Yates v Mobile Marine Repairs Pty Ltd & Anor

Supreme Court of NSW|2007-06-04|Before: Palmer J

CITATION : Yates v Mobile Marine Repairs Pty Ltd & Anor [2007] NSWSC 1463

JURISDICTION : Equity Admiralty List

DECISION : Judgment for the plaintiff against each of the defendants for one half of the plaintiff's loss.

LEGISLATION CITED : Civil Liability Act 2002 (NSW) - Schedule 1, Clauses 6(1), 13, s 34, s 34A, s 35, s 35A, s 36, s 37, s 39

Anthanasopoulos v Moseley [2001] NSWCA 266, (2001) 52 NSWLR 262 CASES CITED : - "Mediana", Owners of the Steamship v Owners, Master & Crew of the Lightship "Comet" [1900] AC 113 - Pump Dredger, Owners of No 7 Steam Sand v Owners of SS Greta Holme [1897] AC 596

Adrian Richard Yates (Plaintiff) PARTIES : Mobile Marine Repairs Pty Ltd (First Defendant) MAN Automotive Imports Pty Ltd (t/as MAN Marine Australia) (Second Defendant)

COUNSEL : D.J. Fagan SC, H.W.D. Stowe (Plaintiff) M.G. McHugh (Defendants)

SOLICITORS : A.R. Yates & Co (Plaintiff) Piper Alderman (Defendants)

0001/06 Yates v Mobile Marine Repairs Pty Ltd & Anor

1 These proceedings involve a claim for damages arising from the negligent repair of the engines of a game fishing vessel known as "Eagle" (the "Eagle"). At all material times, the Plaintiff ("Mr Yates") was the owner of the Eagle. 2 The First Defendant ("Mobile Marine") carried on the business of repairing marine engines and was the Sydney agent of the Second Defendant ("MAN Australia"). 3 MAN Australia was the authorised agent for the east coast of Australia, for MAN Nutzfahrzeuge Aktiengesellscaft ("MAN AG"), the German company which manufactured MAN engines. 4 The repair work to the engines was carried out by Mobile Marine. There is no issue that the repair work was carried out negligently and that the engines were extensively damaged. 5 By his Statement of Claim, Mr Yates alleges that:

in late May or early June 2004 he entered into a contract with Mobile Marine, or alternatively MAN Australia, or alternatively both Mobile Marine and MAN Australia, to remove rust from the engines and to repaint the inter-coolers in consideration of payment by him of half the cost of the work;

Mobile Marine performed the repair work negligently causing the damage;

Mobile Marine, or MAN Australia, or both of them, breached the implied term in the contract that the repair work would be carried out with all reasonable care, skill and diligence;

alternatively, whichever of the Defendants was party to the contract had a duty of care in tort to exercise due care, skill and diligence in carrying out the repair work, and breached that duty causing loss. 6 Mr Yates' claim is for $1,222,328.12 (excluding costs and interest), comprising:

cost of and incidental to replacing engines: $622,065.12;

loss of use: $240,263. 7 Mobile Marine admits that it contracted with Mr Yates to perform the repair work on the Eagle's engines and admits liability for the damage both in contract and in tort. Mobile Marine does not admit the quantum of loss claimed by Mr Yates. 8 MAN Australia denies it was a party to the contract and denies liability for the damage in tort. If found liable, it also disputes the quantum of loss claimed by Mr Yates. 9 In addition, the Defendants:

concede that, prima facie, Mr Yates is entitled to receive compensation for the negligent repairs;

allege that Mr Yates has unreasonably failed to mitigate his loss;

dispute the extent of the diminution in value of the Eagle alleged by Mr Yates; and

submit that Mr Yates is not entitled to any damages for loss of use. Issues for determination

10 Since negligence is admitted by Mobile Marine and MAN Australia, the only disputed issues are:

the quantum of damages in respect of: the cost of replacing the engines; the diminution in value of the Eagle ; and "loss of use" of the Eagle .

if MAN Australia is a party to the contract, are the claims of Mr Yates against Mobile Marine and MAN Australia "apportionable claims" for the purposes of s 35 of the Civil Liability Act 2002 (NSW) ("CLA") so that liability as between MAN Australia and Mobile Marine should be apportioned to reflect the degree of responsibility of MAN Australia for the damage to the engines. An overview of the facts

11 The Eagle is a 58-foot custom-built luxury game fishing vessel designed and constructed by Norman R. Wright & Sons ("NRW"). The vessel was fitted with two MAN 10 cylinder diesel engines built in Germany and purchased by Mr Yates from Seapower Australia Pty Ltd, who were at the time the authorised MAN dealer for Australia. 12 On 22 August 2003, sea trials of the Eagle were conducted at Moreton Bay in the presence of Mr Yates and Mr Jason Grose, a director of Mobile Marine. During the course of the sea trials, Mr Grose informed Mr Yates that the gasket on the sea-water side of the starboard engine intercooler had failed. Mr Yates inspected the starboard engine and observed that there was sea-water over the engine and dripping from the head-lining above the engine. 13 On 23 August 2003, Mobile Marine replaced the gasket on the starboard engine. 14 After further sea trials between August and November 2003, the Eagle was handed over to Mr Yates by NRW on 27 November 2003. On the same day, the Eagle commenced its maiden voyage from Brisbane to Sydney. When the vessel arrived in Southport, Mr Yates inspected the engine room and discovered there was sea-water over the port engine. 15 It was determined that the gasket on the port engine intercooler had failed. Mr Yates contacted the authorised MAN service agent for Queensland, who attended and replaced the failed gasket under warranty. 16 The Eagle arrived at its home port, Sydney, on 1 December 2003. Problems had been experienced with the engines on the voyage from Southport including overheating, leaking fuel lines and oil leaks. Mr Yates advised Mobile Marine, which rectified these problems in December 2003 and January 2004. 17 On 21 January 2004, Mobile Marine issued to Mr Yates the Final Hand Over and Inspection Certificate in respect of the engines, which warranted that the engine satisfied "all criteria for faultless operation" at the time of hand over. The certificate was contained in the MAN Gold Standard Warranty Book which comprised two components: the "Basic Warranty" and the "Extended Warranty". 18 In about mid-February 2004, Mr Yates experienced problems with excessive black smoke and also observed rust staining and paintwork degradation on both engines in the areas affected by sea-water following failure of the gaskets. 19 Mr Yates contacted Mobile Marine and in late February 2004 Mobile Marine conducted sea trials to investigate the cause of the black smoke, without success. 20 In late March or early April 2004, Mr Yates was contacted by Mr David Schluter, the Sales Manager of MAN Australia, who advised that MAN Australia had taken over as the MAN dealer for the east coast of Australia. 21 Shortly afterwards, Mr Yates was contacted by Mr Grose of Mobile Marine, who told him that "MAN Australia has authorised me to change the software in both engines in the hope that this may fix the black smoke problem". The content of this conversation is not disputed, however MAN Australia denies authorising Mobile Marine to carry out any work to fix the black smoke. The work was carried out at no cost to Mr Yates, but it did not rectify the problem. 22 In late May 2004, Mr Grose contacted Mr Yates again and advised that MAN Australia had authorised replacement of the injectors on both engines. The Defendants concede that MAN AG also authorised the injector work. 23 On 8 June 2004, Mobile Marine commenced removing the injectors from the engines. A few days later, Mobile Marine advised Mr Yates that Mobile Marine was experiencing difficulties in removing the injectors due to rust caused by sea-water damage. 24 In mid-June, Mr Yates says that Mr Grose telephoned him and told him that MAN Australia was going to approve the repair of the paintwork and rust. This conversation is disputed by Mr Grose. 25 Mr Yates says that in late June 2004, Mr Schluter informed him that MAN Australia was prepared to fix the paintwork and perform the rust repairs on the engines if Mr Yates paid half the cost. This is the conversation which Mr Yates says resulted in the contract between himself and MAN Australia upon which he now sues. 26 On 24 June 2004, Mobile Marine removed the intercoolers from the port and starboard engines and prepared the intercooler units for sand-blasting. Mr Yates was not told that sand-blasting was to be used. 27 On 6 August 2004, Mobile Marine refitted the intercoolers to the engines. 28 On 11 August 2004, Mobile Marine completed repair work on the engines and, on 12 and 20 August, Mobile Marine conducted sea trials of the engines. 29 It is not disputed that the sand-blasting grit was not properly cleaned from the intercoolers before the intercoolers were refitted to the engines, and that Mobile Marine had negligently caused the problem. The ingestion of the grit caused abrasive damage to various engine components. 30 When Mr Yates started the engines of the Eagle on 31 August 2004, he heard a hammering noise emanating from the port engine. He immediately shut down the port engine, headed back to shore on the starboard engine and contacted Mobile Marine. 31 On 1 September 2004, Mobile Marine commenced dismantling the port engine and found evidence of sand-blasting grit having been ingested into the lower portion of the engine. Mobile Marine says that the grit had been filtered by the engine's oil filter and did not travel through the entire engines. 32 On about 3 or 4 September 2004, Mr Yates says that Mr Grose proposed to repair the port engine by way of what is known as a "bottom end rebuild in situ". Such repair would have involved the following work without removing the engines from the vessel: - replacing piston rings and lines; - replacing big end and main bearings; - overhauling cylinder heads; - cleaning and inspecting all components; - cleaning and reassembling parts and gaskets; and - overhauling the intercooler. 33 Mr Grose contends that he informed Mr Yates that he was prepared to carry out a full engine rebuild "in situ", which was not limited to the "bottom end". This is disputed by Mr Yates, but nothing turns on the question. 34 Mobile Marine says that it was its intention that it would remove each of the components of the engine to confirm the true extent of the damage. Each component would have then be repaired or replaced. Mobile Marine contends that, with a rebuild in situ, there would have been no need for the engines to have been removed from the Eagle, repaired and replaced in the vessel - called a "cut and shut" - and cost, damage and loss of value would have been reduced. 35 Prior to determining whether to proceed by way of replacement or repair, Mr Yates sought the advice of five experts in relation to the feasibility and prudence of an "in situ" repair. Those experts were unanimous in their rejection of "in situ" repair, and advised that it was appropriate to proceed by way of engine replacement. The common foundation of the opinions was the impossibility of reasonably ensuring the removal of grit, and identifying and rectifying damaged engine components in the course of an "in situ" repair. 36 In addition, Mr Yates received expert marine valuation advice which was to the effect that, to protect the value of the vessel, the engines had to be replaced. 37 Mr Yates elected to replace both engines. It is the Defendants' case that his decision to replace the engines was unreasonable and that, in truth, he did not rely on the experts' advice because he had already made up his mind that he wanted new engines. 38 Mr Yates received two offers from MAN Australia on 11 October and 21 October 2004 to sell him new MAN engines at cost price, but Mr Yates refused the offers. He says that by then he had lost confidence in the ability of MAN Australia and Mobile Marine to give him proper service. 39 Mr Yates ultimately elected to procure MTU engines to replace the MAN engines. He paid the deposit for the MTU engines on 14 December 2004. The removal and reinstallation of engines, and associated rectification work was undertaken by Blackline Shipping Pty Ltd in Coomera, Queensland. Whether MAN Australia was party to the contract

40 Mr Yates said that in mid-June 2004 he had a number of conversations with Mr Grose and Mr Schluter about replacing the injectors and at the same time removing the rust and redoing the paintwork on the engines. Mr Yates was insisting that the work to repair the rust and the repainting was covered by the Gold Standard Warranty that MAN Australia had given because the rust had been caused by the failure of the gaskets on the intercoolers. 41 Mr Grose said that Mobile Marine could do only what MAN Australia authorised it to do. Mr Schluter said that he would speak to MAN AG. Mr Yates gave this evidence in paragraph 74 of his affidavit sworn 22 June 2006: "In late June 2004, David Schluter telephoned me and we had a conversation to the following effect:-

Schluter: MAN is prepared to fix up the paintwork and do the rust repairs on the engines if you are prepared to pay half the cost. If you are happy with this, I will give Jason the go ahead to start work.

Yates: I'm not really happy about contributing anything towards the cost of this work. As I have said previously I believe this is a matter that should be covered fully under warranty by MAN particularly in view of the circumstances in which the damage occurred.

Schluter: Please remember we didn't sell you the engines and I have gone to a lot of trouble to get agreement from MAN to do anything about the rust and paintwork.

Yates: David, so far as I am concerned you represent MAN in Australia and this is a problem that MAN must fix up under warranty. However, in the circumstances whilst I am not at all happy I will agree to the proposal as I want to get this boat back on the water.

Schluter: Okay. I will give Jason the go ahead to proceed with the work on that basis. I know you're not happy but it's the best I can do for you." 42 Mr Schluter swore an affidavit which was read on behalf of MAN Australia. It dealt extensively with various conversations alleged in Mr Yates' affidavits. At paragraph 28 of Mr Schluter's affidavit, he said: "In or about late June, I made a telephone call to Mr Yates and we had a conversation to the following effect:

Me: 'Adrian, MAN Germany has agreed to allow Mobile Marine to change the injectors in the engines in order to try and reduce the black smoke under warranty. Normally, they would not cover this type of work, but have made a policy decision to assist you in this case.'

Yates: 'Thanks David. That's great news, but what are they going to do about the paintwork?'

Me: 'I haven't discussed this aspect with them at this stage, but I'll talk to them and see how I go.'" 43 The critical conversation in Mr Yates' affidavit, which I have set out above, concerned paintwork and rust repairs rather than replacement of the injectors. Mr Schluter's affidavit said nothing about this alleged conversation. He was not called for cross examination. 44 In the light of the extensive evidence which Mr Schluter gives in his affidavit, I would have expected that if he disputed that he said what was attributed to him in paragraph 74 of Mr Yates' affidavit, he would have said so unequivocally in his own affidavit. The fact that he did not deny the conversation alleged in paragraph 74 of Mr Yates' affidavits leads me to the conclusion that Mr Yates' evidence as to what was said is unchallenged. I accept it. 45 It is clear that this conversation between Mr Schluter and Mr Yates occurred in the context of repeated insistence by Mr Yates that MAN Australia was responsible under warranty for doing the repairs to the rust and the paintwork. Mr Schluter was speaking to MAN AG about the extent to which MAN Australia would accept responsibility. MAN Australia was denying that the repair and re-paint work fell within the warranty. In that context, Mr Schluter's statement: "MAN is prepared to fix up the paintwork and do the rust repairs on the engines if you are prepared to pay half the cost" can only be interpreted as a compromise offered by MAN Australia: MAN Australia would "give the go ahead" to Mobile Marine to do the rust repair work and the re-paint work if Mr Yates would pay something towards its costs. There was no issue that Mr Schluter had authority to make such a contract on behalf of MAN Australia. I conclude that, by virtue of this conversation between Mr Schluter and Mr Yates, a contract was made between MAN Australia and Mr Yates. Mobile Marine was not a party to that contract although it was expressly envisaged by both parties to the contract that MAN Australia would engage Mobile Marine to carry out the necessary work. 46 It was a term of that contract, implied by law, that MAN Australia would procure that the work performed would be carried out with reasonable skill and diligence. The fact that the work was not carried out by Mobile Marine, or its subcontractor, with reasonable skill and diligence does not relieve MAN Australia from liability to Mr Yates for breach of contract. Whether engine replacement unreasonable

47 There is no dispute about the costs which Mr Yates incurred in purchasing new MTU engines and in having them installed in the Eagle. However, the Defendants submit that Mr Yates' damages should be reduced because the cost of new engines was unreasonably incurred by Mr Yates. The Defendants say that the damaged MAN engines could have been rebuilt properly at much less cost than the purchase of new engines. They say that the reason that Mr Yates decided to purchase new MTU engines was that he wanted to get rid of the MAN engines which had caused him a great deal of trouble previously, and used the damage to the MAN engines as an excuse to get new engines at the Defendants' expense. 48 The Defendants point to the problems which Mr Yates had experienced with the MAN engines before the sand-blasting damage occurred, particularly to the excessive black smoke emission which may well have been irremediable. They rely on Mr Yates' description of his experience in trying to rectify the smoke emission problem as "a nightmare". 49 I reject the submission that Mr Yates unreasonably decided to have the engines replaced. I reject the submission that Mr Yates chose the MTU engines because he simply wanted those engines rather than properly rebuilt MAN engines. 50 Mr Yates is, clearly, highly knowledgeable in those aspects of marine engines and marine repairs generally which might affect vessels of the size and quality of the Eagle. However, he is a solicitor, not a marine engineer or a marine surveyor. Before making any decision about the repairs to the Eagle's engines, he obtained the advice of five experts. Their reports are in evidence. Most of them were cross examined. Their qualifications and experience are beyond doubt. 51 Mr Burge, a marine engineer and marine surveyor, provided a report to Mr Yates on 9 September 2004 after inspecting the damaged engines. He prepared further reports on 8 and 21 October 2004. Mr Burge's advice was that the only way in which the Eagle's true value could be retained was to replace the damaged MAN engines with complete, new, fully warranted engines of a similar type, size, power performance and quality. Nothing emerged in Mr Burge's cross examination which shook his evidence or demonstrated it to be unreliable. I am satisfied that the conclusions which Mr Burge reached were reasonably maintainable. 52 Mr Potts, an automotive engineer, inspected the engines on 13 September 2004 and advised that he did not think that the engines could be repaired at all because one could never be sure of getting all of the sand-blasting grit out of them. Mr Faulkner, also an automotive engineer, prepared a report consistent with Mr Potts' advice. Mr Pettett, a motor assessor licensed by the Motor Vehicle Repairs Industry Council, inspected the partially dismantled port engine and gave Mr Yates the same advice. Mr Roskelly, a foreman diesel mechanic with many years experience, also inspected the damaged engines and gave Mr Yates the same advice. 53 The advice which Mr Yates was receiving from his experts was at complete odds with what Mr Grose was telling him. Mr Grose was insisting that the existing engines could be repaired by way of a bottom end rebuild in situ. 54 Mr Grose was, of course, concerned to minimise the cost to which Mobile Marine might be exposed as a result of the damage occasioned by its negligence. It seemed to me that Mr Grose, in giving his evidence in the witness box, was driven by the same motivation to make rather light of the difficulties which Mr Yates and his experts saw in a rebuild of the engines rather than a replacement. 55 The issue for determination is not whether I should accept Mr Grose's evidence that it would have been possible to rebuild rather than replace the engines in preference to the evidence of Mr Yates' experts that a rebuild was, at the least, highly inadvisable. The issue is whether Mr Yates acted reasonably in acting upon the advice of his experts rather than accepting the advice of Mr Grose. 56 I am far from satisfied that Mr Yates acted unreasonably in insisting on replacement of the engines. As I have noted, the advice he received to that effect was given by highly qualified and experienced people and their advice has not been shown to be fundamentally flawed. I do not see why he should have taken the risk of accepting Mr Grose's advice in preference to that of his own experts when Mr Grose was clearly motivated by self-interest in giving that advice. 57 I reject the suggestion that Mr Yates was not influenced by the advice he received from his experts because in truth, had already made up his mind that he wanted new engines rather than a rebuild of engines which had always caused him problems, particularly with smoke emission. I accept Mr Yates' evidence that he regarded the smoke emission problem as remediable and that he could have had the Eagle back in operation more quickly and with less trouble if he had accepted a rebuild by Mobile Marine rather than a replacement. 58 I am satisfied that Mr Yates' concern was to have the Eagle put back as nearly as possible in the condition in which it would have been had its engines not suffered damage from the sand-blasting grit. He acted upon the advice of his experts that replacement of the engines was the only sure means of achieving that result and that the replacement could best be effected by Blackline Shipping Pty Ltd in Queensland rather than in New South Wales. 59 It has not been shown that the work carried out by Blackline was anything more than what was needed to ensure that the custom finish of the Eagle and its fixtures and fittings were preserved and maintained. I accept the evidence of Mr Schofield and Mr Burge in this regard. 60 I accept Mr Yates' evidence that he had lost confidence in MAN Australia and Mobile Marine by the time he came to decide which engines should replace the damaged engines. He had been in frequent contact with MAN Australia and MAN AG in an endeavour to persuade them of the reality of his difficulties, first with smoke emission, then with replacement of the injectors, then with the rust damage and the repairs to the paintwork. MAN AG had taken the attitude that if there was a problem, the problem was that of Mobile Marine. After the engine damage occurred, MAN AG and MAN Australia took the position that if Mobile Marine said that the engines could be rebuilt in situ, then Mr Yates would have to be content with that mode of rectification. 61 Bearing in mind the expense to which Mr Yates had gone in the first place in building the Eagle, bearing in mind the problems which he had had with the engines from the beginning and that the negligence which had caused the damage to the engines was that of Mobile Marine and that MAN Australia now insisted that Mobile Marine should rectify that damage, I do not think that Mr Yates' loss of confidence in MAN Australia as a supplier of new engines, prepared to support its products by co-operative assistance, was unreasonable. 62 The Defendants criticise Mr Yates because he failed to attend a meeting which they arranged with an insurer on 22 October 2004 to see if a settlement could be achieved. The Defendants say that Mr Yates' attitude shows an unreasonableness and unwillingness on his part to accept any solution other than the replacement of the engines at MAN Australia's cost. In particular, they say that if Mr Yates had shown the insurer at this meeting all of the expert advice which he had then accumulated the insurer may have agreed with his position. They say that Mr Yates' damages should be reduced to reflect the loss of their chance to settle the dispute in October 2004. 63 Mr Yates says that he did not attend the meeting because he believed that the position of MAN Australia, Mobile Marine and the insurer was entrenched and that the meeting would be pointless. 64 In my opinion, Mr Yates was justified in his view as to the utility of the meeting. He had been urging his position with MAN Australia and MAN AG for months, without success. Mobile Marine had already spoken to some of Mr Yates' experts as to the appropriate means of repairing the engines. Mobile Marine maintained that a rebuild in situ was sufficient. 65 I cannot find it probable to any degree that MAN Australia, Mobile Marine and the insurer would have settled the dispute in a way acceptable to Mr Yates if he had shown them the experts' reports which he had accumulated by October 2004. Those reports have been made available to the Defendants since the commencement of these proceedings. The Defendants were not persuaded; they procured their own experts' reports and the case went to trial. If a chance of settlement was lost through Mr Yates' failure to attend the meeting of 22 October 244, the value of that lost chance is negligible. 66 The Defendants fail in their contention that Mr Yates should not be allowed the full cost of replacing the MAN engines with the MTU engines. Diminution in value

67 Mr Yates called a marine surveyor and shipwright, Mr Schofield, to give evidence as to the diminution in value of the Eagle since the damage to the engines and their replacement. Mr Schofield is a highly qualified and experienced marine surveyor and has specific experience in the valuation of luxury vessels such as the Eagle. His expertise is unquestionable. He was an impressive witness. 68 Mr Schofield inspected the Eagle in October 2004. Apart from the damaged engines, he said, the vessel could be described as being new and in immaculate condition. He said: "The standard of finish was superb and the vessel was a credit to its builders. The extent and quality of the equipment, fixtures, fittings and internal finish was quite exceptional". 69 Mr Schofield inspected the Eagle again in May 2006, after the engines had been replaced. He noted that new MTU engines had been fitted. He noted in considerable detail the differences in the appearance of the vessel and said that the fact that the repairs had been carried out was observable. He said: "As a result of these changes I am of the opinion that the vessel shows obvious signs that the original engines have been removed and new engines of a different type and configuration have been fitted. Further the changes indicate that the vessel has had significant structural work carried out on it.

'Eagle' is no longer the same vessel that it was. In particular, the engineroom in its present condition no longer has the features which would entitle it to be described as of 'showroom' quality." 70 Mr Schofield considered the value of the Eagle as at 20 October 2004, with the original MAN engines fitted and undamaged, at between $2.7M and $2.8M. He valued the vessel in that condition as at 22 May 2006 at $2.7M to $3M. 71 Mr Schofield says that the value of the Eagle at present, with MTU engines installed, is between 10% and 15% less than it would have been had the vessel still had its original, undamaged engines, i.e. the vessel has been devalued by between $270,000 and $450,000 as a result of the breach of contract by MAN Australia. 72 Mr Schofield supports this opinion by the following consideration, amongst others: "The value of 'Eagle' in its original, undamaged condition, lay not only in its physical features and components but also in its reputation. 'Eagle' was a high profile vessel with one of the best-possible pedigrees in Australia - a custom-built, one-off, NRW vessel built to USL 2C standards and in accordance with plans approved by DNV.

As I have previously noted, marine circles, particularly when dealing with vessels of this standard, are very small and I say that the damage to 'Eagle's' engines is common knowledge in Australia. In my professional capacity I have reason to speak to people in the marine industry on an almost daily basis and it has been my experience that the damage to 'Eagle's' engines and the manner in which such damage was occasioned is a frequent topic of conversation. The people I have cause to speak to regularly include marine brokers, fellow valuers and surveyors, sales representatives of boat dealers, proprietors of boat yards, boat builders and repairers, owners of other vessels and charter owners and operators. Invariably, people that I speak to who are involved in the marine industry are aware of the history of 'Eagle's' engines. From my experience in the marine industry I would also suspect that the history of 'Eagle's' engines is well known overseas.

The fact that 'Eagle's' engines were replaced so soon after its handover to the owner, whether that had been by MAN or MTU engines, means that the reputation of 'Eagle' has been adversely affected. 'Eagle' is no longer talked about as a custom-built vessel of the highest quality - it is talked about as the vessel that has been 'cut and shut' in order to replace its original damaged engines.

'Eagle' is not the same vessel that it originally was, and anyone considering purchasing 'Eagle' would be aware of this. The damage to 'Eagle's' reputation as the pre-eminent vessel of its type is in my opinion irreparable.

The type of purchaser who would be interested in 'Eagle' would, as I have previously noted, be someone prepared to spend a great deal of money for a high quality vessel. For the amount of money being spent, the purchaser would expect a vessel in pristine condition with an impeccable reputation. Such a purchaser would not in my opinion be interested in paying the same amount for a vessel that has undergone the structural and other work required to change out 'Eagle's' engines. It is further my opinion that any purchaser who would have been interested in purchasing 'Eagle' because of the prestige associated with owning a vessel of such quality would no longer consider purchasing 'Eagle' due to the damage that has been done to its reputation.

It is my opinion that the greatest factors contributing to the devaluation of 'Eagle' are the effects of the changeout on the saloon and the aft saloon bulkhead and the damage to the reputation of 'Eagle'.

It is also my opinion that it would not have been possible to carry out the removal and replacement of the engines, whether the replacement engines were MANs or MTUs, without affecting the saloon and aft saloon bulkhead." 73 The Defendants called an "expert", Mr Kysil, who disagreed with Mr Schofield's opinion that the vessel had been diminished in value between 10% and 15%; Mr Kysil was of the opinion that it had been devalued by 5%. 74 I place no weight on Mr Kysil's opinion. It was revealed in cross examination that he had no relevant experience in valuing custom-built sports vessels such as the Eagle. He refused even to give a broad estimate as to how many such vessels he had valued. Mr Kysil was not at all an impressive witness. The Defendants' closing written submissions did not attempt to support his expertise or his evidence. 75 The Defendants' submission as to diminution in value comes down to an assertion that Mr Yates does not suffer a loss in value of the vessel which is compensable in law unless and until he comes to sell the vessel, which he has not yet done. This proposition is not supported by authority and is untenable. 76 I find the loss in diminution of value of the Eagle claimed by Mr Yates is proved. I accept Mr Schofield's evidence that the loss is between $270,000 and $450,000. Mr Yates claims a figure mid-way between those figures, namely, $360,000. In my opinion, that is a fair estimate of the loss and I accept it. Loss of use

77 Mr Yates claims damages for the loss of the use of the Eagle while it was non-operational, i.e. for 348 days from 31 August 2004 to 14 August 2005. He calculates the damages thus: the value of the vessel at the time was $2.8M (according to Mr Schofield) and the Supreme Court interest rates are an appropriate measure of the time value of money. The Supreme Court rate of interest was 9% per annum during the period during which Mr Yates was deprived of the Eagle, resulting in a figure of $240,263, as the "holding cost" of the vessel. 78 Alternatively, Mr Yates says that it would have been possible for him to use the charter rate which he could have obtained for the vessel had he wished to charter it during its non-operational period. The daily charter rate would have been $4,500. Mr Yates says that he may have chartered the vessel for up to 88 days during the non-operational period, resulting in a figure of $396,000. However, Mr Yates accepts the figure of $240,263 as an appropriate sum for damages for loss of use. 79 The Defendants do not challenge the calculation of the amount for loss of use, but they say that this is not an appropriate case to award any sum under this head of damages. 80 It is not disputed that the Eagle was not intended for use as a charter vessel; it was purely a pleasure craft for Mr Yates' own enjoyment. The Defendants do not dispute that damage to property depriving the owner of its use is compensable even though the owner cannot prove tangible pecuniary loss, i.e. that he or she is out of pocket in any particular sum: see e.g. Owners of No 7 Steam Sand Pump Dredger v Owners of SS Greta Holme [1897] AC 596 ("The Greta Holme"); Anthanasopoulos v Moseley [2001] NSWCA 266, (2001) 52 NSWLR 262. 81 However, the Defendants submit that while the principle is applicable to a "not for profit chattel", it is not applicable to a chattel used purely for pleasure, such as the Eagle. 82 I do not accept this proposition. It is inconsistent with the explanation of the principle given by the Earl of Halsbury LC in Owners of the Steamship "Mediana" v Owners, Master & Crew of the Lightship "Comet" ("The Mediana") [1900] AC 113, at 117: "… the broad proposition seems to me to be that by a wrongful act of the defendants the plaintiffs were deprived of their vessel. When I say deprived of their vessel, I will not use the phrase 'the use of the vessel'. What right has a wrongdoer to consider what use you are going to make of your vessel? More than one case has been put to illustrate this: for example, the owner of a horse, or of a chair. Supposing a person took away a chair out of my room and kept it for twelve months, could anybody say you had a right to diminish the damages by shewing that I did not usually sit in that chair, or that there were plenty of other chairs in the room? The proposition so nakedly stated appears to me to be absurd; but a jury have very often a very difficult task to perform in ascertaining what should be the amount of damages of that sort. I know very well that as a matter of common sense what an arbitrator or a jury very often do is to take a perfectly artificial hypothesis and say, 'Well, if you wanted to hire a chair, what would you have to give for it for the period'; and in that way they come to a rough sort of conclusion as to what damages ought to be paid for the unjust and unlawful withdrawal of it from the owner. Here, as I say, the broad principle seems to me to be quite independent of the particular use the plaintiffs were going to make of the thing that was taken, except - and this I think has been the fallacy running through the arguments at the bar - when you are endeavouring to establish the specific loss of profit, or of something that you otherwise would have got which the law recognises as special damage. In that case you must shew it, and by precise evidence, so much so that in the old system of pleading you could not recover damages unless you had made a specific allegation in your pleading so as to give the persons responsible for making good the loss an opportunity of inquiring into it before they came into court. But when we are speaking of general damages no such principle applies at all, and the jury might give whatever they thought would be the proper equivalent for the unlawful withdrawal of the subject-matter then in question. It seems to me that that broad principle comprehends within it many other things. There is no doubt in many cases a jury would say there really has been no damage at all: 'We will give the plaintiffs a trifling amount' - not nominal damages, be it observed, but a trifling amount; in other cases it would be more serious. It appears to me, therefore, that what the noble and learned Lords who gave judgment in your Lordships' House intended to point out, and what Lord Herschell gives expression to in plain terms, was that the unlawful keeping back of what belongs to another person is of itself a ground for real damages, not nominal damages at all." 83 Mr M. McHugh of Counsel, who appeared for the Defendants, submitted that if Mr Yates were awarded anything but nominal damages for loss of use of the Eagle he would be placed in a much better position than he would have been had there been no damage done to the vessel. I do not agree. Mr Yates had invested a very great deal of his time and money in planning and building the Eagle. Doubtless he was looking forward greatly to enjoying it throughout 2004 and 2005. He would have done so had the vessel not been rendered unusable. This is a case in which, unlike that of the unused chair hypothesised by Lord Halsbury in The Mediana, I am able to find that Mr Yates had a substantial need - in a practical sense, not in a commercial sense - for the use of the Eagle. 84 Mr McHugh submits that in Anthanasopoulos, Ipp JA at paras [78]-[79] has introduced into this area of the law a new test for damages: that of "need" of the plaintiff for the particular chattel. I do not agree. Read in context, all that his Honour was doing in this passage was explaining the rationale behind the principle as laid down in The Greta Holme. His Honour would have been surprised to find himself quoted as the authority for reversing what Lord Halsbury LC had said in The Mediana. 85 I conclude that Mr Yates is entitled to damages in the sum of $240,263 for loss of the use of the Eagle. Apportionment of liability

86 On the last day of the trial Mr McHugh submitted that if MAN Australia were found liable in contract to Mr Yates, the Civil Liability Act 2002 ("CLA") operated to require the Court to make a determination of the respective liability of the Defendants, in accordance with s 35(1) of the Act, and that MAN Australia should be found to have no liability because Mobile Marine was solely responsible for carrying out the work which caused damage to the engines. 87 Mr Fagan SC, who appeared with Mr Stowe of Counsel for Mr Yates, submitted that the CLA had no application so that each of the Defendants was liable for the full quantum of Mr Yates' loss. 88 Part IV CLA provides: " 34 Application of Part (1) This Part applies to the following claims (apportionable claims):

(a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any claim arising out of personal injury,

(b) a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1987 for a contravention of section 42 of that Act.

(1A) For the purposes of this Part, there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind).

(2) In this Part, a concurrent wrongdoer, in relation to a claim, is a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim.

(3) For the purposes of this Part, apportionable claims are limited to those claims specified in subsection (1).

(4) For the purposes of this Part it does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died.

34A Certain concurrent wrongdoers not to have benefit of apportionment (1) Nothing in this Part operates to limit the liability of a concurrent wrongdoer (an excluded concurrent wrongdoer) in proceedings involving an apportionable claim if:

(a) the concurrent wrongdoer intended to cause the economic loss or damage to property that is the subject of the claim, or

(b) the concurrent wrongdoer fraudulently caused the economic loss or damage to property that is the subject of the claim, or

(2) The liability of an excluded concurrent wrongdoer is to be determined in accordance with the legal rules, if any, that (apart from this Part) are relevant.

(3) The liability of any other concurrent wrongdoer who is not an excluded concurrent wrongdoer is to be determined in accordance with the provisions of this Part.

35 Proportionate liability for apportionable claims (1) In any proceedings involving an apportionable claim:

(a) the liability of a defendant who is a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just having regard to the extent of the defendant's responsibility for the damage or loss, and

(b) the court may give judgment against the defendant for not more than that amount.

(2) If the proceedings involve both an apportionable claim and a claim that is not an apportionable claim:

(a) liability for the apportionable claim is to be determined in accordance with the provisions of this Part, and

(b) liability for the other claim is to be determined in accordance with the legal rules, if any, that (apart from this Part) are relevant.

(3) In apportioning responsibility between defendants in the proceedings:

(a) the court is to exclude that proportion of the damage or loss in relation to which the plaintiff is contributorily negligent under any relevant law, and

(b) the court may have regard to the comparative responsibility of any concurrent wrongdoer who is not a party to the proceedings.

(4) This section applies in proceedings involving an apportionable claim whether or not all concurrent wrongdoers are parties to the proceedings.

(5) A reference in this Part to a defendant in proceedings includes any person joined as a defendant or other party in the proceedings (except as a plaintiff) whether joined under this Part, under rules of court or otherwise.

35A Duty of defendant to inform plaintiff about concurrent wrongdoers (1) If: (a) a defendant in proceedings involving an apportionable claim has reasonable grounds to believe that a particular person (the other person) may be a concurrent wrongdoer in relation to the claim, and

(b) the defendant fails to give the plaintiff, as soon as practicable, written notice of the information that the defendant has about:

(i) the identity of the other person, and (ii) the circumstances that may make the other person a concurrent wrongdoer in relation to the claim, and

(c) the plaintiff unnecessarily incurs costs in the proceedings because the plaintiff was not aware that the other person may be a concurrent wrongdoer in relation to the claim,

the court hearing the proceedings may order that the defendant pay all or any of those costs of the plaintiff.

(2) The court may order that the costs to be paid by the defendant be assessed on an indemnity basis or otherwise.

36 Contribution not recoverable from defendant A defendant against whom judgment is given under this Part as a concurrent wrongdoer in relation to an apportionable claim:

(a) cannot be required to contribute to any damages or contribution recovered from another concurrent wrongdoer in respect of the apportionable claim (whether or not the damages or contribution are recovered in the same proceedings in which judgment is given against the defendant), and

(b) cannot be required to indemnify any such wrongdoer.

37 Subsequent actions (1) In relation to an apportionable claim, nothing in this Part or any other law prevents a plaintiff who has previously recovered judgment against a concurrent wrongdoer for an apportionable part of any damage or loss from bringing another action against any other concurrent wrongdoer for that damage or loss.

(2) However, in any proceedings in respect of any such action the plaintiff cannot recover an amount of damages that, having regard to any damages previously recovered by the plaintiff in respect of the damage or loss, would result in the plaintiff receiving compensation for damage or loss that is greater than the damage or loss actually sustained by the plaintiff.

39 Application of Part Nothing in this Part: (a) prevents a person from being held vicariously liable for a proportion of any apportionable claim for which another person is liable, or

(b) prevents a partner from being held severally liable with another partner for that proportion of an apportionable claim for which the other partner is liable, or

(c) affects the operation of any other Act to the extent that it imposes several liability on any person in respect of what would otherwise be an apportionable claim." 89 Part IV CLA commenced on 1 December 2004. However, it applies to civil liability arising before, as well as after, the commencement date: see Civil Liability Act 2002 (NSW) Schedule 1, Clauses 6(1), 13. 90 Mr Fagan's submissions as to the operation of s.35(1) CLA are as follows: "In the absence of authority or guidance on interpretation from extrinsic material, the Plaintiff supports its contention regarding the operation of section 35(1) as follows:

a) the scheme of proportionate liability under the Civil Liability Act is only triggered when the relevant loss or damage was caused by the failure by more than one person to take reasonable care;

b) it does not apply to limit the contractual liability of a defendant who may have sub-contracted its obligations to a third party whose negligence is the sole cause of the loss or damage.

c) Section 35(1) provides that 'In any proceedings involving an apportionable claim … the liability of a concurrent wrongdoer in relation to that claim is limited to an amount reflecting that proportion of the damage or loss claimed that the court considers just …'

d) Section 34(1A) provides that a 'concurrent wrongdoer' is a 'person who is one of two or more persons whose acts or omissions … caused independently of each other or jointly, the damage or loss that is the subject of the claim' ;

e) MAN Australia's 'acts or omissions' did not relevantly 'cause' the loss (whether independently of or jointly with Mobile Marine). MAN Australia's liability arises simply by contract, and is not dependent on proof that its own 'acts or omissions' relevantly caused the loss;

f) MAN Australia is therefore not a 'concurrent wrongdoer for the purpose of section 35(1)' ;

g) The law of contract would be substantially undermined, if a contracting party could effectively pre-empt liability for loss arising from the failure to take reasonable care, by engaging a subcontractor. It is not to be inferred that Parliament intended such a radical outcome. The language used does not dictate it." 91 Neither Counsel nor I have been able to find any decided case which assists. 92 The pivotal point in Mr Fagan's submission is that MAN Australia was not a "concurrent wrongdoer" with Mobile Marine within the operation of s 35(1) because Mobile Marine carried out the physical work on the engines; the liability of MAN Australia rests only on contract and it did not, by its own "acts or omissions" cause the loss. I am unable to accept this submission. 93 The object of Part IV CLA is remedial and it dramatically changes the previous law. Formerly, a plaintiff could choose to sue only one of several wrongdoers who caused the same loss and the Court could enter judgment for the whole of that loss against that defendant. Even if the defendant cross claimed in the proceedings for indemnity or contribution against the other wrongdoers, the plaintiff could enforce a judgment against the defendant alone for the whole of the loss, leaving the defendant to recover from the cross defendants, if it could. Sometimes the defendant obtained judgment against a cross defendant but could not recover the judgment because of the cross defendant's insolvency. 94 Part IV is designed to alleviate this perceived injustice. It is intended to visit on each concurrent wrongdoer only that amount of liability which the Court considers "just", having regard to the comparative responsibilities of all wrongdoers for the plaintiff's loss. How the Court is to assess what is "just" is not explained. The Court must exercise a large discretionary judgment founded upon the facts proved in each particular case. The principles upon which the Court will exercise this discretionary judgment will come to be developed on a case-by-case basis. However, it seems clear enough that the policy of Part IV is that a wrongdoer who is, in a real and pragmatic sense, more to blame for the loss than another wrongdoer should bear more of the liability. This calls for the exercise of the same kind of judgment as the Court exercises in apportioning responsibility as between a defendant sued in tort for negligence and a plaintiff who, by his or her own negligence, has been partly responsible for the injury. 95 However, under s 35(1) CLA, the exercise is much more complicated than apportioning blame in an action for negligence in tort because the apportionment may have to be made as between a wrongdoer who has breached a contract and wrongdoer who has committed a tort: s 34(1)(a) and (1A). 96 In the present case, Mr Yates has sued MAN Australia both in contract and in tort, although the claim in tort could not be maintained but for the duty of care imposed by reason of the contract. Mobile Marine, not being a party to the contract, is liable in tort alone because it actually did the work and did it negligently. 97 As I have observed, s 34 CLA makes it clear that both a contract breaker and tortfeasor may be concurrent wrongdoers liable for the same loss or damage in an apportionable claim. The duty to avoid loss imposed by contract is as weighty as the duty to avoid loss imposed by the common law. However, the Court is required to go beyond the legal character of the duties imposed upon concurrent wrongdoers and to examine the practicalities of responsibility. Accordingly, the Court should apportion liability according to considerations such as (but not limited to):

which of the wrongdoers was more actively engaged in the activity causing loss;

which of the wrongdoers was more able effectively to prevent the loss happening. 98 I do not accept, as Mr McHugh submits, that MAN Australia's breach of contract was not an "omission" causing Mr Yates' loss. The contract imposed an obligation on MAN Australia to ensure that the work was done properly. It "omitted" to perform a contractual duty which, if performed, would have prevented the loss. In my opinion, a breach of contractual duty to ensure that work is done properly by others, whether employees, agents or independent contractors, is an "omission" within s 34(2) CLA such as may make a contract breaker a concurrent wrongdoer within the operation of Part IV CLA. 99 It follows that Mr Yates' claim against MAN Australia is an apportionable claim within Part IV so that I must assess the comparative responsibility for Mr Yates' loss as between MAN Australia and Mobile Marine. 100 Mobile Marine has admitted that it was negligent in carrying out the work on the Eagle's engines. As far as the evidence goes, all that MAN Australia did was to make the contract with Mr Yates and, presumably, pay half the cost of the repairs. 101 However, this is not a case in which MAN Australia undertook contractual responsibility for proper workmanship in an area in which it had no knowledge or expertise whatsoever and had, of necessity, to rely entirely on the skill of Mobile Marine. MAN Australia was the supplier of the engines. It doubtless had its own employees who were capable of overseeing or checking what Mobile Marine had done. It had access to experts within MAN AG, which had actually manufactured the engines. At the very least, MAN Australia might have asked questions as to the process which Mobile Marine proposed to follow in carrying out the repair work. The expert evidence suggests that Mobile Marine's intention to sand-blast before repainting was inherently risky and likely to cause the very damage that occurred. 102 In my opinion, although Mobile Marine was more actively engaged, if not solely engaged, in the physical activity which caused Mr Yates' loss, nevertheless, MAN Australia was not in a position where it was unable effectively to prevent the loss occurring. Because it had its own expertise, it could not disregard its responsibility under the contract to ensure that Mobile Marine had carried out the work properly. 103 In my opinion, the liability for Mr Yates' loss should be apportioned equally between Mobile Marine and MAN Australia. Judgment should be entered against them accordingly. Orders

104 Each of the Defendants is liable for one half of the loss incurred by the Plaintiff, being $1,222,328.12. 105 I will stand the proceedings over for a short time to enable the Plaintiff to bring in Short Minutes of Order reflecting these reasons for judgment. I note that the parties have expressly requested that the question of interest be deferred until judgment has been delivered. 106 I will hear argument as to costs.

oOo -

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