Lavrick v Lease Auto Pty Ltd

THE COURT ORDERS THAT: 1. The first respondent Lease Auto Pty Ltd pay to the applicant Robert Lavrick damages in the agreed sum of $370,000 including interest. 2. The second cross-claimant Lease Auto Pty Ltd is entitled to indemnity from the second cross-respondent Transport Accident Commission in respect of its liability to the applicant Robert Lavrick. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

FIRST CROSS-RESPONDENT AND BETWEEN: LEASE AUTO PTY LTD (ACN 007 163 975)

INTRODUCTION 1 There is now only one issue which falls to be decided in this matter. To explain its context, it is necessary to refer to some facts which are largely undisputed. 2 The applicant Robert Lavrick (Mr Lavrick) is 57. He was born in Kalgoorlie in Western Australia. He has worked variously throughout Australia in activities generally associated with the mining industry. In 1980, he first went to work at Olympic Dam in South Australia. In 1988, he and his family settled at Olympic Dam. He ran a mechanical repair and maintenance business there, often employing in excess of five tradesmen as well as office staff. By 1996, he and his wife were operating a service station under the name Olympic Way Garage as well as the workshop under the name Lavrick Engineering. The operating entity was Robert Lavrick Nominees Pty Ltd as trustee of the Robert Lavrick Family Trust. In addition, by 1996, he and his wife had been operating for some years a travel agency business under the mantle of Roxby Travel Pty Ltd, later called Jan Lavrick Pty Ltd. That business was sold in about November 1998. Mr Lavrick's wife Jan Lavrick principally managed that business. 3 The events to which the present claim relates occurred on 23 February 1996. Mr Lavrick on that day flew to Victoria. He landed at Tullamarine Airport about 7.30 p.m. He had arranged in advance to rent a car from "Budget Rentacar" at Tullamarine Airport. The Budget Rentacar franchise there was operated by the first respondent Lease Auto Pty Ltd (Lease Auto). He planned to travel to the Bendigo area to investigate certain potential business investments that he was contemplating. 4 He entered into a car rental agreement with Lease Auto on that day. It is Rental Agreement 338029990. It comprises a one page document, printed on both sides of the page. The front page has a number of spaces to insert details of the hirer and of the vehicle, and of the variable terms of hire including the rental rate and other charges, the excess, and the term of the hire. There is a section to be completed with the typed entry: Area Where Vehicle will be Used. In the space provided is hand printed the word "Remote". The Rental Agreement identifies that the rented car was a Falcon Sedan NQB-399 (the car) and that the car was taken by Mr Lavrick at 1750 on 23 February 1996. The back or reverse side of the Rental Agreement contains a series of finely printed Terms and Conditions. In this matter, none of those terms and conditions have particular significance. 5 The Rental Agreement was provided in a Rental Folder. Its front cover had sections to be completed to reflect the arrangement for the hire of the car, including that Mr Lavrick required a hands-free mobile phone to be available in the car. It also contained a series of printed instructions regarding driving safely, mobile phone usage, what to do in the case of an accident, and the like. 6 When Mr Lavrick set off for Bendigo he had trouble finding the main Bendigo Highway. After dark had fallen, he was able to find the highway. At about 9.00 pm, as he was travelling along the highway, after a little time, he noticed a vibration in the steering wheel. The road was smooth bitumen, and was dry. He was travelling about 90 km/h, slightly under the speed limit At about the time that he noticed the vibration, Mr Lavrick also heard a noise apparently coming from the front of the car. He reached out with his left hand to turn down the radio so that he could better hear what he thought was an abnormal noise coming from the engine. He applied the brakes. At that point, the steering wheel began to shudder violently. He stopped braking. Then the front left hand side of the car dropped and the steering wheel was jerked from his grip. He feared the car was about to roll over. The car was jarring along the road, veering to the left. Mr Lavrick feared it would hit a fence or some trees on the left hand side of the road, so he pulled the steering wheel hard right. By that time, the car had left the bitumen carriageway. As he pulled the steering wheel to the right, the rear of the car swung out to the left. It came to rest off the bitumen carriageway, to its left, and more or less facing the carriageway. 7 After some time, Mr Lavrick received assistance. He saw that the left side front wheel had come off from the car, and was some distance away from it. The car was towed away for repairs. Mr Lavrick was injured in the accident. He was able to arrange transport back to Melbourne, and the following day returned to South Australia. It is not necessary to refer to the injuries he received in the accident, nor to the treatment he underwent or his ongoing disabilities. That is because the quantum of his claim against Lease Auto has been agreed. It is agreed that he is to receive damages of $370,000 including interest, when judgment is entered. 8 Mr Lavrick's unchallenged description about how the accident happened clearly indicates that its cause was the front left wheel of the car somehow becoming loose and falling off. The only evidence about why that happened is that of Christopher Hall (Mr Hall), a consultant engineer well experienced in addressing the causes of vehicular accidents and motor vehicle failures, and the documentary evidence of Hoover Ford, the entity which examined and repaired the car. That evidence also was unchallenged. 9 On the basis of that evidence, I find that the front left wheel came off the car because the wheel nuts holding the wheel to the axle had failed. The axle studs were still in place after the accident. The studs had the appearance of being "stripped". The wheel came off because four of the five wheel nuts holding the wheel to the axle studs separated from the axle studs. It is unclear whether that occurred because the nuts holding the wheel to the axle studs had been unduly overtightened, or because the nuts holding the wheel to the axle studs had been inadequately tightened. If the former had occurred, that would have resulted from the threads of the studs shearing away inside the wheel nuts because the nut torque or stud tension was too great. If the latter had occurred, that would have resulted from prolonged use of the car whilst the wheel nuts were loose. The continual working of the wheel rim after the wheel nuts had worked loose would have "hammered" down the threads on the axle studs so that they appeared to be flattened or "stripped". In either event, the accident happened through incorrect tightening during wheel fitment. 10 I accept Mr Hall's evidence that because the accident happened on a bitumen road, and that the tyre itself was not damaged, and that the bodywork of the car was not otherwise damaged, other causes of the wheel separating from the car can be excluded. Mr Lavrick confirmed that the car was not otherwise damaged, and the observations of the repairing mechanic confirm that the tyre itself was not damaged. 11 Lease Auto, in the light of those findings, in my view delivered and supplied to Mr Lavrick the car when it was not in fact fit for the purpose of country driving and was not in a roadworthy condition. The car had not been properly presented (whether it had been "serviced" at all is unclear) in a safe and roadworthy condition. There is no reason to think that Lease Auto knew, or had reason to know, of the vulnerability of the car to the sort of accident which occurred. But the causes of action relied upon by Mr Lavrick did not require any such knowledge on its part, and they do not involve any allegation of negligence on its part. 12 Mr Lavrick claims that the accident occurred through breaches by Lease Auto of ss 52 and 53 of the Trade Practices Act 1974 (Cth) (the TPA). It is asserted in his statement of claim that Lease Auto, in trade or commerce, engaged in conduct that was misleading or deceptive or was likely to mislead or deceive in that it provided the car to Mr Lavrick so representing that it was fit, and in a roadworthy condition, for his proposed journey when it was not fit for that journey nor in a roadworthy condition. Mr Lavrick claims that he inferred, as he was entitled to in the circumstances, that the car had been properly and adequately maintained and serviced to a safe and roadworthy standard, and was safe for use in country driving. He said that those matters arose from Lease Auto, being in the business of leasing motor vehicles for hire to the public, supplying the car to him and by the express assertion on the Rental Folder that the car had been professionally serviced and maintained. In fact, he contends the car had not been properly and adequately maintained and serviced to a safe and roadworthy condition and was not in a condition safe for its use in country driving. It is also asserted that Lease Auto, in connection with the supply of the car, falsely represented that the car was of a particular standard, namely that it was roadworthy and fit for his proposed journey, when it was not. That representation is alleged to have been made in the "Drive Safely" section of the Rental Folder, set out in the next paragraph of these reasons. It is claimed to be false because the car was not properly or adequately maintained and serviced to a safe and roadworthy standard and was not in a safe condition fit for country driving. 13 In addition to his claim for damages under s 82 of the TPA for breach of provisions of the TPA, Mr Lavrick pursues a claim for damages for breach of the Rental Agreement. It is claimed that the Rental Agreement expressly warrants that the car had been "professionally serviced and maintained". That express term is said to exist because, in the Rental Folder, under the section headed "Drive Safely" appears the following: "Cars in the Budget fleet are six months old on average. Your Budget car has been professionally serviced and maintained for your safety and comfort. But to be doubly sure you have a safe trip, please drive defensively." Mr Lavrick did not give evidence that he read that part of the Rental Folder. He said that he may have glanced at it, but if he did so I think it was clear that he did not take it in. He said that he had become generally familiar with its terms by reason of his involvement over a number of years with documents available to Roxby Travel Pty Ltd, that business having also held a Budget Rentacar franchise from the second respondent Budget Rentacar Australia Pty Ltd (Budget) for some time, and by having rented "Budget" cars some 50-60 times over a period of 15 years or so from the time when he first went to Olympic Dam. In view of the attitude of Lease Auto referred to below, it is not strictly necessary to make findings about his awareness of those matters. However, I think it may be helpful later if I record my findings about them. When he signed the Rental Agreement, I find that he looked only cursorily over its contents, to ensure that the sections to be completed were accurately completed, including checking that the entry in the section dealing with where the car was to be used contained the word "remote" as he intended to do some country driving. I further find that he did not read the contents of the Rental Folder, other than glancing cursorily over the front section containing the details of his booking. He did not then read the section headed "Drive Safely", although I infer from his evidence that he was aware of its contents in general terms. Those findings are consistent with his evidence. 14 The other basis of the claim for damages for breach of contract is that the Rental Agreement contained the implied term that the car was fit for the purpose of his journey. That term is said to be implied by s 71 of the TPA, because the car was rented to Mr Lavrick by Lease Auto in the course of its business and Lease Auto knew that it was to be used for country travel. Lease Auto does not dispute that that term was implied by s 71 of the TPA into the Rental Agreement. Contravention of the term implied by s 71 of the TPA into the Rental Agreement does not give rise to a claim for damages under s 82 of the TPA, but enables Mr Lavrick to pursue a claim for damages for breach of contract: Arturi v Zupps Motors Pty Ltd (1980) 49 FLR 283 (Arturi). 15 The pleaded defence of Lease Auto to those claims was in essence founded upon provisions of the Transport Accident Act 1986 (Vic) (the TAA). Because the accident happened in Victoria, and amounted to a "transport accident" as defined in s 3 of the TAA, Lease Auto claims that s 93 of the TAA precluded Mr Lavrick from pursuing his claim. Section 93(1) of the TAA provides: "A person shall not recover any damages in any proceedings in respect of the injury or death of a person as a result of a transport accident occurring on or after the commencement of section 34 except in accordance with this section." The balance of s 93 then identifies particular circumstances in which a person injured as a result of a transport accident may recover damages in respect of the injury. It is not suggested that those circumstances apply to Mr Lavrick. It also controls the nature and the extent of damages at common law that may be awarded. Independently of s 93, under Part 3 of the TAA, a person injured as a result of a transport accident may be entitled to statutory compensation as provided for in that part. 16 Mr Lavrick did not file a reply to the defence of Lease Auto. His counsel, in opening, contended that: (1) the accident, in the circumstances, was not a "transport accident" as defined in s 3 of the TAA so the statutory provision apparently precluding him from claiming damages under s 82 for breach of ss 52 and 53 of the TPA or for breach of contract does not apply; and alternatively (2) section 93 of the TAA, to the extent that it prevents Mr Lavrick from pursuing his claim for damages arising from the accident, is inconsistent with ss 52, 53 and 82 of the TPA, and s 71 of the TPA, and so, by virtue of s 109 of the Constitution, is invalid and of no effect. That latter issue emerged explicitly only at the opening of the hearing. Notices under s 78B of the Judiciary Act 1903 (Cth) were duly served upon the Attorneys-General of the Commonwealth of the States and Territories. I proceeded with the hearing of evidence about Mr Lavrick's claim generally, but not on any aspect which might have touched upon that issue: see s 78B(2)(c) of the Judiciary Act. The evidence was not expected to, and did not, touch upon that question. The submissions generally, including as to the alleged inconsistency between provisions of the TPA and of the TAA, then took place only after the Attorneys-General had had an opportunity to intervene in the proceedings. None of the Attorneys-General sought to intervene in the proceedings, or to have them removed to the High Court. 17 Ultimately, Lease Auto did not contend that s 93 of the TAA operates to preclude a claim by Mr Lavrick for damages for breach of contract. It also accepted that s 71 of the TPA implied the condition to which it refers into the Rental Agreement, and that in the circumstances that implied term of the Rental Agreement had been breached so that Mr Lavrick is entitled to recover the agreed quantum of damages from Lease Auto as damages for breach of contract. It took the view that the decision of the High Court in Wallis v Downard - Pickford (North Queensland) Pty Ltd (1994) 179 CLR 388 prevented it from maintaining that s 93 of the TAA could operate to prevent it from being liable for damages for breach of contract in the circumstances. 18 Consequently, I will enter judgment for Mr Lavrick against Lease Auto for $370,000 including interest, based upon Mr Lavrick's claim for damages for breach of contract. That liability is a liability at common law, even though the particular breach of contract is a breach of a term implied into the Rental Agreement by s 71 of the TPA: see per Brennan J in Arturi; E v Australian Red Cross Society (1991) 27 FCR 310. 19 Mr Lavrick also brought a claim against Budget. Budget in turn cross-claimed against Lease Auto. Both the claim against Budget, and Budget's cross-claim against Lease Auto were dismissed by consent at the commencement of the trial.