Damon’s Earthworks Pty Ltd v AA Machinery Pty Ltd [2022] QDC 123

Michael Creedon  |  Alexandria Hammerton  |  Alisha McGrady

Key takeout

When assessing quantum of loss suffered for breach of contract and misleading and deceptive conduct, a court will carefully consider evidence as to income loss including mitigation measures taken by the affected party.

If claiming for the loss of future income, clear evidence of future work must be demonstrated.

Facts

The proceedings were commenced by Damon’s Earthworks Pty Ltd (Damons), an excavating and earthmoving business, against AA Machinery Pty Ltd (AA Machinery), a distributor of heavy equipment and graders.  A dispute arose over the purchase of a new 10-tonne articulated grader and parts from AA Machinery for a purchase price of $77,263.

The grader was purchased primarily due to the rare feature of having a 10-foot blade, with similar machines ordinarily having a 12-foot blade.  This particular blade was required by Damons to perform a job to widen a roadway on the Bruce Highway in Gympie.  At the request of the principal contractor, Damons purchased the grader, anticipating a pipeline of future work.

The grader was ultimately sold with Damons having little use of the grader due to various faults.

Although liability was admitted, Damon’s allegations were relevant to quantum and the assessment of loss. They were:

• Breach of contract – breach of warranty and breach of implied term in respect of grader’s fitness for purpose under s 17(a) of the Sales of Goods Act 1896 (Qld).
  
• Breach of warranty – breach of implied manufacturer’s warranty pursuant to section 54 of the Australian Consumer Law for improper assembly resulting in the hub of the grader failing.  Damons ultimately made a claim pursuant to the warranty, however, an incorrect replacement hub was received resulting in the grader not being used between 22 July and 1 October 2019.
  
• Misleading and deceptive conduct – AA Machinery made representations on its website as to the quality of the grader and after sales customer service including the ability to source spare parts in a timely manner from Australia.  Statements of a similar effect were made by an employed salesman to Damon’s company director, Mr Stiller, as to the availability and supply of spare parts.  On two occasions, two replacement spare parts were required, however, incorrect parts were received, resulting in Damons sourcing its own repairs.
  
• Negligence – upon delivery on 25 March 2019, the grader showed signs of minor damage including scratches and a missing wing mirror.  The hub of the grader failed on 22 July 2019 due to improper assembly during the manufacturing process and inadequate inspection by AA Machinery.

Damons claimed damages for:

• Loss of income for hire – as a result of the hub breaking and grader becoming unusable, Damons suffered, loss of:
  • use of the grader for the Bruce Highway job and income for hire for 56 working days; and
  • the ability to secure or perform future work which required a 10-foot grader.
    
• Loss of income for sale – being the difference between the purchase price and sale price with appropriate deductions for Mr Stiller’s labour, fuel and repairs.

AA Machinery challenged the loss on the following grounds:

• Mitigation – Damons could have hired another grader to earn income during the inoperable period or hired out other equipment ( a posi-track) on a wet hire basis to be operated by Mr Stiller.
  
• Overclaiming – the calculation used to determine the fuel costs of $100 a day was incorrectly based on the fuel usage of a different, less powerful machine with different specifications.  The calculation also failed to take into account other variable costs of earning such as maintenance costs.

Decision

There was some doubt as to whether AA Machinery was negligent and the court found that the manufacturer’s warranty under Australian Consumer Law did not apply, on the basis that Damons was not a consumer under section 3.

The court made an assessment of damages for the claims of breach of contract and misleading and deceptive conduct.

As to the arguments advanced by AA Machinery:

• Mitigation – the court accepted Damons’ evidence that:
  •  it would have been difficult to source a grader with a 10-foot blade and more cost effective to hire out Mr Stiller’s labour to drive other machines which is what it decided to do; and
  •  the posi-track was sold on or about 31 May 2019 and was not available to hire while the grader was inoperable.  Damons acted reasonably in hiring out a tipper truck and trailer it owned to mitigate loss.
    
• Overclaiming – the court accepted that:
  •  while this evidence was diminished through the incorrect calculation, the estimate of $100 per day was roughly accurate and ultimately conservative; and
  •  there was no need to deduct maintenance costs of approximately $16 per month from the hire income and no evidence of any other variable costs during the operation period.

As to the claim for lost revenue by Damons, the court awarded $87,291 including interest, which comprised of:

• Loss of income for hire – as a result of the hub breaking and grader becoming unusable. This included loss of use and loss of future work.
• Loss of income for sale – being the difference between the purchase price and sale price with appropriate deductions for Mr Stiller’s labour, fuel and repairs.