The Manufacturers Warranties Act 1974 (S.A.) ss.3, 4 and 5

Wacondo v The Commonwealth and another [1981] HCA 60; (1981) 148 CLR 1

Commissioner of Taxation v Whitfords Beach Pty Ltd [1982] HCA 8; (1982) 56 ALJR 240

Associated Newspapers Ltd v Wavish [1956] HCA 69; (1956) 96 CLR 526

Re The Licensing Ordinance (1968) 13 FLR 143

Amalgamated Wireless (Australia) Ltd v McDonnell Douglas Corp. (1987) 16 FCR

Tycoon Holdings Ltd and another v Trencor Jetco Inc. and Others [1992] FCA 25; (1992) 34 FCR 31

General Steel Industries Inc. v Commissioner for Railways (NSW) and others [1964] HCA 69; (1964) 112 CLR 125

Harris v Hosking [1917] SALawRp 6; (1917) SALR 81

Wright v Edwards (1961) SASR 267

D'Oro Distributors Pty Ltd v The Superintendent of Licensed Premises and

Kiley (1968) SASR 220

Dolton Bournes and Dolton Ltd v Osmond (Valuation Officer) (1955) 1 WLR 621

Collector of Customs v Chemark Services Pty Ltd [1993] FCA 291; (1993) 42 FCR 585

National Westminster Finance New Zealand Ltd v South Pacific Rent-a-Car Ltd

(1985) 1 NZLR 646

Counsel for the 2nd respondent : Mr M L D Einfeld QC and

Mr G Gregg

Solicitor for the 2nd respondent : Piper Alderman as agents

for Clayton Utz

1. Paragraph 2 of the notice of motion of the second respondent filed

on 24 November 1993 seeking to strike out from the amended

statement of claim the claim based on the Manufacturers Warranties

Act 1974 (S.A.) be dismissed.

2. The second respondent pay to the applicant the costs of and

incidental to paragraph 2 of the said notice of motion.

Note: Settlement and entry of orders is dealt with in Order 36 of the

VON DOUSSA J By notice of motion the second respondent Krone AG seeks orders that the claim against the third respondent, named as Krone GmbH be struck out, and that the claim against the second respondent based on the Manufacturers Warranties Act 1974 (SA) pleaded in the amended statement of claim be struck out.

2. It is now agreed between the parties that Krone AG is, and since 21 July 1986 has been, the legal successor of Krone GmbH in accordance with German law. When the notice of motion was called on, by consent the action was dismissed against the third named respondent, and leave was granted to make consequential amendments to the amended statement of claim.

3. The remaining application is made under O.11, r.16 FCR on the ground that the pleading discloses no reasonable cause of action. An application under this rule is usually argued on the pleading, but in the course of argument limited reference was made to affidavit material, and to contracts referred to in the pleadings, to elucidate the respondent's arguments.

4. The applicant is an instrumentality of the Crown established by the Electricity Trust of South Australia Act 1946 (SA). It is the major generator and supplier of electricity throughout the State of South Australia. The amended statement of claim alleges that under three contracts entered into on 11 November 1986 ("the first contract") 15 October 1987 ("the second contract") and in or about February 1991 ("the third contract") between the applicant and the first respondent, the applicant purchased from the first respondent products defined as "the switchgear" which comprised an 11KV ganged three phase 400A Load Brake Switch, a 160A 11KV phase fuse unit, and accessories associated with these items. The applicant complains that the switchgear did not have the qualities represented by the first respondent, was not of merchantable quality, and did not meet the contract specifications. It is alleged that defects in the switchgear have caused loss, including personal injury to employees of the applicant, and will cause further loss. As against the first respondent damages are claimed for breach of contract, for misleading and deceptive conduct contrary to s.52 of the Trade Practices Act, for misrepresentation and for negligence.

5. It is pleaded that the first respondent is incorporated in the State of New South Wales, that it is a subsidiary of the second respondent, and that between 9 May 1985 and 31 March 1991 there were two common directors of the first and second respondents. The second respondent in its defence admits that all but one of 2,800,000 shares in the first respondent are held by it. It is pleaded that the second respondent is incorporated in the Federal Republic of Germany and is a designer, manufacturer, supplier, and assembler of high voltage electrical switch gear including "the switchgear".

6. The amended statement of claim goes on to plead, relevantly:

"18. The purchase price pursuant to the first, second and third

contracts for the switchgear was between approximately

$3,000 and $8,000 depending upon the switchgear

configuration required and the exchange rate for the

Australian dollar to the German mark.

19. Between November 1986 and the present day, the first

respondent supplied to the applicant and the applicant

purchased from the first respondent the switchgear and other

associated items at a total cost to the applicant of

$5,778,066.62. Such switchgear was delivered to the

applicant by the first respondent in South Australia.

20. The applicant installed the switchgear supplied to it by the

first respondent at various locations throughout the

applicant's electrical distribution system in the State of

South Australia.

21. The proper law of the first, second and third contracts was

the law applicable in the State of South Australia.

...

32. The switchgear supplied to the applicant pursuant to the

first, second and third contracts was:

32.1 designed by the second respondent;

32.2 manufactured or partly manufactured by the second

respondent;

32.3 if not wholly manufactured by the second respondent,

partly manufactured by the first respondent.

32.4 assembled wholly or in part by the first and second

respondents. The applicant will provide further

particulars after discovery by the respondents in this

action.

...

37.1 By virtue of the matters referred to in paragraph 32

above, the first and second respondents were

'manufacturers' within the provisions of the

Manufacturers Warranties Act 1974 (S.A.) with respect

to the switchgear.

37.2 By virtue of the matters referred to in paragraphs

1.1.5 and 32 above the first and second respondents

warranted to the applicant that the switchgear was of

merchantable quality within the provisions of section

4 of the Manufacturers Warranties Act 1974 (S.A.)

38. In breach of the warranty referred to in paragraph 37.2

above the switchgear was not of merchantable quality..."

7. As against the second respondent damages are claimed as a result of a breach of the warranty referred to in s.4 of the Manufacturers Warranties Act. The pleadings also allege a cause of action in negligence against the second respondents but it is not material to the present application to refer to that pleading.

8. The Manufacturers Warranties Act came into force in South Australia on 10 April 1975. It was based upon the recommendations made by the Ontario Law Reform Commission in its Report on Consumer Warranties and Guarantees in the Sale of Goods published in 1972. The Act was the precursor to Division 2A of Part V of the Trade Practices Act 1974 (Cwth) enacted in 1978. Provisions of the Manufacturers Warranties Act relevant to the respondents' arguments are as follows:

(Interpretation)

s.3(1). In this Act, unless the contrary intention appears:

'consumer', in relation to manufactured goods, means any person

(including a body corporate) who purchases the goods when offered

for sale by retail and includes any person who derives title to

the goods through or under any such person:

...

'manufactured goods' or 'goods' means goods manufactured for sale

or disposal by retail but does not include goods that are normally

offered for sale by retail at a genuine retail price in excess of

ten thousand dollars:

'manufacturer', in relation to manufactured goods, means-

(a) any person by whom, or on whose behalf, the goods are

manufactured or assembled;

(b) any person who holds himself out to the public as the

manufacturer of the goods;

(c) any person who causes or permits his name, the name in which

he carries on business, or his brand, to be attached to or

endorsed upon the goods or any package or other material

accompanying the goods in a manner or form that leads

reasonably to the inference that he is the manufacturer of

the goods;

or

(d) where the goods are imported into Australia, and the

manufacturer does not have a place of business in Australia,

the importer of the goods:

...

(Statutory Warranties)

4.(1) Where any manufactured goods-

(a) are sold by retail in this State;

or

(b) are delivered, upon being sold by retail, to a

purchaser in this State,

the manufacturer warrants-

(c) that the goods are of merchantable quality;

..."

9. By s.5 a "consumer" who has lawful possession of the goods may, by action, recover against the manufacturer damages for breach of the warranty as to merchantable quality as if the action were a breach of warranty under a contract between the manufacturer and the consumer.

10. The second respondent contends that the pleadings disclose no reasonable cause of action under the Act for three reasons:

(b) the pleadings do not allege a sale "by retail"; and

(c) the goods sold and delivered in South Australia were not

"manufactured goods" within the meaning of the Act.

Senior counsel for the second respondent foreshadowed that if the claim under the Act were to proceed a further question would arise whether the goods sold and delivered to the applicant were "goods that are normally offered for sale by retail at a genuine retail price in excess of ten thousand dollars" so as to take the transactions outside the definition of "manufactured goods", but counsel conceded that on the present application that point did not arise as the applicant has expressly pleaded that the price was less than this limit.

11. In support of the first ground it is contended that each of paragraphs (a) to (d) of the definition of "manufacturer" should be construed as being mutually exclusive of the others. It is argued that this follows from the prescription that "manufacture" means (a)...(b)...(c)... or (d). It is plain, so it is argued, that the goods the subject of the claim against the second respondent were goods imported into Australia and that the manufacturer (i.e. the second respondent) does not have a place of business in Australia; therefore it follows under paragraph (d) that the "manufacturer" is the importer, the first respondent. The applicants, on the other hand, contend that the paragraphs of the definition are not mutually exclusive, so that the second respondent is a "manufacturer" under one of the other paragraphs, and further, it is said that there is a disputed question of fact, yet to be resolved, whether the second respondent does not have a place of business in Australia.

12. Whilst paragraph (d) of the definition is concerned with situations where goods are imported into Australia, the Act has a much wider application. It covers goods manufactured or assembled in Australia and in that application it is not difficult to envisage situations where a supplier of goods comes within each of paragraphs (a), (b) and (c) of the definition. In many other cases paragraphs (b) and (c) are likely to overlap as conduct of the kind envisaged by paragraph (c) will often amount to a holding out of the kind described in paragraph (b). It would be surprising if it were the intention of the legislation that in such cases a consumer seeking to enforce the remedy given by s.5 was required to nominate which of the paragraphs of the definition was relied upon, or that only one of the paragraphs could have application. It is not difficult to envisage other cases where goods are manufactured by one person on behalf of another person who then holds himself out to the public as the manufacturer. If each of the paragraphs of the definition were mutually exclusive this would give rise to the result that only one of those two persons could be sued, and the Act gives no indication which of them would be the party liable. That would be an odd result, and one which would be avoided if the four paragraphs in the definition were not read as being mutually exclusive.

13. The Act by its terms is obviously one for the protection of consumers. Section 22 of the Acts Interpretation Act 1915 (SA) provides:

"22.(1) Subject to subsection (2), where a provision of an Act is

reasonably open to more than one construction, a construction that

would promote the purpose or object of the Act (whether or not

that purpose or object is expressly stated in the Act) must be

preferred to a construction that would not promote that purpose or

object.

(2) This section does not operate to create or extend any

criminal liability."

The mere statement that the Act is one for the protection of consumers does not identify the purpose or object of the Act with sufficient precision to provide a useful guide to the construction that is to be preferred. In South Australia there is no statutory provision similar to s.15AB of the Acts Interpretation Act 1901 (Cwth) which permits reference to extrinsic aids such as the Second Reading Speech to assist in the ascertainment of the meaning of an enactment. It is nevertheless permissible to have regard to Parliamentary materials to discover the mischief which the Act was intended to remedy: Wacondo v The Commonwealth and another [1981] HCA 60; (1981) 148 CLR 1 at 25, and Commissioner of Taxation v Whitfords Beach Pty Ltd [1982] HCA 8; (1982) 56 ALJR 240 at 247. When introducing the Manufacturers' Warranties Bill into the House of Assembly in South Australia on 12 September 1974 the Attorney-General, the Hon L J King QC said:

"It has often been remarked that in the modern marketing milieu it

is the manufacturer who plays the dominant role; it is he who is

responsible for putting the goods into the stream of commerce and,

in most cases, for creating the consumer demand for them by

continuous advertising. Frequently, the retailer plays only a

very subsidiary role. It is the manufacturer who endows the goods

with their characteristics and it is he who determines the types

of material and component that shall be used and who establishes

the quality control mechanism. It is also he who determines what

express guarantees shall be given to the consumer and who is

responsible for the availability of spare parts and the adequacy

of servicing facilities. Almost all the consumer's knowledge

about the goods is derived from the labels or markings attached to

the goods on the sales literature that accompanies them - and

these, too, originate from the manufacturer.

These are not the only factors that strongly militate in favour of

holding the manufacturer responsible for breach of any express

warranties and the sort of warranties implied under the Consumer

Transactions Act. The present law involves circuity of actions

and an unnecessary multiplication of costs and proceedings.

Typically, the buyer sues the retailer, who then joins the

wholesale distributor or importer, and they will in turn bring in

the manufacturer. If the retailer is insolvent or has otherwise

closed his business for any reason, the consumer may not even be

able to initiate action. If the retailer has no assets or place

of business in this State, the consumer confronts difficulties.

If the cause of the breakdown of the goods is disputed, the buyer

will not have the right to obtain discovery of documents from the

manufacturer or to examine his officers, although the manufacturer

rather than the retailer is likely to be in possession of all the

recent pertinent facts.

Despite these weighty considerations, Anglo-Australian law has

made little progress in permitting the consumer to proceed

directly against the manufacturer. This Bill is intended to

rectify the deficiencies in the present law by providing a clearly

stated statutory rule holding a manufacturer liable for breach of

any express representations, and also deeming him to have given

the implied warranties as to the quality of the goods, and, where

appropriate, the availability of spare parts."

14. The mischief intended to be remedied was the absence of a cause of action by a consumer direct against a manufacturer for a defect in the quality of goods.

15. Paragraph (d) of the definition, in a case to which it applies, provides a consumer with a cause of action against the importer where procedural or other difficulties would make it impracticable to bring an action against the foreign manufacturer, but a construction which denies the consumer the right to pursue an action against the foreign manufacturer where no real difficulty exists in doing so, or where the local importer is insolvent or without the means to meet a judgment, does not promote the purpose or object of the Act. A construction which permits action against both the actual manufacturer, and any other person who comes within paragraphs (b), (c), or (d) would promote that purpose or object.

16. In the case of imported goods, a person in Australia, other than the importer, may hold himself out to the public as the manufacturer, or cause or permit his name or his brand to be attached to or endorsed upon the goods or any package or accompanying material so as to lead reasonably to the inference that he is the manufacturer of the goods thereby bringing the circumstances within paragraphs (b) or (c) of the definition. If the second respondent's contention is correct, a consumer seeking to exercise the remedy provided by the Act who, for example, sued the person whose name and brand appeared on goods could be met with a defence that, contrary to the inference conveyed by markings upon, and the packaging of, the goods, the "manufacturer" was a previously undisclosed importer of foreign made goods. That is also a result which does not promote the purpose or object of the Act as well as one that would permit both the importer and the person whose name and brand appeared on the goods to be sued.

17. In my view the Act by defining "manufacturer" to mean (a)...(b)...(c) or (d) does not intend that each of the four paragraphs be read as mutually exclusive. The definition prescribes a class comprising people falling within the four situations as described in paragraphs (a) to (d). The construction of the definition would have given rise to no difficulty had the wording been that "manufacturer" includes (a)...(b)...(c)... or (d)... Nor would there have been difficulty if the wording had been "manufacturer" includes (a)...(b)...(c)... and (d). The word "and" in a definition in that form would have given the definition of a cumulative effect in that the four paragraphs together would indicate who was a manufacturer, and a dispersive effect would be given to the paragraphs by the word "includes", so that the application of any one or more of the paragraphs would render a person a "manufacturer": see Blackburn J's explanation of Associated Newspapers Ltd v Wavish [1956] HCA 69; (1956) 96 CLR 526 in Re The Licensing Ordinance (1968) 13 FLR 143 at 147. In the present case a dispersive effect is not given to the descriptions of persons who comprise the class by a governing word such as "includes"; the dispersive effect is conveyed by the word "or".

18. In my opinion the definition should be construed by reading the four paragraphs (a) to (d) as constituting a class of persons who are defined as the "manufacturer". The paragraphs should be construed as alternatives, but not as mutually exclusive alternatives. There may be more than one person who comes within the class which is defined. In the present case on the footing that a particular switchgear item was manufactured by the second respondent, imported into Australia by the first respondent, and the second respondent had no place of business in Australia, both the first and the second respondents could be a "manufacturer".

19. I therefore reject the first contention of the second respondent. I consider it is open on the pleadings for the second respondent to be held to have been a "manufacturer".

20. The conclusion urged by the first contention of the second respondent that paragraph (d) of the definition renders the first respondent a "manufacturer" is dependent on the fact (amongst others) that the second respondent does not have a place of business in Australia. This involves questions of evidence which it is not appropriate to enter into on a strike-out application. In my opinion there is on the pleadings an arguable case that the second respondent does have a place of business in Australia, being the place of business of the first respondent. It seems probable that the second respondent was at material times a wholly owned subsidiary of the first respondent, with a degree of common control through one or more common directors. It is possible that the relationship between the two companies, and the manner in which the second respondent supervised the business carried on in Australia by the first respondent, was such that the second respondent was carrying on business in Australia through the agency of the first respondent: see Amalgamated Wireless (Australia) Ltd v McDonnell Douglas Corp. (1987) 16 FCR 238 and Tycoon Holdings Ltd and another v Trencor Jetco Inc. and Others [1992] FCA 25; (1992) 34 FCR 31 at 39. If it were doing so, it is arguable that it had a place of business where the first respondent carried on business. As there is an arguable question whether the second respondent had a place of business in Australia - a question which will turn on the whole of the evidence led on the topic, and may involve questions of degree - the pleading should not be struck out at this stage even if the second respondent's construction of the definition of "manufacturer" were correct: General Steel Industries Inc. v Commissioner for Railways (NSW) and others [1964] HCA 69; (1964) 112 CLR 125.

21. The second ground relied on to strike out the pleading is that the sale of the switchgear was not a sale "by retail", a requirement of the definition of "manufactured goods", and a prerequisite to the imposition of a statutory warranty under s.4 as s.4(1)(a) requires that the manufactured goods be "sold by retail".

22. Words in a statute are to be given their ordinary and natural meaning unless that meaning leads to absurdity, or some repugnance or inconsistency with the rest of the Act. As to the ordinary and natural meaning, "retail" has been defined as "the sale of commodities in small quantities": Oxford English Dictionary (2nd ed., 1989); and "the sale of commodities to household or ultimate consumers, usually in small quantities": Macquarie Dictionary (2nd ed., 1991). Webster's Third New International Dictionary (1986) gives the meaning as: "to sell in small quantities (as the single yard, pound, gallon): to sell directly to the ultimate consumer."

23. Senior counsel for the second respondent referred the Court to a number of decisions which have discussed the concept of a "retail" sale. The authorities recognise the two broad but different meanings of a "retail" sale indicated by these dictionary definitions. The second respondent relied in particular on Harris v Hosking [1917] SALawRp 6; (1917) SALR 81, Wright v Edwards (1961) SASR 267, D'oro Distributors Pty Ltd v The Superintendent of Licensed Premises and Kiley (1968) SASR 220 and Dolton Bournes and Dolton Ltd v Osmond (Valuation Officer) (1955) 1 WLR 621 in support of the submission that a sale by retail is a sale of a commodity in small quantities to the "ordinary man in the street". The applicant, on the other hand, contended that in the context of the Manufacturers Warranties Act this is not the appropriate meaning, and a sale "by retail", should be construed to mean a sale to an ultimate consumer, and referred to other authorities where this meaning had been adopted.

24. The authorities on the meaning of a "retail" sale have been discussed most recently by a Full Court of this Court in Collector of Customs v Chemark Services Pty Ltd [1993] FCA 291; (1993) 42 FCR 585. That case was concerned with the meaning of the expression "for retail sale" in a Schedule to the Customs Tariff Act 1987, and in particular with the question whether an imported herbicide mainly sold in 250 kg drums to professional horticulturalists was "for retail sale". The Full Court at 590-591 after referring to the judgment of Lord Evershed MR in Dolton Bournes and Dolton said:

"We do not apprehend his Lordship's dictum to have been grounded

upon a requirement in every case that the consumer of a retail

sale be an 'ordinary man in the street'. Rather it indicates that

although this criterion will often be relevant, it is not a

determinative factor for consideration. However, even if it can

be read so strictly, we accept the appellant's submission that

Dolton is distinguishable from the present circumstances in that

it was concerned with the definition of retail premises not retail

sale.

...

The weight of authority seems to us to support a conclusion that

the words 'retail sale' have generally acquired a specialised

meaning of a sale to an ultimate consumer. We do not think that

the usage of the term limits such consumers to ordinary members of

the public. The fact that in the present case almost all of the

goods imported by the respondent were directly sold to

professional horticulturalists and not ordinary gardeners as

ultimate consumers is in our opinion irrelevant. Professionals

can still be described as ultimate consumers."

The Full Court held that the imported goods in 250 kg drums were put up in forms or packings "for retail sale" notwithstanding that the sale of such drums could not be described as sales of a commodity in small quantities, or as sales to the "ordinary man in the street".

25. Senior counsel for the second respondent stressed that the Full Court did not reject Lord Evershed MR's requirement that a sale by retail be to an "ordinary man in the street" in all cases; rather, he argued, the passage just cited was a recognition by the Full Court that the requirement could apply in many contexts.

26. In the present case the expressions "sale by retail" and "sold by retail" must be construed in the context of the Act in which they appear, and in doing so the decisions on other legislation can be of limited assistance only.

27. The second respondent argues that as the Manufacturers Warranties Act is an Act for the protection of consumers it is appropriate to import the requirement that the sale be to an ordinary person in the street who would make "small scale purchases", as it could hardly have been intended that the Act would have application to a large statutory authority. This argument, in effect, seeks to limit the benefit of the statutory warranty created by the Act to people who acquired goods in circumstances that would indicate an acquisition for private use or consumption. If it were intended that the scope of the Act should be so limited it could be expected that "consumer" would be defined to have a corresponding meaning, perhaps along the lines of the definition of "consumer" which appeared in s.4(3) of the Trade Practices Act 1974 (No.51 of 1974) which had been assented to before the Manufacturers Warranties Act was introduced into Parliament, namely:

"For the purposes of this Act, unless the contrary intention

appears -

(a) A person who acquires goods shall be taken to be a consumer

of the goods if the goods are of a kind ordinarily acquired

for private use or consumption and the person does not

acquire the goods or hold himself out as acquiring the goods

for the purposes of re-supply;..."

28. However the Manufacturers Warranties Act does not define "consumer" by reference to the kind of goods acquired. The material part of the definition is that "'consumer' in relation to manufactured goods, means any person (including a body corporate) who purchases the goods when offered for sale by retail...".

29. The express inclusion in the definition of "consumer" of a purchaser which is a body corporate is, in my view, an indication that the Act is not intended to be confined to transactions involving goods that are ordinarily acquired for private use or consumption, but is to extend sales of goods to business and commercial enterprises. The inclusion of a body corporate within the definition is an indication against a sale by retail being one to "the ordinary man in the street".

30. If it were not for the monetary price limit contained in the definition of "manufactured goods" there would remain weight in the second respondent's argument that asserts a need to give to the meaning of sale by "retail", the meaning of a sale of a commodity in small quantities, so as to confine the Act to small transactions to be consistent with the ordinary understanding of the purpose of consumer protection. However the price limitation in the definition of "manufactured goods" indicates that the legislature has chosen another scheme for restricting the operation of the Act to small transactions, and for excluding large commercial transactions. The price limitation, although it imposes a test which to an extent involves an evaluation of matters of fact and degree in determining whether goods are "normally" offered for sale by retail at a "genuine retail price" in excess of $10,000, is one which is much less imprecise than the test whether in all the circumstances the goods are of a kind which are normally sold in small quantities to an ordinary person in the street.

31. In my opinion the express limitation on the scope of the Act by reference to price in the definition of "manufactured goods" indicates that the legislature was not intending that "sale by retail" or "sold by retail" would be the means by which small transactions, including those by individuals who acquired goods for private use and consumption, would be brought within the Act, and large commercial transactions would be excluded. The "genuine retail price" test was intended to achieve this end. To so construe the Act is consistent with the scheme adopted in the Consumer Transactions Act 1972 (SA). That Act provided that in every consumer contract for the sale of goods there would be implied certain warranties as to quality, and "consumer contract" was defined to include a range of contracts under which a person purchased goods or contracted for the performance of services "under which the consideration to be paid or provided by or on behalf of the consumer in money or money's worth (excluding any credit charges) does not exceed ten thousand dollars."

32. A consumer of goods is ordinarily understood to be the user or consumer of goods at the opposite end of the chain of supply from the producer. The notion that the consumer protected by the Act is such a person is introduced into the definition of "consumer" by the requirement that a "consumer" is a person who purchases the goods when offered for "sale by retail". I consider this expression in the definition has a similar meaning to that accorded to "for retail sale" in Collector of Customs v Chemark Services Pty Ltd. However the meaning cannot be precisely that of a sale to an ultimate consumer as this would create an inconsistency with the extension of the definition of "consumer" to include "any person who derives title to the goods through or under any such person". That extension contemplates a sale by retail of manufactured goods to a person who is not the ultimate consumer. For example the extension would operate to include within the definition of "consumer" (being the person entitled under s.5 to enforce the statutory warranty created by s.4) a person who was the donee of a gift of goods made by the purchaser, or a member of a family on whose behalf goods are purchased by another family member.

33. The authorities on the meaning of "retail" sale recognise that with a sufficient context, a sale by retail may mean a sale to a person who does not intend to resell: Harris v Hosking per Murray CJ at 92. In this sense the meaning of "retail" is opposed to that of "wholesale". The extension of the definition of a "consumer" in the Manufacturers Warranties Act to a person who derives title from the person who purchases goods when offered for sale by retail provides a context which requires that the expressions "sale by retail" and "sold by retail" include a sale to a person who may not be the ultimate consumer because title is passed on to another otherwise than by way of resale or resupply. Subject to this qualification, of the two broad meanings which sale by retail may convey, the meaning of a sale to an ultimate consumer is the one adopted by the Act; in the context of the Act "sale by retail" does not necessarily require that there be a sale of a commodity in small quantities to an ordinary person in the street.

34. In my opinion a large corporate business can be a "consumer" entitled to enforce the statutory warranty of merchantable quality created by s.4 of the Act if it purchases goods that were manufactured for sale or disposal to ultimate consumers, and those goods are not of a kind excluded from the definition of "manufactured goods" by the price limitation: cf National Westminster Finance New Zealand Ltd v South Pacific Rent-a-Car Ltd (1985) 1 NZLR 646 at 651 per Casey J whose reasons for judgment were confirmed on appeal at 656. Once it is acknowledged that large corporate businesses may be consumers for the purposes of the Act there is no reason why the Act should not extend to a government or semi-government instrumentality. In my opinion the pleading of a cause of action under the Manufacturers Warranties Act by the applicant against the second respondent is not bad by reason of a failure to allege facts which could constitute a sale by retail within the meaning of the Act.

35. Affidavit material filed by the applicant discloses that of nearly four thousand pieces of switchgear purchased by the applicant from the first respondent under the three contracts, approximately 14 whole padmount transformers which incorporate pieces of switchgear have been sold by the applicant to other suppliers of electricity at specialised defence and commercial sites in South Australia. In my opinion these sales are irrelevant to the issue whether, in relation to all the other pieces, including those which give rise to the claims for damage made in this action, the goods were sold by retail by the first respondent to the applicant. The number of pieces resold is trivial in comparison with the total number supplied, and does not alter the nature and purpose of the sales made pursuant to the three contracts, namely for use of the switchgear by the applicant in its undertaking as a generator and supplier of electricity in South Australia.

36. The third ground relied on to strike out the pleading of a claim under the Manufacturers Warranties Act is that the goods the subject of the action were not "manufactured goods" within the meaning of the Act. To develop this argument it was necessary for counsel to travel beyond the pleading to rely on matters of fact. The Court was taken to the second contract entered into by the applicant with the first respondent on 15 October 1987. Documents which form part of that contract include tender documents and precontract Specification Comments. Included in the Specification Comments, on Krone AG stationery, it is written "Soley (sic) due to this tender and any subsequent contract we plan to transfer Krone tooling for component parts to Australia. The result of this will mean the components required for other overseas countries will be manufactured in Australia and then exported..." The Specification Comments go on to state the West German and Australian content of the switchgear components, indicating that in the case of each Item to be supplied under the second contract there was an Australian content, ranging from 14% up to 100% depending on the Item. The Australian content under the third contract was to be even higher.

37. On these contractual statements counsel argued that the goods sold by retail and delivered to the applicant in South Australia by the first respondent were not the "manufactured goods" manufactured by the second respondent and imported into Australia by the first respondent. The switchgear sold by the first respondent incorporated to a greater or lesser extent component pieces made by the second respondent, but the product as a whole which was delivered was manufactured or assembled by the first respondent.

38. I agree with the submissions of the second respondent that the "manufactured goods" to which the statutory warranty created by the Act applies are the entire goods as sold and delivered. And it would follow that in deciding whether the goods are of merchantable quality it would be necessary to judge the goods as delivered in their entire form.

39. Moreover the sale of the component parts by the second respondent to the first respondent (or of the tyre to the lawnmower manufacturer) would not be a sale by retail. That sale would be one for resale or resupply, and is in the nature of a sale by wholesale.

40. The second respondent's contention however runs into difficulty on a factual issue. Whilst documents incorporated into the second and third contracts indicate that switchgear supplied under each of them had substantial Australian content, the corresponding documents in the first contract describe all the Items to be supplied thus: "Origin of Goods: West Germany". It therefore appears that switchgear supplied under the first contract was "manufactured goods" manufactured by the second respondent. It is not possible on the present state of the pleadings to determine whether the switchgear which it is alleged has or will cause loss to the applicant was switchgear supplied under the first contract, or the second or third contracts. It is therefore not possible for the second respondent to demonstrate that the applicant's claim as pleaded under the Manufacturers Warranties Act is so clearly untenable that it cannot possibly succeed. Therefore the pleadings should not be struck out.

41. The second respondent's submissions on this last ground, however, do demonstrate the need for the applicant to give further particulars to identify the particular pieces of switchgear which it is alleged are the subject matter of the various heads of loss in respect of which it is alleged that the second respondent is liable under the Manufacturers Warranties Act. To give these particulars might be a difficult and time consuming exercise, and one that may have to await discovery, but it is nevertheless one that will have to be undertaken if the claim against the second respondent under the Manufacturers Warranties Act is to proceed.

42. In my opinion the application to strike out those parts of the amended statement of claim which plead a claim against the second respondent under the Manufacturers Warranties Act should be dismissed.