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Glascott v Mercedes-Benz Financial Services Australia Pty Ltd[2024] QDC 127

Glascott v Mercedes-Benz Financial Services Australia Pty Ltd[2024] QDC 127

DISTRICT COURT OF QUEENSLAND

CITATION:

Glascott & Anor v Mercedes-Benz Financial Services Australia Pty Ltd & Anor [2024] QDC 127

PARTIES:

JOHN ERNEST GLASCOTT AND MARYANNE RUTH GLASCOTT

(plaintiffs)

V

MERCEDES-BENZ FINANCIAL SERVICES AUSTRALIA PTY LTD A.C.N. 074 134 517

(first defendant)

and

MERCEDES-BENZ AUSTRALIA/PACIFIC PTY LTD A.C.N. 004 411 410

(second defendant)

FILE NO:

15/2016

DIVISION:

Civil

PROCEEDING:

Claim

ORIGINATING COURT:

Cairns

DELIVERED ON:

8 August 2024

DELIVERED AT:

Cairns

HEARING DATE:

23, 24 & 25 October 2023

JUDGE:

Morzone KC DCJ

ORDER:

  1. Judgment to the plaintiffs against the first defendant and second defendant on the claim in the amount of $59,073.81 plus interest pursuant to the Trade Practices Act 1974 (Cth) from 3 May 2014.
  2. Judgment to the first defendant against the plaintiffs on the counterclaim for possession of the car, with the car to be delivered up by the plaintiffs to the first defendant forthwith.
  3. Unless either party applies for a different costs order within 14 days of this judgment, I will also order that the defendants will pay the plaintiffs’ costs of the proceeding (including reserved costs) to be assessed on the standard basis.

CATCHWORDS:

CIVIL PROCEEDING – BREACH OF CONTRACT – BREACH CONSUMER LAW – NEGLIGENCE – whether financier breached implied terms that car was “new” – whether financier misrepresented that car was merchantable quality, roadworthy, safe and fit for purpose of road use – damages.

NEGLIGENCE – BREACH CONSUMER LAW – whether dealership negligently supplied car of unmerchantable quality, unroadworthy & unsafe – whether dealership misrepresented that car merchantable quality, roadworthy and safe to drive – damages.

LEGISLATION:

Civil Liability Act 2003 (Qld), ss 9, 11

Trade Practices Act 1974 (Cth) ss 52, 53, 71, 73

CASES:

Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) 178 FCR 57

Anderson v Scrutton [1934] SASR 10

Annand & Thompson Pty Ltd v Trade Practices Commission [1979] FLR 165

Arsalan v Rixon (2021) 274 CLR 606

Baltic Shipping Company v Dillon (1993) 176 CLR 344

Beneficial Finance Corp Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510 

BP Refinery Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 

Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185

Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 450

Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 and 354

Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588

David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, at 382

Evans v Balog [1976] 1 NSWLR 36 at 40

Gunnersen v Henwood [2011] VSC 440

HG v The Queen (1999) 197 CLR 414 at [44]

Hollis v A.B.E. Copiers Pty Ltd [1979] FLR 141

Hong Kong Fir Shipping Co Ltd v Kawasaki Kisen Kaisha Ltd [1962] 2 QB 26

Ku-ring-gai Council v Chan [2017] NSWCA 226

Lang v The Queen [2023] HCA 29

Nea Pty Ltd v Magenta Mining Pty Ltd [2005] WASC 106, particularly at paras [311] through [316]

Noosa Shire Council v JE Farr Pty Ltd [2001] QSC 60 at [87]

Oraka Pty Ltd & Anor v Leda Holdings Ltd (1997) ATPR 41-558

Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 

Powercor Australia Ltd v Thomas (2012) 43 VR 220

Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370 at 378

Qantas Airways ltd v Aravco Ltd (1996) 136 ALR 510

Qantas Airways Ltd v Christie (1998) 193 CLR 280

Roadshow Entertainment Pty Ltd v ACN 053 006 269 Pty Ltd (Receiver & Manager Appointed) (1997) 42 NSWLR 462 

Rowland v Divall [1923] 2 KB 500

Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 5) [2019] QSC 210

Talacko v Talacko (2021) 272 CLR 478

UI International Pty Ltd v Interworks Architects Pty Ltd [2008] 2 Qd R 158

Wilcox v Richardson (1997) 43 NSWLR 4 

Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515

COUNSEL:

J Jacobs for the Plaintiffs

M Jonsson KC for the First and Second Defendants

SOLICITORS:

WGC Lawyers for the Plaintiffs

Thynne + Macartney for the First and Second Defendants

Summary

  1. [1]
    The plaintiffs lost confidence in the safety of a Mercedes-Benz ML350, which they acquired under an Asset/Hire Purchase Agreement made on 2 December 2010, after it dangerously applied its own brakes, causing it to veer or stop abruptly without any apparent hazard between March 2011 and May 2014. This happened seven times without driver command, under various conditions and locations. The unpredictable brake behaviour persisted despite multiple attempts to diagnose and fix the issue. The car has been stored without use since 3 May 2014. The plaintiffs now sue the first defendant financier and the second defendant car dealer for damages, arguing that the car, delivered with an odometer reading of 5,744 km, was not "new" and its spontaneous braking rendered it of unmerchantable quality, unsafe, and unroadworthy.
  2. [2]
    I accept the plaintiffs as both truthful and reliable witnesses, and I prefer the expert engineering evidence of Mr Sizer over Dr Casey and find in favour of the plaintiffs on all issues.
  3. [3]
    The car was contracted under a Hire Purchase Agreement to be supplied as "new" with an odometer reading of 10 km. The agreement included implied terms that the car was of merchantable quality, roadworthy, safe to drive, and reasonably fit for the purpose supplied by operation of common law and pursuant to s 71(1) and (2) of the Trade Practices Act 1974 (Cth), as then in force.
  4. [4]
    As to the representations arising out of the agreement, it seems to me that the argument is circular and of little utility, having regard to my findings that the agreement contained express and implied terms to the same effect. I am unable to otherwise discern from the evidence any other reliance and inducement on the part of the plaintiffs, apart from the verbal utterances of Mr Tapp comparing the new and demonstrator cars, leading to the plaintiffs accepting the deal for the supply and finance of the car in terms of the hire/purchase agreement.
  5. [5]
    In breach of the express term of the Hire Purchase Agreement, the car supplied to the plaintiffs was not new, nor had it travelled only 10 km, but instead was a demonstrator with an odometer reading of 5,744 km. Further, in breach of the implied terms of the Hire Purchase Agreement, the car was so defective that it was not safe and not roadworthy, and therefore not of merchantable quality or fit for the purpose supplied of driving on public roads from 3 May 2014. Therefore, the first and/or second defendants are jointly and severally liable to the plaintiffs for any loss or damage caused by the breach of the Hire Purchase Agreement pursuant to s 73 of the Trade Practices Act 1974 (Cth), then in force.
  6. [6]
    I do not accept that there was a total failure of consideration since the plaintiffs enjoyed some benefit of the car under the hire arrangement between the parties from December 2011 to May 2014.  I have also concluded that the second defendant is not negligent as contended. Even though it is arguable that it negligently supplied a car that was not new and had done more than 10 km, it was not otherwise in breach of any duty to cause the harm claimed.
  7. [7]
    The measure of damages for the breaches found should compensate for the plaintiffs' losses resulting from the breach being the use and enjoyment of the car in its defective state since 3 May 2014. Therefore, I assess damages accordingly and give judgment to the plaintiffs in the amount of $59,073.81 plus interest pursuant to the Trade Practices Act 1974 (Cth), being the difference of the total payments made under the agreement and payments made from 20 December 2011 to 3 May 2014, being 29 x $2,065.97 per month. The plaintiffs will be relieved from any further payments under the agreement.
  8. [8]
    As to the defendants’ counterclaim, I have concluded that whilst the first defendant terminated the Hire Purchase Agreement, it is not entitled to claim for the unpaid money under the agreement because the relevant provisions that cut across the plaintiffs’ rights under the Trade Practices Act 1974 (Cth) are void by virtue of s 68 of that Act. Instead, the appropriate remedy is to allow the first defendant’s counterclaim for the plaintiffs' delivery of the car to the first defendant.
  9. [9]
    I will hear the parties on the terms of final orders, including costs, which ought to follow the event unless a different order is sought by either party within 14 days of this judgment.

Issues

  1. [10]
    The determinative issues in the proceeding are:
    1. Is it a term of the Hire Purchase Agreement that the car was supplied as “new” with an odometer reading of 10 km?
    2. Is it a term of the Hire Purchase Agreement that the car was of merchantable quality, roadworthy, safe to drive and reasonably fit for the purpose supplied?
    3. Did the second defendant represent to the plaintiffs that the car was new, and of merchantable quality and/or fit for purpose?
    4. Was the car purportedly supplied under the contract not new, but instead a demonstrator with an odometer reading of 5,744 km in breach of the Hire Purchase Agreement?
    5. Was the car so defective that it was not of merchantable quality, fit for the purpose supplied, roadworthy, and safe to drive, in breach of the Hire Purchase Agreement?
    6. Is there a Total Failure of Consideration?
    7. Is the second defendant dealer negligent because the car was not of merchantable quality and/or not fit for purpose?
    8. Is the first and/or second defendants liable to the plaintiffs for any loss or damage caused by breach of the Hire Purchase Agreement?
    9. If the first and/or second defendants are in breach, what is the measure of damages?
    10. Are the plaintiffs liable to pay the first defendant for the amount due or return of the car on termination of the Hire Purchase Agreement?

Is it a term of the contract that the car was supplied as “new” with an odometer reading of 10 km?

  1. [11]
    The answer to this question is “Yes”. 
  2. [12]
    The plaintiffs made an Asset/Hire Purchase Agreement with the first defendant on 2 December 2010 to hire the car by paying 60 instalments of $2,065.97 from 2 January 2011, and an option to buy the car at the expiration of the 60 months term upon payment of the net balance due (balloon) of $45,100.00.  The total amount of $169,058.20 was payable by the plaintiffs, of which $124,827.81 was financed by the first defendant after the trade-in of another car.  The second defendant supplied the car through its dealership, which is identified in the contract as “MERCEDES-BENZ BRISBANE ACN 004411410”.
  3. [13]
    The plaintiffs rely upon that agreement to argue that they were buying a ‘new’ car with an odometer reading of “10” kilometres.  In contrast, the defendants maintain that the car was a demonstrator consistent with the odometer reading and that it was sold as a ‘demo’ according to the delivery invoice.  The first defendant abandoned its counterclaim for rectification at the trial. 
  4. [14]
    In the Asset/Hire Purchase Agreement the car was expressly described as:

Item 2 Car

Make:  MERCEDES-BENZ

X

   New  Glascott v Mercedes-Benz Financial Services Australia Pty Ltd [2024] QDC 127  Demo   Glascott v Mercedes-Benz Financial Services Australia Pty Ltd [2024] QDC 127  Used

Model:  ML 350 CDI SPORTS (4XC4) W164 09 UPGRA

Body Style:  4D WAGON

Compliance Date:  06/10

Registration No: 751RGW

Engine:  64294040962946

Odometer: 10   Colour: Silver

  1. [15]
    The car deal was completed without the plaintiffs seeing or test-driving the car in person. They first saw the car in person when it was delivered to them in Bangalow, New South Wales, on 20 December 2010.  But by then, the car’s odometer was more than 5,744 kilometres. 
  2. [16]
    It seems to me that the plaintiffs were not privy to any of these documents when the deal was concluded or later when the car was delivered, despite the safety certificate being ensconced in the glove box.  In that regard, I accept Dr Glascott’s testimony that he was unaware of the true odometer reading until about the middle of 2014.  His evidence is consistent with the fact that he was purchasing a new car.  He did not differentiate between the first and second defendants in their negotiations. Still, he appreciated that the second defendant was supplying a car under a hire purchase agreement with the first defendant. 
  3. [17]
    In order to find the implication of any term, the critical document is the Hire Purchase Agreement between the plaintiffs and the first defendant.  It seems to me that it was a condition of the agreement that the car was “new” with an odometer reading of 10 km as of the date of the agreement on 2 December 2010.  The check “X” mark against the description “new” only (with no mark against “demo” and “used”), the odometer reading and compliance plate requirements connote a new car that had been driven for 10 km and that complied with Australian requirements as of June 2010.  And that the car was not a “demo”, connoting a car available for test driving by customers, nor a “used” car, connoting a second-hand or pre-owned car.[1] 
  4. [18]
    It matters not that the car travelled some relatively small distance to effect delivery to the plaintiffs.  Even though the car would have travelled some small distance from the date of the agreement to the date of delivery and handover, the critical date was the date of the agreement. 
  5. [19]
    I find that the car agreed to be supplied under the agreement was to be “new” with an odometer reading of 10 km. 

Is it a term of the contract that the car was of merchantable quality, roadworthy, safe to drive and reasonably fit for the purpose supplied?

  1. [20]
    The plaintiffs assert that it is an implied term of the agreement that “the vehicle was of merchantable quality, roadworthy, safe to drive and reasonably fit for the purpose supplied” to give the agreement business efficacy or by operation of law pursuant to s 71(1) and (2) of the Trade Practices Act 1974 (Cth).
  2. [21]
    The defendants contend that there is no room for any implication because the agreement expressly stipulated that, aside from a standard new car warranty, the plaintiffs purchased the car 'as is', with no promises regarding its condition, merchantability, suitability, or fitness for any specific purpose in reliance upon clauses 4.2, 11.1(a) and 11.2.

Implied Term by Common Law

  1. [22]
    The implication of any term is a question of law.  The five strict requirements govern factual implications in formal contracts: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.[2]  These turn on the construction of the agreement in the factual matrix in this case, but the parties’ subjective intentions or negotiations are not admissible to imply a term.[3]
  2. [23]
    The nature of the agreement was an Asset/Hire Purchase Agreement to hire the car for 5 years subject to monthly payments, followed by an option to buy the car for a balloon payment, or return it to the financier.  Critically, the agreement relates to a “vehicle” as particularly described in section 2 (set out above).  It was for a new Mercedes-Benz model ML350 CDI Sports wagon that had travelled 10 km at that date of the agreement and is both compliant and registered under Queensland law. 
  3. [24]
    Both parties intended that the car be both registrable and insurable as part of the plaintiffs’ mutual obligations to retain possession under the agreement. 
  4. [25]
    Clause 1 required the plaintiffs to register and maintain such registration with compulsory third party insurance, as follows:

“1.  REGISTRATION AND COMPULSORY THIRD PARTY INSURANCE

I will register and take out compulsory third party insurance and maintain such registration and insurance on the car at all relevant times during the Agreement Term.”

  1. [26]
    And by Clause 2 the plaintiffs were required to take out, maintain and renew comprehensive insurance, including for the benefit of the first defendant, by noting its financial interest in the car, as follows:

“2.  COMPREHENSIVE INSURANCE

2.1  I will insure the car:

(a) comprehensively against fire, theft and collision cover; and

(b)  against public liability for such an amount as you reasonably require.

2.2  I will maintain and renew that insurance with an insurer acceptable to you noting your interest as owner on the policy and I will provide you with annual written confirmation of that insurance upon renewal.”

  1. [27]
    By Clause 3, both parties also intended that the car be properly maintained, serviced and not used in violation of the law or the comprehensive insurance as part of the plaintiffs’ mutual obligations to retain possession under the agreement:

“3. OPERATION

3.1 I will

(a) ensure that the vehicle is properly maintained and serviced by qualified personnel according to manufacturer’s requirements;  …

3.2 I will not: …

(b) use or let anyone use the vehicle in any way that violates the law or the terms of [the plaintiffs’] insurance policy. …” 

  1. [28]
    A breach by the plaintiffs of these mutual obligations would constitute an event of default under clause 6, which, if left unremedied for 14 days, would render them liable for termination and loss of possession of the car.  Clause 6 relevantly provides:

“6.1 Events of default

I will be in default if:

(a)  I fail to pay any amount or fail to do anything required of me under the Agreement, or any other loan, lease, hire or like finance facility provided to me by you;

…

(d)   any insurance on the vehicle is cancelled …).

6.2 Your rights

If I default and where the default is capable of remedy, I fail to rectify that default within 14 days of notice from you, you may terminate this Agreement by:

(a)  notice to me in writing; or

(b)  repossessing the vehicle (and, unless prohibited by any relevant law, I authorise you to enter any property or premises for that purpose).

6.3 Return of vehicle

If the Agreement is terminated I must return the vehicle to you immediately if you are not already in possession.”

  1. [29]
    It is true, as contended by the defendants, that Clause 4 of the agreement provided for a warranty by the manufacturer and an acknowledgment that the car will be purchased “as is” and absent any promise regarding the car’s condition, merchantability, suitability, or fitness for a particular purpose.  Clause 4 is in these terms:

“4. WARRANTY

4.1  If the car is new, it is covered by a standard new car warranty from the manufacturer. If the car is used, it is covered by any statutory warranties.

4.2  I am purchasing the car from you “as is” and understand that you do not make any promises as to the car’s condition, merchantability, suitability, or fitness for a particular purpose.

4.3  If the car is lost or damaged, I will advise you immediately in writing.”

  1. [30]
    However, I do not accept the first defendant’s contention that this means that there is no room to imply the term sought by the plaintiffs.  In my opinion, proper construction of the agreement does permit the implication of terms to the extent permitted by law but not otherwise.
  2. [31]
    It seems to me that Clause 4.2 regarding the ‘purchasing the car from you “as is”’ without any promises, must be read with clause 5, which governs the election and timing of that prospective purchase as follows:

“5. RIGHT TO PURCHASE

5.1  By payment of the first instalment under this Agreement I elect to become the owner of the vehicle.

5.2  You agree that the purchase will be complete when I pay you the Net Balance Due.”

  1. [32]
    Consistently, under clause 10.1 of the agreement, the plaintiffs acknowledged that (subject to their contingent right under clause 5 to purchase the car) the car would at all times be and remain the property of the first defendant.  Clause 10 is in these terms:

“10. TITLE

10.1 I acknowledge (subject to clause 5) that the vehicle will at all times remain your property.

10.2 You agree that I may assign my rights, title and interests under this Agreement providing I have your consent.  This consent must not be unreasonably withheld.”

  1. [33]
    So, while the plaintiffs became bound by their election to purchase upon payment of the First Instalment due on 2 January 2011, the purchase remained incomplete and conditional upon their payment of the Net Balance Due, which is the final balloon payment of $45,100.00 due at the expiration of the 60-month hire period.  It is at this time, that they would own the car “as is” without any promise by virtue of clause 5.  Before then, they were the mere hirer of the car and the first defendant remained the owner during that hire period.   The first defendant owner was obliged to supply the new (not demonstrator or used) Mercedes-Benz ML350 CDI Sports Wagon that complied with and was registered under Queensland law, to the plaintiffs for their lawful, safe and reliable motoring on public roads, subject to their mutual obligations to pay the hire instalments (and balloon),  keep the car registered, comprehensively insured (for the first defendant as owner), properly maintained and serviced, and not violating the law.
  2. [34]
    It is in this contractual context that clause 11 of the agreement permits the implication of terms to the extent permitted by law but not otherwise, as follows:

“11. EXCLUSIONS

I acknowledge that:

11.1 To the extent permitted by law:

(a)  all terms other than express terms which may be implied into this Agreement do not apply to this Agreement;

(b)  all conditions and warranties relating to the car are negatived and excluded; and

(c) ….

11.2 No representation, warranty or undertaking has been given to me in relation to this Agreement.

11.3 Your liability for breach of any condition or warranty which cannot be excluded is (where permitted by law) limited to:

(a) replacement or payment for replacement of an equivalent car;

(b)  supply or payment for supply of an equivalent car; or

(c)  repair or payment for repair of the car.”

  1. [35]
    I have concluded that an implied term that the vehicle was of merchantable quality, roadworthy, safe to drive and reasonably fit for the purpose supplied for use on public roads was permitted by law, as follows.
  2. [36]
    It seems to me that for the parties to comply with their mutual obligations and rights under the agreement, it would be reasonable and equitable between the parties to imply the term sought that the vehicle was of merchantable quality, roadworthy, safe to drive and reasonably fit for the purpose supplied.  Conversely, in my view, such an implied term is not unreasonable or inequitable.
  3. [37]
    But the fact that it appears reasonable to imply a term is insufficient.  The term must also be necessary to make the contract effective in a business sense. 
  4. [38]
    The plaintiffs rely upon the analogous case of Charterhouse Credit Co. Ltd v Tolly [1963] 2 QB 683. In that case, the hirer entered into a hire-purchase agreement for the supply of a car, which turned out to be seriously defective and unsafe. The hirer failed to pay any instalments, leading the finance company to terminate the agreement, repossess and sell the car, and sue for the balance of the hiring charges. The hirer counter-claimed for damages for breach of contract.  Clause 5 of the agreement stated, “the [finance company] do not supply the vehicle with or subject to any warranties or conditions either express or implied by statute.” The Court of Appeal held that the finance company could recover damages only for breaches that had already occurred by the date of termination and that the defects in the car were a breach of the implied term at common law to supply a roadworthy vehicle. On the hirer’s claim, the court found that the breach of the implied term constituted a fundamental breach of contract. Although not relevant for present purposes, the court held that the exemption clause was ineffective in excusing the finance company from a fundamental breach of contract.  The court further held that the measure of damages for the hirer was based on the general principle of restitutio in integrum, being the reimbursement to the hirer of all money paid or payable in respect of the car, less a deduction for the use of the car. These damages comprised the amounts paid to the finance company and the damages payable by the hirer to the finance company on its claim.
  5. [39]
    In this case, in light of the matrix of facts in which the hire/purchase agreement was made and expected to operate, I cannot see how the agreement is commercially effective without the term; indeed, it would be unworkable without it.  Here, it is necessary because, unless the term is implied, the enjoyment of the rights conferred by the contract would or could be rendered nugatory, worthless, and seriously undermined.[4]  Therefore, the term is necessary to make the contract effective in a business sense.
  6. [40]
    The requirement that the term must be obvious must be considered objectively.  This means considering that if an "officious bystander" suggested the term, both parties would have regarded it so obvious that it went without saying. [5]  Regarding the mutual obligations in the agreement, I think the implied term was something, and if an officious bystander had asked whether that was the common intention of the parties the answer would have been, “Of course”.
  7. [41]
    For the term to be implied, it must also be capable of clear expression and be reasonably certain in its operation.  It is possible to see, from the arguments, that the term could be expressed variously, but the formulation proffered by the plaintiffs encapsulates the necessary implication.
  8. [42]
    The first defendant relies upon contradiction with clauses 4.2 and 11 regarding the purchase of the car “as is” without implied warranties.  However, as I discussed above, it seems to me that clause 4.2 relates to the condition of the car subject of the prospective purchase and not during the period of hire. Further, those warranties not otherwise permitted by law were excluded by clause 11.  In my view, on the proper construction of the agreement, the implied term sought is permitted by law and does not contradict any express term of an agreement but adds to it.  In those circumstances, it is unnecessary for me to deal with the plaintiffs’ further argument that those clauses are ineffective in the wake of misleading and deceptive representations in breach of s 52 of the Trade Practices Act 1974 (Cth).[6] 
  9. [43]
    Having satisfied all the requirements for the term's implication, I find that it was an implied term of the agreement that the vehicle was of merchantable quality, roadworthy, safe to drive and reasonably fit for the purpose supplied on public roads.  I proceed on this basis.

Implied condition by ss 71(1) & (2) of the Trade Practices Act 1974 (Cth)

  1. [44]
    Further, or alternatively, the plaintiffs rely upon the provision in ss 71(1) and (2) of the Trade Practices Act 1974 (Cth) for the implied conditions that the car supplied was of merchantable quality and that it was reasonably fit for the disclosed purpose of driving.
  2. [45]
    Section 71 of that Act provides for the statutory conditions as to the merchantable quality and the quality and fitness of goods supplied by a corporation to a consumer, in these terms:

“(1)  Where a corporation supplies (otherwise than by way of sale by auction or sale by competitive tender) goods to a consumer in the course of a business, there is an implied condition that the goods supplied under the contract for the supply of the goods are of merchantable quality, except that there is no such condition by virtue only of this section:

  1.  as regards defects specifically drawn to the consumer's attention before the contract is made; or
  1.  if the consumer examines the goods before the contract is made, as regards defects which that examination ought to reveal.
  1.  Where a corporation supplies (otherwise than by way of sale by auction or sale by competitive tender) goods to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation or to the person by whom any antecedent negotiations are conducted any particular purpose for which the goods are being acquired, there is an implied condition that the goods supplied under the contract for the supply of the goods are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him to rely, on the skill or judgment of the corporation or of that person.
  1.  Sub-sections (1) and (2) apply to a contract for the supply of goods made by a person who in the course of a business is acting as agent for a corporation as they apply to a contract for the supply of goods made by a corporation in the course of a business, except where that corporation is not supplying in the course of a business and either the consumer knows that fact or reasonable steps are taken to bring it to the notice of the consumer before the contract is made.”
  1. [46]
    These statutory rights cannot be excluded, restricted, or modified by contract, and the exceptions in s 71(1)(a) and (b) are not applicable here. The second defendant, the dealer, is the relevant supplier of the car in the course of their business, through the first defendant, linked credit provider, to the consumer plaintiffs under the agreement. 
  2. [47]
    For the analogous reasons discussed above, I also find that it was an implied condition of the agreement by law by operation of ss 71(1) and (2) of the Trade Practices Act 1974 (Cth) that the car was of merchantable quality and reasonably fit for the purpose for which it was supplied for of driving.

Did the first and/or second defendant represent to the plaintiffs that the car was new, and of merchantable quality and/or fit for purpose?

  1. [48]
    The plaintiffs also mount claims for misrepresentation by both the first and second defendants in relation to “written representations” contained in clause 2 of the agreement that the car was new and only travelled 10 km, and upon “implied representations” that the car was of merchantable quality, roadworthy, safe to drive and reasonably fit for the purpose supplied. 
  2. [49]
    As against the first defendant, they rely on this representation to plead negligent misrepresentation, misleading and deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth), false representations under s 53 of that Act and statutory warranties for financial services under s 74 of that Act. 
  3. [50]
    As against the second defendant, the plaintiffs rely upon the same representations (through the agency of the first defendant) as well as representations in the Order Form that the car was new (through the agency of the Mr Tapp), to plead negligent misrepresentation, false representations under s 53 of that Act and misleading and deceptive conduct under s 52 of that Act.
  4. [51]
    Dr Glascott made no distinction between the first and second defendants as financier/hirer and dealer, respectively.  He was dealing with Mr Tapp in respect of the car and the finance agreement.  Mr Tapp was employed by the Supplier in the position of Senior Sales Executive and conducted negotiations with the Plaintiffs from November 2010, and he delivered the car to the plaintiffs on or about 21 December 2010 at 2 Tinderbox Road at Bangalow in New South Wales.
  5. [52]
    Dr Glascott testified about the circumstances of entering into the agreement in reliance on the discussions with Mr Tapp without seeing or test driving the car, as follows:

“Did you discuss the issue of price with Mr Tapp in relation to both the demonstration vehicle and a new vehicle?--We did.

And what did Mr Tapp say to you about the prices in terms of the cost of the vehicle and the monthly repayments for the vehicle, if it was new or a demonstrator?--The demonstrator vehicle base price that he quoted was $80,818. And the repayments for that, the monthly repayments, would have been $2,013, roughly.

And for the new vehicle?--And for the new vehicle, the price had increased to $82,000 and something - less than $82,100, but only just.  And the repayments had increased to $2,065 and some cents, per month.

Yes.  So as a result of the cost difference between the two vehicles, what did you and Mary Ann decide to do?--We decided that the difference in price didn’t warrant buying second-hand cars, and that we would buy new cars.

…  And you see  there’s … an email message there?--Yes.

What can you tell us about the message sent at 6.07 pm on the 19th of November 2010?--The proposal that is talked about there was the inclusion of a tow bar, a roof rack and a boot liner for the ML - the new ML50 - 350, which Chris Tapp said he could do for no extra cost, if we bought two new vehicles from him.

Did you proceed then, Dr Glascott, with the purchase of two vehicles from Mercedes-Benz?--I’m sorry?

Did you then proceed to place an order for two vehicles?--Yes, we did.

And what sort of vehicles did you place an order for?--I’m sorry, again?

What kind?  Was it a new or a demonstration?--New.

… You see that document is described, Mercedes-Benz Financial Asset Hire Purchase Agreement?--Yes.

Look at the bottom of that page; do you see your signature appearing anywhere there?--Yes.

And is that below the heading Signatures and then is that the first signature yours?--Yeah.  The first one, the top one is my signature.

And the second signature beneath that, do you recognise that?--Yes.

Whose is it?--That’s Mary Ann’s.

Right.  Tell us about this.  When did you receive this document?--It was sent by email to our address in Oak Beach on the 29th of November 2010.

And when you received that, what did you do with it?--We - we signed it and I - I couldn’t scan, so we emailed the signed document back to Mercedes-Benz Brisbane.

Now, could I ask you to look at the first column, under the heading Item 2 Vehicle; do you see that?  It refers to the vehicle being traded in?--Trade - trade in, yes.

Item 3; do you see that?--Yes.

The vehicle that is being traded in is described as a 2001 year model; is that correct?--No.  It was a 2007 model.

When you and - when - did you sign that document on that day, which is the 19th of November?--The 29th …? Yep.  We did.

Did Mary Ann sign it at the same time?--She did.

Was it witnessed by anyone?--Not in Oak Beach, no.

And then you sent it back to Mercedes-Benz?--Yes.

Did you receive from Mercedes-Benz subsequently a signed copy?--Yes.

When did you receive that?--On the 1st of December 2010.

Or thereabouts?--It wasn’t the day before, because it was my birthday.  And we decided we were going to not do anything, apart from have a birthday.

All right.  Dr Glascott, do you see from that document as well, in item 2, a description of the vehicle as an ML350 CDI sports four by four?--Yes.

Is that the correct description for this vehicle?—Yes”.

  1. [53]
    While the plaintiffs received and signed the agreement, they were not privy to the Order Form at the time of the deal. Dr Glascott first saw that document during the disclosure stage of this proceeding.
  2. [54]
    As to the representations arising out of the agreement, it seems to me that the argument is circular and of little utility, having regard to my findings that the agreement contained express and implied terms to the same effect.  I am unable to otherwise discern from the evidence and other reliance and inducement on the part of the plaintiffs, apart from the verbal utterances of Mr Tapp comparing the new and demonstrator cars, leading to the plaintiffs accepting the deal for the supply and finance of the car in terms of the hire/purchase agreement.
  3. [55]
    In these circumstances, it is unnecessary to further consider the misrepresentation claim.

Was the car purportedly supplied under the contract not new, but instead a demonstrator with an odometer reading of 5,744 km in breach of the hire purchase agreement?

  1. [56]
    The answer is “yes”. 
  2. [57]
    It is common ground that the car supplied to the plaintiffs was not new but, in fact, a dealership demonstrator car with an odometer reading of more than 5,744 km.  This is consistent with the safety certificate, which predated the sale, certified the odometer reading as 5,744 km on 25 November 2010.  That breached the express term of the agreement.

Was the car so defective that it was not of merchantable quality, fit for the purpose supplied, roadworthy, or safe to drive, in breach of the Hire Purchase Agreement?

  1. [58]
    Again, I answer this “yes”; in breach of the terms implied by common law and statute.
  2. [59]
    Between March 2011 and May 2014, the car had seven hazardous incidents of uncommanded autonomous braking. In each incident, the car manifested unpredictable, uncontrolled braking behaviour without any driver intervention or detectable impending external danger.  Multiple attempts to replace the brake sensory system in response to each event have failed to sustain a safe and reliable rectification. Experts have not identified the root cause of the car’s intolerable manifestly unsafe behaviour.

First Incident - In late March or early April 2011

  1. [60]
    In late March or early April 2011, the car brakes locked up, causing the car to veer to the left and collide with a garbage bin and a light pole while traveling at about 10 kph, with no apparent hazard in front of the car.
  2. [61]
    Dr Glascott recollects the first incident involving the brakes of the ML350 occurring at the end of March or the beginning of April in 2011.  He was approaching his surgery in Byron Bay around 8:00 am on a morning when the weather was fine, though the road was wet from overnight rain. As he neared the parking area on the left side of the road, the car suddenly emitted a loud screeching noise. The brakes locked up without his applying them, causing the car to veer to the left and collide with a garbage bin and a power pole. Dr Glascott estimated his speed to be approximately 10 kms per hour at the time of the incident.  There were no hazards present that would have required braking. The incident resulted in damage to the car, which cost about $3,200 to repair. After the collision, Dr Glascott noticed three warning lights illuminated on the dashboard. These included the ESP (Electronic Stability Program) warning light, an orange exclamation mark indicating an issue with the brakes, and the ABS warning light signalling a failure in the anti-skid braking system.  A photograph taken by Dr Glascott on 28 May 2019 showed three constantly illuminated symbols on the dashboard.
  3. [62]
    Mrs Glascott also gave evidence about this incident in late March or April of 2011. She was a passenger in the car at the time. The car was being driven down to their surgery in Byron Bay around 8 o'clock in the morning when they started work. The road was wet, but it wasn’t raining.  She recounted that they had only a short distance to go when the car made a screeching noise, veered to the left, and hit a telegraph pole and a garbage bin. She noticed the triangle warning light on the dashboard from her position in the front passenger seat. The light was constant, not flashing.  There was no apparent hazard in front of the car before the collision.

Second Incident

  1. [63]
    A few days later, at Lennox Head, after leaving the insurance broker’s place and while travelling at approximately 40 kph, the car again jammed its brakes with no traffic around and no apparent hazard in front of the car, causing the car to veer to the left.
  2. [64]
    Dr Glascott testified about this incident a few days after the first. He had travelled with his wife as passenger to Lennox Head to show his insurance broker the damage. During the drive, the brakes jammed, and the car veered to the left in a 40 kilometre school zone. Dr Glascott heard a high-pitched screaming noise. The warning lights, like the previous incident, illuminated. There was no obvious hazard before the brakes were applied in front of the car.
  3. [65]
    Similarly, Mrs Glascott testified that she was passenger in the car again when they drove down to show the insurance broker in Lennox Head. The weather was dry, and they were traveling fairly slowly.  The car made a screeching noise, the brakes locked, and it veered slightly to the left. She saw the same triangle warning light on the dashboard, which was constant.

Third Incident

  1. [66]
    After travelling another kilometre or so, while on the main street of Lennox Head, the car jammed its brakes again with traffic around but no apparent hazard in front of the car.
  2. [67]
    Dr Glascott testified after leaving the insurance broker's place, the brakes jammed again in the main street of Lennox Head.  This time, Dr Glascott forced the car into a bus stop to avoid traffic.  He had not applied the brake pedal before the incident; again, the braking was uncommanded. The warning lights remained constant again.  To get the car back home, roadside assistance advised reversing to release the brakes, which worked.  Dr Glascott then drove back using backroads to Bangalow and had the car towed to a Mercedes-Benz repair shop in Lismore. Again, there was no obvious hazard before the brakes were applied in front of the car.
  3. [68]
    Mrs Glascott also described how her husband managed to steer the car into a bus stop when it made the screeching noise again. She called roadside assistance on her phone and relayed the advice about reversing the car to Dr Glascott, which freed up the brakes. They took the back roads home to Bangalow, New South Wales. During the drive back, she saw that the warning light remained on.
  4. [69]
    After the plaintiffs notified the dealer of these three incidents, the car was towed to the dealership to deal with “intermittently brakes locking up”.  The car had only travelled about 7,403 km.  The worksheet for this first claim noted, “ESP inoperative caused by left hand rear wheel speed sensor internal fault”.  The left rear wheel speed sensor was removed and replaced under warranty.  The car was then returned for the plaintiffs’ continued use under the agreement.

Fourth Incident

  1. [70]
    But the car malfunctioned again on or about 26 July 2011, while driving to Byron Bay down a back street, the car braked itself when there was no apparent hazard in front of the car.
  2. [71]
    For this time, Dr Glascott testified that he and his wife were driving to Byron Bay, to his surgery, down a back street leading to Byron Bay. The brakes again applied themselves without human intervention. They heard a high-pitched screeching noise that lasted until the car stopped moving. Additionally, three warning lights appeared on the dashboard. After the car stopped, he reversed it, releasing the brakes, and they continued for the next kilometre or so to the surgery. He called roadside assistance, and they arranged for the car to be towed to Lismore for repairs.  He confirmed that there was no apparent hazard in front of the car when the brakes applied themselves, and he did not apply the brake pedal himself.
  3. [72]
    As for this time, Mrs Glascott recalled that they were driving to work just before 8 o'clock when the car made a screeching noise and came to a halt. Dr Glascott then reversed the car, freeing it up, and they continued on to the surgery. She noticed the triangle warning light on the dashboard. There was no apparent hazard in front of the car, and the weather was dry.
  4. [73]
    The car again needed to be towed to the dealer for repair. By this time the car had travelled about 10,464 km, The Claim 2 detail form noted: “Car towed in Brakes locking on and abs not working plugged into star and found codes for right wheel speed sensor to have electrical fault Tested sensor found to have open circuit (sic) plugged into star replaced sensor cleared codes road tested all ok”.  That right rear wheel speed sensor was removed and replaced under warranty.  The car was then returned for the plaintiffs’ continued use under the agreement.

Fifth Incident

  1. [74]
    The car again malfunctioned on or about March 2012 while travelling along Alinga/Kalinga Street in West Ballina in a 50 km/h zone when it braked again when there was no apparent hazard in front of the car, but the car did not deviate.
  2. [75]
    Dr Glascott spoke of this incident while travelling with his wife along Alinga Street or Kalinga Street in West Ballina in a 50 km/h zone.  The car brakes applied themselves spontaneously, accompanied by the screeching noise, but this time without any deviation in direction.  Similarly, during the March 2012 incident, there was no apparent hazard in front of the car. The road conditions were dry asphalt and reasonably flat.  He described how the car did not veer to the left or right before coming to a stop. The same three dashboard warning lights were displayed again, and the screeching sound was present. Dr Glascott then reversed the car, as there was no traffic around, releasing the brakes. He could travel slowly by a series of back roads back to his house in Bangalow.  Upon arriving home, he contacted roadside assistance again, and they arranged for the car to be towed to the repair place in Lismore.
  3. [76]
    Mrs Glascott also recalled this incident happening when the weather was dry and the road was asphalt. The car screeched and came to a halt, with the brakes locking on. She saw the constant triangle warning light on the dashboard. The car did not veer to the left or right on this occasion. Again, to her, there was no apparent hazard in front of the car before this happened.
  4. [77]
    The car again needed attention by the dealer for repair.  By this time the car had travelled about 14,089 km.  The Claim 3 form similarly details the problem as: “abs esp light on dash again Electrical fault in right rear wheel speed sensor Carry out all test according to tips checked wheel bearings link rods fitment of cable all ok replaced wheel speed sensor … asb esp lights on dash again electrical fault in rpm sensor right /// removed and replaced right sensor.”  The car was repaired by removal and replacement of both the left and right rear wheel speed sensors which was undertaken under warranty.  The car was again returned for the plaintiffs’ continued use under the agreement.

Sixth Incident

  1. [78]
    However, it faulted again in about July 2013.  It came to Dr Glascott's notice from his son, who parked the car outside Dr Glascott’s surgery. The next day, when it was driven into the parking area at the surgery, the brakes were locked on, and the steering was very heavy.
  2. [79]
    Dr Glascott was not in the car on this occasion; but received a phone call from his son.  He told his son to leave the car where it was, right outside the surgery, and to catch a taxi home.  The next day, Dr Glascott went down to the surgery early. He was with his son when it was driven through the gates into the parking area, a distance of about 30 feet, as his son could not access the gates without the key. The steering was extremely heavy during this short drive, and the brakes were locked on.  He again saw the three warning lights on the dashboard.  But by this time, there were no screeching sounds when he moved the car through the driveway.  He called roadside assistance again and arranged for the car to be transported to Lismore. 
  3. [80]
    Mrs Glascott accompanied Dr Glascott when he moved the car into the car park where a truck later picked it up.
  4. [81]
    The car again needed attention by the dealer for repair.  The Claim 5 details again focused on the sensors noting: “Brake malfuction (sic) steering heavy.. electrical failure of front wheel sensors. … Plugged into star found codes for front wheel sensors as per tips doc replaced sensors and brake pads sensor wiring cleared all codes.”  By this time the car had travelled about 27,452 km.  The repair undertaken under warranty again involved removing and replacing the left and right front wheel speed sensors, as well as removing and replacing the two front brake pad sensor wiring harnesses and brackets.  Again, the car was returned for the plaintiffs’ continued use under the agreement.

Seventh Incident

  1. [82]
    In about May 2014, while the car was being driven by Dr Glascott on Martin Street in Ballina in a 50 kph zone, the car brakes again with no apparent hazard in front of the car, but a following BMW avoided a collision with back of the car.
  2. [83]
    As to this time, Dr Glascott confirmed that he was driving along Martin Street in Ballina, in a 50 km/h zone, when the brakes applied themselves without his intervention. The weather conditions were dry and fine, and there was no apparent hazard in front of the car.  The brakes jammed on, and the screeching noise was present again. A car behind him almost ploughed into the back of his car. Maryanne was in the front passenger seat. After the BMW that was following him got around him, he reversed the car, which released the brakes.  He then drove the car again by back roads to his house in Bangalow. Following this incident, he wrote a further letter to Mercedes-Benz.
  3. [84]
    Mrs Glascott also spoke of this incident on Martin Street in Ballina. She testified that they were driving when she also heard a screeching noise and the brakes jammed on, and a close call with a following BMW.  She estimated that they were not travelling very fast at the time, but she was not sure of the exact speed.  She describes how Dr Glascott again reversed the car to free up the brakes and then took the back roads home.  She remembered seeing the triangle warning light come on during the incident. The weather was dry, and there was no apparent hazard in front of the car. 
  4. [85]
    Dr Glascott took the car to be repaired at Doyle Star Motors in Townsville. He transported the car there by road on the back of a truck. He explained that it took nearly a year to repair the car because he contacted numerous experts, including universities, police departments, and other specialists, to understand the problem, but many were reluctant to get involved due to potential legal implications.  After declaring the car’s problems to his insurance broker, he could not renew his insurance but instead arranged for enthusiasts' insurance, which covered the car for fire and other non-road use risks.  The ongoing defects in the car rendered the plaintiffs unable to comply with the obligation to obtain and maintain comprehensive insurance under clause 2 of the agreement.
  5. [86]
    In the absence of any resolution or any solution to the defect, the plaintiffs have not driven the ML350 on a public road since 3 May 2014.  The car was stored in a shed on his property at Oak Beach and was later transported by truck from Cairns back to Bangalow in New South Wales in April or May 2019, after selling the Oak Beach property.  When the car was delivered back to Bangalow, he drove it backwards about 20 metres into a carport and noticed that the warning lights were on, but the brakes were not locked, nor was there any screeching noise.  Initially, the car was stored in the carport, but it was later moved to another enclosed shed on his farm.  To keep the car in running order, Dr Glascott drove it on a circular driveway on his property approximately every two weeks, covering no more than 100 to 150 metres each time.  The car was then washed and parked back in the shed or carport. 
  6. [87]
    Dr Glascott recalled that he also prepared the car on multiple occasions over the years for Mercedes to pick it up, but each time, they cancelled at the last moment. This happened on at least three occasions.  The car remains in the possession of the plaintiffs.  And, in this proceeding, the first defendant “does not press” its counterclaim for delivery up of the car if a monetary judgment is awarded on the counterclaim.

Expert Evidence

  1. [88]
    Mr Geoffrey Sizer, an electrical engineer, provided a report dated 22 October 2018 and Dr Robert Casey, a mechanical engineer, provided a report dated 2 May 2019. Dr Casey inspected and drove the car.  Both experts have also contributed to a joint report and provided concurrent evidence during the trial.
  2. [89]
    Mr Sizer opines that it is likely factors other than spontaneous failure of the wheel rotation speed sensor that may be causing issues, including faults in the vehicle’s wiring, mechanical faults causing damage, or electrical system faults such as exposure to excessive voltage.  Regardless of the cause of the wheel rotation speed sensor failure, he considers it inappropriate for the supplier to deem the vehicle’s repeated braking malfunction rectified by simply replacing the failed sensors.  
  3. [90]
    Mr Sizer opined that it is highly likely that the ESP system and the braking system elements it controls or influences are responsible for the vehicle’s braking system malfunction.  The malfunction is most likely related to the ESP function, although ABS, ASR/ETS, or BAS functions could also be responsible.  He states the vehicle’s braking and/or ESP system is not fail-safe, as the failure of one or more components can lead to an unsafe condition. 
  4. [91]
    He asserts the wheel rotation speed sensor failure contributes to the malfunction but is not the root cause, which is likely a latent design defect in the vehicle’s braking and associated systems, specifically the ESP system and its functions, including the software. Intermittent faults in the vehicle’s wiring could cause the ESP system to receive erroneous wheel rotation speed sensor readings, leading to inappropriate actions based on these readings. Additionally, faulty or intermittent sensors connected to the ESP system, such as the yaw-rate sensor and its wiring, may also contribute to the braking system malfunction.
  5. [92]
    Mr Sizer settled on the view that the car's repeated malfunctions, despite the replacement of multiple wheel sensors, imply an underlying problem.  He also hypothesised about several possible causes of the sensor failures, including:
    1. Potential for the ABS or ESP to fail to correctly recognise and deal with wheel speed sensor failure. The intermittency or concurrency of sensor failure can potentially interact with software deficiencies or trigger software bugs, which could be present and not detected during system development, as the specific combination of faults that may occur in use was not foreseen by developers or applied to the system during developmental testing.
    2. A number of possible electrical faults, including spontaneous failure of the sensor’s integrated circuit sensing device; premature failure of the sensor’s integrated circuit sensing device due to weaknesses induced in it by a flawed manufacturing process; damage to the device caused by its power supply over-voltage or under-voltage; damage to the device caused by over-temperature or under-temperature conditions relative to the device’s ratings; excessive humidity relative to the device’s ratings; corrosion due to fluid ingress, leading to open or short circuits, or excessive leakage current between circuit elements; damage to the device caused by over-voltage transients on its power supply or signal interfaces; damage to the device caused by excessive knocks, shock or vibration, relative to the device’s ratings; an open circuit, short circuit or intermittent connection in the device’s internal circuitry or interface wiring connector; if the device is poorly designed, short circuit to vehicle battery rail or battery ground, on its power or signal interface connection.
    3. A wheel speed sensor could be damaged leading to erroneous operation for, example by mechanical damage to wheel rotation speed sense magnets; damage to wheel sensor electronics, e.g. due to over-voltage or spikes on power connection to the module; water ingress causing corrosion; and intermittent electrical connection caused by a loose, damaged or corroded connector.
  6. [93]
    The defendants are critical of Mr Sizer’s evidence as being impermissibly speculative by offering the various hypotheses as possible explanations for the incidents complained of, they speculated rather than offering a reasoned explanation of the likely causal mechanism in each case, or other evidence that might assist the Court to reach an affirmative conclusion as to the likely underlying cause.  In particular, they point to:
    1. Mr Sizer’s failure to inspect or test the car;
    2. The influence of the cited untested paper entitled ‘Functional Safety and Automotive’, presented by a Dr Schwarz in September 2012, which relates to the inapplicable standard ISO26262;
    3. His reliance on unidentified public domain information about technical requirements and design practices, including ‘design practices considered normal in the automotive industry’;
    4. He fails to use any clear or express reasoning to identify or link any defect to which he attributes the fault,[7] but instead, he hypothesises about some general ‘latent design fault’ using personal intuition or speculation.[8]
  7. [94]
    In these circumstances, the defendants argue, the exception to the hearsay rule is not enlivened and, therefore, the consequential evidence of Mr Sizer is inadmissible,[9] and the infected broader body of Mr Sizer should be disregarded.[10] 
  8. [95]
    As for the other criticism of Mr Sizer’s process of reasoning in reliance on extrinsic material, I do not accept the defendants’ contention that Mr Sizer is speculatively or intuitively asking the court to choose between two guesses or possibilities. Instead, it seems to me that he was not relying on this material as a mere exercise in speculation or intuition but rather to expose the extent of his global search and deductive reasoning in trying to narrow down any possible cause for the car’s problems. However, since there was no evidence to support the various hypotheses concerning the car's problems, his reference to such possibilities falls away.  And while Mr Sizer noted that, superficially, the car’s malfunction might appear to be caused by the failure of one or more wheel rotation speed sensors and that their replacement might have temporarily rectified the issue, the evidence shows that the car still had recurrent spontaneous braking behaviour despite those repairs.  Ultimately, Mr Sizer could not identify any specific faults responsible for the car’s failures, leading him to conclude that the car had an unknown, unapparent, and undiscoverable latent defect.
  9. [96]
    Given his efforts, Mr Sizer reasoned that further physical examination or testing would likely yield no valuable insights.  This was corroborated by Mr Casey’s testing, conducted about a decade after the reported malfunctions, which also provided no useful information.  Mr Sizer concluded that one or more deep-seated but unidentifiable, undiscovered, and inexplicable faults caused a clearly unusual sequence of abnormal and potentially fatal behaviours.  And while the anomalous behaviour remained inexplicably unresolved, he opined that the car is not roadworthy, not safe, and should not be registered.
  10. [97]
    Dr Casey did take the opportunity to inspect and drive the car on 10 April 2019 to look for faults and to confirm the correct operation of the ABS and ESP systems.  He did not find any fault, error, spurious signal or any anomalous behaviour.  Moreover, both the ABS and ESP systems functioned normally.  He said:

“In short, I could not find any fault with the brakes, the ABS system or the ESP system despite testing the vehicle across all types of speeds, across a wide range of brake intensity, in conditions conducive to skidding and in cornering and on slippery surfaces.  No faults were logged into the vehicle’s memory and the signals coming from the wheel speed sensors were normal and did not contain any spurious spikes or noise.  Moreover, when I intentionally forced the vehicle into scenarios where the ABS and ESP functionality ought to work, those systems worked and prevented the vehicle (and all of its wheels) from skidding. … Not only could I not find any fault with the vehicle’s brake systems, the brakes worked normally.  The scope of my testing and assessment is very wide, in my view it encompasses every reasonable step that can be taken to assess the vehicle.  Even so, no fault was detected.  As such, I conclude that currently, there is no fault in the vehicle’s ABS or ESP systems, or its brake system.”

  1. [98]
    Dr Casey asserts that replacing several wheel speed sensors and their cables, followed by an event-free period, indicates the car is fixed.  However, this reasoning seems inconsistent with the evidence of brake locking events and his own view that failures of the wheel speed sensors and their wiring would not cause the brakes to lock inadvertently.  Instead, he explained that such failures would disable the functionality of systems that use those sensors, including the ABS and ESP systems.  He explains that, from that time, the brakes would function as a normal mechanical brake system without ABS and ESP functionality. This is not what happened in the plaintiffs’ experience.
  2. [99]
    Dr Casey acknowledged that other systems can apply the brakes in response to perceived danger and that if one of these systems activated the brakes due to a detected hazard, they were functioning correctly, and this would not constitute a fault.  He considered that he had insufficient information to exclude other potential external factors that may have caused the car to malfunction, including a faulty wheel speed sensor, how the car was operated (including the use of brakes and steering), road conditions, rainy weather, or a combination of these elements.  Still, none have been demonstrated in the evidence, including in the dealer’s records regarding the multiple attempts to remedy the malfunction. I do not accept Dr Casey’s evidence.  The plaintiffs' evidence, which I accept, is that there was no mechanical driver braking and no other elements of impending danger, yet the car behaved as it did.  Nevertheless, Dr Casey acknowledged that the car was not safe to drive on the road but was not an authorised examiner to proffer an opinion of roadworthiness.
  3. [100]
    Despite their detailed analysis, neither expert could explain the car’s anomalous behaviour or find the root cause of the recurrent spontaneous brake activations despite replacing the wheel speed sensors.  Instead of performing as a safety system by design, the car’s braking system was abnormally unsafe due to its unpredictable, spontaneous brake activation without human intervention.   It seems to me that a deep-seated defect remains in the car, giving rise to an insoluble braking problem that renders the car dangerously unsafe and unroadworthy to drive.  The plaintiffs’ substantive expectation interest under the agreement was the use and enjoyment of the car to travel safely on public roads.  For so long as the car’s obviously defective behaviour is unresolved, it is not of merchantable quality or fit for its intended purpose of the plaintiffs’ lawful use on public roads. 
  4. [101]
    I am, therefore, bound to find that the car is so defective that it was not roadworthy and not safe to drive on public roads, and therefore, not of merchantable quality and not fit for the purpose supplied at least from 3 May 2014, when it was taken off the road.  That, it seems to me is a fundamental breach that goes to the heart of the agreement.

Is there a Total Failure of Consideration?

  1. [102]
    It is convenient that I shortly deal with this additional claim for a total failure of consideration.
  2. [103]
    It seems to me that this restitutionary claim will be foiled if the plaintiffs received any part of the agreed benefit.[11]  Unlike a simple car purchase where the party may be reimbursed the purchase price upon the return of a ‘lemon’, this is a hire/purchase contract, where the first defendant’s provided the car for hire for a charge payable by the plaintiffs, with the plaintiffs electing to buy and get title upon making the final payment.[12]
  3. [104]
    In the circumstances here, the Asset/Hire Purchase Agreement was committed to and performed as a hire arrangement between the parties from December 2011 to May 2014, before the first defendant gave notice of termination upon the plaintiffs’ failure to make the final payment.  Therefore, I do not accept the claim for a total failure of consideration.

Is the second defendant dealer negligent because the car was not of merchantable quality and/or not fit for purpose?

  1. [105]
    The plaintiffs also claim against the second defendant for negligently causing or occasioning pure economic loss in reliance upon ss 9 and 11 of the Civil Liability Act 2003 (Qld). 
  2. [106]
    On the contrary, the second defendant contends that the plaintiffs lacked the requisite vulnerability to ground a common law duty of care on the part of the second defendant to prevent economic loss because they possessed the capacity to negotiate and regulate their dealings under a contractual scheme or arrangement.  There is statutory protection included in the ‘linked credit provider’ provisions of the Trade Practices Act 1974 (Cth).
  3. [107]
    Sections 9 and 11 of the Civil Liability Act 2003 (Qld) are premised upon on the obligator owing a duty of care, but the Act is silent about the existence of such a duty of care.  By virtue of s 7(5), the Civil Liability Act 2003 (Qld) is not a code of the law relating to civil claims for damages for harm.  In those circumstances, it must first be established whether the first defendant owed a duty of care to the plaintiffs at common law.
  4. [108]
    It seems to me that the legislation does not disturb the requirement of considering the plaintiffs’ vulnerability to economic loss, coherence, and assumption of responsibility in determining whether a defendant has a duty of care to prevent pure economic loss.  
  5. [109]
    Whilst the mere circumstance that relevant parties had the capacity to negotiate and regulate their dealings under a contractual scheme or arrangement might ordinarily be sufficient to preclude the imposition of a common law duty of care,[13] that is not so clear here. 
  6. [110]
    In the contractual and statutory context in which the deal and finance agreement were made, the plaintiffs were disadvantaged by informational and geographical constraints and wholly reliant upon their dealings with Mr Tapp and the second defendant, the dealership.  
  7. [111]
    The records of the dealership variously described the vehicle and its odometer reading.  The safety certificate certified the odometer reading as 5,744 km on 25 November 2010.  In addition to an unsigned Order Form dated 19 November 2010 described the car as “New Motor Car”, although the “Price Level” was noted as “Demo”.  The “Order Form – New Motor Vehicle” refers to John Glascott as the “Customer” and “Purchaser” and the Second Defendant, as the “Seller” states in clause 5 that: “The Seller being unable to satisfy itself absolutely as to the accuracy of the odometer reading as being the distance travelled by the Purchase Vehicle, cannot and therefore does not, represent or warrant that the odometer reading accurately records such distance”.  But the Odometer section is left blank.  In the Tax Invoice addressed to the first defendant, the second defendant represents that the car is “new” with an “Odometer Reading (kms): 10”.  The settlement report also noted the Odometer Reading as “10”.  Another tax invoice addressed to Dr Glascott does not have any odometer reference but is headed “TAX INVOICE – DEMONSTRATOR” and for a “Mercedes-Benz ML 350 CDI AMG Sports Package”.
  8. [112]
    None of these were disclosed by Mr Tapp to the plaintiffs who negotiated the deal with Mr Tapp remotely without seeing or test-driving the car.
  9. [113]
    In my view of the evidence, the plaintiffs were vulnerable, lacked coherence and did not assume responsibility for the risk of dealing with the second defendant.  The plaintiffs would be 'vulnerable' in circumstances where they were unable to take measures to protect themselves against the relevant risk.  The car deal was completed electronically, remotely and without the plaintiffs seeing or test-driving the car in person.  They necessarily relied upon the information provided by the second defendant.  In the circumstances, the plaintiffs did not coherently distinguish between the defendant entities and were not fully capable of protecting themselves against the situation they now complain about regarding the second defendant dealership. This was due to the contractual allocation of relevant risks and protections to which they committed with the first defendant, the financier.  The plaintiffs were not privy to any of these documents when the deal was concluded or later when the car was delivered, despite the safety certificate being ensconced in the glove box.  They first saw the car in person when it was delivered to them in Bangalow, New South Wales, on 20 December 2010. But by then, the car’s odometer had more than 5,744 kilometres.  They did not learn of the car’s aged travel and braking problems until well after delivery.
  10. [114]
    These circumstances do ground a duty of care on the part of the second defendant to prevent the economic loss now claimed by the plaintiffs.  Therefore, issues of breach and causation must be considered.
  11. [115]
    Section 9 of the Civil Liability Act 2003 (Qld) militates against a breach of duty to take precautions of harm in these terms:

“9 General principles

  1.  A person does not breach a duty to take precautions against a risk of harm unless—
  1.  the risk was foreseeable (that is, it is a risk of which the person knew or ought reasonably to have known); and
  1.  the risk was not insignificant; and
  1.  in the circumstances, a reasonable person in the position of the person would have taken the precautions.
  1.  In deciding whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (among other relevant things)—
  1.  the probability that the harm would occur if care were not taken;
  1.  the likely seriousness of the harm;
  1.  the burden of taking precautions to avoid the risk of harm;
  1.  the social utility of the activity that creates the risk of harm.”
  1. [116]
    The plaintiffs assert that the second defendant is guilty of breaching the duty to take precautions against a risk of harm by supplying them with a vehicle that was unsafe to drive on a public road. 
  2. [117]
    I do not accept that such a breach is made out on my assessment of the evidence.  Whilst the risk of harm resulting from an unsafe car is significant, I think there is insufficient evidence as to the foreseeability of the risk and whether a reasonable person in the position of the second defendant would have taken any other precautions.  The second defendant’s records show that the car was maintained and serviced, and a safety certificate was issued.  There is no evidence that the symptoms of unpredictable brake behaviour manifested prior to the deal, or that there was any notice of such behaviour in that car’s model.  In those circumstances, I am not satisfied that the risk of harm was one that the second defendant knew or ought to have known at the time of the deal.  Further, I am not satisfied that a reasonable person would have taken any greater precautions than was done.  The unusual and mystical nature of the subject car’s defect bears out a low probability of harm if care were not taken, and the burden of taking precautions to avoid the risk of harm would be too great for a car dealership.
  3. [118]
    Further, the protection afforded to the plaintiffs by the agreement, and those contractual arrangements are also augmented by the additional protective schemes and the effect of legislation such as the Trade Practices Act 1974 (Cth). 
  4. [119]
    Therefore, I do not accept that the second defendant has breached the duty contended. Even though it is arguable that the second defendant negligently supplied a car that was not new and had done 10 km, this alone does not show that the car, being a demonstrator with an odometer reading of 5,744 km, caused harm due to being unsafe and unroadworthy.
  5. [120]
    Section 11(a) of the Civil Liability Act 2003 (Qld) provides for general principles of causation as follows:

“(1)  A decision that a breach of duty caused particular harm comprises the following elements -

  1.  the breach of duty was a necessary condition of the occurrence of the harm (factual causation);
  1.  it is appropriate for the scope of the liability of the person in breach to extend to the harm so caused (scope of liability).

…

  1.  For the purpose of deciding the scope of liability, the court is to consider (among other relevant things) whether or not and why responsibility for the harm should be imposed on the party who was in breach of the duty.”
  1. [121]
    In my view, the scope of liability for the harm complained of ought not fall to the responsibility of the second defendant in negligence.  Therefore, I must conclude that the plaintiffs’ claim against the second defendant in negligence fails.

Is the first and/or second defendants liable to the plaintiffs for any loss or damage?

  1. [122]
    The plaintiffs contend that the first and second defendants are jointly and severally liable pursuant to s 73(1)(b) of the former Trade Practices Act 1974 (Cth) because the first defendant is a “linked credit provider” within the meaning of s 73(14) in circumstances where the second defendant was the “Supplier” within the meaning of s 73(1)(a).
  2. [123]
    Section 73(1) of the Trade Practices Act 1974 (Cth) provides for liability for loss or damage from breach of contracts involving suppliers and linked credit providers as follows:

“(1)  Where:

  1.  a corporation (in this section referred to as the supplier) supplies goods, or causes goods to be supplied, to a linked credit provider of the supplier and a consumer enters into a contract with the linked credit provider for the provision of credit in respect of the supply by way of sale, lease, hire or hire purchase of the goods to the consumer; or
  1.  a consumer enters into a contract with a linked credit provider of a corporation (in this section also referred to as the supplier) for the provision of credit in respect of the supply by the supplier of goods or services, or goods and services, to the consumer;
  1.  and the consumer suffers loss or damage as a result of misrepresentation, breach of contract, or failure of consideration in relation to the contract, or as a result of a breach of a condition that is implied in the contract by virtue of section 70, 71 or 72 or of a warranty that is implied in the contract by virtue of section 74 of this Act or section 12ED of the Australian Securities and Investments Commission Act 2001, the supplier and the linked credit provider are, subject to this section, jointly and severally liable to the consumer for the amount of the loss or damage, and the consumer may recover that amount by action in accordance with this section in a court of competent jurisdiction.”
  1. [124]
    Section 73(14) provides the relevant definitions of "credit provider" and "linked credit provider" as follows:

“A “credit provider” means a corporation providing, or proposing to provide, in the course of a business carried on by the corporation, credit to consumers in relation to the acquisition of goods or services.

A “linked credit provider”, in relation to a supplier, means a credit provider:

  1.  with whom the supplier has a contract, arrangement or understanding relating to:
  1.  the supply to the supplier of goods in which the supplier deals;
  1.  the business carried on by the supplier of supplying goods or services; or
  1.  the provision to persons to whom goods or services are supplied by the supplier of credit in respect of payment for those goods or services;
  1.  to whom the supplier, by arrangement with the credit provider, regularly refers persons for the purpose of obtaining credit;
  1.  whose forms of contract or forms of application or offers for credit are, by arrangement with the credit provider, made available to persons by the supplier; or
  1.  with whom the supplier has a contract, arrangement or understanding under which contracts or applications or offers for credit from the credit provider may be signed by persons at the premises of the supplier.”
  1. [125]
    It is common ground that the first defendant is a company duly incorporated and capable of being sued and carried on the business of motor vehicle finance within the motor vehicle industry.
  2. [126]
    It is also common ground that the first defendant and the second defendant are each a “corporation”, as defined in s 4 and as that term is used in ss 52, 53 and 71 of the Trade Practices Act 1974 (Cth).  The first and second defendants had shared a common director, Horst Von Sanden, and a common shareholder Daimler Australia/Pacific Pty Ltd ACN 004 348 421.  It is plain that the second defendant is a “supplier” being the corporation that supplied the car, to the first defendant as a “linked credit provider” of the second defendant, and that the plaintiffs, as consumers, entered into the agreement with the first defendant for the provision of credit in respect of the supply of the car by way of hire or hire purchase of the goods to the consumer.
  3. [127]
    Given my findings above, the agreement was breached.  Firstly, it breached the express term of the agreement, because the car was not new, nor had it travelled only 10 km, secondly, it breached the implied term by common law, because the car is so defective that it was not of merchantable quality, not fit for the purpose supplied of driving on public roads, not roadworthy, and not safe to drive at least from 3 May 2014, and by the implied condition pursuant to s 71(1) and (2) of the Trade Practices Act 1974 (Cth) that it was not of merchantable quality and not fit for the purpose supplied of driving on public roads. 
  4. [128]
    Consequently, by virtue of s 73(1)(b) of the Trade Practices Act 1974 (Cth), the first and second defendants will be jointly and severally liable to the plaintiffs for the amount of the loss or damage as a result of those breaches of contract. 

If the first and/or second defendants are in breach, what is the measure of damages, if any, recoverable by the plaintiffs?

  1. [129]
    The plaintiffs seek $118,986.94 for damages, the difference between the amount payable under the Agreement, $169,058.20, and the unpaid amount of $50,071.26. The defendants assert that the plaintiffs have failed to prove that they have suffered any recoverable loss by not returning the car to the first defendant.
  2. [130]
    Unlike a simple breach of contract for the sale of goods, this underlying transaction is a hire purchase agreement.  By the terms of the agreement here, the plaintiffs’ substantive expectation interest under the contract was the use and enjoyment of the car to drive on public roads, and not merely the acquisition of the car as a mere object or asset for potential subsequent resale as an item of commerce. 
  3. [131]
    Because of this, the defendants argue that a more appropriate measure of damages is a reliance-based assessment measured by the plaintiffs’ wasted expenditure within the confines of the contract.[14] And it is argued that there is no such evidence before the court.  The defendants point to clause 7 of the contract, whereby the plaintiffs were entitled to return the vehicle to the first defendant, in which event the contract was deemed to terminate, with the plaintiffs merely remaining liable for the ‘Amount Due on Termination’. The ‘Amount Due on Termination’ is defined in clause 19(a) as being an amount of liquidated damages calculated by deducting from the total amount the best price reasonably obtainable for the car at the time it is returned to the first defendant less repossession, storage and disposal costs and the monies paid and other consideration provided by the plaintiffs.
  4. [132]
    I agree with the defendants that in relation to the breach of the express term of the contract, that the car would be new and only travelled 10 km, the plaintiffs’ damages are at best nominal since they cannot show that had they known of the true state of affairs, they would not have acted in the same way and with the same consequences, irrespective of the act or omission complained of. 
  5. [133]
    However, as to the breach of the implied terms, I do not accept the defendants’ argument that, having regard to the plaintiffs’ expectation interest, the appropriate measure of damages for the car’s braking malfunction is the rectification cost measure of damages,[15] akin to the tortious measure of damages.[16]
  6. [134]
    I have found that the deep-seated defect remains in the car, giving rise to an insoluble braking problem that renders the car dangerously unsafe and unroadworthy to drive.  The plaintiffs’ substantive expectation interest under the agreement was the use and enjoyment of the car to travel safely on public roads.  For so long as the car’s obviously defective behaviour is unresolved, it is not of merchantable quality or fit for its intended purpose of the plaintiffs’ lawful use on public roads.  That is the context that I concluded that the car is so defective that it was not roadworthy and not safe to drive on public roads, and therefore, not of merchantable quality and not fit for the purpose supplied at least from 3 May 2014, when it was taken off the road, that, it seems to me, is a fundamental breach that goes to the heart of the agreement.
  7. [135]
    The plaintiffs rely upon Charterhouse Credit Co. Ltd v Tolly [1963] 2 QB 683 and Farnworth Finance Facilities v Attryde [1970] 1 WLR 1053 to argue that the measure of damages for the hirer was based on the general principle of restitutio in integrum being the reimbursement to the hirer of all monies paid or payable in respect of the car less a deduction for the use of the car.  On this basis they seek $118,986.94 for damages, the difference between the amount payable under the Agreement, $169,058.20, and the unpaid amount of $50,071.26.
  8. [136]
    In Charterhouse Credit Co. Ltd v Tolly [1963] 2 QB 683, the hirer entered into a hire-purchase agreement for the supply of a car which turned out to be seriously defective and found to be unsafe. The hirer failed to pay any instalments and the finance company terminated the agreement, re-possessed and sold the car and sued for the balance of the hiring charges. The hirer counter-claimed in damages for breach of contract.  Clause 5 of the agreement provided that “the [finance company] do not supply the vehicle with or subject to any warranties or conditions either express or implied by statute”.  On the finance company’s claim, the Court of Appeal held that the finance company was able to recover damages only for such breaches as had already occurred at the date of termination and that the defects in the car were a breach of the implied term at common law to supply a roadworthy vehicle.  On the hirer’s claim, the court held that the breach of the implied term constituted a fundamental breach of contract.  Although not relevant for present purposes, the court held that the exemption clause was ineffective to excuse the finance company for a fundamental breach of contract.  The court further held that the measure of damages for the hirer was based on the general principle of restitutio in integrum being the reimbursement to the hirer of all moneys paid or payable in respect of the car less a deduction for the use of the car and those damages comprised the amounts paid to the finance company and the damages payable by the hirer to the finance company on its claim.
  9. [137]
    In Farnworth Finance Facilities v Attryde [1970] 1 WLR 1053, the hirer under a hire-purchase agreement (which contained the usual exclusion clauses) hired a new motorcycle which developed a series of defects some of which made its use on the road dangerous. The hirer ceased making payments under the hire-purchase agreement and the motorcycle was re-possessed and sold. By then, the hirer had the use of the vehicle for 4 months and had travelled 4,000 miles.  The finance company argued that the hirer had affirmed the contract by his use and payment of instalments.  The finance company sued the hirer for the balance of the hire-purchase price and the hirer counter-claimed for the money paid by him under the agreement.  The court held that the hire-purchase agreement was subject to an implied term that it would correspond with its description and be roadworthy. The series of defects amounted cumulatively to a fundamental breach of the contract in that the machine supplied was not safe for use on the road.  Further, the court held that the finance company could not rely on the exclusion clauses and that the hirer had not affirmed the contract but that his conduct had shown that he would affirm it only if the defects were remedied and that had not been done satisfactorily.  The court declined to reduce the damages awarded to the hirer for the use of the machine in view of the trouble sustained by the hirer during the period of hire which offset the value of any benefit he may have had of the use of the machine.
  10. [138]
    In the circumstances of this case, the plaintiffs made the hire payments in accordance with the agreement at the rate of $2,065.97 per month in arrears from 2 January 2011 until 1 October 2015.  They used and enjoyed the car for about 29 months from the delivery on 20 December 2011 to 3 May 2014, albeit with disrupted enjoyment due to the defective incidents, in accordance with the Hire Purchase Agreement.  They stored the car since 3 May 2014.
  11. [139]
    Dr Glascott acknowledged that the plaintiffs could have ended the agreement by delivering the car to the first defendant, who was obliged to credit them for the best price reasonably obtainable for the car at that time.  Dr Glascott insisted that the plaintiffs offered to pay the entire purchase price out but had stopped making payments under the agreement to put pressure on the defendants effectively to encourage resolution, not in affirmation of the contract.  And he says that he locked it up to prevent ‘Mercedes-Benz’ from selling it to another unsuspecting person who might experience further brake failures.  It seems to me that that remark was made in frustration, and did not reflect the plaintiffs’ attitude at the time when arrangements were made for the car to be collected but no one turned up.  He acknowledges that the car remains the property of the financier, the first defendant, until the final payment and upon the plaintiff’s election to buy the car. 
  12. [140]
    The plaintiffs did not make a timely final payment to acquire ownership of the car, and they do not want the car.   The first defendant still owns the car.  The plaintiffs have accepted that the agreement has been determined in the context of the first defendant’s fundamental breach of the agreement.
  13. [141]
    It seems to me that as a consequence of the first defendant’s fundamental breach of the Hire Purchase Contract, the plaintiffs have not had the use and enjoyment of the car in its defective state since 3 May 2014.  In these unusual circumstances, I think the measure of damages recoverable by the plaintiffs ought to be calculated as follows:

(a)Total payments made under the Agreement

$118,986.94

(b)Less payments made from 20 December 2011 to 3 May 2014 being 29 x $2,065.97 per month

-$59,913.13

______________________________

$59.073.81

  1. [142]
    Therefore, I assess damages accordingly and will give judgment to the plaintiffs in the amount of $59,073.81 plus interest pursuant to the Trade Practices Act 1974 (Cth).

Are the plaintiffs liable to pay the first defendant for the amount due or return the car on termination of the Hire Purchase Agreement?

  1. [143]
    Under the agreement, the plaintiffs agreed to pay to the first defendants 60 monthly instalments, each in the amount of $2,065.97, and the balloon payment of $45,100.00 due at the expiration of the agreed term. 
  2. [144]
    As a consequence of the matters discussed above, the plaintiffs did not make the two instalment payments on 2 November 2015 and 1 December 2015, respectively, and the final balloon on 2 December 2015.
  3. [145]
    Clause 6 of the agreement provided for events of default, as follows:

“6.  WHAT HAPPENS IF I DEFAULT?

6.1  Events of default

I will be in default if:

(a)  I fail to pay any amount or fail to do anything required of me under the Agreement, or any other loan, lease, hire or like finance facility provided to me by you;

…

6.2 Your rights

If I default and where the default is capable of remedy, I fail to rectify that default within 14 days of notice from you, you may terminate this Agreement by:

(a)  notice to me in writing; or

(b)  repossessing the vehicle (and, unless prohibited by any relevant law, I authorise you to enter any property or premises for that purpose).

6.3  Return of vehicle

If the Agreement is terminated I must return the vehicle to you immediately if you are not already in possession.”

  1. [146]
    Clause 9.5 provide for interest on overdue payments, as follows:

“9.5 Interest on overdue payments

I will pay interest on the final daily balance of any amount that is overdue for payment under this Agreement, calculated at the Overdue Rate from time to time, from the day it was due until I pay the overdue amount in full. This interest must be paid by the next scheduled payment date and in any event, if outstanding at that time, upon expiration of the Agreement Term.”

  1. [147]
    By virtue of clause 19(d), the “Overdue Rate” is the aggregate of 4% and the rate from time to time set under s 2 of the Penalty Interest Rates Act 1983 (Vic).
  2. [148]
    By its letter dated 5 January 2016, the first defendant demanded payment of the amount of $50,071.26 by 19 January 2016, and failing payment, the contract would be terminated and the car must be returned immediately. 
  3. [149]
    The plaintiffs failed to make that payment or return the car by 19 January 2016. 
  4. [150]
    So, on 1 April 2016, the first defendant gave notice of termination of the agreement.  At that time, it is argued, the first defendant enjoyed an accrued right to payment of the net balance due of $50,071.26, together with interest on that amount at the overdue rate pursuant to clauses 9.5 and 19. 
  5. [151]
    The first defendant relies upon the plaintiffs’ continuing obligation to pay without set off pursuant to clause 9.7 of the agreement, which provides:

“9.7 Payments in Full

My obligations to pay Instalments and all other monies and otherwise to perform my obligations under this Agreement will continue regardless of any defect in, or lack of performance of, the vehicle or any breakdown, damage to, or loss or destruction of the vehicle or any delay in delivery of the vehicle. I agree not to exercise or seek to exercise any right or claim to withhold instalments or other monies or any right or claim to any set off.”

  1. [152]
    In those circumstances, the first defendant asserts entitlement to judgment in the absence of any assertion and proof of any such discharge by the plaintiffs of the unpaid amounts claimed for by the first defendant. 
  2. [153]
    Whilst the plaintiffs admit that they failed to make the last payments as demanded and that the first defendant terminated the agreement, they dispute any default or the right to damages on termination.
  3. [154]
    In the absence of any resolution of any solution to the defect, the plaintiffs have not driven the ML350 on a public road since 3 May 2014.  The car was stored in a shed on Mr Glascott’s property at Oak Beach and was later transported by truck from Cairns back to Bangalow in New South Wales in April or May 2019, after selling the Oak Beach property.  When the car was delivered back to Bangalow, he drove it backwards about 20 metres into a carport and noticed that the warning lights were on, but the brakes were not locked, nor was there any screeching noise.  Initially, the car was stored in the carport, but it was later moved to another enclosed shed on his farm.  I do not accept that the plaintiffs have allowed the car to perish and deteriorate through non-use, and by the plaintiffs’ decision.  Whilst the storage of the car has had some deleterious impacts on the car, for example Dr Casey reported that the car had a pungent, musty smell, contained spiders and wasps nests and dead mice and showed damage in the engine bay, it seems to me that those matters are minor and largely superficial.  I do not accept that the car has suffered any significant deterioration.  I accept Dr Glascott’s evidence that to keep the car in running order, he drove it on a circular driveway on his property approximately every two weeks, covering no more than 100 to 150 metres each time.  The car was then washed and parked back in the shed or carport.  During cross examination, Dr Glascott rejected as “incorrect” the proposition as pleaded the defence that “the defendants have indicated, … pretty much the whole of the period that the vehicle’s been locked up in storage, they’ve stood ready to inspect the vehicle, to service it and to conduct any repairs that might be necessary in terms of your complaints concerning the braking system and wheel-speed sensors”.  The proposition, reflecting the pleading in the defence, is not supported by any evidence.  On the contrary, I prefer Dr Glascott’s evidence that he prepared the car on multiple occasions over the years for the defendants to pick it up, but each time, they cancelled at the last moment. This happened on at least three occasions. 
  4. [155]
    It seems to me that the first defendant has not been ready, willing and able to perform their obligations under the agreement.  By the time that the first defendant purported to terminate the agreement, it was in fundamental breach of the agreement from at least 3 May 2014.  The car remains in the plaintiffs’ possession but it is of no value and useless to them. 
  5. [156]
    A breach by a terminating party does not preclude termination unless it was so serious as to give the other party the right to terminate the performance of the contract,[17] or caused the event on which reliance is placed for the right of termination and thereby rely upon its own wrongful act.[18]  It seems to me that whilst the first defendant was not precluded from the right to terminate for default in payments, the remedy sought by the first defendant in reliance on clause 9.7 cuts across the plaintiffs’ rights under ss 71 and 73(1) of the Trade Practices Act 1974 (Cth). 
  6. [157]
    Section 68 of the Trade Practices Act 1974 (Cth) provides:

“68   Application of provisions not to be excluded or modified

  1.  Any term of a contract (including a term that is not set out in the contract but is incorporated in the contract by another term of the contract) that purports to exclude, restrict or modify or has the effect of excluding, restricting or modifying:
  1.  the application of all or any of the provisions of this Division;
  1.  the exercise of a right conferred by such a provision;
  1.  any liability of the corporation for breach of a condition or warranty implied by such a provision; or
  1.  the application of section 75A;

is void.

  1.  A term of a contract shall not be taken to exclude, restrict or modify the application of a provision of this Division or the application of section 75A unless the term does so expressly or is inconsistent with that provision or section.”
  1. [158]
    Section 68(1) of the Act would be rendered ineffective if it could be so easily circumvented by the mere use of clauses, as those relied upon by the first defendant, that effectively neutralise any claim under the implied provisions. The terms "exclude," "restrict," and "modify" are pivotal in understanding the legislative intent behind section 68(1).  Parliament’s use of these broad terms underscores the focus on the substantive effect of contract terms, rather than merely their wording. This approach considers whether the “effect” in any way "excluded," “restricted,” or “modified” the application of any provision of the Division or the liability of the corporation for a breach of a statutory warranty.[19]  Accordingly, s 68 ensures that a contract cannot entirely remove a party's ability to rely on statutory warranties and guarantees, impose conditions or limitations that would narrow the applicability of statutory rights and obligations, or alter the fundamental character of statutory rights and obligations to the detriment of the party entitled to those protections.
  2. [159]
    It seems to me that clause 9.7 of the agreement, by enforcing the plaintiffs to continue to pay, and otherwise bar any right or claim to any set-off, despite a defective car rendering it not of merchantable quality or not fit for purpose, is intolerably inconsistent with, and effectively excludes, restricts or modifies the defendants’ liability found for damages caused by breach of the implied condition by supplying the car that was not of merchantable quality or not fit for purpose.
  3. [160]
    Therefore, clause 9.7 and associated clauses of the agreement are void by virtue of s 68 of the Trade Practices Act.  The first defendant’s counter-claim on that basis for payment of money must fail.
  4. [161]
    Even if I am wrong, and the first defendant is entitled to the balance under the agreement of $50,071.26, then that money would also need to be accounted for in the measure of damages awarded to the plaintiffs under s 73 to make that judgment sum $109,145.07.  In that event, the net result would be the same as the judgment I propose.
  5. [162]
    In any event, since the first defendant still owns the car and is entitled to possession, the appropriate remedy is to allow the first defendant’s counterclaim for the delivery of the car by the plaintiffs to the first defendant.

Conclusion

  1. [163]
    For these reasons, I make the following orders:
  1. Judgment to the plaintiffs against the first defendant and second defendant on the claim in the amount of $59,073.81 plus interest pursuant to the Trade Practices Act 1974 (Cth) from 3 May 2014.
  2. Judgment to the first defendant against the plaintiffs on the counterclaim for possession of the car, with the car to be delivered up by the plaintiffs to the first defendant forthwith.
  1. Unless either party applies for a different costs order within 14 days of this judgment, I will also order that the defendants will pay the plaintiffs’ costs of the proceeding (including reserved costs) to be assessed on the standard basis.

Glascott v Mercedes-Benz Financial Services Australia Pty Ltd [2024] QDC 127 

Judge DP Morzone KC

Footnotes

[1]  Cf. Anderson v Scrutton [1934] SASR 10; Hollis v A.B.E. Copiers Pty Ltd [1979] FLR 141 and Annand & Thompson Pty Ltd v Trade Practices Commission [1979] FLR 165.

[2] BP Refinery Pty Ltd v Hastings Shire Council (1977) 180 CLR 266.

[3] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 & 354.

[4]  Cf. Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 450 per McHugh and Gummow JJ. See also Wilcox v Richardson (1997) 43 NSWLR 4 at 13-14 per Handley JA (Powell JA agreeing), CA; Qantas Airways Ltd v Christie (1998) 193 CLR 280 at 337;  per Kirby J (dissenting).

[5] Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337

[6]  Cf. Oraka Pty Ltd & Anor v Leda Holdings Ltd (1997) ATPR 41-558.

[7]  Cf. Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 at [37] and [42]; Lang v The Queen [2023] HCA 29, at paras [11] and [16].

[8]  Cf. Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588, at 605, para [42], HG v The Queen (1999) 197 CLR 414 at [44] per Gaudron J and Gunnersen v Henwood [2011] VSC 440 at [63].

[9] Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 at [115] per Heydon J;  Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 5) [2019] QSC 210 at [52] per Bond J (as he then was).

[10]  Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370, at 378.

[11] David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353, at 382; Baltic Shipping Company v Dillon (1993) 176 CLR 344, at 350-351, 377 and 383.

[12]  Cf. Baltic Shipping Company v Dillon (1993) 176 CLR 344 at 389, and Rowland v Divall [1923] 2 KB 500.

[13] Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 per Hayne and Kiefel JJ at [55], [58] & [59], and see French CJ at 193, para [3].  Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185 at [121] per Crennan, Bell and Keane JJ.  Compare Ku-ring- gai Council v Chan [2017] NSWCA 226 at [97] and Noosa Shire Council v JE Farr Pty Ltd [2001] QSC 60 at [87].

[14]  Comparably, for example, with Nea Pty Ltd v Magenta Mining Pty Ltd [2005] WASC 106, particularly at paras [311] through [316].

[15] UI International Pty Ltd v Interworks Architects Pty Ltd [2008] 2 Qd R 158, at [87] per Keane J (as he then was).

[16] Talacko v Talacko (2021) 272 CLR 478, at 496-497, para [45]; being a passage within the reasons of a unanimous bench of the High Court, which has since been cited with express approval by another unanimous bench in Arsalan v Rixon (2021) 274 CLR 606, at 619-620, para [18].  Compare Evans v Balog [1976] 1 NSWLR 36, at 40; and compare also Powercor Australia Ltd v Thomas (2012) 43 VR 220, at 227, paras [25] to [27].

[17]  Cf. Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588 at [37] and [42]; Lang v The Queen [2023] HCA 29, at paras [11] and [16].

[18]  Cf. Beneficial Finance Corp Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510 at 534 per Young J; Plumor Pty Ltd v Handley (1996) 41 NSWLR 30 at 34 per McLelland CJ in Eq, CA (NSW). 

[19]  Cf. Qantas Airways ltd v Aravco Ltd (1996) 136 ALR 510

Close

Editorial Notes

  • Published Case Name:

    Glascott & Anor v Mercedes-Benz Financial Services Australia Pty Ltd & Anor

  • Shortened Case Name:

    Glascott v Mercedes-Benz Financial Services Australia Pty Ltd

  • MNC:

    [2024] QDC 127

  • Court:

    QDC

  • Judge(s):

    Morzone KC DCJ

  • Date:

    08 Aug 2024

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Allphones Retail Pty Ltd v Hoy Mobile Pty Ltd (2009) 178 FCR 57
1 citation
Jump To
Cite 1 - (2009) 178 FCR 57
Anderson v Scrutin (1934) SASR 10
2 citations
Jump To
Cite 1 - (1934) SASR 10
Cite 2 - (1934) SASR 10
Annand & Thompson Pty Ltd v Trade Practices Commission [1979] FLR 165
2 citations
Jump To
Cite 1 - [1979] FLR 165
Cite 2 - [1979] FLR 165
Arsalan v Rixon (2021) 274 CLR 606
2 citations
Jump To
Cite 1 - (2021) 274 CLR 606
Cite 2 - (2021) 274 CLR 606
Baltic Shipping Company v Dillon (1993) 176 CLR 344
3 citations
Jump To
Cite 1 - (1993) 176 CLR 344
Cite 2 - (1993) 176 CLR 344
Cite 3 - (1993) 176 CLR 344
Beneficial Finance Corporation Ltd v Multiplex Constructions Pty Ltd (1995) 36 NSWLR 510
2 citations
Jump To
Cite 1 - (1995) 36 NSWLR 510
Cite 2 - (1995) 36 NSWLR 510
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
2 citations
Jump To
Cite 1 - (1977) 180 CLR 266
Cite 2 - (1977) 180 CLR 266
Brookfield Multiplex Ltd v Owners Corporation Strata Plan (2014) 254 CLR 185
2 citations
Jump To
Cite 1 - (2014) 254 CLR 185
Cite 2 - (2014) 254 CLR 185
Byrne v Australian Airlines Ltd (1995) 185 CLR 410
2 citations
Jump To
Cite 1 - (1995) 185 CLR 410
Cite 2 - (1995) 185 CLR 410
Charterhouse Credit Co. Ltd v Tolly [1963] 2 QB 683
3 citations
Jump To
Cite 1 - [1963] 2 QB 683
Cite 2 - [1963] 2 QB 683
Cite 3 - [1963] 2 QB 683
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 C.L R. 337
3 citations
Jump To
Cite 1 - (1982) 149 C.L R. 337
Cite 2 - (1982) 149 C.L R. 337
Cite 3 - (1982) 149 C.L R. 337
Council of the Shire of Noosa v Farr [2001] QSC 60
2 citations
Jump To
Cite 1 - [2001] QSC 60
Cite 2 - [2001] QSC 60
Dasreef Pty Ltd v Hawchar (2011) 243 CLR 588
4 citations
Jump To
Cite 1 - (2011) 243 CLR 588
Cite 2 - (2011) 243 CLR 588
Cite 3 - (2011) 243 CLR 588
Cite 4 - (2011) 243 CLR 588
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353
2 citations
Jump To
Cite 1 - (1992) 175 CLR 353
Cite 2 - (1992) 175 CLR 353
Evans v Balog (1976) 1 NSWLR 36
2 citations
Jump To
Cite 1 - (1976) 1 NSWLR 36
Cite 2 - (1976) 1 NSWLR 36
Farnworth Finance Facilities Ltd v Attryde [1970] 1 WLR 1053
2 citations
Jump To
Cite 1 - [1970] 1 WLR 1053
Cite 2 - [1970] 1 WLR 1053
Gunnersen v Henwood [2011] VSC 440
2 citations
Jump To
Cite 1 - [2011] VSC 440
Cite 2 - [2011] VSC 440
HG v The Queen (1999) 197 CLR 414
2 citations
Jump To
Cite 1 - (1999) 197 CLR 414
Cite 2 - (1999) 197 CLR 414
Hollis v A.B.E. Copiers Pty Ltd [1979] FLR 141
2 citations
Jump To
Cite 1 - [1979] FLR 141
Cite 2 - [1979] FLR 141
Hong Kong Fir Shipping Co. Ltd v Kawaski Kisen Kaisha Ltd (1962) 2 QB 26
1 citation
Jump To
Cite 1 - (1962) 2 QB 26
Ku-ring-gai Council v Chan [2017] NSWCA 226
2 citations
Jump To
Cite 1 - [2017] NSWCA 226
Cite 2 - [2017] NSWCA 226
Lang v The Queen [2023] HCA 29
3 citations
Jump To
Cite 1 - [2023] HCA 29
Cite 2 - [2023] HCA 29
Cite 3 - [2023] HCA 29
Nea Pty Ltd v Magenta Mining Pty Ltd [2005] WASC 106
2 citations
Jump To
Cite 1 - [2005] WASC 106
Cite 2 - [2005] WASC 106
Oraka Pty Ltd & Anor v Leda Holdings Ltd (1997) ATPR 41
2 citations
Jump To
Cite 1 - (1997) ATPR 41
Cite 2 - (1997) ATPR 41
Plumor Pty Ltd v Handley (1996) 41 NSWLR 30
2 citations
Jump To
Cite 1 - (1996) 41 NSWLR 30
Cite 2 - (1996) 41 NSWLR 30
Powercor Australia Ltd v Thomas (2012) 43 VR 220
2 citations
Jump To
Cite 1 - (2012) 43 VR 220
Cite 2 - (2012) 43 VR 220
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
2 citations
Jump To
Cite 1 - (1995) 12 WAR 370
Cite 2 - (1995) 12 WAR 370
Qantas Airways ltd v Aravco Ltd (1996) 136 ALR 510
2 citations
Jump To
Cite 1 - (1996) 136 ALR 510
Cite 2 - (1996) 136 ALR 510
Qantas Airways Ltd v Christie (1998) 193 CLR 280
2 citations
Jump To
Cite 1 - (1998) 193 CLR 280
Cite 2 - (1998) 193 CLR 280
Roadshow Entertainment Pty Ltd v C.E.L. Home Video Pty. Ltd. (1997) 42 NSWLR 462
1 citation
Jump To
Cite 1 - (1997) 42 NSWLR 462
Rowland v Divall (1923) 2 KB 500
2 citations
Jump To
Cite 1 - (1923) 2 KB 500
Cite 2 - (1923) 2 KB 500
Sanrus Pty Ltd v Monto Coal 2 Pty Ltd (No 5) [2019] QSC 210
2 citations
Jump To
Cite 1 - [2019] QSC 210
Cite 2 - [2019] QSC 210
Talacko v Talacko (2021) 272 CLR 478
2 citations
Jump To
Cite 1 - (2021) 272 CLR 478
Cite 2 - (2021) 272 CLR 478
UI International Pty Ltd v Interworks Architects Pty Ltd[2008] 2 Qd R 158; [2007] QCA 402
1 citation
Jump To
Cite 1 - [2008] 2 Qd R 158
Wilcox v Richardson (1997) 43 NSWLR 4
2 citations
Jump To
Cite 1 - (1997) 43 NSWLR 4
Cite 2 - (1997) 43 NSWLR 4
Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515
2 citations
Jump To
Cite 1 - (2004) 216 CLR 515
Cite 2 - (2004) 216 CLR 515

Cases Citing

No judgments on Queensland Judgments cite this judgment.

1

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