Findings
88 In my opinion the applicants are entitled to succeed against the first respondent. I am satisfied that Dixie Holdings contravened s 52 of the Act by representing to the applicants that the top speed of the Circa II was 35 knots, and that it could cruise comfortably at around 30 knots. I am also satisfied that Dixie Holdings contravened the same section of the Act by representing to the applicants that the engines of the Circa II were Detroit Diesel and that the boat was in "extremely good condition". The making of a representation constitutes engaging in conduct. Each of these representations was, in my opinion, a misrepresentation. The conduct of the first respondent in causing them to be made was misleading or deceptive, or likely to mislead or deceive - Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 at 87.
89 The true position was that there was a major design fault associated with the engines of the Circa II. Those engines were always likely to overheat when brought up to a speed of around 20 knots. In this case I need do no more than refer to contemporaneous documents. The log books speak for themselves; they paint a clear picture of the frustration which Mr Pottinger experienced in trying to keep the boat operating. They show that the engines frequently overheated, and occasionally broke down. I have no hesitation in accepting Mr Pottinger's evidence regarding this matter. I also accept the evidence of Messrs Hood and Grose, uncontradicted as they were, that the Circa II's engines were poorly designed and in need of constant repair and attention. These engines could not sensibly be described as being in "extremely good condition". The Circa II was, on the evidence, what colloquially would be described as "a lemon".
90 I accept the evidence of Ruben Fried, Morry Fraid and Zac Fried that their decision to purchase the Circa II was influenced to a considerable degree by representations made as to the speed at which the boat could travel. I accept the evidence of Ruben Fried that once it became clear that the boat could not exceed 20 knots he completely lost interest in it.
91 I am satisfied that the part of the second representation concerning the engines being Detroit Diesel was relevantly false. It was, in my opinion, a "half truth". I am satisfied that the applicants relied, in part, upon that representation in deciding to purchase the boat. Detroit Diesel was a name of repute in the context of diesel engines. Converted truck engines are hardly what the applicants expected to be getting when they purchased this very expensive, high speed luxury cruiser.
92 I am satisfied that in deciding to purchase the Circa II the applicants relied upon that part of the respondents' second representation as to its "extremely good condition". The fact that they engaged their own consultants who, it would seem, let them down by not alerting them to the problems with the boat's engines, is no answer to their claim. It does not constitute a break in the chain of causation - see Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 171. Moreover, taken in context, this representation was not mere "puffery" but a representation made seriously, and with the intent that it be acted upon. Even "puffery" may, of course, amount to misleading conduct - General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164.
93 In relation to the applicants' claim against Graham McDonald, I am not persuaded that he knew, at the time the first and second representations were made, that they, or any part of them, were false. The Circa II was little used in the six months or so that it was owned by Dixie Holdings. It was rarely, if ever, driven at any real speed. The problems with the engines would not be likely to have shown up. In any event, Graham McDonald did not operate the boat during that period.
94 I am not prepared to infer that Mr Pottinger told Geoff McDonald about the problems which he had experienced with the engines. Even if I were prepared to draw that inference, I would not infer that Geoff McDonald conveyed that information to his brother, Graham. In that regard I accept the evidence of Graham McDonald to the effect that he was unaware of the problems with the engines. I accept too the evidence of Geoff McDonald, and of Ian McDonald, that they did not know that the engines on the Circa II were inherently defective. I do so in part because I doubt that Ian McDonald would have purchased the Circa II for the price which he did ($575,000) had he had any inkling that the engines would have to be replaced in order for the boat to operate properly.
95 In my opinion there should be judgment for the applicants against the first respondent for most, but not all, of the repair costs incurred. I would disallow the last item claimed, being $10,990 paid on 22 September 1997 to Mobile Marine Repairs (Jason Grose's business). By the date that last repair was effected, the applicants should have known, well and truly, that it was pointless trying to repair the engines. Mr Grose certainly knew that they had to be replaced. Given that the applicants must have known by then that it was pointless spending any more money on the existing engines, but still made one last attempt at repairing them in order to be able to sell the boat, the first respondent should not be liable for what might be viewed as almost an act of folly on their part. Relief under s 82 of the Act is not, of course, to be confined by analogy either with actions in contract or tort - Marks v GIO Holdings Ltd (1998) 196 CLR 494. However, a causal connection must be established between the loss or damage suffered and the conduct done in contravention of the Act. That causal connection does not exist, in my view, between the misrepresentations made by the first respondent and the last repair item.
96 All other repair costs which were incurred prior to that last payment are, in my view, compensable. I accept the evidence that those repairs were carried out in a competent manner by qualified tradesmen, and that it was reasonable in the circumstances for the applicants to try to rectify the problems with the engines. That leaves a total of $56,232.03 for the costs of repairs incurred in 1996 and 1997. The first respondent should be required to compensate the applicants for the cost of these repairs.
97 I also find that the first respondent is liable to the applicants for the cost of replacement of the engines. The applicants actually spent $182,000 on new Detroit Diesel marine engines. However, the evidence before me was that these were a more expensive type than those which they had replaced. Engines comparable to those which were replaced, but which were manufactured by Detroit Diesel as marine engines, would have cost $142,000. I would allow that sum, together with the costs of installation (being $27,817.99) as damages for the replacement cost of the engines. From the total replacement costs of $169,817.99 I would deduct an amount of $10,000. That was said by Mr Grose to be the value of the old engines which are still owned by the applicants. Those engines may be sold at some stage. The total replacement cost of the engines would therefore be $159,817.99.
98 When the sum of $159,817.99 is added to the repair costs of $56,232.03 the total amount to be paid by the first respondent by way of damages is $216,050.02.
99 The applicants have also claimed interest. Order 35 r 8 of the Federal Court Rules provides that interest on a judgment debt is calculated at the rate of 10.5% per annum unless the Court determines that a lower rate should be applicable. The present application was filed in July 1998 and through no fault of any party has been in the list of cases awaiting hearing for a very considerable time. It would be unfair to the first respondent to fail to give consideration to that fact in determining the amount of interest which it should be required to pay in regard to the sum awarded as damages.
100 In the present case I propose to order that a lump sum of $20,000 interest be paid, pursuant to s 51A(1)(b) of that Act, to be included in the sum for which judgment is given. My reasons for arriving at the figure of $20,000 were debated fully during the course of the hearing and need not be set out here.
101 It is clear that the first respondent must pay the applicants' costs of and incidental to this proceeding. However, the applicants have failed in their claims against the second and third respondents. The quantum of costs separately incurred in relation to the second and third respondents would, in all likelihood, have been small. Rather than requiring the applicants to pay the costs of the second and third respondents, thereby introducing further complexity into this case, it was agreed by counsel that the most sensible course would be for me to adjust the amount of costs to be awarded against the first respondent. In doing so I have regard, of course, to the relationship which exists between Dixie Holdings and Graham and Ian McDonald. Accordingly, I order that the first respondent pay 80% of the applicants' costs of and incidental to this proceeding, such costs to be taxed in default of agreement. It follows that there will be no order that the applicants pay the costs of either the second or third respondent.
102 As regards the applicants' claim against Anthony Gripske, I consider that this claim must fail. I am not persuaded by the evidence adduced by the applicants that his report was prepared negligently merely because it failed to state clearly that the engines which he had examined were Detroit Diesel automotive engines which had been converted for marine use. I do not consider that, in the context of a brief report of the type which he was engaged to prepare, there was any obligation on his part to describe the engines in that way.
103 It was not suggested by the applicants, in the course of their closing submissions, that I should find that Mr Gripske was negligent in having failed to detect that they would constantly overheat, or that they were subject to the fundamental defects later identified by Messrs Hood and Grose.
104 Mr Gripske did not appear in this proceeding. He seems to have incurred some costs in the earlier steps of defending the claim brought against him, to which he is entitled. I would therefore order that the applicants pay the fourth respondent's costs, those costs to be taxed in default of agreement.
I certify that the preceding one hundred and four (104) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg.