DISTRICT COURT OF QUEENSLAND
CITATION:
Damon’s Earthworks Pty Ltd v AA Machinery Pty Ltd [2022] QDC 123
PARTIES:
DAMON’S EARTHWORKS PTY LTD
Plaintiffv
AA MACHINERY PTY LTD
Defendant
FILE NO/S:
BD 3/20
DIVISION:
Civil
DELIVERED ON:
18 May 2022 (ex tempore)
DELIVERED AT:
Brisbane
HEARING DATE:
16,17 May 2022
JUDGE:
Barlow QC DCJ
ORDERS:
1. Judgement for the plaintiff in the sum of $87,291.69, including interest of $11,033.05
CATCHWORDS:
SALE OF GOODS – SALE OF GOODS LEGISLATION – ACTIONS FOR BREACH OF CONTRACT – REMEDIES OF BUYER – REMEDY FOR BREACH OF WARRANTY – REMEDY GENERALLY – ACTION FOR DAMAGES –the plaintiff purchased machinery from the defendant – the machinery broke down and the defendant failed to send parts promptly - liability was accepted by the defendant–representations and warranties were made which were not fulfilled – whether the quantum of loss pleaded by the plaintiff was supported by the evidence – assessment of loss
Sale of Goods Act 1896 s 17(a)
Competition And Consumer Act 2010, Schedule 2 s 18, s 54, s 236
COUNSEL:
S Gerber for the plaintiff
SOLICITORS:
Cuddihy Lawyers for the plaintiff
N Yokus, self-represented defendant
Introduction
This proceeding, which commenced in the District Registry at Gympie of this Court, is a matter in which the plaintiff, as its name suggests, is a company that carries out a business of excavating and earthmoving. It does so from the home of its directors, Damon and Karen Stiller. That home is in Gympie. The defendant was formerly known as Agrison Australia Pty Ltd and was a retailer and distributor of Agrison equipment – heavy equipment – including graders. The defendant employed a Mr Peter McFarland as a salesman.
The proceeding was originally listed for trial in November 2021 but, on the date of commencement of the trial, the parties entered into a settlement agreement, by which the hearing was adjourned and the defendant was to pay the plaintiff an agreed sum in satisfaction of the claim, costs and interests by no later than 14 March 2022, although that payment was subject to the defendant obtaining finance. The parties agreed that, in the event the settlement sum was not paid, then they would return to their pre-settlement positions except that, at any rescheduled trial, the defendant admitted liability, but was at liberty to contest the claim on causation and quantum. The settlement agreement is exhibit 1 in the trial before me.
The proceeding arises out of the purchase by the plaintiff from the defendant of a new Agrison 10-tonne articulated grader and some other parts on 20 March 2019. The total purchase price, excluding GST, was $77,263.64. The defendant provided a five-year warranty with the grader.
Although liability is admitted, it is relevant to state the nature of the plaintiff’s case. The plaintiff alleged, and the defendant admitted, that the defendant made certain statements on its website. The plaintiff alleged that those statements were representations as to the quality of the grader and as to the high quality after-sales service provided by the plaintiff to its customers, including its ability to provide spare parts as needed quickly and from stocks held within Australia.
The plaintiff also alleged that Mr McFarland, on behalf of the defendant, made representations to Mr Stiller on behalf of the plaintiff to similar effect, particularly in relation to the availability of spare parts and the plaintiff’s ability to supply them within a short or reasonable period of time.
As I said, the plaintiff purchased the grader on 20 March 2019. The grader was delivered to it on 25 March 2019. The plaintiff alleged that, upon delivery, the grader was already damaged, although in relatively minor respects. It had some scratches on it and it was missing one wing mirror. The plaintiff, nevertheless, accepted delivery and commenced using it for a job, particularly for which the plaintiff had purchased the grader.
The grader was, in one sense, not unique but relatively rare because it has a 10-foot blade, whereas most graders used in road construction and other earthworks jobs have at least a 12-foot blade. The 10-foot blade was necessary for the particular job in question, which was the widening of the Bruce Highway near Gympie, because it was useful for doing some of the narrower parts of the roadway or the entrances to and exits from that roadway. In fact, the plaintiff had been asked by the principal contractor on the roadway if it would buy a 10-foot grader for the purpose of undertaking the job on that roadway and further jobs that the same contractor would have thereafter. It was for that reason that the plaintiff purchased the grader.
Upon delivery, as I said, it was damaged, but the plaintiff also alleged and, effectively the defendant has admitted that the hub of the grader failed on 22 July 2019 and the plaintiff was thereafter unable to use the grader for quite some time. The hub failed because it had not been properly assembled during the manufacturing process and had not been properly inspected or checked by the defendant.
The plaintiff notified the defendant of the failure of the hub on 23 July 2019 and made a claim pursuant to the warranty on the defendant’s website the same day. A replacement hub was delivered to the plaintiff on 12 August 2019, but was the incorrect size and could not be used. Ultimately, a hub was delivered and received on 26 September 2019 and it was installed into the grader by the plaintiff’s external mechanic on 1 October 2019. Of course, during the period between 22 July and 1 October the grader was unable to be used by the plaintiff.
Another problem with the grader was that, after it had stopped working, the plaintiff discovered that the ball joint attached to the blade was worn and damaged and it required replacement. The plaintiff ordered a new ball joint, but no replacement ball joint was ever received. It was not until the grader’s hub had been fixed that Mr Stiller himself was able to repair the ball joint and thereafter use the grader. That was not until about 9 October 2019.
Ultimately, the plaintiff sold the grader in March 2020, having used it very little since July 2019.
While liability is not in issue, the bases for the plaintiff’s claim are relevant to the types of loss to which it may be entitled. The claims are made, in essence, on the following bases: first, breach of contract, namely, breach of the warranty and breach of an implied term as to the grader’s fitness for its purpose under section 17(a) of the Sale of Goods Act 1896; secondly, negligence in failure to ensure that the grader was properly manufactured and assembled and suitable for use in the plaintiff’s business; thirdly, breach of an implied manufacturer’s warranty under section 54 of the Australian Consumer Law; and finally, misleading or deceptive conduct for making representations as to the ready availability of spare parts and the quality of after-sales service.
The defendant’s admission of liability does not state the legal basis on which liability is admitted. I have some doubt that it was negligent and it seems to me that the manufacturer’s warranty under the Australian Consumer Law cannot apply, because clearly the plaintiff was not a consumer as defined in section 3 of that law. But, of course, in causes of action for breach of contract and misleading or deceptive conduct, between them, damages may be awarded that are sufficient to place the plaintiff in the position in which it would have been if the breach of contract had not occurred or if the misleading representations had not been made.
In the case of damages under section 236 of the Australian Consumer Law, any loss that was caused by the defendant’s conduct is recoverable. In this case, the plaintiff alleges that, had the breaches of contract not occurred, the grader would not have broken down or, if it had, spare parts would have been provided under the warranty within a few days or so. If the representations had not been made, the plaintiff would have not bought this grader, but would have bought a different but similar grader. In either case, it would have been able to hire out the grader consistently throughout the period that it owned it.
The plaintiff therefore claims that, as a result of the hub breaking and not being replaced for a long time, it suffered loss of use of the grader and therefore loss of the income that it would otherwise have earned from hiring out the grader, for a period of 51 working days from 23 July 2019 to 1 October 2019. It also alleges that, because of the ball joint being damaged, the plaintiff was unable to use the grader for 5 further working days, from 2 October to 9 October 2019, until Mr Stiller was able to repair it.
It also claims loss on the sale of the grader, being the difference between the purchase price and the price for which it sold. It has reduced its claim by the amount earned by the plaintiff in hiring out Mr Stiller’s labour to operate other people’s machinery in the interim periods. It also makes an allowance of $100 a day for the fuel that it would have had to pay for had it been operating the grader and it adds the costs of repair to the grader by the external mechanic.
The plaintiff’s total claim, based upon those respective categories of loss, is $145,838.39. The defendant challenges those losses – or the extent of the losses – on a number of grounds. I shall deal with them now individually.
The first is that the plaintiff could have hired another grader and therefore used it to earn income. In that respect, the plaintiff’s evidence was that a 10-foot grader is difficult to find for hire as they are not readily available and that was one reason why it was asked to buy one for the Bruce Highway job. But, in any event, there was little point in hiring one. Mr Stiller said they had looked at the cost of hiring a 12-foot grader, which was $65 an hour, and assuming that they could find a 10-foot grader at a similar price, to hire it out at the contract price of $130 an hour including labour would result in a similar return to the plaintiff as simply hiring out Mr Stiller’s labour to drive other machines, which is what the plaintiff did.
I accept that evidence (which was barely challenged). There was little point in the plaintiff hiring another grader, even if it could have done so, and I accept that it was not feasible for it to do so.
The second ground of the defendant’s challenge to the losses is that the plaintiff could have hired out other equipment that it owned on a wet hire basis (that is, to be operated by Mr Stiller). In particular, the plaintiff owned a piece of machinery known as a posi-track, which the plaintiff did hire out on a wet hire basis from time to time in the first few months after it had bought the grader. The plaintiff’s evidence was that it sold the posi-track some time before the grader stopped working, and a tax return depreciation schedule that is admitted in the evidence shows that that sale occurred on 31 May 2019, which is also the last date on which it was hired out by the plaintiff. I find that it was sold on or about that date and it was therefore not available to hire out while the grader was inoperable.
The plaintiff also owned a tipper truck and a trailer that it also hired out from time to time. Mr Stiller said that he did not normally hire out his truck and trailer separately, although it is clear from a number of invoices that he did occasionally hire out the truck at least, with him driving it, at a cost of $90 per hour plus GST. That is also evidenced by some invoices in the trial bundle: that is, exhibit 2, namely, at pages 99 dated 16 July 2019, 144 dated 6 September 2019, 145 dated 17 September 2019 and 148 dated 30 September 2019.
I find that the plaintiff acted reasonably in hiring out Mr Stiller’s labour and its truck in order to mitigate its loss, and that those occasions on which it did so were not inappropriately or unreasonably limited. One must take into account that Mr Stiller’s labour was hired by the plaintiff to various people to operate their machinery very frequently, as I will come to.
The defendant also challenges the amount allowed for fuel to operate the grader if it had been operative. That was, one will recall, $100 a day. The defendant submitted that the accountant’s calculation for the fuel cost was based on the fuel usage of a different, less powerful machine that would use less fuel. She used a different machine’s specifications in order to undertake her calculations and that certainly, I accept, diminishes the strength of her evidence in that regard. But Mr Stiller also said that his average fuel use was probably less than the $100 a day allowed for, which he described as conservative. I accept that that estimate is roughly accurate for the following reasons.
The machine was not operating on site 10 hours a day. Mr Stiller said that it would not normally be turned off altogether, but it would idle while they were waiting, depending upon the expected length of the wait. I accept that evidence. But in any event, the accountant calculated her fuel usage on the basis that it would be operated for an average of about 4 hours a day, which is an estimate that Mr Stiller confirmed. The plaintiff appears to accept, in his final submissions, that 27 litres per hour was approximately the right number of litres per hour for operating this vehicle. The accountant used an average price per litre of $1.47, which amounts to $158 per hour. Allowing for a fuel rebate to reduce that cost, an allowance of $100 seems reasonable and, as Mr Stiller said, conservative. Therefore, I find that the reduction in damages of $100 a day for fuel is a reasonable estimate.
The plaintiff also submitted that the machine was not required every day that is claimed for, which is indicated by the fact that Mr Stiller had operated other machines as well between March and May 2019: for example, see invoices at pages 84 and 126 of the trial bundle. The claim for loss of use of the machine is by far the major proportion of the plaintiff’s claim. It therefore warrants some more careful consideration.
The plaintiff says that, if it had not been for the representations made to it by the defendant, it would not have bought this grader, but it would have bought another 10-foot grader that was available at the time for a cheaper price from a local dealer. There is little evidence about the quality of that grader and the ability of that dealer to provide spare parts, but both Mr and Mrs Stiller gave evidence to the effect that the industry standard is that spare parts are able to be supplied within a few days, or normally about a week at the most. Therefore, even if another grader had broken down, it would not have resulted in several months’ inability to use any grader.
The Bruce Highway job finished in about late October 2019. The contractor who had engaged the plaintiff for that job had indicated that it would also engage the plaintiff for an immediately following job to upgrade parts of the Mount Lindesay Highway. That job was due to start in November and would have gone through at least to Christmas, if not longer.
While Mr Stiller did not give evidence of any particular additional jobs after that one, he did say that there was always work available because there were few 10-foot graders available in the industry. That is all very well but, in the absence of evidence demonstrating other jobs that he might have done, I am not satisfied there would have been persistent further work available from November 2019 through to March 2020. It is therefore necessary to determine whether I am satisfied on the evidence that the plaintiff would have been able to hire out the grader and for how long during that period, as well as during the period when it was inoperable between July and November 2019.
The plaintiff’s claim for lost revenue, in essence, as set out in the schedule to the accountant’s report, which is based upon the schedules to the statement of claim, was that, for each day that the grader was hired, the plaintiff would charge $1300 a day. It would incur a cost of about $100 a day in fuel, therefore having income of $1200 a day. The claim, however, deducts from that amount each day, the amount that the plaintiff earned in hiring out Mr Stiller’s labour to other people. So, for example, on 23 July 2019 the grader hire would have been $1300, less the fuel of $100, less labour hire of $327.25, resulting in a claim for that day of lost income of $872.75.
The defendant submitted that a more reliable daily claim amount ought to have been calculated by, first, calculating the daily revenue at an average of eight and a-half hours per day at $130 per hour, which totals $1105 per day; secondly, deducting the income earned by Mr Stiller driving trucks because he would not have been able to earn this income had he been operating the grader; thirdly, deducting what the defendant referred to as the employee entitlements of Mr Stiller for the 8½ hours per claimed day; and, fourthly, deducting the daily fuel costs and other variable costs related to the operation of the grader.
Mr Stiller said that there were days when the grader was not required on the job in its early stages, so he would wet hire the posi-track or a combination of machinery on those days, but from June 2019 the grader was required every day. Thereafter, it was needed more frequently, even though on most days it would still sit idle at times while other work was undertaken. But, even sitting idle, he would be entitled to charge for the full 10-hour day because that was what he was engaged to hire the grader for.
Those claims need some analysis and consideration. The plaintiff first hired out the grader for five hours on 27 March 2019. Invoices for the hire of the grader in April and May are in the trial bundle. They show that the grader was hired out on 13 occasions in April and 10 occasions in May and not always for full 10-hour days. There are no invoices in the trial bundle or otherwise in evidence for June 2019. The grader was only hired on nine occasions in July up until and including 22 July, when the hub failed. Thus, in the period from March to July, a total of 33 days worked by the grader show on the invoices.
That discrepancy was not put to Mr Stiller or Mrs Stiller in their evidence, but it does indicate to me that perhaps the grader was not required five days a week and would not be required five or six days a week for the balance of the year, or of the time that it was owned by the plaintiff. I should note that, in the claim, most of the days for which a claim is made for lost income are days comprising five days a week, but occasionally six days a week and on a few minor occasions, four days a week as a result, it appears, of public holidays. Those days are claimed because they are the days on which Mr Stiller worked on other machinery and his labour was hired out by the plaintiff for that purpose.
The number of hours for which the grader was actually operated in June can be roughly calculated, notwithstanding the absence of invoices for that month, from the number of hours that it operated at other times. Invoices for grader hire in the trial bundle show that it was hired out on 16 to 19 October, 21 and 22 October, and 28 to 30 October, that is, a total of 10 days, during which the hire periods total 67.75 hours: an average, rounding it up, of about 6.8 hours a day. The total hours that it had operated while in the plaintiff’s possession or ownership, according to Mr Stiller’s evidence and the advertisement for its sale, was 458 hours. That indicates that it was hired out for a total of 390 hours between its first day of operation on 27 March 2019 and its last day before the hub broke.
Mr Yokus, for the defendant, calculated that, for the period it was working, as demonstrated by the invoices between March and July, it was hired for an average of 8½ hours a day on the days that it worked. I have not checked that calculation, but it was not disputed by the plaintiff. Over the 33 days demonstrated by the invoices, 8½ hours a day would result in about 280 hours. That leads to the conclusion that it was probably operated for another 110 hours in June, which would comprise about 13 days at an average of 8½ hours, or 11 days at an average of 10 hours a day. Those numbers of days – between 11 and 13 – are consistent with the numbers of days worked in April, May and July.
I might add that the plaintiff engaged an engineer to determine the cause of the hub failure. That engineer produced a report, commencing at page 377 of the trial bundle, in which he reported that he had been instructed by Mr Stiller that the grader had been operated for about 350 hours when the hub failed. While Mr Stiller did not confirm that in his evidence, that statement at least indicates that my analysis above is likely to be reasonably accurate and it had, in fact, worked a total of about 390 hours before the hub failed.
The claim for lost income is based, as I have said, on the hypothesis that it would have been hired out for a full day of 10 hours at a cost of $1300 on every day that Mr Stiller in fact hired out his labour to operate other machinery from 23 July 2019 to 9 October 2019, and from 29 October 2019 to 11 March 2020. In most of those weeks, as I have said, it appears that Mr Stiller worked five days a week, though on some occasions six days a week and some four days. A break was allowed in the claim between 20 December 2019 and 13 January 2020.
The problem with this hypothesis is that there is insufficient evidence that work would have been available for the grader on so many days, even allowing for the completion of the job on the Bruce Highway and the anticipated work on the Mount Lindesay Highway and for the fact that Mr Stiller gave evidence that, at the beginning of the Bruce Highway job, it was in start-up mode and therefore the grader was not required on every day in the early months. As I have calculated, in those months and June it was hired out for about 10 to 13 days a month for an average of 8½ hours a day, resulting in an average income of $1105 a day.
The number of days claimed, as the defendant also noted, does not take into account contingencies where the grader may not have been able to work, such as wet weather days or other days when other work was to be performed on a planned basis rather than grader work, or even days when other breakdowns might have occurred and it may have become necessary to wait for spare parts to be delivered, allowing for an industry standard of a few days for delivery. However, on my calculations, allowing 10 to 13 days a month of operation of the grader adequately takes those contingencies into account.
Having repaired the machine in October 2019, the plaintiff made a conscious decision not to use it, except for two small jobs in October and November in which it performed well, and the plaintiff advertised it for sale in excellent condition. The plaintiff pleads in its statement of claim – paragraph 19 – that this decision was made and the advertisement for sale was posted online on 29 October 2019. The grader was advertised for sale at the price of $50,000.
Mr Stiller explained this decision by stating that the defendant had a very good reputation as a reliable contractor. He was deeply embarrassed by the performance of the grader on the Bruce Highway job and he did not want to face taking on another major job, such as that which he had anticipated doing straight after the Bruce Highway job – namely, the upgrade to the Mount Lindesay Highway – and then again not being able to complete it because the grader might again fail. Instead, he decided to work on similar jobs by operating other people’s machinery and to sell this grader. He and Mrs Stiller discussed the matter and decided to advertise the grader for sale. They undertook two small jobs in October and November, as I have mentioned.
Notwithstanding the pleading that the advertisement was posted on 29 October 2019, that is not consistent with the evidence. The evidence points to it not having been placed until after the last of the small jobs done in October and November. This is because the advertisement included in it a photograph of the most recently completed job as an example of the type of work for which the grader was suited. Mr Stiller confirmed that the photograph was of the work he did for a particular customer, referring to the three-day job, which is evidenced by an invoice at page 161 of the trial bundle. That job was undertaken at the end of November 2019. I conclude that the advertisement for the sale of the grader was placed in early December 2019.
I consider that the decision to sell the grader was reasonable in the circumstances. Having advertised it for sale, I consider it was reasonable for the plaintiff not to use it any more pending sale.
The defendant also says that the plaintiff is claiming lost revenue, but not lost profit from that revenue, as it has not taken into account other variable costs of earning the revenue, in particular maintenance costs. The defendant did not put that suggestion to any of the plaintiff’s witnesses. But, in any event, there is no evidence of what those maintenance costs might be. Furthermore, both Mr Stiller and Mrs Stiller gave evidence that Mr Stiller carried out the necessary maintenance. That maintenance, according to the engine manual that was delivered as the sole document delivered with the grader in March 2019, was of a type that Mr Stiller could no doubt do. Indeed, he recorded in that engine manual that he had performed the 250-hour service after it had done 259 hours. The next service was not due, according to that book, until it had done 500 hours.
In that regard, Mr Yokus referred me to a manual for the grader, as distinct from the engine manual, that is in the trial bundle commencing at page 425. That manual had been downloaded from the Agrison website by the plaintiff’s accountant for the purpose of assisting her to calculate the fuel use of the grader. That manual appears to have required maintenance at 50 hours and 100 hours, as well as at 250 hours and 500 hours. It appears that Mr Stiller did not do maintenance at those hours. However, that manual was not provided to the plaintiff, so it was reasonable for Mr Stiller to rely on the actual manual that was supplied, namely, the engine manual.
In any event, the question of what maintenance the plaintiff did is not relevant to the defendant’s liability, but simply to what variable costs the plaintiff incurred in operating the grader and that should therefore be taken into account in determining the amount of its loss. The additional maintenance requirements of the manual for the grader would necessitate additional lubricants, but there is no evidence of the cost of those lubricants apart from grease. According to the plaintiff’s accountant at page 413 of the trial bundle, grease would cost about $16 a month. There is, therefore, no need to deduct from the income from the hire of the grader, under the hypothesis, any amount for maintenance apart from $16 a month, in order to derive the lost profit. There is no evidence of any other variable costs of operation during the period in which it was operated.
Thus, I will allow for hiring out the grader for 12 days a month in each of August to December and mid-January to the date of sale, a total of seven months, or 84 days, at an average of 8½ hours a day or $1105 for a day’s hire. That equals $92,820. From that sum, in order to calculate the plaintiff’s loss, I deduct the amount actually earned in October and November of $8989, $100 a day for fuel – a total of $8400 - and $16 a month for grease, totalling $112. That results in a loss of income from grader hire of $75,431. I will then deduct $440 a day as the approximate amount earned by the plaintiff from Mr Stiller’s labour on the remaining 74 days allowed for the lost grader hire: that is, not including the 10 days in October and November for which it was actually used: a total of $32,560. The result is that I will allow $42,759 dollars in damages for lost income from the grader hire.
I should add that, so far as the deduction for Mr Stiller’s labour is concerned, the amounts allowed in the statement of claim and in the accountant’s schedules varied from $440 upwards and downwards, but as I do not accept that the grader would have been operated on all of those days, I consider that the amount of $440 is a rough and reasonable estimate of the amount that should be deducted.
It was not suggested by the defendant with any seriousness that the sale price of the grader was too low. As I said, it was advertised for $50,000. It was sold for $45,000, resulting in a loss, in comparison with the purchase price, of $32,763.64. I find that the plaintiff did suffer that loss.
I should add that, with all the figures that I have been referring to, none of them include goods and services tax, because the plaintiff was registered for goods and services tax and therefore any that it had to pay it would recoup and vice versa.
Therefore, the damages that I consider the plaintiff has suffered and that I will award to the plaintiff comprise the following amounts: $32,763.64 for the loss on the sale, $736 for the cost of repairing the grader and $42,759 for lost income: a total of $76,258.64.
The plaintiff seeks interest on damages at the default judgment rates from the day after it sold the grader until judgment. I consider that to be a reasonable period. While the default judgment rates do not directly apply, I consider them to be a reasonable proxy for appropriate rates in the absence of evidence about commercial interest rates. I shall, therefore, allow interest at those rates from 12 March 2020 to today.
The order of the Court, therefore, is that I give judgement for the plaintiff in the sum of $87,291.69 including interest of $11,033.05. I will hear from the parties about costs.