A number of other cases which have applied that principle, or an analogous one, have been referred to, the most recent being the decision of the Privy Council, Inverugie Investments Ltd v Hackett (1995) 3 All ER 841. That case was not one dealing directly with the wrongful retention of goods but with trespass to land. Nevertheless, the applicant's counsel contends that it confirms a general principle that for the wrongful use of property a reasonable rent should be paid. It was not common ground, but it is established by the evidence, that there is in the industry a $5 per square metre per month standard for long term rental of the kind of tentage under consideration. On what is referred to as casual hire, that is short term rentals, the rate would be higher. It is, in my view, clear on the evidence that the $5 rate is one that is intended to cover both direct and indirect overheads. It was referred to by one of the witnesses as a "budget figure". There are, of course, significant indirect overheads in running a hire business of the kind which was being run by Rosedown. Indeed one could infer from the fate of Rosedown and from that of other companies who carried on similar businesses which have been referred to in the evidence, all of which have in one way or another collapsed, that the indirect overheads are substantial. Direct overheads, greater in the case of casual hire than long term hire, cover such matters as transportation of the tentage, erection, demounting at the end of the hire, periodic inspections and, on Ms Galloway's evidence, replacemnt of consumables, that is parts which are susceptible to being lost or damaged on a regular basis. All those matters are included within the $5. When their Lordships in Strand Electric v Brisford refer to a fair rental value or a reasonable remuneration they are not suggesting one seizes upon a figure which appears in some rental agreement as, "rental" and applies that without further adjustment. Adjustment must be made for direct overheads and outgoings of the kind that I have mentioned. This is borne out by the concluding passages in the judgment in Inverugie Investments Limited v Hackett where the Privy Council approved the deduction of a variety of direct outgoings from the potential rent capable of being charged for the apartments in question.
In my view the first difficulty which the applicant encounters in its approach to this case in seeking to apply a "budget figure", or the standard figure of $5, is that the outgoings appropriate to either a short-term rental or a long-term rental are not adequately established. In effect the Court is being asked to engage upon an exercise of speculation.
I mentioned the rate of return of 62 per cent at the outset to indicate that an unadjusted figure of $5 appears to give an unreasonably high rate of return even allowing that the rental does include an allowance for the wear and tear and depreciation of the goods. It must be some lesser figure, and it seems to me that it must be less by quite some margin for direct expenses, but by what margin I am unable to determine. I agree with the submissions of the respondents that the development of the law of torts in Australia over recent years gives greater emphasis than is apparent in the reasoning in Strand Electric v Brisford to the principle that remedies in the law of torts are to compensate the plaintiff for the loss actually suffered, and not beyond that; in other words to put the plaintiff in the position the plaintiff would have been in but for the wrong. In light of that it seems to me that a wrong result would be achieved by simply applying the $5 per square metre approach without deduction for direct expenses. And, short of speculation, the appropriate deductions cannot be assessed.
There is, however, another compelling reason for not applying the method of assessing damages adopted in Strand Electric v Brisford. In my view, that decision is plainly and firmly based upon the premise that the owner of the goods who was seeking a remedy was in the business of hiring the goods, and moreover that the goods had initially gone out of the possession of the owner as goods for hire. Admittedly in that case there was no charge levied in the first period of the enjoyment of the goods by another party, but nevertheless possession was given over in circumstances akin to rental and as part of the plaintiff's rental business. The goods were not given over as part of a sale transaction, nor was the transaction between the parties one where the plaintiff's continuing claim to possession arose out of a transaction intended to secure the payment of an unpaid purchase price. In a case such as the present I consider different considerations apply.
It was strenuously urged on the applicant's behalf that the applicant was in the business of hiring tentage in Australia and that it should be treated as a hirer in any event. I am unable to accept that submission. The evidence does not establish, to any degree of confidence, that the applicant carried on the business of hiring tents in Australia at the time relevant to the assessment of damages. The evidence at the main trial indicated that Roder was a major international manufacturer of tentage which it sold to many parts of the world, and indeed a number of sales had occurred to Australia including that of the subject tentage. There is no evidence, though, that at the time that the transaction with Rosedown occurred the applicant was in the business of letting tents in Australia.
The impression that I am left with is that after the failure of Rosedown, not the first company failure that the applicant had experienced among its customers in Australia, the applicant decided that it would become a renter of tents in Australia, through an Australian agent. After it regained possession of the subject tents, it embarked on this business by hiring them out. The first hire appears to have been in 1995 when the subject tents were recovered and rented to Burwood Hire for the purposes of the 1995 Grand Prix.
Damages should be assessed on the footing that the applicant was not in the business of hiring tents; rather, at the relevant times, it was in the business of selling tents. It sold tents to Rosedown. It imposed a retention of title clause as a means of security for the unpaid purchase price. It was in that capacity that it sought to exercise its rights as owner in about October 1993. I consider the case is not one governed by the principles that were applied in Strand Electric v Brisford, but rather by the principles usually adopted where goods have been converted, namely that the loss equals the value of the goods at the time of conversion, plus compensation or interest for being kept out of the monetary equivalent of that value until judgment. I refer by way of example to British Wagon Company Limited v Shortt [1961] IR 164 at 168 where Strand Electric v Brisford was not applied because the plaintiff was not in the business of hiring out equipment; rather it was a hire purchase company in the business of financing transactions of that kind. I consider the proper approach to damages in this case is to assess them as if this were a claim in conversion, that is to take the value of the tents at 30 November 1993, then allow compensation by way of interest, or damages akin to interest, from that date forward but giving credit to the respondents for the value of the tentage when it was returned on 30 May 1995.
I have already indicated my view that $17,000 paid to BFC should not be included in the damages. Mr Matthews assessed the value of the tentage at about 30 November 1993 at $417,000. At 30 May 1995 he valued the same tents at $367,000. The difference between those two figures will be accounted for in the mode of assessment that I propose because credit will only be given for the latter figure. It is suggested however that there should be additional sums allowed. It is alleged that the tents were partly damaged and various components were missing when they were returned, and that compensation for these matters should be added.
The respondents answer this by saying that the tentage, or the best part of it, was examined by Mr Matthews, erected at Agfest. Whatever damage existed of the kind now complained of was there to be seen and that damaged condition would be reflected in the value at 30 May 1995. It would therefore be inappropriate to add anything more.
In my view it is appropriate to add something more, but not as much as the applicant seeks. Mr Matthews reached his original valuation by considering several factors. He looked at the tents and he had regard to the likely resale price of what he saw. However, he also had regard to the invoices to Rosedown for the purchases from the applicant which listed all the components that were delivered; then he applied a discount for wear and tear to the current list prices of all the equipment. That calculation assumed that the items in the original invoices were still available and were to be included, and that those items include some that would be additional to those incorporated in the erected tents that he inspected. Additional pieces had been supplied that for one reason or another may not have been incorporated in the erected tents, and it may be that not all the tents were erected. It was certainly the case that not all the tents were erected at Agfest. It may be that less than the total area initially sold by the applicant was erected for the very reason that there were pieces missing and pieces damaged that would prevent erection of the total area. Even if that is not the explanation, I accept the evidence adduced on the applicant's behalf that amongst the returned material there were damaged pieces. If less than the full amount were to be erected, obviously it would be the damaged bits that were not used.
I accept the applicant's evidence that it was necessary to replace certain parts. I think also it was probably necessary to repair some parts. The types of damage described by Mr Curkpatrick would not have been, or at least parts of it would not have been, apparent with the tent erected, e.g. lugs would not be apparent. On the other hand, some of the damage complained about by Mr Watts seems to me to be damage of a kind that would normally be accepted as wear and tear, and some of it was damage of a kind that could be made cosmetically satisfactory, and presumably mechanically satisfactory, more cheaply than by bringing new parts from Germany.
I propose to allow something for the parts that were imported from Germany, including an allowance for freight and the customs agents. The invoice price for all the imports was approximately DM24,000, but some deduction must first be made from that for parts that were bought for other purposes and not merely to make good damage and loss. Taking off the components purchased to make the remainder of the 15 metre structure fully functional, the invoice price is reduced to something like DM21,300. That has to be converted to Australian dollars, and 8 per cent duty and freight added. The total cost of the components imported to rectify damaged and missing components was about A$24,500. The question is, how much of that should be allowed? The applicant has not, and presumably cannot, establish that some of the pieces missing on 30 May 1995 were not missing on 30 November 1993. As well, as I have indicated, I am not satisfied that all the other parts were necessarily needed to make good loss and damage which exceeded ordinary wear and tear taken into account in Mr Matthews' valuation.
All the Court can do is to approach the matter in a broad way. Mr Matthews thought the tents were in an acceptable condition, but the applicant's witnesses thought that the damage was greater than it should have been. I suspect the true position lies somewhere between the two. I propose to allow for repair and replacement over and above wear and tear, the sum of A$8,000.
A claim is made for cleaning. This claim is not admitted, but it is plain that a good deal of the material was returned without being cleaned after its journey to the Agfest event in Tasmania. The claim is for $4,790. I think the calculation may be a slight over-estimate. I propose to allow $4,250 for cleaning costs.
The next component to be determined in the assessment is the rate of interest to be applied to provide compensation, be it allowed as damages or as interest, for the applicant having been kept out of its money from the time of the conversion.
Initially, documents of a contractual nature passing between the parties suggested an interest rate of 9 per cent. However, the documents tendered at trial show that the failure of Rosedown to pay for the goods was causing some financial difficulty or stress to the applicant and the applicant had found it necessary in August 1992 to refinance some aspect of its operation to cover the outstanding purchase price. It was then required to pay an interest rate of 13 per cent in Germany. In the correspondence, quarterly payments of interest were being offered by Rosedown. In those circumstances, it seems to me that it is appropriate to award compensation in the form of damages in lieu of interest under the principle in Hungerfords and Others v Walker and Others (1989) 171 CLR 125. As to the rate, 13 per cent would seem to be an appropriate starting rate. However, there is no evidence to indicate what happened to the rates in Germany thereafter. It is known that they fell in Australia. In the absence of any evidence as to a different picture in Germany, the Court should assume that they would also have fallen in Germany. In the absence of better evidence I think the Court should be guided by rates in Australia. Again, absent any other evidence of what the rates in Australia were, the Court should be guided by Schedule J to the New South Wales Supreme Court Rules which sets out interest rates to be used in assessing both pre-judgment interest and interest on judgments in that Court. The prescribed rate under Schedule J from 1 September 1993 to 28 February 1995 was 10.5 per cent and after 28 February 1995 it increased to 12 per cent.
I think the damages in lieu of interest under the Hungerford principle should be calculated in quarterly rests at 10.5 per cent to 28 February 1995 and thereafter at 12 per cent. The starting figure, therefore, in the calculations will be $417,000 at 30 November 1993 with five quarterly adjustments at an interest rate of 10.5 per cent, and one quarterly adjustment thereafter at the rate of 12 per cent, which takes the calculation to 30 May, 1995, viz $488,921. Then should be deducted the value of the goods upon return, $367,000, which gives an amount due at 30 May 1995 of $121,921. To that must be added the amounts for cleaning and for parts giving a total of $134,171. Two more quarterly rests at 12 per cent produces a total assessment to today's date of $142,342.
There will be judgment for the applicant against both respondents for the wrongful detention of the goods for A$142,342, together with the costs of both trials.
I certify that this and the
preceding pages are a true
copy of the Reasons for
Judgment of Justice von Doussa