Queensland Judgments
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Callinan v Power Equipment Pty Ltd

Unreported Citation:

[2023] QCA 246

EDITOR'S NOTE

The applicant purchased engines and sterndrives, in respect of which the respondent was the manufacturer under the ACL. The equipment turned out to be defective. The Court of Appeal found that under s 272(1)(a), when considering the reduction in value of the goods, the correct focus is on the reduction in utility caused by the defect, rather than on the reduction in the resale price. That assessment will not always require expert evidence. The Court also held that replacement costs cannot be recovered under s 272(1)(b) as that provision deals with only consequential loss.

Bond JA and Henry and Cooper JJ

5 December 2023

The applicant owned a recreational speedboat named Quick Fix. [3]. The applicant purchased two engines and two accompanying sterndrives (“the equipment”). [4]. The equipment was imported by the respondent, making the respondent a manufacturer under s 7 Competition and Consumer Act 2010 (Cth) sch 2 (“ACL”). [4]. The equipment was faulty in a number of ways despite various attempts by the respondent to remedy the faults. [18]. At first instance, it was accepted that the respondent breached the guarantee as to acceptable quality under s 54 ACL. [25]. That finding was not contested on appeal. Rather, the sole issue in the appeal was the proper quantum of damages under s 272 ACL.

Section 272(1) allows recovery of two types of loss for breaches of certain consumer guarantees. First, under s 272(1)(a), “any reduction in the value of the goods, resulting from the failure to comply with the guarantee” below the lowest of the price paid, and the average retail price of the goods. [20]. Second, under s 272(1)(b) “any loss or damage suffered … because of the failure to comply with the guarantee … if it was reasonably foreseeable that the affected person would suffer such loss or damage as a result of such a failure”. [20].

At first instance, it was held that the applicant had failed to prove any entitlement to damages under s 272(1)(a). [25]. That was because evidence was not led as to the value of the goods, as a result of the defects. [25]. On appeal, the Court overturned this finding, awarding damages for a reduction in value of the goods. [46]. In doing so, the Court commented on the proper interpretation of s 272(1)(a).

Generally, the time of assessing a reduction in value under s 272(1)(a) is at the time of supply, however, the overarching consideration is that the amount of compensation for any reduction is appropriate. [26]. As such, in assessing quantum, the court may take account of subsequent events, if doing so is considered appropriate. [26]. In most cases involving consumer goods, the value of the goods to a retail buyer will lie in their utility, rather than their resale value. [26]. As such, the correct approach to assessing reduction in value is to ascertain the component of the price actually paid that could be said to be attributable to the loss in utility arising from the defect. [26]. Where goods are defective but still useable, and repair is not possible, it may be appropriate to apply a percentage figure to the purchase price to determine the correct reduction in value. [26].

The Court also noted that there is no general principle by which the court cannot assess the reduction in value without the assistance of expert evidence. [33]. Consideration of the evidence may provide a sufficient basis to form a view as to the reduction in value, even without an expert opinion. In this case, the utility of the equipment was reduced by at least 50 per cent of the purchase price. As such, that amount was awarded as damages under s 272(1)(a). [38].

The applicant also sought the replacement value of the goods under s 272(1)(b). The Court held that replacement value was not recoverable under that provision. [62]. On the proper construction of s 272, s 272(1)(a) provides for recovery of the performance interest while, s 272(1)(b) provides only for the recovery of consequential loss. [59]–[62]. Performance interests, such as the costs of replacing the goods, are not recoverable under s 272(1)(b). Sections 272(1)(a) and 272(1)(b) are mutually exclusive in their operation, although in some cases, a plaintiff can recover damages under both components. [61]–[62].

L Inglis

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