the same as that which is applicable in an action for breach of warranty on the sale of goods. That is to say, the appellant is entitled to recover the difference between the value which the tractor would have borne without the proved defects at the time it was supplied to him and its decreased value by reason of the defects. The learned trial judge found that the equipment was not saleable as a bulldozer but he assessed its breakdown value at approximately 2,000 pounds and, since its market value or list price as a new tractor appears to have been approximately 4,750 pounds and no claim appears to have been made for any consequential damages, the appellant is entitled to recover pursuant to his counterclaims the sum of 2,750 pounds. (at p123)

ORDER

Appeal allowed with costs. Order of the Supreme Court of Victoria discharged. In lieu thereof order that judgment be entered for the plaintiff upon the claim in its action for the sum of 3,067 pounds 13s. 2d. with costs of the action and that judgment be entered for the defendant Beaton upon his counterclaim against the plaintiff for 2,750 pounds with costs of the counterclaim. Order that the judgments upon the plaintiff's claim and the said defendant's counterclaim against the plaintiff be set off and that the plaintiff recover the balance only, viz., 317 pounds 13s. 2d. and be at liberty to issue execution therefor. The costs of such claim and counterclaim when taxed are to be set off and execution may be issued for the balance. Further order that the claim of the said defendant against Moore Road Machinery (Vic.) Pty. Ltd. and the counterclaim of Moore Road Machinery (Vic.) Pty. Ltd. be severally dismissed and that each of these parties abide their own costs of and incidental to such claims.