JJ Savage & Sons Pty Ltd v Blakney

The respondent entered into a contract with the appellant for the delivery to him of a motor cruiser, constructed to an agreed specification, and powered with a specified principal diesel engine supplemented by an auxiliary engine to be chosen from two named types of diesel engine. The contract is to be found in a series of letters, supplemented as the respondent claims by several oral conversations. The respondent complained in the action brought in the Supreme Court of Victoria, according to his statement of claim, of a number of breaches of the contract, including an alleged breach of a warranty contained in the contract. That warranty was "that the said cruiser when fitted with a single 4/53 series diesel marine engine (being the specified principal diesel engine to which I have referred)" would have an estimated maximum speed of fifteen miles per hour [1] .

The learned judge of the Supreme Court who tried the case found that no such warranty was contained in the contractual arrangements made by the parties. However, his Honour found that there were some breaches of the agreement and in respect of them gave judgment for the respondent for the sum of $800.

The respondent appealed to the Full Court against the trial judge's refusal to find a warranty in the stated terms. The Full Court, whilst accepting the trial judge's view of the facts, differed from him in respect of the inference to be drawn from the relevant pieces of evidence on which the respondent had relied to establish the warranty.

The Full Court agreed with the trial judge that the contract for the building and delivery of the boat did not contain a promise by the appellant in the terms claimed by the respondent.

But the Full Court was of opinion that the respondent had established a collateral warranty that the boat fitted with the 4/53 G.M. diesel engine would travel at approximately fifteen miles per hour. Accordingly the Court ordered that judgment be entered for the respondent, in addition to the sum of $800, for the damages sustained by him for the breach of that warranty, such damages to be ascertained by a master.

The central piece of evidence in the case relevant to the claim to a warranty was a letter written by the appellant to the respondent in response to the respondent's request for the expression in writing by the appellant of his views as to various engines which might be used to power the boat which the respondent was then contemplating purchasing from the appellant. It is convenient to set out this letter in full:

Re your powering problem for proposed 30′ Motor Cruiser, we submit the following.

Comparative costs of suggested combinations of motor installations. (a) Twin C.D. 40 Clae Marine Diesels and auxiliary equipment £2,010 0 0 Fuel consumption. 4.2 Gals/Hr @ Full Throttle. Power output. 80 H.P. @ 3,500 R.P.M. Estimated speed 10 M.P.H. (b) Single 4/53 Series G.M. Diesel and installation with SLI Lister or Yanmar N.S. 70 auxiliary stand-by motor. 4/53 Inst. £2,076 0 0 Auxiliary and Inst. 300 0 0 Total £2,376 0 0 Fuel consumption. 6.5 Gals/Hr @ 2,400 R.P.M. Power output. 120 H.P. Estimated speed 15 M.P.H. (c) Twin 3/53 Series G.M. Diesels £3,258 0 0 Fuel consumption. 5 Gallons/Hour Motor = 10 Gallons (full throttle) Power output. 200 H.P. @ 2,400 R.P.M. Estimated speed. 25 M.P.H.

Installation (b) is by far the best value for money. Auxiliary motor could be installed to drive shaft at 400 R.P.M. (4 M.P.H.). Coupling too would require connection of duplex chain drive to shaft. Sprocket to accommodate this drive to be permanently attached to shaft. Connection would require placing chain in position and joining link to attach. Installation (c) would present problems in wheelhouse layout. Cockpit floor would require raising 2″ above standard height to accommodate motors. Galley and other fitments would have to be relocated to allow for large deck hatches to give access to motors. Cost is substantially increased. H.P. excessive for requirements.

Installation (a) while very suitable from ease of installation, does not appear to offer anywhere near value on Inst. (b) although better single engine performance than (b) is obvious.

While appreciating the odds against two engines failing at the same time, we feel that the quality and superiority of the G.M. diesel over any other suitably sized engine makes safety factor very close to that of the cheaper installation. Throughout the entire fishing fleet of Australia, there are very few twin installations and very few breakdowns at sea. This latter point is mainly due to the reliability of the better quality diesel engines fitted in these boats. (Mostly Gardners & G.M.'s.)

It is our considered opinion that the single installation (b) would give entire satisfaction for reliability, weight factor, maintenance expense, durability and simplicity. Another alternative to the auxiliary diesel emergency motor would be the use of an 18 H.P. Outboard Motor. Suitable mounting could be made on the stern of the vessel to accommodate this unit and its performance would be quite satisfactory. Cost would be approximately the same as diesel, but the outboard could be used for other pleasure purposes and would not be surplus equipment as would the auxiliary diesel.

It may be taken that the respondent having received that letter decided to purchase the motor cruiser, then under discussion, powered by a single 4/53 series G.M. diesel with an auxiliary engine. Two paragraphs from a letter written by the respondent in reply to the appellant's letter above set out suffice to indicate the respondent's reliance on the opinion expressed therein by the appellant. He wrote:

And now that all-important power unit. Stan Ditcham has been very helpful here and whilst bowing to your experience and reputation on the occasion of his phone call to you, has since reconsidered and advised me strongly to have resilient mountings as he feels that these are best.

Stan favours the twin Claes strongly. I prefer upon your advice the G.M. 4/53 and stand by auxiliary which I presume involves an increase of £366 on original quote. As I stated per phone I want tomorrow's boat and power unit. I feel that the speed of the G.M. will be useful at times and again the higher quality of construction appeals.

After this exchange an itemized specification and quotation for the boat was furnished by the appellant to the respondent in which the only reference to the engine is as follows:

4/53 Series G.M. Diesel heat exchanger cooled. Stainless steel shaft. Suitable three blade bronze propeller. Bronze strut and Novasteen bearing. Mild steel exhaust pipe with rubber silencer. 6 H.P. Yanmar diesel stationary engine suitably installed to allow coupling to main shaft. No reference to the capacity of the boat to achieve any particular speed is contained in this document. But it concluded as follows: Acceptance of deposit by J. J. Savage & Sons Pty. Ltd., would signify contract to build boat in accordance with plan and specifications submitted here-in. Warrancy would be given for all materials and workmanship for a period of 90 days after delivery.

The Full Court posed the problem before it as follows:

However, the statement was made in a document which was not part of the contract itself and in order to be a collateral warranty, for the breach of which the plaintiff would be entitled to damages, it is necessary for the plaintiff to establish either that the warranty was given in consideration of the making of the contract or that without the warranty the contract would never have been made (see Benjamin on "Sale" 8th ed. (1950), pp. 671-672; De Lassalle v. Guildford [1] ). This again is we think a conclusion to be drawn from the facts found by the learned trial judge, including the correspondence and any other relevant undisputed facts. 1. [1901] 2 K.B. 215, at p. 222.

It appears to us that the proper conclusion to be drawn from all the facts is that the plaintiff would not have entered into the contract for the purchase of the cruiser fitted with the single 4/53 series G.M. diesel engine without the statement that the estimated, that is, approximate, speed with that engine fitted to the cruiser would be 15 miles per hour. The undisputed evidence is that the plaintiff wanted twin diesel engines in the boat.

The facts, as found by the learned trial judge, to which the Full Court referred were, that the appellant had persuaded the respondent to abandon the idea of Twin Clae diesels for one G.M. diesel; that the appellant had stated that from computations made it was assumed that the boat powered with the 4/53 G.M. diesel would have an estimated speed of fifteen m.p.h.; that the respondent was induced to order the boat with the single diesel engine on the faith of what the appellant had informed him both orally and by letter; that the attainable speed of the boat was an important matter both in the boat building and selling industry and to the respondent. The Court thought that by this material the respondent had established a collateral warranty as to the attainable speed of the boat.

The trial judge was of opinion that the statement in the appellant's letter was an estimate only, expressed as an expectancy, and not an unequivocal promise of a future speed. The Full Court, after referring to a dictionary meaning of the word "estimate", thought the expression "estimated speed 15 m.p.h." in the appellant's letter should be construed as "approximate speed 15 m.p.h.". In our opinion, this was an unwarranted substitution which stripped the words of the letter of their most significant meaning. The actual words used by the appellant in the letter should be considered. So far from being a promissory expression, "estimated speed 15 m.p.h." indicates, in our opinion, an expression of opinion as the result "of approximate calculation based on probability" to use the dictionary equivalent of "estimate" referred to by the Full Court. There is no need to resort to cases decided upon different facts and circumstances in order to determine the significance in this case of the actual words used by the respondent. The words in themselves tend, in our opinion, against the inference of a promise that the boat would in fact achieve the nominated speed.

The Full Court seems to have thought it sufficient in order to establish a collateral warranty that without the statement as to the estimated speed the contract of purchase would never have been made. But that circumstance is, in our opinion, in itself insufficient to support the conclusion that a warranty was given. So much can be said of an innocent representation inducing a contract. The question is whether there was a promise by the appellant that the boat would in fact attain the stated speed if powered by the stipulated engine, the entry into the contract to purchase the boat providing the consideration to make the promise effective. The expression in De Lassalle v. Guildford [1] that without the statement the contract in that case would not have been made does not, in our opinion, provide an alternative and independent ground on which a collateral warranty can be established. Such a fact is but a step in some circumstances towards the only conclusion which will support a collateral warranty, namely, that the statement so relied on was promissory and not merely representational.

When the letter which we have quoted was written, the negotiations for the construction and delivery of the boat were incomplete. On receipt of the letter there were three courses open to the respondent. He could have required the attainment of the speed to be inserted in the specification as a condition of the contract; or he could have sought from the appellant a promise - however expressed, whether as an assurance, guarantee, promise or otherwise - that the boat would attain the speed as a prerequisite to his ordering the boat; or he could be content to form his own judgment as to the suitable power unit for the boat relying upon the opinion of the appellant of whose reputation and experience in the relevant field he had, as the trial judge found, a high regard. Only the second course would give rise to a collateral warranty.

In our opinion, there is nothing in the evidence before the trial judge to support the view that the respondent took either the first or second of these courses: the only conclusion open upon that evidence was that the respondent took the third course; he accepted the appellant's estimate of what the boat would do under the power of the 4/53 G.M. diesel as sufficient to found his (the respondent's) own judgment as to the powering of the vessel. As he said "I prefer upon your advice the G.M. 4/53". That the statement actually made by the appellant was intended to have some commercial significance upon a matter of importance to the respondent can be conceded; that the respondent was intended to act upon it, and that he did act upon it, is clearly made out. But those facts do not warrant the conclusion that the statement was itself promissory.

In our opinion, so far from it being shown that the trial judge was wrong in refusing to draw the conclusion that the appellant made a promissory statement as to the attainable speed of the cruiser (which he did by deciding that there was no condition of the contract in the stated terms) we are satisfied that he took the only course permitted by the material before him. In our opinion, the appeal should be allowed.