Gherm v Pesl

Supreme Court of NSW|2005-12-16|Before: Bell J

DECISION : Verdict and judgment for the second and third cross-defendants; The cross-claimant is to pay the second and third cross defendants' costs.

Trade Practices Act 1974 (Cth) LEGISLATION CITED : Workers Compensation Act 1987

Bryan v Maloney (1994-1995) 182 CLR 609 Chappel v Hart [1998] HCA 55: 195 CLR 232 Clarke v Army and Navy Co-operative Society Ltd [1903] 1 KB 155 CASES CITED : Cole v South Tweed Heads Rugby Club [2004] HCA 29; 217 CLR 469 Grant v Australian Knitting Mills Ltd [1936] AC 85 Rivtow Marine Ltd v Washington Ironworks (1973) 40 DLR (3d) 530

Ivan Gherm (Plaintiff) J & V Pesl Pty Limited (Defendant/Cross Claimant) PARTIES : Ray Smith Tractors Pty Limited (Second Cross Defendant) Ray Smith (Jnr) Pty Limited (Third Cross Defendant)

S D Rares SC / L J Ellison (Cross Claimant) COUNSEL : P G Mahony SC / G Young (2nd and 3rd Cross Defendants)

Rankin Nathan Lawyers (Cross Claimant) SOLICITORS : Thorntons Lawyers (2nd and 3rd Cross Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

JUDGMENT 1 BELL J: On 25 March 1998 the plaintiff, Ivan Gherm, suffered injury in the course of his employment as a mechanic with J & V Pesl Pty Limited (Pesl). He was servicing a heavy industrial rotary grass slasher that was suspended at an angle of 45° from the ground when it fell on him. A lifting bracket attached to the gearbox housing was taking the weight of the slasher. Mr Gherm commenced proceedings against Pesl claiming damages for his injuries. Pesl brought a cross-claim against Howard Australia Pty Limited (Howard), the first cross-defendant, Ray Smith Tractors Pty Limited, the second cross-defendant and Ray Smith (JNR) Pty Limited, the third cross-defendant (I will refer to the second and third cross-defendants collectively as the Smith companies). The cross-claim was brought against Howard as the manufacturer of the slasher and against the Smith companies on the basis that one or other was the supplier. 2 The principal proceedings between Mr Gherm and Pesl have been settled. A consent judgment was entered in favour of Mr Gherm in the sum of $950,000 clear of payments under the Workers Compensation Act 1987 (NSW). The workers' compensation payments were $115,725. Total liability was in the amount of $1,065,725. 3 At the time the cross-claim was brought those advising Pesl believed that Howard was the manufacturer of the slasher. It was later learned that the manufacturer was Howard Rotavator Pty Ltd (Howard Rotavator) and that Howard had been incorporated in June 1985 to acquire the assets of Howard Rotavator in receivership. Proceedings against Howard have been settled. This judgment deals with the cross-claim against the Smith companies.

4 Pesl cross-claims against the Smith companies for (i) negligent misrepresentation, (ii) misleading and deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) (the TPA) and (iii) negligence. Pesl contends that the Smith companies owed it a duty to warn of a danger inherent in the use of the slasher of which the Smith companies became aware after the sale. Claims were also pleaded under s 74B and s 74D of the TPA but these were abandoned at the trial. 5 The representations that give rise to claims (i) and (ii) related to the use of the lifting bracket to support the weight of the slasher including when the slasher was raised from the ground to service it. Three representations are pleaded: (a) The Slasher was (able) to be lifted by means of a chain through the strap (being the strap which came away with subject incident), and then lifting the unit with the tractor bucket while chocking the back wheels of the Slasher. (b) If the Slasher needed to be serviced it could be lifted off the ground in the manner noted in (a) above. (c) The employee lifted the Slasher from the table top of the truck by the means noted in (a) above. As it was lowered to the ground the employee told Joe Pesl, of the Cross Claimant to chock the (rear) wheels. The employee advised when the Slasher was still suspended "This is the service position". He said, "Use this hook (referring to the strap). The Slasher is balanced this way. It will stay at 45°".

6 Pesl contends that the representations were made in the course of trade and commerce and that it relied on them and used the demonstrated method when servicing the slasher. The representations are said to have been negligently made (and to have been misleading or deceptive) in that the lifting bracket and the bolts attaching it to the slasher were not able to take the weight of the slasher during its life. 7 The slasher was delivered to Pesl around February 1982. In January 1993 Howard issued Service Bulletin 37, which warned that the lifting bracket was not to be used to support the weight of the slasher. Howard brought Service Bulletin 37 to the attention of the Smith companies. It was not brought to Pesl's attention. The failure of the Smith companies to bring the contents of Service Bulletin 37 to Pesl's attention gives rise to the claim in negligence. Pesl also pleads that the failure of the Smith companies to recall the slasher was negligent, although this aspect of the claim was not pursued at the trial. 8 Pesl claims complete indemnity or contribution to such extent as appears just and equitable having regard to the liability of the Smith companies for the injuries to Mr Gherm, together with an order that the Smith companies pay to it an amount equal to the payments made by it to Mr Gherm under the Workers Compensation Act and the Workplace Injury and Management Act 1998. Damages are claimed pursuant to ss 82 and 87 of the TPA. 9 Josef Pesl, a Director of Pesl, and Ivan Gherm gave evidence on Pesl's behalf. Raymond Smith, a Director of each of the Smith companies and Glen McCarthy, a Senior Inspector with WorkCover, gave evidence on behalf of the Smith companies. I considered that each of the witnesses was doing his best to give truthful evidence. In written submissions on behalf of Pesl it was contended that Mr Smith had been an unsatisfactory witness. His evidence concerning (i) a statement made to him by a Howard sales representative and (ii) whether he had received amended Service Bulletin 37 in 1998 was said to support this submission. Generally, it was put that Mr Smith's demeanour was indicative of him as being unreliable. The basis for this latter submission was not developed in the course of oral submissions. I did not consider Mr Smith's demeanour to reflect adversely on his credibility or his reliability. It is likely that his memory of the statement made by the Howard representative is faulty, but that did not lead me to conclude that he was other than an honest witness. He made a number of concessions in the course of cross-examination, in circumstances in which I judged that he understood the potential significance of his answers: T 108.37; 108.41-43; 113.45-57. 10 Between 1977 and 1999 Mr Smith operated a business selling new and second-hand tractors and agricultural equipment, trading under the name Ray Smith Tractors. Ray Smith (JNR) Pty Limited was incorporated on 28 August 1964. Ray Smith Tractors Pty Ltd was incorporated on 19 February 1982. In the period 4 January to 19 February 1982 Ray Smith (JNR) Pty Limited operated the business of Ray Smith Tractors. From 19 February 1982 it held the motor dealer's license on behalf of the business but it did not otherwise trade and Ray Smith Tractors Pty Limited operated the business. 11 Josef Pesl operated a business as a contractor doing work that included earthmoving, concreting and posthole digging. On 4 January 1982 Mr Pesl purchased a number of items of equipment on Pesl's behalf from Ray Smith Tractors: a Belarus tractor, a seeder, a spreader, a post-hole digger and a Howard six-foot Rotaslasher (the slasher). He paid for the equipment but did not take delivery of it at the time. 12 The slasher was a heavy piece of industrial equipment which Ray Smith Tractors did not keep in stock. In Mr Smith's experience the market for slashers of this description was comprised of contractors and councils and they tended to turn them over after five years or so. 13 The equipment that Mr Pesl purchased on 4 January was delivered on different dates in the period that followed. Mr Pesl recalled that he had had to wait about a week for the slasher. The likelihood is that the interval between the purchase and delivery was somewhat greater. Records produced by Howard suggest that the slasher was manufactured in February 1982. 14 Mr Smith placed a special order for the slasher with Howard Rotavator. It was his practice to ring up Howard Rotavator and order the machine, giving details of the purchaser, and for Howard to arrange delivery. 15 Mr Pesl believed that a representative of Howard Rotavator delivered the slasher. He recalled that he had received a telephone call, which he presumed came from Howard Rotavator, to tell him of the proposed time and date of delivery. The slasher was delivered in a truck that was equipped with a Hiab crane. The slasher was lifted from the truck with the use of the crane. At the time the Smith companies made deliveries using a truck with a tilt tray and a winch. The Smith companies' truck did not have a Hiab crane. I am satisfied that a person retained by Howard Rotavator delivered the slasher to Pesl. 16 Mr Pesl was present when the slasher was delivered and he watched it being removed from the truck. It was lifted by means of a chain attached to a hook, which passed under the lifting bracket. When the slasher was on the ground suspended from the crane at an angle approximately 45°, the deliveryman told Mr Pesl that the rear wheels should be chocked with a piece of timber and that it could be serviced in this position. While the slasher was suspended, its weight being taken by the lifting bracket, the deliveryman and Mr Pesl stood under it and the deliveryman explained to Mr Pesl how to service the blades which were attached to a bar at the base of it. This method of servicing the slasher - suspending it at an angle to the ground with the weight being taken by the lifting bracket - was the only method demonstrated. 17 Mr Pesl has considerable experience in the use of heavy equipment. He considered that it was dangerous to service the slasher while it was suspended in this fashion (T 37.33-42). He relied on the instructions given to him by the deliveryman, which he believed to be those of the manufacturer. In an interview with Mr McCarthy, the WorkCover inspector, which was conducted on 5 August 1998 (the August interview) Mr Pesl was asked why the lifting bracket was selected to attach the sling to the slasher. He replied: "Because the deliverer of the manufacturer advised me at the time of delivery that this is where it should be lifted to obtain the correct angle of 45 degrees to work underneath it, and this is the way we have been doing it since. We have changed the blades six times and this was the seventh time." (R of I Q 28)

18 The slasher can be lifted from the ground by means of a three-point linkage system. Mr Pesl did not consider that raising the slasher from the three-point linkage would elevate it to a sufficient height to allow a mechanic access to the blades. In the August interview Mr Pesl said that the slasher was now serviced by being turned on its back. He had not considered this to be a practical means of servicing it in the period prior to the accident.

19 One safe means of servicing the slasher would have been to place it on an elevated platform and for the mechanic to access the blades from below it. Pesl did not have a workshop with an elevated platform, or a pit, that would enable mechanics to work on machinery from underneath.

20 In the sixteen years between the delivery of the slasher and the date of Mr Gherm's accident the blades were serviced on approximately six occasions. On each occasion the slasher was suspended with the weight being taken by the lifting bracket.

21 On the day of the accident Mr Pesl arranged for the slasher to be suspended from the ground in the way that had been demonstrated to him by the deliveryman. A chain was looped over one of the teeth of the bucket of the loader and the slasher was suspended from the chain. Its weight was taken by the lifting bracket, to which the chain was attached by a metal hook. The slasher was raised to an angle 45° to the ground. A piece of timber was placed as a chock behind the rear wheels. Mr Pesl also wedged a 35mm diameter x 1950mm long steel bar between the ground and the near side loader arm. He acknowledged in evidence that this was a safety precaution that had not been shown to him at the time of the demonstration. A shorter pinch bar was used to chock the front of the slasher. It stood on the ground and the slasher rested on it. This was a further measure that had not been shown to Mr Pesl at the time the slasher was delivered. Mr Pesl said the use of the bars prevented the slasher from rocking. In the August interview he described them as supporting the slasher (Q 33). 22 Pesl has always employed mechanics to service its equipment. During the period 1982 to 1998 Pesl employed two mechanics, Mr Gherm and Mr Pesl's son. Mr Gherm had been employed by Pesl for twenty-three years at the date of his accident. He is a qualified motor mechanic, experienced in the operation and maintenance of heavy equipment. 23 Mr Gherm believes that the day of his accident was the first occasion on which he had serviced the slasher while it was suspended from the loader. On previous occasions he had serviced the blades after they had been removed from the slasher. The slasher was already suspended by the chain attached to the lifting bracket when Mr Gherm was instructed to service it. Mr Pesl was present and he assisted Mr Gherm as he removed the bolts that held the blades. After this Mr Gherm told Mr Pesl to move out from under the slasher. He explained that he did this because he is a cautious person who would not take any unnecessary risk. Mr Gherm did not turn his mind to the risk of the slasher falling.

24 The slasher was used extensively by Pesl in the sixteen years prior to the accident. The blades were replaced on six occasions. The bolts that attached the lifting bracket to the gearbox housing had not been serviced. Mr Pesl had no recall of ever inspecting them.

25 WorkCover commissioned a report on the accident from Mr Martin, a mechanical engineer. Mr Martin examined the slasher. He observed that three welds had broken at the attachment points that can be seen in photographs 2 to 4, which are annexed to his report. The drive shaft cover to the slasher gearbox was in poor condition. Other than these faults, Mr Martin considered the slasher appeared to be sound for its age. Mr Martin also examined a failed bolt that was one of four bolts that located a guard on the gearbox housing. Two of these bolts held the lifting bracket. The failed bolt was one of these. It was in poor condition with rust evident in the threads, which had obvious wear and mechanical damage. Mr Martin concluded that the bolt had partially failed due to fatigue some time prior to the accident. The progression of a crack in the bolt would probably have been slow and was likely to have been produced by the vibration of the slasher during use. It is likely that the action of lifting the slasher overloaded the weakened bolt. This would have been compounded by lifting the slasher with the loader because of the jerky motion accompanying the lifting action. 26 The failed bolt was a grade 8.8, which equates to a bolt with a tensile strength of 80 kgf/mm. The nominal proof test load for this type of bolt is 3,380 kg and the expected nominal failure load is equal to 4,640 kg. The overall weight of the slasher was 608kg. Taking into account that two bolts held the lifting bracket in place, Mr Martin considered that the load placed on them was quite low compared to their expected failure load. 27 Mr Martin noted that there were more suitable lifting points that could have been used to raise the slasher safely. 28 Mr Pesl said that he did not receive the Howard Rotavator Owner's Manual at the time of the delivery of the slasher or at all. He received no documents from Howard Rotavator or Howard relating to the slasher. He understood that the slasher would be subject to a warranty. At the time he paid for the slasher Mr Pesl said that he was told by Mr Smith that he would post all the necessary paperwork to him. Mr Pesl said that he called into Ray Smith's Tractors the next time he went past their premises to follow up the matter of the missing papers. Mr Smith was not in the office and Mr Pesl said that he had given up. 29 Mr Smith said that slashers purchased from Howard Rotavator were accompanied by an owner's manual. There was also a warranty claim book. He had no recollection of Mr Pesl asking for the warranty book or other documents after the sale of the slasher. He understood that the documents would have been delivered with the slasher. 30 English is not Mr Pesl's first language and he does not read or write in English. He employs staff who attend to the paperwork for his business. Mr Pesl believed that no documents relating to any of the heavy equipment that he purchased from Mr Smith in January 1982 had been supplied with it. Mr Smith said that each of these items of equipment was accompanied by documentation. The various items were delivered on different dates. It seemed to me to be inherently unlikely that there would be an omission in the supply of warranty documents and service manuals or the like in relation to the tractor, the post-hole digger, the grader, the spreader and the slasher. In the event of a systematic failure leading to the delivery of each machine without accompanying documents, I consider it likely that it would have been pursued with somewhat greater rigour by some person on Pesl's behalf than an acceptance of Mr Pesl's evidence would suggest. The purchase of this equipment occurred over twenty years ago and while I accept that Mr Pesl has no recall of sighting any documents accompanying the slasher, the likelihood is that the documentation was supplied.

31 The Howard Rotavator Service Procedure Manual for the slasher (Exhibit K), which was printed in 1976, states: This manual has been compiled to give HOWARD dealers and their staff a procedure in operations to enable the servicing and repair of all models of HOWARD Rotaslashers, Rotacutters and Rotamowas to be carried out quickly and effectively. Because of our policy of continuous improvement, this manual should always be used in conjunction with the latest Service Bulletins covering the Rotaslashers, Rotacutters and Rotamowas . These Service Bulletins are distributed by us to all HOWARD agricultural dealers when they are first printed, and back issues are available from us on request. Service Bulletins should be retained at the back of this manual, and a note added to the index of each section affected, so that a convenient record of modifications may be kept. 32 In January 1993 Howard issued Service Bulletin 37, which contained a warning concerning the gearbox lifting bracket. Service Bulletin 37 bears the words "SAFETY WARNING" and beneath them: 1. DO NOT USE the gearbox lifting strap to support the rotaslasher. 2. REMOVE all gearbox lifting straps from existing machines.

Under these instructions is a sketch of a slasher depicting a hook and chain attached to the lifting bracket. The chain and hook are contained within a circle with a bar across it. The diagram conveys that lifting the slasher by suspending it from the lifting bracket is prohibited. The Service Bulletin states: Although capable of supporting the gearbox, the bolts attaching the gearbox lifting straps do not have the required design safety factors to qualify as 'lifting equipment' for the whole Rotaslasher, which is what they might be mistaken for. The risk of failure increases if service personnel replace the attaching bolts with damaged or weaker grade ones. 33 Around the time Service Bulletin 37 was issued a Howard representative called to Ray Smith Tractors and handed Mr Smith a copy of it. Mr Smith recalled the Howard representative telling him, "in future if you sell them make sure they don't lift them by the gearbox". 34 Service Bulletin 37 was filed in the manual at Mr Smith's office, where the mechanics could refer to it if required to do work on a slasher. 35 As at 1993 Mr Smith had been in the business of selling Howard Rotavator (or Howard) equipment for some thirty-five to forty years. His business included the servicing and repair of equipment. Ray Smith Tractors had provided demonstrations of the operation of Rotaslashers, which included information about servicing them. The instruction mainly related to the need to check the oil and seals and to ensure that the drive shaft is greased. Mr Smith had never demonstrated a Howard Rotavator (or Howard) rotaslasher by suspending it by the lifting bracket. He had never instructed any employee of the Smith companies to demonstrate suspending a rotaslasher in this way. 36 Mr Smith understood that Pesl employed trained staff to service its equipment including the slasher. 37 At the time Mr Smith received Service Bulleting 37 he did not know that Mr Pesl was servicing his slasher by suspending it using the lifting bracket. He did not consider that anyone would lift the slasher in this way. He understood the way to lift the slasher was by means of the three point linkage.

38 Mr Smith was challenged that his recall of the statement made by the Howard representative at the time he was handed Service Bulletin 37 was faulty: Howard were no longer supplying slashers with lifting brackets and Service Bulletin 37 instructed that lifting brackets were to be removed from existing machines. It is likely that Mr Smith is mistaken in his recall of the terms of the conversation.

39 It was put to Mr Smith that, as a matter of commonsense, Service Bulletin 37 conveyed that some people were lifting the slasher by the unsafe method depicted in Service Bulletin 37. I understood him to accept this proposition (T 113.49-50). He acknowledged that, once told by Howard that people were lifting the slasher by this method, he had an appreciation that if a person stood underneath the slasher when it was suspended by the lifting bracket it could be dangerous to life. Mr Smith did not say that Service Bulletin 37 suggested to him that persons were standing under the slasher when it was suspended by means of the lifting bracket. Mr Smith agreed that he must have been conscious that persons to whom he had sold slashers with lifting brackets needed to know the advice contained in Service Bulletin 37: Q. But you didn't send out to anyone you'd sold such a slasher to this safety bulletin? A. No. Howard do them direct. We only get one sheet. Anything that's like a recall or a safety issue Howard send them direct. We don't come into that. (25/5/2005 T 109.49-54). 40 Exhibit 6 is a Howard Distribution notice relating to Service Bulletin 37. It records in the distribution column "Aust Cust." It is probable that Howard distributed copies of Service Bulletin 37 to customers who had purchased slashers that had been supplied with lifting brackets. I am satisfied that Pesl did not receive one. It is likely that by 1993 Howard did not have records of purchasers of its equipment in the period prior to 1986. Records produced by Howard relating to the distribution of a revised Service Bulletin 37 in October 1998 include a chart that suggests that at that date no records of customers who had purchased slashers in the period prior to 1986 were then in existence. 41 Mr Smith was not given any instruction by Howard to distribute Service Bulletin 37 to past purchasers of the slashers with lifting brackets. He was given one copy of Service Bulletin 37 for the purposes of his business. 42 It was not put to Mr Smith that he knew that Howard Rotavator was no longer in existence in 1993. It is not suggested that Mr Smith was aware that Howard did not have a record of customers who had purchased slashers in 1982 when he received Service Bulletin 37. 43 Mr Smith recorded details of the sales of slashers in his Implements Book, a Collins' bound ledger book. The records dated back to 1982. He had not sold many slashers and it would not have been difficult for him to identify past purchasers had he wished to do so.

44 Mr Smith did not know whether Pesl was still operating in 1993. 45 In late 1998 Howard issued a revised Safety Bulletin 37. Mr Smith did not receive it. The Smith companies lost the dealership for Howard equipment in 1996. Despite a notation on a Howard internal document that Service Bulletin 37 was to be distributed to past dealers, I accept Mr Smith's evidence that after the relationship between Howard and the Smith companies came to an end he did not receive further documents from Howard, including revised Service Bulletin 37. The claims in negligent misrepresentation and under the TPA 46 Representations consistent with the three representations that are pleaded were made by the person who delivered the slasher to Pesl's premises. They were made in the course of trade and commerce.

47 I am satisfied that the person who delivered the slasher was not an employee of the Smith companies. I find that the slasher was delivered by an employee or person retained by Howard Rotavator and that the Smith companies did not know the content of the representations. 48 Senior counsel for Pesl submitted that whichever of the Smith companies was the vendor of the slasher it had delegated delivery, including whatever instruction was given as to use, to a third party acting on its behalf and that it mattered not if that person be an employee or person retained by the manufacturer. In counsel's submission: Because Mr Smith was leaving it to the manufacturer to do the delivery and the explanation for him. He earns a commission or earns a reward for selling the goods to us. My client is not to know what those arrangements are between them or whatever. He's paid Mr Smith for this service (T 168.16-21).

49 The evidence did not disclose the nature of the relationship between Howard Rotavator and the Smith companies beyond that the Smith companies were the distributor of Howard Rotavator (and subsequently Howard) slashers and other equipment in the years 1981 to 1996. Mr Smith's evidence was that Ray Smith Tractors was the vendor of the slasher. Pesl paid the Smith companies the purchase price of the slasher. I approach the matter on the basis that the distributorship was one in which the Smith companies purchased equipment from Howard Rotavator for re-sale and not that they received commission on sales made by Howard Rotavator to third parties. 50 In support of the submission that the Smith companies were bound to demonstrate the operation and method of servicing the slasher, counsel referred to the statement in the Owner's Manual (Exhibit E): It is the Distributor's obligation to arrange for your machine to be started up by a competent mechanic, who will also instruct you in its operation under actual working conditions and advise you on its care, maintenance and lubrication.

51 Counsel also relied on evidence given in cross-examination by Mr Smith: Q. You were the one who was selling that machine to Mr Pesl; is that right? A. Correct. Q. So you had to make arrangements with Howard to get the machine to the customer? A. We ring up Howard, order the machine, they say approximately four, five days, we give them the owner, who it was, then they will say, "We will deliver that" and they will show him everything on it. Q. And you understood that Howard was fulfilling your obligations as a dealer in explaining whatever needed to be explained about the machine to the customer; is that right? A. Yes. Q. That was being done on your behalf as the vendor to the customer? A. Like a heavy machine, Howard does them. Same as a rotary hoe, if you have a 100-inch, Howard will do that. They do that because it is a heavy duty machine. Q. They do it on your behalf as the vendor to the customer? A. Yes (T 118.11-36). 52 Senior counsel for the Smith companies submitted that, notwithstanding Mr Smith's evidence, Howard Rotavator was not acting as agent for the Smith companies in making the representations. 53 Mr Smith's evidence is not determinative of the question of whether at common law, or under the extended agency provisions of s 84 of the TPA, the person who made the representations was acting as agent of one or other of the Smith companies.

54 The statement by Howard Rotavator in the Owner's Manual of the obligations that it imposed on the distributors of its products does not establish that Ray Smith Tractors was bound by its contract with Pesl to arrange for a competent mechanic to start up the slasher and instruct Pesl on its operation including by advising how to service it. Mr Smith knew that Mr Pesl was a contractor with experience in the operation of heavy industrial equipment and that he employed mechanics to service and maintain Pesl equipment.

55 Mr Smith understood that Howard Rotavator would deliver the slasher to Pesl and that Howard Rotavator would give instruction in the operation of the slasher to Pesl. It does not seem to me that either the Smith companies or Howard Rotavator expressly or impliedly agreed to the latter giving instruction as to the servicing the slasher as the agent of the former. Mr Pesl understood the person making the representations to be a representative of Howard Rotavator. The reliance that he placed on the representations was based on his understanding that they were made by the manufacturer. There is no suggestion that the Smith companies had control over the content of the representations made by Howard Rotavator concerning the means of servicing the equipment that it had manufactured. 56 In counsel's submission, if not an agent at common law, then the deliveryman was an agent for the purposes of s 84(2) of the TPA: (2) Any conduct engaged in on behalf of a body corporate: (a) by a director, servant or agent of the body corporate within the scope of the person's actual or apparent authority; or

(b) by any other person at the direction or with the consent or agreement (whether express or implied) of a director, servant or agent of the body corporate, where the giving of the direction, consent or agreement is within the scope of the actual or apparent authority of the director, servant or agent; shall be deemed, for the purposes of this Act, to have been engaged in also by the body corporate.

57 For the reasons that I have given it does not seem to me that the representations were conduct engaged in on behalf of the Smith companies for the purposes of s 84 of the TPA.

58 I do not find that the representations were made by a person acting as the agent of the Smith companies at common law or under the TPA. 59 If I am wrong in coming to this conclusion, and the representations were made by a person acting as agent for the Smith companies, there remains the question of whether they were negligently made or whether they were misleading and deceptive (or likely to mislead or deceive). Counsel for the Smith companies submitted that representations (a) and (b) were true, albeit that safer means of servicing the slasher were readily available and were obvious to any experienced technician, including Mr Gherm. I accept that is so. In counsel's submission, representation (c) may also have been true given the evidence of Mr Martin's report, which I have referred to at paragraphs [25] - [27] above. The particulars of the negligence relied upon are that the lifting bracket and the bolts attaching it to the slasher were not able to take the weight of the slasher during the life of the slasher. Taking into account the expected nominal failure load of the bolts that attached the lifting bracket to the gearbox housing, given the overall weight of the slasher when suspended, I am not persuaded that Pesl has established that the representations were negligently made in the respect particularised. 60 Counsel for Pesl submitted that it was plain that the representations were misleading and deceptive for the purposes of the TPA claim given that the lifting bracket and the bolts were not able to take the weight of the slasher during its life: the accident established so much. The slasher fell on Mr Gherm because one of the bolts attaching the lifting bracket to the gearbox housing failed. The slasher was sixteen years old at the time. The bolt had never been serviced. I accept the Smith companies' submission that implicit in the representations was that the equipment including the bolts be serviced and maintained. I am not persuaded that representation (c) was misleading and deceptive or that it was likely to mislead or deceive.

Negligence - the failure to bring Service Bulletin 37 to Pesl's attention 61 Pesl submits that in January 1993 when the Smith companies received Service Bulletin 37 they came under a duty to warn it that the slasher may be dangerous if raised by means of the lifting bracket. In Pesl's submission, a distributor or vendor of a product has a duty to take reasonable care to avoid persons using the product in the way that it was intended to be used suffering harm or damage from the use: Clarke v Army and Navy Co-operative Society Ltd [1903] 1 KB 155; Grant v Australian Knitting Mills Ltd [1936] AC 85. 62 The question is whether the duty is to be imposed in circumstances in which the sale occurred eleven years prior to the vendor becoming aware of the potential danger. Pesl relies on the judgment of the Supreme Court of Canada in Rivtow Marine Ltd v Washington Ironworks (1973) 40 DLR (3d) 530. The plaintiff in that case was the charterer of a logging barge fitted with two pintle cranes. The cranes had been negligently designed and were subject to cracking. Both the manufacturer and the distributor of the cranes were aware of the danger posed by the design flaw and both failed to warn the plaintiff. A similar crane on another barge collapsed, killing a person. As the result, it became necessary for the plaintiff to take his cranes out of use during a busy period. He claimed both for the cost of repairs to the cranes and the loss of the use of the barge. Ritchie J (with whom Fauteux CJC, Abbott, Martland, Judson, Spence and Pidgeon JJ concurred) considered that knowledge of the danger involved in the continued use of the cranes for the purposes for which they were designed carried with it a duty to warn those to whom they had been supplied. The duty arose at the moment when the manufacturer or the supplier, or either of them, became seized with the knowledge. He said (at 542): That liability for this damage does not flow from negligence in design and manufacture is illustrated by the fact that Walkem [the supplier], which was not a party to such negligence, is equally liable with Washington [the manufacturer] for failing to warn the appellant. The difference between the two types of liability and consequent damage is that one may arise without the manufacturer having any knowledge of the defect, whereas the other stems from his awareness of the danger to which the defect gives rise.

The damages to be recovered for breach of that duty, in his Honour's judgment, did not extend to the cost of repairs. 63 Laskin J (with whom Hall J agreed) favoured enlarging the scope of recovery to include the cost of repairs. His Honour observed: Here then was a piece of equipment whose use was fraught with danger to person and property because of negligence in its design and manufacture; one death had already resulted from the use of a similar piece of equipment that had been marketed my Washington [the manufacturer] I see nothing untoward in holding Washington liable in such circumstances for economic loss resulting from the downtime necessary to effect repairs to the crane. The case is not one where a manufactured product proves to be merely defective (in short, where it has not met promised expectations), but rather one whereby reason of the defect there is a foreseeable risk of physical harm from its use and where the alert avoidance of such harm gives rise to economic loss. Prevention of threatened harm resulting directing in economic loss should not be treated differently from post-injury cure. 64 Important to the decision in Rivtow was the distributor's knowledge of the exact task to which the cranes were to be put.

65 In Pesl's submission, Rivtow is authority for the proposition that there is a duty on the vendor/distributor of goods to warn of dangers in the use or operation of equipment sold years earlier when the distributor/vendor is seized with knowledge of the danger. It was noted that Rivtow had been cited without disapproval in the joint judgment in Bryan v Maloney (1994-1995) 182 CLR 609 at 630 in the context of a claim for recovery of pure economic loss. Fleming, The Law of Torts (Sydney: LBC Information Services, 9th ed, 1998), ch 23 at 548 cites Rivtow as authority for the proposition that "a dealer has a duty to warn even when becoming aware of the defect only after the sale".

66 In written submissions, the duty for which Pesl contends was identified as "a duty to take reasonable care to warn of the potential danger those small number of purchasers to whom it had sold slashers of a similar or greater size to that sold to the cross-claimant" (WS [20]). The duty to warn was said to arise because of the vulnerability of the purchaser to injury. The submissions were developed in the context of an acceptance that the representations had been made by the Smith companies' agent. It was put: Thus, there was a positive statement by the vendor's agent for delivery as to the use of the strap which, on later being found to be wrong, ought to have been corrected. The positive statement as to suitability for use of the strap for lifting meant that the cross-claimant was and remained ignorant of the falsity of that statement and thus not able to protect itself from the risk. As Gleeson CJ, Gummow, Hayne and Heydon JJ noted in cases of negligent misstatement, such as here in respect of the oral representation as to how to use the strap, "… a central plank in the plaintiff's allegation that the defendant owed it a duty of care is the contention that the defendant knew that the plaintiff would rely on the accuracy of the information the defendant provided": Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2004] HCA 16; 216 CLR 515 at 531, [24]. 67 Clarke is authority for the proposition that a duty arises independently of contract on the vendor of goods to take reasonable care to prevent injury to purchasers by warning of possible dangers of which the vendor is aware and of which, presumably, the purchaser is not. The duty identified by the Court in Clarke, arising out of the relationship between vendor and purchaser, arose at the time of sale. I am concerned with whether in the circumstances of this case a duty to take reasonable care to warn of the potential danger of the slasher is to be imposed: Cole v South Tweed Heads Rugby Club [2004] HCA 29; 217 CLR 469 per Gleeson CJ at 475, [9]. 68 I consider that the Smith companies were not under a legal duty to warn Pesl of the dangers associated with the use of the lifting bracket to suspend the slasher when they became aware of the contents of Service Bulletin 37. The sale had taken place eleven years earlier. There had been no contact between Pesl and the Smith companies in the intervening years and the Smith companies' had no knowledge of what, if any, use Pesl was making of the slasher. The Smith companies were not on notice that Pesl were using the lifting bracket to support the weight of the slasher while it was serviced. Assuming that a duty arises, I consider that the Smith companies were not in breach of it. In my view a reasonable person in the Smith companies' position would not have foreseen that failing to pass on the manufacturer's warning (which it received as a current supplier of the slasher) involved a risk of injury to persons who had purchased the slasher eleven years earlier. In coming to this conclusion I note that while Service Bulletin 37 conveyed that there was a risk associated with using the lifting bracket to support the slasher it did not put the reader on notice that persons were likely to service the slasher by standing under it when it was suspended in this way.

69 In the event that I am wrong in coming to this conclusion, I record my findings with respect to the submissions advanced by the Smith companies on causation. They contended that no breach of duty by either of them was causative of the plaintiff's injuries, which were the product of Pesl's failure to provide a safe system of work. 70 Mr Pesl said that he would not have lifted the slasher by means of the lifting bracket had he been advised not to do so. I approach this evidence with caution taking into account the observations of McHugh J in Chappel v Hart [1998] HCA 55: 195 CLR 232 at 246, [32] fn (64). I think it likely that if Mr Pesl had been aware of the contents of Service Bulletin 37 he would have arranged for the slasher to be serviced by a method that did not include its weight being taken by the lifting bracket. Mr Pesl understood that suspending the slasher from the lifting bracket was consistent with the manufacturer's advice. Had he been aware that the manufacturer had countermanded this advice the likelihood is that he would have changed the system that he employed. It remains that a system that required a mechanic to stand under the slasher and remove the blades while it was suspended in this fashion was an obviously unsafe one. Mr Martin's report is supportive of this conclusion. Mr Pesl acknowledged his awareness that servicing a large and heavy piece of equipment in this way was dangerous. Mr Gherm's instruction to Mr Pesl to move out from under the slasher is eloquent of that fact. In the event that Pesl had succeeded on its claim in negligence against I would have assessed as just and equitable, having regard to the respective liabilities of Pesl and the Smith companies, that the Smith companies be required to make contribution be in the amount of 25 percent.

Verdict and judgment for the second and third cross-defendants;

2.The cross-claimant is to pay the second and third cross defendants' costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

Trade Practices Act 1974(Cth)

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Judgment (37 paragraphs)

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