IN THE HIGH COURT OF FIJI
(AT SUVA)
CIVIL JURISDICTION

ACTION NO. 92 OF 1993

BETWEEN:

CARPENTERS CARPTRAC
a division of
CARPENTERS FIJI LIMITED
Plaintiff

AND

TRADEWINDS MARINE LIMITED
Defendant

S. Lateef for the Plaintiff
R.A. Smith for the Defendant

Dates of Hearing: 29th, 30th November, 1st, 2nd, 5th, 6th December 1994
Date of Judgment: 22nd March 1995

JUDGMENT

The Plaintiff is a member of the Carpenters Group of Companies and is the distributor of earth-moving equipment.

The Defendant is the owner of "The Exploring Isles Estate Resort", a proposed tourist resort being constructed at Nabavatu, Vanuabalavu, Lau.

In these proceedings the Plaintiff claims $112,500.00 as the balance outstanding for the purchase of a Caterpillar D-4H Series II Tractor by the Defendant from the Plaintiff on the 29th of May 1992.

On that date the Defendant bought the tractor from the Plaintiff for the sum of $125,00.00 and paid the Plaintiff the sum of $12,500.00 as a deposit.

According to the Statement of Claim the balance of $112,500.00 was to be paid to the Plaintiff by the Defendant's bankers on 28th August 1992 direct to the Plaintiff's account.

The Statement of Claim also alleges that on 11th August 1992 the Defendant instructed its bankers not to make the payments to the Plaintiff as the Defendant alleged that the tractor had certain defects and that certain parts were missing.

The Plaintiff claims that at its expense it sent mechanics to check the machine and found no defects and either replaced or fitted the alleged missing parts. The Plaintiff claims that any defects were due to the fact that the machine was not being operated in the right manner by the Defendant.

The Defendant denies all the allegations made by the Plaintiff except that it bought the tractor from the Plaintiff on 29th May 1992 for the sum of $125,000.00 and paid a deposit of $12,500.00.

The Defendant in its Defence states that the Defendant bought the tractor or bulldozer for the purpose of using it on various works involved in the establishment of the resort and states that the Plaintiff knew of the Defendant's intended use of the bulldozer and the place at which it was to be used.

The Defendant claims that prior to it agreeing to buy the bulldozer the Plaintiff represented to the Defendant that the bulldozer was a new machine with five hours on the clock (meaning it had been used for five hours) and that those five hours had accumulated during demonstrations in the Plaintiff's yard.

The Defendant relied on these representations and bought the bulldozer.

The Defendant claims that the Plaintiff's representations were false and were made fraudulently in that, as the Plaintiff knew, the bulldozer was not new and had operated for many more hours than showed on its clock in places other than the Plaintiff's yard, or the representations were made recklessly. The Defendant claims to have thus suffered loss and damage and claims by way of counter-claim:

(a) rescission of the Defendant's agreement to buy the bulldozer; 

(b) return of $12,500.00 paid to the Plaintiff;

(c) damages for misrepresentation.

In reply to this Defence the Plaintiff admits that the bulldozer was purchased to carry out certain works in the Lau Group and that it knew of the Defendant's intended use of the bulldozer and the place at which it was to be used.

The Plaintiff denies making any representation to the Defendant that the bulldozer was a new machine. The Plaintiff states that the bulldozer was sold as a "new machine" with a new machine warranty and that the Defendant was informed that the machine had been used both in its yard and at Nausori Highland for demonstration purposes for prospective purchasers.

The Plaintiff further claims that there was nothing major wrong with the machine. Some minor works had to be carried out and this was done under the warranty.

The Plaintiff also claims that the Defendant used the machine continuously from 3rd November 1992 to mid January 1993 even though there was a gear-shift problem.

The Defendant claims that the faulty bulldozer has to be replaced and estimates the cost of doing so at $154,873.00. It also estimates its costs and losses due to the delayed commencement of construction and resultant opening of the tourist resort as at over $409,000.00, as to which I heard evidence and will give some details of how this amount is calculated later in this judgment.

THE EVIDENCE

Both sides gave sworn evidence and I shall now summarise this as briefly as possible.

The first witness called for the Plaintiff was its former General Manager when the bulldozer was sold to the Defendant, Arthur James Manton who is now the General Manager of Carpenters Motors. Mr. Manton produced a copy of the Plaintiff's Invoice for the bulldozer dated 29th May 1992 which stated that delivery was to be on the 7th of May 1992. The Invoice describes the bulldozer as "one only new Caterpillar D-4H Series II Tractor Serial Number 2AC00637 fitted with angle blade 3/N 92B03777, 4 new lights, two new batteries. Also fitted with ripper, operation manual, service manual, and parts book. Engine No. 3204DI S/N 45V88283" and the price stated, $125,000.00.

Mr. Manton stated that the machine was new and had never been sold to anyone else although it had been used by prospective purchasers.

It was also supplied with a warranty and Mr. Manton said that if the machine had been second-hand he did not believe Caterpillar would have given a warranty. He said he had received a telephone call on behalf of the Defendant asking for the best price of a bulldozer presently in the Plaintiff's yard. He presumed that a representative of the Defendant had seen the machine and that this person was familiar with it.

The machine was duly delivered to the Defendant which subsequently complained of having difficulty driving the machine.

The Plaintiff therefore sent a service technician and mechanics to the Defendant's resort to examine the machine three times. There seemed to be a recurring problem with the gear.

By agreement with the Defendant Mr. Manton arranged for an independent operator to see the machine because both parties differed as to the cause of the problem. The Plaintiff said it was caused by an inexperienced operator whereas the Defendant said the gear was faulty.

A report dated 7th December 1992 was obtained from a Mr. Alivereti Roko who subsequently gave evidence. This report was tendered and I shall set out relevant parts of it when dealing with the evidence of Mr. Roko.

After receiving the report the Plaintiff sent its mechanic to modify the machine according to Caterpillar instructions with particular attention being given to the gearshift problem.

Mr. Manton said that this bulldozer was relatively smaller compared with other bulldozers sold in Fiji and that he had never discussed the use of the machine by the Defendant nor had his company ever advised the Defendant of the machine's capabilities. He denied making any representation to the Defendant.

In cross-examination Mr. Manton said that he was unaware that the machine had been sold previously to a man named Permal Padayachi of Nadi. Mr. Manton knew that the machine had been delivered at least once to a prospective purchaser and that he would expect the Plaintiff to keep a record of any such transaction.

He said that the company's practice was that when a machine arrived at its sales yard a file was opened. In the present case the file on this machine contained no record of any sale to a Mr. Padayachi. He said that when the machine first came into the Plaintiff's stock in early 1990 there was a record of it going to the workshop to be touched-up.

He did not know how long the machine had been with the prospective purchaser and he had not been able to find any records of this. He said that Mr. Philp the Managing Director of the Defendant had told the Plaintiff that he wanted the machine for use in the Lau Group, a remote part of Fiji and that for this purpose Mr. Manton regarded a new machine as being superior to a second-hand machine. He also said that before delivery to the Defendant the Plaintiff had put the machine in for a check but because of the urgency expressed by the Defendant and the short delivery time the check was quite rushed.

On 17th of May 1990, some eight days after the delivery the Plaintiff had sent one of its mechanics, a Mr. Latchman, to Lau to investigate some transmission problems the Defendant was experiencing on the bulldozer and that following this Mr. Latchman had reported that certain items were missing from the machine.

As a result Mr. Philp was so upset that a meeting was arranged in Suva between representatives of the parties on the 29th of May 1992 at the office of Mr. Philp. Mr. Manton said that he would not deny that he said at this meeting that the machine had worked 200 hours in the West if Mr. Philp gave evidence of this. He agreed that he could have said that the original hour meter had been replaced prior to the sale to the Defendant and that the reason for this might have been to offer the new owner a completely new warranty. He was not prepared to deny that he said this at the meeting.

The next witness for the Plaintiff was Alivereti Roko, a driver who was sent to Vanuabalavu in November 1992 by his employer Construction Equipment Hire Ltd to test the bulldozer. He did so and found that the gear gave trouble occasionally and he reported his findings in the report I have previously mentioned on the 17th of December 1992. His relevant findings in that report were:

(1) No speed control pedal was fitted on the machine.

(2) When he first worked the machine it had only registered 55 hours on the hour meter.

(3) After testing the machine he could not feel the difference between clutch and shaft brake on the clutch pedal. It should be easy to feel this difference.

(4) It was also hard to change gear without the speed control pedal.

He fitted such a pedal to the machine but found it still difficult to change gear some times.

(5) The first operator who broke the machine had been too rough in handling the machine (e.g. changing gear on full speed).

He commented that the clutch still needed adjustment by an expert as it was still giving trouble when changing gear.

From his experience he considered the machine had been used for more then 55 hours at the time when he started to work on it, even though the hour meter showed 55 hours.

He said he believed nothing was seriously wrong with the machine because it was being used when he arrived at the resort by the Defendant's mechanic.

He said that the Plaintiff had sent over a missing part which the Defendant's mechanic fitted but after this the machine still gave some problems. The Plaintiff then sent an expert to fix the machine but it still occasionally had given problems.

Mr. Roko said that he continued to operate the machine which did all the jobs Mr. Philp had asked him to do. He said that he had had twenty-two years experience and while on the estate had operated the machine for about 500 hours. During his stay on the estate he had cut roads and built up a jetty with the machine. He had remarked to Mr. Philp that it was very difficult for such a bulldozer to do that type of work.

He said he had left the estate in mid January 1993 because the hydraulic system of the machine was not working properly. He could not control the blade of the machine which could not be used for building roads and similar work.

In cross-examination he said he did not know who had broken the machine but that somebody somewhere in the first 55 hours had broken it.

He also said it was easy to tell the difference between an old and new machine by the feel. This machine was new. He said that the bulldozer was rusty and scratched but this could have been because it was used near the sea and had been parked near the jetty.

The third witness for the Plaintiff was Amatave Vuatalevu, a workshop supervisor for the Plaintiff who said that he went to the estate in January 1993 to inspect the machine having been told that it was difficult to change gear on it. He considered this a minor problem which he fixed after which the operator drove it and was happy. He said he had seen rust on the machine which was probably due to it being near salt water.

He said that nobody knew how to fix the bulldozer until the modification in the form of new parts had been fitted on Caterpillar's instruction after which the problem was solved.

The fourth witness for the Plaintiff was Inoke Temo Niumataiwalu who was the Service Manager of the Plaintiff in May 1992 when the bulldozer was sold to the Defendant.

He had prepared for the delivery of this machine twice, the first time to Mr. Padayachi and the second to the Defendant. He said that Padayachi was a logging contractor working at Nausori. He remembered being given an order to prepare the machine for delivery very quickly because the Defendant had arranged for a barge to pick it up. He said that he had sent two mechanics to the estate to investigate the complaint initially. They found there was a problem but could not diagnose it. They could not find any component problem.

The Defendant then called evidence. Its first witness was Anthony Colin Philp the Managing Director of the Defendant who said that he was one of the partners in Nabavatu Plantation Company, a copra estate with beef and pork herds which was developing a marina and a 30-bed resort. The materials to build this came essentially from the plantation which had about 400 acres of hardwood forest.

As part of the project the company had developed a 4000 sq. ft. workshop incorporating a break down mill and finishing equipment so that most of the construction could be done using their own timber resources. He said that the Defendant required a piece of earth-moving machinery which could drag large hardwood logs to the mill and service the estate roads, clear pastures and generally assist in the construction of the resort.

With his partners he had looked at various sources for suitable equipment both locally and overseas, both new and used. As a result the partners concluded that to buy anything less than a brand new machine would be risky because of the remote location of the estate which is 180 miles north-east of Suva. Mr. Philp said they eventually located a suitable machine, the bulldozer in issue here.

During their search they called at the Plaintiff's yard at Raiwaqa at least twice and saw several machines including the bulldozer. They were told by a salesman of the Plaintiff that it was a new D-4H of the latest design and had only been used in the Plaintiff's display yard for demonstration and levelling the loose gravel surface of that yard.

Mr. Philp said that he had had previous experience with heavy machinery. Before he came to Fiji to settle permanently in 1966 he had worked in the construction industry in Australia where he became familiar with various types of earth-moving equipment and for several years after coming to Fiji he had been directly in-charge of reclaiming the 3½ acre site where the Tradewinds Hotel now stands. This project took approximately three years during which Mr. Philp had directed and often drove the earth-moving equipment. Since then he had always been closely connected with the construction industry and had always had "an in-house" construction unit so that within his group of companies whenever they developed anything or repaired or built anything this was always done by the group's own staff under Mr. Philp's direction. This occasionally involved heavy machinery.

He said that when considering the purchase of any piece of heavy machinery he always looked for the attachments on it such as the blade and rear attachments. He also made sure there was an hour meter on the dashboard which records all the time the engine has run.

In this instance the machine had such a meter on it which showed slightly less then 5½ hours which a member of the sales staff had told him had been spent on demonstration in the Plaintiff's yard.

When they decided to approach the Plaintiff about this machine Mr. Philp spoke to Mr. Arthur Manton and asked him what the price of a brand new D-4H was fitted with a set of rippers. He told Mr. Manton that the Defendant had decided to buy a brand new machine because of the remoteness of the location to which it would go and because it was to play a key role in various aspects of the resort development.

Mr. Manton said he would telephone him as soon as possible, which he did about 1½ hours later. He advised Mr. Philp the Plaintiff could deliver the machine the next day but that it had no rippers in stock but would procure them in three weeks The price was $125,00.00.

Mr. Philp said he told Mr. Manton that the fact that the machine was available immediately was attractive to the Defendant because it could charter a barge which could go to the estate as soon as the machine was available, even without the rippers which would be simple to attach later.

The next day the Defendant took delivery of the bulldozer and placed it on a barge which Mr. Philp escorted to Vanuabalavu Island.

The barge arrived at mid-night and Mr. Philp removed the machine from it.

He said that he was able to drive the machine ashore but found that the first time he tried to shift the directional gear it was stuck in reverse and it was only with considerable difficulty that he managed to shift the directional gears.

During the ensuing days he found that by persevering and in many cases moving the engine throttle to an idling position after the machine stopped, the directional gear change problems were often overcome. However the gear change apparatus was unpredictable in its operation.

For this reason he telephoned his partner a Mr. Colin Dunlop and asked him to inform the Plaintiff of the problems he was encountering with the machine.

About a week later Mr. Philp returned to Suva and with Mr. Dunlop went to the Plaintiff to discuss the problems with Mr. Temo and Mr. Chute.

They told him that he did not know how to drive the machine and perhaps the fault was imaginary which Mr. Philp denied. 

The Plaintiff then agreed to send a mechanic named Latchman to investigate the problem on the estate. Mr. Latchman gave the machine a thorough inspection, confirmed the problems but could not find the cause. He had exactly the same problems as Mr. Philp had with the gear.

Mr. Philp continued that to inspect such a machine one must get into its interior which Mr. Latchman did. He made some interesting discoveries including the finding of a large quantity of sandy material after he had removed the belly pan cover over the large cavity on the bottom of the machine. This was completely full of sandy material which Mr. Philp said is not evident on the estate.

In Mr. Latchman's opinion such a quantity of material could not find its way into the belly pan cavity except if and when the machine had been used for a considerable period of time which he said Mr. Latchman believed would have to be at least a month of continuous use at a site where the particular material was evident. Mr. Latchman also noted that numerous pieces of equipment were missing from the machine, for example there were no catlocks which are a special type of waterseal padlock to the fuel and hydraulic tanks and the exhaust and oil reservoirs. The hydraulic dipstick was missing as were the seat belt and the dashboard cover lock. The witness explained that the belly pan is a cavity under the machine which protects the sump and provides access to other parts of the machine.
 
I comment here that this evidence although strictly hearsay, went in without any objection by counsel for the Plaintiff.

Following these discoveries, Mr. Philp returned again to Carptrac and complained to Messrs Temo and Chute who still said there was nothing wrong with the machine and refused to offer any explanation for either the directional drive gear problem or Mr. Latchman's observations.

The result of this meeting was that later the same day Mr. Chute telephoned Mr. Philp requesting a meeting the following morning in Mr. Philp's office at Lami with himself, Mr. Chute and Messrs Temo and Manton. In addition Mr. Dunlop attended with Mr. Philp. Mr. Philp continued that Mr. Manton told him that he had looked into their complaint and was fairly sure that Latchman's comments were well-founded because Mr. Manton's own investigation had revealed the machine had previously been sold to a logging contractor at Nadi who had probably done between 200 and 300 hours work as far as Mr. Manton could ascertain. Mr. Manton speculated that the previous usage of the machine was in all probability responsible for at least some of the missing items and the belly pan full of sandy material.

Mr. Philp asked Mr. Manton why if this was so the engine hour meter only registered 5½ hours when it was delivered to the Defendant. Mr. Manton replied that after the machine returned from the Madi logging contractor it had been returned to stock and a further prospective buyer had appeared and Carptrac had changed the engine hour meter to a new meter showing 'zero hours' so as to be able to offer that buyer a new warranty.

At this point the witness was shown Exhibit P.4, Caterpillar's warranty, which states that the warranty period is 12 months starting from the date of delivery to the first user. He continued that at about the end of the first week in June 1993 the Plaintiff provided rippers and sent two mechanics to the estate to fit these, the missing parts and to further investigate the cause of machine's problems.

When this had been done the transmission fault still persisted and the mechanics could not explain why.

Thereafter Mr. Roko was sent out and Mr. Philp was absent from Fiji for some weeks.

When he returned in early August he found the machine still lying idle on the estate and no communication from the Plaintiff to the Defendant offering to do any more.

Accordingly on the 20th of August 1992 Mr. Philp wrote to the General Manager of the Plaintiff expressing his dismay to find that no attempt had been made by Carptrac to either correct the transmission fault in the bulldozer or satisfactorily come to terms with the fraudulent misrepresentation by Carptrac over the age and history of the machine. 

The letter continued that accordingly the Defendant had cancelled its previous instructions to the National Bank of Fiji covering settlement of the balance of purchase moneys due.

The Defendant required that the machine be replaced at the expense of Carptrac with a new fault-free machine without delay whereupon payment of the balance would be made.

This letter elicited a response from the Plaintiff in the form of a letter from its solicitors, following which there was a meeting in the solicitors' office at which Mr. Manton re-asserted his view that Mr. Philp did not know what he was talking about and he proposed sending an experienced driver to thoroughly test the machine.

As a result of this Mr. Roko went out to the estate as previously described. Mr. Philp stated that he accepted his expertise as a driver.

Mr. Roko spent approximately 3½ weeks on the island during which Mr. Philp said he was able to work the machine slowly but with considerable difficulty.

Mr. Philp said that in the nine months which had elapsed between the time Mr. Philp had put about 19 hours on the meter and by the end of January the machine had worked for about 540 hours.

He said that normally for a new machine such as the D-4H one would expect to get about 2000 hours per year and possibly more use from it.

He said that the usability of the machine depended on the extra skills of the operator. The machine operated quite well for brief periods and then became difficult to use and this was reflected in the hours which it accumulated on it.

Mr. Philp confirmed the earlier evidence for the Plaintiff that mechanics employed by it had added a factory supplied modification to the clutch housing at the rear of the machine.

By this time the machine had developed an hydraulic fault and whilst the factory modification had improved the directional gear problem a little the intermittent directional gear problem still remained giving Mr. Philp no choice but to put the machine under cover, lock its key in a safe and return to Suva with Mr. Roko. He said the machine had not moved from that day forward.

He then referred to two stress cracks on either side of the blade at the rear of the machine as to which Mr. Dunlop gave more detailed evidence later. Mr. Philp remarked that one striking feature of the modification was the difference in the colour from the rest of the machine and that it was external or additional to the machine. He noticed that the machine was shedding its paint and exposing a layer of paint underneath which exactly matched the colour of the modification. He therefore concluded that the machine had been repainted before being delivered to him.

He therefore took some large flakes of paint and brought them with the dashboard cover to Suva for analysis of the differences in the paints. This report which was tendered stated that the exposed portion of the panel had been re-coated with a coat of paint the colour of which was very close to that of the Caterpillar yellow very distinctly different from the original coat of paint.

In February 1993 he met the new General Manager of the Plaintiff and the then Sales Manager Mr. Chute and reiterated that the fault though improved, was still present and again stated that the Defendant required Carptrac to replace the machine with a new and fault-free machine.

When asked by counsel for the Plaintiff why, as a fairly successful businessman, Mr. Philp would buy a $125,000.00 machine without test driving it, he replied that he did not consider this necessary because of the fact that he as Managing Director of the Defendant was dealing with the General Manager of the Plaintiff. He said he had dealt with the Plaintiff and its associated companies most of his time here and was still dealing with them. He said he considered them fairly honest and he did not expect that they would be out to cheat him. Nevertheless he believed that they had deceived him in this case. This was the first time in 25 years dealing with the Plaintiff's group of companies he had been cheated.

He agreed he was a very experienced entrepreneur but had never claimed to be an expert in earth-moving machinery. He denied again that the sand found in the pot belly was sand from his estate because he said there was no sand in the area from which the machine was working. He also said that the Defendant did not return the machine to the Plaintiff because it was extremely difficult and expensive to do so. He considered it was the Plaintiff's duty to take the machine back. He said as a result of all the problems he had with the machine by the middle of February 1993 he was absolutely convinced that the machine was not new when supplied. It had been purchased to play a key role in the development of the tourist resort and he denied any suggestion that since all the work the machine was bought to do had been done the Defendant was only interested in getting damages from the Plaintiff. He said that he would have been happy to get out of the deal.

He also said that he believed that the cracks on the blade were stress cracks and had not been caused by any use by the Defendant of the machine.

His plan was to open the residential part of the resort by Christmas 1993 and he had been prevented from doing so by the various faults in the bulldozer. He said he had made no attempt to hire a similar machine to continue the work because it was very difficult practically to get a similar machine to this island.

The next witness called for the Defendant was Bernard Charles Chute the former Sales Manager of the Plaintiff. He remembered Mr. Padayachi taking the machine for some weeks on a trial basis and when it was returned to the Plaintiff's premises it was cleaned and put back in the showroom.

At this stage Mr. Chute was declared a hostile witness. He then said that to his knowledge no one else had owned the machine before its sale to the Defendant.

I then heard evidence from Colin Dunlop one of the partners in the Nabavatu Plantation Company who is a Naval Architect. To a large extent he corroborated the evidence of Mr. Philp. He said that as a result of the disruption caused by the failure of the machine to do the work for which it had been bought the whole staff except for two men at the estate had been disbanded. He also said that to the knowledge of the Defendant particularly Mr. Philp and himself when they bought the machine there was no similar machine in Fiji. He said that the D-6 bulldozer would do the job required but it was too big for the Defendant's needs and the price was about 60% higher. He said that as a Naval Architect he had to have a thorough understanding of steel structures, their properties and the causes of failure to steel.

The last witness called by the Defence was Neil Peter Underhill a Chartered Accountant who prepared two reports estimating the costs and losses to the Defendant caused by the delay of the project at Vanuabalavu.

In cross-examination Mr. Underhill agreed that if the Defendant had obtained another bulldozer it would not have suffered such a loss as he estimated in his report. He said that the Defendant had the financial means to purchase another bulldozer but had not done so.

COUNSEL'S SUBMISSIONS

Counsel for the Plaintiff stated that the Plaintiff based its case particularly on Sections 10, 13(3), 16(2)(b), 49 and 50 of the Sale of Goods Act Cap. 230. The last two sections give the remedies of a seller under a contract of sale where the property in the goods has passed to the buyer and the buyer wrongfully refuses to pay for the goods under the terms of the contract. In such a case the seller may maintain an action against the buyer for the price of the goods. Under Section 50 where a buyer wrongfully refuses to accept and pay for the goods, the seller may maintain an action against him for damages for non-acceptance.

Under Section 13(3) where under a contract of sale the buyer has accepted the goods, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there be a term of contract express or implied to that effect.

Section 16(2)(b) provides that there is no implied condition that the goods supplied under the contract are of merchantable quality if the buyer examines the goods before the contract is made, as regards defects which that examination ought to reveal.

Counsel submits that here the buyer inspected and examined the goods before purchasing the machine and therefore the implied condition of merchantable quality has been negated. It was submitted that since the Defendant continued to use the machine throughout it cannot claim to have rescinded the contract. Further, said counsel, the machine is still in the possession of the Defendant and therefore the Defendant is estopped from claiming rescission.

Counsel then referred to the evidence. He stated that Alivereti Roko had said that he had been able to do all the jobs that Mr. Philp requested.

As to Mr. Chute, counsel said that he had to be declared a hostile witness and although called by the Defendant clearly gave evidence for the Plaintiff. He said that as Mr. Chute had been dismissed by the Plaintiff he could easily turn against the Plaintiff but did not do so. It was submitted that his evidence was crucial although limited.

Mr. Lateef argued that all the Plaintiff's witnesses stated that they had received complaints, attended to them and as far as they were concerned they had resolved the problem be it operational or mechanical.

Counsel then submitted that the Defendant had never mitigated its losses and had clearly admitted this even though avenues were open to it to do so.

Finally counsel submitted that it would have been prudent for the Defendant to have at least tested the machine before buying it and, of course, said Mr. Lateef, "the Plaintiff denies any defects".

In reply to these submissions counsel for the Defendant stated that the question of rescission did not arise until it was apparent that there had been misrepresentation made by the Plaintiff and more particularly after it became apparent that there were defects in the machine as well.

Counsel said that it was wrong to claim as the Plaintiff did that Mr. Roko had stated that all the mechanical defects had been resolved.

Mr. Smith referred to the number of hours shown on the hour meter and said it was obvious that the Defendant had been sold a machine which had worked for at least some hundreds of hours and not the 5½ hours shown on the meter when the Defendant took delivery. He said that the machine had simply been damaged through the use which Carptrac had concealed; that according to the pleadings and the evidence the machine was sold as new. Further counsel submitted the only reason the Defendant had been unable to establish its case with complete precision was the lack of records held by the Plaintiff which it was submitted was the most damning feature of the case.

As to the law Mr. Smith relied on the English case of Doyle v. Olby (Ironmongers) Ltd [1969] 2 Q.B. 158 a decision of the Court of Appeal.

Having carefully considered the evidence I am satisfied on the balance of probabilities that the Plaintiff mis-represented to the Defendant that the bulldozer in question was new. I am satisfied that at the time of sale the Plaintiff knew that the machine was not new and it had been used for some 200 to 300 hours at least by Permal Padayachi in his logging operation.

Contrary to the submission of the Plaintiff that Mr. Alivereti Roko had said that he had done all the work which the Defendant had asked him to do, in my opinion this ignores the evidence of Mr. Roko that the machine had mechanical problems and particularly his statement that it was the first operator who broke the machine by handling it too roughly. Further there is Mr. Roko's evidence that he considered the machine had been used for more than 55 hours when he started to work on it, even though the hour meter showed 55 hours.

I also attach significance to the evidence of Arthur James Manton who in cross-examination said that he would not deny he had told Mr. Philp the machine had worked 200 hours in the West if Mr. Philp said he did.

In fact Mr. Philp did make this allegation against Mr. Manton and so as General Manager of the Plaintiff I find that Mr. Manton did make this statement which of course is an admission against the Plaintiff by its General Manager.

Undoubtedly the Plaintiff made several attempts to try to resolve the problems the machine was causing the Defendant but the undeniable evidence is that despite this the machine never worked in the way one would expect a new machine to work.

As to Mr. Chute I formed the impression that he was a very unwilling witness whose evidence did not help the Plaintiff despite Mr. Lateef's submissions that it did. Mr. Chute's evidence was that he knew the machine had been used by Padayachi for some weeks before he returned it to the Plaintiff. How in such event the Plaintiff could then describe the machine as new escapes me.

I noted that Mr. Chute was careful to say that to his knowledge no one else had owned the machine before its sale to the Defendant.

I accept that but this does not exonerate the Plaintiff from its responsibility in law of informing the Defendant that the machine had worked more than the number of hours shown on the hour meter when the Defendant took delivery. I am satisfied that responsible employees of the Plaintiff knew that the machine had worked much more than they led the Defendant to believe and they failed to be honest with the Defendant.

As to the failure by Mr. Philp or Mr. Dunlop to test drive the machine before taking delivery, on the facts I consider this failure was not unreasonable. Mr. Philp and Mr. Dunlop believed that they were buying a new machine - the Invoice said so.

Furthermore Mr. Philp stated that he had been dealing with the Plaintiff for the last 25 years and had never had any reason to doubt its honesty.

The position is that the Plaintiff has shown itself incapable of correcting the mechanical problems which existed in this machine at the time it was delivered and later. In these circumstances I consider it was reasonable for the Defendant to require the Plaintiff to take the machine back and give it a new, fault-free bulldozer in its place. For reasons which I cannot understand, given the evidence, the Plaintiff has failed to do so.

I accept the evidence of the Defendant that it considered the D-4H model ideal for its purposes and that it was unreasonable to expect the Defendant to go to the further expense of hiring or buying another similar machine when account is taken of the practical difficulties and expense of taking such a machine to the Defendant's estate.

In Doyle v. Olby (Ironmongers) Ltd it was held that the proper measure of damages for deceit, as distinct from damages for breach of contract, was all the damage directly flowing from the tortious act of fraudulent inducement which was not rendered too remote by a Plaintiff's own conduct whether or not the Defendant could have foreseen such consequential loss.

In the instant case the Defendant has given evidence of costs incurred resulting from the faulty bulldozer which are based on the accounting records of the Defendant and from information it provided to the Chartered Accountants. The Defendant has also provided an estimate of costs and losses caused by the delay of the project.

Its actual estimates were not questioned by the Plaintiff in cross-examination. The Plaintiff simply suggested, and Mr. Underhill agreed, that if the Defendant had got another bulldozer it would not have suffered the loss which Mr. Underhill estimated. 

As I have found that it was reasonable for the Defendant not to have obtained another bulldozer, and since there is no contradictory rebuttal evidence called by the Plaintiff I am strictly speaking entitled to accept the amount estimated by Mr. Underhill.

However a report of 1st December 1994, Exhibit D.6 estimates loss of profits from 1/1/94 to 30/6/96 as $229,407.00 based on estimated occupancy rates at the resort in that period.

The only reservation I have about this figure is the fact that tourism can be unpredictable but even more importantly the basis on which Mr. Underhill calculated his estimates of occupancy, revenue, costs and profit was never stated. Presumably Mr. Underhill conducted research overseas in arriving at his figures but he does not mention this in his report nor was he asked any questions about it either in evidence-in-chief or cross-examination. For these reasons I believe it would be fair to make some reduction in the amount claimed and I propose to substitute an amount of $391.000.00 for that of Mr. Underhill.

In his report of the 5th of December 1994, Exhibit D.7 Mr. Underhill gives an additional cost of replacement of the D-4H with a Cat D-6 as $50,000.00 although the evidence is however by the Defendant that they did not consider a D-6 entirely suitable because it was too big for their needs and the price was 50% to 60% more than a D-4H.

In view of the Plaintiff's steadfast refusal to replace the bulldozer with another new, fault-free D-4H model I consider it reasonable to require the Plaintiff to pay this sum.

Applying Doyle v. Olby (Ironmongers) Ltd. it follows that the Defendant is entitled to an amount of $391,000.00 as its estimated costs and losses due to the delay of the project and the sum of $154,873 as costs resulting from the faulty machine.

In addition the Defendant is entitled to the return of $12,500.00 paid to the Plaintiff and rescission of the Defendant's agreement to buy the bulldozer.

There will therefore be judgment for the Defendant on its counter-claim in the sum of $558,373.00. The Plaintiff must also pay the Defendant's costs to be taxed if not agreed.

JOHN E. BYRNE
J U D G E

Authorities and legislation referred to in judgment:

Doyle v. Olby (Ironmongers) Ltd. [1969] 2 Q.B. 158
Sale of Goods Act Cap. 230.

No other authorities or legislation were referred to in argument.
HBC0092J.93S