RICHARD v GENDORE ENTERPRISES PTY LTD & ANOR

LOWER COURT District Court JURISDICTION : LOWER COURT 9185/00 FILE NUMBER(S) : LOWER COURT Certoma ADCJ JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40231/03 DC 9185/00

SHELLER JA HODGSON JA IPP JA

Gendore, the first respondent, had some time before 1993, imported a TAARUP 605B forage harvester from Denmark where it was manufactured. Gendore sold the harvester to a dealership in Western Australia. The second respondent, Frahm, acquired the second-hand harvester on 21 May 1993 and sold it in September 1993 to certain silage contractors. In 1995, this purchaser arranged for Frahm to sell the harvester on consignment. Frahm sold the second-hand harvester to the appellant on 14 November 1995.

The harvester when supplied, was found by the appellant to be missing an electrical fitting which controlled the direction of the chute and also an operations manual. The appellant contacted Frahm and Frahm located a manual in his spare parts store, which he then copied and forwarded to the appellant. Neither of the respondents had any involvement in the production of this manual.

The manual described standard tyres for the harvester as 11, x 15, when in fact, a 15.3 inch tyre was required. On 14 March 1996, after consulting the operations manual, the appellant attempted to replace a blown tyre on the harvester with a used 15 inch Landcruiser tyre. When the appellant started to inflate this replacement tyre it blew out and injured his right arm. It was alleged that, in December 1999, as a result of this right arm injury, the appellant fell some six feet from a machine known as a Header and suffered injury to his back and right shoulder. The appellant commenced proceedings in the District Court to recover damages from the respondents claiming negligence and/or misleading and deceptive conduct against the respondents for importing or selling a machine with a manual, which contained incorrect information and advice as to the tyre size. A claim was also made for breaches of conditions of a contract of sale of goods implied by the Sale of Goods Act 1923. However, this claim was not pressed. The trial Judge gave judgment for the respondents. His Honour held that in the absence of the defendants' actual knowledge of an ambiguity or error in the manual or knowledge of anything that might suggest to them that there was an ambiguity or error, they could not be regarded as having a duty to have the manual professionally examined, when they did not compile, meddle with, or adopt it as their own. Further, in relation to the misleading and deceptive conduct claim, the trial Judge found that neither respondent could be regarded as making a representation through a manual, which they did not compile or otherwise adopt. They were, at most, mere conduits in supplying a manual compiled by the manufacturer.

The appellant challenged the findings of the trial Judge in relation to duty of care and misleading and deceptive conduct. The appellant also claimed that the trial Judge erred in failing to deal with the misleading and deceptive conduct claim against both respondents under the Trade Practices Act 1974 and the Fair Trading Act 1987 and that reference to "in trade and commerce" and "the misleading and deceptive conduct" of the respondents in the statement of claim demonstrated a reliance on a claim under these Acts. The respondents contended that neither Act was relied upon by the appellant before the trial Judge.

Held: per Sheller JA, Hodgson and Ipp JJA agreeing:

1. In a desultory and certainly not forthright way, the appellant succeeded in keeping alive its misleading and deceptive conduct case and it must have been a case based on the Trade Practices Act against Gendore and based on the Fair Trading Act against the individual Frahm.
2. The submission by the appellant, that there were facts and circumstances which would lead a court to find that either respondent adopted the false and misleading representation in the operations manual about the appropriate tyre size, was never explained or developed.

3. The operations manual was the product of the manufacturer TAARUP. The first respondent importer was unaware of its contents and never held out to the appellant any belief about the accuracy of the contents. Similarly, the second respondent did no more than provide a photocopy of the manual after the harvester had been delivered and paid for. The finding by the trial Judge that neither respondent adopted the false and misleading statement was hardly surprising given the circumstances.
4. There is nothing to demonstrate that the trial Judge did not consider the deceptive and misleading conduct case or that the conclusions he reached about it were not open to him. His Honour's conclusions were correct.
5. In relation to the finding on negligence, nothing has been advanced on appeal, which in any way undermines the conclusion reached by the trial Judge. The reasoning of the trial Judge is adopted by this Court. Legislation:

Fair Trading Act 1987 Sale of Goods Act 1923 Trade Practices Act 1974

Gardam v George Wills & Co Ltd (1988) 82 ALR 415 Kirby v Sanderson Motors Pty Ltd (2002) 54 NSWLR 135 Laundess v Laundess (1994) Aust Torts Reports 81-316 Yorke v Lucas (1985) 158 CLR 661

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40231/03 DC 9185/00

SHELLER JA HODGSON JA IPP JA

Wednesday, 14 April 2004 RICHARD v GENDORE ENTERPRISES PTY LTD & ANOR Judgment 1 SHELLER JA:

The appellant, John Richard, began proceedings in the District Court to recover damages from the respondents, Gendore Enterprises Pty Ltd (Gendore) and Rod Frahm trading as Rod Frahm & Co (Frahm), for breaches of conditions of a contract of sale of goods implied by the Sale of Goods Act 1923, negligence and "misleading and deceptive conduct". The claim based upon implied conditions under the Sale of Goods Act was not pressed and requires no further consideration. 2 The second respondent, Frahm, sold to the appellant a second-hand TAARUP 605B forage harvester under a contract said to have been made on 14 November 1995. The first respondent, Gendore, had some time before May 1993, imported the harvester from Denmark where it was manufactured. Gendore sold the harvester to a Western Australian dealership. With the harvester was imported the manufacturer's operations manual. Frahm first acquired the second-hand harvester on 21 May 1993 and sold it on 18 September 1993 to certain silage contractors. In 1995, the purchaser of the harvester asked Frahm if the harvester could be left with Frahm on consignment. Frahm then sold it to the appellant. 3 The appellant stated that he, with others, none of whom was a qualified mechanic, checked the harvester a few days after he had received it and it was in the condition that it was reported to be. However, the harvester was missing an electric fitting which controlled the direction of the chute and an operations manual. The appellant spoke to Frahm and Frahm said he had a manual in his spare parts store. That manual was photocopied and a copy forwarded to the appellant. Frahm had no involvement with the manual and was unaware of whether or not it was inaccurate or ambiguous. Frahm's contact with the harvester was when he acquired it second-hand on 21 May 1993 and sold it on 18 September 1993 and again in 1995, when the purchaser asked him if he could leave the harvester with him on consignment. Neither in 1993 nor in 1995, when Frahm came in contact with the harvester, did he have, or arrange to have, the harvester re-conditioned. 4 On 14 March 1996, the appellant was telephoned by an employee, who was operating the harvester at a property 25 kilometres from Cooindi, the appellant's property, saying that a tyre needed replacement. The employee brought the tyre rim to Cooindi and dismantled the tyre from the rim. The appellant did not inspect the tyre removed from the rim or the tube. He inspected the rim but did not notice the size of the rim marked on it. He consulted the copy manual and decided the tyre could be replaced with a used Landcruiser tyre. When he started to inflate the replacement tyre, it blew out and struck and broke his left arm. 5 Page 6 of the copy manual under the heading "Technical data" stated: "Standard tyres … 11, 5 x 15"

without indication of whether these were metric or imperial measurements. The tyre which the appellant attempted to inflate on the rim was a 15 inch tyre. The rim was a 15.3 inch rim and was so marked. The blown tyre to be replaced was a 15.3 inch tyre. 6 As a result of the injury to his left arm, the appellant claimed that in December 1999 while he was climbing the header he lost his grip and fell six feet to the ground injuring his back and right shoulder. In the proceedings, the appellant claimed damages for injuries and disabilities, the consequence of the two events. Paragraph 28 of the amended statement of claim read: "And the plaintiff claims damages for injury loss and damage and ongoing disabilities caused by both accident 1 and accident 2 and interest thereon pursuant to s83A of the District Court Act and s73 of the Motor Accident Act 1988."

There was no explanation for the reference to the Motor Accidents Act. 7 Expert evidence was called and indicated that it is paramount to ensure when fitting a tyre that the tyre is the correct size. A 15 inch tyre should not be mounted on a 15.3 inch rim.

Judgment at first instance 8 The proceedings were heard by Certoma ADCJ. On 10 March 2003, his Honour gave judgment for the defendants and ordered the plaintiff to pay the defendants' costs of, and incidental to, the proceedings. 9 Before dealing with the claim in negligence the trial Judge in his reasons for judgment said: "With respect to misleading and deceptive conduct, the plaintiff did not articulate in his submissions a claim against the first defendant, and relied on the particulars in the pleadings, without any specific reliance on the Trade Practices Act or its State equivalent, as his basis for the claim against the second defendant." 10 On the negligence claim the trial Judge said that the appellant essentially claimed that either or both defendants provided an operator's manual which contained misleading information, failed to ensure that the operator's manual was amended, and failed to advise or warn the appellant concerning the fitting of a tyre. He then made eleven findings of essential facts:

The harvester was sold by Frahm to the appellant as a second-hand retailer of the machine;

Frahm had not carried out any work on the harvester on either of the two occasions when it came into his hands;

There was no inherent defect in the harvester as such when it was received by the appellant;

Neither respondent had any responsibility or role in the production of the operator's manual, which was supplied by the manufacturer (TAARUP) and accompanied the harvester when it was imported;

The operator's manual forwarded by Frahm to the appellant was not the original manual which accompanied the harvester, but was a photocopy of one which Frahm had in its spare parts store and was forwarded to the appellant at the appellant's request subsequent to the sale of the harvester;

The standard tyres were described under the heading of "Technical data" on page 6 of the operator's manual as 11, 5 x 15 without any indication of whether this was a reference to metric or imperial measurements, yet every other item under that heading was in metric measurements;

Neither respondent was aware, and at no time prior to the present proceedings was made aware, of any ambiguity or other problem with the manual, including any ambiguity with respect to the size of tyres;

Neither respondent had any actual knowledge, other than perhaps background knowledge, that farmers may themselves replace tyres or that the appellant contemplated changing a tyre on the harvester himself;

Neither respondent provided information or advice to the appellant regarding the use of a non-original or foreign tyre as a replacement tyre on the harvester, the only communication between the appellant and Gendore being limited to advice by Gendore, after inquiry from the appellant, as to the availability and price of a tyre listed in the spare parts section of the manual,

The suitable replacement tyre could have been provided by Gendore;

Leaving aside the reasonableness of the appellant's conduct, the appellant at most relied on the operations manual in determining that the 15 inch used Landcruiser tyre that he had on hand was suitable for the harvester. 11 The trial Judge referred to the judgment of Mahoney JA in this Court in Laundess v Laundess (1994) Aust Torts Reports 81-316 where his Honour remarked, with the agreement of other members of the Court, that a vendor of goods does not, as such, have a duty in negligence to a purchaser. "There must be something more than the mere relationship of vendor and purchaser. The problem is to define what more is necessary and when the duty arises." Mahoney JA did not think that that additional factor could be stated in a simple formula of words. The circumstances in which a duty of care will be imposed upon a vendor of goods must depend upon the nature of the goods, the risk involved, and the circumstances of the case. In that case, which concerned the sale of a car with a defective door mechanism, Mahoney JA said: "In the present case, the relevant risk was that the door mechanism was defective. It is, of course, always a possibility that the door mechanism of a car will be defective. But, in my opinion, that possibility is not sufficient to give rise to a duty of care which requires the vendor to inspect every car it proposes to see whether the door mechanism is defective. To repeat, there must be something more. Thus, if there be something to suggest to a reasonable vendor of the vehicle that the risk actually existed, ie that the door mechanism was defective, then there would ordinarily be a duty of care which would involve such an inspection." 12 In that case, if the defect in the door mechanism had been present in the vehicle when the vendor had acquired the vehicle the vendor would not have been liable in negligence. "The mere fact that the vehicle was second-hand did not, without more, oblige the defendant to inspect it for such a defect." Certoma ADCJ said: "In the present case, there was no defect in the harvester as such. The relevant risk was that the operator's manual was ambiguous or contained an error. Therefore, the essential issue is whether the defendants had a duty to inspect the manual for ambiguities or errors. However, even if the manual was ambiguous or inaccurate, this was not in fact known to the importer (with whom the plaintiff had no direct relationship) of the harvester or the second-hand dealer from whom the plaintiff purchased the harvester, and, moreover, there was nothing to suggest to either defendant that they ought to have checked the accuracy of the manual, or to have it inspected and examined by an expert to see whether the manual contained an ambiguity or error. Further, the manual was not their manual, they did not take any part in its compilation, and they did not in any way meddle with it or adopt it as their own. Indeed, as far as the second-hand dealer was concerned, no manual accompanied the purchase of the harvester by the plaintiff. The defendants, essentially, had nothing to do with the manual. Therefore, in the absence of any evidence of the defendants' actual knowledge of an ambiguity or error in the manual or knowledge of anything that might suggest to them that there was an ambiguity or error in the manual, they cannot be regarded as being under a duty to have a manual which they did not compile, meddle with, or adopt as their own, professionally examined. In conclusion, and in all of the circumstances, the defendants had no duty of care to inspect or to have the manufacturer's manual professionally scrutinised for any ambiguity or error as to the tyre size." 13 Under the heading "Misleading and deceptive conduct" the trial Judge said: "It follows from the evidence, that there was no statement or representation made by either defendant to the plaintiff. So far as the first defendant (the importer) was concerned, it was not the author of the operator's manual, it did not supply the manual to the plaintiff, it never adopted or warranted the accuracy of the manual, and the plaintiff neither sought the advice of the first defendant nor relied on anything said or done by it. The first defendant was in no manner involved in the plaintiff's acquisition of the harvester. Therefore, even if the manual were inaccurate, the first defendant made no representation and there was no reliance by the plaintiff on anything said or done by the first defendant. Likewise, the second defendant made no statement or representation to the plaintiff. It merely provided to the plaintiff, after the conclusion of the sale, a copy of an operator's manual it happened to have in its spare parts store and, in doing so, did not adopt it as its own or make any warranty as to its accuracy or otherwise. As already seen, there was no manual accompanying the particular harvester, and the dealer was not the author of the manual. Again the plaintiff never sought the advice of the second defendant nor relied on anything said or done by it, other than rely on a copy of a manual unconnected with the particular sale and compiled by the manufacturer. Neither defendant could be regarded as making a representation through a manual, which they did not compile or in any manner adopt. They were, at most, mere conduits in supplying a manual compiled by the manufacturer." 14 There was no evidence about the operations manual imported with the harvester or to explain how the importer Gendore could be responsible for the contents of an operations manual which came from Frahm's store room. It has been tacitly assumed that the text of the operations manual from the store room was the same as the text of the one imported with the harvester which never got into the hands of the appellant.

Appeal 15 On 28 March 2003 the appellant filed a notice of appeal with appointment. The grounds were as follows: 1. The learned trial Judge erred in law in his finding that neither of the respondents owed a duty of care to the appellant to: i. Inspect and/or ii. Have the manufacturer's manual professionally scrutinised for any ambiguity or error in relation to the tyre size as specified in that manual. 2. The learned trial Judge erred in law in failing to find that the respondents or either of them owed a duty of care to the appellant, in the circumstances, and that by reason of their breach of such duty they were responsible for the appellant's injury, resultant loss and damage. 3. The learned trial Judge erred in law in failing to find that the respondents or either of them had engaged in misleading and deceptive conduct, in the circumstances, which led to the appellant suffering loss or damage. 4. The learned trial Judge failed to address at all or, alternatively, failed to address adequately, written submissions which had been filed on behalf of the appellant. 16 By leave of the Court, the appellant filed in court an amended notice of appeal in which the grounds were revised and notably expressly called in aid the provisions of the Trade Practices Act 1974 and the Fair Trading Act 1987. It was claimed that the trial Judge erred in failing to deal with the misleading or deceptive conduct claim against both respondents under those Acts. 17 The respondents' immediate retort to this was that neither Act had been relied upon by the appellant before the trial Judge. A significant amount of time was spent before this Court debating that question. The statement of claim made mention of neither Act but did plead that the first respondent "in the course of trade and commerce" conducted its importing business and the second respondent "in the course of trade and commerce" sold the harvester together with a manual to the appellant. In the statement of claim, the appellant claimed that his injury was caused by the appellant's reliance on "the misleading and deceptive conduct" of each respondent. That expression combined with the expression "trade or commerce" states the kernel of the prohibition in s52 of the Trade Practices Act and s42 of the Fair Trading Act. On the other hand, we have the assurance of senior counsel, who acted for the second respondent at the trial, that the trial was not run on that basis. 18 When all the evidence had been taken the parties agreed that there would be no oral submissions. Arrangements were made for the filing and serving of written submissions. Senior counsel for the appellant submitted that this was a bad practice which had resulted in misunderstanding about what the issues were. 19 Gendore's submissions were filed before those of the appellant. The opening paragraph under the heading "Misleading and deceptive conduct" was as follows: "The plaintiff pleads its case against the first defendant (Gendore) in negligence and misleading and deceptive conduct. There is no properly articulated claim for the alleged misleading and deceptive conduct, and a cause of action is not pleaded. Notwithstanding this, there is no statement or representation made by Gendore. Gendore is not the author of the manual and it never warranted the accuracy of it. There is no reliance by the plaintiff on anything said or done by Gendore. It didn't supply the manual to the plaintiff. There is simply no misrepresentation by Gendore." 20 The appellants' submissions which followed contained under the headings "1.0 Liability, 1.1 First Defendant" the following: "The plaintiff sues the first defendant in negligence and for misleading and deceptive conduct - as particularised in the Amended Ordinary Statement of Claim. There can be no dispute relevantly, that the first defendant: (a) in the course of trade and business conducted a business of importing farm machinery - in particular the TAARUP 605B forage machine (in a partially disassembled condition and boxed for container shipment); together with operating manuals; (b) imported the subject machine - and then shipped it to WA for sale (in the condition as it was when imported). The evidence would appear to suggest that the box in which the machine was imported was not even opened by the first defendant upon its importation. The first defendant cannot, in these circumstances, be heard to say that it exercised any or any proper care for the plaintiff. As an importer of the machine it either knew or was recklessly indifferent to the machine being manufactured to metric measurement and as a consequence being incompatible with imperial measurements." 21 Paragraph 1.2 of the appellant's submissions at trial contained particulars of negligence of the first respondent. As against the first respondent, no further mention in that part of the submissions was made about misleading or deceptive conduct beyond saying in the particulars of negligence that the manual was "misleading in its content". Under the heading "2.0 Liability of the Second Defendant" was the following: "The plaintiff submits that it has established: (a) That the second defendant owed to it a duty of care as particularised in the Amended Statement of Claim and that the second defendant, in breach thereof, committed those acts of negligence as are particularised therein together and also was guilty of the acts of misleading and deceptive conduct as is also particularised therein. It is not relevant to misleading and deceptive conduct that the second defendant did not intend the consequences of its actions. (See generally Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre Pty Limited (1997-1998) 140 CLR 216 per Stephen J 227.8-228). In these circumstances the plaintiff says that it is entitled to succeed against either and/or both defendants. In the event that the plaintiff succeeds against both then it is open to the Court to apportion liability according to its assessment of the degree of culpability of each tortfeasor defendant; Law Reform (Miscellaneous Provisions) Act 1946 s2(1)(a)." 22 It is not unfair to summarise the rest of those written submissions, under various heads of damages and extending from page 6 to page 31 as entirely devoted to the calculation of common law damages with no mention of the Trade Practices Act or the Fair Trading Act. 23 In this Court, the appellant's senior counsel relied upon Yorke v Lucas (1985) 158 CLR 661 at 666 where four members of the High Court said, of s52 of the Trade Practices Act: "It is, of course, established that contravention of that section does not require an intent to mislead or deceive and even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive: Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd ; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 197. That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaged in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive." 24 In Gardam v George Wills & Co Ltd (1988) 82 ALR 415 at 427 French J said: "The innocent carriage of a false representation from one person to another in circumstances where the carrier is and is seen to be a mere conduit, does not involve him in making that representation. Nobody would expect that the postman who bears a misleading message in a postal article has any concern about its content or is in any sense adopting it. The same is true of the messenger boy or courier service. When, however, a representation is conveyed in circumstances in which the carrier would be regarded by the relevant section of the public as adopting it, then he makes that representation." 25 I accept that, in a desultory and certainly not forthright way, the appellant succeeded in keeping alive its misleading and deceptive conduct case and that it must have been a case based on the Trade Practices Act against the corporate respondent Gendore and based on the Fair Trading Act against the individual Frahm. But the argument that there were facts and circumstances which would lead a court to find that either respondent adopted the false and misleading representation in the operations manual about the appropriate tyre size was never explained or developed in the written submissions. All that was said was that it was not relevant to the argument that Frahm did not intend the consequences of his actions and that in the circumstances the appellant was entitled to succeed against either and/or both respondents. 26 The trial Judge found that the false and misleading statement was adopted by neither respondent, a finding which, in the circumstances, was hardly surprising. The operations manual was the product of the manufacturer TAARUP, as was stated on the front cover. The first respondent importer was unaware of its contents and never held out to the appellant any belief about the accuracy of its contents. Similarly, the second respondent, the second-hand vendor, did no more than provide the photocopy of a operations manual that he happened to have in the store room and he provided this after the harvester had been delivered and paid for. The trial Judge went on to say that neither respondent could be regarded as making a representation through a manual, which they did not compile or in any manner adopt. His Honour's reasons for these conclusions which were clearly open, were brief but so were the submissions put to him. Indeed, the trial Judge demonstrated a better understanding of the basis of the deceptive and misleading conduct case than did the writer of the appellant's submissions to him. 27 Whatever may be the rights and wrongs of the way in which the case on this ground was run at trial, there is nothing at all to demonstrate that the trial Judge did not consider it or that the conclusions he reached about it were not open to him. In my opinion, they were correct. Therefore, the appeal fails on this ground. 28 So far as the finding on negligence is concerned, I am content to adopt the trial Judge's reasoning. Nothing has been advanced on the appeal which in any way undermines the conclusion he reached. 29 Accordingly, in my opinion, the appeal should be dismissed with costs. 30 HODGSON JA: I agree with Sheller JA. I would add the following. 31 The Statement of Claim stated all material facts necessary for a cause of action under the Trade Practices Act against Gendore, and under the Fair Trading Act against Frahm. Accordingly, the Statement of Claim was adequate to support a case under those statutes, in that it complied with the requirements of the District Court Rules Pt.9, r.3(1), unless it failed to contain "a statement of each cause of action" (Pt.9, r.BA(a)) or unless such a case might take a defendant by surprise (Pt.9, r.9(1)): cf. Kirby v. Sanderson Motors Pty. Ltd. (2002) 54 NSWLR 135. In the absence of evidence as to actual surprise, I am not satisfied that the pleading was fatally deficient. However, in the interests of clarity and avoidance of the possibility of surprise, it would have been much better if the Statement of Claim had referred to the statutes. 32 As pointed out by Sheller JA, the primary judge found that neither respondent had adopted what was said in the operations manual. That finding was plainly available on the evidence and was, having regard to the submissions made to the judge, supported by adequate reasons. It could be suggested that the crucial question, however, was not whether either respondent actually adopted what was said in the manual, but whether either would have been regarded by a person in the position of the appellant as having done so (cf. Gardam v. George Wills & Co. Ltd. (1988) 82 ALR 415 at 427). As to this, the primary judge found that "Neither defendant could be regarded as making a representation through [the] manual"; and again, this was a finding that was plainly available on the evidence and was, having regard to the submissions made to him, supported by adequate reasons. 33 Accordingly, no error or inadequacy of reasons has been shown in relation to the primary judge's decision on the misleading conduct case. 34 Of course, Frahm at least would probably be regarded as having represented to the appellant that he did not believe that the manual was inaccurate; but there never was any suggestion that this representation was untrue or otherwise misleading. 35 IPP JA: I agree with Sheller JA. **********

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