Brownbill, A.V. & Anor v. Kenworth Truck Sales (NSW) Pty Ltd [1982] FCA 7

Federal Court of Australia|1982-07-01|Before: Sheppard J

Illegality - action for breacnes of some provisions of

Part V Division 1 of Trade Practices Act 1974, for negligent misrepresentation and breach of collateral contract - vehicle acquired by applicants from respondent on faith of allegedly false representations and promises - vehicle regularly driven in overloaded condition contrary to State legislation - vehicle acquired by applicants knowing that this would probably be the case - whether illegal conduct

Alan Victor Brownbill & anor. v. Kenworth Truck Sales (NSW) Pty. Limited

NEW SOUTH WALES DISTRICT REGISTRY No. G 63 of 1979 GENERAL DIVISION 3 BETWEEN ALAN VICTOR BROWNBILL and FREDERICKA KATHLEEN BROWNBILL Applicants AND KEMWORTH TRUCK SALES (NSW) PLY. LIMITED First Respondent McGRATH EQUIPMENT COMPANY PTY. LIMITED Second Respondent RULING JUDGE MAKING RULING: SHEPPARD J.

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

The action is to proceed. (For details of Court's

) NEW SOUTH WALES DISTRICT REGISTRY No. G 63 of 1979

ALAN VICTOR BROWNBILL and FRED&@RICKA KATHLS2N BROWNBILL

REASONS FOR DECISION ANNCUNCED CN 18 DECEMBER, 1981

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

The action 1S one 1n which the applicants sue tne res- pondent for damages. The causes of action are for alleged breaches of some of the provisions included in Part V Division 1

of the Trade Practices Act 1974, for a breach of an alleged

collateral contract and for negligent misrepresentation,

The subject matter of the causes of action is a large prime

mover acquired by the applicants in their business of long

distance hauliers for the purpose of hauling trailers of

various kinds. The applicants complain about 2a number of alleged

aefects in the vehicle which they say they were induced to buy

upon the faith of certain representations made to them on behalf

of the respondent. They also say that they entered into a

lease of the vehicle in consideration of a promise by the

first respondent that the vehicle was of merchantable quality.

They further say that representations made by the respondent

in relation to the quality of the vehicle were made negligently.

The causes of action based upon breaches of the Trade Practices

Act are plainly within the jurisdiction of this Court. There

remains a question as to whether the other causes of action

relied upon are within its jurisdiction. For the purposes

of this decision I have assumed (without deciding) that they are. After the hearing of the matter had proceeded for some

days it emerged from the cross-examination of the first

applicant that he had driven the vehicle over a lengthy veriod

when it was in a substantially overloaded condition. The

vehicle was repeatedly driven in contravention of New South

Wales legislation limiting the loads which vehicles may carry

on New South Wales main roads. To the deta1l of the evidence

in this respect and to the legislation I shall later refer. After this evidence had been given I raised with counsel

the question of whether the applicants could recover damages

in respect of loss of profits wnich could only have been made if the vehicle were used in this illegal way. I referred them to Smith's Newspapers Limited v. Becker (1932) 47 C.L.R. 279. I took this course because I con- ceived it to be my duty to do so, a question of illegality having arisen in the course of the evidence. There was no pleading by either party which raised the matter but, for the reason I have given, I raised it of my own motion.

After he had considered the matter further, counsel for the respondent announced that he wished to make sub- missions about the question of illegality although the entirety of the evidence in the proceedings had not concluded. He took the course he did because the litigation is complex and expensive and will, if 1t proceeds, last approximately a further three weeks. It was agreed that no further evidence would be given on the question by either party.

Counsel has raised the point without any matter in the respondent's defence relating thereto. He has, however, offered to formulate an amendment to the defence in order to raise the point that he has argued. On reflection I think the defence should be amended to raise the point specifically. I am particularly of that view because the

point argued by counsel for the respondent is far more

fundamental than that raised by me. Furthermore, it does not necessarily arise, as the point on damages in my opinion arises,on the face of the proceedings. When the defence has been amended to raise the point I shall make an order pursuant to Order 29 Rule 2 of the Rules for the decision of the question raised separately from other questions in the proceedings and direct that that question be determined first. That formality and the formality of amending the defence can be attended to after the publication of these reasons.

The point relzed upon by the respondent is that the applicants acquired the vehicle for the avowed purpose of using 1% illegally on New South Wales roads in a business venture that depended for its success upon such illegal use. It is the respondent's submission that in those circumstances there can be no recovery by the applicants of damages for any of the causes of action upon which they rely. Their remedies, so it is contended, are taken away. In order to deal with the point which is relied upon it 1s necessary to refer in a little detail to the relevant New South Wales legislation and to the evidence of illegal conduct which there 1s.

the applicants also acquired a trailer which was capable

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

The evidence establishes that for approximately four months after the acquisition of the prime mover the first applicant drove it hauling the trailer in a substantially overloaded condition. For the main part his loads consisted of grain of various kinds but he also carried sand, soil and blue metal. The prime mover was acquired late in March 1977. From about the end of July 1977 the nature of the loadséarried changed to commodities of a more general kind. Although there is some evidence of overloading, 1t does not disclose the very substantial overloading which occurred in the first four months of operations.

prime mover and trailer was 16 tonnes. Pursuant to powers conferred by the Main Roads Act 1924 (N.S.W.)s.51 and the Local Government Act 1919 (N.S.W.) ss.575-579, the

Governor in Council has made Orainance No.30C. It provides

for the maximum weight of loads on vehicles on main roads

and on bridges forming part thereof. Clause 2 of the Ordinance defines "loaded weight" to mean the total weight, determined in accordance with the Ordinance of any vehicle

load carried by any vehicle, that is the payload. Clause 7 of the Ordinance provides for the maximum loaded weights for vehicles and the sum of the axle loads of groups of axles thereon For present purposes it 1s only necessary to refer to the provisions which limit the maximum weight which may be carried by vehicles. It is not necessary to refer to the sum of the axle loads of groups of axles. Clause 7 provides that a person shall not drive or draw or cause to be ariven or

drawn on any main road any pneumatic tyred vehicle if the loaded weight of the vehicle exceeds the loaded weight prescribed according to the distance between the extreme

axles of the vehicle as set out in a table which 1s

appended to the clause, The relevant distance 1s established as being 13.63 metres. The vehicle (including the trailer) was fitted with six axles. The table provides that where

the distance between the extreme axles of a vehicle exceeds

13.5 metres but does not exceed 13.8 metres and the vehicle

has six axles its loaded weignt must not exceed 35.6 tonnes. It follows that the maximum weignt or payload which the vehicle 1n question could lawfully carry was 19.6, say 20,tonnes,

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

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

He had driven his previous vehicle in a similarly overloaded

The first applicant readily agreed with a suggestion put to him that "the set uo" after he acquired the vehicle and trailer was a set up which worked on the basis that he would cart about eight to ten tonnes overload of grain on the relevant gourney. After that concession the following appears, "That 1s the way you set it up - that is correct yes", He went on to concede that in order to carry grain economically he needed to run overlcaded and that if he did not he could not make anything out of it. He added, "You would exist, but you did not make anything out of it". Later he made it clear that nis claim was that he and his wife were forced out of the grain business because of defects in the vehicle. The inference is that they would have con- tinuea to haul grain if it had not been for the defects in the vehicle which developed.

Although that 1s the tenor of the first applicant's evidence, there 1s a difficulty about accepting it at its face value at this stage of the case. That is because of cross-examination of him designed to show that he left the grain haulage business, not because of a defective vehicle but because of a fall off in the availability of such work. That 1s an issue upon which tore evidence 1s to come and upon which I have not as yet heard counsel.

Evidence of weights carried by the first applicant after

he gave up the grain haulage business is scant. Moreover,

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

The two matters to which I have referred may, 1n my opinion, be significant for the point here to be decided. If the applicants left the grain haulage business because it was unprofitable, and if, after July 1977, they carried on their business lawfully, the legal position may well be different from what 1t would have been if they had been engaged from first to last in a totally unlawful enterprise. I put these matters on one side for the time being. I can now go to a consideration of the submissions of law made by counsel.

The primary submission of the respondent was that although the contract and other transactions whereoy the

vehicle had been acquired were perfectly legal the underlying

purvose of the applicants in acquiring the vehicle was

an illegal one with the result that they were denied any curial remedy. In support of this proposition counsel relied on a number of authorities, the first of which

case the plaintiff was a landlord who wished to deceive

premises. It was not unusual for lessors and lessees to enter into two agreements, one being an agreement for a lease and the other being an agreement for the provision of services. In the case in question, however, both agreements, subject to a minor exception, obliged the land- lord to provide the same services so that, subject to that exception, the agreement for services conferred upon the defendant no benefit other than that which was conferred by the agreement for lease. The plaintiff brought an action to recover the amount due under the agreements. A plea of illegality was raised and upheld. The court found that the plaintiff nad attempted to perpetrate a gross fraud upon the rating authorities and, through them, upon the Inland Revenue. In the course of its jgucgment the court

act that 1s illegal or immoral or contrary to public policy, or to do any act for a consider-~ ation that is illegal, immoral or contrary to public policy, is unlawful and therefore void. But it often happens that an agreement which in itself 1s not unlawful is made with the intention of one or both parties to make use of the subgect matter for an unlawful purpose, that is to say a purpose that is illegal, immoral or contrary to public policy. The most common instance of this is an agreement for the sale or letting of an object, where the agreement 1s unobjectionable on the face of it, but where the intention of both or one of the parties is that the obgect shall be used by the purchaser or hirer for an unlawful purpose. In such a case any party to the agree- ment who had the unlawful intention is precluded from suing upon it. Ex turpi causa non oritur actio. The action does not lie because the Court will not lend its help to such a plaintiff. Many instances of this are to be found in the books."

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

the plaintiff was endeavouring to enforce by action an agreement, or a clause in an agree- ment, which was tainted by the unlawful

intention of the plaintiff, or the unlawful intention of the defendant known to the plaintiff, as to the purpose for which the subject matter

of the agreement was to be used. To such an action the maxim, ex turpi causa non oritur actio applies. But the maxim does not require, nor

does the language of it suggest, that a com- pletely executed transfer of property, or of an

interest in property, made in pursuance of such an agreement must be regarded as being invalid."

resolution of the problem in Alexander v. Rayson but it is not relevant to the present problem.

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

Alexander v. Rayson was applied by the Full Court of the Supreme Court of New South Wales in McCarthy Bros. (Milk

Vendors) Pty. Limited v. The Dairy Farmers' Co-operative

Milk Company Limited (1945) 45 S.R.(N.S.W.) 266. There

the plaintiff sued the defendant to recover rebates alleged

to be receivable by it under an agreement to purchase from the defendant milk required for its business as a milk vendor. The defendant pleaded, inter alia, that the plaintiff was not authorised to carry on its business of milk vendor by a certificate of registration as required by the Milk Act 1931. On demurrer it was held that since the business was carried on without the authorising certificate it was an illegal business and the plaintiff was precluded from suing upon the agreement. In the course of its judgment (delivered by Sir Frederick Jordan C.J.) the Court cited the two passages from Alexander v. Rayson earlier cited 1n these reasons.

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

An alternative submission relied upon by counsel for tne respondent was that at the least the applicants' claim for damages must be seriously affected by the illegality which was involved in the purpose for which they acquired the truck. Certainly, so he submitted, the applicants

ought not to be entitled to recover anything for loss of

profits. This submission was along the lines of the point raised by me with counsel. Although the submission was put, it was made clear by counsel that it was to be regarded Yery much as "second best", It was, so he said, the very least to which his client was entitled.

Counsel for the applicants emphasised the fact that the causes of action in the present case were not, except in one instance, for breach of contract. They were either statutory causes of action based upon alleged breaches of the Trade Practices Act or a cause of action in negligence. He submitted that as regards these causes of action it was inappropriate to have regard to the authorities relied upon by counsel for the respondents. He submitted that so much was clear from the decisions of the High Court in Smith's Newspapers

Limited v. Becker (supra) and Neal v. Ayers (1940) 63

C.L.R. 524. The former was an action for defamation

and the latter an action for deceit. In a similar category was another defamation case, Kings Cross Whisper Pty. Limited v. Ray (1972) 72 S.R. (N.S.W.) 339. So far as the count in contract was concerned counsel submitted

that there was nothing 1n the provisions of the Ordinance of which the applicants were in breach which indicated

that it was the intention of the draftsman that civil rights should be affected by any breach thereof. Reliance

was placed, inter alia, upon St. John Shipping Corporation v. Joseph Rank Limited (1957) 1 Q.B. 267, Archbolds

(Freightage) Limited v. S. Spanglett Limited (1961) 1 Q.B. 374

and Yango Pastoral Company Pty.Limited v. First Chicago Australia Limited (1978) 139 C.L.R. 410.

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

In the Smith's Newspapers case the plaintiff was a doctor of medicine of a German university. He had attempted unsuccessfully to register himself as a medical practitioner under the law in force in South Australia where he lived. Nevertheless he practised medicine and in contra- vention of the legislation held himself out as qualified to practice. The aefendant published an article about him in its newspaper. The plaintiff complained that the article described him as a person with a discreditable past, who treated patients in an incompetent manner and with a reckless indifference to the dangerous character of a particular drug which he prescribed. It was held that a person who pursues an unlawful vocation or engages in unlawful acts or trans- actions could not maintain an action for libel regarding his conduct in such vocation, acts or transactions, but that that did not deprive him of his absolute right to his personal character and professional reputation unaffected by defamatory statements. The defendant could not therefore rely upon the plaintiff's illegal acts as affording a defence to the action because the libel affected the plaintiff not only in

the vocation he was illegally carrying on but in his private

character also. It followed that the question of illegality was relevant in relation to the amount of damages which the plaintiff was entitled to recover but 1t did not take away his right to sue. In the course of his judgment Rich J. said (p.288) that the plea of illegality, however relevant on the question of damages, must fail both because the libel was not confined to conduct arising in the course of comnitting the unlawful acts or to disparaging a reputation derived from unlawful practices. He added that it was not defamatory merely because it reflected upon the plaintiff in the way of his trade or vocation. It would seem to follow from what his Honour said that if the defamatory matter had reflected only upon the plaintiff in relation to "a reputation derived from unlawful practices", he would nave been held not entitled to recover any damages. But it may be that his Honour did not intend to say that the cause of action could not be relied upon; rather the damages would have been nominal only. To the same effect is the judgment of Dixon J.(as he was). He said (pp.298-299):

ation will seldom occur without an unlawful holding out, but the Legislature does not

is not confined to statements about or obser- vations upon the conduct of the respondent in infringing the law, or upon what may be described as the actions which constitute the parts and details of that conduct or are naturally associated with it. The more serious imputations are concerned with things which would be as likely or as unlikely to occur whether he did or did not violate the Medical Practitioners Act 1919 in the course of

his practice in the treatment of diseases. Accordingly, the unlawful conduct of the respon- dent does not afford a defence to the appellants. It goes to damages only."

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

In Neal _v. Ay&rs (supra), which, as I have mentioned, was an action for deceit, the plaintiff sued the defendant in respect of the purchase from the defendant of the lease, licence, goodwill and furniture of a hotel. The plaintiff alleged that she was induced to enter into the contract upon the defendant's false representation that the hotel takings were about £100 a week of which at the most the takings derived from after-hour trading were £15 or £20 a week. The trial judge non-suited the plaintiff because, in his view, the action was based on illegality. The High Court held that the cause of action was not founded on illegality. The representation was material as an inducement to a

purchaser buying the hotel ratner for the sake of lawful

than unlawful trading. The subject matter of the contract

was the sale and purchase of the hotel in the ordinary course

of business. The fact, known to the vendor, that the plaintiff intended to continue for a time the practice of unlawful

trading was not enough to stamp the whole transaction with

unlawfulness. Starke J. referred to Pearce v. Brooks (supra)

and some other authorities. He continued (pp.528-529):

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

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

was itself unlawful it might well be that none of the money expended for the purpose of obtaining it could be recovered, even against a fraudulent wrong- doer. In order to oring the case under this nead it

to some extent the expectation that customers would resort to the site for the purcnase of liquor after hours increased the price which the plaintiff agreed to pay. Even so we do not think that the contract of sale could be regarded as unlawful or as relating to an unlawful subject matter. It is after all a contract for the sale and purchase of the lease, licence and furniture of a hotel. These are assets of an ordinary character, and the fact that the vendor during her period of possession did break the licensing law and the purchaser intended during her period of possession to follow her example could not make the subject matter of the contract an unlawful one."

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

"The substantial purpose of tne contract was to transfer the property on which a business was carried on and was to be continued. The fact that on and from the property the purchaser intended for a time to exceed the limits within which she could lawfully trade, could not invalidate the whole transaction, notwithstanding the vendor's knowledge of her intention. Her intention to con- tinue for a time the practice of unlawful trading does not go to the substance of the transaction. It 1s an incident which provided none of the inducement for her to enter into it, if her evid- ence is to be believed. It appears to us to be extrinsic to the dealing which forms the foundation of the contract and of the inducing causes and therefore not to corrupt the contract."

After I had reserved my decision I came across two further

authorities which I regard as relevant. Through my associate I notified counsel of these authorities. Written submissions were made about them.

The first is Le Bagge v.Buses Limited (1958) N.Z.L.R.630.

In that case the plaintiff brought an action under fatal accidents legislation for financial loss suffered by

her and the children of a marriage with the deceased

who had been killed in an accident negligently caused

by the defendant. A number of matters are dealt with

it 1s to be noted that transport licensing regulations provided that it should be a condition of every licence for a goods service that the licensee should not drive

or cause or permit any person employed by him or subject to his orders to drive any vehicle used under the authority of the licence so that the driver had not at least 24 consecutive hours for rest in any period of seven days. The deceased employed no labour and himself had driven his truck for seven days each week for the purpose of fulfilling his milk contract which occupied him for about 3% hours each morning. It was held by the Court of Appeal in New Zealand that as the plaintiff did not in any way seek to enforce the contract in her action and she did not have to make the illegal earnings part

of the cause of action but as she merely referred to such earnings in aid for their evidentiary value as to the

earnings of the deceased, her cause of action, being

distinct from any right possessed by the deceased, was free and unaffected by any illegality arising from the fact that the deceased in the performance of the contract infringed the regulation. The defendant had asked for a direction as to damages. This was refused and held by the Court of Appeal to have been rightiy refused.

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

loss of earnings were proper to be considered by the jury

Neither Smith's Newspapers Limited v. Becker nor Neal v. Ayers was referred to in the judgments in the

two cases, It would seem that in btoth cases the fact that there was not to be discerned any legislative intention to prevent the recovery of charges made by the deceased in the one case and the plaintiff in the other was largely determinative of the outcome. The decision

in the St. John Shipping Corvoration case (supra) is

referred to in the New Zealand case and that decision along

with the Archbolds (Freightage) Limited case (supra) is

referred to in the Victorian case. In that case reference

was also made to Henwood v. Municipal Tramways Trust (1938)

60 C.L.R. 438. That was a case where a passenger in a tram, contrary to a regulation made in that behalf, lent over a guard rail. He was Killed when his head came into contact with a stanchion. His widow was held entitled to recover because there was no discernible intention on the part of the legislature to bar recovery in such a case. These cases, as well as the later decision of the High Court in the Yango Pastoral Company case (supra), are in my respectful opinion in a different category from cases of this kind. They were concerned with the construction of particular legislation in order to determine whether 1t

was the intention of the legislature to deprive a person

guilty of a breach of it of redress for a breach of contract or, in the Henwood case, for negligence. Here no such question arises. What the respondent says is that the underlying purpose of the applicants in acquir- ing the vehicle was an unlawful one, namely to use it for the unlawful purpose of carrying loads in excess of those permitted by law. No question of the construction of Ordinance 30C for the purpose of determining whether a person in breacn of it is deprived of a cause of action arises. The position would be otherwise if the applicants were suing a customer for freight earned on one of their unlawful journeys. But here the problem is to determine what flows from the evidence that the vehicle was acquired, at least 1n part, for the purpose of unlawful operation on New South Wales roads.

The distinction between the two classes of case 15,

I think, pointed up in a dictum of Jacobs J. in the Yango

Pastoral Company case. He said (139 C.L.R. at p.432):

"In other cases the prohibition against carrying on a business may not be able to be construed as either an express or implied prohibition against the making of a particular contract. Nevertheless in such a case the courts may not enforce such a contract but, if they do not, it is not because the contract itself is directly contrary to the provisions of the statute by reason of an express or amplied prohibition in the statute itself but because it 1s a contract associated with or in tne furtherance of illegal purposes, for instance, the purposes of a business being carried on

lllegally; McCarthy Bros. Pty. Ltd. v. Dairy Farmers' Co-operative Milk Co. Ltd. One then

"enters the field of contracts not themselves unlawful but made for an illegal purpose. Of these the classic case is Pearce v. Brooks. The refusal of the courts to regard such con- tracts as enforceable stems not from a legis- lative prohibition but from the policy of the law, commonly called public policy."

In my opinion the relevant authorities are the Smith's Newspapers case and Neal v. Ayers. These establish that in a case such as the present an applicant or plaintiff suing for a civil wrong - I am not yet dealing with causes of action in contract - will not be deprived of his remedy or have his damages reduced to a nominal sum, if the enterprise which he has acquired or carries on is intrinsically lawful and capable of lawful operation. He may be prevented, as was the position in the Smith's Newspapers case, from recover- ing such portion of his damages as depends upon the unlawful carrying on of a vrofession or business. But, subgect to that qualification, he retains his rignt to remedies in respect of wrongful conduct which hes adversely affected the subgect matter of the contract, for example, the hotel in Neal v. Ayers or the orime mover in the present case. Furthermore, I think it follows from what was decided in the Smith's Newspapers case and Neel v. Avers that, to the extent

that he does in fact carry on the business lawfully and his

profits are shown to have been affected adversely by the

defendant's wrongful conduct, he will not lose his right to damages in respect of that head of claim.

Here there are two heads of damage which, subject to other matters in issue in the proceedings being decided in their favour, the applicants are entitled to claim. There may be others as well. As earlier mentioned there 1s no evidence of illegal conduct after the first four months of operation of the vehicle. If,as a result of wrongful acts on the vart of the respondent, the applicants have suffered losses of profits after that initial period, there is in my opinion no reason, based on considerations of illegality, why the applicants should not recover damages in respect of such loss. Then it should Le mentioned that one of the claims arises out of a representation alleged to have been made by the respondent as to the value of the vehicle. it is alleged by the applicants (althougn denied by the respon- dent) that the respondent said that the vehicle would be a good investment because it was being acauired cheaply and could be expected to hold its value. In my opinion no illegal purpose for which the applicants may have acauired the vehicle could defeat a claim for damages for the alleged falsity of that representation. It was lawful for the applicants to acquire the vehicle and 1t was lawful for them to have it in their possession and to operate it. The

purpose for which they acquired it, whether unlawful or not,

is an irrelevant consideration when one comes to consider this head of claim.

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

My conclusion in this regard may run counter, I think, to the decisions in Le Bagse v. Buses Limited and Mills v. Baltis. Those decisions provide support for the view, not only that the causes of action are not taken away, but also for the view that damages may be recovered in respect of the carrying on of an unlawful activity. To the extent that the two cases so decided, they are contrary, in my opinion, to the Smith's Newspapers case and probably also to

Neal _v. Ayers, both of which cases are binding upon me,

My reservation in relation to Neal _v. Ayers arises because

of the terms in whicn some of the dicta therein are expressed. But the court was not concerned with the question of damages. It was only concerned with the question of wnether the plaintiff had a remedy. The plaintiff had been non-suited at first instance so that all that the High Court could do was to order a new trial. Notwithstanding the way in wnich the judgments are expressed, no intention 1s revealed to

depart at all from what was said in the Smith's Newspapers

case which was referred to in argument (63 C.L.R. at p.526). It remains to consider the cause of action for breach of a collateral contract. In my opinion the respondent is on much firmer ground when one comes to consider the sub- mzssion it makes in relation to the cause of action based on contract. But for two reasons I do not propose to express a final view on the matter at this stage. Firstly, the matter may never arise, Collateral contracts or warranties are never easy to establish, The appiicants may, in the end, fail to persuade me that there was here made any such contract or warranty. Secondly, a determination of the matter now would involve my reaching some final conclusions

on the dominant purpose and object of the applicants in

acquiring the vehicle. The evidence on that aspect of the matter is probably complete, but to the extent that it becomes necessary for me to consider what finding should be made, it is a matter which I con- sider best left to be dealt with at the end of all the evidence. Resolving the contract question now will not lead to the overall resolution of the litigation which will need to proceed, in any event, on the remaining causes of action. If I had taken a different view in relation to the causes of action based on breaches of the Trade Practices Act and negligent nisrepresentation, the same problem would have arisen. It exists because of the evidentiary difficulty to which I have referred on p.8 of these reasons. This was not a matter much canvassed in counsels' submissions. If I haa been against the applicants on the principal argument, I would not have been prepared to dispose of the matter without hearing counsel further on this question.

For the reasons I have given, the primary submission made by counsel for the respondent was rejected. When

I announced my decision to this effect on 18 December, 1981,

I said that the matter would proceed to a final hearing on all issues. I also said that I would make no formal order giving effect to my conclusion. Thus no time for appeal has or will run until final judgment in the proceedings is entered.

Since the announcement of my decision the further hearing of the proceedings nas been fixed to commence

| cerury that this and the 8 preceding pages are a true copy of the reasons for judgment herein of The Honourable

At a glance

Court

Decision date

Before

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Source

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Judgment (173 paragraphs)

Cited By (1)