Dudney v Larsson[2017] QDC 248

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   A dispute has arisen between the plaintiffs and the defendants over the sale of a yacht, a catamaran, called “Belle de Jour.” The plaintiffs purchased the vessel from the defendants in November 2011 for $360,000. They allege, and it is admitted, that the vessel had a history of significant engine problems. They further allege that the first defendant and Mr Neville Brooks, who was a director of MDBS Whitsunday Pty Ltd (MDBS), the broker appointed by the defendants to sell the vessel, misrepresented the true history of engine failures. The defendants’ case is, primarily, that they fully disclosed the history of engine problems. They also relied on a number of other defences.

2. [2]
   The plaintiffs in their second Further Amended Statement of Claim seek:

1. 1.A declaration that the plaintiff rescinded the contract.

1. 2.In the alternative, an order pursuant to s 243 of Schedule 2 of the Competition and Consumer Act 2010, declaring that the whole of the contract between the parties has been void ab initio.

1. 3.In addition to each of those alternative remedies, damages or compensation, either pursuant to Schedule 2 of the Competition and Consumer Act 2010 or otherwise, in the amount of $69,886.

1. 4.In the alternative to all such relief, damages or compensation, pursuant to Schedule 2 of the Competition and Consumer Act 2010 or otherwise, in the amount of $421,537.50.

They also seek interest on damages and costs.

3. [3]
   In addition to denying making any relevant misrepresentations, the defendants allege that the plaintiffs have not demonstrated reliance upon any misrepresentations and, in any case, are estopped from relying upon any misrepresentations by reason of an exclusion clause contained in the contract of sale. They also allege that the plaintiffs have failed to mitigate their loss and allege that reliance on the Competition and Consumer Act is misplaced since the sale of the vessel, and so any misrepresentations about its qualities, did not involve a sale in “trade or commerce”. They also allege that the plaintiffs affirmed the contact after becoming aware of the alleged misrepresentation and that rescission of the contract is not possible since the yacht is, and has been, since any purported rescission, in a substantially altered condition. They also allege that if there were any misrepresentations which induced the plaintiffs to enter into the contract, that the measure of damages is limited to the difference between the contract price and the value of the asset at the time of sale.

4. [4]
   Finally, the defendants submit that whether or not rescission is granted, the damages sought are excessive and that, in any case, damages and interest should not be awarded for a period of a year between an aborted trial of this matter and the actual trial in May this year.

Background

5. [5]
   The defendants purchased the 35ft Fontaine Pajot power catamaran, the “Belle de Jour”, in 2008. It was sold to the plaintiffs on 17 November 2011, pursuant to a contract of 14 November. During the time the defendants owned the vessel it was initially placed with Cumberland Charter Yachts, who promoted the vessel and let it on charter on behalf of the defendants. It was then placed with another charter company, Queensland Yacht Charters (QYC) from 15 June 2011 until its sale to the plaintiffs. The plaintiffs continued to place it on charter with QYC, though the plaintiffs did occasionally use it for personal use up until a further engine failure on 3 November 2012. Thereafter, although ostensibly still with QYC, it has not in fact been chartered to any end user.

6. [6]
   In April 2011, the defendants determined to sell the vessel and engaged MDBS as their agents to negotiate the sale of the vessel. Mr Brooks was a director and shareholder of MDBS and conducted relevant business on its behalf. Initially it had been listed at a price of “$400, 000 as a going concern” (See Exhibit 4, Tab 1). By the time the plaintiffs became aware of its being for sale, the asking price had been reduced to $365,000, shown as an advertisement placed in the window of MDBS (Exhibit 1, page 38).

7. [7]
   The vessel had first been sailed in late 2007. It is accepted that in about January 2008 a starboard engine failed, but that both engines were replaced at that time, the second as a precaution. The defendants acquired the “Belle de Jour” shortly thereafter, it exhibited a number of significant problems in both the starboard and port engines. After relatively limited use, the engines failed due to cracking at approximately the same location, the oil galley between the oil filter and centre unit, resulting in loss of oil or engine failure. This is, I interpose, the same location as the problem which emerged in November 2012.

8. [8]
   In so concluding I accept the evidence of a witness, Daniel Moss, who said he saw at least two of the engine failures prior to November 2011 and worked on at least one of them. He also examined the motor following the November 2012 engine failure. He described the location of the oil leak in the 2012 engine (shown in Exhibit 13) and in the earlier engine failure and said that oil was leaking from a similar location (see T3-10/12 esp. at 3-11, ll 45/46). That was consistent with, the male defendant Mr Larsson’s own description of the pre-November 2011 engine failures he observed, which he said all failed in the same location.

9. [9]
   The original starboard engine was, as I have said, replaced on 29 January 2008. This engine was again replaced on 25 March 2010. The original port engine, which had also been replaced in January 2008, was in turn replaced on 16 October 2009 and again on 12 August 2010. It was the starboard engine which later failure in November 2012.

10. [10]
    There is some dispute about the number of hours that each of the engines had operated for prior to being replaced. Whatever be the actual hours, I accept that it was far short of the expected usage of at least 7000 hours, even in a charter vessel like the “Belle de Jour”. Charles Preen, who gave evidence, was the managing director of Cumberland Charter Yachts. He gave evidence that with his company the “Belle de Jour” was chartered out for 26 charters in 2009, 21 charters in 2010, and 15 charters in 2011. On average, such charters were for 7 days. He said engines are typically run for 2-3 hours per day while on charter. This would suggest the starboard engine, installed on 25 March 2010 would have done approximately 450-700 hours by November 2011, and the port engine, installed on 12 August 2010, would have done approximately 350-550 hours. In calculating those figures, I have assumed similar charter rates for the period from July 2011 until the November sale. During the trial there appeared to be some agreement about the hours the engines had run at the various times they failed, and were replaced. I had doubts about those hours because they were based, it seemed to me, on tachometer hours and that itself was changed. In any case, I do not think determination of that issue is important for the resolution of the matter.

11. [11]
    On any view of the number of hours of service of the various engines when they failed, there was clearly a significant problem which resulted in failure of the engines of the vessel. One would normally have expected engines on a vessel such as the “Belle de Jour” to have lasted for significantly greater hours of operation, as I earlier indicated. All witnesses agreed on that matter.

12. [12]
    It is also common ground that between 5 July 2010 and June 2011 various experts from Volvo Penta, the engine manufacturer, and Fountaine Pajot, the vessel manufacturer, attempted to ascertain the cause of the engine failures. They conducted, inter alia, metallurgical testing, and reviewed the engineering of the engine installation. Whilst the outcome of such investigations is not clear, a recommendation was ultimately made to change the engine mounts of the vessel. On 3 June 2011 such a change was effected. Thereafter the engine operated, using the starboard engine installed on 25 March 2010, and the port engine installed on 12 August 2010 and utilising new engine mounts. That was the set-up of the vessel at the time the plaintiffs tested it during a sea trial on Saturday 12 November 2011 and thereafter.

13. [13]
    The plaintiffs both said in evidence that in 2011 they had a conversation with Mr Brooks. They said he represented that the vessel was a good boat, presently in the QYC fleet and that it had been in charter since 2008. I accept that those representations were made, but once again, that is not of critical importance. The representation about it being in charter was true and whether to represent it as a “good boat” is of importance really depends on the findings I make as to whether the plaintiffs, or at least the male plaintiff, Mr Reintals, was told of the engine issues prior to the plaintiffs buying the boat.

14. [14]
    It is alleged that immediately after Mr Brooks told the plaintiffs it was a good boat, they, with Mr Brooks, went to the marina where it was berthed and met the defendants. It is accepted that at that time the first defendant, Mr Larsson, told them that “it’s a great boat” and that “it’s easy to look after.”

15. [15]
    Again, whether such representations were false and misleading depends in my view on my determination of whether the Mr Reintals was later told of the history of engine failures. That is the critical question. If told of that history, the representations referred to in the previous paragraph can be seen to refer to other aspects of the boat – and everyone agreed it was in other respects a good quality boat that was easy to look after.

16. [16]
    The plaintiffs’ asked to take the vessel for a sea trial and to bring along some friends because, as Mr Reintals said to the defendants, they themselves were novices in these types of boats. That was agreed to. That sea trial was undertaken on 12 November 2011. The plaintiffs attended with three friends, Peter Kerr, David Earea and Murray Cockburn. Mr Kerr has since died.

17. [17]
    During the sea trial, Mr Earea, who was a very experienced mariner, noted that the electronic display on the motors (the tachometer) revealed a significant difference between the hours of use of the starboard and port engines. As a result, he spoke to the Mr Larsson and asked why there was such a difference between the hours of operation of the engines. Mr Larsson, according to Mr Earea, said there had been an engine mount issue and one of the motors had been “changed out”: (T2-106- ll 1-15).

18. [18]
    In the Second Further Amended Defence (“the Defence”), the defendants alleged that the first defendant explained to one of the plaintiffs guests (without admitting it was Mr Earea) that one of the tachometers had been replaced so that the tachometer did not represent the total number of hours of service of the vessel. This allegation, in paragraph 10(d) of the Defence, is admitted in paragraph 5(a) of the Third Further Amended Reply (hereinafter “the reply”). That admission is largely consistent with Mr Earea’s evidence. The evidence of Mr Larsson as to that conversation was however different. He said he told Mr Earea of a history of multiple engine failures (see T4-21, ll 1-23) resulting in the replacement of the port and starboard engines, but that the engine mounts for those engines had been replaced and this appeared to have resolved the previous engine issue.

19. [19]
    The plaintiffs also said that they to spoke to Mr Larsson during the sea trial, and he confirmed only one engine had been replaced. Mr Larsson denied telling them that. Mr Cockburn’s evidence was also that he understood from conversation during the sea trial that only one engine had been replaced (T2-96/97 and T2-102 l18/20).

20. [20]
    In relation to the sea trial I preferred the evidence of Mr Earea to that of Mr Cockburn, though what they said was generally consistent. I concluded Mr Earea’s memory of what occurred was clearer, and that Mr Cockburn had some trouble distinguishing between what he remembered people saying during the trial, and what he may now believe occurred as a result of what others may have since told him.

21. [21]
    Each of Mr Earea and Mr Cockburn were however clear that if they knew of the history of prior engine failures, they would have strongly recommended the plaintiffs did not purchase the boat (see Mr Cockburn at T2-00 l 17/21 and T2-100l41/2-101 l 3 and Mr Earea at (T107 l 25/28).

22. [22]
    Another significant dispute concerned what occurred after the sea trial. The plaintiffs, Mr Earea and Mr Cockburn all said that they went to lunch, with Mr Kerr also attending. Mr Cockburn said the defendants might have attended. He is, I find, mistaken about that issue. If is one of the reasons I preferred Mr Earea’s evidence to his. No one else suggested the defendants had gone to that lunch. The plaintiffs both said that during lunch the male plaintiff, Mr Reintals spoke to Mr Brooks by phone on two occasions and that an oral agreement was reached to buy the boat. Mr Reintals said after lunch he attended the offices of MDBS and asked Mr Brooks for the photo of the vessel which was in the window of the office. He says that Mr Brooks then asked him whether Mr Larsson had told him that there was an engine problem and that the male plaintiff said “yes, he mentioned he put a new engine on the starboard side.” He said Mr Brooks did not disabuse him of the notion that only one engine, and on the starboard side, had been replaced. Instead, Mr Reintals said that Mr Brooks remained silent and blushed.

23. [23]
    By contrast both Mr Brooks and Mr Larsson said that after the sea trial Mr Reintals went to Mr Brooks’ office with them both. They each said Mr Reintals was told of the full history of the engine failures in the boat.

24. [24]
    It was said that Mr Reintals was told by Mr Brooks and/or by Mr Larsson that the vessel had previous engine problems involving breakdown and replacement of both port and starboard engines on more than one occasion, that the problem had involved cracking of the engines at about 200 to 300 hours of operations, that there had been numerous investigations into the problem by the manufacturers of both the engines and the vessel and that as a result, the engine mounts had been replaced. Mr Brooks and/or Mr Larsson said they believed that to be the source of the problem. It was also said that Mr Reintals was further informed by Mr Brooks and/or the first defendant that Mr Larsson had a file of his dealings with Volvo and Fontaine Pajot that could be provided to the plaintiffs, and that he could confirm all the details with Ian Moss. It was further alleged that Mr Brooks told Mr Reintals that his usual practice was to include a provision in a contract for the sale of a vessel that it be subject to a satisfactory survey. It was said that Mr Reintals told Mr Brooks that he did not require the first defendant’s file and did not wish to make the contract subject to a satisfactory survey. There was a general consistency between what Mr Brooks and Mr Larsson said in evidence about that meeting, though, curiously, each said it was the other one had made most of the actual statements.

25. [25]
    There is thus a significant dispute whether or not Mr Reintals was advised of the extent of the engine problems. That is the critical factual finding in the case.

26. [26]
    The parties later entered into a written contract consisting of a “selling agreement” dated 14 November, two days after the sea trial, and a bill of sale of 17 November. It should be remembered that at the time of discussions between the plaintiffs, Mr Brooks and Mr Larsson, the boat was listed for sale for $365,000, only $5000 more than the price ultimately agreed.

27. [27]
    The contract contained the following clause:

“The Purchaser acknowledges that no warranties (except those expressly contained in this Agreement) and no representations in connection with the sale of the vessel had been made by the Vendor or his Broker or any persons on their behalf and that the Purchaser has entered into this agreement after satisfactory inspection and investigation of the vessel, it’s fittings, appliances and equipment used in connection therewith -  and without limiting generality of the foregoing the Purchaser acknowledges that the Vendor (and his Broker) have made no warranties or representations as afore said nor as to the sea-worthiness or suitability of the vessel hereby sold AND THAT in all respects the Purchaser relies upon his own enquiries.”

28. [28]
    In paras 24 and 25 of the Defence, the defendants allege that they relied upon the acknowledgment in that exclusion clause in entering into the contract and that by virtue of that clause and the defendant’s reliance on it, the plaintiffs are estopped from relying upon the representations alleged to have been made by Mr Larsson and the representation by silence of Mr Brooks. Mr Larsson gave evidence to that effect.

29. [29]
    Further the defendants allege that prior to the plaintiffs executing the contract Mr Reintals had made enquiries with Ian Moss of Whitsunday Diesel Marine (the father of Daniel Moss who gave evidence) as to the condition of the vessel, and that Mr Moss was aware the vessel had experienced the engine problems I have outlined. The defendants allege that the plaintiffs relied on those enquiries, with Mr Moss, in deciding to proceed with the purchase of the vessel.

30. [30]
    Mr Moss was well known to both parties but did not give evidence. Mr Reintals denied speaking to Mr Moss about the boat. In the circumstance that either party could have called Ian Moss to give evidence, but chose not to do so, I draw no inference against either party from the fact Mr Ian Moss was not called. I do not think the failure of either party to call him assists me in resolving the important factual disputes.

31. [31]
    The plaintiffs allege that at the time of the completion of the contract on 17 November, each of the engines had performed less than 300 hours of operation. That is denied in para 12(a) of the Defence, and the defendants assert that each of the engines had performed no less than 500 hours of service as at 17 November 2011.

32. [32]
    As I have said previously, I do not think resolution of that question is critical to determination of the issues in dispute. What is important is that the failure of the engine on November 2012, and each of the earlier failures, was at a time vastly earlier that the expected lifetime of such motors.

33. [33]
    After completing the sale on 17 November 2011, the plaintiffs signed an agreement with QYC retaining the placement of the vessel on charter with that organisation until 17 November 2012. That agreement has been subsequently verbally extended, and the vessel remains with QYC, but has not been operable since November 2012.

34. [34]
    On 3 November 2012 the starboard engine again failed. The plaintiffs allege it failed due to cracking at the same approximate point as the previous engine failures. I have found that it did. They also allege that the replacement of the engine mounts on 3 June 2011 in accordance with the recommendation of Fountaine Pajot and Volvo Penta following their investigations had not resolved the cause of the engine failures. Whether the engines failed in the same location as previously due to the same undetermined cause was an issue at the trial but, as I earlier indicated, I find it did.

The Allegations

35. [35]
    The plaintiffs rely on the following alleged misrepresentations:

1. Mr Brooks’ representation that the boat was “a good boat.”

2. Mr Brooks’ representation that the boat was “presently in the Queensland Yacht Charter Fleet and has been in service since 2008.”

3. The first defendant’s representation that the boat was “a great boat.”

4. The first defendant’s representation that the boat was “easy to look after.”

5. The first defendant’s representation that “one of (the motors) had been replaced” and “the starboard engine had been recently replaced.”

6. The first defendant’s representation that “the engine needed replacement due to engine mount issues” and “the engine mount issues have been resolved.”

36. [36]
    The first 4 allegations are of secondary importance. Their import depends on a finding that the representations numbered 5 and 6 were made. If the defendants misrepresented the history of the engines of the vessel then those early representations about the qualities of the boat are flavoured by those misrepresentations and would be seen, on that account, to be false. By contrast if, as Mr Brooks and Ms Larsson said, Mr Reintals was told of the history of a number of prior engine failures, then those earlier misrepresentations can be seen as nothing more than referring to other qualities of the boat – and all agreed it was otherwise a good boat.

37. [37]
    It is alleged that the representations numbered 5 and 6 above were false and either made fraudulently or recklessly. It is said that each of the representations numbered 5 and 6 were made by Mr Larsson and constitute misleading or deceptive conduct of the defendants made in trade or commerce within the meaning of s 18 of the Australian Consumer Law, being part of Schedule 2 of the Competition and Consumer Act.

38. [38]
    The plaintiffs allege that the conversation between Mr Brooks and Mr Reintals, referred to in [22] above clearly indicated to Mr Brooks that Mr Reintals mistakenly believed only one engine had been replaced, due to an issue with the engine and not an unknown cause which had resulted in multiple engine failures, and that such mistaken belief was due to misrepresentations from Mr Larsson. It is alleged that Mr Brooks’ silence was also fraudulent or reckless, and was conduct engaged in by the defendants pursuant to the provisions of s 139C of the Competition and Consumer Law, which deals with conduct of agents or employees. It is said that such conduct was misleading or deceptive and was, like Mr Larsson’s own representation, made “in trade or commerce” in contravention of s 18 of the Australian Consumer Law.

39. [39]
    In those circumstances, the plaintiffs assert that they rescinded the contract by letter of 18 March 2013 (Tab 32 of Exhibit 1), or alternatively, by filing the Claim and Statement of Claim on 27 August 2013, seeking an order for rescission.

40. [40]
    The defendants in their Defence do not admit that the installation of new engine mounts on 3 June 2011 did not resolve the engine failure issues in the vessel or that the cause of the engine failures remains unknown (see para 13A of the Defence). Furthermore, in para 13A(c) they allege that because, following the installation of the engine mounts in June 2011 there were no further engine failures despite the vessel being used for the purpose of charter and the engines being operated for at least 500 hours of service, that they reasonably believed at the time of sale that the issue had been resolved.

41. [41]
    The defendants deny Mr Larsson made the statements on which the plaintiffs rely as misrepresentations inducing them to enter into the contract and deny the conversation with Mr brooks, which the plaintiffs say amounts to a misrepresentation by silence. So far as any representations were made, the defendants deny they were false and specifically say that during the sea voyage the plaintiffs were told that each of the port and starboard motors had been replaced.

Findings

42. [42]
    I find that during the sea trial Mr Larsson did not advise Mr Earea or the plaintiffs of the history of engine failures. I accept Mr Earea’s evidence that Mr Larsson said only one engine had been replaced due to engine mount issues which had been resolved although there may also have been further general discussion about the boat. I find Mr Larsson knew Mr Earea was on board to advise the plaintiffs about the possible purchase of the boat. Moreover, I find he repeated this representation, effectively, when he told the plaintiffs a little while later that it was the starboard engine which had been replaced. I also reject the evidence of Mr Brooks and Mr Larsson that after the sea trial Mr Reintals attended Mr Larsson’s office. I reject therefore their evidence of what was then said.

43. [43]
    Mr Larsson’s credit was not enhanced by what was a significant difference between his evidence and what was put to Mr Earea about conversations with Mr Larsson (and also to Mr Cockburn, though, ultimately, Mr Cockburn appeared to have a lesser recollection of events and I do not rely to any significant extent upon his evidence of any relevant conversations). The issue is helpfully dealt with in the plaintiffs’ counsel’s written submissions.

44. [44]
    It was put to Mr Earea:

“What I put to you is that in the context of that question being asked, what Mr Larsson told you was that the tacho had been changed out, because there’d be some engine problems to do with the engine mounts, and that those engine mounts had been changed and that everything had been running fine since. Do you accept that’s a reasonable summary of the conversation?” (see T2-111)

45. [45]
    Subsequently the following exchange occurred between, the defendants’ counsel and me;

HIS HONOUR:Mr Deaves, your case isn’t that Larsson never spoke about a significant number of engine failures in front of this man, is it?

MR DEEVES:Didn’t run through the history with Mr Earea or Mr Cockburn…and it’s never been our case.

46. [46]
    Mr Larsson’s evidence however involved him claiming to have told Mr Earea of numerous engine failures and of the ongoing dispute with Volvo and with Fontaine Pajot. Indeed, he agreed with this proposition that I asked (see T4-58);

HIS HONOUR:So you say you explained it clearly so that Mr Earea could have been left in no doubt that there were multiple changes, not just one change?

MR DEEVES:- Yeah.

47. [47]
    In my view those matters significantly adversely reflect on Mr Larsson’s credit.

48. [48]
    The defendants also relied on the evidence of Maree Brooks, the wife of Neville Brooks. She said that after the sea trial on 12 November 2011 her husband, Mr Larsson and Mr Reintals went back to the MDBS office for discussions (T3-125 l 20). She said she did not recall anything of the discussion. I am not satisfied Mrs Brooks had a clear recollection of such a meeting. She had commenced her evidence about this topic by saying: “the boys usually just come straight up to the office and discuss…. anything”.

49. [49]
    It is somewhat surprising to me that she could specifically recall a meeting of 3 men almost 6 years ago, a meeting that she could say nothing about other than the men’s attendance. She could not recall the length of the meeting. Under cross-examination she said this meeting was not different to what had happened when other people had bought boats and ultimately said ‘I cannot say who was in there really” (T3-128- l 39/44).

50. [50]
    In my view her evidence is of no assistance to me in determining whether events occurred as Mr Brooks and Mr Larsson said (namely, that Mr Reintals attended a meeting with them both in the MDBS office immediately after the seal trial) or as Mr Reintals, Mrs Dudney, David Earea and Murray Cockburn said.

51. [51]
    I accept the evidence called by the plaintiffs that after the sea trial they went to lunch with Mr Earea, Mr Cockburn and Mr Kerr. I accept also that following discussion about the boat by those present, Mr Reintals phones Mr Brooks and offered to buy the boat for $355,000. I accept that Mr Brooks shortly thereafter rang Mr Reintals offering to “split the difference” and that oral agreement was then reached to sell the boat for $360,000, only $5000 less than the then asking price.

52. [52]
    I accept Mr Reintal’s evidence of what occurred when he then went to the office of Mr Brooks.

53. [53]
    The defendants said (and I accept) that when they listed the boat with MDBS they told Mr Brooks of the fact of the previous engine failures, and their replacement. They also said, and Mr Brooks confirmed, that Mr Brooks was authorised by them to tell all prospective purchasers of those facts. I am not prepared to find that such authorisation in fact occurred. In circumstances where such disclosure was not in fact made, and when I have significant doubt about the credit of both men, I do not find that understanding was ever reached despite the defendants making Mr Brooks aware of the prior history.

54. [54]
    That Mr Brooks was aware of the engine failures is clear from a letter he wrote, on 18 May 2011 (Exhibit 17). Although it is not addressed, Mr Brooks said it was to Fountaine Pajot, the manufacturers of the vessel. In that letter he says, “I was more than surprised to learn that the vessel is now on its third set of engines”. He continued. “The history of the previous engines having to be replaced would have to be disclosed to any serious purchaser” and then wrote:

“I really feel for the Larssons now having to try and sell this vessel with its quite serious history of engine replacements. Any prospective purchaser would certainly be suspicious of any reasons why the engines have had to be replaced at this early stage of the vessel’s life and certainly to have the engines replaced twice would have a significant effect on their perception of the vessel and how reliable the engines are or indeed if there are any other serious issues with the vessel.

I feel the price of the vessel will be seriously affected if the Larssons cannot supply some form of written guarantee from Fountaine Pajot or Volvo that the now installed engines are fitted correctly and will provide the amount of service hours that are expected of them without any more similar problems such as cracks in the blocks.

Without having any proof of why the previous motors suffered this problem it will be very hard to convince any purchaser that this will not happen again to the newly installed motors.” 

55. [55]
    Despite that pleading letter, no such document was ever provided by Fountaine Pajot, or by Volvo. Despite this, and at a time the vessel was listed for sale at $365,000, the plaintiffs readily agreed to purchase it on the day of the sea trial for $360,000. I agree with the sentiments Mr Brooks expressed in that letter. I agree that knowledge of the history of the engine failures would be likely to seriously affect the price of the yacht if no guarantee could be given by Volvo or Fontaine Pajot. I agree any purchaser would be very suspicious provided, of course, that they were aware of that history. I accept the evidence of Mr Earea and Mr Cockburn that if they knew of the real history, they would not have recommended the purchase. I find the plaintiffs would not have entered into the contract they did if they were aware of that history.

56. [56]
    In so concluding I am influenced by the fact that it is in my view inherently unlikely that the plaintiffs would have purchased the vessel, especially for $360,000, only $5,000 less than the then asking price, if they had been told of the history of previous engine failures. That view is entirely consistent with common sense. It also accords with the evidence of David Earea that if he had known of the fact of the prior engine failures he would have considered there was no point in looking at the boat (T2-107, L 25FF). It also accords with the letter written by Mr Brooks to Fountaine Pajot to which I have referred. It is consistent with what took place in respect of the negotiations for the sale of the vessel.

57. [57]
    I note also that Mr Brooks, who said he recalled the meeting with Mr Reintals and Mr Larsson in his office to which I have previously referred, and to Mr Reintals being told of the earlier engine failures, said he had no memory whatsoever of the actual circumstances surrounding reaching of agreement about the sale of the Belle de Jour. I do not accept his evidence about that.

58. [58]
    He said this lack of any memory of the sale was because he had been engaged in many boat sales over the years. I accept that he had been involved in many sales, but in my view this was a sale that had the very unusual features identified by him in the letter to Fontaine Pajot. If the course of negotiations was as he had said, that is, that having been told of the previous engine failures Mr Reintals said that he was prepared nevertheless to buy it, almost for the asking price, because Mr Brooks and Mr Larsson had assured him the problem was fixed, he would have been a surprised man indeed. He would, I think, have recalled making such an unusual and unexpected sale and would have been acutely aware of the circumstances of the actual signing of the documents two days later.

59. [59]
    The plaintiffs’ counsel in his written submissions submits that the explanation given by Mr Brooks for his ability to recall the meeting immediately after the sea trial between himself, Mr Larsson and Mr Reintals, namely, that “you don’t always have that sort of meeting about a boat” (see T3-99, ll 43-45) was said to be inherently believable.

60. [60]
    A difficulty with that submission is that it can be contrasted with Mr Brooks’ professed complete inability to recall anything about the signing of the contract itself.

61. [61]
    Furthermore, the defendants’ counsel conceded (at paragraph 1.17 of his submissions) that the evidence of Mr Brooks and Mr Reintals regarding the disclosure of multiple engine failures at the alleged meeting with Mr Reintals in Mr Brooks’ office immediately after the sea trial was “far from identical”. Indeed it was. Whilst each gave moderately similar evidence about what was said, each said it was the other person who had disclosed that information to Mr Reintals.

62. [62]
    The plaintiffs’ evidence about the making of the contract is consistent with what they, Mr Earea and Mr Cockburn said occurred on the sea trial on 12 November, and with oral agreement being reached soon after when they and their advisers were at lunch, and with the contract of sale being signed by the parties on the following Monday, 14 November. Mr Brooks’ inability to recall this sequence of events at all indicates to me he either has a surprisingly poor memory for the events or was not being entirely truthful when giving his evidence. I think the latter is more likely but it is unnecessary to form a concluded view about that issue.

63. [63]
    I accept that Mr Earea was a close friend of the plaintiffs’ and remained in court with them during the course of the trial, but that does not cause me to doubt his evidence about what was said during the sea trial, or to doubt the truth of what he said his reaction would have been if he had been told about the prior history of engine problems with the boat. Such a reaction is entirely in accord with common sense.

64. [64]
    The starboard engine, which ultimately failed in November 2012, was itself only about 20 months old at the time of the sea trial, more than 6 months newer than the starboard motor which failed on 25 March 2010 and about the same age as the port engine which failed in October 2009, although older than the port engine which failed in August 2010. In such circumstances it does not seem to me that in November 2011 at the time of the sea trial it was true to say, as the male defendant said in evidence and his counsel asserted in submissions, that at that time it was reasonable to think the change to the engine mounts in June 2011 had rectified the previous problem.

65. [65]
    Any assertion it had been rectified was, in my view, one made recklessly, having regard to the history of prior engine failures. The evidence that the motor had then done about 1000 hours, more than any of the previous motors, is in my view inconsistent with the prior history of the motors and not supported by cogent evidence which I accept.

66. [66]
    Moreover, in a handwritten inventory provided by the defendants to Mr Brooks in April 2011, at the time the vessel was listed with him for sale, the defendants said that the engines had at that time done about 200 hours of service. That must demonstrably have been false. The starboard engine was then 12 and a half months old, the port engine only about 8 months old. They would therefore have each performed different hours of service since the boat is designed for both to be run at once, and it is likely that each had done more than 200 hours.

67. [67]
    In my view, the fact that the inventory did not set out the different hours for each motor is an indication that the defendants did not wish to draw a prospective buyer’s attention to the difference in engine hours. But for the careful eye of David Earea, and the conversation he then had with Mr Larsson, and consequently, the conversation Mr Larsson had with the plaintiffs, it is likely the plaintiffs would never have been told of even one of the prior engine problems by Mr Larsson or Mr Brooks.

68. [68]
    Only after the parties had, through Mr Brooks, agreed over the phone for the sale of the vessel for $360,000 did Mr Brooks, when the male plaintiff went to his office in the circumstances I have outlined, say anything about the engines of the vessel.

69. [69]
    I reject his evidence, and that of Mr Larsson, that at a meeting in Mr Brooks’ office immediately after the sea trial Mr Reintals told of the history of engine problems. If he had been so told it is impossible for me to believe he would have told neither his wife nor his “advisers”, whom he had taken on the sea trial because of their experience and his lack of it, of that fact, or to believe he would have readily agreed to purchase the boat for a price only $5000 below the asking price.

70. [70]
    The defendants’ counsel cross-examined both the plaintiffs, suggesting that in December 2012 they had an amicable, indeed friendly, meeting with the defendants, at the plaintiffs’ house, even sharing a glass of wine. It was suggested this was improbable if what the plaintiff said about being deceived by the defendants was true. It was suggested the plaintiffs had simply made up their version of what occurred sometime after that amicable meeting.

71. [71]
    One difficulty with that suggestion is that prior to 19 December 2012 the plaintiffs must have informed John Webster, a marine assessor, that the “previous owners” (i.e. the defendants) did not disclose the prior repeated engine failures to them. This is very clearly set out in a report of Mr Webster of that date (see Exhibit 10) and I accept Mrs Dudney’s evidence about their meeting with Mr Webster.

72. [72]
    Mr Reintals, whose evidence I prefer to Mr Larsson’s, also gave evidence of a phone conversation prior to the December meeting in which he accused Mr Larsson of not disclosing that history. I accept Mr Reintal’s evidence about that issue.

73. [73]
    I conclude the fact that the meeting was amicable even friendly, is a product of the personality of the plaintiffs’ and their belief that even then some solution short of litigation might have been forthcoming. That attribute is consistent with an email they wrote to the manufacturer at that time.

74. [74]
    I accept that the misrepresentations of Mr Larsson and Mr Brooks earlier referred to were made fraudulently in order to induce the plaintiffs to purchase the boat. The other representations concerning whether the vessel was a “good boat”, or was a “great boat” and “easy to look” after only assume importance in light of the fact that the engines on the vessel had failed at numerous times. It was accepted that in other ways the boat was a good boat, easy to clean, and very suitable both as a charter boat and for the plaintiffs to use personally at times when it was not in charter. The essential factual issue to be resolved therefore involves the representations sets out in subparagraphs 5 and 6 of [35] above.

Mr Brooks Silence

75. [75]
    I accept the evidence of Mr Reintals that when he went to the office, after reaching the oral agreement to which I have referred, Mr Brooks asked him if Mr Larsson had told him about the engines. I also accept that Mr Reintals said words to the effect “yes, he told us he’d replace one engine” and that in response Mr Brooks said nothing.

76. [76]
    His silence, in such circumstances, amounted to a representation that the fact that only one engine had been replaced was true. In MacFarlane v Heritage Corp (Aust) Pty Ltd & Ors [2003] QSC 350, Chesterman J at para 76 said:

“The second defendant made the representations while the third defendant sat in silence. He must, by that conduct, be taken to have endorsed the second defendant's conduct and to have corroborated the representations. It is clear that misleading and deceptive conduct for the purposes of s 52 may occur despite the absence of what might be called a positive misrepresentation. It is sometimes said that silence may be a contravention of the section.

'But in any case where a failure to speak is relied upon the question must be whether in the particular circumstances the silence constitutes or is part of misleading or deceptive conduct ... The question is whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive. Conduct answering that description may not always involve misrepresentation ...'

Per Gummow J in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 40, 41. The only sensible construction to put on the third defendant's conduct is that, by his silence, he was expressing his agreement with what the second defendant said.”

77. [77]
    In my view, the silence of Mr Brooks, as Mr Reintals explained it, must be seen as expressing his agreement with what Mr Reintals had said Mr Larson had told him, that is, that only one engine, the starboard engine, had been replaced and that the problem had been fixed. Having regard to Mr Brooks’ knowledge of the true position it should, in my view, have been expected that Mr Brooks would have spoken up to correct Mr Reintals’ false understanding of the history of engine failures.

78. [78]
    A further minor issue concerning this representation by silence is that it was made after the parties had orally agreed on the sale of the vessel. In my view, if Mr Brooks had informed Mr Reintals of the true position, the plaintiffs would not have completed the transaction as they did. It was therefore an inducement to the plaintiffs subsequently signing the written contract and completing the transaction, including paying the $360,000 purchase price.

Exclusion Clause

79. [79]
    The defendants also relied on an exclusion clause contained in the agreement to the following effect:

“The purchaser acknowledges that no warranties (except those expressly contained in this Agreement and no representations in connection with the sale of the vessel have been made by a Vendor or his Broker or any persons on their behalf and that the Purchaser has entered into this Agreement after satisfactory inspections and investigations of the vessel, its fittings, appliances and equipment used in connection therewith – and without limiting generally of the foregoing the Purchaser acknowledges that the Vendor (and his Broker) have made no warranties or representations as afore said, nor as to the seaworthiness or suitability of the vessel hereby sold AND THAT in all respects the purchaser relies upon his own enquiries.”

80. [80]
    Whilst I accept that the plaintiffs determined not to have the vessel formally inspected that is, in my view, irrelevant. They relied on the inspections during the sea trial carried out by their friends, who were experienced in boats. In any case, it is inherently unlikely that any inspection would have resulted in detection of a problem with the motors.

81. [81]
    I reject the defendants’ evidence and that of Mr Brooks that he offered Mr Reintals the opportunity to inspect a bundle of documents dealing with the earlier replacement of the engines of the vessel. Mr Larsson and Mr Brooks both said that statement occurred during the course of the conversation which I find did not occur, in which Mr Reintals was told of the history of problems with the engines of the vessel.

82. [82]
    In Miller’s 2016 “Australian Competition and Consumer Law Annotated” the learned authors deal with disclaimers and exclusion clauses at para 1.S2.18.95, saying:

“As intent is not an element in determining whether conduct is misleading or deceptive, a disclaimer as to the truth or otherwise of a particular representation should not, of itself, absolve the maker of the representation from liability. The same result should apply in relation to exclusion clauses.

This does not mean that disclaimers and exclusion clauses are to be ignored completely… in order to determine whether conduct is misleading or deceptive, the court must consider the conduct as a whole and should accordingly consider whether the representation in question, including the disclaimer or exclusion clause, is misleading or deceptive.

When misleading or deceptive conduct had occurred and a disclaimer is published subsequently or a contract containing an exclusion clause is subsequently entered, how should the courts deal with a party complaining of the conduct who subsequently acts to his or her detriment? As French J explained, in Campbell v Backoffice Investments Pty Ltd [2009] 238 CLR 304:

‘Where the impugned conduct comprises allegedly misleading pre-contractual representations, a contractual disclaimer of reliance will ordinarily be considered in relation to the question of causation. For if a person expressly declares in a contractual document that he or she did not rely upon pre-contractual representations, that declaration may, according to the circumstances, be evidence of non-reliance and of the want of a causal link between the impugned conduct and the loss or damage flowing from entry into the contract.’

The court will take the disclaimer or exclusion clause into consideration in determining, as a matter of fact, whether there is any nexus between the misleading or deceptive conduct and the damage alleged to have been suffered as a consequence.”

83. [83]
    Consideration of such issues, in this case, leaves me in no doubt that in the circumstances of this case there was a clear nexus between the misleading and deceptive conduct of Mr Larsson and Mr Brooks, and the fact that the plaintiffs entered into a contract to purchase the vessel, the engine of which subsequently failed in November 2012. Thus, taking the clause set out in [79] above into consideration I nevertheless determine there was a strong nexus between the misleading conduct of Mr Larsson and Mr Brooks, and the fact of the plaintiffs entering into the contract to purchase the “Belle de Jour”.

84. [84]
    The inclusion of the exclusion clause in the contract of sale was not evidence of non-reliance by the plaintiffs on the misrepresentation and I conclude the defendants did not themselves place any reliance on the presence of that clause in the contract in deciding to themselves enter into the contract. In relation to this see Guirguis Pty Ltd and Anor v Michel's Patisserie System Pty Ltd and Anor [2017] QCA 83 where Fraser JA, delivering the judgment of the court, endorsed remarks of Jackson J in Juniper Property Holdings No 15 Pty Ltd v Caltabiano (No 2) [2016] QSC 5 at [76] that courts should adopt a cautious approach to assertions of reliance in circumstances such as here existed. His Honour said:

“I must look to see what other evidence supports the defendant’s evidence that he would not have entered into the contract but for the alleged representations.”

Here the fact that the parties had orally agreed on a sale at $360,000 in circumstances where there was no evidence the defendants were then aware of the presence of an exclusion clause in the pre-forma written contract, along with my doubts about the credit of Mr Larsson, persuades me to conclude that the defendants placed no reliance at all on the presence of the exclusion clause in determining to sell the boat to the plaintiffs.

In Trade or Commerce

85. [85]
    Section 18(1) of Sch 2 of the Competition and Consumer Act provides: 

“A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.” 

86. [86]
    The High Court, in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 determined that the phrase “in trade or commerce” had a restrictive operation on the effect of the section i.e. the statutory prohibition on engaging in conduct that was misleading or deceptive was confined to these cases where such conduct was engaged in “in trade or commerce” (my emphasis). It was held not to encompass all activities of or incidental to the carrying on of a commercial enterprise but “only to conduct which is itself an aspect or element of activities or transaction which of their nature, bear a trade or commercial character” (see per Mason CJ, Deane, Dawson and Gaudron JJ at p 608). It was involved with that their Honours declined as the actual conception of trade or commerce and not to the “immense field of activities in which corporations may engage in the course of, or after the purposes of, carrying on some overall trading or commercial business” (also at p 603).

87. [87]
    In this case I find that the misrepresentation of Mr Larsson and the misrepresentation by silence of Mr Brooks, were misrepresentations engaged in “in trade or commerce”, so that the relevant provision of the Australian Consumer Law contained in schedule 2 of the Competition and Consumer Act are engaged.

88. [88]
    In so finding I am influenced by the following facts, in addition to the background mattes set out earlier in this judgment:

1. (i)
   The boat was owned by the defendants in partnership and they had placed it on charter with QYC in order to earn income and they did not use it, or use it extensively for private purposes.

2. (ii)
   The sale included the transfer of forward bookings with that charter company, with whom the plaintiffs themselves immediately also placed the yacht on charter. The advertisement to which the plaintiffs responded (see Ex 1, tab 7 p 38) was in Mr Brooks’ window and referred to a “bare boat charter earning an income” and more especially said the “price is as a going concern charter vessel but will be plus GST is sold for private use. Forward booking to the value of approximately $60,000 are included in the price”. It was sold without GST, reflecting its sale as a going concern.

89. [89]
    Thus both the defendants themselves, and the plaintiffs, owned the boat for commercial activities. Their motivation in owning the boat was commercial. Indeed the defendant’s, in addition to this boat, owned another boat also used to generate income.

90. [90]
    In Williams v Pisano (2015) NSWCA 177, Emmett JA (with whom Bathurst CJ and McColl JA agreed) considered the question of whether representation concerning the sale of a residential house upon which the vendors had undertaken renovation work was a sale “in trade or commerce”. His Honour said at [38]:

“In ordinary circumstances, a person who sells his home, whether by private treaty or by auction and whether he conducts the negotiations personally or through a real estate agent, would not be said to be undertaking those activities in the course of a trade or business or in a business context. Whether or not an estate agent is used and whether or not that agent advertises the house, by preparing brochures or other advertisements, and whether or not the agent sells by auction or merely negotiates a private treaty, the sale will normally remain a sale by the vendor of his house and not an act done in a business context. It is relevant to consider the character of the parties involved, which includes whether they are people who have engaged in or are about to engage in commercial activities, whether the transaction is motivated by business, as distinct from personal, reasons and whether the person whose conduct is under attack played an active part in the transaction. The mere use of an estate agent does not bring about the result that the sale of a capital asset by a householder is a transaction occurring in trade or commerce.”

91. [91]
    In my view the facts of this case set it apart from the mere sale of a boat, albeit through a broker, for private use. It should properly be seen as a sale of a commercial asset (although one commonly used for private purposes, including substantial advance bookings, from vendors who themselves used it for income earning purposes to a purchaser who had similar intentions. The misrepresentation by Mr Larsson and Mr Brooks were conduct designed to facilitate that commercial purpose I should, I find, be seen in misrepresentations made in trade or commerce within the meaning of s 18 of the Competition and Consumer Act.

92. [92]
    Such a finding is consistent with the approach of the Federal Court in Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 where at p 329 the court highlighted the fact that the sale was of a going concern and that the sale of the clinic (and, here the boat) should not be seen in isolation from the vendors commercial activities. Here the “Belle de Jour” was one of two boats commercially operated by the defendants who determined to sell the vessel as an ongoing business, including significant forward bookings.

Remedy

93. [93]
    The plaintiffs claim that if the contract was void ab initio they have suffered loss as a result of incurring vessel maintenance and service costs, net of charter income from 17 November 2011 to 30 April 2016. That loss, they said, should be calculated in accordance with a calculation of Peter Hood of 25 May 2016.

94. [94]
    Alternatively if the contract was not declared void ab initio, the plaintiffs allege they have suffered significant loss including:

1. (a)
   Diminution in the value of the vessel.

2. (b)
   Loss as a result of being unable to charter the vessel after the failure of the starboard engine on 3 November 2012.

3. (c)
   In addition, the plaintiffs says that after the failure of the engine on 3 November 2012, they have been unable to use the vessel privately.

95. [95]
    In the period from the purchase of the boat up until 3 November they used the vessel for a total of 15 charter nights privately and claim loss on the basis of the charter cost of $650 per night.

96. [96]
    The defendants allege that the real value of the vessel as at the date of sale to the plaintiffs on 17 November 2011 was not less than $360,000 being the contract price. Further, the defendants say that the plaintiffs could have repaired the engine and charted the vessel from 3 November 2012 to the present time and that their failure to do so amounted to a failure to mitigate their loss. They also allege that the plaintiffs have failed to undertake any maintenance, cleaning or other turnaround activities on the vessel. The defendants allege the plaintiffs could have replaced the engine for between $15,000 and $27,000. They say the plaintiffs failed to investigate the cause of the starboard engine failure after November 2012.

97. [97]
    In response, the plaintiffs in their Reply allege that it was reasonable not to replace the starboard engine and not to investigate the cause of the engine failure because the engine had been replaced on 5 previous occasions, cracked in November 2012 at the same approximate location as the previous engine failures, the cost of purchasing and fitting a replacement engine was approximately $26,000, and it was futile to replace the engine as the cause of the previous engine failures had already been extensively investigated by Volvo Penta and Fountaine Pajot and had not revealed the underlying cause of the engine failures. I accept that position.

98. [98]
    The plaintiffs of course seek rescission under the Act, rather than in reliance solely on equitable grounds. The power that they be exercised under the statutory provisions is wider than the power of an equity court to grant rescission. In particular, bars to equitable rescission such as affirmation and an ability to achieve restitutio in integrum, both of which the defendants here rely on, are only discretionary matters to be taken into account in deciding whether to grant relief under the Act (see JAD International Pty Ltd v International Trucks Australia Ltd [1994] 50 FCR 378 at 380).

99. [99]
    The primary matters on which the defendants here rely are:

3. (1)
   The alleged affirmation of the contract by the plaintiffs between November 2012 and the solicitor’s letter of rescission; and

3. (2)
   The very significant delay between November 2012 and now, during which it is alleged the condition of the vessel has significantly deteriorated so that proper restitution is now not possible.

100. [100]
     In relation to the alleged affirmation, the defendants rely on:

3. (1)
   The plaintiffs’ claim on their insurance policy for the vessel;

3. (2)
   The plaintiffs’ email to Fontaine Pajot of 10 December 2012 (part of Exhibit 2) in which they indicated their aim was to get the vessel back to fully workable service without future recurrence of engine failure;

3. (3)
   The plaintiffs’ email to Mr Larsson of 17 December 2012 (Exhibit 7) enclosing an email they had sent on 13 December to Volvo Penta to similar effect and in which they indicated they intended to undertake metallurgical testing of the engine;

3. (4)
   The plaintiffs’ consideration of a proposal, referred to in Exhibit 7, to trade-in the Belle de Jour on the purchase of a new and more expensive vessel Muttihull Solicitors, with Mr Larsson acting as an intermediatiary to effect that sale;

3. (5)
   An offer of May 2013 by Mrs Dudney to sell the vessel to Mr Larsson (Exhibit 9); and

3. (6)
   Their extending the charter contract with Queensland Yacht Charters in November 2000, and, indeed, their subsequent extensions of that charter contract.

101. [101]
     In my view these matters are not decisive of the issue of whether I should order rescission. Indeed they are not in my view of great weight in the exercise of my discretion as to whether or not to order rescission. They do not amount to affirmation of the contract such as to disqualify them from now obtaining rescission. The claim on the insurance policy was made very soon after the engine failure of 3 November and before the plaintiffs were aware of the history of engine failures. The report of Mr Webster of 19 December (part of Exhibit 10) indicates that the plaintiffs, consistent with their evidence before me, were not at the time of making the claim aware of the prior engine failures. Upon being told of the true history, they then emailed their insurer on 26 November 2012 (Exhibit 10) and said they agreed that, based on “the actual facts”, the policy would not cover the damaged engine. They indicated they therefore had “decided to withdraw the claim”.

102. [102]
     Seen in that light it can readily be understood why I place no reliance on their initial claim for insurance in determining whether to order rescission.

103. [103]
     So too the letters to Fontaine Pajot (part of Exhibit 2) and to Volvo Penta (part of Exhibit 7) are, in my view, largely irrelevant. It is clear to me that the plaintiffs were actively seeking a commercial resolution of the problem they found themselves in, a problem not of their creation. Indeed, in the email to Volvo Penta, Mrs Dudney specifically says “we do not wish to take an adversarial approach to this issue”. That was consistent with my impression of them when giving their evidence. Mrs Dudney in particular impressed me as a careful and rational decision maker.

104. [104]
     It is also consistent with their attitude to Mr and Mrs Larsson when the Larssons visited them just before Christmas 2012. At that time an offer had been made by Mark Elkington, the proprietor of Multihold Solutions through Mr Larsson, to “trade-up” the “Belle de Jour” on a larger boat. One can see the advantage to the plaintiffs of such a solution, if it made sense commercially. It was in such circumstances that, in Exhibit 7, Mrs Dudney, in an email to both Steven Larkin and Mark Eltington, acknowledged receipt of “your proposal” and said the plaintiffs would discuss it with Mr Larsson “during the week”. That discussion took place at the pre-Christmas meeting to which I have referred. That the plaintiffs, despite their plight, were hospitable, even friendly, is not surprising. It does not cause me to doubt their evidence that they were then aware Mr Larsson had misrepresented the quality of the boat, or at least its engines to them in November 2011, or cause me to doubt that they believed Mr Larsson was responsible for those misrepresentations.

105. [105]
     Moreover, it does not cause me to conclude that anything said at that time caused the defendants to in any way act to their detriment or to reasonably conclude that the plaintiffs might not proceed with action against them.

106. [106]
     I accept the evidence of Mr Reintals that he had an earlier, somewhat angry phone call with Mr Larsson. This is consistent with Exhibit 20, an email written by Mr Larsson on 20 November 2012 to Mark Elkington, in which he said he had “just got away from a rather long conversation” with Mr Reintals. I accept Mrs Dudney overheard her husband talking to Mr Larsson at that time.

107. [107]
     The plaintiffs’ then solicitor wrote on 18 March 2013 to the defendants rescinding the contract (p 203-4 of Exhibit 1). The defendant’s solicitor’s letter rejecting that claim (p 204 of Exhibit 1) was written on 28 March. Importantly, for the purposes of present consideration, whilst denying any misrepresentation, referring to the exclusion clause, and to the fact that the boat had operated without problems for 12 months after its purchase by the plaintiffs, the defendants’ solicitors letter did not assert any conduct of the parties, between the engine failure on 3 November 2012 and the letter of 28 March, was in any way relevant to the issue of rescission.

108. [108]
     I do not think it was.

109. [109]
     Likewise I think the action of the plaintiffs in extending their charter agreement with QYC in November 2013, and subsequently, is of no relevance. The services provided, in circumstances where the boat has not in fact been used since 3 November 2012, involved no more than periodic maintenance by QYC. It does not mean the plaintiffs have actively used the boat for business or private purposes. It has produced no revenue. It was not inconsistent with a wish to rescind. It was, it seems to me, no more than a convenient way of maintaining the vessel to ensure rescission is now possible.

110. [110]
     Of greater interest is the question of whether restitution can now be achieved, having regard to the passage of time and its effect on the condition of the boat. It seems to me the decision whether to order rescission or not really comes down to consideration of whether it is now appropriate to make orders which effectively transfer the boat back to the defendants in 2017, almost six years after the sale by them, seen against a background of the defendants’ deliberate deception of the plaintiffs.

111. [111]
     I have said already, as is apparent, that up until November 2012 the plaintiffs could not reasonably have been aware of the inherent problem with the boat. At that time the engine failed. The failure was in the same place as the earlier engine failures. It was only on 25 March 2010 that the starboard engine had failed, that is, it was about two and a half years old when it failed. When it was sold it was only about one and a half years old. Those periods, I note, are not dissimilar to the period from 29 January 2008 to 25 March 2010 during which the second starboard engine operated (26 months) or from 29 January 2008 until 16 October 2009 (almost 21 months) when the second port engine operated. I conclude that the male plaintiff not only misrepresented the history of the engine problems, but could not have reasonably believed that when the vessel was sold, and more particularly when it was placed on the market in April 2011, the problem had been resolved. This is especially so when Mr Preen in his evidence spoke of the significant reduction in the chartering of the Belle de Jour in the 2011 financial year, namely 15 charters, compared to 26 in the 2009 financial year.

112. [112]
     At the trial there was a dispute about the current condition of the boat. The male defendant took a number of photos showing what he said was its dilapidated condition. I accept that the vessel, at the time of those photos, was in a somewhat visually dilapidated condition. I also accept that it has recently been the subject of some cyclone damage. But all of that is really only a veneer. It does not indicate to me any significant deterioration in its underlying condition. More recent photos indicate it has been significantly cleaned up. It’s significant that the defendants have not sought to prove by expert evidence any significant diminution of value if the vessel since its purchase. Mr Smith, called by the defendants, gave evidence of some damage to the propeller which he repaired in September 2012. He said that was likely to be from damage caused during a charter. I infer from all of the evidence that this is not uncommon in charter vessels. It is important to note however that the vessel was thereafter in use until 3 November, but has not been used since.

113. [113]
     A condition report on the Belle de Jour was prepared by Whitsunday Marine Surveyors for the defendants’ solicitors on 28 October 2016 (Exhibit 23). It concludes:

“General comments and conditions

The vessel was considered to be structurally sound and constructed to a good boat building standard.

The condition of the vessel was considered to be fair for its age and type of use. Remedial work would be required prior to commercial operations in class 4D hire and drive.” 

114. [114]
     The report then contains a summary of remedial work required, such costings not including GST. It is said that a list of items will be required to be rectified for the vessel to operate commercially in class 4D hire and drive and be suitable for hire by paying customers. The total cost of such items was said to be $16,260. That report was obtained by the defendants in October 2016, almost 12 months ago.

115. [115]
     In the circumstances it is my view that is appropriate to order rescission of the contract. In so determining I am significantly influenced by the fact that the defendants’ misrepresentations were clearly designed to induce the plaintiffs to purchase a vessel which Mr Larsson knew, or ought have strongly suspected, was likely to contain a significant fault which, based on his own experience, was extremely difficult to resolve. In my view that conduct was deliberately deceptive. It did induce the plaintiffs to purchase a boat at close to the asking price, a boat which, as Mr Brooks eloquently expressed in his letter of 18 May 2011 (Exhibit 17) would be seriously reduced in value. That deliberate deception strongly influences my decision, in circumstances where the boat is still in reasonably comparable condition, that rescission is the appropriate remedy. I do however propose to order that $20,000 be deducted from the sum the defendants are required to repay to the plaintiffs from the sale price to compensate them for rectification work that will be required to be undertaken. This sum essentially adopts the report of Whitsunday Marines Surveyors with some small increase to represent any further minor deterioration over time and the effects of some inflation since October 2016. I also note that in Munchies Management Pty Ltd v Belperio & Anor (1988) 58 FCR 274 the court said at p 289:

“By refusing to accept the return of the property involved in this sale, the respondents…elected to carry the risk of any devaluation of plant or business that might occur by allowing the business to be continued by the purchasers.”

Damages

116. [116]
     But for the misrepresentation by Mr Larsson and Mr Brooks, the plaintiffs would not have purchased the Belle de Jour. They are, in addition to rescission, entitled to damages arising from the purchase. I interpose that in my view loss of private use of the vessel, which is the subject of a claim by the plaintiffs, does not fall within the purview of such damages. If the contract had not been entered into, they would not have had the use of the vessel for private purposes.

117. [117]
     They claim the sum of $79,099 as their business losses. That sum is derived from consideration of the calculation of Peter Hood, their accountant (page 9 of Exhibit 1). His calculations were in turn taken from the tax returns he prepared and from worksheets prepared by Mrs Dudney. In essence, the figure is derived as follows:

Maintenance and service cost $154,344

Charter income $65,495

Gross loss $88,849

Less private useduring the 12 month $9,750

operation of the boat

Total$79,099

118. [118]
     The figure for private use in that table represents the plaintiffs’ use of the boat on 15 charter nights between November 2011 and November 2012, allowed at $650 per night. That figure accords with the evidence of Mr Preen about the cost of charter and with the plaintiffs’ evidence of the use of the boat. It should be so deducted.

119. [119]
     The calculation by Mr Hood was objected to at trial as being secondary evidence of a document. I admitted it on the basis that it was a summary by Mr Hood of what was contained in the financial records he and Mrs Dudney prepared in relation to the business. The real issue is whether items included in those figures are not an accurate representation of the actual vessel maintenance and service costs. Counsel for the defendants sought to cross-exam Mrs Dudney, who was responsible for preparation of the books for account, on the basis that it cost only $7,000-$8,000 to keep the vessel maintained in harbour when not in use. Whilst she agreed with that proposition, it does not cause me to doubt the accuracy of the accounts, other than in relation to some minor matters.

120. [120]
     I am satisfied as a result of cross examination that sum of $482.95 and $525.45 (total $1008.40) were not real expenses. The first was the cost of fuel during the plaintiffs’ private use of the boat. The latter was not supported by any invoice and was conceded as unproven by the plaintiffs’ counsel.

121. [121]
     I accept that Mrs Dudney’s acceptance of the suggestion that the real cost of keeping the vessel maintained when not in use was only $7000-$8000 fails to take into account periodic cleaning and anti-fouling. I generally accept the evidence called on behalf of the plaintiffs about the boat expenses and allow damages of $78,091.

122. [122]
     I have given consideration to the submission that damages, and interest, should not be allowed for the period of about a year between the first occasion when this matter was to be heard, and the eventual trial. The first trial was adjourned, by me, when the plaintiffs significantly amended their pleadings just before trial. I adjourned the matter and ordered they pay the defendants’ costs thrown away by reason of the adjournment on an indemnity basis.

123. [123]
     I have concluded however that it is appropriate the defendants do not get an amnesty from damages, or instead, over that period. In particular I am influenced in so concluding, by the fact they have had the use of the purchase price over the whole of the period since sale, including over that period, and by consideration of the fact that the plaintiffs loss arises from the significant misconduct of the defendants, and of Mr Brooks, who was their agent. By comparison, the 12 month delay arose merely because of mistakes by the plaintiffs, or their lawyers, in the timely enunciation of their case. The defendants misconduct was very significantly more egregious.

Orders

124. [124]
     Subject to submission on the form of the order, I will order that:

1. On 18 March 2013 the plaintiffs lawfully rescinded the contract of sale of the “Belle de Jour”.

2. On 30 October 2017 the plaintiffs, upon payment of the sums set out hereafter deliver to the defendants, the vessel, the “Belle de Jour”.

3. On that date the defendant pay to the plaintiffs:

1. (a)
   $340,000.

2. (b)
   Interest thereon from 17 November 2011 to date.

3. (c)
   $78,091 in damages.

4. (d)
   Interest thereon (at half the usual applicable rate) from 17 November 2011.